As an example, Jokowi mentioned the lengthy process of establishing a power plant in Indonesia. Despite the fact that Indonesia is in acute need of electricity to supply the people and its businesses, it can take up to four years to complete the permitting process for this type of investment. Also regarding other investments the time-consuming process is problematic and more or less structural as improvement has been slow. Indonesia's lengthy and complicated bureaucracy seems to be a 'power centre' in its own right, effectively resisting reforms. Moreover, bribery (‘under-the-table-costs’) remains rife; civil servants need to be handed some extra money in order to speed up the permitting process.

Jokowi added that the online application system at the BKPM is already well developed but the real problem lies in civil servants commitment to complete the procedures. Certain types of permits should only require three days to finalize but in reality it can take 12 days before the permit is handed to the investor. Furthermore, Jokowi believes there is still ample room for progress by integrating the permitting process at the BKPM and other ministries or government agencies (both at the central and regional level).

Ease of Doing Business in Indonesia: Slight Improvement Detected

Although Indonesia is only ranked 114th in the World Bank’s most recent ease of doing business ranking (published on 29 October 2014), there have been several improvements. The World Bank comments:

“Indonesia made starting a business easier by allowing the Ministry of Law and Human Rights to electronically issue the approval letter for the deed of establishment, a reform applying to both Jakarta and Surabaya. In addition, Indonesia made paying taxes less costly for companies by reducing employers’ health insurance contribution rate, another reform applying to both Jakarta and Surabaya. In Jakarta, the electricity company made getting electricity easier by eliminating the need for electrical contractors to obtain multiple certificates guaranteeing the safety of internal installations - though it also increased the cost by introducing a security deposit for new connections. In both Jakarta and Surabaya, trading across borders became more difficult because of insufficient infrastructure at the Tanjung Priok Port Jakarta.”

However, compared to its regional peers, Indonesia still lags behind:

Doing Business 2015 Ranking:

     1.   Singapore
     2.   New Zealand
     3.   Hong Kong
     4.   Denmark
     5.   South Korea
     6.   Norway
     7.   USA
    18.   Malaysia
    19.   Taiwan
    26.   Thailand
    29.   Japan
    78.   Vietnam
    90.   China
    95.   Philippines
   114.   Indonesia

Source: World Bank 'Doing Business 2015'

Ease of Doing Business in Indonesia:

Please note that - when you click on the links below that lead you to the World Bank website - the 2014 ranking mentioned on the World Bank website is not last year's published ranking but a comparable ranking for the Doing Business 2014 Report that captures the effects of such factors as data corrections.

  2014 Rank   2015 Rank
 Starting a Business        158        155
 Dealing with Construction Permits
       150        153
 Getting Electricity
       101         78
 Registering Property        112        117
 Getting Credit         67         71
 Protecting Minority Investors         43         43
 Paying Taxes        158        160
 Trading Across Borders         61         62
 Enforcing Contracts        171        172
 Resolving Insolvency         71         75

Source: World Bank 'Doing Business 2015'

Key Findings:

Indonesia’s economic growth cannot reach its full potential due to bureaucracy (red tape)

Newly inaugurated President Joko Widodo is eager to combat the country’s bureaucracy in an effort to optimize and maximize foreign and domestic investments

The World Bank is not positive about the ease of doing business in Indonesia. In its latest ‘Doing Business Ranking’ (published on 29 October 2014) Indonesia ranks 114th