Indonesia rose six positions in the 2017 edition of the IMD World Competitiveness ranking. In this edition Southeast Asia's largest economy was ranked 42nd. This is positive because it shows the government's reform agenda is having an impact by improving the investment and business climate. However, Indonesia remains ranked behind its regional peers the Philippines (41st), Thailand (27th), Malaysia (24th), and Singapore (3rd).
Indonesia's Investment Coordinating Board (BKPM), the investment services agency of the central Indonesian government, is content seeing the progress and attributes the improvement to the government's efforts to enhance the quality and efficiency of Indonesia's investment and business climate. For example, logistics costs are now lower (for some businesses) due to improvement in local harbors, while it now also requires less time to obtain certain permits.
This enables companies and investors to realize the start of construction and production in line with their schedule. Meanwhile, Azhar Lubis, Deputy Chairman of the BKPM, said internal efficiency measures undertaken by companies in their production process have also contributed to rising competitiveness.
Last month we reported there has been an improvement in the degree of bureaucracy under the Joko Widodo administration. However, investors continue to complain about the difficulty of obtaining all necessary investment permits, especially in the regions of Indonesia. It are not the basic permits and licenses that are difficult to obtain (for example the basic permits required to incorporate a foreign company) but it are the more special permits that remain complicated and time-consuming because these permits need approval from various government departments (particularly when it involves investment outside the industrial areas). For example, a building permit (Izin Mendirikan Bangunan, IMB) or the environmental impact analysis (Analisis Mengenai Dampak Lingkungan, or AMDAL) remain difficult to obtain.
Lubis added the government remains committed to keep improving the business and investment climate of Indonesia, both at the central and regional level. For example by cutting unnecessary regulations. He emphasized it is inevitable to increase the focus on rapidly developing information technology to make the permitting process in Indonesia more efficient and effective. This would eventually mean that the investor does not have to meet face-to-face with any government officials during the whole process. The advantage is that it would limit room for officials requests for bribes (which may scare off investors).
Another strategy to improve Indonesia's investment and business climate is to speed up infrastructure development, including the construction of roads, harbors, power station, and industrial zones.