Learn how the World Bank Group is helping countries with COVID-19 (coronavirus). Find Out

FEATURE STORY

Indonesia - The Most Active Reformer

September 9, 2009

STORY HIGHLIGHTS
  • Latest Doing Business report recognizes Indonesia as the region’s most active reformer of business regulations in 2008-2009
  • Time it takes to start up a new business has gone from 76 to 60 days -- a significant drop from the 100 days it took just three years ago
  • Indonesia’s Investment Coordination Board (BKPM) pledges to focus on reforming Companies Law and SME registration

Jakarta, September 9, 2009 – A nice little ‘birthday gift’ for the Indonesian president who happens to turn 60 today: global recognition of the fact that it is getting easier to do business in Indonesia. Doing Business 2010: Reforming through Difficult Times – the seventh installment in a series  of annual reports from the World Bank Group – recognizes Indonesia as the region’s most active reformer of business regulations in 2008-2009, and has accordingly bumped up its ranking from 129 to 122. Local businesses and entrepreneurs are now enjoying a relatively more enabling environment: the time it takes to start up a new business has gone from 76 to 60 days, marking a significant drop from the 100 days it took just three years ago. Other positive reforms include the time it takes to transfer property, which has dropped from 39 to 22 days, as well as the fact that investors now enjoy greater protection thanks to stronger disclosure requirements for related-party transactions. These reforms become particularly impressive once one takes into account that they were carried out during the height of the global economic crisis, and that Indonesia itself has managed to maintain positive economic growth during this difficult period for most of the world. 

Muhammad Luthfi, who leads Indonesia’s Investment Coordination Board (BKPM), was on hand for the report’s launch event and announced concrete steps to take business reforms even further. Luthfi says Indonesia would not be able to make any significant improvements on the Doing Business index so long as Law No.40/2007 on Companies remains as it is. The existing law enforces a minimum capital requirement to start up a business, which essentially negates the very point of starting a business. Luthfi highlights that such requirements are not imposed by governments of such neighboring countries as Singapore and Malaysia. Singapore, in fact, ranks number 1 in this year’s Doing Business index.

“I will personally write a letter to the President explaining that this law is very disruptive,” said Luthfi in a joint press conference after the launch. Luthfi hopes that the issue of Law No.40/2007 will become part of the President’s first 100-day work agenda.

Lutfi is also intent on improving conditions for small medium enterprises. At present, some 60 percent of all SMEs in Indonesia remain unregistered, and are denied the opportunity to flourish as legal entities. The process for SME registration is still riddled with red tape and can cost entrepreneurs anywhere between 5-13 million rupiah (500-1,300 USD). Lutfi envisions a simpler registration process which guarantees entrepreneurs official notary documents, a tax card, and funding from commercial banks. “That way, small businesses have the opportunity to grow into medium and eventually large businesses,” he said.

 


Api
Api