Out of 155 economies rated in the 2006 World Bank (WB) Doing Business Report, Indonesia ranks only 115th in respect of its “ease of doing business”. Interestingly, Iraq ranks 114th which reminds that figures, in general, should be interpreted cautiously. Indonesia has in fact been steadily recovering from the turmoil of the financial crisis and is resolutely engaged in the long battle of eradicating the corruption, collusion and nepotism that had become the norms of the country’s political and economical system and brought it to its collapse.
In a few years time, through the continued implementation of prudent fiscal and monetary policies, the Indonesian Government managed to control and restore macroeconomic fundamentals. Miranda Gultom, Senior Deputy Governor of Bank Indonesia, the Indonesian Central Bank, declared on July 26, 2006 that Government could repay this year the remainder of its debt of US$ 3.74 billion to the International Monetary Fund (IMF).
The Indonesian Government succeeded also in enhancing the stability of the financial system by a continuous strengthening of the banking system: “Indonesia has a thriving banking system for the first time in its history” says German Vegarra, country manager at the International Finance Corporation (IFC) in Jakarta in the June 2006 issue of Asia Money. “Ten years ago, banks where there to lend at their whim to their cronies and, more often than not, to themselves”.
Recently, the Government gave a new impulse to its efforts to restore investment – the engine of long-term growth and employment generation – which had remained relatively weak until now. On February 27, 2006, the President issued a Policy Package for Improvement of the Investment Climate instructing individual Ministers to implement 85 precise time-bound regulatory and institutional reforms in 2006. The package focuses on five areas: general investment policies, customs, excise and duties, taxation, labour and small and medium enterprises (SMEs).
The Ministry of Trade (MoT) met the first key deadline in the package by submitting a new draft Investment Law to the Parliament on March 22. The draft law intends to unify the existing separate Domestic Capital Investment Law and Foreign Investment Law and reinforce investment protections including national treatment, the right to repatriation of profits, guarantees against nationalization and expropriation, fiscal and non-fiscal incentives and in terms of dispute settlement. In conjunction with a new investment law, the Government plans a number of other regulatory changes including a revised Government Regulation setting out “clear, simple and transparent” criteria for the Negative Investment List.
As part of the investment climate improvement package, the MoT also issued decrees simplifying application procedures and eliminating some bureaucratic requirements for eight separate trade licenses (trade business license, representative office license, surveyor business activity license, franchise business registration document, agency and distribution registration document, alcoholic beverages trade business license, multi-level sales business license and warehouse registration document). Under Indonesian law, all local companies must obtain a trade business license (SIUP) as part of the business establishment process. In a 2005 survey, the International Finance Corporation (IFC) estimated this step took companies an average of 14 days. The new decrees seek to shorten the SIUP issuance process to five days, reduce the number of documents required from six to four, and standardize fees throughout Indonesia.
In a few years time, through the continued implementation of prudent fiscal and monetary policies, the Indonesian Government managed to control and restore macroeconomic fundamentals. Miranda Gultom, Senior Deputy Governor of Bank Indonesia, the Indonesian Central Bank, declared on July 26, 2006 that Government could repay this year the remainder of its debt of US$ 3.74 billion to the International Monetary Fund (IMF).
The Indonesian Government succeeded also in enhancing the stability of the financial system by a continuous strengthening of the banking system: “Indonesia has a thriving banking system for the first time in its history” says German Vegarra, country manager at the International Finance Corporation (IFC) in Jakarta in the June 2006 issue of Asia Money. “Ten years ago, banks where there to lend at their whim to their cronies and, more often than not, to themselves”.
Recently, the Government gave a new impulse to its efforts to restore investment – the engine of long-term growth and employment generation – which had remained relatively weak until now. On February 27, 2006, the President issued a Policy Package for Improvement of the Investment Climate instructing individual Ministers to implement 85 precise time-bound regulatory and institutional reforms in 2006. The package focuses on five areas: general investment policies, customs, excise and duties, taxation, labour and small and medium enterprises (SMEs).
The Ministry of Trade (MoT) met the first key deadline in the package by submitting a new draft Investment Law to the Parliament on March 22. The draft law intends to unify the existing separate Domestic Capital Investment Law and Foreign Investment Law and reinforce investment protections including national treatment, the right to repatriation of profits, guarantees against nationalization and expropriation, fiscal and non-fiscal incentives and in terms of dispute settlement. In conjunction with a new investment law, the Government plans a number of other regulatory changes including a revised Government Regulation setting out “clear, simple and transparent” criteria for the Negative Investment List.
As part of the investment climate improvement package, the MoT also issued decrees simplifying application procedures and eliminating some bureaucratic requirements for eight separate trade licenses (trade business license, representative office license, surveyor business activity license, franchise business registration document, agency and distribution registration document, alcoholic beverages trade business license, multi-level sales business license and warehouse registration document). Under Indonesian law, all local companies must obtain a trade business license (SIUP) as part of the business establishment process. In a 2005 survey, the International Finance Corporation (IFC) estimated this step took companies an average of 14 days. The new decrees seek to shorten the SIUP issuance process to five days, reduce the number of documents required from six to four, and standardize fees throughout Indonesia.
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