JAKARTA (TheInsiderStories)—The Indonesian government’s rush to launch an online single submission (OSS) system pours more uncertainty into the country’s investment climate.
Indonesian government finally launched OSS, an integrated web-based business permit application, today (09/07), a delay from the initial schedule of April 2018. The government ensured the OSS system will make the business licensing granting proceed in less than an hour.
In the launching ceremony, the Coordinating Minister for Economic Affairs Darmin Nasution said OSS system was built since October 2017 as the implementation of Presidential Regulation No. 91/2017 on Accelerating Enforcement of Businesses and has conducted concept test at three locations, namely Purwakarta, Batam, and Palu.
The design of this information technology-based system is basically by interconnecting and integrating licensing service system in the Investment Coordinating Board, integrating licensing service system in the provincial, and using the Communication and Information Ministry system.
The system includes various ministries and institutions issuing licenses, including Indonesian National Single Window (INSW) system, General Legal Administration System of the Ministry of Justice and Human Rights, and the Information System of Population Administration of the Ministry of Home Affairs.
Currently, the Coordinating Ministry for the Economy has also made OSS lounge which is expected to be the standard in integrating licensing service system. In the OSS lounge, there are self-service, assisted services, priority services, general investment consultations, and clinics.
Task Force units to oversee the process of completing licensing have been established in all Provinces. However, some of the district and cities have not completed its task forces.
According to the Coordinating Ministry for Economic Affairs data on May 2018, 17 provinces completed the task forces desks in the provincial and regency/municipal levels including DKI Jakarta, Central Java, Yogyakarta, Riau, North Sumatra, and South Sulawesi. However, another 17 provinces have not yet completed the task forces booth in the regency/municipal levels including East Java.
The OSS operation is currently under the control of the Coordinating Ministry for Economic Affairs with the support of INSW and other relevant ministries. However, this is only a transitional period while preparing for its permanent implementation at the Investment Coordinating Board.
The launch of OSS was delayed as the Investment Coordinating Board was not ready to run OSS without a transitional period. It made the launching delay from an initial target of April 2018. This makes the system following its business license was taken over by the Coordinating Ministry of Economic Affairs until the end of the year.
The Chairman of Investment Coordinating Board Thomas Lembong earlier criticizes the absence of transition period in the OSS launching, even though he mentioned that Indonesia needs OSS to increase investment. In addition, Lembong Thomas still finds many licensing procedures issued by each ministry/agency and local government without going through the OSS.
“Frankly, we continue to monitor the issuance of licenses of several ministries/institutions and local governments through the online system at the Investment Coordinating Board. Many permits are currently issued not through the OSS system, ” he added.
The sudden change of permit application made investors confused because business permit application in the Investment Coordinating Board was suddenly stopped since June 29, 2018, while the system in OSS in Coordinating Ministry for Economic Affairs was not ready yet. The government has not been conducted socialization related to the shifting, even though the Investment Coordinating Board usually serves 150 investors per day.
Furthermore, the House of Representative also criticized the authority of OSS in accordance with Government Regulation No. 24 of 2018 contradicted to the Investment Coordination Board function pursuant to Law Number 25/2007 on Investment.
This could add more problem in Indonesia’s investment climate. It is worth noting that Indonesia is currently ranked 72 out of 190 countries in Indonesia’s ease of doing business (EODB) ranking to 40 in 2019 from the current ranking of 72 out of 190 countries. Indonesia’s ranking is still below Singapore which ranks 2nd, Malaysia at 24th, Thailand at 26th, Brunei Darussalam at 56th, and Vietnam at 68th.
The investment climate in Indonesia is still haunted by various problems including lack of infrastructures, lack of incentives, high energy cost, high dependency on the imported raw materials, and high logistic cost.
In the energy cost, electricity tariff n Indonesia is more expensive than Vietnam and Bangladesh. Indonesia’s electricity tariff is about US$0.12 per kWh, much higher than its peers such as Vietnam and Bangladesh which is only US$0.7 and US$0.5, respectively.
In addition, the country’s logistic cost-to-GDP ratio is far higher than those of neighboring countries, including Thailand and Malaysia where the ratio reached 15 per cent and 13 per cent, respectively.
Indonesia is also scored poorly in the World Bank’s 2016 Logistics Performance Index (LPI), as it got the 63rd rank out of 163 countries. Indonesia’s logistics infrastructure, international shipment, and logistics competence are elements scored the least.
The Indonesian government must remember that the implementation of OSS alone has not been able to lure investment. Conversely, the hurry and rowdy OSS implementation potentially worsen the country’s investment climate.