Indonesia EODB Jumps But Still Behind Malaysia

Headquarter of World Bank - Photo by World Bank

JAKARTA (TheInsiderStories) – Indonesia has made significant progress in its business climate as measured by the ‘Ease of Doing Business’ (EODB) global ranking for 2018, issued by World Bank on Wednesday (Nov. 1). The latest EODB ranking shows Indonesia is amongst the world’s top 10 reformers.

In this year’s ease of doing business global rankings, the country moved up to 72nd place from 91st position last year.

Chart by World Bank

With this achievement, Indonesia’s position is still higher than other developing countries, including South Africa (82), India (100), Philippines (113), and Brazil (125). This year, Indonesia’s position passed China, which is ranked 78th but still below Malaysia in 24th.

According to the report, more than half of these reforms have been implemented in the last four years.  For a second consecutive year, Indonesia carried out seven reforms, the highest single-year count for the country.

The report, which is a survey among 190 countries, takes into account the processes that an entrepreneur has to go through to start and operate a business in the country.

“Indonesia has accelerated the pace of reforms in recent years and its efforts are paying off. We commend the government’s continued determination to improve the business environment in the country. Continuation of the reform momentum, and a widening of the reform effort to include openness and competition reforms, is the key to further stimulating the country’s private sector,” said Rodrigo A. Chaves, Country Director for Indonesia.

The reforms implemented in the past year in Jakarta and Surabaya, the two cities covered by the report, are:

  • Starting a business was made less costly with a reduction in business start-up fees to 10.9 percent of income per capita, from 19.4 percent.
  • Getting electricity was made less costly by reducing connection and internal wiring certification fees. The cost to obtain an electricity connection is now 276 percent of income per capita, down from 357 percent. In Jakarta, getting electricity was also made easier by streamlining the application processing for new connections.
  • Access to credit was improved with the establishment of a new credit bureau.
  • Trading across borders was facilitated by improving an electronic billing system for tax, customs and excise as well as non-tax revenue. As a result, the time for obtaining, preparing, processing, presenting and submitting documents when importingdecreased from 133 to 119 hours.
  • Registering property was made less costly by a reduction of transfer tax, reducing the total cost from 10.8 percent to 8.3 percent of the property value.
  • Minority shareholder rights were strengthened by increasing their role in major corporate decisions and enhancing corporate transparency.

In the last 15 years, the country has reformed the most in Starting a Business, with eight reforms since 2003. As a result, starting a new business in Jakarta now takes 22 days, compared with 181 days in Doing Business 2004. However, the number of procedures required to register a new business remains high, at 11, compared with five procedures in high-income OECD economies.

Indonesia has also made significant improvements in Resolving Insolvency, an area in which the country performs best. In 2003, the recovery rate was only 9.9 cents on the dollar. This has jumped significantly to 65 cents today.

Indonesia still needs to improve in the area of Enforcing Contracts. While the cost for resolving a commercial dispute through a local first-instance court in Jakarta has almost halved from 135.3 percent of the claim in 2003 to 74 percent now, it is still much higher than the average cost of 21.5 percent in high-income OECD economies.

By Elisa Valenta, email: elisa.valenta@theinsiderstories.com