Jakarta Loses its Luster for Attracting New Investors

Jakarta's CBD (photo by : RK)


JAKARTA (TheInsiderStories) – Jakarta, Indonesia’s capital city seems to have lost its momentum for attracting investors in 2017, meaning it is possible it will cease being the top destination for investors, according to a survey held by Asia Competitiveness Institute (ACI).

A new Ease of Doing Business (EoDB) index released by ACI shows ‘Special Capital City of Jakarta (DKI) has slipped from second to fourth ranking, in terms of ease of doing business in Indonesia.

Jakarta lost to East Java, West Java, and Central Java, respectively ranked first, second, and third.

Research Fellow and Deputy Director of ACI Mulya Amri surmised that the downturn in Jakarta’s ‘business-friendliness’ is the result of stagnant performance in recent years, in term of regulatory breakthroughs.

“The Jakarta scores on the average indicator of ‘Responsiveness to Business’ and ‘Competitive Policies’ reveal that Jakarta is still less competitive compared to provinces that have achieved much progress,” Mulya said at a press conference on Tuesday (21/11).

Executive Director of Jakarta Property Institute Wendy Haryanto pointed out how building permit processes (one of the important indicators of ‘ease of doing business’) is still at the top of the list of problems in Jakarta.

‘Until now, there has been no significant innovation related to the licensing process in Jakarta; one area of concern is the One Stop Service and One Stop Service (DPMPTSP) as the frontline of licensing, as it incurs many problems,’ said Haryanto.

In addition, she continued, the complexity of regulation at national and provincial levels is an important factor in terms of licensing management efficiency. There is currently no private sector involvement in policy formulation.

“The complex licensing process in Jakarta is a challenge for the Jakarta Provincial Government and also for property sectors,” she said.

A downgrade in the ease of doing business can influence the decision of potential investors in determining the location of their investment, influencing them to move to other areas where the business climate is more conducive, and the ranking of business convenience is higher, and can ultimately impact on the economy and absorption of labor in less attractive areas.

These problems could stand as obstacles for new Jakarta Governor Anies Baswedan and Vice Governor Sandiaga Uno, who have already set up quick wins for their first 100 days in office covering important aspects such as job creation, high-quality education and lowering the cost of living in the capital.

ACI Co-Director Tan Kong Yam explained that the ACI index is calculated based on economic statistics combined with 925 business outlooks from 33 provinces. He claims that ACI’s ‘ease of doing business’ is more comprehensive than a similar index released by the World Bank.

According to Tan Kong Yam, investors are currently looking at how the provincial government intends to expedite investment procedures. For them, he continued, regulatory reform alone is still not enough.

“To decide on investment objectives, they also consider infrastructure and labor conditions, market potential, and cost-effectiveness, so we include these factors in this index,” Tan Kong Yam said.

Written by: Elisa Valenta, email: elisa.valenta@theinsiderstories.com