11/08/2007

News / With simple reforms, RI could rise: World Bank

Linked from: http://www.thejakartapost.com/detailheadlines.asp?fileid=20071108.B07&irec=6

Written by: Andi Haswidi

Without discouraging reforms on more complex platforms, the World Bank has said that by simply cutting bureaucratic red tape, Indonesia could significantly improve its position in the "Doing Business" survey next year.

"Potentially, Indonesia could jump to the 41st rank. It is a theoretical exercise, but it indicates that a lot can be done just by simply cutting red tape and not very complicated regulatory reforms," World Bank Doing Business 2008 researcher and spokesperson Sylvia Solf said in Jakarta on Wednesday.

Earlier in September, the WB released the Doing Business 2008 report, where Indonesia ranked 123rd out of the 178 countries surveyed, up from 135th last year.

The report, the fifth in an annual report series by the World Bank and its private sector development arm, the International Finance Corporation, ranks the best places to do business worldwide.

Despite being dubbed as the second fastest reformer in the East Asia Pacific region, Indonesia still lags behind regional countries such as Thailand, ranked 15th, Malaysia, at 24th place, and slightly below Vietnam, in 91st place.

The "simple" reforms, Solf said, actually divided into three categories: starting a business, registering property and getting credit.

"Just looking at the comparison with other countries, 105 days in Indonesia to start a business and also to comply with all other registrations, including tax registration and social security registration, is still a rather lengthy process and it quite costly," she said.

To speed things up, Solf said that the government should eliminate the minimum capital requirement, make notary involvement optional and consolidate government approvals at a one-stop shop.

The government is all too aware of the problem and has made some improvements, such as by issuing a regulation through the Justice and Human Rights Ministry in September that aims to centralize the issuing of business permits in the hopes of speeding up the process.

The government hopes to reduce the duration and cost of property registration as well.

According to the survey, it still takes an average of 42 days to register a transfer of property ownership, at a cost at about 10.5 percent of the property's value.

"Indonesia is actually a country with some of the highest costs in the region. Only a few specific countries have high costs to register property," she said.

Solf also said that making it easier for businesses to take out loans would also improve the country's ranking.

She said that lenders must be given access to credit information so as to improve risk management, and that borrowers must be allowed to collect and distribute information from retailers, trade creditors and utilities.

The central bank launched the Credit Information Bureau in June last year, although many analysts and professionals say there is much room for improvement.

"What a lot of countries have done is take some areas where you can see results very quickly. So this is all about cutting red tape," Solf said.

To give an example, she said that Egypt was able to increase business transactions by 40 percent after reforming its business start-up and property registration, whereas Saudi Arabia increased 80 percent more transactions just by reforming its business entry regulation.



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