Business reform package: Easier said than done

Recently, the International Finance Corporation released its ranking for “Ease of Doing Business” in 189 countries/economies. Indonesia, as usual, remains low on the list and even dropped four points to 120th place, down from the previous ranking of 116. We are far below our neighbors in ASEAN: Singapore (1), Malaysia (6), Thailand (18), only slightly higher than Cambodia (137), Lao (159) and Timor Leste (172).

The response of the central government has been the Policy Package on Ease of Doing Business, consisting 17 action plans to open the relevant bottlenecks.

To start a business, the necessary registration and social security arrangements will be cut from seven days each to just one day for both procedures; and the issuance of trading license (SIUP) and company registration (TDP) will be cut from 15 days to only three days.

But all this is not new. In 2009, four ministers issued a joint decree (SKB) with an ambitious target: to fast track the process to start a business. All the processes related to establishment of a corporation (PT) was targeted to be completed in eight days, issuance of taxpayer registration number (NPWP) and VAT collector number (NPPKP) in one day, and issuance of local licenses and social security in five days.

The result? Far below expectations. In 2010, the process of starting a business in this country was 60 days and this year it was 47 days.

Therefore, the Government’s Annual Plan of 2012 that targeted the establishment of a business to be 20 days in 2013 was not achieved. Compared to 2012, when we got a ranking of 161 for ease of starting a business, in 2013 it dropped five points to 166 and in 2014 it is predicted to drop again sharply to 175.

The challenge — as usual — lies in execution, monitoring and evaluation. We may have made a good plan, a more comprehensive and integrated package; however, a strategy is very important, regarding the priority that will be a show case and a leverage point at once.

We need to focus our attention on the elements of starting a business. First, to improve our global image, the index of “starting a business” has its own prestige in the index composition of “ease of doing business”.

Second, the ease in starting a business itself means the early stage of business should be easy; for small and medium scale businesses, serious challenges often occur in the early stages.

Third, in the context of decentralization, starting a business is obviously the most complex stage since it involves the central and local government, also private parties and professionals like notaries, lawyers apart from business people.

Fourth, this stage has been the government’s experiment for the last four years, but the main targets have not been achieved.

In my study of the issue from 2008-2012, there are some apparent problems in policy management that have hindered efforts in making it easier to start businesses here.

First, such multi sector policy demands a strong control authority. The joint ministerial decree intended to speed up the process of doing business showed that when parties involved in the agreement are officials at the ministerial level, commitment to coordination is apparently impossible.

Therefore, the Vice President should not just make an announcement and set a target, but, based on the progress report prepared by the President’s Supervision and Management of Development unit (UKP4) he could also force the indolent parties to work harder, or else face penalties.

Second, considering that the target to realize 17 action plans is February 2014, arrangement of government and ministerial regulations as well as operational preparation must be conducted simultaneously.

So far, regulations needed for the action plans have already been available. For instance those regarding trade licenses are based on the 2007 Ministry of Trade regulations. But now the issue is in regards to the implementation strategy for these two regulations, which states such licenses are completed in three days at the latest, instead of 15 days in the current practice.

Third, performance in the province of Jakarta is the test case. Today, processing trade licenses in the capital city is still 15 working days. One reason is that the bureaucratic procedure in a permit process is more like a one roof model rather than a one stop service.

This situation demands for close coordination between the central and the Jakarta administrations. At the local level the commitment of the governor and his deputy is obviously strong, but it is still hard to garner support from the politicians at the legislative council on Jl. Kebon Sirih.

After that, preparation and implementation levels to speed up the start of businesses need intensive facilitation and assistance.

The new institution’s capacity and management capability can be guaranteed if supported by an institutional capacity strengthening program and a change in the services culture of the relevant bureaucracy.

All the above matters show that the Policy Package is one thing, but its realization can be another. Implementation strategy, monitoring and evaluation are key aspects.

The essence is the Vice President’s authority to ensure that all parties move forward in a harmonious tune.

The bureaucratic procedure in a permit process is more like a one roof model rather than a one stop service.

The writer is executive director of Regional Autonomy Watch (KPPOD), Jakarta.

Business reform package: Easier said than done