3.1.5 Business Environment
The current business environment in Indonesia can be characterized by the fast pace of reform coupled with general high levels of optimism. The country has been moving from the planned market economy toward a decentralized economy, and currently enjoys a stable political and economic outlook (World Bank 2010a). The business environment has also been positively affected by the country’s fast recovery from the global economic slowdown, together with the overall reforms and decentralization policies that improved the economic growth and outlook. Several issues, however, remain, with the most problematic factors being government bureaucracy and corruption (Schwab 2011), following the low quality of the country’s infrastructure. Reforms have successfully reduced the startup time for a new business by 70 percent, from 151 days in 2006 to 45 days in 2011. Additionally, the number of procedures required was also reduced from 12 in 2006 to 8 in 2011. The time spent to get construction permits was reduced by 15 percent from 186 days in 2005 to 158 days in 2011 (World Bank 2012a). But Indonesia remains well below the OECD average, which requires only 5 procedures to start a business, taking around 12 days. Table 3.4 provides a snapshot of doing business indicators in Indonesia. Table 3.4 Indicators for Doing Business in Indonesia Compared to OECD Average Indonesia
OECD
1. Starting a Business
Indonesia
OECD
6. Protecting Investors
Procedures (#)
8
5
Extent of disclosure index (0-10)
10
6
Time (days)
45
12
Extent of director liability index (0-10)
5
5
Cost (% of income per capita)
17.9
4.7
Ease of shareholder suits index (0-10)
3
7
Paid-in min capital (% income per cap)
46.6
14.1
Investor protection strength (0-10)
6
6
Rank (Change in rank from 2011)
46 (-2)
Rank (Change in rank from 2011)
155(+1)
2. Dealing with Construction Permits
7. Paying Taxes
Procedures (number)
13
14
51
13
158
152
Time (hours per year)
266
186
Cost (% of income per capita)
105.3
45.7
Profit tax (%)
23.7
15.4
Rank (Change in rank from 2011)
71 (0)
Labor tax and contributions (%)
10.6
24
0.1
3.2
34.5
42.7
Time (days)
Payments (number per year)
Other taxes (%)
3. Getting Electricity
Total tax rate (% profit)
Procedures (number)
7
Time (days)
5
108
103
Cost (% of income per capita)
1,379.0
92.8
Rank (Change in rank from 2011)
161 (-3)
4. Registering Property
Rank (Change in rank from 2011)
131 (+3)
8. Trading Across Borders Documents to export (#)
4
4
Time to export (days)
17
10
644
1032
Cost to export (US$ per container)
Procedures (number)
6
5
Documents to import (#)
7
5
Time (days)
22
31
Time to import (days)
27
11
10.8
4.4
Cost to import (US$ per container)
660
1085
Rank (Change in rank from 2011)
39 (-1)
Cost (% of property value) Rank (Change in rank from 2011)
99 (-3)
5. Getting Credit
9. Enforcing Contracts
Strength of legal rights index (0-10)
3
7
Time (days)
Depth of credit information index (0-6)
4
5
Cost (% of claim)
Public registry coverage (% of adults)
31.8
9.5
Private bureau coverage (% of adults)
0
63.9
Rank (Change in rank from 2011)
Procedures (number) Rank (Change in rank from 2011)
570
518
122.7
19.7
40
31
156 (-2)
126 (-10)
10. Resolving Insolvency Time (years)
5.5
Cost (% of estate)
18
9
13.8
68.2
Recovery rate (cents on the dollar0 Rank (Change in rank from 2011)
1.7
146 (+3)
Source: World Bank 2012a. Note: Ranking is out of 183 countries.
Despite the reforms and impressive growth rates, Indonesia’s business environment is still weighed down by the 32 years of centralization of authority, corruption, and weak governance of the Suharto rule. In 1997 it
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