Corruption a serious threat to business sector, Kadin says

Fitri Wulandari, The Jakarta Post , Jakarta

Rampant corruption, coupled with ineffective bureaucracy and unfavorable industrial relations, remains the main obstacle in doing business in this country, the Indonesian Chamber of Commerce and Industry (Kadin) said in its year-end assessment.

Kadin chairman Aburizal Bakrie told a media conference on Monday that corruption and collusive business practices had created uncertainty and worsened the investment climate here.

Aburizal cited a study from the prestigious University of Indonesia that shows that businesses have to set aside 10 percent to 11 percent of production costs for bribes.

He explained that one of the direct impacts of the above problems was a slowdown in the recovery of the country's crucial manufacturing sector, which has seen a decline in production capacity, as new investment in the sector remains low despite hard-won macroeconomic stability.

The recovery of this sector is important as it can provide a huge number of jobs for the millions of people left jobless following the late-1990s economic crisis.

Aburizal also criticized the country's ineffective bureaucracy.

He cited a World Bank study, which shows that it takes 196 days to set up a company in Indonesia, while it only takes 50 in Vietnam and 5 in Singapore.

He said that corruption and the ineffective bureaucracy had worsened the country's competitiveness.

The World Economic Forum recently ranked Indonesia 60th of 102 countries surveyed in terms of business competitiveness.

Aburizal said it was urgent to reform the bureaucracy in the country to reduce corruption and collusive business practices.

Kadin plans to work with different groups as part of the organization's drive to combat corruption. The organization signed an antibribery pact last week with Muhammadiyah Students Association (IMM), under which IMM will be involved in an antibribery campaign.

"We shall sign an antibribery pact with different groups, including students. We want to inform the public that bribery is damaging and needs to be eliminated," Aburizal told The Jakarta Post.

Aburizal added the business sector needed a business-friendly government.

"We need a strong leader who can ignore political parties and select capable people who understand business and the economy," he said.

Aburizal cited the government's minimum wage policy as an example of what was undermining the country's business competitiveness. He said that minimum wages in Jakarta were higher than those in Hanoi and Shanghai.

The upcoming election also raises concern on whether it can produce a government that is committed to economic development, Aburizal added.

"They want a government that can tackle problems like the rising price of goods, unemployment and other matters," he remarked.

He said that improving the investment climate at home was crucial to attracting new investment to the country to help the economy grow at a faster rate and create more jobs.