Cumbersome bureaucracy undermines competitiveness

Tony Hotland, The Jakarta Post, Jakarta

Indonesia's global competitiveness has improved over the past year, and yet it is battered by an inefficient bureaucracy, inconsistent policies and corruption, according to the World Economic Forum (WEF).

The forum's latest global competitiveness report, released here on Thursday, shows that Indonesia ranks 69th out of 104 countries surveyed this year in terms of growth competitiveness and 44th out of 103 in terms of business competitiveness.

This is an improvement from last year, when Indonesia's growth competitiveness ranked 72nd and business competitiveness 60th, and also marks the first improvement recorded since Indonesia joined the WEF in 1996.

The WEF is an independent, international organization that groups together corporate leaders and provides a platform for addressing global issues.

Tulus Tambunan, head of research at the Indonesian Chamber of Commerce and Industry (Kadin), said a quick assessment of the report showed that the considerably better security condition and higher growth rate contributed to Indonesia's improved standing.

The Growth Competitiveness Index examines three macro factors critical to economic growth: quality of macroeconomic environment, public institutions and technological development.

Meanwhile, the complementary Business Competitiveness Index evaluates two areas critical to the business climate: the sophistication of the operating practices of companies and the quality of the business environment in each country.

Aside from the inefficient bureaucracy, inconsistent policies and corruption that top the list of most problematic factors, the WEF report also pointed to inadequate infrastructure, tax rates, tax regulations, access to financing, restrictive labor regulations, crime and theft, government instability and poor work ethics as inhibitive for doing business in Indonesia.

Tulus said the report only confirmed the conditions that had shackled businesses here.

The cumbersome bureaucracy, for example, provide a loophole for charging foreign and domestic investors illegal fees, which could comprise 25 percent to 30 percent of production costs.

Inconsistent policies have also cost local and foreign businesses alike, with overlapping regulations making it difficult for businesses to make long-term plans and strategies, Tulus said.

"For businessmen here, these problems are the main factors that have bogged them down, and the government must resolve these issues quickly," he said.

While it has shown initial improvement, Indonesia still has a long way to go before it can vie with other Asian countries in terms of growth competitiveness. Neighboring Singapore, for example, ranks 7th, Malaysia at 31st, Thailand at 34th, China at 46th and India at 55th.

In terms of business competitiveness, Indonesia lags far behind Singapore, ranked 10th, followed by Hong Kong at 11th, Malaysia at 23rd, India at 30th and Thailand at 37th.

The world's top five in growth competitiveness are Finland, the United States, Sweden, Taiwan and Denmark, while leading in business competitiveness are the United States, Finland, Germany, Sweden and Switzerland.

Competitiveness Ranking

Growth Business

1. Finland 1. U.S.

2. U.S. 2. Finland

3. Sweden 3. Germany

4. Taiwan 4. Sweden

5. Denmark 5. Switzerland

6. Norway 6. U.K.

7. Singapore 7. Denmark

8. Switzerland 8. Japan

9. Japan 9. Netherlands

10. Iceland 10. Singapore

21. Hong Kong 11. Hong Kong

29. Korea 23. Malaysia

31. Malaysia 24. Korea

34. Thailand 30. India

46. China 37. Thailand

55. India 44. Indonesia

69. Indonesia 70. Philippines

76. Philippines 79. Vietnam

102. Bangladesh 95. Bangladesh

104. Chad 103. Angola

Source: WEF Global Competitiveness Report