President Susilo Bambang Yudhoyono last week issued a regulation which now requires all 524 regency and municipal administrations to quickly and efficiently process all business licenses needed by an investor through a one-stop licensing centre.
The centre, said a deputy to the coordinating minister for the economy, Eddy Putra Irawadi, will integrate the processing of applying for all business permits required by regional service agencies into a single online system.
The facility will operate like the National Single Window at customs clearance, which enables a single submission of information and data to be simultaneously processed through close collaboration with the various ministries involved.
This new ruling came as quite a pleasant surprise. It has been two years since the enactment of the new investment law in 2007, and still the Investment Coordinating Board (BKPM) has not yet been developed into an effective one-stop investment centre for issuing permits under the central government’s jurisdiction.
The online system developed for the submission of applications and processing of business permits will minimize physical contact between businesspeople and officials, which is normally the point at which collusion and corruption start.
Several regency and municipal administrations, which understand the key role of investment in generating jobs, have taken the initiative to cut down bureaucratic procedures and streamline business licensing long before the issuance of this presidential decree. But they are still the exception rather than the rule.
However, as provincial governors, regents and mayors have to compete in direct elections, more regional administrations are beginning to realize that economic records, which directly benefit the people - meaning jobs - are the most effective means of gaining voter support.
It is private investment that creates jobs. This in turn generates wages and purchasing power for locals and consequently creates market demand for numerous goods and services, from which local administrations can raise levies.
The inadequate institutional capacity of the public administration and an acute lack of basic infrastructure have hindered investment, especially outside Java. No wonder Java accounts for around 60 percent of the national gross domestic product while most of natural resources such as minerals, forests, plantations and fisheries are located on the outer islands. The new regulation will surely improve the ease of doing business in the regions.
However, improvement at regional administrations alone will not be sufficient to woo new investment. As long as the BKPM cannot effectively serve as a one-stop administration centre for all business licenses required from the central government, as mandated by the 2007 investment law, national economic growth will remain low.
The President should issue another regulation to streamline and integrate the processing of all permits needed by an investor from the various ministries in Jakarta because ministries will not voluntarily surrender their licensing authority to another agency.
Within the scheme of things in our bureaucracy, licensing authority often functions as a source of “power” for corruption.
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