Illegal fees remain a huge problem for business: Survey

Sari P. Setiogi, The Jakarta Post, Jakarta

Businesspeople still see illegal fees as a major problem in doing business and they are unable to put a stop to the practice as police and court officials are among those who demand the illegal fees, according to a survey.

The latest survey made by the Regional Autonomy Watch (KPPOD), released on Monday, indicates that businesspeople were obliged to pay illegal fees to court officials, security officers, community groups and thugs in order to secure their business interests.

In some companies, the illegal costs account for up to 10 percent of costs, quite high in view of the fact that many of them are still struggling to achieve a mere 5 percent profit amid the continued doldrums in many sectors of the economy.

KPPOD is formed by the National Economic Recovery Committee (KPEN), a group of leading businesspeople.

The survey said, of the illegal fees, 13.1 percent were paid to court officials, 11.5 percent to security officers, 8.5 percent to community groups and 6.1 percent to thugs.

The payment of illegal fees are particularly common in the forestry, agribusiness and mining sectors.

The survey does not name the regions where the practice mostly occurs.

The report was made after a survey conducted last year on 5,140 companies operating both at the regional and national levels -- including foreign companies.

The survey covered 200 districts and cities in 29 provinces.

Out of the surveyed companies, 85 percent said they paid the illegal costs, while 15 percent did not respond.

Executive director P. Agung Pambudhi said on average the illegal costs reached 2 percent of the production cost, while 337 respondents or 3 percent said the illegal costs reached between 8 percent and 10 percent of total production costs.

The survey found that 44.8 percent of respondents said the regional regulations were "quite supportive", while another 28.3 percent described the regulations as "very supportive".

Only 6.8 percent of respondents said the regulations were "not supportive", while the remaining 20.2 percent say they were "less supportive".

However, almost all of the business players surveyed (86 percent) said they were not involved in the process of a making business-related regional regulations.

The study shows 32 percent out of 896 regional regulations are damaging to business.

"Facts show that illegal costs continue causing problems for us (business players) ... At the moment, investors could only achieve an average profit of about 5 percent. With illegal costs reaching 2 percent, who else will invest here?" said KPEN chairman Sofyan Wanandi.

He said currently investors were still reluctant to enter the country.

"As the survey shows not only the government but also the regional authorities are causing problems for us."

Separately, economist with the Center for Strategic of the International Studies (CSIS), Djisman Simandjuntak, said Indonesia should do its utmost to get rid of all problems haunting the business sector as many countries, such as China, India and Vietnam, are now doing to lure investors.

"It's now or never, if we do not get any better, more foreign investors may pull their investments out of the country," he said.