Indonesia's rank in the latest Enabling Trade Index (ETI) published by the World Economic Forum dropped six notches to 68th place from last year due to security issues and inability to improve supporting infrastructure.
The index ranks 125 economies based on their ability to fully benefit from trade in market access, border administration, transport and communication infrastructure, and business environment.
According to the ETI report published on Thursday, Indonesia did better than most of the other lower-middle-income economies. The most positive aspects of Indonesia's performance were found in the regulatory framework pillar.
In particular, the country received good marks for the efficiency of its financial sector and of government policymaking, as well as for some measures of the country's openness to foreign participation, including the prevalence of foreign ownership, rules on foreign direct investment, and restrictions on capital flows.
However, the assessment was more negative regarding security due to the costs associated with the threat of terrorism and for the reliability of the police, in line with the average for the country group.
The quality of Indonesia's transport infrastructure, including roads and seaports, was also negative and airport density was low. According to the report, the availability and quality of transport services, though improving, were not satisfactory.
Meanwhile, the information and communication technologies infrastructure remained largely underdeveloped, with very sparse Internet usage and a very limited government online presence. Border administration also offered a mixed picture. Customs procedures associated with importing and exporting are relatively inexpensive and require little paperwork, but they still take a lot of time by international standards and border administration remains marred by corruption.
Singapore ranked the highest among other economies for the efficiency of border administration and the quality of logistics and transport services and possesses top-notch transport and communications infrastructure.
The second-highest among Southeast Asian countries was Malaysia in 30th place, for its high quality transport infrastructure and services, and border clearance procedures were fairly efficient and very inexpensive by world standards. However, the study found that the quality of the general business environment in Malaysia was deteriorating.
Vietnam showed the biggest improvement among other countries as it jumped 18 places to 70th, thanks to better market access. The area offering most room for improvement was border administration.
Recent efforts to streamline the efficiency of the country's customs led to a 10-place improvement in the related category, albeit from a low start. Trade could also be further enabled by upgrading the country's transport infrastructure, which is increasingly strained by the booming economy.
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