RI's red tape must be cut despite 'big rating hike'

JAKARTA (JP): The Indonesian Chamber of Commerce and Industry (Kadin) asked the government yesterday to further cut red tape to improve economic efficiency, despite a big improvement in the country's competitiveness rating.

Sjahrir, director of the chamber's Institute for Economic Studies Research and Development, said red tape, bribery and other illegal payments could make Indonesia less attractive to foreign investors.

"Foreign investors tolerate irregular payments and count them as routine business expenditure now, but they will be concerned about them eventually," Sjahrir said.

Sjahrir said the World Economic Forum rated Indonesia the worst country in terms of "irregular additional payments" or illegal payments in 1997.

Indonesia's success in climbing from 30th place to 15th place on the forum's 1997 Global most competitive economies ladder would be harder to maintain next year, he said.

"The government must eliminate red tape to attract more foreign investment," he said.

The forum upgraded Indonesia's competitiveness ranking this year. It was the highest jump of any of the top 20 ranked countries.

Sjahrir said competitiveness was assessed on 155 criteria drawn from survey and quantitative data.

He said Kadin cooperated with the WEF by distributing survey questionnaires to small and large businesses, whether they were Kadin members or not.

This year, Kadin distributed 100 questionnaires in Jakarta and 50 each in North Sumatra, West Java, and East Java, he said. Last year they distributed 150 questionnaires in Jakarta.

The economic forum used eight factors to evaluate competitiveness. The most important were: openness of economy to international trade and finance, the role of the government's budget and regulations in improving the business climate, the development of financial markets and labor market flexibility.

Other factors were the quality of infrastructure, technology, business management and judicial and political institutions, he said.

Sjahrir said the WEF data showed the country's openness to international trade and finance jumped to fifth place this year from 38th position last year.

The role of the government's budget and regulation in improving the business climate went up three notches to fifth position this year from 8th place last year, he said.

Labor flexibility improved to sixth place from 26th place last year, he said. This was due to an improved labor force, the availability of workers with basic skills, the cost of labor, and labor regulations, he said.

Sjahrir said market size and market growth were the major deciding factors for investors. The WEF's report listed Indonesia in fifth place in terms of market growth index.

This year's global competitiveness report featured a new survey in which WEF asked business leaders to judge the 10 most competitive economies. This survey judged Indonesia the 19th most competitive economy.

Sjahrir said Kadin had asked for more survey questionnaires next year to distribute them to eastern Indonesia as well. (das)