SMEs need one-stop service at regional level: ADB

Tantri Yuliandini, The Jakarta Post, Jakarta

The Asian Development Bank (ADB) said on Monday that the government should not establish separate bodies to handle corporate and investment licensing at the central government level but instead establish one-stop service agencies to handle all procedures at the regional level.

Mangara Tambunan from ADB's technical assistance (ADB-TA) program for small and medium enterprises (SMEs) said that plans to establish one-stop service units within different institutions of the central government -- such as by the Investment Coordinating Board (BKPM) and the Ministry of Industry and Trade -- would only overlap one another and create more bureaucracy.

"What we need is an independent body at the level of regional administrations that can bypass all the red tape of other institutions," he said, citing the Sidoarjo administration in East Java as one administration that had successfully launched a one-stop service for its SMEs.

"Those (agencies) of the central government should only give guidance, but the operational procedures should be coordinated at the regional level," Mangara said.

The Sidoarjo regent has successfully influenced the various governmental agencies in its area to allow an SME to process all licensing needs, including land leases, at a one-stop service office, he explained.

Mangara said that the government had planned one-stop service shops within regions since 1993 but only 50 were currently in existence and "very few are actually operating as they should".

He also criticized the BKPM's intention to centralize licensing procedures, saying that it was against the spirit of decentralization.

ADB-TA team leader Peter Bissegger said that the rationale for one-stop agencies was that SMEs should not be exposed to too many bureaucratic procedures that would only deter them from applying for official licenses.

According to the World Bank's 2000/2001 World Development Report, official and unofficial levies in Indonesia are expected to raise the costs faced by SMEs by as much as 30 percent.

Therefore, licenses should also be simplified, Bissegger said, and micro enterprises should not need specific business licenses unless their activities involve special public interest requiring safeguards, such as health and safety, he said.

"I do not see why beauty parlors should require specific business licenses," he said.

Mangara also said that general business licenses such as trade licensing should also be scrapped and replaced with a formal notification to a registry office, which only requires basic details such as the purpose of the business, basic information about the business and identification documents of the entrepreneur.