Investment Climate after Nine Years of Decentralization

jawapos.co.is

Tuesday, Jan. 05, 2010 WIB

How attractive is Indonesia after nine years of decentralization? Doing Business 2010, report released by World Bank and International Finance Corporation (IFC), deserve to be a binocular for the question. The research reports 14 cities in Indonesia.

Before, IFC was just researching Jakarta which then compared its investment climate with the major cities in the world. This time is the research is very important because it involves fourteen cities in Indonesia. This is the first time and is very important to observe local attraction in the business world.

There were fourteen cities researched. Namely, Balikpapan, Banda Aceh, Bandung, Denpasar, Jakarta, Makassar, Manado, Palangkaraya, Palembang, Pekanbaru, Semarang, Surabaya, Surakarta, and Yogyakarta.

The research was also compared with other countries. Indonesia, which is currently the third largest democracy in the world, is ranked 122 of the 183 countries researched. Last year, Indonesia ranked 129 slumped after (Doing Business in 2008) had perched on 123.

Indonesian version of Doing Business analyzes regulations that support or hinder business activities. Regulations that affect three stages of business life measured at the regional level. Three stages, which at the same time used as an indicator, are starting the business, dealing with construction permits, and registering property.

One of the policies that commended in Doing Business in Indonesia 2010 is decentralization. Because of this policy, Indonesia was saved from disintegration that had widespread ten years ago.

Decentralization also allows local governments to introduce some mechanism to provide innovative services, for example One Stop Service (Pelayanan Terpadu Satu Pintu). Such innovations are replicated by other local governments and create a healthy competition.

The picture of decentralization issues was presented by quoting KPPOD and the Asia Foundation (TAF) report on Regional Economic Governance Index, released in October 2008. The research, surveyed businesses from 243 districts-cities in Indonesia, shows a surprising discovery.

The research found about 85 percent of local regulation is inconsistent with the regulations at the central level and incomplete or disrupt economic activity.

Of all 14 major cities in Indonesia, Jogjakarta is the easiest city to establish a business and obtain building permits. While registration of property most easily done in Bandung.

In contrast, the most complicated business establishment procedures are in Manado. While, most difficult procedures to obtain building permits and registration of property are in Surabaya and Balikpapan.

What can be inferred from the table of region ranking? Doing Business report provides two notes. First, there is no city that has good performance for these three topics.

Second, there is no direct relationship between the size of the city and the quality of policies governing the business sector.

Then, what is the significance of Doing Business report for the business, central government, and the region? The team which produced the report provides interesting analogy. Doing Business in Indonesia 2010 serves as a kind of "cholesterol" measuring tool for domestic business.