Thursday, 17 October 2013


In times when Rupiah value was down and Indonesia’s economy was on the slowdown, World’s Economic Forum [WEF] in their annual report of 2013-2014 had positioned Indonesia in 38th grade in terms of competitiveness; a significant promotion against the 50th position of last year.

Although still way below Singapore at 2nd place, Malaysia 24th and Brunei Darussalam 26th and almost the same as Thailand at 37th, at least Indonesia’s position excelled over some ASEAN countries.

Take for example the Philippines in 59th position, Vietnam 70th, and Laos, Cambodia and Myanmar at 80th, 88th and 139 respectively. Compared to China and India, two rising Asian giants, Indonesia was in between. China was in 29th position and India 60th.

Improvement of Indonesia’s competitiveness brought high expectations as the international world would see Indonesia as more competitive nation. The promotion also uplifted optimism and brought brighter prospect. On thing was certain Indonesia’s elevated position means stronger supporting pillars to rest on.

WEF was using three catalyst to measure competitiveness. Firstly, the fundamental factor encompassing institution, infra structure, macro-economic environment, basic health and basic education. In terms fundamental factor Indonesia moved up to 45 from the previous 58.

Secondly, the efficiency elevator factor encompassed six pillars, i.e. high education and training, market efficiency of goods, labor efficiency, development of the money market, technological readiness and market scale. By this factor Indonesia’s position moved up from 58th in 2012-2013 to 52nd in 2013-2014.

Thirdly, the innovation factor which rest on two pillars i.e. sophistication in business and innovation. In this respect also having betterment from 40th to 33rd position. Elevated competitiveness level was thanks to betterment in the above factors. Of the 12 pillars the brighter side for Indonesia was market scale and macro-economic environment.

The only thing was, the greatest contributor to appraisal was the infra-structure pillar which elevated from 78th position to 61. It seemed that the Government’s effort through the MP3EI plan to spur on economic development through infra-structure was beginning to show results.

Infra structure development must be accelerated to step up national efficiency in regard to logistics and connectivity about which investors complained. The characteristics of an advanced nation was adequate infra structure. The effective way to spur on development of physical facilities and infra-structure was to increase allocation for infra-structure building which now constituted 2% of GDP-to 5% of GDP.

Betterment of Indonesia’s competitiveness from WEF must not make the Government to be off guard as there were still some points to be corrected. This was related to the fundamental institutional factor. The information was unveiled from the main problems in the business world.

There were five main problems faced by business players, namely corruption [19.3%] inefficient Government’s bureaucracy [15%], poor infra structure [9.1%]; access to capital [6.9%]; restrictive labor regulations [6.3%]. Four of the five problems, except infra-structure, was institutional problem.

Poor institutional quality, particularly inefficient bureaucracy and corruption was the worst obstacle in increasing competitiveness significantly. Small wonder that WEF placed Indonesia in 106th position in terms of corruption factor in competitiveness.

Business people and investors placed corruption as their main grievances. This was in line with the report in Transparency International 2013 which positioned Indonesia as one of the most corrupted country. Indonesia was in 118th position among 175 countries with score 32 out of 100.

WEF also put bad mark on distrust in politicians, mis use of state’s fund, extravagance in state’s expenditure all boiling down to Inefficient bureaucracy.

The institutional factor was more than just a matter of institutions, but also regulations. In other words, legal uncertainty might generate serious problem. The problem was not lawlessness but disobedience to Law. Uncertainty in law abiding appeared in the form of illegal collections and bribery. To establish a clean and responsible Government must be the determination of the bureaucracy.

Permit application procedures for business called for serious attention. Take for example, as reported by the World Bank in 2013, it took 47 days to accomplish, but businesspeople claimed they needed longer time. The policy of One-Stop-Service [OSS] was still a subject to grievances by applicants as the road was still long and winding.

The fact confirmed assumptions that the institutional factor was in a strategic position in the process of strengthening of competitiveness. The conclusion was that good performance must be maintained while low performance must have its pitfall detected and solution be found for it.

The principle was that competitiveness must be reviewed each year. So next year WEF would re evaluate the determinant factors of Indonesia’s competitive edge. It must be remembered that other countries were also striving to improve their ranking to drum up investors.

Business News - September 20, 2013

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