Thursday, 18 December 2014


The World Bank in their latest report on Doing Business 2015 again presented a report car on doing business in Indonesia; among others about the bad condition of infra structure such as the Tanjung Priok and Tanjung Perak harbor.

The rating for Ease in Doing Business given by the international rating was a reflection of optimism that the Joko Widodo – Jusuf Kalla would start to run their mission with a new spirit because higher rating was attained.

Behind all there was unspoken message that the new Government must work extra hard based on effective planning. Clearly there was nothing extraordinary about the World Bank’s report just as the previous reports. About infra structure handicaps it had been known for along time but no notable progress was ever made.

Undeniably infra structure in Indonesia was still inadequate inter-regional trading was still problematic, while main harbors were overloaded. So the World Bank’s report should serve as encouragement for the new Government to rehabilitate and innovate. Perhaps the sea inter-connectivity concept in the economic development platform could undo logistic distribution knots which had happened for decades.

The “Sea Toll Road” concept which interconnected main harbors in Indonesia could serve as answer to World Bank’s remark on the weakness of infra-structure in Indonesia, and also inter-insular connectivity which was still problematic.

Not just that, the sea toll concept could also offer multi benefit, such as to reduce inter insular logistic cost, to stimulate growth of economic centers in the regions, and to enhance comparative advantage and competitiveness of the regions. The toll road concept could also reduce traffic jams in the cities, stimulate development of marine bio-life industry, to promote tourism industry and to energize sea transportation industry.

According to the World Bank, Indonesia’s rating in Doing Business had placed Indonesia in 114th position among 189 countries; a position better than that of last year at 117 an achievement to be attributed to the past Government.

There were some points which enable investors to start business in Indonesia. Firstly permit application procedure by on-line. Secondly, betterment in taxable income [PTKP]. Thirdly, eased was of getting electricity.

Sadly, the heartening promotion of Indonesia’s rating still left problem in competitiveness at least compared to that of Asean states: Singapore 1st, Malaysia 18th, Thailand 26th, Vietnam 78th, Brunei Darussalam 101. Indonesia only excelled against Cambodia at 135th, Timor Lester 172nd and Myanmar 177th.

The World Bank’s warning was also strong warning for Indonesia who would soon enter the MEA 2015. If Indonesia’s ease level in doing business was still low, investors might not be interested in coming to Indonesia and prefer to go elsewhere instead where climate was more business friendly.

Now it was for the new Government to meet the great challenge. Take for example in electricity which frequently went off. the Government through the Ministry of Energy and Ministry and Mineral Resources must meet the need for electricity, especially for industry and household.

So it was right indeed for the Ministry of Energy to plan to build powerhouses at the capacity of 35,000 Megawatt in the next 5 years which would cover up power shortage felt in the past 3 years.

For that matter the Government would open investment opportunities from any country. The Ministry also had their commitment to make easy regulations and easy permit application procedures for investors. However it was not specified whether the projects would be undertaken by BUMN or private companies.

Naturally the Ministry of ESDM would coordinate with PLN Electricity Company on the technical side of the plan like land clearing, permit application, contactor’s capacity and real capacity of the businessplayers. In this case the Ministry had to review all contracts as many of them were low performing. Unless promptly tackled, electricity crisis would be inevitable as there was gap between the need for growth and existing building capacity.

In fact the actual need for additional power supply was 50,000 giga watt which might grow higher depending on circumstances. If economic growth was higher the plan would have to be restructurized. The good news was that PT PLN Persero also planned to build 15,000 MW of power while to remanding 20,000 MW would be build by Independent Power Producers [IPP].

By estimate, the cost to build a power house was around USD 1.5 million per MW. The cost for power transmission was around USD 1 billion or around Rp. 10 trillion. In this, priority for the project to be started in 2015 would be for Steam Powered Generators [PLTU] and Gas Powered Generator [PLTG]. The existing hindrances to project were land clearing, regulations, and financial capacity of contractors.

The last agenda for strengthening competitiveness in doing business was to build proper mental attitude and proper mindset among Government servants, i.e. “the spirit to serve instead of being served” which should be a new culture to be public orientated.

By its name, the Working Cabinet must take action instead of running costly meetings, Trying to solve problems was better that trying to find fault on others. Regulations which might keep Government servants from serving or keep businesspeople from developing business must be amended.

Easing of regulations must be accompanied by stringent control. The way it happened was the reserve: regulations made strict but the implementation poor. The result was that corruption remained at large. So it was time for the new Government to enhance convenience in doing business in Indonesia (SS)

Business News - November 14, 2014

No comments: