Indonesia held on to its ranking as the world's worst spot to establish a new business. (GA Photo/Mohammad Defrizal)

Reforms See Indonesia Move Up in Global Business Ranking


OCTOBER 28, 2015

Jakarta. Indonesia has moved up 11 places in a global business annual ranking, thanks to reform in financing, registration and online tax payments allowing improved ease of business in the country.

Indonesia ranked 109 of 189 countries in the World Bank's Ease of Doing Business survey 2016, published on Wednesday, a marked improvement from the 120 ranking of a year ago. Neighboring Singapore maintains its top place on the global list, with Malaysia, Thailand Vietnam and the Philippines all above Indonesia.

The study monitors many factors in compiling the rankings, including securing permits, access to electricity and other utilities, registering property and securing credit. Legal concerns, such as the enforcement of contracts and resolving insolvency are also weighed. The measurement uses figures from between June 2014 to June 2015 to calculate the rankings.

The 2016 ranking suggests launching a business in Indonesia has improved after the government introduced reforms to ease of registering with the Manpower Ministry.

"Indonesia improved access to credit by enabling searches of the collateral registry by the debtor’s name," the report said.

Online systems for paying social security contributions and reducing the rate and ceiling for contributions paid by employers has made taxes easier and less costly for companies.

Still, reforms in other countries saw Indonesia dominated overall.

The report highlighted that costs of enforcing contract in Indonesia courts could "exceeded the value in dispute, suggesting litigation may not be cost-effective way to resolve the disputes."

Indonesia remains the most difficult country globally to start a business, with the use of third-party services, like notaries, inevitable.

"Frequent use of third-party services in business incorporation is associated with a higher level of informality, less regulatory transparency and a less efficient civil justice system," said World Bank in the report.

It takes 48 days to start business in Indonesia, compared to just two and half in Singapore.

"Where the business registration process does not follow good practices, the opportunity costs can be high, especially for small and medium-size businesses — because company founders may end up spending far too much of their scarce resources on third-party services," the report said.

The country's investment board on Monday introduced a three hour business permit service as part of a broader effort to attract investment.