Business Shakedowns ‘Hurting Indonesia’s Competitiveness’

SP/Robertus Wardi | January 19, 2013
The hidden fees of doing business in Indonesia are a major factor keeping investors at bay and undermining the country’s economic competitiveness, an analyst says.

Dian Revindo, a researcher with the University of Indonesia’s School of Economics, said on Thursday that it was no secret that virtually all individuals and companies seeking to do business in the country had to pay illegal fees and bribes to government and regional officials.

“It’s very common for businesses to have to pay some kind of fee to regional leaders depending on the value of their enterprise and their ties with the officials,” he said at a discussion in Jakarta.

“The question is, where is the central government in all this? Why should a legitimate business be made to pay such illegal fees to regional authorities just to be able to do business?”

Dian said this was the kind of corrupt practice that was driving down Indonesia’s global competitiveness, citing the country’s constant slide down the World Economic Forum’s annual Global Competitive Index since 2010.

The 2012-2013 GCI, published last September, ranked Indonesia 50th out of 144 countries, down from 46 out of 142 in the 2011-2012 GCI.

In the 2010-2011 index, Indonesia was in 44th place out of 139 countries.

The report identified inefficient government bureaucracy and corruption as the two most problematic factors for doing business in the country. On the issue of “irregular payments and bribes,” Indonesia ranked a lowly 111th out of 144.

Dian said the problem of illegal fees was also something that most Indonesians encountered on a regular basis, and cited as an example the process for applying for an identity card, or KTP, which is ostensibly issued without charge.

“Ordinary citizens know the frustration that comes of trying to get public services without having to pay illegal fees, which is abundantly manifest in requests by officials for ‘grease money’ in the process to issue a KTP,” he said.


About Stephen Booth

Surface Engineering, HVAF, HVOF, APS Coating technologies expert in Asia
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