Improving Ease of Doing Business Ranking with RDTR Improvement

Similar to President Jokowi's ambition for Indonesia, Jakarta Deputy Governor Sandiaga Uno also aims to improve Jakarta's ranking on the Ease of Doing Business (EODB) Index.

Sandiaga wants Jakarta to actively participate in achieving Indonesia's EODB target at rank 40. In fact, in the last two years Indonesia has only been able to increase its rank from 91 to 72.

Too ambitious, right? Maybe. Why maybe?

The EODB Index is a ranking of one to 190 issued by the World Bank to describe the policy environment conducive to starting and doing business in a given country.

EODB is one of the considerations for investors when they want to invest in a country. The existence of investment itself can help increase economic growth, provide jobs, and improve the welfare of a country's people.

The difficulty of doing business in Jakarta

In 2017, the Asia Competitiveness Institute (ACI) released the Ease of Doing Business Index on Attractiveness to Investors, Business Friendliness, and Competitive Policies (EDB Index ABC). The index assesses the ease of doing business by calculating economic statistics and incorporating the views of 925 business people in 34 provinces in Indonesia.

While Indonesia's ranking is encouraging, Jakarta is lagging behind other provinces. According to ACI data, in 2017 Jakarta was ranked fourth, down two places compared to 2015. Jakarta was beaten by East Java, West Java and Central Java, which currently occupy the first, second and third positions.

So, what does the government, especially local governments, need to do to realize this ambition?

Actually, the answer is easy. Let's start from the most basic and simple. Local governments do not need to make grandiose innovations or budget fantastic budgets. Local governments only need to make it easy to grant licenses for those who comply with the law.

The government promised 8 months to obtain a Building Construction Permit (IMB) for buildings above eight floors with a land area above 5,000 square meters. However, in reality it took an average of 21 months for one developer to obtain the permit, despite following all the processes properly.

Such uncertainty discourages investors from investing in Jakarta, especially investment in the property industry, which accounts for nearly 20 percent of Jakarta's total Gross Domestic Product (GDP).

The need for legal certainty for ease of doing business

The length of the licensing process is partly due to the number of repeated requests.

The local government has a Regional Regulation on Spatial Detail Plan (Perda RDTR) no. 1 of 2014 that serves as a reference for Jakarta's development direction. If the process of making the RDTR has considered various aspects and studies, developers should only need to follow it when they want to develop land or property.

However, the above practice is far from ideal. Developers are still required to make their own studies even if they comply with the RDTR.

For example, a developer wants to build an office on land that is designated for offices with intensity 4 according to the RDTR regulation. The developer is still required to submit environmental, traffic impact and flood studies.

These studies should have been included during the drafting of the RDTR.

I understand that the new One-Stop Investment and Integrated Services Agency (DPMPTSP), which handles licensing, wants to make sure that the documents are valid and that the development will not have a negative impact.

However, it would be nice if the government is confident in its own study and sticks to it. With more efficient licensing, investors will surely come by themselves, especially when considering Jakarta's still very strong domestic market.

The ball is now in the government's court. Whether it wants to move quickly towards an EODB ranking of 70, or just hope. The government can start by improving the existing RDTR, without having to use the APBD.