Failure to improve the ease of doing business will
result in a decline in Indonesia's competitiveness
in the eyes of the international community!
Indonesia's performance in construction licensing and property registration is low compared to other countries in Asia. The World Bank's 2019 report on the ease of doing business states that Indonesia lags behind in these two aspects. In fact, the level of ease of doing business also determines the competitiveness of a country. In 2019, Indonesia was ranked 112th out of 190 countries measured by the World Bank in terms of the ease of obtaining an IMB.
Domestically, the Investment Coordinating Board also noted a decline in the value of Foreign Direct Investment. Throughout 2018, the value of foreign investment totaled IDR 392.7 trillion. While in 2017 the value reached 430.5 trillion. To improve Indonesia's competitiveness, especially in the property and construction sectors, the government must do at least three things:
First , understand that investment can easily move to other cities, provinces, or countries that offer a better business environment. When investment leaves a place, the loss will be in the form of low economic growth, lost tax revenue, and fewer jobs. Governments must have a competitive mindset to attract the best businesses and labor. Two of these are offering ease of doing business for entrepreneurs and a high quality of life for citizens.
Secondly , the government should ease the construction process by reducing the number of procedures, days, and costs required to obtain a Building Permit (IMB). Alarmingly, in Indonesia it takes 200 days to obtain an IMB to build a warehouse. In Singapore, the same permit is issued in 44 days and in Malaysia only 54 days.
Third , the government should reduce the number of procedures, days and costs required to register a property (land or building). According to the World Bank, Indonesia ranks 100 out of 190 countries in terms of property registration. The cost of registering a property in Indonesia is equivalent to 8.3% of the property's value. This is very expensive compared to the cost in Malaysia which is only 2.9% and in the Philippines 4.3%.