No Licensing Innovation, DKI Jakarta Drops to Fourth Place for Ease of Doing Business in Indonesia

Jakarta, November 21, 2017 - DKI Jakarta ranked fourth in the latest Ease of Doing Business Index released by the Asia Competitiveness Institute (ACI) in 2017, down two places compared to 2015. Jakarta's position was defeated by East Java, West Java and Central Java, which occupied the first, second and third positions respectively. This has the potential to make potential investors no longer make Jakarta the main investment destination and switch to other provinces. As a result, economic growth in Jakarta will slow down and impact on employment.

ACI Co-Director Professor Tan Kong Yam said that this index is more comprehensive than a similar index issued by the World Bank. The ACI index, he added, is calculated based on economic statistics and incorporates the views of 925 business people in 33 provinces. "Investors are currently watching how provincial governments ease investment procedures. For them, regulatory reforms alone are not enough. To decide on an investment destination, they also consider infrastructure and labor conditions, market potential and cost-effectiveness. Therefore, ACI includes these factors in this index."

Research Fellow and Deputy Director of ACI Mulya Amri said the decline was caused by Jakarta's stagnant performance. "Jakarta's score on the Responsiveness to Business and Competitive Policies indicator which is fairly average shows that Jakarta is still less competitive compared to other provinces that have made a lot of progress.

Wendy Haryanto, Executive Director of JPI, said that the building permit process, which is one of the important indicators of ease of doing business, is still problematic. "Until now, there has been no significant innovation related to the licensing process in Jakarta. This is partly because DPMPTSP as the frontline of licensing has many problems."

Furthermore, the complexity of regulations at the national and provincial levels is also an important factor in the efficiency of licensing. In addition, there is currently no involvement of the private sector in policy formulation.

The complexity of the licensing process in Jakarta is a challenge for the DKI Jakarta Provincial Government as well as property players. However, the Jakarta Property Institute (JPI) as a partner of the DKI Jakarta Provincial Government took the initiative to embrace the government in mapping existing licensing problems and jointly finding solutions.

From ACI's findings, it is also known that DKI Jakarta has experienced a decline in rankings in two of the three categories:

• In the Attractiveness to Investors category, Jakarta's ranking dropped from number 1 in 2015 to number 3 in 2017.
• In the Business Friendliness category, Jakarta's ranking dropped from 2nd in 2015 to 7th in 2017.
• In the Competitive Policies category, Jakarta is ranked 19th out of a total of 34 Indonesian provinces.