Guests read a brochure about PT Perusahaan Listrik Negara’s performance in the signing of an investment credit agreement in Jakarta on Thursday. PLN received a loan of Rp 16.3 trillion from various financial institutions for the funding of electrification infrastructure.
Indonesia’s ease of doing business index has surged to 72nd out of 190 countries, a significant jump of 42 places in the last three years.
The phenomenal jump based on the World Bank report, Doing Business 2018: Reforming to Create Jobs, signifies the global recognition of the Indonesian government’s commitment and efforts to continuously improve the nation’s investment climate in the last three years.
Last year, Indonesia also saw its rank improving by five places to 36th in the World Economic Forum’s Competitiveness Index. The Big Three international credit rating agencies have also given Indonesia an investment grade.
All of this shows that Indonesia is on the right track to a healthier and more competitive economy. The government’s various policies of improving the business climate, including through its 16 reforms, de-bureaucratization and deregulation packages, must be appreciated. We also hope that the government and all relevant parties will not get complacent.
At its current position, Indonesia is ranked sixth out of 10 ASEAN countries. We are above China (78th), India (100th) and the Philippines (113th), but are still below Vietnam (68th), Malaysia (24th), Thailand (26th) and Singapore (second). Hard work is still needed to reach President Joko “Jokowi” Widodo’s target of reaching the 40th position in 2019.
Our challenge, however, is not only about catching up to other countries, especially Asian developing economies. What is more important is how this rank jump affects investment realizations (direct and portfolio), economic growth and job creation in the real sector.
We all agree that this jump will not automatically lead to more investment as there are many factors investors need to consider, including political climate, before deciding whether or not to invest in any country. Therefore, maintaining a good investment climate is closely linked to maintaining political and social-economic conditions as a whole, as well as observing similar conditions in competitor countries and global economic conditions.
In the short term, the 2018 simultaneous regional elections and the 2019 legislative and presidential elections may cause turbulence and this may be among investors’ points of consideration. The Finance Minister recently complained about the lack of investments despite the improving Competitiveness Index that was caused by problems in infrastructure preparedness. The complicated taxation system, rampant corruption, labor climate, fluctuating purchasing power and lack of synchronization between central and regional governments’ regulations are often highlighted by investors.
In short, we need to focus on the spots where we are lagging behind our competitor countries. We must not forget that other countries are also making efforts to improve themselves. The world is never static. Our huge dependency on investment to realize our economic growth target and catch up with the world will necessitate us to continuously improve ourselves, whether we want it or not.
