Monitoring The Investment Climate In Indonesia : A Report From The Mid 2005 Survey

PREFACE

There are various complaints regarding investment climate in Indonesia. This study is a first step toward developing monitoring investment climate indicators. These indicators should cover the basic elements of business climate faced by firm such as taxation, custom, infrastructure, labor regulation, and business licensing which have been known as important obstacles to doing business in Indonesia.

The survey produces several interesting results. First, the FDI approval in BKPM is still slow, discretionary and unnecessary. Inefficiency and corruption remains major problems at the import clearance procedure-Customs, port authorities and other entities share responsibilities. Human contact is still the source of informal payment in export-import clearance. Minimization of human contact can be pursued further by full implementation of the EDI system. Also port infrastructures should be improved to shorten waiting time in unloading, by doing so eliminate these as sources of corruption and inefficiency. VAT refunds are still major problems for exporters, with 57% of respondents reporting that they must negotiate with tax officials or make extra payments to obtain refund. In other are of taxation the requirement to file income tax returns on a monthly basis should be reviewed as this imposes a significant paperwork burden,with business forced to devote 45 man-days on average each month to filing tax returns. Relative to the firs years of regional autonomy, the ?squeeze? on business through informal payment demanded by local governments. But national authorities, such as customs and tax, might not feel the same competitive pressures as they continue to exert negative burden on business.


Ari Kuncoro

Isfandiarni

Thia Jasmina

Cita Wigjoseptina


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