Palm | Kelapa Sawit

Indonesia’s business climate has fallen further behind its peers, according to a report by the International Finance Corporation. In the Doing Business 2012 report released on Thursday by the IFC, the investment arm of the World Bank, Indonesia slipped three places to 129th out of 183 economies surveyed.

The report, the ninth produced by the IFC, said Indonesia’s efforts to improve its business climate were insufficient to match those of neighboring countries. It showed the country’s competitiveness fell in most of the aspects of doing business that it assessed.

Aviliani, an economist from the Institute for Development of Economics and Finance Indonesia (Indef), said the country’s falling competitiveness could slow efforts to secure an investment-grade assessment from ratings agencies.

“This shall be in the short term a concern for our new energy minister [Jero Wacik]. I share the view that businesses are not feeling secure about their electricity supply,” Aviliani said.

Singapore topped the list for ease of doing business. Elsewhere in Southeast Asia, Thailand came in 17th while Malaysia was 18th, Brunei 83rd and Vietnam 98th. The only Asean countries trailing Indonesia were the Philippines (134), Cambodia (138) and Laos (163).

In the past few years, the IFC has revamped some aspects the report looks at, including how quickly one can start a business in a country and how to deal with construction permits. Its assessment also analyzes the ease of registering property, securing credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

Indonesia slid down the rankings in all those categories except starting a business, where it was unchanged, and trading across borders, where the country rose eight places.

In a slight modification to this year’s report, the IFC did not include the ease of employing workers. Instead, it added the criteria of how easy it is to get electricity, in which Southeast Asia’s largest economy performed poorly, ranking 161st.

Erwin Aksa, the former chairman of the Indonesian Young Entrepreneurs Association (Hipmi), said in his review of the country’s business climate near the end of his term that electricity supply was a big obstacle for large manufacturers if they wanted to establish plants in remote areas. He said a lack of electricity added to the cost of overall investment, which deters investors’ appetite for the country.

Dahlan Iskan, the former president director of state utility Perusahaan Listrik Negara who is now the state nterprises minister, denied electricity was a problem for the business community.

“Just ask the textile association. They told me that they could compete better with the Chinese after we fixed their electricity problem,” he said.

Gita Wirjawan, the chief of the Investment Coordinating Board (BKPM) who now also serves as the trade minister, said the IFC’s report should spur the government to work harder to improve the weak points that were cited.

Last year, the Java-Bali power grid frequently suffered problems with its transformers, causing rolling power cuts that businesses complained hurt their operations. The grid currently has a capacity of 21,000 megawatts with a daily peak load of 19,300 MW.

PLN has reduced the number of blackouts, although it has not completely eliminated them in some regions. The region’s grid is expected to receive 990 megawatts of additional electricity from newly opened coal-fired power plants in Indramayu, West Java, which had been delayed for years.

Finance Minister Agus Martowardojo said he would study the report. “There is an issue regarding finance, particularly tax and customs, that we will give special attention,” he said.

In the report’s subcategory of paying taxes, Indonesia’s position slid down one place to 131st.