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by Asia Perspective

Foreign Entry into Indonesian Market Eased by New Deregulation Measure

July 24, 2018

Strategically positioned along major sea lines connecting East Asia, South Asia, and Oceania, Indonesia holds a wealth of natural appeal for foreign investors.

As well as strong geographic reach into major international markets, the country boasts a population of more than 250 million,offering a viable domestic market for investors. Relatively low wages and an abundance of natural resources also provide the country with a competitive edge in manufacturing-related sectors. Services and industryare both key economic drivers for Indonesia, accounting for 46 percent and 40 percent of the country’s total GDP, respectively.

Despite these advantages, Southeast Asia’s largest economy has long been a daunting market for foreign investors due to inefficient administration governing business registrations. Over the past few years, the local government has introduced a number of deregulation measures to help address this issue. Among these, an online single-submission system (OSS) was launched at the beginning of July 2018 to shorten the business registration period and thus ease the process significantly. The new initiative allows prospective businesses to apply and submit their documents digitally, making it possible to obtain a number of key permits in as little as a few hours. The measure has reduced business registration to an average of 22 days — a fraction of what it used to be. While obstacles to obtaining local and regional government permits remain, permits needed to incorporate a foreign company have become relatively accessible.

The OSS is one of many stimulus and deregulation packages launched by President Widodo since his inauguration in 2014. Following these reforms to remove market entry barriers, improve the country’s business climate, and boost FDI, Indonesia’s rank in World Bank’s Ease of Doing Business Index [1] has improved from 109th in 2016 to 72nd in 2018.

With the country now ranking among the world’s top-100 competitive economies, Indonesia appears to be well on its way to reaching its mid term goal of steady improvement in a broader business environment.

 


[1] The World Bank’s Ease of Doing Business Index measures a country’s regulatory performance across a host of categories covering investment climate, operating environment and regulatory practices


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