High Cost Economy In Indonesia

27 Apr

The government must remove the high economic costs in licensing services. The government should ensure the implementation of public service free of bribery that spurred investors to invest to create jobs. Chairman of the Indonesian Employers Association (Apindo) Sofjan Wanandi. Indonesia’s ranking in the Global Competitiveness Index 2012-2013 World Economic Forum slipped from 46th position in 2011 to 50th.

 “Determination removing high-cost economy and infrastructure do not continue to be a discourse. More serious the government should fix these problems in order to increase the competitiveness of our products, “said him. Employers want a reform of the bureaucracy does not run half-heartedly. According to Sofyan, employers desperately need government support to increase competitiveness in order to regain control of the domestic market from the flood of imported products. Problems of local public services is a concern Coordinating Minister Hatta Rajasa. Hatta said the government continues to run a bureaucratic reforms to improve the quality of public services at the center and the regions.

Companies from the United States (U.S.) have never doubted the business in Indonesia. In fact they have been declared to the more entrenched in business in this country. Because the Indonesian economy is considered to have great potential. However, there are some things that need to be done to realize that potential.

According to the Managing Director of the American Chamber of Commerce in Indonesia (AmCham Indonesia) Andrew White in a seminar in Jakarta, Wednesday (01/23/2013), the problems facing U.S. businesses, the problems that have for years been appearing and more so now. One of the obstacles mentioned is infrastructure. White is said, such problems did not make U.S. employers intention to enter Indonesia to be receding. But it’s just, constraints that lead to cost slightly more expensive business. In fact, the infrastructure including the determinants of a country’s competitiveness. Due to lack of infrastructure makes mobility hampered. So can lead to inefficiencies and affect competitiveness.

The problem of high cost economy dominated by a few factors, Nazamuddin (2007) stated that there are four kinds of economic practices that typically occur high cost, namely:

1. illegal levies

2. Formal charges based on tax regulations with relatively high rates;

3. Imposition of double taxation and multi-layered;

4. Long bureaucratic.

Also based UI research LPEM 2003 that corporate spending to cost “an extra or illegal charges” has reached 11 percent of the cost of production. This is certainly going to be a huge obstacle and can disrupt the investment climate in Indonesia is being built.

As we know, licensing is a mechanism which is common in every independent state. State in this case the government will try to implement licensing for one of them is driving the country’s economy as well as for monitoring and controlling business activities. This licensing is required as a means to govern (bestuurszorg) to support improved quality of public services.

Besides a role in monitoring and control efforts, permitting the monetary field also serves to contribute to the country in the form of revenue to the state treasury, for example by charging a licensing fee to the applicant, or in the form of tax breaks given after the licensee conduct its activities and may also form the imposition penalties for violations committed by the licensee of the obligations which must be executable. In terms of investor or entrepreneur, this is a basic permit or legalization of the business they run. So that they can safely and comfortably carry or develop a business that they have. However, this permission could also backfire that actually impede the course of development. This licensing issues often become the topic of discussion in the sessions of the cabinet or at international meetings relating to the economy and investment.

Licensing does not always reap the positive response from the public, licensing often a frightening specter for entrepreneurs and investors who want to run businesses in Indonesia. DI in Article 25 paragraph (4) and (5) of Law No.25 of 2007 on Investment explained that the license of the investment company will conduct business activities acquired through one stop service. In Article 26 paragraph (1) further said that the one-stop service that aims to assist investors in obtaining ease of service, fiscal facilities, and investment information, all of which was to culminate in legal certainty and investment climate in Indonesia.

But in fact not the case, not ensure legal certainty for investors in investing in Indonesia, permitting it to grow into a new arena suburkan practice extortion and corruption. Biroktrasi licensing process convoluted regarded as one of the obstacles to the promotion of the economy in Indonesia. Thomas Darmawan Chairman of the Association Indonesian Food and Beverages (GAPMMI) said that the potential production cost can be saved up to 30 percent if the practice of extortion could be eliminated. This means that almost a third of the cost of production is extortion and the sale price to the consumer can be lowered up to 30 percent if the extortion practices eliminated.

Reference :

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Posted by on April 27, 2013 in Uncategorized


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