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Red tape, corruption push Indonesia down: Competitiveness index

Publication Date : 06-09-2012


Indonesia slipped four places in the World Economic Forum’s (WEF) new global competitiveness index (GCI), particularly due to inefficient government bureaucracy and corruption, inadequate infrastructure, poor ethics in its national labour force and restrictive labour regulations.

The 2012–2013 report, published yesterday, showed that Indonesia's competitiveness ranking fell to 50th out of 144 countries surveyed, a further decline after last year's slide of two places. However, Indonesia remains one of the best-performing countries within the developing Asia region, ahead of the Philippines, Vietnam, and all South Asian nations, while still trailing Malaysia, China, and Thailand.

"The institutional framework [ranked 72nd] is undermined by concerns about corruption and bribery, unethical behaviour within the private sector and the cost to business of crime and violence," the report read.

The report also pointed out Indonesian infrastructure, ranked 78th, remained "largely underdeveloped".

On the positive side, the country's macroeconomic environment continued to be stable, supported by "solid performance" on fundamental indicators.

Ahmad Erani Yustika, an economist at the Institute for Economics and Financial Development, described the bureaucracy as a "deep-rooted" problem that the government had failed to address.

"Our bureaucracy, in the case of investment permit processes, has improved, but we’ve achieved that at a slower pace compared to other countries," he said.

Yustika pointed to the low realisation of government targets as caused by state budget disbursement delays as prominent consequences of the failure of bureaucratic reform in the country.

Trade Minister Gita Wirjawan, who formerly chaired the Investment Coordinating Board, said the drop in the competitiveness ranking would be the government's job to improve.

"We're moving in a fluid world, in which other countries may have worked harder than us. This [decline] is a kind of push for us to work even harder," he said on the sidelines of APEC-related meetings in Vladivostok, Russia.

However, Wirjawan argued that another indicator to measure economic performance was investment, which currently showed an upward trend in the country.

Indonesian Employers Association chairman Sofjan Wanandi said that the Asean Economic Community (AEC), which is slated to be established in 2015, would pose a new challenge for Indonesia, especially if the government could not the address major bottlenecks that undermined its competitiveness.

"The real challenge will be the AEC, when investors can pick any country in the region as their production base. If the government fails to boost the country's competitiveness, it will become a market only," he said.


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