The new one-stop integrated service (PTSP) launched by President Joko “Jokowi” Widodo on Monday is expected to simplify investment licensing procedures and improve ease of doing business, which in turn could bolster economic growth.
Jokowi said the flagship project of the Investment Coordinating Board (BKPM) would help boost economic growth from the 5.1 percent expected last year to 5.8 percent this year, as investment accounts for about a third of the nation’s gross domestic product (GDP).
The target is to cut the lengthy period to secure permits and reduce the number of permits, which Jokowi considered “too many”.
“Investors now have to get 52 licenses to build a power plant and it may take 930 days. I cannot tolerate this and they should be simplified so that the power crisis in regencies and cities can be resolved,” Jokowi said. The electricity sector, natural resource processing and maritime industries are the top priority sectors to be lured into investing.
With the new service, the BKPM has taken over 134 permits from 22 ministries and institutions, including the Food and Drug Monitoring Agency (BPOM) and National Standardization Agency (BSN). These permits include some of those that have often been stumbling blocks for investment, such as land-use permits and environmental impact analysis permits from the Environment and Forestry Ministry.
Investors now do not need to go back and forth to the authorities to process licenses from principal to permanent investment permits as they will be served by dozens of officials, including some of those in charge of making decisions in their respective areas.
The service — which covers 1,198 business sectors, excluding finance and oil and gas — showed the government’s commitment to providing better service to investors and putting aside “sectorial ego” among ministries, Jokowi highlighted. In issuing permits, different ministries may have different interests.
However, intergovernmental coordination seems to be a challenging task in Indonesia, particularly with regional autonomy in place.
Overlapping bureaucracy at the regional and central levels is a main reason why the World Bank ranked the country 114th out of 189 countries in its Doing Business 2015 report.
Indonesia is ranked 155th in starting a business and 153rd in dealing with construction permits. To begin a business in the country requires on average 10 procedures in 52.5 days, according to the report.
BKPM chief Franky Sibarani said the implementation of the service would be supported by a similar integrated service at the provincial and regency as well as city level.
To ensure transparency, the board has also set up an online monitoring service that can be used by investors to check the progress of their permits.
Business players expect the one-stop integrated service to help accelerate the realization of investment plans.
“We expect that simpler, more transparent and cheaper permits will enhance the ease of doing business in Indonesia,” Indonesian Employers’ Association (Apindo) secretary-general Sanny Iskandar said.
The government this year hopes to realize Rp 519.5 trillion (US$41.5 billion) in direct investment, a main driver of economic growth in Southeast Asia’s biggest economy after domestic consumption. That will be a 14 percent increase from the Rp 456 trillion estimated for last year.