A breath of fresh air for start-ups

Mustaqim Adamrah, THE JAKARTA POST, JAKARTA | Wed, 10/28/2009 1:28 PM

Aiming to help cut red-tape and bureaucracy, the Law and Human Rights Ministry is in the process of adopting a system that would cut the registration period for business start-ups to 14 days at the longest.

Head of the restructuring team at the ministry, Freddy Harris, said Tuesday the new system - developed in partnership with the International Finance Corporation (IFC), the private arm of the World Bank - would effectively reduce the registration process from between 30 to 60 days now, to 14 days or less.

"The new system will be fully effective on Jan. 1, 2010," he said on the sidelines of a workshop on business registration reforms in East Asia and the Pacific organized by the IFC.

He said the system was already "semi-online" at present, with 75 percent of the information "produced by the system, not people".

These efforts, he said, were eventually aimed at improving the business climate in Indonesia.

Under the latest Doing Business Survey jointly conducted by the World Bank and the IFC, Indonesia now ranks as the 122nd most competitive country in terms of ease of doing business, up by seven notches from its ranking last year.

The annual survey, first launched in 2004, involves 183 economies including in East Asia and the Pacific.

In spite of some improvements, Indonesia is still ranked far below Singapore (1st), Thailand (12th), Japan (15th), Malaysia (23rd), Mongolia (60th) and even Ethiopia (107th), but is doing better than Nepal (123rd), Brazil (129th), India (133rd), the Philippines (144th) and Cambodia (145th).

Brigit Helms, IFC Indonesia's head of advisory services, said the ministry could cut red-tape by, first, eliminating the mini-mum capital requirement, and two, and by dispensing with the role of notaries in registering a business as this "can add more time to the process".

"Any top rated countries, like Singapore and New Zealand, don't *have the minimum capital requirement, while* in many other countries, people can go directly to the electronic governance system . and input their information," she said.

"As many as 95 percent of companies in Indonesia are informal. That means they're marginalized, they may be small, they don't have access to credit, they don't pay taxes," she said.

"They'll really contribute as fully as they can so that the economy can grow, if we can make busi-ness registration easier for these informal businesses. The benefits are *potentially* enormous to the economy."

In response to IFC's suggestions, Freddy said the ministry might consider eliminating the present requirement for Rp 50 million (US$5,250) in minimum capital, and would also look at redefining the role of notaries.