Deregulation Program Launched to Boost Investment Potential in Eastern Indonesia

Strategic Insights -

The International Finance Corporation's Program for Eastern Indonesia SME Assistance (IFC-PENSA) and the Indonesian Regencies Cooperation Agency (BKKSI) have launched a sub-national deregulation program to increase investment potential, generate employment opportunities, and improve economic growth through deregulation. The program aims to assist local administrations in improving the efficiency of business registration and licensing services, particularly in simplifying administrative procedures that impede business development. By reforming administrative procedures, non-formal businesses in regencies are encouraged to become formal small and medium-sized enterprises, providing access to more products and services, including finance from commercial banks.

Key Takeaways:

  • The deregulation program is designed to improve the efficiency of business registration and licensing services in Eastern Indonesia, with a focus on simplifying administrative procedures that impede business development.
  • The program aims to encourage non-formal businesses in regencies to become formal small and medium-sized enterprises, providing access to more products and services, including finance from commercial banks.
  • The program has seen immediate results, including an increase in local generated revenues (PAD) and the number of business licenses issued, with a preliminary survey in one medium-sized East Java city showing a threefold increase since the simplified administrative procedures effort started.
  • One of the key success factors to improve the local investment climate is the commitment of the local government to make changes toward better public service provision with transparency and accountability.
  • BKKSI, a non-profit organization established in April 2000, has 348 members all over Indonesia and aims to encourage regional autonomy implementation, improve people's welfare, and maintain national unity.
  • PENSA is IFC's technical assistance facility supporting small and medium enterprises in Eastern Indonesia, with a five-year mandate and initial funding commitments of $23 million from various governments and the Asian Development Bank.

Statistics:

  • A preliminary survey done for IFC-PENSA in 2003 in one medium-sized East Java city found that PAD and the number of business licenses issued had increased threefold since the simplified administrative procedures effort had started.
  • The PENSA facility has a five-year mandate and has been co-funded by IFC, the Australian, Canadian, Japanese, Swiss, and Netherlands governments, and the Asian Development Bank with initial funding commitments of $23 million.
  • BKKSI has 348 members all over Indonesia.

Sources:

  • "Business Plus", ANTARA, June 3.
  • IFC-PENSA statement as cited in "Business Plus", ANTARA, June 3.
  • BKKSI information as cited in "Business Plus", ANTARA, June 3.
  • IFC-PENSA information as cited in "Business Plus", ANTARA, June 3.