POLICY BRIEF

Improving Indonesia’s Ease of Doing

Business Rank through Simplifying
Starting Business Procedures
by Eggie Dwi Ananda C (1806159911)

Background The online services and human capital improvements

The government has done a lot of efforts to improve
Foreign Direct Investment (FDI), among them is by
improving Ease of Doing Business (EoDB) rank. Empirical
study shows that efficient business regulation is the main
factor of FDI improvement (Vogiatzoglou, 2016),
especially for middle-income countries (Corcoran and
Gillanders, 2014). Moreover, EoDB has been proven to
have a significant influence on economic growth (Ani,
2015).
In 2019, Indonesia not only failed to reach the EoDB
rank target of 40 as President Joko Widodo had set, but
we were also down 1 position from 72 to 73. Even
though the overall score was up 1.49 points, it signaled
that other countries have done better improvement than
Indonesia. The starting business indicator, in particular,
needs special attention and must be improved
immediately – now is still in 134 position.
were the variables that had the most impact in EoDB
(Almeida, 2016). The implementation of OSS in some
local government is still constrained by the limited
internet network and unpreparedness of human
resources. The weak coordination and collaboration
between government agencies adds to the existing
problems. The issuance of regulations by various line
ministries lacks coordination and a coherent vision
(Sandee, 2016). In fact, China as the top 10 EoDB 2019
performers, managed to prove that collaboration is an
effective way to improve public services and solve
complex problems (Liu and Zheng, 2015).
Condition and Development of Policy in
Indonesia
Based on the EoDB 2019 report (table 1), to start a
business in Indonesia must go through 10 stages which
require 20 days to complete, with a maximum cost of
5,03 million rupiahs.

Table 1: Starting a Business in Jakarta – Procedure, Time and Cost

No. Procedures Time to Complete Agency Associated Costs
1. Pay fee for obtaining clearance of company Less than one day Notary IDR 100,000
name (online procedure)
2. Obtain clearance for the company's name at the Less than one day Notary Included in procedure 3
Ministry of Law and Human Rights (online procedure)
3. Arrange for a notary to obtain the standard 1 day Notary - IDR 500,000 for companies with capital
form of the company deed and notarize (simultaneous with of up to IDR 25 million;
company documents previous - IDR 2 million, for companies with
procedure) capital of up to 500 million; and
- IDR 4 million for companies with
capital up to IDR 1 billion.
4. Apply to the Ministry of Law and Human Rights Less than one day Ministry of Law and Included in procedure 6
for approval of the deed of establishment (online procedure) Human Rights
5. Apply for the Certificate of Company Domicile 2 days Municipality No charge
(Surat Keterangan Domisili Usaha, SKDU)
6. Pay the non-tax state revenue (PNBP) fees for Less than one day Notary IDR 500,000 (validation of company as
legal services (online procedure) legal entity) + IDR 430,000 (publication)
7. Apply for the permanent business trading 7 days on average One Stop Integrated No charge
license (Surat Izin Usaha Perdagangan, SIUP) Service Body of SKI
and the company registration certificate (Tanda Jakarta Provincial
Daftar Perusahaan, TDP) Government – Ministry
of Trade
8. Register with the Ministry of Manpower 1 day Ministry of Manpower No charge
9. Apply for the Workers Social Security Program 7 days Social Security No charge
(BPJS Ketenagakerjaan) and for the Healthcare Administrative Bodies
Insurance Program (BPJS Kesehatan) (BPJS Ketenagakerjaan,
BPJS Kesehatan)
10. Obtain a taxpayer registration number (NPWP) 1 day Tax Office No charge
and a VAT collector number (NPPKP) (simultaneous with
previous
procedure)
Total 20 days IDR 5,030,000
Source: EoDB 2019 Report

Word count (excluded table and reference): 1266 1

POLICY BRIEF
This achievement was obtained through several
policies as follows:
- 2013: Regulation of Ministry of Trade 77/2013,
which states that the business license (SIUP) and
company registration certificate (TDP) can be
issued simultaneously for all trading companies.
- 2017: Regulation of Ministry of Home Affairs
19/2017, which states that to achieve the EoDB
target, the Ministry Home Affairs eliminates the
requirement for a nuisance permit (Hinder
Ordonantie/HO).
- 2017: Regulation of Ministry of Law and Human
Right 3/2017, which regulates the uniformity of
notary rates for making company deeds.
- 2017: Regulation of Ministry of Trade 7/2017,
which deletes the validity period of SIUP so that it
no longer needs to be extended.
- 2017: Presidential regulation 91/2017 which sets
the strategy for accelerating business.
- 2018: Government Regulation 24/2018, regarding
the Online Single Submission (OSS), which is meant
to facilitate and accelerate business registration
With this OSS system, business owners will get
Business Identification Number (NIB) which will
function as TDP, Import Identification Number (API),
and customs access. Furthermore, OSS integrates
business trading license (SIUP) process - procedure 7,
approval of foreign manpower utilization plan (RPTKA)
- procedure 8, application for the workers social
security program (BPJS Ketenagakerjaan) and for the
healthcare insurance program (BPJS Kesehatan) –
procedure 9, and application for taxpayer registration
number (NPWP) and a VAT collector number (NPPKP) –
procedure 10.
Developments in Jakarta
The submission of SIUP and TDP in Jakarta is still done
through a system that has been running
(jakevo.jakarta.go.id). The main reason why Jakarta
continues to choose its own digital system is that the
company's recorded data in jakevo is very large, and
the process of migrating data to OSS takes a long time.
Business owners also feel the quality of OSS is still far
below jakevo. Performance expectancy, facilitating
conditions, social influence, and perceived credibility
are all significant factors of user acceptance (Bhuasiri
et al, 2016)
To improve the indicator of starting a business, the
Head of DPMPTSP DKI Jakarta issued Decree 23/2017-
Word count (excluded table and reference): 1266
which removes the Certificate of Company Domicile
(SKDU) from the licensing requirements under
DPMPTSP's authority, and sets the completion time of
simultaneous SIUP and TDP for 1 day. However, based
on the EoDB report the SIUP and TDP processes can
take up to 7 days. This is at least caused by the
verification officers being unable to handle the very
large number of SIUP and TDP submissions
(overload), and the applicant has not yet completed
the requirements set at the first submission.
Comparison with the conditions and development of
other countries' policies
New Zealand
Starting a business in New Zealand only requires 1
step and resolved no more than 35 minutes. Business
owners can register their company name through
www.companies.govt.nz by filling out the form and
paying a registration fee of NZD 115. When
registering the company name, the business owners
automatically get the Inland Revenue Department
(IRD) and Good and Service Tax (GST) numbers.
The key to New Zealand's success lies in the
utilization of information technology, a
collaboration between government agencies and
customer-centric public services.
New Zealand has succeeded in utilizing Big Data,
where information provided by business owners is
used by all government agencies. Business owners do
not need to fill out forms repeatedly for the same
information requested by different government
agencies. When creating a public service system, the
New Zealand government intensively engages
business owners to ensure that the system is easy to
use.
Key Performance Indicators for each government
agency are not only based on the tasks inherent in
the agency, but also on shared targets set by the
Prime Minister, so collaboration between
government agencies is a necessity.
Most Improved Countries
Afghanistan, Togo, Turkey and Côte d’Ivoire reduce
the cost of establishing and minimum company
capital requirements. China launches online
registration and simplification of social security
registration, Djibouti launches one-stop services, and
India replaces the value-added tax with goods and
services tax.
2
POLICY BRIEF

Recommendation 2. Assistance for OSS implementation in government

In the long term, the Indonesian government can use
New Zealand’s system as a benchmark for starting
business procedures. The policy of sharing
information through the management of Big Data
does not only require investment in information
technology, but also a collaboration between
agencies and the development of human resources.
Simplification of procedures can be done by revoking
regional regulations that conflict with the OSS and
making it difficult for business owners.
In the short term, several strategies that can be
implemented immediately to shorten the procedure
to 6 steps and completion time from 20 to 4 days are
as follows (table 2):
1. Socialization of SKDU Elimination
DPMPTSP DKI Jakarta has abolished SKDU from all
types of licensing requirements under its authority.
This information has not been properly socialized, so
business owners consider SKDU to be something that
is required to be owned.
agencies including the local government
OSS has integrated procedures 6, 7, 8 and 9. However,
relevant agencies (Ministry of Manpower, Tax Office,
BPJS and DPMPTSP) still accept requests outside the
OSS because the officers are not ready to use OSS.
Therefore, the Coordinating Ministry for Economic
Affairs / BKPM needs to provide assistance in the use of
OSS so that OSS can be the only system used in the
business registration process.
3. Delegation of the authority to issue SIUP to the UP-
PTSP in Sub-Districts and Villages (UP-PTSP Kecamatan
and UP-PTSP Kelurahan)
The SIUP issuance delay can be up to 7 days due to the
authority of SIUP category large and medium is still in
the UP-PTSP District Level (UP-PTSP Kota Admnistrasi).
By delegating the authority of the SIUP category large
and medium to the UP-PTSP Kecamatan and SIUP
category small to the UP-PTSP Kelurahan, the process of
issuing SIUP can be shortened to a maximum of 1 day in
accordance to the target set by the Head of DPMPTSP
DKI Jakarta.

Table 2: Expected Output from Implementing Proposed Policy

No. Procedures Time to Complete Agency Associated Costs
1. Pay fee for obtaining clearance of company Less than one day Notary IDR 100,000
name (online procedure)
2. Obtain clearance for the company's name at Less than one day Notary Included in procedure 3
the Ministry of Law and Human Rights (online procedure)
3. Arrange for a notary to obtain the standard 1 day (simultaneous Notary - IDR 500,000 for companies with capital of
form of the company deed and notarize with previous up to IDR 25 million;
company documents procedure) - IDR 2 million, for companies with capital
of up to 500 million; and
- IDR 4 million for companies with capital
up to IDR 1 billion.
4. Apply to the Ministry of Law and Human Less than one day Ministry of Law and Included in procedure 6
Rights for approval of the deed of (online procedure) Human Rights
establishment
5. Pay the non-tax state revenue (PNBP) fees Less than one day Notary IDR 500,000 (validation of company as legal
for legal services (online procedure) entity) + IDR 430,000 (publication)
6. Business registration through OSS 1 day OSS – relevant agencies No charge
Total 4 days Up to IDR 5,030,000

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