For the second year running, Indonesia has ranked in the top ten most challenging countries in which to do business, by the TMF Group Complexity Index.
Argentina ranked as the most complex for the second year running
Although Indonesia has moved slightly down the rankings – falling from 5th in 2013 to 9th in 2014 – the complexity of its business environment ranks second only to South Korea in the Asia Pacific region.
The far-reaching annual study by TMF Group, a leading provider of global business and compliance services, has ranked 81 jurisdictions across Europe, the Middle East, Africa, Asia-Pacific and the Americas according to how complex they are to do business in from a regulatory and compliance perspective. The full report can be seen here.
Whilst in recent years the Indonesian government has made significant progress in improving Indonesia’s business environment, such as reducing corporation tax, simplifying its licencing processes and amending laws to give foreign companies greater protection, the country’s overly-complicated bureaucracy can still significantly intrude on a company’s ability to conduct business there.
For example, starting a business in Indonesia, such as a limited liability company, can be cumbersome, taking around 45 days compared to just 12 in OECD countries, involving multiple filings with various government ministries, often in the local language, and costing four times as much as in neighbouring Thailand. Paying taxes is also more time-consuming, requiring on average 51 payments per year compared to the OECD average of 13.
The recent inauguration of Joko Widodo as Indonesia’s new president, however, should be a very positive step for the country. He has committed to eradicating widespread corruption and, as a priority, making Indonesia more market-friendly, particularly to its closest ASEAN neighbours. Also at the top of his agenda is a reduction in bureaucracy in all government agencies to help encourage further foreign direct investment into the country.
"Despite the complexity and relatively high cost of doing business in Indonesia, the country is the biggest economy in Southeast Asia and remains a popular destination for foreign investment, where as a percentage of GDP, it receives more FDI than China, India or Brazil," commented Vinod Kumar, Managing Director of TMF Group in Indonesia. "However, whilst Indonesia has made much progress in recent years, there are still many challenges to overcome if the country is to remain an attractive investment destination and chief among these is reducing the amount of red tape for multinational businesses."
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