Reducing Barriers to Markets (PROMIS)

Background

Indonesia consistently ranks as one of the most difficult countries in the region in which to do business.  The licensing and registration processes that govern entry into the formal market in Indonesia represent an area of particular concern to business owners. Once registered, businesses continue to confront challenging and costly regulation governing market transactions. Decentralization appears to have exacerbated this situation, as some local officials, under pressure to raise revenues are using their new authority to increase taxes and user fees. Thus, local governments’ short-term interest in raising revenue has the unintended consequence of dissuading investors and dampening growth.

Project Objectives

1. Reducing the cost and complexity of business licensing and permitting, resulting in higher numbers of businesses entering the formal sector and faster licensing for investors;

2. Improving the formulation of business regulation so that local governments issue fewer distortionary regulations; and

3. Creating strong incentives for local governments to implement business-friendly policies, resulting in higher numbers of local governments implementing market reforms and adopting best practice.

Project Components

PROMIS is a grant to The Asia Foundation to support long-term technical assistance, short-term technical assistance, limited commodity support and domestic and international training and conferences.

Project Focus

1. Streamlining Business Licensing and Registration

• Support to local governments on streamlining licensing procedures through the establishment or upgrading of One-Stop Licensing  Centers.
• Regulatory review of licensing requirements.

2. Establish a Community of Practice to Streamline Business Licensing

• Establish provincial level roundtables on business licensing.
• Establish resource centers to provide technical assistance for local governments.

3. Rationalization of Licensing Requirements at the Provincial and Central Government Levels

• Provide technical assistance to the provincial-level investment boards to improve services.
• Design and implement a national advocacy campaign on the issue of duplicative and unnecessary business licensing.

4. E-government Application for Business Licensing

• Installation of automated complaint mechanisms in selected OSS’s receiving assistance.
• Working with OSS centers and the local governments’ data department.

5. Institutionalizing Regulatory Impact Assessment in Local Policymaking

• As a complement to the efforts to streamline business licensing, PROMIS proposes to help government units improve the way they formulate regulation. One way that lawmakers can be helped to understand the potential negative impact of proposed regulation is through regulatory impact assessments (RIAs).

6. Rating of Local Business Environment Attractiveness

• The successful implementation of economic reforms is most easily accomplished where government officials are motivated to implement better economic policy. Under decentralization, many local officials are eager to be seen as successfully promoting their region to attract investment and jobs. Beginning in 1999, the Asia Foundation, with USAID support, has worked with the local NGO Regional Autonomy Watch (KPPOD)  to develop a ranking exercise to gauge how decentralization is impacting the local business climate. The first of its kind in Indonesia, the ranking now covers 200 local governments and is well regarded by policymakers and business owners.
  

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