FEATURE-Indonesian local govt shows way in cutting red tape

SRAGEN, Indonesia, Oct 15 (Reuters) - Indonesians joke that if a bureaucrat can complicate your life, why would he bother to make it simple ?

Day to day, Indonesians regularly bump up against bureaucracy and corruption when they apply for simple permits -- obtaining an ID card or other essential document can take weeks and a greased palm.

It's this sort of red tape and corruption that deters many foreign investors from putting their money in Indonesia, despite the opportunities offered as Southeast Asia's largest economy is set to enjoy its biggest growth spurt in 11 years.

But a small revolution is under way in the regency of Sragen, central Java, and its success may provide the basis for good, relatively bureaucracy-free government in other parts of the country.

Untung Wiyono, the regent of Sragen, is one of a handful of leaders gaining a reputation at home and abroad for improving the lives of his electorate following the decentralisation of power to the provinces and districts.

It takes just two minutes and 5,000 rupiah ($0.55) to get an ID in Sragen, business licences take a few days, and there are free training schemes for the unemployed so that they can get jobs as seamstresses, mechanics or carpenters.

"The problem is that government offices are all slow motion, they're reactive not creative, and into wasting time," said Wiyono, 57, in an interview with Reuters in the town of Sragen, which has the same name as the regency.

Indonesia has the slowest business start-up time of any country in Asia, taking 105 days compared with just five in Singapore, according to a recent World Bank report.

Big foreign manufacturers have tended to shun Indonesia in the past decade, said S.D.Darmono, head of industrial parks developer PT Jababeka Tbk, because of concerns about the economy, terrorism, law enforcement and red tape.

"They have to go through the bureaucracy, they have to buy the land, there is always a problem," he said.

Indonesia was one of the world's most centralised countries until 2001 when decentralisation reforms were introduced after former President Suharto was ousted in 1998 and the country moved towards greater democracy.

Gita Wirjawan, head of JP Morgan in Jakarta, said his office has arranged for foreign fund managers who invest in Indonesia to visit the regent so that they can see what he's achieved.

"It's important for people who invest billions of dollars in Indonesia to see this, to see that decentralisation can work. This is the future," Wirjawan said.


The citizens of Sragen, a rice-growing region studded with tidy villages and set against a backdrop of volcanoes, have benefited from more efficient local services.

When they visit the local government office to get a licence, whether to start up a new factory or a dentist's clinic, the first thing they see as they enter is a big sign stating how long it will take. The maximum turnaround is 12 days.

Once an application has been filed, they can monitor the approval process on one of the office laptops, set out on the counters for anyone to use in order to ensure transparency.

"It's all about entrepreneurship," said Wiyono, a former engineer and businessman who worked in the oil and gas industry before getting into local politics.

Bank borrowing has increased because more people have been encouraged to get a licence and set up a business, he said, adding that he prefers to provide funding for small businesses which have already demonstrated their viability.

Wiyono's steps are attracting attention from politicians and investors. He was one of two regents featured in a local leadership forum for President Susilo Bambang Yudhoyono's office earlier this year that highlighted successful reforms.


Indonesia has been struggling to curb unemployment. The official rate is 9.75 percent, or about 10.5 million people, but it is estimated that it is really 30 percent after accounting for the under-employed, who may work as little as one hour a week.

Yet in Sragen the unemployment rate has been dropping.

Yani Effendi, who chose to set up a business in Sragen, said she got a licence to start up a new garment factory in two days, and now plans to recruit as many as 1,000 workers locally to make shirts and skirts for buyers in the United States.

Many of those workers are likely to come from the regency's training centre, where a reporter from Reuters saw girls aged 16 years or more bowed over their sewing machines as they practiced stitching cuffs, collars and pockets for school uniforms.

In the same complex, three men were training as motorbike mechanics in one workshop, while a nearby classroom was set up to provide basic computer skills for those in search of office jobs.

Wiyono's other initiatives include encouraging farmers to use organic farming methods for their rice crops, because even though the harvest is smaller, they can earn a higher margin.

According to Sragen's manpower and transmigration office, open unemployment in the Sragen district fell to 7,132 in 2006, from 8,665 in 2005 and 12,722 in 2000, suggesting that the training schemes are helping the jobless to find work.

When Indonesia's decentralisation reforms began, the shift of power to the provinces and regencies exposed a shortage of experienced managers and administrators, and in some cases, opened the door for more corrupt practices.

But it also opened the door for new possibilities.

"Budgets have been more transparent, the planning has been more participatory. Generally people are not unhappy, they support the notion," said Hans Antlov, a governance advisor and USAID contractor.