Doing Business in Indonesia: Legal and Bureaucratic Constraints

The World Bank’s new series of Doing Business reports attempt to measure the relative ease of doing business in countries around the world. The output of this research is a set of rankings that enable each country to see how it looks relative to the others from the point of view of private sector businesses. This paper highlights a number of concerns about the Doing Business methodology, and presents a critique of the ‘law and finance’ view regarding the influence of legal system origins on countries’ economic performance, which was highly influential in the first of the Doing Business reports. Selected data from the 2006 report are used to explain why Indonesia is having difficulty getting back to Soeharto-era rates of economic growth. The report’s findings in relation to Indonesia are then interpreted within the framework of an analysis of the way the Soeharto ‘franchise’ operated.