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Introducing the Institute’s Global Index of Economic Openness Stephen Brien Director of Policy

2 13 Years of reporting global prosperity

3 Economic Openness and Prosperity

Global Index of Indonesia Case Study: Economic Openness, Economic Openness, 2019 2019 4 Why Indonesia?

5 Element details

6 Evolution of Indonesian Economic Openness Economic Openness score

57 rd 68th Investment Environment 53 (↑27) 56 55 Market Access and 54 Infrastructure 85th (↑6) 53 52 Enterprise Conditions 61st (↓3)

51 Index score Index 50 74th 49 Governance 63rd (↑9) 48 47 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Indonesian Economic Openness in Context

GIEO Score Investment Market Enterprise Governance Environment Access & Conditions Infrastructure

Singapore 2 1 1 5 26 Malaysia 38 29 41 29 58 51 44 54 41 88 57 76 87 42 46 Thailand 66 46 55 78 104 Indonesia 68 53 85 61 63 Philippines 79 83 76 75 76 97 109 73 103 109 Myanmar 120 136 108 101 134 Laos 124 126 111 117 135 Cambodia 131 119 101 140 149 Strengths and Opportunities

Strengths Opportunities

. Investment Environment . Infrastructure

. Entrepreneurial Dynamics . International & FDI (Bypassing Regulation) . Informal -> Formal

. Government and Courts (Integrity and Consistency) Strength: Investment Environment

10 Investment Environment: improvements

Protection of Property Rights Protection Venture Availability

5 5 5

49th 48th

th 4 4 4 25

142nd 40th 3 3 3

th

Expert survey (WEF) survey Expert (WEF) survey Expert Expert survey (WEF) survey Expert 127

2 2 2

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Financial Ecosystem

Insolvency recovery rate Quality of banking system and capital markets 100 10

80 8

60 6

40 4 Expert survey (BTI) survey Expert

20 2 Percentage of claim value claim of Percentage

0 0

Indonesia rank: 32nd Indonesia rank: 34th 12 Investment Environment: Opportunities

. Greater confidence in property rights, esp expropriation

. Strengthening shareholder rights

. Building out domestic stock-market participants

13 Opportunity: Infrastructure

14 Transport and Communications

Road quality Broadband download speeds 7 100

7 90

6 80

6 70

5 60

5 50

4 40

4 30 Expert survey (WEF) survey Expert 3 second per Megabits 20

3 10

2 0

Indonesia rank: 77th Indonesia rank: 126th 15 Market Access & Infrastructure: Opportunities

. Increased access to broadband and 4G

. Continued investment in transport

. Continued reform of energy subsidies

. Renewed role for PPPs, and alternatives to SOEs

16 Opportunity: International Trade and FDI Border Regulation Compliance

Time to comply with border regulations Cost to comply with border regulations and procedures and procedures 160 350

140 300

120 250 100 200 80

Hours 150

60 dollars US 100 40

20 50

0 0

Indonesia rank: 112th Indonesia rank: 81st 18 FDI: Declining Attractiveness

Business Impact of Rules on FDI Presence of Foreign Ownership of companies 7 7

st 10th 1 6 6

5 5 64th

97th Expert survey (WEF) survey Expert Expert survey (WEF) survey Expert 4 4

3 3 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Market Access: Opportunities

. Reduced dwell-time at ports

. Securing further trade agreements

. Reducing NTB

. Reduce the negative investment list (FDI)

20 Opportunity: Enterprise Conditions

21 Doing business

New business density Ease of starting a business

10 100

8 90

64 64 6 80 -

4 70

ages 15 ages Index score (WBDB) score Index

2 60 New registrations people 1,000 per registrations New 0 50

22 Indonesia rank: 131st Indonesia rank: 113th Labour Market Regulations

Redundancy costs Flexibility of employment contracts

70 1,0

0,9 60 0,8

50 0,7

0,6 40 0,5 30 0,4

Weeks of salary of Weeks 20 0,3 Index score (WBDB) score Index 0,2 10 0,1

0 0,0

Indonesia rank: 154th Indonesia rank: 134th 23 Enterprise Conditions: Opportunities

. Increased contestability of markets

. Reduced burden for firms entering formal sector

. Increased labour-market flexibility

. Improved workforce skills

24 Opportunity: Governance

25 Rule of Law: improvements

Efficiency of dispute settlement Judicial independence

5 5

51st 44th

4 4

62nd

3 3 Expert survey (WEF) survey Expert Expert survey (WEF) survey Expert 111th

2 2 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

26 Administration of justice

Quality of judicial administration Alternative dispute resolution 18 1,0

16

14 0,8

12 0,6 10

8 0,4

6

Expert survey (BTI) survey Expert Index score (WBDB) score Index 4 0,2 2

0 0,0

Indonesia rank: 85th Indonesia rank: 113th 27 Rule of Law: Areas for Focus

Civil justice Integrity of the legal system 6 10

8

4 6

4

2

Index score (FI) score Index Index score (WJP) score Index 2

0 0

Indonesia rank: 106th Indonesia rank: 117th 28 Government Integrity

Use of public office for private gain

6

4

2 Index score (WJP) score Index

0

Indonesia rank: 116th 29 Governance: Opportunities

. Reforming civil and commercial code

. Continuing to tackle corruption

. Increasing government capacity (at all levels)

. Greater coordination and streamlining of government

30 Conclusions

. Infrastructure Investment

. Removing protectionist policies and role of SOEs

. Regulations and policies to incentivise (formal) business activity

. Improving governance

31 Introducing the Legatum Institute’s Global Index of Economic Openness Thank You www.li.com | www.prosperity.com 33