Background According to International Finance Corporation (2013) Indonesia ranks 166th out of 185 countries in terms of ease of starting

a business, based on a report in 2013 while Singapore sits in the first place. Indonesia ranks 129th in terms of ease of obtaining credit. It shows significant backwardness of Indonesia compared to neighboring countries. It also shows urgent need for Indonesia to reform its regulation and legislation (Republika, 2013). Indonesia has huge potency of market, over hundred millions of human capital and look likes unlimited natural resource to be a magnet for investor to come and invest for global partnership. Based on Government Effectiveness data from World Bank, Indonesia scored -0.43 in 2004, -0.37 in 2006 and -0.29 in 2008 and steadily same in 2012 (World Bank, 2012). Scale of data is from -2.5 to 2.5, the highest numbers imagine the greatest effectiveness of government run in that country, and the highest data is vice versa. Even Indonesia moves slowly to positive numbers of government effectiveness, Indonesia government still left behind when compared to progress achieved by the neighboring countries. This condition reflects there are problems in government activity to supported business activity as well. The problems arise such as national bureaucracy quality, public service and competency of government apparatus.

National Politics Elements that Impact Business Activity Human Capital Indonesia is characterized by a dual labor market: a small formal market and a large informal one. The formal-sector workers are protected through severance payments and relative high minimal wages. The letter is an incentive for employers to hire workers from the informal sector where there is a lack of social insurance. Extensive informality is detrimental to long-term growth and undermines the collection of tax revenues (needed for investments in the country's infrastructure, healthcare and education). For Instance: One of famous shoe manufacturer suspected utilizes informal labor (children labor) rather than formal labor in repetitive work area. That will be the ways to hidden cost of paying labor force to company.

Infrastructure The quality and quantity of Indonesia's infrastructure is in a worst condition than the other regional countries. This applies to both hard infrastructure (roads, railways, bridges) and soft infrastructure (education, social welfare and health). There has been a serious shortage of business investments in this field. For that matter, the Indonesian government has put investments in infrastructure as a top priority of its Medium Term Development Plan (RPJMN 20102014), most of which is envisaged to be financed through private capital in the form of public-private partnerships (PPPs). However, as Indonesia's current regulatory framework and business environment are not optimally conducive, it might be a too ambitious strategy of the government at this point (until further reforms are initiated). Conflicting law and regulation are currently hurdles for Indonesia's infrastructure development. For Instance: One of private distribution company loss their order from international fish restaurants because the flood that immobilize the tool road of Jakarta in 2012. This problem tend not only increasing cost to maintenance and idle of the containers but also loss the opportunity cost and trust from international customers. Land Acquisition One of the main obstacles to infrastructure development in Indonesia has been the issue of land acquisition. The underlying reason for this situation is legal impediments to agree on fair compensation for land-owners and, as a result, endless legal disputes over valuation (on various occasions, business expansion has led to tensions with local communities). A new land acquisition law has applied by Indonesian government in 2010 but its results are yet to be seen. For Instance: One of huge mining and energy group in Indonesia faced problem in valuation of the land acquisition in Banjarmasin, they tend to revaluating and paid more cost for court and pending of land utilization to running business. Energy Subsidies A major concern of international institutions is Indonesia's ever increasing amount of energy subsidies, which entail significant budgetary costs. Initially, these energy subsidies were introduced to support basic needs of the poor. However, by keeping these energy prices

artificially low, price signals are blurred, consumption and investment decisions are distorted, and the vulnerability of public finances to international oil-price volatility is increased. It is also assumed that richer households benefit more of these subsidies than poorer households do. These subsidies have become a huge burden on the government budget and therefore the government is aiming to slash them. However, cutting energy subsidies is a politically-sensitive issue in Indonesia and will bring about serious criticism and demonstrations. It will also put great pressure on the achievement of inflation targets. Knowing that in 2014 new elections are held, the government will not be too supportive of reducing the subsidies as it will come at the price of popular support. For Instance: Based on instability of consumers purchasing power that caused by increasing of energy prices, Customers Goods product tend to more expenses to holding products and loss margin in order to increasing the energy price. Bureaucracy Indonesia's bureaucracy is known to be long and complicated and seems to have become a 'power centre' in its own right, thus effectively resisting efforts toward reforms: bribery remains rife and there is no sustained progress in building institutions that enhance the business climate, such as credible courts. As such, the country contains various business uncertainties that harm the business climate. For Instance: One of Government Company suspected to give some billion rupiahs in order to smoothing the proposal of tender to ministry and also the commission of parliament. These are the application of corruption that looks like regularly happen in Indonesia business that related to the government, and that cost define as the other expenses and usually hidden by company.

Conclusion The emergence of Indonesias Reformation Period after Suharto stepped down from the presidency in 1998 implied a significant break with the past. Indonesian politics changed profoundly from a centralized authoritarian regime to a decentralized democracy, and with this change came important economic implications. Around half of total public spending came from

sub-national government control. This ongoing journey towards a full effective democracy has been accompanied by both successes and difficulties, while major challenges remain ahead: improving the countrys infrastructure, education, healthcare, and employment opportunities. An agenda of state reformation must be followed with reforming of the executives bodies of government. This is an important part to realize the vision of Indonesia. But the changes of democratic systems are observed to be unparallel to the capacity of the Government bureaucracy. It can be seen from the bureaucratic capabilities that are resulting less improvement in public service sectors and government apparatus competency. Obviously it will be the obstacle to accelerate the national welfare development. The phenomenon of poor quality in public services showed that the bureaucratic reform does not affect to the fundamental rights of the community that is justice. A variety of opinions showed the existence of the four causes1 : 1) There is a problem on the input of the public service in Indonesia. The state government of manpower at the range of education and training to deliver the quality of public services. This can be seen from the large number of practices of corruption, collusion, and nepotism at the planning of public policy which seemed abuse the importance of interests of society at large. 2) The working culture of the bureaucracy known as mal-administration such as delayed job, un-discipline, unfriendly to the business, abuse of authority, incompetent, illegal charges, and many others. 3) Public participation in planning and monitoring to the government is still at low level, and then the societies do not have courage to claim their rights for having proper public service. 4) The supervision and prevention against mal-administration practice have not been adequate.

Girindrawardana, D. Public Services Reform in Indonesia

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