2012年-世界发展银行全球_Constraints_on_Productivity_and_Investment_in_Indonesias_Manufacturing_Sector___Survey-based_Analysis_of_Business_Constraints_34页_1mb

Summary: Constraints on Productivity and Investment in Indonesia's Manufacturing Sector

Core Content

This policy note provides a survey-based analysis of the main constraints affecting the manufacturing sector in Indonesia, focusing on their impact on productivity and investment decisions. It highlights the challenges faced by firms, especially small and medium enterprises (SMEs), and outlines key policy recommendations to improve the business climate.

Main Constraints Identified

Based on the World Bank Enterprise Survey (WBES) 2009 and the Monitoring Investment Climate (MICI) Survey 2009, the following constraints were identified as critical for Indonesian manufacturing firms:

• Access to Finance: More than half of the firms (53%) identify this as the most severe constraint. Small and medium firms face higher costs due to poor credit information and weak legal protections. Domestic firms are more affected than foreign ones, with 32% of domestic firms citing it as a major constraint compared to 22% of foreign firms.

• Electricity Supply: Electricity is a major constraint, especially for small and medium firms. Power outages disrupt production and force firms to invest in private generators, increasing costs. Indonesia ranks 161st out of 183 countries in ease of getting electricity.

• Transport and Logistics: Poor transport infrastructure is a significant constraint. Indonesia ranks 75th in logistics performance, far behind its regional peers. However, expanding firms value transport infrastructure more highly than contracting firms.

• Labor Regulations: These are a major constraint, particularly for large firms and exporters. Regulations related to severance payments, minimum wages, and lay-off procedures are seen as obstacles. New, expanding, and more productive firms perceive this constraint as less severe.

• Political Instability: This is perceived as a major obstacle, with Indonesian firms more likely to identify it than firms in Vietnam and the Philippines. It affects all firms, but registered firms are slightly more affected than unregistered ones.

• Tax Rates: High tax rates are a significant constraint for large firms and exporters. They are ranked fifth among large firms and first among exporters.

• Courts/Conflict Resolution: This is among the top five constraints, with 21% of firms citing it as a major issue. Indonesia ranks 154th in contract enforcement, indicating a weak legal system.

• Crime, Theft, and Disorder: This is a general constraint across all firms, with no specific firm characteristics significantly affecting its perception.

• Access to Land: Registered firms find this less important than unregistered firms, suggesting a lack of clarity or accessibility in land acquisition processes.

Impact on Productivity and Investment

• Productivity: Business climate constraints reduce average productivity levels by about 10%. Access to finance reduces productivity by 6%, electricity disruptions by 0.7%, and excessive regulation by 3.3%.

• Investment Decisions: Constraints influence firms' willingness to invest. Firms with higher costs due to these constraints are more likely to delay or reduce investment size.

Key Policy Recommendations

• Improve Credit Information Systems: Establish a well-functioning private credit bureau to enhance access to finance.

• Provide Microfinance for Start-ups: Support small and medium enterprises (SMEs) with financial resources to boost productivity.

• Enhance Infrastructure: Focus on improving electricity and transport systems, particularly for SMEs and exporters.

• Incentivize Training: Promote workforce development to reduce labor-related constraints.

• Strengthen Collective Action: Encourage knowledge sharing among firms to improve operational efficiency.

• Improve Tax Administration: Shorten VAT refund and duty drawback processes to reduce financial burdens.

• Strengthen Law Enforcement: Improve the efficiency and predictability of the legal system, especially in contract enforcement.

Role of Government and Private Sector

• Government Responsibility: To set clear regulations, improve the business environment, and enforce laws effectively.

• Private Sector Responsibility: To take initiative in knowledge sharing and cluster development to mitigate constraints.

Comparative Insights

• Indonesia vs. Philippines and Vietnam: Indonesian firms are more likely to perceive access to finance, political instability, and labor regulations as constraints compared to firms in the Philippines and Vietnam.

• Firm Characteristics: Larger, more productive, and foreign-owned firms are generally less affected by constraints than smaller, domestic, and new firms.

Conclusion

The poor business climate in Indonesia has substantial negative effects on productivity and investment in the manufacturing sector. Addressing these constraints is essential for fostering growth and competitiveness. While the government plays a crucial role in regulatory and institutional reforms, the private sector must also contribute through knowledge sharing and collaboration.