2012年-世界发展银行全球_Productivity_Performance_in_Indonesias_Manufacturing_Sector_25页_1mb

Summary of Productivity Performance in Indonesia's Manufacturing Sector

Core Content

This policy note analyzes the productivity performance of Indonesia's manufacturing sector from 1990 to 2009, focusing on three key areas: micro-level productivity, allocative efficiency, and distortions in firm size distribution. It emphasizes the role of regulatory reforms, foreign competition, and access to imported inputs in improving productivity and allocative efficiency. The analysis also highlights the importance of start-ups in driving job creation and productivity growth.

Main Points

1. Total Factor Productivity (TFP)

• TFP growth in Indonesia's manufacturing sector increased over the period 1990–2009.
• The increase in TFP was driven by both internal efficiency improvements and allocative efficiency gains.
• Electronics, machinery and instruments, and textiles, clothing and footwear sectors showed the highest TFP growth.
• Natural-resource-based sectors (non-agricultural) showed limited TFP improvements due to high rents and limited competition.
• Productivity dispersion increased over time, with a growing share of firms at the extremes of productivity levels.

2. Allocative Efficiency

• Allocative efficiency refers to the reallocation of resources to more productive firms.
• It is positively correlated with firm entry and exit.
• Sectors with higher rates of new product introduction showed better allocative efficiency.
• Imported intermediate inputs and foreign direct investment (FDI) are important determinants of allocative efficiency.
• Regulatory barriers to entry and exit significantly hinder allocative efficiency.
• Foreign-owned firms had a 28% productivity advantage over domestic firms.

3. Plant Size: The Missing Middle

• Indonesia's manufacturing sector exhibits a "missing middle" — a low proportion of firms with 20–100 employees.
• Only 5.1% of manufacturing firms in Indonesia fall into this category, compared to 46.5% in Brazil and 27.4% in Vietnam.
• Small firms (5–19 employees) constitute 93% of manufacturing firms in Indonesia, far exceeding their share in other countries.
• The missing middle is associated with distortions in firm size distribution and limited access to finance.
• Small firms often evade taxes and inspections, which limits their growth potential.

Key Findings

• Start-ups are more dynamic than existing firms, contributing significantly to job creation and productivity growth.
• New entrants showed an 8% productivity growth premium in the first three years of operation.
• Export-oriented firms and foreign-owned firms tend to be more productive and grow faster.
• Import penetration and FDI are crucial for competitiveness and allocative efficiency.
• Market concentration (measured by HHI) varies across sectors, with less concentrated sectors showing higher productivity growth.
• Competition enhances firm performance by increasing efficiency, innovation, and cost control.
• Firms in more open sectors are more likely to exit if they are less productive, but those in sectors with a higher share of multinational firms are less likely to exit.

Policy Implications

• Regulatory reforms are essential to improve entry and exit processes, which are critical for allocative efficiency.
• Improving financial markets can help small firms access credit, thus reducing the "missing middle" phenomenon.
• Supporting start-ups should be a priority for policymakers, as they are key drivers of job creation and productivity growth.
• Enhancing access to imported inputs and FDI can help improve competitiveness and productivity in the manufacturing sector.
• Promoting competition through trade openness and market reforms can lead to better resource allocation and firm performance.

Conclusion

The manufacturing sector in Indonesia has shown overall productivity improvements, but these have been uneven across sectors and firm sizes. Allocative efficiency and foreign integration play a significant role in this productivity evolution. Addressing regulatory barriers, improving financial access, and supporting start-ups are crucial for enhancing productivity and job creation in the sector.