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Abstract
By various performance indicators, the Indonesian services sector ranks below those of its main ASEAN neighbours. This is concerning for Indonesia, given the the increased attention worldwide on the services sector as a likely source of growth, the contribution of the services sector to the competitiveness of other sectors, and the opportunities available for capturing the gains from innovation and change in services. There is scope, we argue, to increase the number of formal jobs in the sector and to dispel its reputation as the employer of last resort. We find that a restrictive policy regime contributes to the sector’s poor performance, leading to an argument for reform. We discuss a potential strategy for such reform, focusing on four factors: increasing transparency and policy information; capturing the opportunities from international commitments; and exploring the potential of, one, new technology, and, two, urbanisation.
Dari berbagai indikator kinerja, sektor jasa Indonesia memiliki peringkat di bawah negara-negara tetangga utama di ASEAN. Hal ini menguatirkan bagi Indonesia, terutama dengan semakin bertambahnya perhatian dunia terhadap sektor jasa sebagai sumber pertumbuhan yang potensial, kontribusi sektor jasa terhadap daya saing sektor-sektor lainnya, serta kesempatan untuk mendapatkan keuntungkan dari inovasi dan pertumbuhan dalam bidang jasa. Kami berpendapat bahwa terdapat ruang untuk menambah jumlah pekerjaan formal di sektor jasa, sembari menanggalkan reputasinya sebagai pemberi kerja terakhir. Selain itu, kami menemukan bahwa rezim kebijakan yang bersifat restriktif berkontribusi terhadap lemahnya kinerja sektor ini, sehingga diperlukan reformasi. Kami juga melakukan pembahasan atas strategi yang potensial untuk reformasi tersebut, dengan berfokus pada empat faktor: memperbaiki transparansi dan informasi kebijakan, menangkap kesempatan dari komitmen internasional, mengeksplorasi potensi dari teknologi baru, dan memanfaatkan potensi urbanisasi.
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Notes
1 Mechanisms by which growth in the services sector helps to reduce poverty have been discussed by Abrenica, Findlay, and Lim (2009).
2 See the work of Lee and McKibbin (2013) for a more extensive review.
3 The role of the political process in services growth has been linked to the rule of law and the quality of the regulatory environment (see Repucci Citation2015).
5 Data on services exports for Indonesia come from Bank Indonesia, the central bank, while comparative data come from the WTO (2015).
6 Parham (Citation2004) finds significant contributions to productivity growth in Australia from services subsectors, including transport and storage, and finance and insurance.
7 For example, Indonesia’s director-general of domestic trade and the regent of Brebes, in Central Java, recently launched the export of Brebes shallots to Thailand. The project certainly benefited from cooperation between a large number of smallholders and an exporter of shallots, but it also depended on access to warehousing, packaging, and transport services.
8 Even the export of Brebes shallots is an example of a global value chain, since the seeds for the shallots were grown in the Philippines and the final product is sold to Thailand and Vietnam.
9 Imported intermediate inputs can be used in a different sector; imports of mining products, for example, may be exported as metals. See http://www.oecd.org/sti/ind/TiVA_2015_Guide_to_Country_Notes.pdf.
10 Data are also available on the services shares of exports by subsector. There are relatively high shares in ICT, electronics, and machinery, as well as in rubber and plastics. Overall, the shares of services in exports across sectors lie in a remarkably narrow range (with the exception of mining exports, in which the share is low). Across all sectors in Indonesia, the shares are much lower than the OECD average.
11 The original BRICS economies were Brazil, Russia, India, China, and South Africa. All were assessed to be at an advanced stage of development at which they had arrived relatively recently. There has been some discussion that Indonesia should be added, making the expanded group the BRIICS.
12 The average OECD STRI values in are based on a subset of the 22 available subsectors—that is, they refer only to services in commercial banking, telecommunications, air transport, maritime transport, road freight, rail freight, and construction.
13 Inefficiencies in logistics, which are often due to the protection of domestic transport and distribution or to the monopoly of state-owned enterprises on ports and airports, have often been said to reduce Indonesia’s export competitiveness and thus the country’s ability to be part of global value chains (see, for example, World Bank Citation2016).
14 World Bank governance indicators show a significant increase in performance in a number of measures in Indonesia in the last decade. See http://info.worldbank.org/governance/wgi/index.aspx#reports.
15 Ahsan et al. also find that the performance of Malaysia’s higher-education sector, which has relevance for Indonesia, is related to a willingness to liberalise; to allow in private providers, including prestigious foreign universities; and to establish an internationally benchmarked quality-assurance framework.
16 The four modes of GATS services delivery are as follows: mode 1 (cross-border supply) comprises transactions across borders, including via the Internet; mode 2 (consumption abroad) comprises the movement of consumers, as in tourism; mode 3 (commercial presence) comprises foreign investment; and mode 4 (movement of natural persons) comprises the relocation of people.
17 In some cases—in telecommunications, banking, and insurance, for example—commitments are more liberal than actual policy, because of discrimination in favour of other ASEAN members (which is recorded as a commitment). It could also follow from the treatment of prudential measures and their exclusion from reference in the commitments but their inclusion in the data on actual policy.
18 See Tan’s (2013) paper for more detail on the ASEAN experience in air transport.
19 The government has allocated funds to subsidise training and certification, in cooperation with the Association of Indonesian Hotels and Restaurants (which has fulfilled the requirements for awarding certifications). The training of major hotel chains has been integrated into the relevant competency standards.
20 The head of Indonesia’s Investment Coordinating Board (BKPM), Franky Sibarani, has revealed that, in order to increase investment, the negative investment list, which indicates which sectors are closed to foreign investment, will be reduced by opening up more business sectors. A new presidential regulation on the list’s revision was set to be issued in March 2016. It was reported that discussions on opening up foreign investment in three industrial sectors—namely, tourism, the creative economy, and health care—had almost been concluded. Five business sectors in the creative economy, including film production and cinemas, will be opened up (Jakarta Post, 25 Jan. 2016), as will other services-related areas, such as e-commerce (Jakarta Post, 16 Jan. 2016).
22 Forums such as the Indonesian Services Dialogue are important in bringing together producers and users of services: ‘Services-users such as manufacturing companies as well as natural resources companies are also engaged to voice their input as the services users to obtain higher quality services with better efficiency’. See http://isd-indonesia.org/about-us/.