o Replace goods transportation system from predominantly cartruck to train as the main mode of land transportation
o Establishing world-class export supporting infrastructure and manufacturing clusters, such as: ring road, road access to port, access to warehouse, international
port o Improving the ratio of electri ication to 100 and enhance further the quality of
electricity in Indonesia, especially at the regional level who experience blackout in a highly frequent basis e.g. Medan, etc.
4. To better the institutional aspects of infrastructure development, through several steps:
o Improving public budget for infrastructure to a comparable level to those of other major developing countries
o Encouraging and re ining Public-Private Partnership for strategic infrastructure. PPP scheme needs to have clear standardization, including con idence in private sector to
participate in project inancing o Lands acquisition needs to be fully settled prior to construction; government should
guarantee full compensation of any losses arising from land acquisition failure, or implement land fund that is reliable to investors. Land fund implementation consists
of the following, will release risks borne by private investors: ·
Land revolving fund: set off land acquisition cost ·
Land capping: cover risk of increasing land price o Re ine government institutions as planner, coordinator, and evaluator of
infrastructure projects. As an institution, the Committee for Priority Infrastructure Development Acceleration, or KPPIP Komite Percepatan Pembangunan Infrastruktur
Prioritas needs to have legal power to execute as well as clear coordination and order relationship with related stakeholders, to ensure KPPIPs ef icient and effective work.
5. To have a more lexible and conducive employment regulation that support business productivity and employment creation.
This includes labor policy reforms such as: o Amendment of labor law 132003 to better balance the interest of workers,
employers, and the job seekers o Minimum wage should be determined through a technocratic and centralized
approach by independent institution, in which heads of the regions may not politically interfere to it.
o Signi icantly reducing the mandated amount of severance pay o To delay the implementation of BPJS until it is ready, legally clear, and procedurally
coordinated, especially to have a clear mechanism on the Coordination of Bene it CoB between BPJS and private insurance scheme that has already been provided by
the companies.
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STRENGTHENING BUSINESS COMPETITIVENESS FOR
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6. To Improve workers skill and productivity, through: o Establishment of National Training Fund as an instrument to drive training done
internally by industry on-the-job training in order to improve the practical skill of the workers. National training fund functions to help the funding and incentive to
business sectors that seek to conduct training for their workers in order to ful ill the change in required skills.
o Revitalization of vocational and skill training center BLK. In order to improve its effectiveness and to be more able to re lect market dynamics, BLK management needs
to be conferred to industrialprivate sector whose funding is sourced from government.
In complement to those recommendations,
Indonesia also needs a more pro-active trade and investment policy as well as
clear and market-friendly industrial development strategy. To be more
competitive at the global level, policy makers need to consider a rather pro-active trade
policy, such as free trade agreement FTA or comprehensive economic partnership
agreement CEPA as it offers tariff elimination and non-tariff barriers
relaxation which translates to: i cheaper input, i.e. raw material and capital goods, for
domestic industry, as well as ii better market access for Indonesias export. This
w i l l e v e n t u a l l y b o o s t i n d u s t r i a l development and export competitiveness in
Indonesia. Moreover, since getting fresh liquiditycapital has now been harder
following the monetary tightening in US, certain policy measures are needed to better
attract foreign investment, especially the measures, which focus to regain investors
con idence, such as investment protection, liberalization, and incentives as typically
featured under the FTACEPA. Now that the global commodity boom is over,
theres wider opportunity to develop manufacturing sectors, not only in labor-
intensive industry, but also in downstream- higher value added products. However,
government should not force private sectors to do it, through distortive tax and forcing
regulation. A misplaced tax and regulation will not entail industrial development,
but rather depressing further business competitiveness. Therefore, it is better for
the government to do it via market-based strategy that is to use market price as a basis
for industrial development. Let the market decide whether or not they want to
specialize in a higher value chain. If government wants to expedite further the
downstream industrial development of speci ic sector, better to use the incentive
policy rather than tax. In Indonesia, there is a speci ic need to eliminate 10 value added
tax VAT imposed on coffee and cocoa bean. In the market, that particular VAT doesnt
stimulate downstream industry of cocoa and coffee products, but rather reduce their
competitiveness in export market. Instead,
we recommend the government to set up appropriate incentive both to stimulate a
new market niche and encourage downstream industrial production of
cocoa and coffee products.
For any recommendations set out above to work, it needs a political certainty and
stability. First, the disharmony between
legislative and executive must be put to an end. This is very crucial for business
certainty and more importantly for any reform measures to work effectively by not
29
STRENGTHENING BUSINESS COMPETITIVENESS FOR
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having inappropriate interpellation from the House. Secondly, government must be able to
capitalize the high expectation from the business sectors and translate it as a
foundation to do any necessary bold m e a s u r e s t o i m p r o v e b u s i n e s s
competitiveness, even though its a hard thing to do. Government must be able to
sacri ice inef icient public budget earmark such as subsidy and have it allocated to
other more productive sectors, such as infrastructure development, education, and
healthcare. The government must keep its consistency to do necessary reform and do it
as soon as possible; before the political capital begins to slower, and business
con idence will not be that high anymore.
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STRENGTHENING BUSINESS COMPETITIVENESS FOR
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REFERENCES
APINDO 2014. Economy Roadmap: The Creation of Three Million Good Jobs per Year, APINDO’s Contribution to the 2014-2019 National Leadership. Jakarta: APINDO
ILO 2013. Labor and Social Trends in Indonesia 2013: Reinforcing the Role of Decent Work in Equitable growth. Jakarta: ILO Country Of ice for Indonesia
IMF 2013. World Economic Outlook: Special Focus. Washington, DC: International Monetary Fund
Kaplan, S. B. 2006. Do Elections Hurt Developing Economies. Connecticut: Yale University Keliat, M., A. Virgianita, S. Al Banna, A. C. Aryanto 2013. Pemetaan Pekerja Terampil Indonesia
dan Liberalisasi Jasa ASEAN. Depok: ASEAN Study Center FISIP UI Laksono, R. and Situmorang R. 2014. In Facing the Indonesia-European Union Comprehensive
Economic Partnership Agreement: Perspective from Indonesias Business Sector. Jakarta: APINDO
Papanek, G., R. Pardede, and S. Nazara 2014. The Choice for the Next 5 years: 5 growth and 0.8 million good jobs a year or 10 growth and 3 million good jobs. Presentation at APINDO
Economic Roadmap Discussion Series Porter, M. E. 1990. The Competitive Advantage of Nations. Massachusetts: Harvard Business
Review Riley, G. 2012. Economic Growth. Retrieved from http:tutor2u.neteconomicsrevision-
notesas-macro-economic-growth.html The Conference Board 2014. Total Economy Database, January 2014
World Bank 2010. Towards Better Jobs and Security for All. Indonesia Jobs Report. Jakarta: World Bank
World Bank 2013. State of Logistics Indonesia 2013. Jakarta: World Bank Of ice Jakarta World Bank 2014. World Development Indicators. Downloaded from
http:data.worldbank.org World Economic Forum 2014. Global Competitiveness Index 2014-2015. Genève: World
Economic Forum
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STRENGTHENING BUSINESS COMPETITIVENESS FOR
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APPENDICES Appendix A. Elements of Competitiveness
Abbreviation as in Figure 4 No
Description
Logis cs Infrastructure Logistic infrastructure roads, railways, ports,
and transportations 1
ICT Infrastructure ICT Infrastructure telephone, internet, etc.
2
Taxa on Taxation system
3
Educa on System The quality of educational system
4
Universi es Linkage between University and industry
5
Entrepreneurship Support to entrepreneurship, especially
start-ups
6
Skilled labor Skilled labor availability
7
Hiring and firing Flexibility in hiring and iring workers
8
Innova on Infrastructure to support innovation
research institution, government support to RD, and researchers availability
9
Regula on Business regulation
10
Clusters Industrial cluster availability
11
Finance Access to Finance
12
Macro Macroeconomic policies
13
Poli cs Political stability
14
IPR Protection to intellectual property rights
15
Legal Law certainty and enforcement
16 32
STRENGTHENING BUSINESS COMPETITIVENESS FOR
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Appendix B. Distribution of Respondents: by Size, Ownership Status, 2 digit HS Code, and
Main Business Operation Area
Size
Type of Firms Percentage
Small Enterprises less than 10 employees Medium Enterprises 10-99 Employees
Large Enterprises more than 100 employees 13.34
49.53 37.14
Ownership Status
Status of Ownership Percentage
Fully Domes c Fully Foreign
Joint Domes c-Foreign 80.19
14.15 5.66
Hs Code 2 Digit
Sector Percentage
Manufacturing Agriculture, Forestry, and Fishery
Wholesale Trade and retail Professional Services
Mining and Quarrying 55.65
18.87 16.04
1.89 1.88
Rental services, Employment, Travel Agencies and Other Business Support
1.88 Construc on
Communica on Finance Insurance
0.94
Real Estate 0.94
0.94 0.94
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STRENGTHENING BUSINESS COMPETITIVENESS FOR
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Main Business Operation Area
Appendix C. Export and Import Activities of Respondents
Export Activities
Number of respondents
Yes No
Are you expor ng? 106
40.57 59.43 Are you exporting raw materials?
104 83.65 16.35
Are you exporting semi- inishedintermediate goods? 103
90.29 9.71 Are you exporting inished inal goods?
103 53.40 46.6
Import Activities
Number of respondents
Yes No
Are you importing? 105
61.90 38.10 Are you importing raw materials?
101 74.26 25.74
Are you importing semi- inishedintermediate goods? 102
88.24 11.76
Are you importing inished inal goods? 103
80.58 19.42
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STRENGTHENING BUSINESS COMPETITIVENESS FOR
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Central Java and Yogyakarta Sumatera
Jabodetabek Greater Jakarta East Java
West Java except Bogor, Depok, Bekasi Kalimantan
Banten except Tangerang Sulawesi
Bali and Nusa Tenggara Papua
Maluku
Kode Kuesioner J
K T
-
1
Indonesia Business Compe veness Survey The Employer’s Associa on of Indonesia APINDO, 2014
Welcome to Compe veness Survey, APINDO Thank you for your par cipa on in Indonesian Compe veness Survey in 2014 conducted by The
Employers’ Associa on of Indonesia APINDO. In general, this survey aims to map the ability of Indonesian firms to compete in global market by iden fying many recognizable business obstacles.
Prac cally, this study is expected to become an indicator of compe veness in Indonesia, comple ng other indicators in global level such as Doing Business, Global Compe veness Index, etc. In long
term, this study is expected to become a systema c mechanism to monitor dynamic and development of compe veness in Indonesia.
This study is financed by The European Union, through APINDO-EU ACTIVE Project. This survey takes about 20 minutes to finish and consists of 4 themes of ques on.
The ques ons in ques onnaire are relevant for discussion and policy recommenda on, mainly related with compe veness and business climate improvement in Indonesia. Your answer and private data
in this ques onnaire will be protected and treated as “confiden al”. You can complete this ques onnaire whenever you have spare me subject to me span and
deadline, which is latest in 3 November 2014. If you have ques ons about this study and ques onnaire, you can contact the Person in Charge of this
study, Riandy Laksono through the email: riandy.laksonoapindo.or.id
or phone number: 021- 83780824 ext. 122
Basic Informa on
1. Firm’s name
: __________________________________________________ 2.
Posi on in company : __________________________________________________
3. E-mail address
: __________________________________________________ 4.
Main business opera onal area, ck the suitable answer. You can choose more than 1 anwer
1 Sumatera 7
Bali andor Nusa Tenggara 2 Jabodetabek Jakarta-Bogor-
Depok-Tangerang-Bekasi 8
Kalimantan 3 West Java outside Bogor,
Depok, Bekasi 9
Sulawesi 4 Banten outside Tangerang
10 Maluku 5 Central
Java andor
Yogyakarta 11 Papua
6 East Java
Kode Kuesioner J
K T
-
2 5.
Fill 2 digit of ISIC code of your firm if it more than one, choose the mainly one:___
Look 2-digit ISIC code in this link h p:www.google.comurl?q=h p3A2F2Fapindo.or.id2Fuserfiles2Fpublikasi2Fpdf2FKBLI_p
df_color.pdfsa=Dsntz=1usg=AFQjCNEGypar0jqhMTkUqJ2Y4wmxzLPd3w 6.
Number of employee choose the most suitable answer:
1 Fewer than 5 7
250 – 499 2 5 – 9
8 500 – 999
3 10 – 19 9
1000 – 2499 4 20 – 49
10 2500 – 4999 5 50 – 99
11 5000 – 9999 6 100 – 249
12 10000 or more
7. Firm’s ownership status choose the most suitable answer:
1 Wholly domes cally owned 2 Wholly foreign owned
3 Foreign-domes c ownership
A. Reviewing actual condi on and projec on of Business Compe veness in