The Road to Recovery: Improving the Investment Climate in Indonesia

Abstract

To determine views of the business community, the Asian Development Bank (ADB) and the World Bank conducted an Investment Climate and productivity Study (ICS) of 713 large and medium manufacturing firms in 2003 in collaboration with the Coordinating Ministry for Economic Affairs and the Indonesian Central Board of Statistics. The survey gathered information on the problems businesses faced such as physical and financial infrastructure, governance, labor, and other factors affecting productivity. It covered 11 regions and 10 manufacturing subsectors: food and beverages, tobacco, textiles, garments, leather and footwear, wood, paper, chemicals and chemical products, electronics and electrical machinery, and transport equipment. This brochure presents key findings of the ICS report Improving the Investment Climate in Indonesia. The problems they face Business problems faced by firms in Indonesia were ranked based on their average ratings in the ICS (Figure 2). They are: (i) economic and regulatory policy uncertainty and macroeconomic instability; (ii) corruption, both at the national and local levels; (iii) labor regulations which are more of a concern than labor skills; (iv) cost of financing which is a bigger issue than access to financing; (v) high tax rates which are perceived as a more serious problem than tax administration and customs regulations; and (vi) availability of electricity.