Resource information
The services sector in Indonesia
accounts for more than half of total value added, employs
more than 55 million workers, and provides 35 percent of
overall inputs to the productive sectors of the economy.
Improving quality, increasing diversity and reducing costs
in service sectors produce is likely to greatly improve
Indonesia s competitiveness across all sectors. With a focus
on the manufacturing sector, this note argues that relaxing
restrictions on competition and on the participation of
foreign firms, in services can be expected to improve
service sector performance, and lead to economy-wide
benefits in terms of productivity and competitiveness. It
does so by reviewing the international evidence available,
and by presenting new evidence for Indonesia on the positive
spillovers that easing restrictions has had on the
productivity of domestic manufacturing firms. The economic
impact of these spillovers is sizable. In fact, spillovers
from service sector reform account for about 8 percent of
the observed increase in Indonesian manufacturing
productivity over the period 1997-2009.
