Deregulation and Development in Indonesia

By Farrukh Iqbal; William E. James | Go to book overview

NOTES
1.
The author is indebted to Dr. Anggito Abimanyu for help in organizing the manufacturing sector data on which much of this paper is based.
2.
The process of cleaning and revising the data included the following: conducting new backward-looking surveys to collect information on firms that were missed or were not properly recorded in earlier surveys; estimating data for non-surveyed establishments; and making adjustments for undercoverage. Because of the emphasis on establishing accurate information for earlier years, the revised series is commonly known as the “backcast” series.
3.
The conceptual and empirical link between exports and productivity growth is covered in detail in the World Bank publication The East Asia Miracle (1994). The main assertion here is that exporting helps firms acquire best-practice knowledge through such channels as the purchase of new equipment, direct foreign investment, technology licensing, transfer of non-proprietary technology, and buyer-generated information on quality, design and process.
4.
The export-promoting role of the BAPEKSTA scheme and of reforms in customs administration should not be overlooked. The use of BAPEKSTA facilities grew rapidly after 1986. For example, whereas in 1987 only 494 firms were registered as “beneficiaries” of duty drawback and exemption facilities, by 1991 this number had grown to over 3,000. Similarly, the value of imports covered rose from around $200 million in 1987 (on a realized rather than approved basis) to almost $7 billion in 1991. Less easy to quantify but of significant importance also were the reforms introduced in customs administration. These consisted mainly of reducing the scope of inspections by customs personnel. A presidential decree (“Inpres 4”) removed the authority of customs to inspect and process shipments valued at more than $5,000 transferring these functions to a private surveying company. This change brought about a substantial reduction in import clearing times (reportedly from three weeks to a few days on average) and costs (reportedly around 25 percent).
5.
The employment level and growth figures shown by the Backcast series of the Industrial Surveys differ from those shown by other sources. For example, census data report a total manufacturing employment level of 5.8 million in 1985 and 8.2 million in 1990; the relevant figures from the Backcast series are 1.9 million and 2.8 million respectively. Two factors probably contribute the most to this discrepancy. One is that the Industrial Survey data cover only those firms in the formal manufacturing sector which have an employment level of at least 20 people. The other is that the survey data probably cover less than the full universe of larger (that is, above 20 people) manufacturing firms.
6.
The cross-sectoral regression model consisted of employment growth over 1986–1991 as the dependent variable and share of exports to output as

-103-

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