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Improving the Business and Investment Climate in Indonesia

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  • Diego Moccero

    (OECD)

Abstract

Indonesia’s business environment is discouraging entrepreneurship and holding back private-sector growth and development. Weaknesses in the regulatory framework, infrastructure bottlenecks and poor governance continue to weigh down on investment. Policies have been put in place to address these problems, but much remains to be done. An important recent initiative is the enactment of the Investment Law in 2007, which strengthened the foreign investment regime. This paper argues that options for reform could focus on making regulations more pro-business, including by removing red tape and onerous provisions at the local level of government, improving governance and relaxing remaining restrictions on foreign investment. Further financial deepening would facilitate access by enterprises to more abundant, cheaper sources of finance. This Working Paper relates to the 2008 OECD Economic Assessment of Indonesia (www.oecd.org/eco/surveys/indonesia). Améliorer le cadre des affaires et des investissements en Indonésie En Indonésie, le cadre des affaires décourage la création d’entreprises et freine la croissance du secteur privé. Les faiblesses de la réglementation, les goulets d’étranglement dans les infrastructures et la médiocrité de la gouvernance continuent à entraver les investissements. Des mesures ont été prises pour remédier à ces problèmes, mais beaucoup reste à faire. L’une des importantes initiatives prises récemment a été l’adoption, en 2007, d’une loi sur les investissements qui a amélioré le régime des investissements étrangers. On soutient dans ce papier que la réforme pourrait viser surtout à rendre la réglementation plus favorable à l’activité privée, notamment en supprimant les tracasseries et les lourdeurs administratives aux échelons locaux des pouvoirs publics, en améliorant la gouvernance et en assouplissant les restrictions qui subsistent à l’égard des investissements étrangers. En outre, la poursuite de l’approfondissement des marchés financiers permettrait aux entreprises de se procurer davantage de fonds à moindre coût. Ce Document de travail se rapporte à l’Évaluation économique de l’OCDE de l’Indonesie, 2008 (www.oecd.org/eco/etudes/indonesie).

Suggested Citation

  • Diego Moccero, 2008. "Improving the Business and Investment Climate in Indonesia," OECD Economics Department Working Papers 638, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:638-en
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    File URL: http://dx.doi.org/10.1787/236810400872
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    Cited by:

    1. Tang, Ya & Xu, Jianguo & Zhang, Xun, 2017. "China's investment and rate of return on capital revisited," Journal of Asian Economics, Elsevier, vol. 49(C), pages 12-25.
    2. Xu, Jianguo & Zhang, Xun, 2014. "China's sovereign debt: A balance-sheet perspective," China Economic Review, Elsevier, vol. 31(C), pages 55-73.
    3. repec:ekd:006356:6689 is not listed on IDEAS

    More about this item

    Keywords

    climat des affaires; financial sector; foreign direct investment; Indonesia; Indonésie; infrastructure; infrastructure; investissement direct étranger; investment climate; secteur financier;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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