Productivity levels are low, due to a large agricultural sector, as well as many other structural and regulatory bottlenecks. Regional variance is high and inclusive outcomes require progress be made at all levels of government.
- Remove barriers to foreign investment in non-strategic sectors.
- Streamline the regulatory environment for, and encourage private participation in, infrastructure investment.
- Invest in education, and encourage higher enrolment and quality. Improve teacher training and professional development.
- Phase out remaining energy subsidies for fuel and electricity and compensate the poor through targeted poverty reduction schemes.
- Increase resources for the Corruption Eradication Commission (KPK), and vigorously defend its independence.
- Make job dismissal procedures more flexible, reduce severance payments, and introduce unemployment benefits.
Source: OECD May 2017 Economic Outlook database
Chapter 1 of OECD Economic Survey of Indonesia discussed productivity issues in the context of inclusive and sustainable growth.
van der Eng, P. (2013), “Total Factor Productivity and Economic Growth in Indonesia”, in Prasada Rao and Bart Van Ark (ed.), World Economic Performance: Past, Present and Future, Edward Elgar Publishing, Cheltenham UK, pp. 193-226.
Productivity - enhancing institutions
There is no single institution in Indonesia dedicated to productivity issues. The Ministry of Finance, the Ministry of National Development Planning (BAPPANAS) and the Ministry of Manpower, among others, are all responsible for policies related to productivity.