Can Open Service Sector FDI Policy Enhance Manufacturing Productivity? Evidence from Indonesia

Victor Duggan, Sjamsu Rahardja () and Gonzalo Varela
Additional contact information
Victor Duggan: World Bank
Sjamsu Rahardja: World Bank

World Bank - Economic Premise, 2013, issue 106, 1-7

Abstract: Drawing on the findings of recent research, this note examines the extent to which changes to policy restrictions on foreign direct investment (FDI) in the Indonesian service sector affected the performance of downstream manufacturers during 1997–2009. The analysis uncovers two important findings: first, that relaxing restrictions toward FDI in service sectors was associated with improvements in the perceived performance of those sectors, and second, more importantly, that this relaxation accounted for 8 percent of the total observed increase in manufacturers’ total factor productivity (TFP) during this period. The results show that these TFP gains accrue disproportionately to those firms that are relatively more productive and that gains are related to the relaxation of restrictions in the transport as well as the electricity, gas, and water sectors. TFP gains are associated, in particular, with the relaxation of foreign equity limits, screening and prior approval requirements, but less so with discriminatory regulations that prevent multinationals from hiring key personnel from abroad.

JEL-codes: D0 F2 J3 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://siteresources.worldbank.org/EXTPREMNET/Resources/EP106.pdf (application/pdf)

Related works:
Working Paper: Can Open Service Sector FDI Policy Enhance Manufacturing Productivity? Evidence from Indonesia (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:prmecp:ep106

Access Statistics for this article

More articles in World Bank - Economic Premise from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Michael Jelenic ().