Services Competitiveness for Growth and Jobs in Indonesia

Overview & Synopsis

Indonesia’s services sector has emerged as a key driver of economic growth and employment. Services have also been the driving force of global trade and investment. Advances in technology are expected to further improve the tradability of services, creating new opportunities for Indonesia. With the right policies, Indonesia can capitalize on the ongoing reconfiguration of global value chains (GVCs) and the increasing demand for services. Under the Job Creation Omnibus Law, Indonesia substantially opened services sectors to foreign investment. Significant barriers to services hinder Indonesia’s ability to compete in global markets and access to essential imports of services. Policies to shield key sectors and firms may have supported growth and job creation, but their effectiveness is approaching their limits. Addressing barriers to services will be crucial to achieving Indonesia’s development objectives and other national priorities. Looking ahead, Indonesia has set ambitious targets for the growth of services exports in its 2025-2029 Medium-Term National Development Plan. This report provides a first comprehensive assessment of the role of services and related policies in Indonesia’s economy, incorporating both backward- and forward-looking perspectives. Chapter 1 provides introduction. Chapter 2 looks back at the past decade to analyze how services contributed to value addition, job creation, domestic and foreign investment, and export revenues. Chapter 3 provides a systematic review of the regulatory framework, examining domestic and cross-border policies affecting the four modes of services delivery and within Indonesia’s trade agreements evaluates the restrictiveness of regulatory measures. Chapter 4 looks ahead, quantifying the impacts of various policy alternatives on Indonesia’s growth and development objectives. Finally, chapters 5 and 6 provide detailed deep dives into two key service sectors - information and communication services and transport services - both critical for enhancing Indonesia’s value addition, economic growth, and development.