- Rationale
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The Government's structural reform program has dealt with many of the anti-competitive manifestations of its economic policies. However, the policy environment is still characterized by a myriad of regulatory and licensing requirements that restrain market entry, discourage FDI, and reduce competition and efficiency. The complex system of licensing imposes a significant cost burden on firms, of which the greatest is borne by small and medium enterprises. In addition, key sectors such as fertilizers, trading and distribution are subject to significant regulation of entry that restricts competitive pressures to increase efficiency and reduce costs.
- Objectives and Scope
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The Program's objective is to achieve economic recovery by encouraging a more diversified and efficient industrial structure through deregulation and adoption of policies that promote competition and outward orientation and a level playing field for SMEs. This is to be achieved through (i) strengthening competition; (ii) investment promotion and trade facilitation; and (iii) rationalizing assistance to SMEs. The deregulation and liberalization of the industrial policy framework achieved through these reforms will improve competitiveness, strengthen economic growth, and generate employment and poverty reduction through a more dynamic SME sector. The resulting impetus to structural change is expected to lead to a reduction in the highly concentrated structure of industry in Indonesia with concomitant benefits in terms of a more even size distribution of firms and market power, and increased consumer welfare. The reforms will improve governance through reductions in the opportunities for rent seeking and corruption.
- Policy Dialogue
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1. Competition Policy Law
2. Efficient Financial Intermediation for SMEs
- Environment Category:
C
- Environment Impact and Mitigation
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- Social Aspects and Remedies
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The Program is pro-poor and does not require remedy measures to mitigate its impact.
- Benefits and Beneficiaries
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All enterprises in the economy. Medium and small enterprises, consumers and importers.
- Public Consultation
- Arranged by Borrower
- Date for Consultation : Throughout 1998.
- Groups Consulted : Chamber of Commerce, Importer-Exporter Associations, NGOs and SMEs.
- Beneficiary Participation in Formulation
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Consultations were held with (i) industry groups regarding deregulation and measures to facilitate investment; (ii) medium and small enterprises and NGOs representing them; and (iii) importer and expatriate groups regarding efficiency of trade facilitation measures.
- Beneficiary Participation in Implementation
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NGOs representing SMEs will be represented in body to be consulted by Government and the Bank in the design and implementation of SME support policies.
- Consulting Services
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Not applicable.
- Procurement
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The proceeds of the loan will be used to finance the foreign exchange costs of items produced and procured in member countries of the Bank excluding items on a negative list, and imports financed by other bilateral and multilateral funding agencies.
- Contacts
- Bank
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Thatha Hla
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Economist (Financial Sector)
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SEFM
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Tel. No.:
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(632) 632-6208
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E-mail:
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thla@adb.org
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- Executing Agency
- Ministry of Finance
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Contact Person
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:
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Tel. No.
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:
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Fax. No.
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(6221) 365-859
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E-mail
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:
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- Remarks
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None
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Projects 
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