Client: World Bank

In 2016, together with the World Bank and Indonesia Ministry of Trade, Svara Institute (formerly Presisi Indonesia) conducted a study on “Indonesia’s Services Sector Performances”. The study attempts to examine the market structure of services sectors in Indonesia, utilizing both quantitative and qualitative approaches. For the quantitative analysis, we utilize Input-Output (IO) Table, World Trade in Services Database, Trade Map, Groningen Employment Database, and Services Trade Restrictive Index. Based on the IO Table, we identify eleven sectors that capture all services sectors. The study finds that there are two sectors of which the domestic supply level exceeds its domestic demand, which is absorbed by export markets. They are distribution sector and leisure, culture, and sports services sector. Meanwhile, the rest of the services sectors have excess demand that should be fulfilled through imports. In terms of sectoral linkages, most of the sectors have high forward linkage. This indicates that services sectors play an important role as inputs in the production process. Therefore, policy makers need to ensure that the services sectors in Indonesia should be efficient, both in terms of quantity and quality, to accelerate the productivity of other sectors in the national economy.

Qualitative analysis based on the FGDs draws on two major points. First, statistical data is still unable to reflect the true magnitude of the domestic services sectors. It is mainly driven by the rapid development of services sectors, while the sectoral classification is lagging and too broad. Second, although our commitments on trade in services sectors are relatively liberal, yet there are domestic regulations in place that impede sectoral growth.