How the Macroeconomic Environment and Investment Climate Have Affected the Manufacturing Sector

The performance of Indonesia's manufacturing sector has lagged over the past decade. This is seen in the decline in growth after the Asian financial crisis, by the sector's decline relative to other sectors within the economy, and relative to countries in the region. This note documents the effects of the challenging macro and external environment on the profits of manufacturing firms, and on the uncertainty they face, and argues that these adverse conditions partially explain the stagnation of the sector in the past decade. The changes in incentives appear to have particularly affected labor-... Mehr ...