Magister ManajemenUniversitas Gadjah Mada

General Business General Business Environment:Environment:

GOVERNMENTGOVERNMENTAS A BUSINESS ENVIRONMENTAS A BUSINESS ENVIRONMENT

P r a t i k n oFisipol UGM

Some Questions

1. What are the expectation of business in regard to the functioning of government?

2. What problems are faced by business in dealing with the government?

3. What shall the government do to be more ‘business friendly’?

4. What shall the business do to make the government reforms itself?

What are the expectation of business in regard to the functioning of government?

Situation which are:

1. Certain or predictable;

2. Efficient for running business.

1

Through the function of government:

1. Regulatory functions;

2. Development and public service provision functions

The relevance of government for business?

1.Certainty or predictability:• Rule of law;• Social and

political order;• Policy

consistency;• Monetary

stability;• Etc.

Regulation, Development & Services provision to secure:

2. Efficiency:•Efficient

bureaucracy;•Good physical

infrastructure;•Skilful &

productive labors;

•Etc.

1

Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003

Business’ Expectations: Example of indicators1

Indikator Daya Saing Daerah (versi KPPOD)

Kelembagaan (31%) • Kepastian hukum• penegakan hukum• konsistensi peraturan• pungli di luar birokrasi• hubungan eksekutif-

legislatif• Keuangan Daerah

– anggaran pembangunan– rasio retribusi pajak

• Aparatur– penggunaan wewenang– pelayanan birokrasi

• Perda/Kebijakan Daerah

Sosial Politik (26%)• Sosial Politik

– stabilitas politik– konflik masyarakat– unjuk rasa– partisipasi masyarakat

• Keamanan– gangguan masyarakat– gangguan usaha– kecepatan aparat

• Budaya– keterbukaan– non diskriminatif– adat istiadat

• etos kerja

Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003

1

Ekonomi Daerah (17%)

• Potensi Ekonomi– PDRB Per kapita– Pertumbuhan– Indeks pembangunan

manusia

• Struktur Ekonomi– nilai tambah tersier– nilai tambah sekunder

• nilai tambah primer

Tenaker & Produktivitas (13%)

• Biaya Tenaga Kerja– upah aktual– UMP

• Ketersediaan Tenaga Kerja– SLTP berpengalaman– usia produktif– pencari kerja

• Produktifitas Tenaga Kerja

Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003

Indikator Daya Saing Daerah (versi KPPOD)

1

Infrastruktur Fisik• Ketersediaan Infrastruktur

– pelabuhan udara– pelabuhan laut– jalan– telepon– listrik

• Kualitas Infrastruktur– kualitas pelabuhan udara– kualitas pelabuhan laut– kualitas jalan– kualitas telepon– kualitas listrik

Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003

Indikator Daya Saing Daerah (versi KPPOD)

1

What problems faced by business in dealing with the government?

2

• Problems are varied among countries and regions.

• General picture can be seen from, for examples:– Level of competitiveness (Global

Competitiveness by World Bank)– Rank of investment attractiveness (KPPOD)– Rank of political risks (PRA),– Etc

Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003

2 Examples: Rank of Investment Attractiveness

Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003

2 Examples: Rank of Investment Attractiveness

Common problems faced Common problems faced by business in dealing by business in dealing with the governmentwith the government

1. At the policy level;

2. At the daily administrative services level.

2

(1) Problems at the policy (1) Problems at the policy levellevel

1. Policy inconsistency:a. Between level of government;b. Between level of regulation;c. Among ministries;d. Among regions;e. Etc.

2. Instability: politics, economy, security, etc3. Inefficiency: high cost economy, etc

2

1. Red tape;

2. High cost

3. Low transparancy

4. Complicated procedures;

5. Long queue;

6. etc

(2) Problems at(2) Problems atthe bureaucracy levelthe bureaucracy level

2

(3) What shall the government do to be more ‘business friendly’?

• The government should reform itself;• Many formulas have been proposed by

academicians:– Good governance;– New Public Management;– Market-based Public Administration;– Entreprenurial government;– New Public Services,– etc

3

Good GovernanceGood Governance

3

Osborne & Gaebler Reinventing/ Entrepreneurial Government (1)

1. Promote competition between service providers

2. Empower citizens in controlling bureaucracy 3. Outcomes oriented in measuring

performance4. Driven by missions & regulation5. Redefine clients as customers & offer them

choices

3

Osborne & GaeblerReinventing/ Entrepreneurial Government

(2)

6. Prevent problems7. Earning money, not simply spending8. Decentralise authority/participatory

management9. Prefer market mechanism10.Catalysing all sectors, not simply

providing services

3

New Public Management Owen Hughes (1994)

1. The focus on outputs, instead of inputs.2. Changes to input in staff resources,

budgeting, or technology3. Reducing the scope of government. 4. Responsibility is taken by managers 5. Relationship between managers and

politicians and managers and the public must alter

3

New Public Management Principles

(Hood 1991) : 1

1. Hands-on professional management

2. Letting the managers manage

3. Accountability responsibility for action.

4. Explicit standards and measures

5. Requires goals and performance targets

3

NPM- Hood : 2

6. Accountability clear statement of goals; efficiency ‘hard look’ at objectives.

7. Greater emphasis on output controls8. Resourcesmeasured performance

the need to stress results rather than procedures.

9. disaggregation of units in the public sector

3

NPM-Hood : 3

10.breaking up of large entities corporatised units around products

11.create manageable units and gain the efficiency advantages

12.Greater competition in the public sector13.The move to term contracts and public

tendering procedures

3

NPM: 4

14. Rivalry key to lower costs and better standard

15. Stress on private sector styles of management practice

16. move away military-style to public service ethics and flexibility

17. Use proven private sector management tools

18. Greater discipline and parsimony in resource use

3

NPM : 5

19.Cutting direct costs, raising labour discipline, resisting union demands, limiting compliance costs to business

20.Need to check resource demands of public sector and do more with less.

3

What shall the business do?

Alternatives:1. Exit

Avoding the government by moving away !!

2. VoiceDemanding the government to

reform itself !!

4

Private Mechanism

Government Mechanism

Orientation Profit Public interests

Mechanism Competition Regulation

Position of Individual

Customer Client

Bargaining Power of Indiv.

Choice & Exit Voice

4What shall the business do?

Recent structure?

More space for exit:1. Globalization

Easier to move to other countries

2. DecentralizationMore possibility to find more friendly

regions for business

3. Foot loose industryEasily moved industries

4

Not all are easily moved !

• Such as: mining ….• Small scale industry …• Etc

In this case, what can be done?

4

If so, what shall the business do?

If you are in a very long queue with complicated procedure

without knowing when you will be served, what are you going

to do?

4

If so, what shall the business do?

Voice !!• Not only as an individual

company …• But, more importantly, as an

association which voice collectively

4

What shall the business do then?

The limit, and even the danger, of individual action?

4

The strength of collective action?

The case of ‘Perda Bermasalah’ & the role of KADIN & KPPOD !

Minor Paper

Write a short paper (approx 5 pages) containing three parts:1. Formulate problems of government environment:

you can show a specific case, or otherwise a general problems that you can drawn from literature or agregrat data, about problems that faced by business in dealing with the government.

2. Formulate a set of recommendation for the government:

Write your recommendation what shall the government do.3. Formulate your recommendation for business (choice

or voice) : since the governmet may not be willing to implement your

recommendation in number 2, you need to formulate some strategies that business should consider in confincing and insisting your recommendation. Please elaborate the possibility of exit and voice strategies.