Magister Manajemen Universitas Gadjah Mada

1. Magister ManajemenUniversitas Gadjah Mada General Business Environment: GOVERNMENT AS A BUSINESS ENVIRONMENT P r a t i k n o Fisipol UGM

2. Some Questions • What are the expectation of business in regard to the functioning of government? • What problems are faced by business in dealing with the government? • What shall the government do to be more ‘business friendly’? • What shall the business do to make the government reforms itself?

3. 1 What are the expectation of business in regard to the functioning of government? Situation which are: • Certain or predictable; • Efficient for running business. • Through the function of government: • Regulatory functions; • Development and public service provision functions

4. 1 The relevance of government for business? Regulation, Development & Services provision to secure: • Certainty or predictability: • Rule of law; • Social and political order; • Policy consistency; • Monetary stability; • Etc. • 2. Efficiency: • Efficient bureaucracy; • Good physical infrastructure; • Skilful & productive labors; • Etc.

5. 1 Business’ Expectations: Example of indicators Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003

6. 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 1 Indikator Daya Saing Daerah (versi KPPOD) Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003

7. 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 1 Indikator Daya Saing Daerah (versi KPPOD) Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003

8. 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 1 Indikator Daya Saing Daerah (versi KPPOD) Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003

9. 2 What problems faced by business in dealing with the government? • 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

10. 2 Examples: Rank of Investment Attractiveness Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003

11. 2 Examples: Rank of Investment Attractiveness Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003

12. 2 Common problems faced by business in dealing with the government 1. At the policy level; 2. At the daily administrative services level.

13. 2 (1) Problems at the policy level • Policy inconsistency: • Between level of government; • Between level of regulation; • Among ministries; • Among regions; • Etc. • Instability: politics, economy, security, etc • Inefficiency: high cost economy, etc

14. 2 (2) Problems atthe bureaucracy level • Red tape; • High cost • Low transparancy • Complicated procedures; • Long queue; • etc

15. 3 (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

16. 3 Good Governance

17. 3 Osborne & GaeblerReinventing/ Entrepreneurial Government (1) • Promote competition between service providers • Empower citizens in controlling bureaucracy • Outcomes oriented in measuring performance • Driven by missions & regulation • Redefine clients as customers & offer them choices

18. 3 Osborne & GaeblerReinventing/ Entrepreneurial Government (2) • Prevent problems • Earning money, not simply spending • Decentralise authority/participatory management • Prefer market mechanism • Catalysing all sectors, not simply providing services

19. 3 New Public ManagementOwen Hughes (1994) • The focus on outputs, instead of inputs. • Changes to input in staff resources, budgeting, or technology • Reducing the scope of government. • Responsibility is taken by managers • Relationship between managers and politicians and managers and the public must alter

20. 3 New Public Management Principles (Hood 1991) : 1 • Hands-on professional management • Letting the managers manage • Accountability  responsibility for action. • Explicit standards and measures • Requires goals and performance targets

21. 3 NPM- Hood : 2 • Accountability  clear statement of goals; efficiency  ‘hard look’ at objectives. • Greater emphasis on output controls • Resourcesmeasured performance  the need to stress results rather than procedures. • disaggregation of units in the public sector

22. 3 NPM-Hood : 3 • breaking up of large entities corporatised units around products • create manageable units and gain the efficiency advantages • Greater competition in the public sector • The move to term contracts and public tendering procedures

23. 3 NPM: 4 • Rivalry  key to lower costs and better standard • Stress on private sector styles of management practice • move away  military-style to public service ethics and flexibility • Use proven private sector management tools • Greater discipline and parsimony in resource use

24. 3 NPM : 5 • Cutting direct costs, raising labour discipline, resisting union demands, limiting compliance costs to business • Need to check resource demands of public sector and do more with less.

25. 4 What shall the business do? Alternatives: • Exit Avoding the government by moving away !! • Voice Demanding the government to reform itself !!

26. 4 What shall the business do?

27. 4 Recent structure? More space for exit: • Globalization Easier to move to other countries • Decentralization More possibility to find more friendly regions for business • Foot loose industry Easily moved industries

28. 4 Not all are easily moved ! • Such as: mining …. • Small scale industry … • Etc In this case, what can be done?

29. 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?

30. 4 If so, what shall the business do? Voice !! • Not only as an individual company … • But, more importantly, as an association which voice collectively

31. 4 What shall the business do then? • The limit, and even the danger, of individual action? • The strength of collective action? • The case of ‘Perda Bermasalah’ & the role of KADIN & KPPOD !

32. 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. • Formulate a set of recommendation for the government: Write your recommendation what shall the government do. • 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.