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Doing Business in Indonesia: Legal and Bureaucratic Constraints

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  • Ross H. McLeod

Abstract

The World Bank's new series of Doing Business reports attempt to measure the relative ease of doing business in countries around the world. The output of this research is a set of rankings that enable each country to see how it looks relative to the others from the point of view of private sector businesses. This paper highlights a number of concerns about the Doing Business methodology, and presents a critique of the 'law and finance' view regarding the influence of legal system origins on countries' economic performance, which was highly influential in the first of the Doing Business reports. Selected data from the 2006 report are used to explain why Indonesia is having difficulty getting back to Soeharto-era rates of economic growth. The report's findings in relation to Indonesia are then interpreted within the framework of an analysis of the way the Soeharto 'franchise' operated.

Suggested Citation

  • Ross H. McLeod, 2006. "Doing Business in Indonesia: Legal and Bureaucratic Constraints," Departmental Working Papers 2006-12, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2006-12
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    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2006/wp-econ-2006-12.pdf
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    References listed on IDEAS

    as
    1. Thorsten Beck & Ross Levine, 2008. "Legal Institutions and Financial Development," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 11, pages 251-278, Springer.
    2. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    3. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    4. Mari Pangestu & Miranda Swaray Goeltom, 2001. "Survey Of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 37(2), pages 141-171.
    5. Johnson, Simon & Boone, Peter & Breach, Alasdair & Friedman, Eric, 2000. "Corporate governance in the Asian financial crisis," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 141-186.
    6. Ross Mcleod, 2005. "The struggle to regain effective government under democracy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(3), pages 367-386.
    7. World Bank & International Finance Corporation, 2006. "Doing Business in 2006 : Creating Jobs," World Bank Publications - Books, The World Bank Group, number 7421.
    8. Ross H. McLeod, 1998. "From Crisis to Cataclysm? The Mismanagement of Indonesia’s Economic Ailments," The World Economy, Wiley Blackwell, vol. 21(7), pages 913-930, September.
    9. Steven Tolliday (ed.), 1991. "Government And Business," Books, Edward Elgar Publishing, number 521.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Pelzl, Paul & Poelhekke, Steven, 2021. "Good mine, bad mine: Natural resource heterogeneity and Dutch disease in Indonesia," Journal of International Economics, Elsevier, vol. 131(C).
    2. Wahyu Sutiyono, 2007. "Human Resource Management In State-Owned And Private Enterprises In Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 43(3), pages 377-394.

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    More about this item

    Keywords

    business regulation; contract enforcement; law and finance; legal heritage;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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