Institutional Analysis Of Indonesian Economic Development

This essay argues that institutional factors play a key role in Indonesian economic development.In theory,institutions decide the outcome of economic activities and resource allocation,through functions like saving,coordinating,messaging,motivating and restraining.Generally speaking,appropriate and efficient institutions promote economic growth and vice versa.In reality,holding back Indonesian economic developments,factors like imperfect market system,poor business environment and high enterprise cost,reflect institutional barriers directly or indirectly.Concerning institutions influencing Indonesian economy,this essay draws on land system,labor policy and local autonomy.First,due to imperfect legislation of land system,problems of land ownership remain unsolved for a long time.Government's lacking settlement mechanism on private land dispute leads to restriction on land supply and transfer,which brings about inefficient allocation of land source,as well as negative impact on enterprise production and investment activities.Second,while Indonesian labor policy system is fairly complete,it is still unable to fit into current economic development level.This incompatibility leads to unequal labor-capital relationship,high labor cost,restricted labor mobility,low production efficiency,and poor enterprise competitiveness.Third,with unmatched regulations and imperfect accountability system,reform of Indonesian local autonomy didn't achieve the desired effect to stimulate local economy.In contrast,this program causes redundant institution supply,low administrative efficiency,unequal financial distribution,and corrupted bureaucratic system.Impossible to ignore these institutional barriers,China's enterprises have to face difficulties and challenges when they invest Indonesian market.According to analysis of related systems,this essay concludes with certain suggestions:coordinating Indonesian government's policy,doing investment climate survey,making long-term development planning,choosing suitable investment path,dealing with labor-capital relationship,and taking enterprise social responsibility.