Magister Manajemen
Universitas Gadjah Mada
General Business Environment:
GOVERNMENTAL
ENVIRONMENT
Pratikno
Fisipol 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?
1
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.
Through the function of government:
1. Regulatory functions;
2. Development and public service provision
functions
1
The relevance of government for business?
Regulation, Development & Services provision to secure:
1.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.
1
Business’ Expectations: Example of indicators
Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003
1 Indikator Daya Saing Daerah (versi KPPOD)
Kelembagaan (31%)
• Kepastian hukum
• penegakan hukum
• konsistensi peraturan
• pungli di luar birokrasi
• hubungan eksekutiflegislatif
• 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 Indikator Daya Saing Daerah (versi KPPOD)
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
1
Indikator Daya Saing Daerah
(versi KPPOD)
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
2
What problems faced by business in
dealing with the government?
Potensial problems:
Business
Government
Orientation
Profit
Public interests
Mechanism
Competition
Regulation
Customer
Client
Choice & Exit
Voice
Position of
Individual
Bargaining
Power of Indiv.
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
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
Sumber : Data hasil pemeringkatan daya tarik investasi 200 kabupaten/kota se-Indonesia, KPPOD 2003
2
Common problems faced by
business in dealing with the
government
1. At the policy level;
2. At the daily administrative
services level.
2
(1) Problems at the policy level
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, etc
3. Inefficiency: high cost economy, etc
2
(2) Problems at
the bureaucracy level
1. Red tape;
2. High cost
3. Low transparancy
4. Complicated procedures;
5. Long queue;
6. etc
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
3
Good 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
performance
4. Driven by missions & regulation
5. Redefine clients as customers & offer them
choices
3
Osborne & Gaebler
Reinventing/ Entrepreneurial Government (2)
6. Prevent problems
7. Earning money, not simply spending
8. Decentralise authority/participatory
management
9. Prefer market mechanism
10. 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 technology
3. 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.
2.
3.
4.
5.
:1
Hands-on professional management
Letting the managers manage
Accountability  responsibility for action.
Explicit standards and measures
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 controls
8. Resourcesmeasured 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 sector
13. 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.
4
What shall the business do?
Alternatives:
1. Exit
Avoding the government by
moving away !!
2. Voice
Demanding the government to
reform itself !!
4
Recent structure?
More space for exit:
1. Globalization
Easier to move to other countries
2. Decentralization
More possibility to find more friendly
regions for business
3. Foot loose industry
Easily 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?
 The strength of collective
action?
 The case of ‘Perda Bermasalah’
& the role of KADIN & KPPOD !
Minor Paper (June 2009)
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.