After 12 years since the establishment of the commission for the supervision of business competition (KPPU), a large number of policy recommendations related to specific regulations and policies which impede competition have been issued.
A majority of those recommendations have received positive responses from the government and have improved the efficiency of various sectors of Indonesian economy.
However, our understanding on the effect of competition in Indonesia is not yet supported by adequate robust empirical studies. Since, public, academics, particularly KPPU needs more documentation on the impact of competition on a wider scale, new research is needed to empirically examine how effectively an increase in the level of competition contributes to the sectoral performance of major industries in Indonesia.
Japan government, through Japan International Cooperation Agency (JICA) together with Indonesian KPPU then open a research grant competition with the aim of implementing this research to help build better understanding on the relationship between competitiveness and sectoral performance of important economic sectors in Indonesia. CEDS took the opportunity to submit a research proposal and won the grant.
Mr. Maman Setiawan (a CEDS senior researcher and a Ph.D candidate from Wageningen University), the team leader of the proposal development and principal investigator in this research, stressed the important contribution of this research to public at large. Indonesian manufacturing industries contributes significantly to the Gross Domestic Product (GDP) and employment absorption yet its low competition causes inefficiency and low productivity with lower product quality, higher prices and therefore creates welfare losses in the economy as a whole. As this research aims to provide arguments and design policies to increase competition, the long run contribution of this research is reducing the welfare losses in the Indonesian economy.
Maman further added that this research can also have positive externalities in improving academic atmosphere in Padjadjaran University. As this research will utilize better and updated methodology and also combine various different experts from different background and institutions, academic atmosphere in UNPAD will be positively affected.
Morever, this research contributes to the scientific literature at least in three ways. First, it will use new models and previous models’ modification. Second, the data and indicators of latent variables used are more comprehensive, and third, the coverage of the analysis is wider that include some major Indonesian manufacturing industries. Therefore, publications in good international refereed journal will be part of the output of this research.