APINDO: Situating Services Strategically for Indonesia

This sector is the fastest growing in the economy, averaging over 7% per annum and creating over 400,000 jobs in the last year alone, predominantly in small and medium-sized enterprises. Despite this growth, Indonesia lags behind some of its ASEAN partners in the services area. Services industries are closely linked to all other sectors of the economy and play a crucial role in their effective functioning. Key services industries include finance, telecommunications, utilities, transport, distribution, logistics, retail, construction, tourism, education, professional services, computer services, creative and cultural services, and others. These industries are essential for Indonesia's economic growth, as they account for more than 25% of all intermediate inputs in the country's goods-producing sectors. For example, wood products contain roughly 40% of embodied services inputs. Economy-wide productivity and competitiveness depend heavily on services sector performance. Services are inputs into all final products, including agricultural and manufactured products. As a result, strategies for increased growth, efficiency, and trade in services must be central to Indonesia's national development agenda. Despite recent improvements in export performance, Indonesia still has a significant net deficit on trade in commercial services. The country's services value-added as a percentage of total exports is well below the APEC average, at around 21%. Indonesia needs to develop and share widely a consistent national services export strategy, together with a strong supportive public-private dialogue. This strategy should be implemented to ensure the services sector can mobilize and contribute to the country's economic growth. APINDO is willing to play a key role in this effort, in collaboration with key government and legislative partners. The organization aims to support the development of a comprehensive services export strategy that will help Indonesia to catch up with its ASEAN partners in the services area. The growth of the services sector in Indonesia has significant implications for the country's employment structure. Services are expected to soon overtake agriculture as the largest sector in terms of employment. This shift is driven by the increasing demand for services in various industries, including finance, telecommunications, and tourism. As the services sector continues to grow, it is essential to develop strategies that will support the development of this sector and ensure that it contributes to the country's economic growth and development.