Duggan, VictorRahardja, SjamsuVarela, Gonzalo2014-02-122014-02-122013-02https://hdl.handle.net/10986/17014Drawing on the findings of recent research, this note examines the extent to which changes to policy restrictions on foreign direct investment (FDI) in the Indonesian service sector affected the performance of downstream manufacturers during 1997-2009. The analysis uncovers two important findings: first, that relaxing restrictions toward FDI in service sectors was associated with improvements in the perceived performance of those sectors, and second, more importantly, that this relaxation accounted for 8 percent of the total observed increase in manufacturers' total factor productivity (TFP) during this period. The results show that these TFP gains accrue disproportionately to those firms that are relatively more productive and that gains are related to the relaxation of restrictions in the transport as well as the electricity, gas, and water sectors. TFP gains are associated, in particular, with the relaxation of foreign equity limits, screening and prior approval requirements, but less so with discriminatory regulations that prevent multinationals from hiring key personnel from abroad.en-USCC BY 3.0 IGOACCESS TO SERVICESACCESSIBILITYACCOUNTINGAIRAIR TRANSPORTBUSINESS ACTIVITYBUSINESS ENVIRONMENTBUSINESS OPPORTUNITIESBUSINESS SERVICESCAPABILITIESCOMMODITIESCOMMUNICATIONS MEDIACONFIDENCEDEVELOPING COUNTRIESDOMESTIC MARKETDOMESTIC PROVIDERSDRIVINGDRIVING COSTSECONOMIC DEVELOPMENTELECTRICITYENTERPRISE SURVEYSEQUIPMENTEXPORT MARKETSFINANCIAL SERVICESFOREIGN DIRECT INVESTMENTFOREIGN ENTRYFOREIGN EQUITYFOREIGN EXCHANGEFOREIGN FIRMSFOREIGN INVESTMENTFOREIGN OWNERSHIPFOREIGN PARTICIPATIONFREIGHTFREIGHT SECTORGLOBAL MARKETPLACEGLOBAL TRADEGROSS DOMESTIC PRODUCTGROWTH RATEIMPORTANCE OF SERVICESINCREASED COMPETITIONINNOVATIONINSURANCEINTELLECTUAL PROPERTYINTERNATIONAL BUSINESSINTERNATIONAL TRADELIBERALIZATIONMANUFACTURINGMANUFACTURING INDUSTRIESMARKET FAILURESMONOPOLIESMONOPOLYMULTINATIONALSOUTPUTPENSIONPRIVATE SECTORPRIVATE SECTOR INVESTMENTPRODUCTIVITYQUALITY OF SERVICESRADIOREAL ESTATEREGULATORY BODIESREGULATORY ENVIRONMENTREGULATORY FRAMEWORKREGULATORY REGIMEREGULATORY RESTRICTIONSRESULTRESULTSROADSERVICE PROVIDERSSERVICE QUALITYSERVICE SECTORSERVICE SECTORSSERVICES INPUTSSERVICES LIBERALIZATIONSERVICES SECTORTECHNOLOGY TRANSFERTELECOMTELECOMMUNICATIONSTELEVISIONTRADE IN SERVICESTRADE POLICY REFORMTRANSPORTTRANSPORT SECTORTRANSPORT SECTORSUNIVERSAL ACCESSUSERUSERSUSESVEHICLESWORLD INVESTMENT REPORTWORLD TRADE10.1596/17014