CEDS FEB UNPAD Concludes That The 2022 Competition Index Goes Up.

Tuesday, March 14, 2023

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Bandung (27/02) – Center for Economics and Development Studies (CEDS) of the Faculty of Economics and Business (FEB) of Padjadjaran University (UNPAD) has concluded that the value of the competition index in 2022 increased to 4.87 from the previous year’s index of 4.81. This shows that business competition in Indonesia is still at a slightly high level of business competition. This increase shows that economic conditions have continued improving post- the COVID-19 pandemic, so as to be capable pf stimulating an increase in the national competition climate. The findings indicate that almost all the dimensional values of the components forming the competition index have increased, except the dimension of industrial performance and that of regulation the values of which have decreased. The various conclusions as conveyed by CEDS UNPAD at a virtual media meeting on February 27, 2023 were generated on the basis of a study of the business competition index that it had conducted nationally in 34 (thirty-four) provinces through the aggregation method of business competition in each economic sector in the regions.

Graph: Comparison of the 2019-2022 Competition Index Scores, processed

Business competition index for your information constitutes the only business competition indicator covering all the provinces in Indonesia and 15 (fifteen) economic sectors. The said index was measured through a survey of 34 (thirty-four) provinces with respondents representing various institutions such as the Indonesian Chamber of Commerce and Industry, academics, Bank Indonesia, and Provincial Industry and Trade Service Offices. The study was conducted using the industrial structure, conduct, and performance (SCP) concept or paradigm. Business environment factors such as regulations, institutions, demand and supply factors also serve as the business competition index forming dimensions.

The study also concludes various sectors with high and low levels of business competition. The sectors of (i) Provision of Accommodation and Food and Beverages; (ii) Wholesales, Retails, Auto and Motorcycle Repairs; and (iii) Financial Services and Insurance in 20022 constitute the three sectors with the highest level of business competition, respectively, while the sectors of (i) Procurement of Electricity and Gas; (ii) Water Supply, Garbage, Waster Management, and Recycling; and (iii) Mining and Quarrying; are the three sectors with the lowest level of business competition, respectively.

Against the findings of CEDS UNPAD, ICC hopes that the increased Business Competition Index can give rise to the welfare and a controlled inflation rate. Mulyawan R, ICC’s Director of Economics who was also attending the dissemination of the results of the study  said that today an understanding that business competition is one of the instruments for controlling inflation has developed by way of enhancing people’s purchasing power through the improvement of welfare and prevention of the conducts of business actors from perpetrating monopolistic practices by raising prices above reasonable ones.

The opinion of ICC is also in line with that of the Secretary General of OECD, Mathias Corman, in November 2022 stating that business competition contributes to reducing the inflation pressure in the long term and prevents the behaviors of business actors from further worsening the inflation. In line with Corman, senior economist of the Institute for Development of Economics and Finance (INDEF), Faisal Basri, in his testimony at the cooking oil hearing at ICC (on February 17, 2023) also co-underscored that the role of ICC in keeping fair business competition helps suppress the inflation in Indonesia for the last few years. The statements of the two economists prove the important role of business competition in keeping the inflation rate.

“The role of business competition has proved to be very important for the Indonesian economy. Therefore, the Government deserves to make a national strategy for business competition (National Business Competition Strategy) in scaling up the synergy and effectiveness of the role of business competition for the national economic growth,” asserted Mulyawan.