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The
services sector in Indonesia in the early 1990s was a
heterogenous mix of modern government-operated utilities
such as gas and electricity, sophisticated and well-paid
private services such as finance and insurance, and
millions of self-employed traders earning a marginal
living in what is often called the informal sector. While
there was little threat of privatizing the often
inefficient government monopolies, the deregulation trend
in the late 1980s encouraged more private participation in
many services formerly reserved exclusively for the public
sector. For example, a private airline--Sempati Air
Services--was permitted for the first time to provide
international jet service in competition with the
government-owned airline, Garuda Indonesia, and the
massive state-owned National Electric Company (PLN) began
negotiations to purchase electricity from privately owned
generators.
In
an archipelagic setting, transportation infrastructure is
crucial to a modern integrated economy. The effort to
boost non-oil exports also demanded more efficient
transportation both among islands and to international
ports. Repelita V (FY 1989-93) increased transportation
investment to almost 20 percent of development
expenditures from around 12 percent in Repelita IV. An
extensive reform of shipping regulations increased
competition and access to Indonesia's ports.
Services
provided 26 million jobs, about 35 percent of the employed
work force in 1989. Growth in service employment was over
4 percent per year during the 1970s and 1980s, faster than
total labor force growth, which averaged about 3 percent
per year. One of the fastest growing sources of employment
in services was the government civil service, which grew
at a rate of almost 6 percent per year in these two
decades. By 1990 there were 3.8 million civil servants
employed in all levels of government and in public
institutions such as schools and hospitals.
Government
civil servants were typically more educated than average.
In 1990 over 16 percent of civil servants had some
university education, compared with about 1 percent for
the labor force as a whole.
Employment
in trade or commerce was the largest source of employment
in the service sector, accounting for almost 11 million
workers in 1989. This number included about half of all
women employed in nonagricultural occupations. A wide
range of enterprises were involved in commerce, from large
incorporated firms to unincorporated establishments
operating without fixed premises. However, the
unincorporated establishments were much more numerous and
probably accounted for about 90 percent of employment in
trade. These ubiquitous small-scale traders, usually
selfemployed or employing only family labor, could be
found plying their wares in the colorful village pasar
(market) and in urban streets.
Petty
traders made up the majority of the informal sector
(small establishments outside the agricultural sector
that employed only unpaid family labor). By this
definition, about 17 million workers (around 23 percent
of the labor force) in 1989 were employed in the
informal sector in activities that usually required
little skill or capital. Most informal activities
provided household consumption services, like the
popular kaki lima (five-leg) food stalls found
throughout Javanese cities, so named for the
three-legged food stall together with the two legs of
the attendant. The informal sector also accounted for an
important share of industrial employment.
The
government had an ambivalent attitude toward the
informal sector. On one hand, the sector was recognized
as an important source of employment that should be
supported as part of the overall effort to promote
pribumi economic development. Throughout the 1970s and
1980s, a variety of credit and training programs were
geared to informal services and industry, although
success was often tenuous because of the large and
diverse target population. On the other hand, many
policies, often on a municipal level, thwarted informal
sector activities. For example, repeated efforts were
made to centralize petty traders and food stalls into
government-provided facilities in less-desirable
locations with high rents. The once common becak (pedicab)
was restricted to small side streets in many urban areas
to reduce traffic congestion. In Jakarta, the becak was
to be phased out entirely by denying new licenses after
1985.
Specific
programs designed to assist the informal sector may have
been less important than general, unrestricted economic
growth. In spite of its symbolic
"backwardness," the becak, like many informal
activities, offered a vital service to urban dwellers at
a low cost. The benefits of increasing manufacturing
employment in the 1990s, which should have increased
incomes of factory workers who had a high demand for
inexpensive informal services, possibly offered the best
program to assist this sector. The extensive investment
in transportation infrastructure during the 1970s and
1980s, which facilitated urban-rural migration and eased
rural travel, already enabled many rural households to
supplement their income with informal employment in more
prosperous urban areas.
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