Linking Business Environment Reform with Gender and Inclusion: A Study of Business Licensing Reform in Indonesia

Abstract

Business environment reform (BER) targets inadequate business regulations. It is intended to remove constraints to business investment, enabling growth and job creation, and create opportunities for international business to contribute to and benefit from this growth. However, there is a lack of detailed knowledge of the impact of BER on gender and inclusion (G&I). While a review of existing literature suggests that in general, there is no direct link between BER and G&I, indirect links are likely through the influence of BER on firm performance. Outcomes will be influenced by the differential ways in which women-led firms experience the business environment when compared to their male counterparts, with disparities based on how they are treated under the law, as well as structural and sociocultural factors. The fact that in many countries, female-led firms are fewer and smaller than those of their male counterparts, and may operate in different sectors, also affects these dynamics. This research offers new insights through an in-depth analysis of the impact of the Pelayanan Terpadu Satu Pintu (PTSP) or one-stop shop business licensing reform in 2009 on firm performance in Indonesia, and how these impacts vary based on the gender of firm leadership. The results find that on average, firms benefited from improved business performance (sales), as a direct or indirect effect of this reform, as well as an increase in the number of medium and large-scale firms. Outside Jakarta (Bali, Banten, Lampung), women-led firms experienced a small but significant benefit relative to male-led firms, related to both sales and the number of medium and large-scale firms they run. In Jakarta, women-led firms continued to lag behind men and there were no significant effects on employment, and this held across province and gender. These findings are based on an analysis of the PTSP reform using data from the World Bank Enterprise Survey (WBES), a survey of small, medium and large firms (i.e. with more than four employees) which took place in Indonesia between 2009 and 2015.

The Impact of Business Environment Reforms on Poverty, Gender and Inclusion

“…It also demonstrated an increase in medium and large firms, with these increases marginally favouring women over men outside of Jakarta. However, the reform had no significant effects on employment (Saha et al, 2021).…”

“…However, one study which assessed whether the reform encouraged formalisation found little evidence that the programme reduced the rates of informality (Rothenberg et al, 2016). Recent research analysing World Bank Enterprise Survey data demonstrates that this reform had impacts which varied by geography, and by gender (Saha et al, 2021). Overall, in regions where the reform was implemented effectively, there was an increase in firm performance.…”

Female Entrepreneurship and Informality in Low- and Middle-Income Countries: What Have We Learned So Far?

“…The view that BERs are gender neutral has been disputed, with compelling evidence that women experience the business environment very differently from men (despite there being no legal discrimination between the two in most countries), with potentially different BER outcomes for men and women (Aidis 2017;Saha et al 2021). In response, gender-sensitive BERs have been proposed, which refer to 'changes in policy, legal, institutional, and regulatory conditions that govern business activities in ways that account for the dynamics of socially constructed relationships between men and women' (Miles 2017: 4).…”

Inclusive Trade: Four Crucial Aspects

“…Women who are not wage earners but who are business owners or own-account producers (e.g. women-led small and medium-sized enterprises (SMEs)), find it difficult to become independently involved in global value chains (Saha et al 2021). This is because these women often lack access to the productive resources and networks needed to achieve competitive advantage.…”