The article discusses the challenges faced by manufacturing firms in Indonesia due to a poor business climate. The main constraints include lack of well-functioning markets, infrastructure, and clear regulations. These constraints vary depending on the type of firm and have negative impacts on productivity and investment decisions. The study suggests policy recommendations such as improving credit information, providing microfinance for start-ups, enhancing infrastructure like electricity and logistics, and strengthening law enforcement on business contracts. Both the government and private sector have roles to play in addressing these constraints to improve the business environment in Indonesia.