Twenty Years of Expenditure Inequality in Indonesia, 1993–2013

In this article, we consider the recent increase in inequality in Indonesia. We make new, consistent estimates of expenditure inequality for 1993–2013, using several measures that draw on household expenditure data from the National Socioeconomic Survey (Susenas) for 1993–2013. In doing so, we note that the central statistics agency, Badan Pusat Statistik (BPS), used grouped data for its estimates of inequality until 2009 and that this underestimated inequality up to then. Thus the rise in inequality reported since 2009 actually has a longer history. We argue that Indonesia experienced divergence and convergence at the same time: the magnitude of the rise in inequality was significant (divergence), but the rise was greatest in provinces or districts with low initial levels of inequality (convergence). We consider the literature on drivers of changes in inequality and identify a set of hypotheses, with an empirical basis, which we introduce as potential Indonesian-specific drivers of rising inequality for future exploration.     

Is Being Stuck with a Five Percent Growth Rate a New Normal for Indonesia?

Indonesia’s economic growth over the past three years has been stuck at approximately 5% annually, despite a changing global environment and the Indonesian government’s efforts to boost growth. This paper asks whether this level of growth is a new normal for Indonesia—i.e. do government efforts and the global environment matter, or will the country’s economic growth remain at around 5% annually. If private consumption, the major component of GDP, continues to grow at its current level and inflation is controlled, this paper concludes that Indonesia might maintain its current annual growth rate of 5% for several more years. The probability of higher growth, however, is not promising. Lower growth seems more likely. To ensure the current level of economic growth will be sustained in the foreseeable future, this paper recommends stricter economic reforms to allow larger and more productive capital investments; more aggressive management of exchange rates to improve the country’s competitiveness; a more effective fiscal space to support improvements to needed infrastructure by developing innovation to increase revenue; a reduced energy subsidy; and a more flexible upper bound of deficit. Effective programs to improve the country’s human capital and innovation are crucial.     

中小企业开辟融资新渠道初探

商业代理制以其风险共担、服务优质和市场开拓能力强而成为市场经济条件下的一种新型营销方式。其在引入我国的 2 0年间的发展过程中 ,取得了令人瞩目的成绩 ,同时也出现了不少问题 ,面临很多困难。本文在分析我国发展商业代理制过程中出现的问题的基础上 ,提出了解决的对策和     

INTERNATIONAL PRODUCTION/DISTRIBUTION NETWORKS AND INDONESIA

This study examines the industrialization performance of Indonesia through a comparative evaluation with other East Asian economies. While neighboring countries actively formulated international production/distribution networks, Indonesia fell behind in utilizing the benefits of globalizing corporate activities. International production/distribution networks are supported by new economic thought such as fragmentation, agglomeration, and theories about corporate firm; and a policy package of development strategies should be designed to utilize such opportunities. The design of Indonesia's development strategies and “institutions”, however, does not conform to the globalizing world because the presence of network‐forming foreign companies is not large enough to make them influential “actors”. This author argues that the traditional comparative advantage argument for Indonesia's economic development is possibly misleading. Rather, Indonesia must learn the experience of its neighboring countries and introduce foreign companies as new actors to break the old “structure”.     

INDONESIA'S NEW FISHERIES LAW: WILL IT ENCOURAGE SUSTAINABLE MANAGEMENT OR EXACERBATE OVER-EXPLOITATION?

Indonesia is at a vital juncture in the direction of its fisheries management. There is ample evidence that fisheries resources throughout Indonesia continue to decline and that over-fishing not only persists but is a growing problem. Without government intervention, fisheries, like other natural resources, are subject to open access and therefore over-exploitation. Confronted with the drive to increase fisheries production to benefit the economy, spur business development, provide an essential food source and maintain local livelihoods, the government must at the same time seek to ensure that this resource is not depleted. The enactment of a new statute governing fisheries affords an opportunity to balance these competing goals and address some serious problems in fisheries management and enforcement. This paper analyses Law 31/2004 on Fisheries and concludes that, given early indications on implementation, the government should more aggressively improve the regulatory and enforcement mechanisms needed to achieve sustainable fisheries management.     

How Robust Is Indonesia’s Poverty Profile? Adjusting for Differences in Needs

Poverty profiles showing how the magnitude of poverty differs across subgroups of a population are important tools in designing effective social protection programs. Using data from the March 2013 round of the National Socio-economic Survey (Susenas) and the fourth round of the Indonesia Family Life Survey (2007–8), I explore the sensitivity of Indonesia’s poverty profile to different assumptions about the relative costs of individuals, taking into account differences in age, gender, body weight, and physical activity levels. I adopt parameter estimates for my simulation exercises from various Indonesia-specific publications, as well as from a joint intergovernmental consultation on nutrition. I compare my estimates with the per capita scale used by Statistics Indonesia (BPS), the central statistics agency. My findings suggest that the age–poverty relationship in Indonesia is sensitive to assumptions about the relative costs of individuals, with all alternative scales showing substantially lower poverty incidence among young children than by BPS’s estimate. Overall, however, I find that Indonesia’s poverty profile is relatively robust.     

The Demography of Indonesia in Comparative Perspective

Having reduced its fertility rate over the past 40 years, Indonesia has reached a new demographic crossroad. Its fertility rate is now around 2.5 births per woman, which, if sustained, would add substantial numbers to Indonesia's population in the future. There are concerns within Indonesia that the present level of population growth is an obstacle to continued economic development and, accordingly, that fertility should be reduced to the replacement level of 2.1 births per woman as soon as possible. Yet a comparative perspective indicates that countries such as Singapore, Japan, and Thailand are concerned about the effects that their very low rates of fertility are having on their labour forces and their rates of population ageing. This article suggests that with the right policy settings Indonesia can avoid this outcome yet continue to reduce its fertility. It discusses the implications of Indonesia's population growth and distribution for its economy, as well as the poor quality of demographic data.     

印尼经济转型及其与中国经贸合作前景

印尼是东盟最大的经济体。苏西洛就任总统后,通过实施有效政策,印尼很快走上经济复苏与政治整合的发展道路。目前,印尼经济转型加快推进,虽然面临着一系列难题,但发展态势依旧良好,为中印经贸合作持续发展奠定了基础。     

Vernacular Models of Development: An Analysis of Indonesia Under the “New Order”

Official development discourses often differ from the everyday discussions and activities of development agents. If the former reflect an official model of development, then the latter could be said to reflect a “vernacular” model. The latter model is the focus of this analysis, taking as a case study development in Indonesia during the “New Order” regime (1966–98) of former President Suharto. Resource relations between the Indonesian state center and rural periphery are examined along with the norms that govern the flow of resources as well as information on resource-use. This vernacular model of resource and information flows helps to explain the economic, political, and environmental crisis that befell Indonesia in the late 1990s and is relevant to understanding the development dynamics of a number of other nations.     

现代企业制度若干理论问题的反思

企业形态取决于企业自身发展状况和周围环境的变化,盲目推行现代企业制度并将其作为企业改革的唯一努力方向并不一定正确.随着知识经济的发展和生产社会化程度越来越强,现代企业制度也日益显示出其弊端.比如其忽视代理成本因素和生产组织方式的新变化.在我国的实践中,国企改革过于强调产权和委托代理等理论,而忽视公司治理结构中其他相关利益主体的重要作用,在贯彻政企分开时则一方面未能区别对待各类国有企业,另一方面未真正下决心割断企业和政府的直接联系.我国实行的是社会主义市场经济体制,应在借鉴西方先进理论的同时把精力主要放在制度创新上.     

One-fifth of the Sky: China's Environmental Stewardship

While China's economic success has won international acclaim, far less attention has been paid to its mounting environmental problems. As the second major producer of ozone-depleting chlorofluorocarbons and greenhouse gases, China casts a shadow upon the 21st century. The agency with major responsibility for protecting China's environment, the National Environmental Protection Agency (NEPA), is little known in the industrialized world. Two major weaknesses for the environmental policy system's weakness are explored. First, its vertical, top-down development reflects the low salience of environmental protection for the general public. Second, contextual and structural obstacles impede effective use of conventional regulatory approaches, led by either state or market forces.     

A Standard-Setting Agency and Environmental Enforcement

This paper considers an environmental regulatory agency that sets both the emissions standard and the enforcement parameters in contrast to the usual treatment in which the agency sets only one of the two. It is shown that if the agency's budget is sufficiently small, it sets the strictest possible standard and adopts a policy that minimizes noncompliance with that standard, thus legitimizing the literature that assumes this behavior on the part of the agency. In contrast, if the budget is sufficiently large, the agency can obtain its unconstrained optimum, but this optimum has too little pollution from a social perspective.     

FOREIGN DIRECT INVESTMENT IN INDONESIA: FIFTY YEARS OF DISCOURSE

The topic of foreign direct investment (FDI) has been prominent in assessments of economic development in Indonesia during the past 50 years. In this article I review Indonesia's FDI record in a historical perspective; the current urge to control FDI inflows and the need to augment domestic savings and facilitate technology transfers are not at all new in Indonesia. I draw in particular on the discourse on FDI in this journal, the Bulletin of Indonesian Economic Studies, giving special attention to contributions by this journal to the international literature on FDI and its impact. The article demonstrates that the relation between FDI and economic growth has been less straightforward in Indonesia than elsewhere in Southeast Asia. Although FDI has grown in a restrictive investment climate, on occasion it has failed to do so despite more liberal conditions. This may be attributed to the sustained role of natural resources in determining Indonesia's attractiveness as a host country of FDI.     

Cost Effectiveness of Water Supply Technologies in Rural Indonesia: Evidence From Nusa Tenggara Barat

The supply of adequate safe water to households in rural Indonesia remains a problem despite considerable government effort. Causes include lack of funds, the administrative shortcomings of water supply authorities, and inadequate consultation with the communities involved. The choice of water supply technology is crucial, because the alternatives vary widely in cost and in the demands they place on the organisational and technical capacity of water supply authorities and village communities. This paper compares the average incremental costs, in both financial and economic prices, of various technologies used in rural Indonesia, and discusses how to estimate their economic benefits. It shows that installing improved traditional wells and simple piped systems and rehabilitating large scale piped systems in Nusa Tenggara Barat province is likely to increase economic welfare, while installing new large scale piped systems may not. Finally, a distributional analysis of the different technologies is used to trace their beneficiaries.     

Indonesia's Debt-for-Development Swaps: Past,Present, and Future

This article systematically reviews recent debt-for-development swaps in Indonesia, the only debtor country where the number of such swaps warrants their being considered as a deliberate government debt-relief policy and development finance strategy. We show that the 11 swaps Indonesia has signed with its bilateral creditors since 2002 have performed rather erratically across four criteria: an increase in resources at the debtor country or government budget level or both; an increase in resources for intended sector purposes; whether, taken together, these swaps ease debt burdens; and the extent of their alignment with government policy and systems. We find little evidence of learning on the Indonesian side. We believe that Indonesia can take a more proactive stance in negotiating the economic terms underlying its debt swaps, and we suggest concrete ways for it to do so.     

Global economic sustainability indicator: analysis and policy options for the Copenhagen process

The traditional discussion about CO₂ emissions and greenhouse gases as a source of global warming has been rather static, namely in the sense that innovation dynamics have not been considered much. Given the global nature of the climate problem, it is natural to develop a more dynamic Schumpeterian perspective and to emphasize a broader international analysis, which takes innovation dynamics and green international competitiveness into account: We discuss key issues of developing a consistent global sustainability indicator, which should cover the crucial dimensions of sustainability in a simple and straightforward way. The basic elements presented here concern genuine savings rates—covering not only depreciations on capital, but on the natural capital as well—, the international competitiveness of the respective country in the field of environmental (“green”) goods and the share of renewable energy generation. International benchmarking can thus be encouraged and opportunities emphasized—an approach developed here. This new EIIW-vita Global Sustainability Indicator is consistent with the recent OECD requirements on composite indicators and thus, we suggest new options for policymakers. The US and Indonesia have suffered from a decline in their performance in the period 2000–07; Germany has improved its performance as judged by the new composite indicator whose weights are determined from factor analysis. The countries covered stand for roughly 91% of world GDP, 94% of global exports, 82% of global CO₂ emissions and 68% of the population.     

Recollections of my Career

Subroto, Professor at the Faculty of Economics, University of Indonesia (FEUI), is one of the architects of the economic policies that brought growing prosperity to Indonesia over the New Order years Educated in Dutch colonial and Japanese occupation schools, he joined Indonesia's independence struggle, and later studied economics at FEUI, McGill University, MIT, and Stanford and Harvard Universities. He taught international economics and business cycles at FEUI and was Secretary of the Faculty. With Widjojo Nitisastro, Mohammad Sadh, Ali Wardhana and Emil Salim, Subroto was appointed a Personal Economic Adviser to General (later President) Soeharto's new government in 1966 In 1968 he joined the Department of Trade, and later was minister of departments responsible for transmigration, cooperatives, mining and energy. After a 17-year ministerial career serving in four consecutive cabinets, Subroto was Secretary General of OPEC for six years from 1988 He remains active in Indonesia's nongovernmental Indonesian Institute for Energy Economics (IIEE), writing on energy problems, and is also Rector of the private Pancasila University in South Jakarta As part of our occasional series of interviews with economists who have helped shape New Order Indonesia, Professor Subroto talked with Chris Manning and Thee Kian VVie of the Bulletin's Editorial Board about his experience as a cabinet minister and as Secretary General of OPEC, and about his views on Indonesia's economic development, particularly its energy problems.     

Jokowi and the New Developmentalism

Indonesia’s president, Joko Widodo (Jokowi), made a remarkable political recovery in 2016. During his first year in office, Jokowi had been overwhelmed by a combative and divided parliament, disunity in cabinet, tensions with his own party, and declining approval ratings. In 2016, however, Jokowi expanded his ruling coalition and consolidated his power, and his approval rating rose to almost 70%. By mid-2016, the president had achieved stable government for the first time since winning office. Political stability gave us greater clarity on Jokowi’s agenda and the kind of Indonesia he wants to shape. I suggest that in 2016 a Jokowi-styled new developmentalism began to emerge. Jokowi’s administration focused narrowly on infrastructure and deregulation; other problems of government were subordinated to these developmentalist goals. There are uncanny echoes of the past in the new developmentalism, and its conservative and nationalist features reflect political trends that pre-date Jokowi’s presidency. Indeed, Jokowi’s developmental strategy is neither unique nor coherent; his decision-making is defined by ad hocery. Instead, I argue, deeper structural features of Indonesia’s socio-political landscape are making their mark on the president and returning Indonesia to its developmentalist moorings.     

Poverty in Indonesia 1984–2002: the impact of growth and changes in inequality

This paper examines the growth elasticity of poverty across three development episodes in Indonesia between 1984 and 2002, after controlling for inequality. It relies on estimation of panel data from the National Socio-Economic Survey conducted by the central statistics agency. Contrary to expectations, the growth elasticity of poverty was virtually indistinguishable across the three development episodes – a period of far-reaching policy liberalisation (1984–90); a second period of slower liberalisation (1990–96); and the period of recovery from the Asian financial crisis (1999–2002). Growth was pro-poor in all three periods, while the impact of growth on poverty was either augmented or offset by changes in inequality, depending on the period. Only during the first liberalisation period did a reduction in inequality serve to augment the impact of growth on poverty.