Transboundary Pollution in Southeast Asia: The Indonesian Fires

Uncontrollable forest fires in Indonesia have caused much environmental damage in Southeast Asia with immediate countries such as Singapore, Malaysia, Brunei, and even Southern Thailand bearing most of it. The intentional burning of forests has engendered a transboundary haze pollution problem with severe economic ramifications in both victim and perpetrator countries. This paper reviews the related issues and suggested policy responses from the different interdisciplinary perspectives. Identification and analysis by way of a “stakeholders approach” to the possible sharing of costs in certain programs to combat the fires and haze is suggested. The paper also discusses the role of economic incentives in managing forest fires.     

Post-crisis export performance: The Indonesian experience in regional perspective

This paper examines post-crisis export performance in Indonesia against the backdrop of pre-crisis experience and the comparative export performance of other Southeast Asian countries. It surveys trends and patterns of export performance, focusing on comparative experience in major commodity categories and changing revealed comparative advantage. It also examines the implications for Indonesia's export performance of China's emergence as a major competitor in world trade, considers market prospects for textile and garment exports following the demise of the Multi-fibre Arrangement, and explores the factors contributing to the post-crisis export slowdown. The findings support the view that Indonesia's poor export performance in the post-crisis era is largely supply driven. They strengthen the case for reversal of recent backsliding in macroeconomic policy reform, and for speedy implementation of the unfinished reform agenda. Prudent macroeconomic management, while necessary, is not sufficient to achieve rapid and sustained export growth in an era of rapid economic globalisation.     

Indonesian Trade Reform in Close-Up: The Steel and Footwear Experiences 1

In evaluating the widespread trade liberalisation that has occurred in Indonesia since 1983, it is important not to lose sight of the uneveness of many of the reforms, both intra- and inter-industry, that have been implemented. Different industry structures help to account for the different degrees of reform delivered within and between industries. This paper examines the extent and implications of the liberalisation process in two structurally diverse industries — steel and footwear. One objective of this paper is to illustrate the consequences for competitiveness of the reform sequence and the instruments of reform; another is to highlight the impediments to further progress.     

The Indonesian macroeconomy and the yield curve: A dynamic latent factor approach

We develop a fine representation of the term structure of interest rates in Indonesia and create a link between the yield curve and macroeconomic fundamentals. We construct a state-space representation of the yield curve as a function of three time-varying parameters: level, slope, and curvature factors. The model is then expanded to include three macroeconomic variables: real activity, inflation, and interest rates. We find that the dynamic latent factor model provides a very good fit to characterise the Indonesian yield curve in terms of the statistical properties for each maturity, and in terms of the properties of three latent yield-curve factors. With regards to the relationship to the macroeconomy, we find that there is a large amount of idiosyncratic variation in the yield curve movements. Therefore, macroeconomic variables can only explain small dynamics in the yield curve.     

Globalisation and its discontents: an Indonesian perspective

It is indeed a great honour for me to give the 2011 Heinz Arndt Memorial Lecture. The first time I met the great Professor Heinz Arndt was as a nine‐year‐old back in 1966 when our family first came to Canberra and Heinz was my father's (Panglaykim) new boss. I recall that he picked us up at the airport and within the first week we had visited his house in Deakin, where he gave me and my two brothers games such as Chinese checkers and books that his own kids had outgrown. So my first thought was: what a kind and thoughtful man. Little did I know that I would end up being what he often termed his ‘academic grandchild’. I never took a class from Heinz or was fortunate enough to be supervised by him. However, I had many interactions with him when I was a student at the Australian National University (ANU) and, upon graduation, as an aspiring young academic. He had an important influence on the course of my life. First, he encouraged me to do my PhD in the USA. After I completed my masters at the ANU under Peter Drysdale, I toyed with the idea of continuing with a PhD at the Research School of Pacific Studies. However, Heinz convinced me to go to the USA because he thought it would widen my horizons. He was right. Second, there was the importance of being disciplined and thorough in undertaking country or regional research. One of the most important initiation exercises for an academic working on Indonesia was to do a ‘Survey of Recent Developments’ for the Bulletin of Indonesian Economic Studies. I recall being given a yellowed document that had been formulated by Heinz with precise guidelines on topics, structure, and people to see and interview. We found similar guidelines on regional surveys when we did economic surveys of all the provinces a few years later. I found that doing the research and interviews for the survey was the easy part. The hard part was the two weeks spent in Canberra writing up the survey and being subjected to peer review. The draft was presented to the ‘editorial team’ and others, including, of course, the venerable Professor Arndt. I am glad to say that I passed in terms of substance; but of course there were lots of edits to do following Heniz's traditional typed‐up comments, both general and specific! Third, despite being a formidable figure and someone with a reputation for strong opinions, Heinz was the same kind and thoughtful man I remembered as a nine‐year‐old. He always had the time of day for the young academics, especially those from Indonesia. I had many cups of tea with him as a student and later as an aspiring academic. I still recall his room in University House filled with his books and the filing cabinet near the bathroom, where he would inevitably pull out the right references and reading materials that one needed. I learned a lot about the importance of mentoring and encouraging the young—many of whom have succeeded and are in the room today. This lecture is to honour Professor Heinz Arndt. I believe Professor Arndt was a true internationalist and therefore he would tackle with gusto the rumblings of discontent on globalisation. He would be thorough in trying to understand the manifestations of globalisation and its sources of discontent. He would also be of the firm belief that the benefits of globalisation outweigh its costs and come up with strategic ideas on how to best manage globalisation to counter ‘globaphobia’. I hope I do justice to this topic in the Heinz Arndt tradition.     

The Politics of Indonesian Textile Policy: The Interests of Government Agencies and the Private Sector

This paper uses case studies of policy making in the Indonesian textile industry to illustrate the roles of variables neglected by the two principle theories of economic policy making, the dependency and state-centric approaches. These include political-cultural variables, intra-bureaucratic politics, and interaction between the bureaucracy and the private sector, the press and political leaders.     

Indonesian Agricultural Development: The Awkward Case of Smallholder Tree Crops 1

The problems of transforming smallholder tree crops from traditional low-yielding to modern high-yielding technology are examined, using a meta production function approach to analyse the changes. The role of government in transformation is considered, and various ‘individual’ and ‘black’ improvement schemes implemented since the 1950s are analysed. Many of these schemes have not teen successful owing to poor planning and inadequate managerial and financial support, and their coverage has been small in relation to the huge areas needing improvement. The paper suggests a more modest ‘dispasal’ approach to transformation, concerned with setting up nurseries to provide better quality planting material and advice to individual fanners. But even this revised approach should be carefully planned and executed light of previous mistakes if it is to have widespread impact.     

The road to pro-poor growth: the Indonesian experience in regional perspective

Indonesia's long-run ‘pro-poor growth’ record is among the best in Asia. It shows that appropriate policies can free societies from poverty's worst manifestations in a generation, a crucial message as democracy begins to influence the policy process. This paper places Indonesia's record in regional perspective, analysing determinants of income distribution in Asia and connecting this analysis to Indonesia's pro-poor growth process and the policy mechanisms that encourage pro-poor growth. Using a data set for eight Asian countries, it examines patterns of change in incomes and distribution across countries and over time. Building on Indonesian experience, the paper presents a pro-poor growth model encompassing three levels: improving the ‘capabilities’ of the poor, lowering transactions costs in the economy, especially between rural and urban areas, and increasing demand for goods and services produced by the poor. It finds that rapid pro-poor growth requires simultaneous and balanced interaction between growth and distribution processes.     

The Indonesian Log Export Ban: An Estimation of Foregone Export Earnings

The paper examines the economic impact of the Indonesian phased log export ban from 1981 to 1986, by means of a counterfactual analysis which permits the calculation of hypothetical export revenues under the assumption that the log export ban was not implemented. A graphic and numeric presentation of the analysis is provided. The present value of the range of estimated cumulative losses is USS (1980) 1.9 billion to $3.1 billion.