Recollections of My Careerlections of My Career

Suhadi Mangkusuwondo, Professor Emeritus of the Faculty of Economics at the University of Indonesia (FEUI), was born in Solo, Central Java, in December 1927. After participating in the war of independence, he resumed his secondary education in Malang, completing it in 1949. He then studied economics at the University of Indonesia (UI) and later became a teaching assistant there. Suhadi spent two years doing postgraduate study at the Massachusetts Institute of Technology and later obtained a PhD in economics at the University of California at Berkeley. Returning to Indonesia and his teaching post at FEUI, he became editor of the journal Economics and Finance in Indonesia (EKI). He was Head of the R&D Agency in the Department of Trade from 1973 to 1975 and again in 1983-88, and Director General of Foreign Trade from 1975 to 1983. Professor Suhadi served as the Representative of the Government of Indonesia in the Uruguay Round when it was launched in 1986, and since 1992 has been a member of the Eminent Persons Group of the APEC (Asia–Pacific Economic Cooperation) forum. His other activities include membership of Indonesia's National Research Council (DRN), and of organisations such as the Regional Advisory Board of the ASEAN Economic Bulletin, the journal of the ASEAN Economic Research Unit of the Institute of Southeast Asian Studies in Singapore. He is now also Vice Chairman of the Jakarta-based Trade and Development Institute. On 8 July 1994, Professor Suhadi talked with H.W. Arndt, Hal Hill and Thee Kian Wie about his views on Indonesia's economic development under the New Order, and particularly about trade policy. On 19 September 1995, in a second interview with H.W. Arndt, Mari Pangestu and Thee Kian Wie, he elaborated further on his work at the Ministry of Trade and his participation in the Uruguay Round and the APEC Eminent Persons Group (EPG).     

Recollections of My Career

Mohammad Sadli, Professor Emeritus in the University of Indonesia's Faculty of Economics and Chairman of the Institute for Research and Development (LP3E) of the Indonesian Chamber of Commerce and Industry (Kadin), is one of the group of economists who fashioned Indonesian economic policy under the New Order government after it took power in 1965. He was Chairman of the Technical Committee for Capital Investment (1967–73), Minister of Manpower (1971–73), Minister of Mining (1973–78), Secretary-General of Kadin, and later LP3E-Kadin's first director. Despite retiring from the University in 1987, Professor Sadli continues to write and give seminars in Indonesia and abroad. In 1992 he granted an interview to Thee Kian Wie and Chris Manning of the BIES Editorial Board, and discussed his career, economic policy formulation in the early years of the New Order, and issues such as foreign investment, manpower and labour relations, the 1975 Pertamina crisis and government-private sector interaction.     

Recollections of My Career

Editorial Note:Professor Sumitro Djojohadilcusomo is one of the principal architects of Indonesia's post-independence economic policy. He has held key economic portfolios in both the immediate post-independence era and in the New Order. In addition, as Professor of Economics at the University of Indonesia, and as a tireless lecturer and writer on economic issues, he has been instrumental in shaping the education of several generations of economics students in Indonesia, many of whom are now in key government positions. At the end of August, Professor Sumitro generously agreed to be interviewed on his long career by two members of the BIES editorial board, Anne Booth and Thee Kian Wie. In preparing this interview for publication, the editors have tried to preserve Professor Sumilro's own words to the greatest extent possible; his lucid and entertaining remarks are thus reproduced with a minimum of editing. The interview began with a question to Professor Sumitro about his early training in economies.     

M. Hadi Soesastro: Indonesian public intellectual,Asia Pacific visionary

This note commemorates and celebrates the life and contribution of M. Hadi Soesastro, a Bulletin board member who passed away on 4 May 2010. Hadi was arguably Indonesia's leading public intellectual in the fields of international economic policy and political economy, ASEAN economic cooperation, and East Asian economic integration. He made seminal contributions in these fields, and on the political economy of reform in Indonesia, the economic development of East Timor, and energy economics. He also played a major role in institutional development, most notably at the Centre for Strategic and International Studies, and in many other official, academic and research endeavours in Indonesia and East Asia.     

What can Indonesia learn from China's industrial energy saving programs?

Even though Indonesia's CO₂ emissions are dominated by deforestation while China's are dominated by industry, Indonesia has much to learn from China's industrial energy saving programs. To begin with, it is only a matter of time before Indonesia's emissions from fossil fuels overtake those from deforestation. Given the long technological lock-in effects of energy systems and industries, Indonesia needs to think now about how it will tackle this problem. There are other reasons for believing that Indonesia might learn something from China – the CO₂ intensities of GDP, of industry and of cement production have been rising in Indonesia, while they are falling in China. China's better intensity performance is due to policies that Indonesia would do well to follow – adopting a technological catch-up industrial development strategy; raising energy prices to scarcity values; liberalising domestic markets and opening the economy to trade and investment; and mounting a massive energy saving program.     

Tinbergen's work: Change and continuity

Summary This article provides an overview of Tinbergen's economic writings, comprising well over 900 publications. Six broad areas have been distinguished to allow for the classification and discussion of Tinbergen's economic work. These six areas embody the change in Tinbergen's areas of interest apart from the shift from physics to economics early in his career. Tinbergen's work, however, is not only characterised by change of areas but also by continuity in approach. To mark this continuity four main characteristics of Tinbergen's work have been elaborated. The article concludes with Tinbergen's observations on the achievements to be expected from scientific research.J. Kol is Associate Professor of International Economics and Economic Integration at the Faculty of Economics of the Erasmus University in Rotterdam; P. de Wolff is Emeritus Professor at the University of Amsterdam and was Director of the Central Planning Bureau in The Hague as successor of J. Tinbergen. The authors are grateful to Mrs. I.M. Lageweg and Mr C.J. van Opijnen for their assistance with references.     

Economics: The Sexy Social Science?

Michael Watts of Purdue University organized this symposium as a session at the 2002 Southern Economic Association Meetings in New Orleans. He invited five economists, who are specialists in economic education and other areas, to comment on William Becker's paper, “How to make economics the sexy social science.” which first appeared in the Chronicle of Higher Education (December 7, 2001). Their comments and Professor Becker's response appear below.     

Growth,Poverty, and Inequality under Jokowi

SUMMARY

The political authority of President Joko Widodo (Jokowi) was bolstered in the third quarter of 2015 by a cabinet reshuffle, his coalition's gaining a parliamentary majority, and several foreign-policy developments. Indonesia's request to rejoin OPEC, for example, after having left in 2008, seemed more about international relations than oil prices, while official visits to the Middle East and the United States allowed Jokowi to project his presidency on the international stage. He still faces resistance from within his own party, however.

Jokowi's politically bold reshuffle of economic ministers in August soon yielded a range of policy announcements. In September and October, his government introduced its first substantial set of reforms—a number of economic policy packages intended, among other things, to attract investment and stimulate domestic demand. If even half of these policies are put in place, the impact on Indonesia's economy should be tangible.

Few countries have escaped the effects of falling global commodity prices and China's growth slowdown. At 4.7%, year on year, in the third quarter Indonesia's rate of economic growth again fell short of the government's target. Slowing growth and a negative outlook have lowered market expectations and weakened the rupiah, which is also burdened by the large outstanding external debt held by corporate borrowers. Indonesia's real effective exchange rate has recently begun to depreciate, however, which may stimulate exports. Growth prospects will also improve if the substantial increase in capital and infrastructure spending allocated in the state budget is realised.

Against this backdrop, we focus on what has happened to poverty and inequality in Indonesia since Jokowi took office. The distributional impacts of the current macroeconomic climate are likely to be hardest felt by the poor. Indonesia is well known for its record on poverty reduction, but between September 2014 and March 2015 the share of the population in poverty increased, even though economic growth was close to 5.0%. Slowing growth, rising food prices, the falling real wages of farmers, and the delayed disbursement of fuel-price compensation all had an effect. Such impacts may be mitigated in the medium term by Jokowi's budget reallocations to infrastructure, if realised, and his expansion of social spending.     

CLIFFORD GEERTZ, 1926–2006: MEANING,METHOD AND INDONESIAN ECONOMIC HISTORY

Clifford Geertz was best known for his pioneering excursions into symbolic or in terpretive anthropology, especially in relation to Indonesia. Less well recognised are his stimulating explorations of the modern economic history of Indonesia. His thinking on the interplay of economics and culture was most fully and vigorously expounded in Agricultural Involution. That book deployed a succinctly packaged past in order to solve a pressing contemporary puzzle, Java's enduring rural poverty and apparent social immobility. Initially greeted with acclaim, later and ironically the book stimulated the deep and multi-layered research that in fact led to the eventual rejection of Geertz's central contentions. But the veracity or otherwise of Geertz's inventive characterisation of Indonesian economic development now seems irrelevant; what is profoundly important is the extraordinary stimulus he gave to a generation of scholars to explore Indonesia's modern economic history with a depth and intensity previously unimaginable.     

INTERGOVERNMENTAL TRANSFERS AND DECENTRALISATION IN INDONESIA

A fundamental restructuring of intergovernmental relations involving decentralisation and expanded autonomy for provincial and local governments is under way in Indonesia. This paper explores the intergovernmental financial system that preceded the new General Allocation Fund (DAU), with particular attention to the old Inpres development grants. Like Inpres, the DAU attempts to address national development objectives, and can be seen as a logical consequence of reform efforts in intergovernmental finance that began long before the demise of the New Order government in 1998. The use of earmarked Inpres grants enabled the central government to ensure that key sectors such as roads, public health and education received adequate attention throughout Indonesia's diverse regions. Local governments' experience with Inpres should help in implementation of the DAU, yet Law 25/1999which restructures fiscal relations between the various levels of governmentmay actually have increased local reliance on the central government.     

Arrow's impossibility theorem

Summary It is the purpose of this article to give an exact formulation of Arrow's famous impossibility theorem and its proof. Although the results presented here are not new in the sense that the theorem is refuted or questionned, it may be of some interest especially for the reader who wants to get a more or less complete view of the argumentation leading up to the theorem. Special attention is paid to the logical structure of the argument in the conviction that a lot of misunderstanding exists about what Arrow and subsequent writers tried to say. By way of introduction to the central theme some remarks are made concerning the relation of the Arrow problem to welfare economics.The author would like to thank Mr. W. R. de Jong of the Department of Philosophy of the Free University for his valuable advice in the field of logic and in particular Keimpe Reitsma, student of economics at the Free University, for the extensive discussions which formed an indispensable element in realizing this article. Thanks are due also to two referees for their useful suggestions.During the preparation of this article I was Assistant Professor at the Faculty of Economics, Free University, Amsterdam, The Netherlands. At present I am with the Ministry for Social Affairs, Directorate for General Economic Affairs.     

Recollections of My Career

The Bulletin's occasional series of interviews with the older generation of economists has so far focused upon those who have served as ministers or held high positions in the civil service. A rather different perspective on economic conditions and economic policy under the Old Order is offered here by one of Indonesia's veteran pribumi (indigenous) entrepreneurs, Soedarpo Sastrosatomo, best known for his involvement with Bank Niaga and the Samudera Indonesia shipping group. Notable as one of the few pribumi to have survived in the forefront of business since the early years of Independence, he aimed in his business ventures to be an agent of soaoeconomic progress, a goal for which he is still working. His experience covers the fields of importing, office machines and computers (Soedarpo Corporation, est. 1952), insurance (Asuransi Bintang, est. early 1955), banking (Bank Niaga, est. late 1955) and, in the transport industry, agencies, stevedoring, shipping and freight forwarding (Samudera Indonesia and associated firms, 1964 onwards).

In view of the priority given after Independence to fostering the emergence of an indigenous business elite and the generally disappointing results, an underlying theme is that elusive factor of production, entrepreneurship. The interview therefore devotes some attention to Soedarpo's atypical family and educational background, as a prelude to his acquisition of banking skills and foreign contacts during a posting to the United Nations in New York (1948–50). By 1952, when he embarked on a business career, he was still inexperienced but better prepared than most of his contemporaries. The middle sections of the interview focus on the problems of capital formation, import licensing and inflation under the Old Order. Finally, Samudera Indonesia's role in the development of Indonesia's deepsea liner shipping is traced from the mid 1960s into the 1980s, showing how, even for a mature enterprise, survival still depends upon a judicious combination of local knowkdge, foreign Connections, and scarce capital.     

Managing the Indonesian economy: Some lessons from the past

This paper draws some tentative lessons for the management of Indonesia's economy from recent political–economic history. After a brief review of the economy under the present government, the paper then puts the picture in the longer term perspective of post-independence Indonesia. Some lessons are then drawn. They include the need to maintain awareness of the close connection between economics and politics, constant vigilance about economic stability and the budget, a solid economic team, a coherent overall strategy and a focus on institutions and governance.     

ASIAN DEVELOPMENT STRATEGIES: CHINA AND INDONESIA COMPARED

China's and Indonesia's development strategies have been compared with others, but rarely with each other. Radically different political contexts have produced both similar and distinctly different development patterns. Each using formal planning, Indonesia spurred radical reforms to promote growth, whereas China opted for incremental reforms to ‘grow out of the Plan’, as a political device and to discover what policies and institutions worked. Both strategies produced environments largely conducive to rapid development. Indonesia relied on a few economic technocrats to oversee development; China used decentralisation and party reforms to create a credible environment for non-state investment. Both shared concern for agricultural reform and food security; both opted to open up for trade—China gradually, Indonesia radically. Both did well in growth and poverty reduction following reform. China's growth performance is in a league of its own, especially since Indonesia's Asian crisis setback, but Indonesia had more equitable growth and survived a difficult political transition with, in hindsight, modest costs.     

Dawn of Industrialisation? The Indonesian Automotive Industry

This article traces the development of industrial policy towards the Indonesian motor industry within the automotive global value chain. Showing the current dominance of Japanese motor assemblers in Indonesia, it notes the rather undeveloped nature of the locally owned supporting industry, particularly compared with that of neighbouring Thailand. Most investment in auto-parts production has been by foreigners. Nevertheless, Indonesia's rapid domestic-market growth has allowed it to attract foreign automotive investment without having to offer excessively generous incentives. While the continued entry of foreign suppliers of auto parts into Indonesia offers opportunities for local suppliers to upgrade their productive capabilities, it also limits their chances of becoming first-tier suppliers themselves. Japanese automotive investors are optimistic about Indonesia's export potential, more so than Malaysia's.     

Comparative Advantage and Protection in Indonesia 1

The comparative advantage of Indonesia's traded goods producing sectors is examined in this paper. Comparative advantage is studied by computing the domestic resource costs of foreign exchange earned or saved in each of the 138 such sectors defined in the 1985 input-output tables for Indonesia. The paper also computes measures of effective rates of protection. It is found that these two types of measures are highly correlated across industries. The paper also shows that between 1975 and 1987 the distortionary effects of Indonesia's trade policies declined markedly. Nevertheless, Indonesia's most highly protected industries continue to be those in which its comparative advantage is least.     

The Role of Markets,Technology, and Policy in Generating Palm-Oil Demand in Indonesia

Indonesia produces more palm oil and consumes more palm oil per capita than any country in the world. This article examines the processes through which Indonesia has promoted palm-oil consumption and some of the consequences of that promotion. Partial equilibrium modelling shows that Indonesia's remarkable increase in palm-oil consumption since 1985 is not largely attributable to population and income growth. Instead, much of this consumption growth has resulted from substitution away from coconut oil, facilitated by government policies on technology, pricing, distribution, and trade. The switch from coconut oil to palm oil in Indonesia was associated with increased land conversions to agriculture and diminished smallholder competitiveness. Despite lower rates of cooking-oil substitution in the future, simulations suggest that Indonesia's total palm-oil consumption in 2035 will be at least double that of 2010.     

Hal Hill Steps Down—and up. Head of the Indonesia Project,ANU, 1986–98 Editor of BIES, 1990–98

Hal Hill is known as an eminent authority on the Indonesian economy. He is an astonishingly productive scholar. He continues as an imaginative and highly successful head of the ANU's Indonesia Project and Editor of its journal. He is constantly sought after abroad as Visiting Professor, participant in conferences and contributor to research projects (June 1997).     

Unity in diversity? The creation of new local governments in a decentralising Indonesia

This paper evaluates the proliferation of local governments concurrent with Indo-nesia's 2001 decentralisation. Largely static for decades under the New Order, the number of municipalities (kota) and districts (kabupaten) has increased by half, from 292 before decentralisation to 434 in 2003. Most of the increase is off-Java. This represents a fundamental change in Indonesia's subnational administrative, political and fiscal landscape. We present a new dataset that elucidates the characteristics of these new kota and kabupaten, and review political, fiscal and economic incentives for creating new jurisdictions. We find that geographic dispersion, political and ethnic diversity, natural resource wealth and scope for bureaucratic rent seeking all influence the likelihood of regional splits. Since jurisdictional changes will affect local governance and service delivery, we stress the importance of providing an effective institutional framework for the creation – or future amalgamation – of local governments as part of a strategic approach to consolidating Indonesia's decentralisation.     

Academic Anti-Semitism and the Austrian School: Vienna, 1918–1945

The theme of academic anti-Semitism has been widely discussed recently in histories of the interwar period of the University of Vienna, in particular its Faculty of Law and Policy Sciences. This paper complements these studies by focusing on the economics chairs of this faculty and, more generally, on the fate of the younger generation of the Austrian School of Economics. After some introductory remarks the paper concentrates on three case studies: the neglect of Mises in all three appointments of economics chairs in the 1920s; the anti-Semitic overtones in the conflict between Hans Mayer and Othmar Spann, both professors of economics in the faculty; and on anti-Semitism as a determinant of success or failure in academia, and consequently of the emigration of Austrian economists. Finally, we have a short look at the development of economics at the University of Vienna during and after the Nazi regime.