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.     

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

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.     

Reflections on Industrialisation and Industrial Policy in Indonesia

Abdoel Raoef Soehoed was born in Jakarta in 1920. After graduating from senior high school in Jakarta in 1939, he studied engineering in Bandung and subsequently graduated after the independence struggle. In 1956 Soehoed, who had become an officer of the Indonesian Air Force, resigned from military service and became an engineering consultant with a private firm. His career as a public servant started with his appointment as an Advisor to the Senior Minister for Development and Industries. He was then appointed a member of the Technical Committee for Capital Investment, which became the Coordinating Board for Capital Investment (BKPM). Soehoed was made Deputy Chairman of the Board, and head of BKPM's Division for Promotion of Foreign Capital Investment. In 1976 he was also appointed Chairman of the Asahan Development Authority, a position he still occupies In 1978, he became Minister of Industry in the Third Development Cabinet (1978–1983) and in May 1983 he was appointed Member of the Supreme Advisory Council.

As a forceful and articulate advocate of what has come to be called the structuralist approach to industrialisation, Soehoed can rightly be considered the prime architect of Indonesia's current industrial development. on 7 September 1987 he talked to Thee Kian Wie and Hal Hill about his views on the development of Indonesia's manufacturing sector.     

Ruth Daroesman

Ruth Daroesman was the first Assistant Editor of the Bulletin of Indonesian Economic Studies. She joined the ANU in 1968 and for the next 15 years worked alongside Professor Heinz Arndt, head of the then Department of Economics in the Research School of Pacific Studies, in building the journal's standard and reputation. As well as editing the content and overseeing production, Ruth pursued her scholarly interest in Indonesian education and its financing, and wrote economic surveys of several Indonesian provinces. This tribute contains contributions from colleagues who were graduate students, academic staff and visitors in the department during Ruth's term there.     

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.     

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.     

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.     

Book Reviews

Susan Toft (ed.), Compensation for Resource Development in Papua New Guinea Shinichi Ichimura, Political Economy of Japanese and Asian Development Myo Thant, Min Tang and Hiroshi Kakazu (eds), Growth Triangles in Asia Mario Rutten and Carol Upadhya (eds), Small Business Entrepreneurs in Asia and Europe Peter Van Diermen, Small Business in Indonesia Sung Gul Hong, The Political Economy of Industrial Policy in East Asia Anand Chandavarkar, Central Banking in Developing Countries Gavin W. Jones and Terence H. Hull (eds), Indonesia Assessment: population and human resources Garry Rodan, Kevin Hewison and Richard Robison (eds), The Political Economy of South-East Asia Maysing H. Yang (ed.), Taiwan's Expanding Role in the International Arena M. Adil Khan, Economic Development, Poverty Alleviation and Governance East Asia Analytical Unit (EAAU), The New ASEANS: Vietnam, Burma, Cambodia & Laos Chris Rowley (ed.), Human Resource Management in the Asia Pacific Region Gavin W. Jones and Pravin Visaria (eds), Urbanization in Large Developing Countries Chris Manning, Indonesian Labour in Transition Asian Development Bank, Asian Development Outlook 1997 and 1998 Jomo K. S. et al., Southeast Asia's Misunderstood Miracle Chris Dixon and David Drakakis-Smith (eds), Uneven Development in South East Asia Tony Fu-Lai Yu, Entrepreneurship and Economic Development in Hong Kong Anne Booth, The Indonesian Economy in the Nineteenth and Twentieth Centuries Harry J. Waters, China's Economic Development Strategies for the 21st Century Chan Heng Chee (ed.), The New Asia–Pacific Order Chia Siow Yue and Marcello Pacini (eds), ASEAN in the New Asia: issues & trends Chia Siow Yue and Joseph L. H. Tan (eds), ASEAN & EU: forging new linkages and strategic alliances Seiichi Masuyama, Donna Vandenbrink and Chia Siow Yue (eds), Industrial Policies in East Asia Pierre van der Eng, Agricultural Growth in Indonesia     

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.     

Book Reviews

Hal Hill, The Indonesian Economy since 1966: Southeast Asia's Emerging Giant, Cambridge University Press, Melbourne, 1996, pp. xv + 319. Cloth: A$90; paper: A$36.95.     

Structural Change and Industrial Relations During the Soeharto Period an Approaching Crisis?

This paper examines the evolution of the Indonesian industrial relations system and labour welfare in the New Order period, giving special attention to labour policies and unrest in the 1980s and early 1990s. The tightly controlled industrial relations system which emerged after 1965 is contrasted with the labour activism of the Sukarno era. It is argued that the greater de facto freedoms granted to industrial labour in recent years are an inevitable outcome of growing political openness, concentration of industrial labour around Jakarta and the vulnerability of new industries to domestic and international criticism of labour conditions. It is also contended that intensified labour action is unlikely to bring about a general improvement in worker welfare, although it can overcome some of the worst abuses of labour laws.     

Book Reviews

W.T. Woo, B. Glassburner and Anwar Nasution, Macroeconomic Policies, Crises, and Long-term Growth in Indonesia, 1965–90, Comparative Economic Studies, The World Bank, Washington DC, 1994, pp. xiii + 216. Paper: $13.95.

Hal Hill (ed.), Indonesia's New Order; The Dynamics of Socio-Economic Transformation, Allen and Unwin, Sydney, 1994, pp. xxxv + 364. Paper: A$29.95.

J. Thomas Lindblad (ed.), New Challenges in the Modern Economic History of Indonesia: Proceedings of the First Conference on Indonesia 's Modern Economic History, Jakarta, October 1–4, 1991, Programme of Indonesian Studies, Leiden University, Leiden, 1993, pp. viii + 306.

Thee Kian Wie, Explorations in Indonesia's Economic History, Lembaga Penerbit Fakultas Ekonomi Universitas Indonesia, Jakarta, 1994, pp. xv + 187.

Nancy Lee Peluso, Rich Forests, Poor People: Resource Control and Resistance in Java, University of California Press, Berkeley, 1992, pp. xv + 321.

Effendi Pasandaran, Agus Pakpahan, Edwin B. Oyer and Norman Uphoff (eds), Poverty Alleviation with Sustainable Agricultural and Rural Development in Indonesia, Published jointly by the Center for Agro-Socioeconomic Research (CASER) (Bogor), and the Cornell International Institute for Food, Agriculture and Development (CIIFAD) (Ithaca), Bogor 1992, pp. vi + 233.

Eric Thorbecke and Theodore van der Pluijm, Rural Indonesia: Socio-Economic Development in a Changing Environment, IFAD (International Fund for Agricultural Development) Studies in Rural Development no. 3, New York University Press, New York, 1993, pp. xxix + 360.

Niels Mulder, Inside Southeast Asia: Thai, Javanese and Filipino Interpretations of Everyday Life, Duang Kamol, Bangkok, 1992, pp. xiii + 178.

M.C. Ricklefs, War, Culture and Economy in Java, 1677–1726: Asian and European Imperialism in the Early Kartasura Period, ASAA Southeast Asia Publications Series no. 24, Allen & Unwin, Sydney, 1993, pp. xi + 425. A$29.95.

Ken Young, Islamic Peasants and the State: The 1908 Anti-Tax Rebellion in West Sumatra, Yale Southeast Asia Studies Monograph 40, Yale Center for International and Area Studies, New Haven, pp. xviii + 361.

Saya Shiraishi and Takashi Shiraishi (eds), The Japanese in Colonial Southeast Asia, Translation Series, Translation of Contemporary Japanese Scholarship on Southeast Asia, vol. 3, Southeast Asia Program, Cornell University, Ithaca, 1993, pp. 172.     

Book Reviews

Book reviewed in this articles: Fiscal Systems and Practices in ASEAN: Trends, Impacts and Evaluation. Edited by Mukul G. Asher. Asian development Asian Development Outlook 1990. Edited by the Asian Development Bank Reforms in China China and the Open Door Policy. By Kevin Bucknall Complexities of Indonesian integration National Integration in Indonesia: Patterns and Policies. By Christine Drake TNCs from developing Asian countries Transnational Corporations from Developing Asian Economies. Perspectives of competitiveness Trade Policies for International Competitiveness. By Robert C. Feenstra. Friedman's lecture tour Friedman in China. By Milton Friedman. Comparing economic performance Perspectives on the Pacific Basin Economy: A Comparison of Asia and Latin America. Edited by Takao Fukuchi and Mitsuhiro Kagami Success of NICs in East Asia Pathways from the Periphery, the Politics of Growth in the Newly Industrializing Countries. By Stephan Haggard. Effectiveness of price stabilization Commodity Price Stabilization in Papua New Guinea. By L. Jolly, A. Beck and P. Bodman. China's urban development Chinese Urban Reform: What Model Now? Edited by R. Yin-Wang Kwok, William L. Parish, Anthony Gar-on Yeh and Xu Xueqiang. Economics and environmentalism Market Environmentalism: Lessons for Hong Kong. By Jo Ann Kwong Economics and environmentalism After the Green Revolution: Sustainable Agriculture for Development. By Gordon R. Conway and Edward B. Barbier. Economics and environmentalism Sustainable Development: Economics and Environment in the Third World. By David Pearce, Edward Barbier and Anil Markandya. Economics and environmentalism Wasting Assets: Natural Resources in the National Income Accounts. By Robert Repetto, William Magrath, Michael Wells, Christine Beer and Fabrizio Rossini Taiwan's financial system Money and Finance in the Economic Development of Taiwan. By Lee Sheng-Yi. Key oil-related issues The Oil Markets of the Pacific Rim: Into the 1990s. By Paul McDonald. Indonesian economic history Economic Growth in Indonesia, 1820–1940. Edited by Angus Maddison and Ge Prince. Festschrift Economic Development in East and Southeast Asia: Essays in Honour of Professor Shinichi Ichimura. Edited by Seiji Naya and Akira Takayama Japanese investment in ASEAN The New Wave of Japanese Investment in ASEAN. By Pasuk Phongpaichit Macroeconomic adjustment in Asia Beyond Adjustment – The Asian Experience. Edited by Paul Streeten. Recent industrial development Strategies for Industrial Development: Concept and Policy Issues. Edited by Suh Jang-Won. Vietnamese economy Vietnam's Economic Policy since 1975. By Vo Nhan Tri. Vietnamese economy Doi Moi: Economic Reforms and Development Policies in Vietnam. Edited by Per Ronnas and Orjan Sjoberg. Chinese economy China: Macroeconomic Stability and Industrial Growth under Decentralized Socialism. Chinese economy China: Revenue Mobilization and Tax Policy.     

Survey of Recent Developments

Outgoing Indonesian president Susilo Bambang Yudhoyono's second-term record is creditable, measured against the targets he set himself in 2010, but deficient in key areas: economic reform, infrastructure investment, and anti-corruption. Indonesia's 2009–14 parliament has been active in economic policymaking, and will leave as its legacy a raft of protectionist legislation. Both presidential candidates, Joko ‘Jokowi’ Widodo and Prabowo Subianto, have appealed to nationalism in their campaigns, calling for Indonesia to assert its sovereignty and increase its self-sufficiency, but Jokowi's economic platform is more moderate and economically literate than Prabowo's. The incoming president will inherit an economy that continues to slow. Growth is now not expected to approach 6% until 2015 at the earliest. Having engineered a reduction in the current account deficit, Indonesian policymakers now face the more difficult problem of structural fiscal adjustment. Energy subsidies are the most immediate problem, but fiscal reform more generally will emerge as an overriding and unpleasant imperative for whoever wins the presidential election on 9 July. Unless difficult fiscal policy measures are taken, Indonesia will face major trade-offs between deficit control and investment in social programs and economic infrastructure. The new president will struggle to restrict the deficit to the cap of 3% of GDP: a balanced budget will likely not be feasible for several years. He will need to increase the ratio of revenue to GDP and eliminate fuel subsidies—through a more systematic approach than the infrequent price increases of the past. He will need to choose carefully between competing expenditure priorities, such as infrastructure and defence. The new president would also be well advised to tread cautiously in implementing the legal mandates he will inherit, and to work with parliament to avoid further and unwind current earmarking of public expenditure.     

Publication

Masalah Usahatani-Tebu dan Industri Gula di Djawa [Problems of Sugar-cane Farming and the Sugar Industry in Java]. Report of the Agro-Economic Survey. Faculty of Economics, Gadjah Mada University, Jogjakarta, 1968. Pp. ix + 105. (In Indonesian.)

J. Panglaykim and K.D. Thomas, Indonesia's New Era - Development Administration: Supplementary Papers . Committee for Economic Development of Australia, Melbourne, 1968. Pp. xxix 86. Price $A2.00.

T. K. Tan (editor), Sukarno's Guided Indonesia, Brisbane, Jacaranda Press, 1967. Pp. xi + 196. $A5.50.

Angkatan Kerdia Penduduk Indonesia [The Indonesian Labour Force] . Report No. 2A, December 1967. Pp. 309. Angkatan Kerdia Penduduk Diawa-Madura [The Labour Force of Java and Madura]. Report No. 2B, March 1968. Pp. 282. Angkatan Kerdja Penduduk Luar Diawa [The Labour Force Outside Java]. Report No. 2C, March 1968. Pp. 282. Reports of the National Social-Economic Survey, Phase II (November 1964-February 1965). Research and Development Section, Central Statistical Bureau, Djakarta. (Text in Indonesian; tables with English subtitles.)

Buku Pedoman untuk Pentjatjah dan Pemeriksa [Instruction Manual for Interviewers and Supervisors]. Cost of Living Survey 1968-69. Research and Development Section, Central Statistical Bureau, Djakarta, June 1968. Pp. 48, mimeographed. (In Indonesian.)

Investment. The New Policies and Procedures of Foreign Capital Investment in Indonesia. Prepared by the Technical Team on Foreign Private Investment of the Government of Indonesia. Departmcnt of Iniorniation; Djakarta, 1968. Pp. 152.

G. L. Hicks and G. McNicoll, The Indonesian Economy, 1950-1967: Bibliographic Supplement. Bibliography Series No. 10, Southeast Asia Studies, Yale University, 1967. Pp. 211.     

Book Reviews

Anne Booth (1998), The Indonesian Economy in the Nineteenth and Twentieth Centuries: A History of Missed Opportunities, Macmillan, London, and St Martin's Press, New York, pp. xvi + 377. Paper: US$ 19.95; cloth: US$ 79.95.

J. Thomas Lindblad (1998), Foreign Investment in Southeast Asia in the Twentieth Century, Macmillan, London, and St Martin's Press, New York, pp. xiii + 240. Paper: £49.95.

Adam Schwarz and Jonathan Paris (eds) (1999), The Politics of Post-Suharto Indonesia, Council on Foreign Relations Press, New York, pp. 150. Paper: US$17.95.

Arief Budiman, Barbara Hatley and Darnien Kingsbury (eds) (1999), Reformasi: Crisis and Change in Indonesia, Monash Asia Institute, Melbourne, pp. 402. A$24.95.

Hal Hill (1999), The Indonesian Economy in Crisis: Causes, Consequences and Lessons, Institute of South East Asian Studies, Singapore, pp. 150. S$22.50; US$14.90.

Terry Dwyer (ed.) and Barry Reece and Craig Emerson (contributors) (1999), Resource Tax Policy in Countries of the Asia Pacific Region, Asia Pacific Press, The Australian National University, Canberra. A$20.00; US$20.00.

Januar Achmad (1999), Hollow Development: The Politics of Health in Soeharto's Indonesia, Coombs Academic Publishing, Research School of Pacific and Asian Studies, The Australian National University, Canberra, pp. viii + 220. A$15.00 plus postage.

Terence H. Hull, Endang Sulistyaningsih and Gavin W. Jones (1999), Prostitution in Indonesia: Its History and Evolution, Pustaka Sinar Harapan, Jakarta, pp. 161. A$10.00.     

Indonesia's missing multinationals: business groups and outward direct investment

Some countries produce more multinational enterprises (MNEs) than others. India and China, in particular, have produced a number of dynamic MNEs whose success abroad generates important economic benefits for the home economy. Motivated by this observation, we describe the internationalisation record of Indonesia's major business groups. Using an archival analysis method, we find that, with a few exceptions, Indonesia's largest business groupings focus predominantly upon the domestic market. We advance two explanations for this investment pattern. The first suggests that the apparent absence of Indonesian MNEs is an accounting error, because firms’ outward investment is under-reported in official statistics. The second suggests that Indonesian outward foreign direct investment is impeded by a combination of institutional and firm-level factors that arrest the internationalisation of all but the largest firms. We discuss the policy implications of these findings and reflect on their theoretical implications.