Regional development effects of a free market for sugar in South Africa

In a free market for sugar it is estimated that the area under sugar‐cane would decrease by 49 per cent and labour employment by 26 per cent relative to the single‐price policy which was in operation until 30 April 1985. Sugar‐cane would be produced in areas of comparative advantage, namely the Eastern Transvaal, Zululand high and low rainfall areas, the North Coast, Indian and Mangete areas and KwaZulu. The domestic equilibrium sucrose price is estimated to be about 9 per cent below the price under the single‐price policy and 17 per cent below the A‐pool producers’ price under the present two‐tier price scheme.

Full irrigation water tariffs have a considerable impact on enterprise mix. Farmers would shift from sugar‐cane to higher return crops or leave land fallow if they perceived the risk to be too high. Land values would fall in irrigation areas and increase in dryland areas.

Results are obtained from a regional linear programming model which incorporates negative sloping demand functions for crops, limited substitution in demand between crops, positive sloping labour supply functions and variance/ covariance risk matrices.     

Survey of recent developments

In the 15 years since the Asian financial crisis, the Indonesian economy has benefited from a stable macroeconomic policy framework and prudent macroeconomic policy settings. Economic growth has been solid, inflation has been contained and government finances have strengthened. Indonesia weathered the global financial crisis better than many countries, and it subsequently benefited from the low global interest rates resulting from highly stimulatory monetary conditions in many advanced economies, especially the US.

In the middle of 2013, however, speculation on when the US Federal Reserve would begin to unwind its program of quantitative easing saw global interest rates jump. Short-term capital flowed out of Indonesia, causing the stock market to fall, the currency to depreciate and interest rates to rise. On top of this, GDP growth appeared to be slowing, the trade balance worsening and inflation increasing. In late September and October, the failure of the US to raise its legislated debt ceiling led to speculation that it might fail to meet some of its debt obligations, which fuelled financial-market volatility.

It is yet to be seen whether the Indonesian economy and its financial markets are sufficiently flexible to make a smooth transition to the new external reality. The policy tools available to the government to deal with the short-term economic challenges are limited: it introduced an economic policy package in August, and Bank Indonesia (BI) raised official interest rates in August and September, following two increases earlier in the year.

These pressures from global financial markets have drawn attention to the need for further structural reforms in Indonesia, including those aimed at deepening financial markets, strengthening financial-sector supervision, freeing up trade and encouraging competition, and maintaining the government’s revenue base in the face of falling commodity prices. While some reforms, particularly in financial-sector supervision, are already in train, it may be difficult for Indonesia to make serious gains on longer-term economic reforms before the 2014 presidential elections.     

Survey of recent developments

The Indonesian economy is maintaining its momentum at a time of ongoing uncertainty in the global economy and slowing economic growth in China. Strong domestic demand saw output grow by 6.4% over the year to June, despite a steep fall in net exports. Inflation is safely within Bank Indonesia's target range, although food prices have increased relatively quickly. The current account deficit widened to 3.1% of GDP in the June quarter due to continued growth in imports and falling prices for commodity exports. The trade environment has deteriorated in 2012, and new divestment and domestic processing requirements are likely to further reduce investor interest in the mining sector.

President Yudhoyono has recently made several speeches calling for a ‘green growth agenda’. Some progress has been seen in slowing deforestation and in establishing mechanisms for facilitating payments to reduce emissions from deforestation, but loss of natural forests remains rapid. Carbon dioxide emissions from energy are growing quickly, stoked by increasing use of coal. The proposed 2013 budget continues to be heavily burdened by energy subsidies, which encourage over-consumption of fossil fuels. In most respects, therefore, the business-asusual trajectory of the Indonesian economy is unlikely to be particularly green.

A barrier to subsidy reform is its perceived unpopularity, including the threat of public protests such as those witnessed in March. To gauge current opinion we carried out a survey of Jakarta-based university students. The results indicated majority support for the removal of fuel subsidies, but some respondents said they would protest against fuel subsidy reductions, highlighting the politically sensitive nature of the issue.

Indonesia has witnessed booms in the coal and palm oil sectors in recent years, becoming the world's largest exporter of both commodities. We review the benefits from these two booms and the tensions between the development of these sectors and environmental goals. We also review the tourism sector, which remains relatively under-developed outside Bali. Tourism is a potential source of long-run growth that may be aligned with a green economy. The development of the sector would be aided by infrastructure improvements and a renewed focus on the conservation of natural assets.     

Survey of recent developments

Little has happened to dispel concern that reform momentum is dissipating. New National Economic and Innovation Committees to help accelerate development will probably achieve little: resolving many key economic policy issues is straightforward technically, so the real obstacle to doing so is lack of political will and leadership.

It appears that economic growth has stabilised rather than continuing to accelerate. Investment is still strong, but fiscal policy is no longer providing a stimulus. Soeharto-era attachment to small budget deficits remains evident in the 2011 budget, which persists in spending heavily on subsidies at the expense of investment in sorely needed infrastructure. The demand for net exports had temporarily constrained growth, but by Q2 2010 this was no longer the case. Manufacturing has been in the doldrums, partly because of surging export commodity prices and volumes, but its recent growth seems more promising. International reserves continue to accumulate because of the commitment of Bank Indonesia (BI) to avoiding rupiah appreciation, which makes monetary policy difficult and costly to implement. BI has responded by allowing some appreciation, an acceleration of inflation and a small increase in the interest rate on its certificates of deposit, and by forcing banks to place more funds with it at low or zero interest. At last it has begun to tighten monetary policy, but this is likely to increase capital inflow, despite the introduction of a new capital control. The incompatibility of BI's monetary and exchange rate policies will therefore continue to cause problems. Rapid rice price inflation, however, is not the fault of the central bank, but a consequence of the policy of preventing Indonesia from participating more fully in the world rice market.

Official indicators suggest that the banking sector is in good condition. One concern is that interest margins are too high, which seems to be attributable to inefficiency in government-owned banks. If pressure to prevent or roll back increased foreign ownership of Indonesian banks is successful, this is likely to make the banking system even less efficient. Indonesia continues to have difficulty competing for foreign investment with comparator countries such as Thailand, Vietnam and Brazil: much remains to be done to improve the climate for doing business. The government appears to be pondering more serious approaches to tackling the problem of Jakarta's congestion, although conflicting signals on this have emerged. Solutions are seen in expansion of transport infrastructure and improvement of its management, and in the introduction of electronic tolling on main roads.     

Capital Utilisation in Indonesian Medium and Large Scale Manufacturing∗

This article presents the main results of a survey of the utilisation of existing productive capacity in the Indonesian manufacturing sector. It was found that although prevailing levels of capital utilisation in Indonesian manufacturing do not appear to be out of line with levels observed in other developing countries, there is scope for improvement in some sectors. The paper suggests some policy reforms which would improve the competitive environment for Indonesian manufacturing and increase the price ratio of capital to labour, thus promoting more intensive capital utilisation in the manufacturing sector.

     

Rice Marketing in Indonesia: Methodology and Results of A Research Study∗

This paper summarises the methodology, results and lessons of a research program undertaken between 1989 and 1991 on the private rice marketing system in Indonesia. A method of linked interviews, starting from farmers, gave results in the two main areas of seasonal volume flows and competition in rice marketing channels. Sample survey results were used to interpret seasonality in the aggregate rice market It is concluded that price stabilisation remains a valid policy objective in Indonesia, but that targeted interventions could substantially reduce the cost of achieving this goal.

     

Survey of recent developments

The Indonesian public is becoming increasingly concerned about the gap between policy rhetoric and action. A strong contributor to this has been a long-running corruption saga involving a tax official, Gayus Tambunan, whose activities have helped confirm the public's worst fears about the ineffectiveness of the anti-corruption campaign. Claims of progress in this and other fields, including the economy, are often overstated, and opinion polls suggest that people are increasingly unwilling to take them at face value.

Nevertheless, the most recent data reveal a surprising surge of GDP growth, driven mainly by investment spending. Inflation has been quite steady for the last six months, albeit a little above the target range; this is disappointing, but not a major problem. In response to surging food prices the government has temporarily removed tariffs on rice, wheat and soybeans, and ordered increased rice imports. Energy subsidies continue to weigh heavily on the budget; the plan to remove the subsidy from petrol used in private cars but not from that used in motor cycles makes good political – if not economic – sense, since motor cycle owners greatly outnumber car owners. The 2011 budget is unlikely to have a stimulatory impact.

The composition of exports has altered quite dramatically over the last two decades, albeit in unexpected directions. The pattern of export destinations has also undergone significant change, reflecting the growing relative importance of Asia to the global economy.

The president's proposal for a new capital as the solution to the congestion problem in Jakarta is questionable. If policy makers fail to understand why existing cities perform their diverse functions poorly, the creation of a new capital is more likely to replicate than to solve problems. Cities are crucial to the modernisation of the economy, and are important vehicles for poverty reduction. City governments could greatly improve their performance by adopting a strategy of financial self-reliance.

The decision to establish a single authority to supervise the entire financial sector has now been delayed for almost 11 years. The draft law currently under discussion suggests that the central bank has no intention of giving up its role as supervisor of the banks. This means there would be wasteful and confusing duplication of that function in the new authority. In any case, it remains unclear exactly what purpose the authority's establishment is intended to achieve.

There have been several reminders recently of Indonesia's vulnerability to natural disasters, including multiple eruptions of Mount Merapi in central Java, which caused almost 400 fatalities and considerable damage to the local economy and infrastructure. Evacuation of residents of the area worst affected seems to have been handled well. An important policy decision needs to be made about whether those who lost their houses, crops and livestock should be permitted to return permanently to their villages.     

Publications

The Kian-wie, Plantation Agriculture and Economic Growth: An Economic History of East Sumatra, 1863–1942, Jakarta, National Institute of Economic and Social Research (LEKNAS-LIPI(, 1977. Pp 142 + xii. Price not given.

Rodolphe De Koninck, D.S. Gibbons, and Ibrahim Hasan, “The Green Revolution, Methods and Techniques of Assessment: A Handbook of a Study in Regions of Malaysia and Indonesia', Notes et Documents de Recherche, No. 7, December 1977, Department of Geography, Universite Laval, Quebec, pp 409 + xiii.

Graeme J.Hugo,Population Mobility in west Java, Gadjah Mada university Press Yogyakarta, 1978,pp.

John Ingleson, Road to Exile: The Indonesian Nationalist Movement 1927–1934, Singapore: Heinemann for the Asian Studies association of Australia, 1979, pp. 254.

The Population of North Sulawesi by G.W. Jones, Gadjah Mada C. E. Beeby,Assessment of Indonesian Education, a Guide in Planning, Wellington, New Zealand Council for Educational Research in association with Oxford University Press, 1979, pp. 349. (Educational Research Series no. 59; appendices, tables and index; no price given).

Haryati Soebadio and Carine A. du Marchie Sarvaas (eds.),Dynamics of Indonesian History,Amsterdam, North-Holland, 1978, pp. 395 + xvi, $53.25.     

Book briefs

G Antonelli and A Quadrio‐Curzio (eds) The agro‐technological system towards 2000 North Holland.

W J Baumol Superfairness: Applications and theory The MIT Press, Massachusetts, 1986

E Boonzaier and J Sharp (eds) South African keywords: The uses and abuses of political concepts David Philip, Cape Town and Johannesburg, 1988

C Bryant (ed) Poverty, policy, and food security in Southern Africa Lynne Rienner Publishers. Boulder, Colorado, 1988

J Butler. R Elphick and D Welsh (eds) Democratic liberalism in South Africa: Its history and prospect David Philip, Cape Town and Johannesburg. 1987

D P Chaudhri and A J Dasgupta Agriculture and the development process: a study of Punjab Croom Helm, London, 1985

R Cohen (ed) Satisfying Africa's food needs: Food production and commercialization in African agriculture Lynne Rienner Publishers. Boulder/London, 1988

J M Conrad and C W Clark Natural resource economics: Notes and problems Cambridge University Press, Cambridge, 1987

D E Janvry and K Subbarao Agricultural price policy and income distribution in India Oxford University Press, Delhi, 1986     

SURVEY OF RECENT DEVELOPMENTS

The 10^th anniversary of Soeharto's resignation was coloured by disappointment with the slowness of reform, and with the government's reluctance to confront blatant religious intolerance. Nevertheless, economic growth is strong and investment spending buoyant. Inflation has risen well above target, suggesting that a more effective approach to monetary policy is needed. The recent surge in global rice prices coincided with bountiful domestic harvests, putting the government under pressure to restrict rice exports rather than imports as it has in recent years. However, restricting exports has been recognised as a ‘starve thy neighbour policy’, and the ASEAN trade ministers have jointly agreed ‘to continue fair trade practices and to achieve an orderly regional rice trade’.

The government has at last increased domestic fuel prices significantly, mind-ful of the waste of valuable resources and the inequity involved in keeping such prices constant in the face of world price increases. It will implement a cash transfer program to compensate the poor for the resulting increase in living costs.

The Ministry of Finance is leading reform of the central government bureaucracy. Its most fundamental initiatives are in human resource management, where it is attempting to match remuneration to skill requirements and responsibilities, and to align the pay structure more closely with that in the private sector–with pay rates rising much more rapidly than hitherto as levels of responsibility increase. It is also encouraging competition to fill vacancies by advertising them internally, rather than continuing to rely on promotion by seniority. At local government level, a small number of heads of government have gained a reputation as pioneers of reform. Two interviewed for this survey are exemplars of precisely what it was hoped would result from bringing government closer to the people through decentralisation, and from the switch to direct election of heads of local government. Both have considerable experience in the private sector, and their success seems related to their more entrepreneurial (as distinct from bureaucratic) way of thinking.

‘Good corporate governance’ has now become the mantra for state-owned enterprises (SOEs). It is recognised that this depends heavily on choosing the right people to manage each firm and to oversee it on behalf of its owner. Accordingly, almost all directors and commissioners of the 11 SOEs indirectly studied here have been replaced in recent months, and there is now a willingness to appoint professionals from private companies and from academia in order to gain access to needed skills. In addition, the initial selection of candidates has been shifted outside the bureaucracy to professional recruitment agencies.     

Survey of recent developments

There is a growing confidence in policy, business and finance circles about Indonesia's ability to withstand global economic and financial shocks, and a renewed belief in domestic sources of growth. Despite uncertainty in Europe and slower than expected recovery in the US, Indonesia is well placed for moderately high growth in the medium term, and economic stability in the shorter term. At the end of June 2011, foreign reserves were at a record high, inflation was down, annual growth was steady at 6.5%, and investment – especially foreign direct investment (FDI) – was up significantly.

Consumer price inflation had fallen to just below 5% by August, from double-digit levels earlier in the year. This was due partly to low food prices and success in sterilising the effects of capital inflows. However, turmoil in international markets led to a sharp fall in the Indonesia stock exchange index and a mild currency depreciation in August– September, prompting central bank intervention in the foreign exchange market. Fiscal policy has remained conservative, aiming for a balanced budget by 2014. However, the government has still not moved to reduce growing fuel and energy subsidies.

While the service sectors have continued to record high rates of growth, there has been a revival of manufacturing in 2011. This is partly underpinned by strong inflows of FDI, and is especially evident in the labour-intensive textiles, clothing and footwear industries after a decade of stagnation. Multinationals have announced plans to expand operations in Indonesia in the past six months to take advantage of new tax incentives. Overseas investors have also been attracted by Indonesia's growing middle class – a result partly of higher rural incomes driven by the commodity boom outside Java.

Some recent ministerial announcements about initiatives to promote domestic industry have a protectionist flavour. A cabinet reshuffle in October may signal a more dirigiste approach to industrial policy – especially the shifting of internationally respected economist Mari Pangestu from the trade portfolio to that of tourism and creative economy.

One important outcome of recent growth has been falling unemployment rates. However, youth unemployment remains a major problem, and efforts to overcome it have been fragmentary. A recent ban on overseas migration of domestic helpers (maids) seems certain to add to labour supply pressures among young people.

The government is now considering how to mobilise its large population base, abundant natural resources and strategic location to play a greater role in the world economy. These assets are central to the ambitious ‘Master Plan’ for longer-term development (2011–25), announced in May. It focuses on developing the resource-rich Outer Island regions, with massive investments in energy and ‘connectivity’ to link the major centres and islands with each other, and centres with their hinterlands. Funding (to come mainly from the private sector), implementation and coordination are all major challenges.     

SURVEY OF RECENT DEVELOPMENTS

Managing the Indonesian economy in 2015 has proved challenging for the administration of Joko Widodo (Jokowi). In a first quarter plagued by external adversity—especially a sharp drop in exports to China—coupled with internal political paralysis and the delayed disbursement of fiscal spending, the economy recorded its lowest rate of growth since 2009. Observing relatively stable inflation, Bank Indonesia (BI), the central bank, eased its policy rate in February by 25 basis points, to 7.5%. The bank also adjusted its macroprudential measures to counter declining bank lending. On the fiscal side, the expected stimulus from fuel-subsidy reallocation and aggressive public-capital spending did not arrive. Meanwhile, tax revenue made slow progress towards its ambitious target, which it seems unlikely to attain.

Increases in supply costs made it difficult for the government to align domestic fuel prices more closely to the market. Major commodity exports fell significantly, but some manufactured exports showed hints of an upturn. The depreciation of the rupiah, the global strategies of leading investors, and the introduction of taxexemption policies that have been tested in neighbouring countries may have contributed to this trend. To further broaden the base of export diversification, the priorities should be to reduce business costs and enhance competition rather than enforce mandatory regulations. Jokowi has stressed that his focus on maritime development, part of a broader development strategy, includes reducing logistics costs.

The second quarter of 2015 saw the start of several projects in Jokowi's flagship ‘sea toll’ program to improve maritime connectivity. There is a concern, however, that the predominance of state-owned enterprises (SOEs) in strategic port operations will continue to limit competition and reduce efficiency. Jokowi's development strategy also focuses on reducing inequality. His government has implemented several distribution and redistribution policies, including the national social-security system initiated by the previous administration. The system suffered financially in its first year from low participation among those in the informal sector.     

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.     

Issues in Smallholder Tropical Dairying∗

Smallholder dairying is attractive to agricultural policy makers in Indonesia owing to its success in the countries of South Asia. The principal constraints facing Indonesian dairying are reproduction, nutrition and marketing. The hot, humid conditions unfavourably affect the imported Friesian cows on which the industry is based, leading to low milk yields and reproductive capacity, and necessitating a continuing reliance on imported stock. Agricultural residues used for stock feed are cheap to produce and their collection provides employment in rural areas, but the nutritional value of this forage is poor. Marketing constraints for dairy products include widespread lack of refrigeration in rural areas and prices which are too high for all but the urban middle class. For intensive research on Indonesian dairying to be worthwhile, the gains in productivity attributable to research would need to be between one-quarter and one-third of present levels of milk production per lactating cow per year. It is not apparent that gains of this order are feasible.

     

Book Reviews

Idris F. Sulaiman, G. Hanafi Sofyan and Shannon Luke Smith (eds) (1998), Bridging the Arafura Sea: Australia-Indonesia Relations in Prosperity and Adversity, Asia Pacific Press, Asia Pacific School of Economics and Management, The Australian National University, pp. xxi + 325.

David C. Cole and Betty F. Slade (1996), Building a Modern Financial System: The Indonesian Experience, Cambridge University Press, Cambridge, pp. xxvii + 379. Cloth: US$59.95; paper, US$25.

Chris Manning (1998), Indonesian Labour in Transition: An Indonesian Success Story?, Cambridge University Press, Cambridge, pp. xxii + 323.

Hal Hill and Thee Kian Wie (eds) (1998), Indonesia's Technological Challenge, Research School of Pacific and Asian Studies, Australian National University, Canberra, and Institute of Southeast Asian Studies, Singapore, paper, pp. xxv + 414.

Steven J. Keuning (1996), Accounting for Economic Development and Social Change, IOS Press, Amsterdam, Oxford, Tokyo, Washington DC, pp. x + 233. NLG100; £39; DM90;US$58.

Thomas Brandt (1996; English trans. 1997), Kunci Budaya. Business in Indonesia: The Cultural Key to Success, goasia Verlag, Bad Oldesloe, Germany.     

Publications

H. S. Kartadjoemena, The Politics of External Economic Relations: Indonesia's Options, Institute of Southeast Asian Studies, Singapore, 1977(?), pp. 179, $S 12.00

Ingrid Palmer, The Indonesian Economy since 1965: A Case Study of Political Economy, London, Frank Cass, 1978, pp. ix, 196, £11.00.

Gadjah Mada University, Faculty of Economics, Graduate Program in Economics, Four Papers on Employment and Income Distribution in Indonesian Agriculture, Yogyakarta, pp. 118 + ii, mimeo.

U.S. Department of Commerce, Country Market Sectoral Survey, Indonesia: A Survey of U.S. Business Opportunities, U.S. Government Printing Office, May 1977, pp. 320.

Borrowing By Developing Countries on the Euro-currency Market P. A. Wellons, OECD, Paris 1977 $20, pp. 449.

Mayling Oey and Ketut Sudhana Astika, The Social and Economic Implications of Transmigration in Indonesia: A Policy-Oriented Review and Synopsis of Existing Research. L. P. E. M., Fakultas Ekonomi, Universitas Indonesia, 1978, pp. 228.

Paul A. Meyer and Colin MacAndrews, Transmigration in Indonesia. An Annotated Bibliography. Gadjah Mada University Press, 1978, 245 pages.

Fox, James J., Harvest of the Palm: Ecological Change in Eastern Indonesia. Harvard University Press, Cambridge, Massachusetts 1977.     

Book briefs

Key variables in social investigation, Routledge & Kegan Paul, London, 1986, vii + 276 pp.

Reproductive change in developing countries, Insights from the World Fertility Survey, Oxford University Press, Oxford 1985, xvi + 301 pp, ISBN 0‐19‐828465‐9.

The world crisis in education, The view from the eighties, Oxford University Press, New York, 1985, vii + 353 pp ISBN 0‐19‐503503‐8

Reaching the Urban Poor, Project implementation in developing countries, Westview Press, Boulder Colorado. 1986, vii + 264 pp, ISBN 0‐8133‐7129‐5

Housing policy, An international bibliography, Mansell Publishing Limited, New York, 1986, ix ‐ 398 pp, ISBN 0‐7201‐1785‐2

Agribusiness and the small‐scale farmer: A dynamic partner for development, Westview Press, Boulder, 1985

Agriculture and employment in developing countries: Strategies for effective rural development, Westview Press, Boulder, 1985

Progress in natural resource economics, Clarendon Press, Oxford, 1985

International agricultural trade: Advanced readings in price formation, market structure and price instability 1984

The role of markets in the world food economy, Westview Press, Boulder, 1983     

Publications

Demographic Institute, Faculty of Economics, University of Indonesia, Preliminary Report, Indonesian Fertility-Mortality Survey 1973, (West Java March 1974), (Central Java August 1974), (East Java October 1974), (Bali 1974), (Sulawesi December 1974), and (Sumatra, January 1975).

Peter F. McDonald, Mohammad Yasin and Gavin W. Jones, Levels and Trends in Fertility and Childhood Mortality in Indonesia, Monograph No 1, Indonesian Fertility-Mortality Survey 1973, Demographic Institute, Faculty of Economics, University of Indonesia, August 1975.

Allen M. Sievers, The Mystical World of Indonesia Culture and Economic Development in Conflict. The Johns Hopkins University Press, 1974. pp. xix + 425. US $14.     

SURVEY OF RECENT DEVELOPMENTS

The second half of 2008 is proving to be a time of unprecedented global volatility, and the sound performance of the Indonesian economy over the first half will be difficult to maintain. With growth for the year projected to remain around 6%, Indonesia is relatively well placed to face the challenges of the unfolding global financial crisis, but the risks to the outlook are increasing. The crisis has begun to impact directly, with trading on the Indonesian stock market suspended on 8 October after an alarming one-day fall of 10% in share prices. Sustained pressure on the currency since mid-August has also seen Bank Indonesia running down its sizable foreign exchange reserves in attempting to support the rupiah. The authorities are taking steps to relieve liquidity pressures in the financial system, but will also need to address medium-term issues of stability, especially in relation to inflation; interest rate increases have so far done little to contain prices. Although exports have remained surprisingly strong, rapid import growth has resulted in a small current account deficit. Growth of exports is likely to decelerate as demand in developed economies slows, putting further pressure on the balance of payments and the currency.

The 2009 budget reflects the government's positive outlook, but the underlying assumptions about growth, inflation and interest rates seem rather optimistic. Tax revenue has been increasing strongly, allowing the government to allocate significant new spending to education, in particular; however the budget remains hostage to global oil prices, with energy subsidies still very large despite the unpopular recent increases in domestic fuel prices. Other issues likely to affect voting in the 2009 elections include scheduled electricity blackouts in Jakarta in response to demand continuing to outstrip supply; the government's apparent indifference to the fate of the victims of the Sidoarjo mud disaster; and its failure to make much impact on the level of poverty.

Despite asking major donors for additional loans for budget support, the government has unveiled a new strategy for managing development partnerships. This will encourage smaller donors to operate through multi-donor arrangements and larger donors to use government systems for more of their programs—a signal that the government intends to shape its relationships with donors despite the global crisis.     

Publications

Japanese-Indonesian Relations in the Seventies. Centre for Strategic and International Studies, Jakarta 1974. pp. x + 160.

V. V. Bhanoji Rao, (ed.), Inflation and Growth, Stamford College Press for the Economics Society of Singapore, 1974, pp. 256.

Bibliografi Teh Indonesia (Indonesian Tea Bibliography), Nazar Nur (Ed.), Research Institute for Estate Crops, 1974, pp. 335.