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Bulletin of Indonesian Economic Studies
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
Book Reviews
Walter P. Falcon , Ken Young , Terence H. Hull , Henry Sandee & Chris
Manning
To cite this article:
Walter P. Falcon , Ken Young , Terence H. Hull , Henry Sandee & Chris
Manning (2000) Book Reviews, Bulletin of Indonesian Economic Studies, 36:2, 143-155, DOI:
10.1080/00074910012331338933
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http://dx.doi.org/10.1080/00074910012331338933
Published online: 18 Aug 2006.
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BOOK REVIEWS
David Glover and Timothy Jessup (eds) (1999), Indonesia’s Fires and Haze: The Cost of Catastrophe, Institute of Southeast Asian Studies, Singapore, and International Development Research Centre, Ottawa, pp. xviii + 149. Cloth: S$59.90; US$36.00; Paper: S$28.90; US$17.00.
Indonesia’s Fires and Haze is a remarkable small volume—broad and comparative in scope, and interesting and important in substance. Yet its quantitative conclusions are flawed. The book definitely deserves to be read by those interested in Indonesia, forest management, regional air pollution, and social-cost analysis. But caveat emptor is also in order, and the chapters are best read in conjunction with additional writings in these fields.
The El Niño-related drought of 1997–98 was among the worst ever recorded for Indonesia. Large portions of the country went without significant rainfall for more than six months, leaving extensive areas as tinderboxes. Although tropical rainforests are generally resistant to fires, they burn fairly readily in times of severe drought. There were thus potential fire hazards arising from lightning or from cooking fires gone astray. The sad fact is, however, that virtually all of the Indonesian fires that so polluted the atmosphere for months were set deliberately. Everyone seemed to have a large supply of matches: tree-crop concessionaires who saw the dry period as the ideal time to clear additional land for extending their plantations; developers who set fire to groundcover (even on peat land!) for rice projects; and slash and burn agriculturists of all sizes interested in expanding their holdings.
Indonesia’s Fires and Haze says less about Indonesia and the causes of the forest fires than it does about their consequences. The volume, which focuses on valuation methods, is the product of organisational efforts by the World Wide Fund for Nature (WWF) and the Economy and Environment Program for Southeast Asia (EEPSEA). Four of the seven contributing authors have been associated with these organisations; the others are academics or journalists in the Southeast Asia region. Collectively, they assess the costs of the Indonesian fires and haze to Malaysia, Singapore and parts of Indonesia. They quantify damages to forests, wildlife, water, tourism and human health, using a more or less common template across countries. In total, they estimate that 5 million hectares were burned in 1997, causing fire- and haze-related damages of about $4.5 billion for the three countries; directly or indirectly, some 70 million people were affected by the fires and related smoke.
These sums are impressive, and so too are the details behind the estimates. These detailed calculations are what make the book worth reading. At the same time, the volume has a rush-to-judgment quality about it that is unnerving. With the word ‘catastrophe’ in the subtitle, I was concerned that there might be a tendency for authors to ‘round upwards’ on all assumptions and calculations. In fact, I believe that the opposite is true and that the costs are substantially higher than those suggested in the text. It is on this point that the rush to press may have lessened the potential usefulness of the volume. For example, no damage estimates for Java are included in the Indonesia calculations. An area-burned figure of 5 million hectares is used for all of Indonesia, although a more reasonable estimate is probably in excess of 8 million hectares— at least if the fires that continued into 1998 are included. Health effects reported relate only to 1997 and assume zero costs for longer-run health consequences in the form of afflictions like asthma.
The inclusion of actual spreadsheets makes parts of the volume less than totally reader-friendly, although these working tables do highlight a number of key assumptions. For example, the incremental cost of illness because of the haze over Malaysia during 1997 is simply doubled to estimate Malaysians’ willingness to pay for avoiding the smoke and haze. Therefore, great care must be taken in citing the volume’s summary statistics on the various social costs, for without significant qualifications and annotations the summary data are likely to mislead.
the serious nature of these continuing problems, Indonesia’s Fires and Haze
is useful as a sobering reminder about how costly fires are, especially for Indonesia, but also for all of Southeast Asia.
Walter P. Falcon
Stanford University
Jeffrey A. Winters (1996), Power in Motion: Capital Mobility and the Indonesian State, Cornell University Press, Ithaca NY, pp. xvi + 241. Cloth: US$36.90; A$54.25.
Jeffrey Winters’s book traces the interior tensions and the major strategic shifts in policy formation in the Soeharto era up to the late 1980s. It is not a comprehensive analysis of the exercise of state power in New Order Indonesia. Through a detailed examination of the Indonesian case, Winters aims to show the nature and limitations of the structural power exercised by capitalists over the state, even over an authoritarian state that is largely insulated from electoral pressure. He seeks to show how, and in what circumstances, ‘control over resources translates into power’ (p. 192), and how that power is exercised by those key individuals and institutions (he refers to them as the ‘capital controllers’) who manage capital that is not strongly bound to any national investment site. Since the power of capital controllers is to a significant extent structural, and because the nature of their choices is governed by the logic of capital accumulation, he is talking about ‘capital’s ability to exercise structural leverage without first having to organise as a class’ (p. 32).
The more interesting developments begin with the consolidation of Soeharto’s control of the state and the huge windfall in state revenues that followed in the years after the OPEC oil crisis of 1973. The second, stronger surge in oil revenues between 1978 and 1982 gave the regime control over vast sums with which it could pursue development priorities and move to recast the terms of engagement with mobile capital (both foreign and domestic). Once again Winters illustrates the shift in policy orientation through an extended examination of the pervasive growth of bureaucratic mechanisms (linking the president, the state secretariat, and the government political party, Golkar) that undertook control of state contracts and procurements down to district levels. All this routine and development expenditure was coordinated from the top by a body known as ‘Team 10’ which became, in Winters’s estimation ‘... perhaps the most powerful and notorious non-military body to exist in Indonesia since Ibnu Sutowo’s heyday at Pertamina’ (p. 125).
The attempts to micro-manage the economy while distributing vast amounts of patronage to government insiders were matched with increasing regulation of investment and other forms of intervention that discouraged major investors. Once it became clear that the boom was over, the policy pendulum swung back again towards policy makers who favoured allocation of resources through impersonal market forces.
The post-boom period is only partly examined in the book, but it is a period that poses many questions. Winters’s emphasis is on ‘mobile capital’, and while he talks about a ‘locational revolution’ (p. 218–21), it seems that there is so much more that needs to be elaborated about how globalised economic processes in the 1990s confer significantly enhanced discretion on investors, and appear correspondingly to have increased ‘market’ disciplines on national governments. Winters takes pains to point out that these structural imperatives are mediated by a host of other contingent variables defying any mechanistic attempt to read off outcomes from structural imperatives. His final chapter includes brief comparative studies of NAFTA and Nigeria. The Nigerian experience illustrates graphically that governments can refuse to respond to the demands of the controllers of mobile capital, albeit with disastrous consequences.
On balance, Winters succeeds in his objective of demonstrating the structural power that mobile capital has over states. Among all the post-mortems about to be administered to the New Order, Jeffrey Winters’s precisely focused analysis of the foundational vulnerabilities of that regime deserves to be widely read.
Ken Young
Swinburne University of Technology
Donald K. Emmerson (ed.) (1999), Indonesia Beyond Suharto: Polity, Economy, Society, Transition, M.E. Sharpe, Armonk NY and London, published in cooperation with The Asia Society, pp. xxviii + 395. Cloth: US$69.95; Paper: US$26.95. Not available in Australia and Southeast Asia.
to print, is the strange title of the book: Indonesia Beyond Suharto. Events clearly overtook the team when the book on the later part of the New Order was suddenly turned into a commentary on the late New Order. The editor had to add two additional chapters on ‘Transition’ to give the appropriate necrological tone and finality to the volume.
Each of the first nine chapters of this book is engaging in the depiction of how conditions and events shaped the New Order. Each makes just enough of a tip of the hat to the future to convince the reader that this history is indeed relevant in attempts to understand the present. Malley’s chapter on regionalism stands out as being particularly relevant to the headlines of July 2000. The terrain he covers (the nature of central control in a diverse nation) is filled with precedents for understanding the potential impact of the implementation of Laws 22 and 25 of 1999 on regional autonomy (see the Survey of Recent Developments in this issue). Academic readers in particular will find this a useful book. In addition to a painstakingly detailed index, there are eight pages of sources including monographs, websites and videos. Specialists will no doubt complain that some of their favourite resources are missing (the website for the Indonesian Observer is listed, but not the sites for Kompas, Republika
or the Jakarta Post) and that the list has a distinctly American bias. There are also many little points on which readers might like to challenge a particular assumption or simplification that seems to be a hangover from the ideological rigidities of the New Order. For instance, on map 4 (p. xxviii) Indonesian Religious Affiliations are presented according to the five official and compulsory religions recognised by the Ministry of Religious Affairs under Soeharto. Some discussions of the political and economic importance of religion refer back to this map. At times the use of terms like ‘majority Muslim’ implies that affiliation to Islam is a homogeneous and valid social category. Because indigenous religious groups (e.g. the various animist groups throughout the archipelago) are ignored, and the homogeneity of Muslim orientation and religiosity is not critically questioned, it is easy to be misled into simplistic notions of political Islam and ‘mass responses’ to political change.
the millions of forms were already printed the interviewers were instructed to make a special double code; thus marking the spaces for both ‘Buddhist’ and ‘Other’ on the form will be translated by the scanners as ‘Confucian’. From this very pragmatic response to the rapidly changing political positions on religion it would be a small step to include the
kebatinan groups that claim millions of followers across Java, or indigenous belief systems that have survived the mission activities of Christians and Muslims in West Papua. If such religious groups are recorded as exclusive choices the number of Muslims would probably drop substantially, while if people could give multiple responses then Islam would be shown to be remarkably heterogeneous. In either case the simplicities of New Order religious authoritarianism would be corrected for all to see.
Yes, this is a book that BIES readers have been waiting for, and one they would undoubtedly want to read, debate, question and commend. Unfortunately most BIES readers live in Southeast Asia and Australia, and the publisher’s announcement from last year says the book is not available in these regions. However, if you manage to get your hands on a copy, you can be assured of some good reading on the New Order, and lots of food for thought to complement the newspapers and seminars that are daily unfolding the complex stories ‘Beyond Suharto’.
Terence H. Hull
ANU
Tulus Tahi Hamonangan Tambunan (2000), Development of Small-scale Industries during the New Order Government in Indonesia, Ashgate, Aldershot, pp. 218. Cloth: £37.50.
Tulus Tambunan is one of Indonesia’s most productive scholars on small-scale industrial development, publishing widely inside and outside Indonesia. Throughout the years Tambunan has kept in touch with the theoretical and policy debates on small-scale industries (SSI). This book provides an overview of his publications on this topic.
Anderson’s (1982) overview article on the changing size structure of employment in the manufacturing sector plays a crucial role in Tambunan’s analysis. Tambunan finds that the role of cottage industries in Indonesia declines when incomes per capita rise. Economic development offers new opportunities for small and medium-scale enterprises, and increasingly also for large-scale manufacturing. He concludes in chapter 2 that SSI in Indonesia lack the dynamism of their western counterparts because policy is biased towards larger establishments. Chapter 3 shows that SSI in Indonesia are dominated by agro-processing industries which are firmly embedded in the rural economy. The linkages between SSI and large manufacturing enterprises are much less extensive, and industrial subcontracting is underdeveloped in comparison with neighbouring countries.
Chapter 4 concentrates on ‘strategic alliances’ within the private sector. Tambunan argues that SSI that want to compete successfully in both domestic and foreign markets benefit from the development of stable long-term relationships with other firms. A field study assessing the importance of such alliances in Indonesia finds that SSI are often firmly embedded in production and trade networks, and points to many examples of long-term marketing arrangements and purchaser–supplier linkages. It suggests that this offers interesting policy options for promoting collaboration and private sector associations.
Chapter 5 looks at a characteristic feature of SSI in many developing countries: the tendency of small firms to cluster geographically and by economic sector. In principle, clustering offers opportunities for small firms to grow by cooperating in the purchase of inputs, in production, or in marketing. Tambunan shows that clusters are significant in virtually all Indonesian provinces, but his fieldwork in West Java suggests that most clusters are not very dynamic, and that it will be a long time before they become more than pockets of poverty.
than expected, many being more successful than large firms because of their limited dependence on formal markets and formal credit. The Asia Foundation study forecasts that in the long run the IMF structural reforms will benefit SSI if fully implemented and not replaced with other market restrictions and regulations.
Finally, chapter 7 discusses the role of the government in promoting SSI development in Indonesia. Tambunan analyses the shift in government thinking away from less effective ‘subsidise and protect’ policies towards the more market-oriented demand-driven programs advocated by the international donor community. In this new role, the government is a facilitator, regulator, stimulator and stabiliser of small business development, rather than a direct provider of support programs. This book offers a good coverage of the main issues, except for the financial side of SSI development. It pays close attention to linkages among SSI (e.g. clusters) and to backward and forward linkages between SSI and other firms. It would have been interesting if the last two chapters had also focused on the linkages through which SSI are embedded in wider economic environments, and how such SSI have fared through the crisis. Almost all chapters commence with a theoretical review of the issues, but Tambunan does not always do justice to the theories, in my view; for example, the chapter on clustering appears to judge the performance of Indonesian clusters against that of the dynamic industrial districts in western Europe. It thus comes as no surprise that Tambunan does not think highly of clusters in his country. Finally, the book would have benefited from more careful editing: there are unnecessary mistakes in grammar, and repetitions of arguments and sections that could have been avoided.
Henry Sandee
Vrije Universiteit Amsterdam
Reference
C.H. Kwan, Donna Vandenbrink and Chia Siow Yue (eds) (1998), Coping with Capital Flows in East Asia, Nomura Research Institute, Tokyo, and Institute of Southeast Asian Studies, Singapore, pp. xiii + 319. Cloth: S$78.90; US$49.90; Paper: S$49.90; US$32.90.
This book is the outcome of a conference held in Tokyo in January 1997 and sponsored by the Tokyo Club Foundation for Global Studies for the members of its network of East Asian think-tanks. The bulk of the book is taken up by studies on a country-by-country basis of capital inflows, the relaxation of capital controls and the removal of financial repression in East Asia. In addition to an overview chapter on coping with capital flows in Asia—and two chapters on the currency crisis that were added after the conference—there are separate chapters on Korea, Taiwan, Hong Kong, Singapore, Thailand, Malaysia, Indonesia, the Philippines and China. Several of these document gradual moves towards more flexible exchange rate policies: Singapore had already adopted a heavily managed floating exchange rate system before the crisis, and the intervention bands for the rupiah, the won and the New Taiwan dollar had all been widened before 1997. These moves to floating rates culminated in an undignified rush in 1997 as all the countries with fixed rates, except China and Hong Kong, abandoned the attempt to peg their currencies. Malaysia of course reverted to a fixed exchange rate in 1998, but this move is unlikely to be permanent.
According to the preface, the Tokyo Club was inspired to choose the subject of coping with capital flows partly by Mexico’s experience in 1994–95 and partly by an anxiety that East Asia might not be as different from Latin America as was popularly believed. In this sense, as the preface claims, the choice of topic could not have been more timely. But since, like most of the economics profession, the authors did not foresee the coming Asian crisis, the book was overtaken by events. One sympathises with the authors as one might with someone who had written a biography of Lenin in 1916, or of Winston Churchill in 1938. Many of the fixed exchange rate systems described at the conference have since been abandoned; some countries—such as Korea—have liberalised the capital controls that were in place in 1997, while others—such as Malaysia— have introduced controls that did not then exist.
233, for example, the reader is assured that ‘Malaysia is unlikely to suffer serious contagion effects [from a Mexican-type crisis] because of its strong economic fundamentals, its high national savings rate of 34 percent of GNP, and the fact that the floating ringgit is not the monetary anchor’.
In addition to the updates, two new chapters were added after the conference: one on the causes of the crisis, and one on its effects on the Japanese economy. Obviously, the various addenda can only be partially satisfactory: they are brief and had to be finished before February 1998. At that date, the crisis was far from over; its extent was not fully appreciated, and many of the policy responses to it had yet to occur: for example, Soeharto was still president of Indonesia, and people had not begun to appreciate the eventual cost to taxpayers of bailing out bank depositors in the most seriously affected countries.
It is a pity that there is no index, since in an edited volume of country studies this lack makes it difficult to follow particular themes across the various countries. However, the editors have done an excellent job in ensuring that every chapter gives a competent and clear picture of capital account developments and monetary and exchange rate policies in the chosen country in the period leading up to the crisis.
These historical summaries are the book’s main merit, since most of the updates on events in 1997 are too short, and too hurriedly written, to be of much use. Several authors draw the lesson that premature removal of capital and financial controls can be disastrous, but do not carefully analyse the problem of how to know whether or not particular reforms would be premature, or whether particular systems of capital or financial controls are likely to be effective. All the countries hit by the crisis had set up elaborate systems of prudential controls well before 1997, but in most cases they proved completely ineffective. With the exception of Hong Kong, all the countries studied try to limit the scope for speculation against their currencies by imposing restrictions on direct lending to non-residents in domestic currency, and on indirect lending through the swap and forward foreign exchange markets. Although these controls were tightened in 1997 in Korea, Malaysia, Indonesia and Thailand, they failed to stem the currency crises in these four countries.
George Fane
International Labour Organisation (1999), Indonesia: Strategies for Employment-Led Recovery and Reconstruction, Jakarta, pp. 404.
This book makes an important contribution to the discussion of employment and equity in Indonesia in the wake of the financial crisis. Even if the title provides rather an exaggerated view of the potential role of employment policy, there is no doubt that creation of new jobs is critical to assisting many people recovering from the shock of the crisis.
The book consists of an ambitious 16 chapters, arising from a special ILO ‘mission’ led by Mr Rizwanul Islam from the ILO Geneva office over two weeks in April–May 1999. The coverage is broad: from employment in various sectors of activity (agriculture, manufacturing, the ‘informal’ sector) to labour market institutions, education and training, social protection, labour mobility and labour statistics.
What is the main message? Mr Islam and his colleagues do not suggest anything radically new for an ‘employment-led strategy’. A two-pronged approach is recommended, consisting of a more employment-friendly growth process and direct employment programs of a Keynesian kind (the latter to be financed through a special employment fund).
Although the components of the employment-friendly strategy are not summarised in the text, it seems that they would include policies such as switching from domestic production to exports, support of small and medium industry through removal of taxes, levies and controls, and diversification in agriculture. Three chapters in particular, dealing with agriculture, the informal sector and small and medium industries, contain much interesting information to support such a strategy. They quite rightly criticise over-regulation (the transport industry is singled out) and the multitude of relatively ineffective subsidised credit schemes for cooperatives and small industry.
The chapters on labour issues are useful reviews of developments during the crisis, especially the chapters on labour migration (both domestic and international) and on training, although the latter would appear to give a little too much support to costly (and inefficient?) public rather than private initiatives in the area of skill upgrading. This reviewer was surprised that there was no discussion of industrial relations policies or labour protection legislation, which have major implications for job creation during the recovery: prolonged industrial unrest, for example, is bound to affect employment, especially given the unfavourable investment climate; severance pay, which may reduce employment, is another controversial policy area.
In sum, this is a useful book and should be circulated widely as a reference on employment issues and policies in Indonesia in the post-crisis period. In scope, the book reminds one of the influential ILO employment strategy reports of the 1970s—on the Philippines and Kenya in particular. Unfortunately, it falls down compared with these earlier publications on technical grounds: there is no list of references even of works cited; numerous mistakes appear in the tables and in the text; and there was insufficient editing of some of the weaker chapters—several of which might have been excluded altogether.
Chris Manning
