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Bulletin of Indonesian Economic Studies

ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20

In this issue: notes from the editor

Ross H. McLeod

To cite this article: Ross H. McLeod (2011) In this issue: notes from the editor, Bulletin of Indonesian Economic Studies, 47:1, 5-6

To link to this article: http://dx.doi.org/10.1080/00074918.2011.556053

Published online: 15 Mar 2011.

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Bulletin of Indonesian Economic Studies, Vol. 47, No. 1, 2011: 5–6

IN THIS ISSUE

Notes from the editor

Our new ‘Survey of recent developments’ covers a wide range of topics. Ross McLeod notes increasing concern about the gap between policy rhetoric and

action, fuelled by a corruption saga involving a tax oficial whose activities have helped conirm fears about the ineffectiveness of the government’s

anti-corruption campaign. On the economic front, however, there has been a welcome surge in GDP growth. The government has responded to food price increases by temporarily removing tariffs on rice, wheat and soybeans, and by ordering increased rice imports. It is planning to remove the costly subsidy from petrol used in private cars. The composition of exports has altered greatly over the last

two decades, and the changing pattern of export destinations relects the growing

importance of Asia to the global economy.

The president’s proposal for a new capital as the solution to trafic conges -tion in Jakarta would be more likely to replicate than solve problems. A more promising approach would be for city governments to improve their performance overall by aiming for full cost recovery in the provision of their services, rather than compromising on quantity and quality as at present. A draft law to establish

a single authority to supervise the entire inancial sector suggests that the cen -tral bank intends to continue supervising banks, implying wasteful duplication of that function in the new authority. There have been several reminders recently of Indonesia’s vulnerability to natural disasters, including multiple eruptions of Mount Merapi, which caused almost 400 deaths and considerable damage to the local economy and infrastructure. The survey notes the capable handling of the disaster by local authorities and discusses the policy question as to whether resi-dents of the affected area should be compulsorily relocated.

In their contribution to the ‘Indonesia in comparative perspective’ series,

Robert Lipsey and Fredrik Sjöholm ind that Indonesia has been an outlier

within the region. It has failed to integrate fully into international production

net-works, and foreign direct investment (FDI) inlows have been lower than could

be expected given Indonesia’s size, population and other characteristics. A

rela-tively poor business environment, ineficient government institutions, low lev -els of education and poor infrastructure all seem to be important explanations for this and, despite some progress, corruption also remains a problem. Multi-national enterprises (MNEs) will tend to avoid Indonesia unless these problems are addressed. The authors use the East Asian experience to identify measures

Indonesia could take to increase FDI lows. They also refer to studies of provinces that have been able to implement good policies and improve local institutions, and suggest that using these regions as models for reform at the national level

could help to increase FDI inlows.

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6 In this issue: notes from the editor

Michael Buehler contributes to our series on economic legislation with an analysis of Indonesia’s new Law on Public Services. The law introduces a range of regulations for public service providers. It also expands the responsibilities of the Ombudsman in responding to complaints from the public, and introduces citizen committees to monitor public service delivery. It strongly emphasises restraints and control measures, yet enforcement is the Achilles heel of such reform initia-tives. Buehler argues that enforcement of the law’s restraints and rules is indeed beyond the current capacity of Indonesia’s political and legal system. A lack of realism is evident also in its failure to acknowledge the budget constraints faced by public service providers: civil servants simply cannot deliver services satisfac-torily if funding is inadequate. The author warns that the law is likely to become another symbol of the claimed ‘reforming spirit’ of the Yudhoyono administra-tion, without actually producing tangible results.

Widjojo Nitisastro was the pre-eminent economic policy maker of the Soeharto era, and much has been written by others about his role. In his review article,

Peter McCawley explores a collection of Widjojo’s own essays to reveal an

alter-native perspective. He identiies seven main themes: the role of economic growth

in helping overcome poverty; the need for policy makers to pay close attention to risk management and be constantly ready to respond to economic shocks; the importance of strong leadership and discipline in government; the need to scru-tinise investment programs closely; the high priority that must be given to bor-rowing programs and debt management; the role of the price mechanism; and the management of Indonesia’s relations with the international community. McCaw-ley sees the collection as a valuable contribution to the literature on policy making in developing countries. He notes also that the emphasis of Widjojo and his col-leagues on sound economic policy has established a valuable tradition in Indone-sian policy-making circles that endures to the present day.

While there have been many studies of FDI inlows, those of outward direct

investment (ODI) – by which hitherto domestic irms become MNEs – are much

less common. Michael Carney and Marleen Dieleman note that India and China,

in particular, have produced a number of MNEs, whose success beneits their

home economies. They then describe the internationalisation record of Indonesia’s

major business groups, inding that nearly all of them still focus predominantly

upon the domestic market. Although some ODI presumably goes undetected, the

authors are conident that the oficial statistics, together with their own newly generated data, are strong enough to justify this inding. They argue that both

the small size of most Indonesian business groups and the familial structure of Indonesia’s corporate sector inhibit ODI, with possibly worrying consequences for Indonesia’s economic development.

Our regular set of abstracts of recently completed PhD dissertations on Indo-nesia includes a study of the takeovers of foreign companies under Soekarno and

another on the beneits of reducing air pollution in Greater Jakarta. The book review section covers works on the state-owned Bank Rakyat Indonesia; access to

inance and inancial services in Indonesia; cities in Southeast Asia; democratisa -tion in Indonesia; and politics and the media in Indonesia.

Selamat membaca!

Ross H. McLeod