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Book reviews

Matthew Wai-Poi , Edmund Terence Gomez , Joan Hardjono , Paul J. Burke ,

Moekti P. Soejachmoen & Ian Anderson

To cite this article: Matthew Wai-Poi , Edmund Terence Gomez , Joan Hardjono , Paul J. Burke , Moekti P. Soejachmoen & Ian Anderson (2011) Book reviews, Bulletin of Indonesian Economic Studies, 47:2, 281-291, DOI: 10.1080/00074918.2011.585956

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ISSN 0007-4918 print/ISSN 1472-7234 online/11/020281-11 DOI: 10.1080/00074918.2011.585956

BOOK REVIEWS

Xin Meng and Chris Manning with Li Shi and Tadjuddin Noer Effendi (eds) (2010) The Great Migration: Rural–Urban Migration in China and Indonesia, Edward

Elgar, Cheltenham, pp. 288. Cloth: £69.95; publisher’s online price: £62.96.

The Great Migration represents the irst major output from the Rural–Urban Migra -tion in China and Indonesia (RUMiCI) project, a collaborative academic research initiative that aims to address three main issues: the effect of rural–urban migra-tion on income mobility and poverty alleviamigra-tion; its long-term effect on the educa-tion and health of migrants’ children; and the extent to which migrants assimilate into urban societies and the channels through which they do so. At the heart of the

project is a ive-year annual panel survey of Chinese and Indonesian households,

selected to include both recent and long-term migrants, as well as non-migrants.

This book collects analysis and commentary on the results of the irst wave of the

survey in 2008.

As the introductory chapter of the book notes, the sheer scale of rural–urban migration in the two countries is immense. In 1980, only 19% of China’s popula-tion and 22% of Indonesia’s lived in cities. By 2005 this had risen to 47% in China, with the 130 million rural–urban migrants representing a third of the urban labour force. Similarly, by 2010, nearly half of the Indonesian population was living in urban areas. Urbanisation in both countries is expected to continue. It is there-fore of great importance and interest to understand the effect of such enormous demographic and socio-economic change in these countries, particularly with respect to poverty and inequality and the outcomes for migrants and their chil-dren. While this is not a new area of research in either country, the RUMiCI project

distinguishes itself with its ambitious multi-year household survey, speciically

designed to address issues of rural–urban migration.

The differences in the nature of rural–urban migration in China and Indonesia are emphasised early in the book. In China, migration is highly regulated and

migrant workers enjoy far less protection and fewer beneits than non-migrant

urban workers. Indonesia, by contrast, has relatively little systematic restriction on migration or access to services (although the book underplays the greater

dif-iculties Indonesia’s migrant workers face in accessing social safety net programs

such as subsidised health care). Thus, the introductory chapter concludes that while the two countries face similar challenges from rural–urban migration, the outcomes from their different policy approaches provide an interesting contrast.

The main weakness of the book is its relatively uneven treatment of the two countries. This unevenness starts with the size and coverage of the two house-hold surveys: 18,000 Chinese househouse-holds, including rural–urban migrants, non-migrant rural households and non-non-migrant urban households, compared with

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just 2,400 Indonesian households in urban areas only, excluding non-migrant rural households. It extends to the heavy focus on China and the sophistication of the analysis. There are only four chapters on Indonesia, one of which is largely on summary statistics while another is on survey design. Also, the Chinese

chap-ters use instrumental variables to address identiication issues and distributional

decompositions to understand effects across the population, whereas the analysis in the Indonesian chapters is simpler.

The various Chinese chapters offer convincing evidence of the poverty-reducing effect that rural–urban migration has in rural areas, but also of the income discrimination migrants face in cities compared with their non-migrant urban counterparts, as well as the effect of migration on urban wage distributions. The book also examines differences between migrating and non-migrating rural households; the non-economic factors that appear to affect the migration deci-sion; and the poorer educational and health outcomes of children from migrating households who are left behind with relatives compared with those who accom-pany their migrating parents or who live in non-migrant rural areas.

The Indonesian chapters focus on migrants’ labour and human capital out-comes. One strength of this analysis is the careful distinction between recent and long-term migrants, with the contrast between these groups and urban non-migrants offering insights into the life cycle of a rural–urban migrant household in Indonesia. This is missing from the Chinese research.

A key message of the Indonesian work is that rural–urban migrants do tend to ‘make it’ in the cities. While recent migrants receive lower wages (and their children are more likely to be underweight when preferred measures of nutrition are used), in the long term there are no large differences in economic and social outcomes between lifetime migrants and non-migrant urban households. The authors take this as evidence of a reasonably high degree of economic mobility. However, the relatively small number of rural households in the Indonesian study

means that care should be taken in interpreting this result, as a signiicant selec -tion bias is likely. It may well be that the lifetime migrants captured by the survey are those who thrived and remained in an urban area, while other migrants who arrived in urban areas at the same time, but did not prosper, returned home. Since the latter group was not surveyed, we do not know what proportion of migrants succeeds in urban life in the long term, nor what the outcomes are for those who return home. Nonetheless, it is clear that many do prosper and that economic opportunities are accessible, at least for some.

As an additional note, it would be more useful if standard nutrition measures were used in the health analyses, particularly standardised height-for-age and weight-for-age z-scores (below –2 standard deviations for stunting and under-weight respectively, in line with international practice).

Some weaknesses will no doubt be addressed as further waves of the panel sur-vey become available. Chinese migrant workers will be tracked over a longer time to understand more about the migration life cycle. Recent Indonesian migrants will be observed both remaining in and leaving their new urban lives. Increas-ingly the researchers should be able to identify differences in characteristics between the two countries.

Overall, the RUMiCI project is an impressive undertaking, examining a sub-ject that remains little understood, yet has important policy implications for both

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countries. The project’s publications will be benchmark studies in the area, and I look forward to the results from the next wave.

Matthew Wai-Poi

World Bank, Jakarta

Marleen Dieleman (2007) The Rhythm of Strategy: A Corporate Biography of the Salim Group of Indonesia, Amsterdam University

Press, Amsterdam, pp. 240. Paper: €29.50.

Marleen Dieleman’s book, based on her doctoral dissertation, attempts to offer a fresh theoretical perspective to decipher the evolution of companies owned by well-connected ethnic minority groups. Though this study focuses on assessing the development of Indonesia’s largest conglomerate, the Salim Group, it also serves to validate Dieleman’s contention of the viability of co-evolution theory –

the theory that irms are shaped by, but also shape, the environment in which they

exist – to contextualise and illustrate the development pattern of large

Chinese-owned irms in Southeast Asia.

Dieleman’s theoretical insights are important because they offer a more holistic perspective for understanding the ascendance of Chinese-owned conglomerates in the region. However, as she acknowledges in her concluding chapter, addi-tional case studies would be required before a convincing argument could be made about the fresh way co-evolution theory enlightens us about the mode of enterprise development by ethnic minority communities in Indonesia in particu-lar, and in Southeast Asia more broadly.

Even though Dieleman’s entire thesis is devoted to an assessment of a com-pany that has already been extensively researched, this study’s real value lies in its empirical contribution. Her biography of this conglomerate raises an intrigu-ing question: is the Salim Group an entrepreneurial enterprise?

The Salim Group is indeed a paradox. On the one hand, it is the largest Chinese-owned conglomerate in Southeast Asia, developed by Liem Sioe Leong, an immi-grant of modest means with limited education, skills and money. He fostered the rise of the enterprise in an environment that was quite hostile to a migrant with his background. Yet, the Salim Group emerged as Indonesia’s largest taxpayer, and in the early 1990s its annual turnover constituted about 5% of the country’s total gross domestic product.

A key factor contributing to the Salim Group’s rapid rise was Liem’s close association with President Soeharto, who eased access to economic rents from the state, including monopoly concessions, and provided the company with long-term protection from foreign competition in key sectors, such as the burgeoning auto mobile industry. Crucially too, Dieleman’s history indicates that the growth of the group primarily occurred through acquisitions, facilitated by easy access

to loans and extensive asset shufling, the latter involving the injection of private assets into publicly listed irms at inlated prices. With ample access to funds, these companies acquired even more irms, allowing Liem to create a colossal, diversiied enterprise in Indonesia.

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The Salim Group eventually expanded abroad, with the acquisition of irms

in Singapore and Hong Kong and investments in China. When the group ven-tured into manufacturing, it did so primarily through joint ventures with foreign

irms. There is little evidence of active investment in research and development to improve the quality of its products, relecting an organic pattern of growth. There

is scant indication that the Salim Group managed to create a brand product of international repute. Its only possible claim to fame for creating a well-recognised product would be in the food industry, through the production of instant noodles.

As Dieleman notes, even though the Salim Group has ownership of large

enterprises abroad, the owners seem to lack conidence about proitably expand -ing these individual businesses across national borders to compete actively with multi national companies. In Hong Kong, the group’s main enterprise, First

Paciic, has also adopted a pattern of growth based on the acquisition of irms. Though professionally managed, First Paciic – like its parent company – has not acquired an international proile.

Dieleman’s review of the dificulties the Salim Group encountered in sustain

-ing itself through a serious crisis, speciically dur-ing the 1997 East Asian currency

debacle, demonstrates why its entrepreneurial capacity and managerial nous can be questioned. After all, conglomerates owned by ethnic Chinese in Malaysia and Thailand, two economies equally mired in the deep crisis of 1997, fared well, drawing attention to their industrial capacity, focused approach to business and

modest reliance on loans to generate growth. Dieleman alludes to these deicien -cies in the Salim Group when she quotes government ministers posing questions such as: should the state nurture conglomerates? If they become too big to fail, wouldn’t they become a huge burden on the public during times of crisis?

Dieleman’s study brings forth suficient evidence to answer these intriguing

questions about the entrepreneurial capacity of the Salim Group and the viability of nurturing large-scale domestic enterprises – a key agenda of governments in most industrialising countries that again came under scrutiny following the 2007

global inancial crisis. Dieleman assesses this issue empirically by reviewing the

Salim Group’s pattern of growth in three core stages of its history: the early stage, from the 1930s until 1997; the crisis period; and the post-crisis period.

This, inevitably, draws attention to another crucial question: if the evidence suggests that the Salim Group is not entrepreneurial, is this theoretical framework helpful in explaining the development of Southeast Asia’s largest Chinese-owned conglomerate? Dieleman’s penultimate chapter, which is devoted to reviewing the

viability of co-evolution theory after her historical proiling of the Salim Group, is

undoubtedly informative. It reveals how the group has been profoundly shaped by external factors, including regime changes, as well as how the conglomerate

itself has inluenced the moulding of key public and private institutions, given

its powerful economic base. However, her theorising stops just short of provid-ing insights into why cumulative learnprovid-ing and product development within the

Salim Group have not taken place. If this defect is rectiied, co-evolution theory

could indeed help us understand why numerous Southeast Asian conglomerates,

speciically those owned by ethnic minorities, are such a paradox.

Edmund Terence Gomez

University of Malaya

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Carol Warren and John F. McCarthy (eds) (2009) Community, Environment and Local Governance in Indonesia: Locating the Commonweal, Routledge Contemporary

Southeast Asia Series, Routledge, London, pp. 288. Cloth: $150.

The nine chapters in this book examine the ways in which local communities in Indonesia have been affected by questions of social equity, access to resources and resource conservation since the devolution of authority to the district level in the

years following 1998. The case studies, which cover agriculture, isheries, forestry,

mining and tourism, examine the rights of local people in the context of natural resource utilisation and management.

The starting point for the editors’ discussion is Garrett Hardin’s concept of the ‘tragedy of the commons’, in which excessive short-term utilisation of common resources is seen as leading to their depletion. The nature of the commonweal – referring here to ’the general welfare of the public, as well as the institutional, political, cultural and material domains through which that common welfare is pursued’ (p. 1) – is also discussed.

In the second chapter, Jim Schiller and Achmad Fauzan analyse the relation-ships between local people and local government in Jepara District, Central Java. They examine the utilisation of three local resources currently experiencing

envi-ronmental stress. The irst of these is the illegal logging of the state forest, which is

not ‘common property’, even though local people might view it as such. The

sec-ond is marine isheries, and the third mineral sands (in this case, a large working

deposit of feldspar). The latter is particularly relevant, as disputes about rights to exploit sand, rock and similar materials are increasingly frequent in Java today.

In chapter 3, Anton Lucas looks at the institutional aspects of the control of marine resources. He describes an attempt in Tegal, Central Java, to establish a

ish sanctuary in an area where the presence of too many boats and ishers has

been further complicated by the introduction of new technologies.

In discussing Lore Lindu National Park in chapter 4, Greg Acciaioli questions what the terms ‘community’ and ‘indigenous’ really mean and whether new-comers (in this case, Bugis migrants) can adapt to demands to safeguard natu-ral resources. In chapter 5, Laurens Bakker also raises the question of what adat

means and asks whether adat communities can allow outsiders to undertake log-ging in theirareas.

In chapter 6, Hidayat Alhamid, Chris Ballard and Peter Kanowski analyse forest utilisation in Papua. The writers conclude that ‘efforts at preventing local people from depleting their own forests … have to make sense to the local com-munity if they are to work’ (p. 163). In chapter 7, John McCarthy examines defor-estation in Jambi caused by the expansion of oil palm plantations. He highlights the ‘un resolved problems facing Indonesia as a political community expected to act and resolve differences in the common interest of all its citizens’ (p. 190).

In chapter 8, Carol Warren describes attempts by local people in Bali to prevent the sale of land and to reduce their reliance on tourism as a source of livelihood.

Chapter 9, contributed by the book’s editors, raises some important points that

are often overlooked in discussions in this ield: that indigenous systems do not

always imply conservation of resources; that equity is not always present in tradi-tional conservation systems; and that these systems have not always been main-tained intact or without distortion.

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Many chapters tend to refer to all non-government systems as adat in nature. It would perhaps be preferable to speak of local persons’ interests and traditional livelihoods, because the term adat has a much broader meaning, encompassing

ields other than resource utilisation. While the book presents clear descriptions of the conlict between government and local interests, the arguments are often

one-sided; that is, anything undertaken by the government tends to be viewed

nega-tively. Nevertheless, the book makes a very signiicant contribution to discussions

about the rights of traditional communities in the context of wider sub-national and national interests.

Joan Hardjono

Independent researcher, Bandung

World Bank (2011) The Changing Wealth of Nations: Measuring Sustainable Development in the New Millennium, World Bank,

Washington DC, pp. xvi + 224. Paper: $35.00. Available for free download at <http://go.worldbank.org/TF3U5N1AO0>.

No one can accuse the World Bank research team of lacking ambition. In this update of their 2006 Where Is the Wealth of Nations?, the World Bank has provided estimates of the total wealth of over 120 countries for the years 1995, 2000 and 2005. This latest contribution also provides updated estimates of ‘adjusted net savings’ (also known as ‘genuine savings’), an indicator of whether consumption will be able to be sustained if current economic settings are maintained. The data can be downloaded from the World Bank website.

Economists have long been accused of an over-reliance on gross domestic product as a measure of an economy’s health. The World Bank should be con-gratulated for its efforts to estimate broader measures of economic development and sustainability, and for supplying data for such a large number of countries. Its work has extended the knowledge frontiers in the areas of environmental wealth

accounting and development economics, and has greatly raised the proile of the

issue of sustainability.

Surprisingly, the World Bank reports that natural capital accounts for only 6% of the world’s wealth. There is little doubt that this represents an under-valuation of the importance of the environment. After all, human survival depends on the environment. One reason for this under-valuation is that important aspects of humanity’s ecosystem, such as the atmosphere, the oceans and biodiversity, are not included directly in the World Bank’s accounts. Another is that wealth is

deined as the ability to provide for future consumption (rather than as the ability

to provide for future welfare, more broadly considered).

As it has done previously, the World Bank inds that the majority of the world’s

assets are ‘intangible’, a broad residual category that includes human capital,

social capital, institutional capital and dificult-to-value environmental assets.

Chapter 5 examines the contents of this black box, and concludes that it mostly represents human capital. An attempt to value China’s human capital directly is discussed in chapter 6.

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Valuing the world’s assets is no simple task, and the World Bank’s approach

rests on a multitude of heroic assumptions and approximations. (Countries are assumed to have common depreciation rates, discount rates and per capita con-sumption growth rates into the future; ecologically important areas are valued as

if they are farms; and so on.) Simpliications are clearly necessary to present a con -cise and consistent account of the world’s wealth, and the book does recognise the boldness of the exercise and the need to improve estimation procedures. Never-theless, readers could be left with the impression that the reported numbers are close to precise. Readers should instead bear in mind that many of the numbers in this book are relatively crude approximations.

The primary practical use of the World Bank’s efforts to measure the sustain-ability of economic development relates to resource-rich countries such as Indo-nesia. The genuine savings data identify whether countries are depleting their natural resources at a rate that exceeds their accumulation of other assets. Coun-tries that are running down their aggregate asset base are on an unsustainable path, and will need to reverse course if they are to avoid falls in consumption at some stage in the future.

While the book does not go into much detail on country-speciic stories, the

disconcerting news for Indonesia is that its economy has become less sustain-able according to the World Bank’s numbers. Indonesia’s genuine savings fell from 20% of gross national income in the mid-1990s to –2% in 2008. The move to negative genuine savings has occurred as a result of both a downward trend in Indonesia’s net saving rate and an increase in the value of energy depletion (due principally to surging energy prices and a take-off in coal extraction).

The World Bank estimates that in 2005 the average Indonesian had a total wealth equal to $20,000 – around one-sixth of the world average, but much higher than the wealth of the average citizen in the world’s poorest country, Burundi ($2,000). While Indonesia’s per capita wealth increased over the period 1995–2005, it is likely to start to fall if the country’s genuine savings rate remains negative. The World Bank records that, of the 148 countries for which data are available for both years, 32 did indeed experience falling per capita wealth over the period 2000–05.

Two key policy messages for Indonesia emerge from this book. The irst is that

Indonesia needs to invest more of its resource revenue in physical and human capital to ensure that the current consumption of Indonesians is sustainable. The second is that Indonesia needs to continue to improve its governance and institu-tions to maximise opportunities for long-run economic development.

The primary global program for improving minerals sector governance is the Extractive Industries Transparency Initiative (EITI), with which Indonesia is working towards compliance. Chapter 7 provides an overview of the EITI. Some countries (Indonesia included) are beginning to make progress towards broader

wealth accounting, and their experiences are reviewed in the inal chapter. The

World Bank expresses the hope that these nascent efforts will one day allow it to pass on to individual countries the primary responsibility for producing data of the kind this book contains.

Chapter 4 presents a stand-alone analysis of the valuation of carbon dioxide (CO₂) emissions. Its estimated value of the stock of anthropogenic CO₂ in 2005 is rather small – less than 1% of global wealth. This value implies either that climate

change is unlikely to be a signiicant threat to overall human progress, or that

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the World Bank has got its numbers wrong (in particular, its social cost of carbon

igure of $20 per tonne of carbon at 1995 prices).

The book is written in a fairly clinical manner, but this does not detract from its value. For those with an interest in sustainable development, there could hardly be a more important publication. And for country benchmarking enthusiasts, the book’s data sheets are a treasure trove (although the impreciseness of the wealth data needs to be kept in mind). I highly recommend that both development econ-omists and resource econecon-omists have this book on their shelf or hard drive.

Paul J. Burke

ANU

Philippe Gugler and Julien Chaisse (eds) (2010) Competitiveness of the ASEAN Countries: Corporate and Regulatory Drivers, New Horizons in

International Business Series, Edward Elgar, Cheltenham, pp. 315. Cloth: £79.95; publisher’s online price £71.96.

This book is a collection of papers presented at the second annual conference on ‘Competitiveness of ASEAN Economies: Investment and Trade Issues’, organised by the University of Fribourg, Switzerland, and held at the National Institute of Development Administration in Bangkok in January 2009.

The editors argue in their introduction that ‘ASEAN is part of the Asian

contri-bution to a global rebound’ from the most recent world inancial crisis and that

ASEAN’s competitiveness is, importantly, driven by multinational enterprises (MNEs) as well as the strong economic fundamentals of ASEAN countries. The

irst part of the book focuses on patterns and trends in inward and outward for -eign direct investment (FDI) in ASEAN countries; links between MNEs in ASEAN countries; and broad questions surrounding regional integration. The second focuses on the role of free trade agreements (FTAs) in ASEAN’s integration into the world economy.

The irst two chapters in part I, by Philippe Gugler and Julien Pananond (ch. 2)

and Nessara Sukpanic and Alan M. Rugman (ch. 3), focus on FDI’s role in improv-ing competitiveness. Most ASEAN countries are much more dependent on inward

than on outward FDI. Inward FDI is high because of the location-speciic advan

-tages of ASEAN countries, while the low level of outward FDI relects the inabil

-ity of local irms to compete in international markets. Axèle Giroud and Haiz

Mirza argue in chapter 4 that differences in stage of development affect the

abil-ity of local irms to beneit from interaction with foreign subsidiaries. Firms can

establish integrated corporate networks internationally if governments have cre-ated regulatory frameworks that are conducive to the growth of such networks.

Siow Yue Chia argues that regulatory frameworks such as trade and

invest-ment liberalisation and cooperation arrangeinvest-ments are important in enabling irms

to create international networks (ch. 5). Lawan Thanadsillapakul points out that

effective competition law is needed to ensure that irms, both local and foreign,

are prevented from engaging in restrictive business practices, abusing a dominant

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position, forming a cartel or engaging in other unfair practices that might damage

other irms (ch. 6). Chalita Srinuan et al. say that increased competition in the

tele-communications sector will help narrow the digital divide in ASEAN countries (ch. 7).

ASEAN may be able to enhance its competitiveness by broadening its links with global partners. The second part of the book therefore focuses on FTAs negotiated with major partners such as Japan, China, India and the European Union coun-tries. It begins by examining whether ASEAN countries use FTAs (with ASEAN

members and with other countries) for exporting. Ganeshan Wignaraja inds in chapter 8 that FTAs do help to increase irms’ competitiveness internationally,

but that there are impediments to their effectiveness, such as lack of information, rules-of-origin restrictions and low margins of preference compared with most favoured nation (MFN) arrangements. He compares the use of ASEAN FTA

pref-erences by irms in the Philippines (using the ASEAN Free Trade Area) and China

(using the ASEAN–China FTA).

Major partner countries have adopted different strategies in pursuing FTAs

with ASEAN and its members. According to Suian Jusoh and Intan Mirnira Ramli

(ch. 9), Japan began by making bilateral agreements with several ASEAN coun-tries before negotiating an FTA with ASEAN itself. Some EU members already had bilateral agreements with particular ASEAN countries before starting negoti-ations with ASEAN-7 (which excludes Myanmar, Cambodia and Laos). However, the negotiation of FTAs between the European Union and ASEAN was halted in

2009 because of dificulties arising from differences in the level of development

among ASEAN countries (Ludo Cuyvers, Lurong Chen and Philippe de Lom-baerde, ch. 12). China and India, on the other hand, began by negotiating FTAs with ASEAN directly. Jun Xiao shows in chapter 11 that the ASEAN–China FTA follows World Trade Organization (WTO) and General Agreement on Trade in

Services (GATS) rules. It is the irst Chinese investment agreement to include an

investment liberalisation program. India began by seeking an FTA with ASEAN, but slow progress led it to switch to bilateral negotiations (Debashis Chakraborty and Dipankar Sengupta, ch. 10).

The irst part of the book provides a clear analysis of factors inluencing ASEAN

competitiveness. The second part aims to explain how ASEAN can broaden its links with global partners through participation in FTAs. However, since FTA negotiations with major partners have not gone as smoothly as expected, FTAs may not be the most effective means of broadening linkages. It would have been interesting if the volume had explored alternative approaches to this issue, such as expanding business-to-business relationships through global production net-works, with governments acting as facilitators to the process. A sound investment climate is an important factor in encouraging such relationships. While invest-ment is covered in some of ASEAN’s FTAs with major partners, it is not included in all of them.

Moekti P. Soejachmoen

ANU

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Sisira Jayasuriya and Peter McCawley, in collaboration with

Bhanupong Nidhiprabha, Budy P. Resosudarmo and Dushni Weerakoon (2010)

The Asian Tsunami: Aid and Reconstruction after a Disaster,

Asian Development Bank Institute, Tokyo, and Edward Elgar, Cheltenham, pp. xv + 272. Cloth: A$179.

What have we learned about responding to megadisasters such as the 2004 Asian tsunami, which killed more than 220,000 people and displaced some 1.7 million others? This book aims to answer that question. It argues that eight key lessons can be learned from the responses to the tsunami.

First, objectives vary, and effective delivery of humanitarian emergency relief is only one of these objectives. Following the disasters, some organisations wanted to ‘build back better’, acknowledging that this would require careful design work and longer timeframes. However, local communities wanted an immediate start to getting their lives back to order. Foreign policy objectives also came into play, affecting the volume and nature of assistance to countries like Indonesia (in con-trast to the more muted response to Cyclone Nargis in Myanmar in 2008).

Second, local responses are critical. Local communities generally provided the

fastest relief, within the irst 12–24 hours of the tsunami. This was the critical

period for determining whether people lived or died. Despite this, the role of local communities is often overlooked.

The third lesson is that coordination is important, but dificult at every stage.

The book notes:

when megadisasters strike in poor countries, international donors do not always cooperate as well as they should – either with national governments or with each other. Too many agencies from too many countries with too many goals compete rather than cooperate to provide aid (p. 253)

For example, only 128 of 438 NGOs registered with the Indonesian government had provided the required activity reports to the coordinating authority by mid-September 2005.

Fourth, sequencing and stages matter. Responses to the disaster, and the roles played by different actors, varied over time, as did the needs of the local com-munities.

Fifth, donors (and local governments) over-invest in some sectors, leaving others under-funded. The chapter on Indonesia’s response to the tsunami, by Suahasil Nazara and Budy P. Resosudarmo, suggests that transport may have been under-funded by almost $300 million. Flood control and irrigation, environ-ment, and energy also lacked funding. On the other hand, some sectors in Aceh – including health; community culture and religion; and governance and admin-istration – attracted generous, perhaps even excessive, contributions.

Sixth, the low and features of inancing need to improve. Financial support is

particularly valuable at the beginning stages of a disaster when livelihoods have been disrupted. Yet more than a year after the tsunami, less than 3% of the $430 million allocated to reconstruction in Indonesia and Sri Lanka had been spent.

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Seventh, cost increases should be planned for. In Aceh, the cost of building a new 36-square-metre house increased from an initial estimate of $3,000 to around $5,000 by the end of 2005 (p. 248). Much of the increase was driven by rising

labour and timber costs, exacerbated by the dificulty of delivering workers and

supplies to damaged areas. In contrast, the case study of Thailand reveals that costs actually declined following the tsunami because of spare capacity in the Thai economy and the relatively easy access to materials and labour.

The inal lesson is that the method of spending matters. Cash payments pro -vided a quick form of income for those who had lost livelihoods and assets. These payments had multiplier effects in local economies, allowed for local deci-sion making and contributed to a sense of self-reliance. However, such schemes

require careful targeting, and can lead to inlation where supply channels have

been disrupted.

The book also offers some other lessons from the disaster. One is that mainte-nance is a good preventive measure. Non-compliance with building codes was

the main reason that four out of ive houses in Nias were damaged. In poorer

areas of Aceh and Nias, the heavy physical damage to infrastructure seems to

have been due to poor structural quality or insuficient maintenance rather than

the severity of the disaster.

It is also clear that natural disasters can have unforeseen consequences. The Indonesia chapter contains a detailed account of how the government quickly recognised that a peace treaty would be an essential part of the reconstruction process in Aceh.

The book ills an important space in the international literature. It brings together all the main facts and igures on the Asian tsunami and provides a

detailed comparative case study of the situation in Indonesia, Sri Lanka and

Thai-land. It identiies policy and programming lessons for governments and local

communities, as well as lessons for developed country governments, United Nations organisations, NGOs and other donors. The book also provides some modern insights into the literature on disaster preparedness and responsiveness.

Ian Anderson

Ian Anderson Economics Pty Ltd, Canberra