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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

Pierre van der Eng

To cite this article: Pierre van der Eng (2013) In this issue: notes from the editor, Bulletin of Indonesian Economic Studies, 49:3, 265-266, DOI: 10.1080/00074918.2013.850625

To link to this article: http://dx.doi.org/10.1080/00074918.2013.850625

Published online: 05 Dec 2013.

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Bulletin of Indonesian Economic Studies, Vol. 49, No. 3, 2013: 265–6

IN THIS ISSUE

notes from the editor

Our latest ‘Survey of recent developments’, by Jason Allford and Moekti P. Soejachmoen, examines the responses of the Indonesian government and the central bank to what appeared to be disappointing economic data released in August. GDP growth, for example, has decreased further. Foreign portfolio inves-tors have continued to pull funds out of Indonesia, as the likely tapering of the US Federal Reserve’s quantitative-easing program and hesitant economic recov-ery in Europe look set to increase investment returns in advanced economies. As

a consequence, the rupiah has depreciated, adding to the cost of imports. Inla -tion has continued to rise, owing in part to rising food and fuel prices – the latter

because of reduced fuel subsidies. In contrast, following a record 2012, inlows of foreign direct investment (FDI) have so far remained signiicant.

Indonesia weathered the 2008 global inancial crisis better than many of its peers, yet lagging macroeconomic indicators contributed to the government’s decision to implement a policy package in August in a bid to delect the situa -tion. The Survey analyses the package, which includes, among other measures, increasing mineral exports by removing regulatory hurdles, as well as reducing oil imports by increasing the share of biodiesel in diesel fuel. Allford and

Soe-jahmoen express doubts about the eficacy of the package. Around the same time,

Bank Indonesia lent support to the package by raising its lending- and deposit-facility rates in an effort to attract foreign portfolio investors back into the country and slow the rupiah depreciation.

The Survey discusses these and other moves in detail, acknowledging that Indonesia’s government has limited policy tools to deal with the short-term economic challenges. Allford and Soejachmoen argue that Indonesia therefore would do well to sustain deregulation. They detail that argument with

discus-sions of reforms of the supervisory regulations of its inancial market, as well as its mining and energy policies. Yet they concede that it may be dificult for

policymakers to reap the effects of such economic reforms before next year’s presidential elections.

The potential emergence of a next-generation, reformist president in 2014 has changed the tone of discussions of Indonesian politics. In this year’s poli-tics update, Dave McRae assesses the so-called Jokowi effect – that is, the rise of Joko Widowo, the governor of Jakarta, from mayor of Solo to potential presi-dent. The polls are in Jokowi’s favour, but he has yet to announce whether he will run. McRae notes that this decision is up to former president Megawati

Sukar-noputri, the leader of Jokowi’s party, who may again wish to run for ofice. Other

candidates include Golkar’s Aburizal Bakrie, a business tycoon, and Gerindra’s Prabowo Subianto, a former Soeharto-era general. Regardless of who Indonesia’s next president may be, McRae questions whether any leader can redress the

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266 In this issue: notes from the editor

entrenched defects of Indonesia’s democracy and the tackle the corruption that

aflicts many of the country’s institutions.

Three further articles analyse speciic issues in Indonesia’s economy. Lloyd R. Kenward reviews the history of inlation targeting in Indonesia since 1999, when

Bank Indonesia (BI) adopted it as part of its monetary-policy toolset. Kenward

examines BI’s performance in hitting its inlation targets against a discussion of its

policy reactions in critical periods. He summarises BI’s record from two perspec-tives: a narrow, technical analysis; and a broader view of the bank’s

accomplish-ments in inlation targeting. Kenward inds that, although BI’s record falls short of that of its peers in the region, inlation has been kept largely in check throughout

Indonesia’s most recent period of solid economic growth. Indeed, he notes that

the past three to ive years have seen the most stable rates of inlation in Indone -sia’s history. The question, he argues, is how authorities will be able to build on this achievement.

Rudy Rahmaddi and Masaru Ichihashi use industry-level data from 1990 to 2008 to examine the effect of FDI on Indonesia’s manufacturing exports. They

also assess the inluence of private domestic capital investment, GDP growth

and exchange rates in determining manufacturing export performance. They reveal that the export-generating effect of FDI is higher in industries in which Indonesia has not had a comparative advantage, and also that FDI has played a role in changing Indonesia’s export structure from natural-resource-based, low-technology commodities to technologically complex, higher-value-added ones.

In the inal article in this volume, Tim Stapleton considers the potential of

branchless banking to enhance inancial inclusion and to connect Indonesia’s

smaller enterprises to the world economy. Stapleton asks why the country has yet to undergo a branchless-banking revolution, given that its citizens are

enthusias-tic in adopting new information and communications technologies. He deines

the main barriers to the uptake of transformative branchless banking in Indo-nesia, from its fragmented telecommunications sector, to the restrictive regula-tory environment, to a possible lack of demand. Yet he argues that success in this

ield could make Indonesia an exemplar for branchless-banking deployments in

emerging economies.

In each issue, we endeavour to publish a number of recent abstracts of doctoral theses on the Indonesian economy, to bring new research and researchers to the attention of our readers. This issue features studies of contract farming among oil-palm smallholders, public-sector accounting reforms after Soeharto, agricultural transformation and the middle-income trap, determinants of labour migration in East Java, and regional dimensions of monetary policy.

Our collection of book reviews includes discussions of Indonesia’s economic history, the role of infrastructure in connecting Asia’s economies, the development of Indonesia’s distinctive foreign policy, the distributional effects of fuel taxes and their implications for climate policy, the ‘conservative turn’ in Indonesian Islam, the economics of East Asian integration, changing marriage patterns in Southeast Asia, and how to sustain growth in Asia in the face of subdued global demand for its exports. Selamat membaca!

Pierre van der Eng