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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
Suahasil Nazara , Shaianne T. Osterreich , Meryl J. Williams , Arief
Ramayandi , Thee Kian Wie , Akiko Morishita & Michele Ford
To cite this article: Suahasil Nazara , Shaianne T. Osterreich , Meryl J. Williams , Arief
Ramayandi , Thee Kian Wie , Akiko Morishita & Michele Ford (2010) Book reviews, Bulletin of Indonesian Economic Studies, 46:1, 115-126, DOI: 10.1080/00074911003642286
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ISSN 0007-4918 print/ISSN 1472-7234 online/10/010115-12 DOI: 10.1080/00074911003642286
BOOK REVIEWS
Shafi q Dhanani, Iyanatul Islam and Anis Chowdhury (2009)
The Indonesian Labour Market: Changes and Challenges, Routledge Studies in the Modern World Economy, London, pp. 256. Cloth: $150.00.
This is an important book. The labour market is a key determinant of a coun-try’s competitiveness. President Yudhoyono has listed unemployment as one of the indicators in his National Medium-term Development Plan targets. And Indonesia’s labour market has undergone important transformations in the last decade. The 1998 crisis changed the way Indonesia is governed, including rela-tionships and regulation in the labour market. It is timely that such a book should appear about a decade after the last comprehensive assessment in 1998 (Chris Manning, Indonesian Labour in Transition: An Indonesian Success Story?, Cambridge University Press).
This new book discusses the role of the labour market in Indonesian economic policy making, elaborating how debates have evolved over time. The introduc-tion briefl y surveys Indonesian politics as far back (perhaps unnecessarily) as the 1950s. The next chapter analyses the employment implications of macroeconomic policy. These are elaborated further in two subsequent chapters on unemploy-ment and under-employunemploy-ment (ch. 3) and wages and productivity (ch. 4). Chapter 5 starts with a discussion of poverty and inequality, and relates this to labour mar-ket indicators, especially wages. Chapter 6 examines labour regulations and the business climate. Chapter 7 concludes with several policy recommendations.
The book primarily covers the labour market before and after the Asian fi nan-cial crisis of the late 1990s. Most of the data presented are from the mid-1980s onward, with a few tables containing data from the 1970s. This is no surprise. Reliable data became available only in the mid-1970s.
The macroeconomic analysis in chapter 2 takes a rather pessimistic view of Indonesia’s economic standing. It says ‘the country was hit hard by the global fi nancial crisis in the last quarter of 2008 … The global economic slowdown will likely dampen the demand for commodities and exports from Indonesia …’ (p. 51). We now know, however, that Indonesia is one of the few economies in Asia to have survived the global fi nancial crisis with positive economic growth for 2008 and 2009, trailing only China and India. The outcome was due partly to a decade of relatively low infl ation – which the authors appear to deem of lit-tle importance. Low infl ation contributed to the wealth accumulation process, which enhanced the domestic demand, replacing the demand for exports during the most recent crisis. Of course, several other coincidences helped. The direct cash transfer program, launched in 2008, quickly put money in the hands of poor
families. Together with expenditure in the prolonged 2008–09 political campaign periods, this money all ended up as consumption.
The authors correctly point out the importance of looking beyond open unem-ployment rates. Examining these rates over a two-decade period, the analysis shows that most of the increases in the offi cial rates ‘from 2–3 per cent in the 1970s and 1980 to around 10 per cent in the late 2000s … were due [merely] to defi nitional changes’ (p. 79, words in square brackets added). Despite low open unemployment, under-employment is high. It represents the under-utilisation of labour.
There are two connections that one may expect to be made at this point. The fi rst is a link between low open unemployment and high under-employment, with increasing informality in labour status. While the latter is examined at length in chapter 2, its link to low open unemployment and high under-employment is only briefl y recounted in this chapter (p. 79). More could have been said about this. The second connection relates to discussion of the notion of employability. It is important at this juncture to address issues such as employment elasticity, an essential link between macroeconomic conditions and labour absorption.
On real wages, chapter 4 outlines how real wages grew alongside labour pro-ductivity. Long-term public investment in education and health also helps boost productivity. That was the case until 1997. The next decade was a lost decade for Indonesian workers. The authors state in the introductory chapter: ‘By 2007, real wages were no higher than the 1997 level’ (p. 16).
In examining poverty and inequality in Indonesia (ch. 5), the authors rightly touch upon issues of vulnerability, the Millennium Development Goals targets, and non-income poverty, as well as the functional distribution of income. The chapter does not, however, explore fully the regional dimensions of poverty and inequality, saying only that ‘regional inequality in Indonesia was moderate rela-tive to other large regionally diverse economies’ and that ‘regional inequality in terms of human development indicators refl ects a complex picture, rising in some cases but declining in others’. There really is more to that issue.
This chapter also points to the different direction of unemployment and pov-erty trends (fi gure 5.6). Between 1999 and 2005 the poverty rate declined while the unemployment rate rose. The authors argue that the best route to policy-relevant knowledge is to focus on the ‘working poor’ (p. 138). However, if one extended the series to the most recent data available (say 2009), one may fi nd that since 2006 the two rates have been on a similar declining trend. Would we conclude that ‘a one-to-one mapping between the unemployment rate and the poverty rate’ (p. 138) is now the case in Indonesia? I would argue negatively. The fact that the two rates can fl ip from contradictory to similar trends without a clear reason simply strengthens the need to go beyond the aggregates. In the light of what is known about the ‘working poor’, policy may need to address the poverty–productivity nexus in poverty alleviation programs.
Chapter 6 on labour regulations and the business climate asserts that although the ‘regulatory environment governing the labour market altered dramatically in the fi rst half of the 2000s’, the ‘evidence ... cannot show that labour market out-comes deteriorated in the 2000s as a result’ (p. 175). The authors do not ‘endorse a “minimal regulation” approach, but neither does [this] mean … endorsement of a “business as usual“ scenario’ (p. 181). Although rapid economic growth ‘more
than compensated’ for job losses arising from compliance with the labour law, ‘employment creation would have been higher in the absence of higher wages and infl exible labour arrangements’ (p. 175).
What more would I have liked to see in this book? There are at least two issues. The fi rst is labour migration, both domestic and international. Inter-provincial (as well as rural–urban) labour migration has been a crucial element of long-term economic development, particularly during periods of economic turmoil. Work-ing abroad has been pivotal to the welfare of many workers, and the remittances from it are of great signifi cance to the economy (national and provincial alike). The other factor that has changed the landscape of the Indonesian labour market is the labour union. Following the end-1990s crisis, Indonesia moved peacefully from a single-union to a multi-union system. Unions constitute a challenge for the labour market of the future. It is crucial to defi ne precisely the role of the union in an economy where 70% of workers are in the informal sector. Perhaps the next book in this fi eld could be titled The Political Economy of the Indonesian
Labour Market.
Suahasil Nazara
University of Indonesia, Jakarta
© 2010 Suahasil Nazara
Teri L. Caraway (2007) Assembling Women: The Feminization of Global Manufacturing, Cornell University Press, Ithaca NY, pp. 224.
Paper: US$18.95; Cloth: US$60.95.
In her fi rst book, Assembling Women: The Feminization of Global Manufacturing, Teri Caraway explores some of the causes of the dramatic increase in industrial female labour force participation that began in the mid-1970s. With a close look at the Indonesian case she demonstrates the complicated decisions that export-oriented manufacturing fi rms faced as they chose the role that female labour was going to play in their success in the global economy.
Although Caraway attempts to forge new paths in gender and globalisation theory, the strongest part of the book is its detailed and comprehensive telling of the economics, politics, and gender relations stories of late 20th century Indo-nesian industry. This book makes a signifi cant contribution to several lines of existing literature, including the economic history of Indonesian industrialisation; gender and globalisation; labour and international trade; and market structure and export orientation.
The most interesting of Caraway’s claims centres on why Indonesian export-ers hired (or did not hire) women in the 1980s and 1990s. Looking at garments, textiles, plywood and automobiles, she combined primary evidence from inter-views, secondary fi rm-level data and political history to explain the trends in hir-ing women. By lookhir-ing at fi rms with varied export orientation, market structure, labour intensity, and trends in male and female labour recruitment, she was able to determine what types of fi rms hired women and for what reasons.
She argues that by the mid-1970s Indonesian women were ready to go to work. Owing to a variety of conditions, which she terms gender mediating institutions,
education levels were relatively high and increasing, fertility levels were low, and political parties and labour unions (primarily male) had been demobilised. These state policies created a scenario ripe for change in the labour force. First in textiles (a generally female-intensive sector), then later in plywood and garments, and fi nally in the 1990s in electronics, women’s employment was on a steady rise.
It is not enough, Caraway argues, for women to accept lower wages for fi rms to decide to hire them over men, or worse, to fi re men and replace them with women. With commendable clarity, Caraway delineates how fi rms responded. With sticki-ness – that is, in fi ts and starts – they experimented with hiring women, they considered the hiring practices of competitor fi rms, and sometimes they decided it was not going to work. At other times they learned from other sectors that had already employed women how they could increase productivity while improving the bottom line; this she calls ‘spillover’. Lastly, the term ‘snowballing’ captures the experience of export-oriented fi rms that grew and were able to add assembly lines and hence hire women for new jobs without having to displace men.
Caraway concludes that there were two indicators that a fi rm would feminise: if it faced a price-competitive market structure (and one likely to be labour inten-sive) and if it already had some women employees. Though gender wage differ-entials were much wider in capital-intensive fi rms, where the cost savings would be much higher if they replaced men with women, that they had not already done so was a key determinant of their not doing so in the future. Further, since they were less focused on keeping prices low, these fi rms were less concerned about the wage bill at the margin.
Caraway’s major theoretical contribution is that feminisation in global man-ufacturing is due to labour intensity rather than export orientation. This is not entirely the outcome of her own study, but rather a response to the general trend that there are industrial sectors that resisted feminisation (despite being export oriented) and that many countries experienced a de-feminisation upon industrial upgrading. While some of the evidence she points to is widely agreed upon, it is not altogether compelling with regard to her own thesis. There is a dynamic in export-led growth that leads to both price competition and labour intensity that is not fully captured in the argument presented. Further, some parts of the book read as ungenerous and incomplete refl ections of the current literature.
What is of real value is the detailed look at the way fi rms actually make deci-sions about how and when to hire women. When we make claims about how fi rms behave in the global economy, we must remember that different histories, cultures and habits create these scenarios and although phenomena may appear similar the world over, in practice things play out differently. This exploration of Indonesia reminds the interested scholar of this, very acutely.
Shaianne T. Osterreich
Ithaca College, Ithaca NY
© 2010 Shaianne T. Osterreich
Budy P. Resosudarmo and Frank Jotzo (eds) (2009) Working with Nature against Poverty: Development, Resources and the Environment in Eastern Indonesia, Institute of Southeast Asian Studies, Singapore, pp. 384. Paper: S$39.90/US$29.90.
Indonesia has a large territory comprised of over 17,000 islands, is the world’s fourth most populous nation and is one of the most complex countries in terms of its geography, ethnicities, cultures, politics, languages, bio-diversity and many other dimensions. Not surprisingly, knowledge of this diverse country is uneven, and the eastern provinces are the least understood. This excellent book takes the three least well-known provinces, East Nusa Tenggara, Maluku and the now fur-ther partitioned Papua, and provides a wealth of detailed statistics and analy-sis on the people, politics, economics and resources of each. The trade-offs and synergies between natural resource exploitation and development are explored across the range of natural resources – watersheds, minerals, forestry, agriculture and fi sheries – and in relation to the factors that underpin the development of local economies. Thus, the book also explores eastern Indonesia with respect to government capacity, governance performance and corruption, links to the wider Indonesian economy and international markets, and the delivery of public sector services such as health, education and infrastructure.
The editors and authors have undertaken a mammoth task in mining the avail-able statistics and, in some cases, providing critical commentary on the challenges of collecting and using these data. Of particular interest is appendix A2.1 (by Bambang Heru), written by a senior member of the central statistics agency (BPS), outlining the challenges of obtaining accurate statistics on Papua in the national system. Many of the book’s statistics are disaggregated to the sub-provincial level, to show the granularity within each province and illustrate the diffi culty of gen-eralising causes and solutions. At the other end, many comparisons are made with other provinces of Indonesia and, in the case of Papua province, with several Pacifi c island, African and South American countries.
The book is based on sound knowledge of eastern Indonesia. All 31 authors are from Indonesia and/or are long-time researchers on Indonesia, and thus have excellent language fl uency and access to fi rst-hand research materials. The chap-ters deal effectively with the major shift that has occurred in Indonesia through the decentralisation law of 1999 and the ongoing challenges of its implementation. Decentralisation has opened up opportunities for greater provincial and district/ municipality responsibility and control. But it has also created tensions, for exam-ple, over how revenues are allocated from exploitation of natural resources; how funds are devolved to sub-national governments for the operation and delivery of services; and what are the respective powers and capacities of different levels of government to issue permits and licences to exploit resources.
Who should read this book? My answer is that it should be read by every devel-opment assistance worker interested in Indonesia, every student studying Indo-nesia and every environmentalist working in the Coral Triangle that comprises the marine area of eastern Indonesia, the Philippines, eastern Malaysia, Papua New Guinea, the Solomon Islands and Timor Leste. Many others interested in the nexus between resources and development will also fi nd the book of great inter-est. It deserves wide distribution and use.
While strong on statistics and descriptive analysis, complemented by a very useful overview chapter (by Resosudarmo and Jotzo), the book does display some unevenness in the quality and tone of individual chapters. For example, some chapters, such as that by Ballard and Banks on the Freeport mine, voice strong opinions that tend to weaken their objectivity. The book would have benefi ted from a more unifi ed structure for chapters and a stronger conclusion on develop-ment and resource sustainability challenges. Indeed, the content of the chapters lends itself to further overviews and derived analyses, should the authors and others wish to draw further from the rich material within the book.
Finally, here is a small sample of the insights to be found in this volume. Taken together, the book refl ects a complex of factors that combine to explain the low development levels of the three eastern Indonesian provinces. Rich resource endowments such as those of Papua may create relatively high GDP growth, but the resulting wealth can be diluted by high population growth (Papua) and diminished by confl ict (Papua and Maluku). All three provinces are hampered by remoteness and poor infrastructure, only some of which disadvantage can be overcome.
The chapter by Dutton et al. provides useful reviews of four marine conserva-tion initiatives in the general eastern Indonesia area – Lore Lindu Naconserva-tional Park in Sulawesi; marine protected areas in Sulawesi; and Komodo National Park and Bintuni Bay integrated watershed management in Papua – and offers conclusions on what works. The authors conclude that bio-diversity conservation has to be made meaningful to the lives of local people; conservation actions need to be owned by people, governments and the private sector, and not just by conserva-tion organisaconserva-tions; only the local people can sustain conservaconserva-tion; and projects must be learning experiments from the outset.
Different types of natural resources generate very different interactions between the exploiters, the local people and governments. In eastern Indonesia the pat-terns range from large mineral deposits with a single exploiter to resources with competing but unequal exploiters at large and small scales. Huge corporate and therefore political and strategic power is wielded by the owners of massive opera-tions such as the Freeport mine in Papua, which provides 50% of provincial GDP and 90% of provincial exports (Ballard and Banks). The operations of this mine, one of the largest in the world, have proven highly resistant to the so-called ‘green disciplining of capital’, and its management seems adept at maintaining the free-dom to operate in the face of changes in political parties and political and envi-ronmental protests. Forest concessions granted to large companies have diverted resources previously accessible to local communities (Hidayat, Kanowski and Bal-lard). Small-scale fi shers, beholden to onshore owners and capital providers, are in a constant struggle to make ends meet, facing declining catches, often involved in illegal fi shing (for example, in Australian waters), and subject to global market shifts (such as in the price of shark fi n) and competing economic opportunities and risks, including inter-island trade and people smuggling (Fox et al.).
Meryl J. Williams
Brisbane
© 2010 Meryl J. Williams
Aulia Pohan (2008) Potret Kebijakan Moneter Indonesia [A Portrait of Monetary Policy in Indonesia], PT RajaGrafi ndo Persada, Jakarta, pp. xxii + 314. Rp. 90.000.
Aulia Pohan (2008) Kerangka Kebijakan Moneter dan Implementasinya di Indonesia [TheMonetary Policy Framework and Its Implementation in
Indonesia], PT RajaGrafi ndo Persada, Jakarta, pp. xiv + 260. Rp 65.000.
Monetary policy plays a key role in the management of economic fl uctuations, so understanding how it is conducted has long been of interest to scholars. The conduct of monetary policy is an intricate process whereby a monetary author-ity gathers an extensive set of relevant information before delivering its policy action. This complicates the effort to understand monetary policy making in many countries.
Indonesia is no different, particularly because there have been a number of changes of policy regime in the country’s history. The titles of these two books by Aulia Pohan promise to shed light on the issue, and no student of monetary policy in Indonesia would want to miss the opportunity to read them.
The fi rst book, A Portrait of Monetary Policy in Indonesia, is divided into four parts. The fi rst two provide some preliminary discussion of the effectiveness of monetary policy and its impact on the economy. The author lays down some basic concepts and defi nitions that do not go beyond the level of an undergraduate course in monetary economics. This feature is useful for general readers, but per-haps not suffi cient to fulfi l the needs of more advanced readers.
Part 3 contains the main thrust of the book, providing a comprehensive sum-mary of monetary policy development in Indonesia. Its fi ve chapters discuss vari-ous issues related to monetary policy – overall monetary policy development, developments in banking and credit policies, and the conduct of monetary policy in the 1997–98 crisis. The author has provided a good, concise summary of the development of monetary policy and the banking sector in Indonesia, giving readers adequate historical information to understand the way monetary policy has evolved in the country. Unfortunately, this section is not well connected with the theoretical foundations offered by the preceding sections. As a result, it fails to provide a theoretical explanation of why the development of monetary policy and the banking sector has followed this particular historical path.
In part 4, the book offers a simplifi ed discussion of the current and future chal-lenges faced by monetary policy in Indonesia. Although this section lists some factors that need to be anticipated and addressed by the monetary authority in Indonesia, its simplistic discussion fails to provide a satisfactory explanation of the real challenges faced and possible ways to deal with them. Readers are left with a big question about what the author is actually suggesting for the improve-ment of Indonesia’s monetary policy making in the future.
The limitations in the depth of analysis found in the last two parts of this book seem to be due to the inadequacy of the discussion provided in the fi rst two parts, which are supposed to lay the foundation for a more thorough discussion. In short, the book does offer a portrait of the country’s monetary policy, but it fails to provide a satisfactory explanation for why the picture looks as it does.
Unlike the fi rst book, the second, TheMonetary Policy Framework and Its
Imple-mentation in Indonesia, is not divided into parts. But it can be viewed as consisting of three broad sections: general theoretical foundations (covered in the fi rst three chapters); monetary policy planning and framework in Indonesia during the tran-sition period (chs 4 and 5); and the infl ation targeting framework (the rest of the book).
The fi rst part is mainly a repetition of material found in the fi rst book. It is shorter and does not cover the more specifi c theoretical background that is needed for the discussion in the subsequent chapters. As expected, this book presents similar problems to those found in the fi rst book. Its fi rst part limits the depth of analysis that can occur in the subsequent chapters.
The second part of the book provides a concise discussion of the monetary policy planning done by Bank Indonesia, and of its monetary policy framework during the transitional period following the fi nancial crisis of 1997–98. This part makes a contribution to the literature on the monetary policy making process in Indonesia.
The third part covers the infl ation targeting framework pursued by Bank Indonesia after the transitional period of monetary policy. It provides a lengthy discussion of the issues, but unfortunately with relatively little reference to the framework adopted by Indonesia. The book’s contribution would have been greater if it had extended the explanation of why Bank Indonesia decided to adopt such a framework, and how the framework was being assimilated into the conduct of macroeconomic policy in Indonesia more generally.
Editorial input into the two books is also rather unsatisfactory, particularly in regard to referencing. Some references mentioned in the text do not appear in the reference lists.
The target audience for the books is not very clear. The discussion is too sim-plistic to be used for deepening understanding of the conduct of monetary policy in Indonesia, but it also covers issues that are too technical to be useful to the general public. The books may at best be helpful as references for those who need some preliminary information about how monetary policy has been conducted in Indonesia.
Arief Ramayandi
Padjadjaran University, Bandung
© 2010 Arief Ramayandi
Ross Garnaut with David Llewellyn-Smith (2009) The Great Crash of 2008,
Melbourne University Press, Melbourne, pp. xv + 256. Paper: A$24.99.
This book, by one of Australia’s most eminent economists, Ross Garnaut, together with David Llewellyn-Smith, is a veritable tour de force. It was written in only six months, just after Professor Garnaut had fi nished the comprehensive Garnaut
Cli-mate Change Review, a gruelling 18-month project for the Australian government. The year 2008 witnessed several serious crises. First, there was a food crisis, which hurt the poor, particularly in the least developed countries. It was followed
by a steep increase in oil prices which hurt all the oil-importing countries. Some-what later the world experienced the global fi nancial crisis (GFC) and the sub-sequent world-wide recession. This turned out to be the most serious global economic crisis since the Great Depression of the 1930s.
There are several aspects to a global economic crisis as serious, damaging and complex as the GFC. This book has succeeded in describing and analysing the crisis in a comprehensible and concise way. The book is divided into three parts: part I describes the boom conditions that preceded the bust described in part II; part III analyses the aftermath of the Great Crash.
In the fi rst part the authors observe that since the early 21st century the world has achieved the most widely based, rapid and sustained economic growth ever experienced. The strong growth in their economies spurred people in what the authors term the Anglosphere (the US, the UK and Australia) to spend more than they earned. When America’s Federal Reserve and other western central banks recognised that the boom was getting out of control, they raised short-term inter-est rates from 2004. However, long-term real interinter-est rates remained low because of the stream of money pouring into US bond markets from surplus economies, notably China, Japan and the resource-exporting countries. The availability of abundant funds from the surplus economies allowed high spending in the defi cit countries, particularly the US, to continue without constraint. Low real interest rates provided a strong boost to housing in the United States, where most mort-gage lending is based on long-term loans at fi xed interest rates.
High immigration levels and population growth in the US, the UK and Aus-tralia also contributed to the strong demand for housing, which led to rising house prices. After the mid-1990s the housing market received an even stronger boost through a shift in perception of home ownership away from dwellings and towards investment. As the housing bubble emerged in the US, credit was made available from the late 1990s to a new class of borrowers, through a loosening of credit standards for low-income people. By 2004 the ratio of these sub-prime loans to new loans was 21%, up from 9% in the 1990s. Although sub-prime loans were also introduced in the UK and Australia, they were less extensive than in the US.
Part 2 discusses the conditions that led to the bust. The US Federal Reserve has recorded the fi rst salient date of the Great Crash as 7 February 2007, when the government-sponsored enterprise Freddie Mac stated that it would no longer buy sub-prime mortgages from mortgage originators. Higher interest rates in response to infl ation concerns triggered asset defl ation, and the circulatory sys-tem of the boom failed, when the ‘shadow banking’ syssys-tem (investment banks, hedge funds, mortgage originators and non-bank lenders), which had transferred capital around the world, collapsed.
The collapse of the global fi nancial system became more serious when Lehman Brothers fi led for bankruptcy in mid-September 2008; this turned out to be the largest bankruptcy in US history. The following day American Insurance Group (AIG), shadow banking’s greatest risk-taking insurance fi rm, also collapsed, lead-ing the Federal Reserve to bail it out several times before nationalislead-ing it.
The collapse in trust in the shadow banking system adversely affected the basic fi nancial operations of the entire global economy. It subsequently led to a reces-sion in world output and trade, as trade fi nance collapsed.
Part 3 explores the aftermath of the Great Crash, and the acceleration of ongoing trends. Although it is likely that the world economy will resume strong growth, the authors argue that the distribution of that growth will be radically different, and heavily concentrated in the successful developing countries, particularly China, India and Indonesia.
The authors have produced an eminently readable and informative book on a very complicated phenomenon that has adversely affected the welfare of many the world over. It should be required reading for anyone interested in the origins, course, impact and possible outcomes of the global fi nancial crisis of 2008. The only issue on which I question the authors’ conclusions is their optimistic assess-ment of the economic prospects of Indonesia, one of only three Asian countries (with China and India) that managed to achieve positive growth following the GFC.
There are three reasons why Indonesia was less vulnerable to the transmis-sion of the GFC than most of its East Asian neighbours. The fi rst is the relatively low share of manufactures in its total exports. Since manufactured exports have much higher income elasticities than primary exports, the external demand for manufactured exports fell sharply during the GFC. The second reason is the rela-tively low share of inter-regional trade – specifi cally in regional product-fragmen-tation industries – in Indonesia’s total trade. The third is Indonesia’s relatively low degree of ‘export-led’ growth. Hence, the contribution of domestic expendi-tures, particularly consumption (both government and household) to growth for Indonesia was larger than for its more export-oriented neighbours. Indonesia was also less vulnerable to the transmission of the GFC because it benefi ted from not having increased its exposure (relative to GDP) to banks in the US and the EU in the decade preceding the crisis. It can therefore be argued that Indonesia’s better performance during the GFC was to some extent more a matter of default than design. However, the Indonesian government’s speedy and skilful response to the crisis, including fi scal stimulus measures, prudent monetary policy and direct cash transfers to the poor, also softened the adverse impact of the GFC.
Although Indonesia’s economic performance during the GFC has been bet-ter than that of its East Asian neighbours, there is no reason for complacency. A worrisome feature of Indonesia’s growth after the Asian fi nancial crisis is that its non-tradable sectors have on the whole been growing more than twice as rapidly as its tradable sectors, including the manufacturing sector. Since the manufactur-ing sector is crucial to fuellmanufactur-ing rapid growth, generatmanufactur-ing employment and reduc-ing poverty, as China’s recent experience has shown, the lacklustre performance of Indonesia’s manufacturing sector does not bode well for its future.
Thee Kian Wie
Indonesian Institute of Sciences (LIPI), Jakarta
© 2010 Thee Kian Wie
Maribeth Erb and Priyambudi Sulistiyanto (eds) (2009)
Deepening Democracy in Indonesia? Direct Elections for Local Leaders (Pilkada), Institute of Southeast Asian Studies, Singapore, pp. xxv + 392.
Paper: S$42.90/US$34.90; Cloth: S$69.90/US$59.90.
The Indonesian government held direct elections for local government heads (pilkada) in 2005 as part of the process of democratisation and decentralisation after the dramatic fall of Soeharto’s New Order in 1998. Since then many scholars both inside and outside the country have paid close attention to how direct elec-tions are affecting the deepening of Indonesian democracy at the ground level. Perceptions of the relationship between pilkada and democracy differ among scholars, however. In this book, readers will fi nd three types of arguments, which sometimes overlap and sometimes contrast with each other.
The fi rst argument – articulated in the introduction by Sulistiyanto and Erb, and in the essays of Hidayat and Subianto – asserts that although direct elections certainly promoted more popular political participation, actual pilkada practices demonstrate ‘potential democratic failure’ (p. 9), owing to rampant money poli-tics, corruption and the continuing dominance of New Order elites. Their view is that Indonesia still falls far short of substantive democracy, and that voters are irrational, with ‘the majority of constituents not yet understanding the impor-tance of political participation in the pilkada’ (p. 142).
The second argument – in the essays of Choi, Buehler and (in part) Hidayat – comments on the same drawbacks of the pilkada as the fi rst, but arrives at different conclusions. These authors question the very assumption, commonly accepted, that the pilkada ultimately promote further democratisation by improving the equity, responsiveness and accountability of local governance. Choi argues that direct local elections ‘have ... contributed to the repositioning of long-established and well-resourced local elites in local political institutions and governance’ (p. 90), rather than enhanced the democratic quality of local politics. Buehler, on the other hand, argues that even entrenched political elites have had a hard time winning elections without strong personal networks at the sub-district level, but leaves aside arguments about whether this will promote democratic politics.
The last argument – in the essays of Schiller, Ratnawati, Sulistiyanto, Hill, Erb, Anggal, Smith and (in part) Subianto – delves deeper into local perspec-tives, analysing how elites, the middle classes and the media view voters and the
pilkada, and how ordinary voters access candidates. It notes that, contrary to the prevailing belief of many elites and the media that voters are irrational and eas-ily subject to money politics and patron–client ties, fi eld evidence indicates that voters are actually motivated by factors other than money politics. The authors show that local cultural factors and a candidate’s leadership style, populist poli-cies, local personal networks and media image are instrumental in shaping vot-ing behaviour.
Mboi and Mietzner highlight other aspects of the pilkada, and differ in their arguments from the standard views on Indonesian democracy. Mboi, the former governor of Nusa Tenggara Timur, sharply criticises not pilkada practices per se
but the decentralisation laws themselves. He makes the cutting remark that the decentralisation policies were ‘piecemeal political action[s]’ rather than parts of
the ‘grand design of a government system’ (p. 43), because the original decentrali-sation law (Law 22/1999) and the amended law (Law 32/2004) refl ect completely different conceptions of a local government system. Mietzner examines the role of the pilkada in relation to the Papuan separatist movement. He argues that electoral competition ‘has exposed internal divisions within Papuan society that, in the long term, could weaken the drive for secession of the province’ (p. 260), whereas direct central intervention against Papuan separatism in the end strengthened Papuan solidarity against the centre. He concludes that the most effective way to keep Papua in the Indonesian union is ‘to expand democratic liberties and eco-nomic opportunities in the province’ (p. 279).
Among the 16 chapters, I particularly recommend the essays of Schiller, Ratna-wati, Sulistiyanto, Hill, Erb, Anggal, Smith, Subianto, Mboi and Mietzner to read-ers interested in Indonesian politics, society, history and culture rather than in political science theory. These authors provide profound insights into the role and signifi cance of the Indonesian pilkada in local socio-political and cultural arenas, rather than simply evaluating the pilkada in relation to general theoretical argu-ments about democracy.
Akiko Morishita
Kyoto University
© 2010 Akiko Morishita
Iem Brown (ed.) (2009) The Territories of Indonesia, Routledge, London and New York, pp. x + 346. US$265.00.
The Territories of Indonesia promises the reader a ‘complete guide’ to the archipela-go’s many regions, and in particular their geography, politics and economics. An introductory chapter provides an overview of the country’s population, religious and ethnic profi le, economy and political history, and is accompanied by an out-line of Indonesia’s government, a timeout-line that spans around 1,600 years of Indo-nesian history and a statistical summary of Indonesia’s area, population and basic economic data by province. Each of the provincial surveys that follow consists of a map, a summary of that province’s geographic and demographic features, and overviews of its history and the structure of its economy.
A survey volume of this kind necessarily has limitations, particularly when dealing with a country as vast and diverse as Indonesia. The historical over-views are the strongest aspect of this work, while its weakest feature is clearly its handling of contemporary politics and government – topics that are dealt with briefl y in the introductory chapter, but which receive little mention in the chapters that follow. The economic sections of the survey chapters (which vary in length and level of detail) are of little utility for those seeking an up-to-date snapshot of a particular province, as most of the data provided pertains to 2007 or earlier, but they do provide readers with a digestible historical overview of the diverse economic structures found in Indonesia’s regions.
Michele Ford
University of Sydney
© 2010 Michele Ford
