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Book reviews
To cite this article: (2004) Book reviews, Bulletin of Indonesian Economic Studies, 40:3, 401-418, DOI: 10.1080/0007491042000231557
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BOOK REVIEWS
Thee Kian Wie (ed.) (2003), Recollections: The Indonesian Economy, 1950s–1990s, Institute of Southeast Asian Studies, Singapore, pp. xv + 276.
Paper: S$39.90/US$25.90; Cloth: S$59.90/US$36.90.
Reading these recollections of former Indonesian economic policy makers is like having a seat in the room as Thee Kian Wie conducts the interviews on which the memoirs are based. That is an experience only few have had at first hand. Col-lected in one place, the memoirs make clear, as Dr Thee and his associates hoped, that extended face-to-face interviews could add significantly to our understand-ing of ‘how policy-makers attempted to solve the economic problems they encountered, which constraints they faced, and what compromises they had to make in order to achieve their goals’.
Readers of the Bulletin of Indonesian Economic Studiesbetween the late 1980s and late 1990s will recall the occasional appearance of these memoirs, most entitled ‘Recollections of My Career’. Thee Kian Wie participated in the planning and conduct of all the interviews, accompanied over time by a variety of colleagues from the editorial board of BIES. It is appropriate that this distinguished historian of the Indonesian economy should now serve as editor of the anthology that brings the memoirs together in one place. He introduces the collection with a short review of the major economic challenges that policy makers faced during the early independence period and the Soeharto era that followed, providing use-ful context for readers not familiar with these earlier years.
What stands out in such a collection? One feature clearly is the strength of the personalities captured in the interviews. There is the prideful wit of the godfather of Indonesian economists, Sumitro Djojohadikusumo: ‘I tend to like writing sweeping statements and leave it to the clever people to worry about whether it is 2.5 or 2.6’. There is the sombre reflection of Subroto on the end of the New Order: ‘I feel very sad about what has been happening in Indonesia since the monetary and financial crisis hit the country in July 1997. The work of the past 30 years has been evaporating before our eyes’. There is also down-to-earth musing by the socialist-turned-businessman Soedarpo Sastrosatomo on his experience in leading a major private firm: ‘We think … we contribute in our own little world to the betterment of things. But it is hard to transfer this model to the whole soci-ety’. And there is earnest speculation by Emil Salim, a year and a half before the fall of Soeharto: ‘In our next stage of development I sense that we will need a leader who places more emphasis on democracy and decentralisation, to give substance to the notion of diversity with unity’. The memoirists all project the strong self-image that is to be expected in a group that filled posts of great responsibility in a large and complex nation.
ISSN 0007-4918 print/ISSN 1472-7234 online/04/030401-18 © 2004 Indonesia Project ANU DOI: 10.1080/0007491042000231557
Also notable is the change that occurred in the preparation of the memoirists for their roles as economic policy makers over five decades. Sjafruddin Prawiranegara, who served as Minister of Finance in early post-independence cabinets, looked back to his training in law in the 1930s and boasted: ‘I had a Western education—I know Dutch perhaps better than many Dutch people. But I never left Indonesia’. A generation later, Mohammad Sadli, Emil Salim, Subroto and Suhadi Mangkusuwondo, all of whom played major roles in government at home and abroad after 1965, are describing their experiences at Berkeley, Harvard and MIT, listing the professors under whom they studied in the 1950s, including some who in later years were to win the Nobel Prize for Economics. One already knows that this generation gap existed, but its significance becomes powerfully clear in the individual recounting.
Do the memoirs tell us more than we knew about Indonesian economic policy making? Not much new is learned about policies in the early years of the Repub-lic; the survivors of that period were too few and too elderly when the interviews began. The volume is especially rich on the Soeharto era from 1966 to 1996. Su-broto and Suhadi describe the roles that they and others played in the student army that fought the Dutch effort to return to power in Java after 1945—roles that enabled them to find common cause with army leaders after 1965. Suhadi recounts how he, as chairman of the student council, recruited Sumitro to become dean of the Faculty of Economics of the University of Indonesia, where they all eventually taught. Sadli describes how they came to become advisers to presi-dent-to-be Soeharto in 1966.
Emil Salim, who was a presidential adviser or cabinet minister continuously from 1966 until 1993, gives the most complete exposition of the views of the group of policy makers known as the economic ‘technocrats’. Their first task was to establish macroeconomic stability, and Salim explains how they did this. There is a valuable account of the decision to end the control of foreign exchange as early as 1967, making Indonesia the first developing country to do so, and estab-lishing an open orientation to external market forces after a long period of inward-looking statist policies. He also discusses the broad consensus that devel-oped early among civilian and military advisers to Soeharto that Indonesia should give priority to agriculture, unlike India and China, which invested heav-ily in capital-intensive industry very early on. The consequences that flowed from these choices for the rural populations of the three countries were enor-mous. Emil Salim candidly expresses the frustration of former economic minis-ters with critics who question whether the government was ever seriously committed to equity in the process of development. When oil income rose in the 1970s, much of it was directed also to the rural population. As he sees it, such decisions empowered rural people.
Abdul Raoef Soehoed, who was a major figure in industrial policy during much of the 1970s and 1980s, provides a wide-ranging exposition of a second group of economic policy makers, the engineers who called for the setting up of basic industries to make use of available natural resources. This school was often in opposition to the technocrats, who failed to develop a strategy of industriali-sation of their own. When the private sector is unable or unwilling to act, these engineers argued, it is proper for the state to act. Their position became a realis-tic choice with the rise of oil revenues by the late 1970s. Soehoed goes on to
cuss some of the issues that followed from this approach, including the manage-ment of state-owned enterprises, the pros and cons of privatisation, and the use of subsidies to encourage indigenous entrepreneurs to push the industrialisation process downstream. Soehoed also expresses his impatience with the economists who counselled caution when presented with major capital investment propos-als, leaving some major opportunities to be taken up by other countries.
Salim and Soehoed together lament the failure of both groups to do more to train a younger generation of Indonesians to replace themselves.
What is missing from this anthology? Widjojo Nitisastro and Ali Wardhana, who served as Soeharto’s chief economic strategist and chief financial guardian respectively, were still advising the government when the project came to an end with the onset of the Asian monetary crisis in 1997, as a result of which neither was interviewed for this series. One also notes the absence from the collection of any Sino-Indonesians, except in the person of its indefatigable editor. And only the editor is looking back at a time when it is possible to begin to consider what went wrong to cause the economy to plummet so much more deeply than others in the region in 1997–98. But one does not wish to appear ungenerous. The mem-oirs as they stand constitute valuable guides to the thinking of key figures at strategic points during half a century of Indonesian economic history. I read them again from start to finish in just two sittings, and I expect other readers of this journal will do the same.
John Bresnan Columbia University
World Bank (2003), Decentralizing Indonesia: A Regional Public Expenditure Review Overview Report, World Bank Report No. 26191-IND,
World Bank, Jakarta, available at <www-wds.worldbank.org>.
Indonesia was once known as the largest country in Asia managed under a strong centralised government. Suddenly in 2001 it was transformed into one of the world’s most decentralised countries. This report analyses various problems aris-ing from this ‘Big Bang’ transformation, includaris-ing those related to the two decen-tralisation laws (Nos 22 and 25/1999) and their associated regulations; to unbalanced revenue and expenditure assignments; to establishing accountability; and to political battles between government officials at different levels. The report also discusses near-term challenges faced by Indonesia in the new era of decentralisation.
The first of the five chapters discusses why Indonesia adopted the ‘Big Bang’ approach—a radical decentralisation concept. According to the report, the main reason was a build-up of dissatisfaction with decentralisation policy on the part of many regions, in particular the resentment of resource-rich regions which believed that the central government had ‘stolen’ their natural resources. An additional reason was that the parliament, mainly with an eye to gaining popu-larity, agreed to a fiscal decentralisation scheme that transferred a significant amount of funding from the central government to regional governments. Hence,
the central government had no choice but to transfer more responsibilities to the regions.
This report implicitly argues that Indonesian decentralisation policy does not achieve the common decentralisation objective of bringing public services closer to the people; nor does the basic design adhere to the principle of ‘money follow-ing functions’, since the devolution of functions was driven by financial decen-tralisation, rather than the reverse. These arguments are very difficult to prove, however.
Chapter 2 discusses Law No. 22/1999, which sets out the basic rules for decen-tralising government functions and authority. This chapter identifies three major problems. First, Law No. 22/1999 does not spell out local government (district and municipality) functions, but merely specifies the residual functions of the centre and the province. This has left many interpretations open, and created overlapping activities among levels of regional government. Second, regulations to support the laws were not available when implementation of Law No. 22/1999 began. This led to confusion in many regional governments about how to imple-ment the law properly. Third, a minimum standard of services has never been for-mulated. There is thus no benchmark for judging the quality of services provided by local governments. This conclusion is supported by the results of a field sur-vey, which show that individuals and businesses see no improvement in the qual-ity of local public services; moreover, decentralisation has left many business people facing new charges for local government licences.
The rest of chapter 2 focuses on the local civil service and the reorganisation of local government. What this chapter does not deal with is the question of the appropriate authority for service delivery; for example, whether the centre or the provincial or local government should be responsible for providing higher edu-cation and training.
Chapter 3 discusses Law No. 25/1999, which sets out the design of the new intergovernmental fiscal relationships. According to this chapter, there are four elements of Indonesian fiscal decentralisation that distinguish it from the models adopted elsewhere. First, although it has only recently implemented decentrali-sation, Indonesia is one of the few countries in the world to adopt such a compre-hensive set of fiscal decentralisation instruments, including a general purpose grant (DAU), a specific purpose grant (DAK) and a natural resource sharing arrangement. Second, each fiscal decentralisation instrument requires regulations and a complicated allocation formula. Third, a huge proportion of central govern-ment transfers are used by local governgovern-ment without any specific guidelines or assistance from the centre, the DAK being the exception. Fourth, each type of fis-cal instrument has a different impact on the economy, in terms of lofis-cal fisfis-cal capacity and fiscal equalisation across regions. This chapter provides very informative data, enriched by quantitative analysis, to show the impact of trans-fers on inter-regional financial disparity.
Chapter 4 describes the challenges of the Indonesian tradition of national plan-ning. Despite its decentralisation policy, the central government continues to pre-pare a national plan, known as Propenas (Program Pembangunan Nasional, the National Development Plan), which must be followed in any planning done by regional governments. However, it is unclear what would happen if a region
decided largely to ignore the Propenas in its planning. In the end, there appears to be no fiscal consequence at all for a region that does not follow the national planning mechanism. The report seems to challenge whether Indonesia still needs a national plan, but unfortunately there is no further elaboration of this interesting question.
Chapter 5 deals with the difficult issue of local accountability. Unexpectedly, it reports that audits by the Supreme Audit Authority (BPK) show financial accountability to be stronger in the regions than at the centre. Furthermore, results from a survey show that while citizens do believe there is a significant amount of corruption in their regional governments, they consider central gov-ernment officials to be the most corrupt.
I found this report highly informative, and commend it to those interested in understanding Indonesian decentralisation policy.
Raksaka Mahi University of Indonesia
Mark Turner and Owen Podger with Maria Sumardjono and Wayan K. Tirthayasa (2003), Decentralisation in Indonesia: Redesigning the State, Asia Pacific
Press, Australian National University, pp. 181. A$38.00.
Indonesia’s 2001 ‘Big Bang’ decentralisation was rapidly implemented and, when contrasted with the preceding decades of highly centralised rule under the New Order, radical. Much like the closely associated ascendance of electoral democ-racy, realised in the 1999 and 2004 national elections, the transition to decentrali-sation unfolded far more smoothly than many sceptics would have predicted. Yet the full ramifications of these reforms for improved governance in Indonesia at the national and local levels remain open to question.1
The book provides an engaging chronicle of the policy context and process associated with the emergence of the new legal framework, particularly its legal, administrative and political contours. Sympathetic to the overall decentralisation thrust to date, the authors bring out some of the major challenges for consolida-tion of the framework, and its prospective developmental gains. The decentrali-sation framework—as embodied by Laws 22 and 25/1999 on governance and fiscal balance—was forged and implemented on a remarkably short timetable, ultimately by a small group of highly engaged bureaucrats, but with limited pop-ular participation.
In retrospect, many observers will no doubt wonder whether a more gradual and broadly deliberated decentralisation would have been preferable. Alterna-tively, one might ask whether a more gradual process would have been feasible, given the context. The book underscores the unique window of political upheaval that defined the process. The historical circumstances—including the previous decades of still-born decentralisation initiatives and pent-up demands for reform—probably did not offer significant alternatives. At the root of the ensuing decentralisation framework were Indonesian political considerations and actors,
and at least some national legacy of decentralisation thinking, coming to a head with the spectre of national disintegration and the desire for reform.
Although rapid implementation undoubtedly strained existing capacities, it remains debatable whether many parts of the central bureaucracy (and sceptical local counterparts for that matter) would have availed themselves of any extra time to strengthen strategic implementation measures or enhance bureaucratic coordination. Many of the changes undoubtedly remain unpopular in certain quarters, including central bureaucracies that saw their power, prestige and resources curtailed. At the margin, the time-bound implementation of the decen-tralisation probably maintained a degree of momentum that averted gridlock to the process.
While readers can conclude that the first phase of Indonesia’s decentralisation progressed remarkably smoothly, with some commendable features in the frame-work, the ensuing phase will necessarily be more contested, more complicated on the ground, and probably generally ‘messier’. The fact that the making of Indo-nesia’s decentralisation policy had ‘considerable continuity with the New Order style policymaking, in which top-down policy directives were issued by the cen-tral government for implementation across the archipelago’ (p. 22), potentially presages some of the more fundamental weaknesses the policy must overcome in the future. Moreover, some of the structural problems of late New Order policy making, including rent-seeking and lack of accountability, were themselves rea-sons for reformers to embrace a more radical tack of decentralisation.
The effective implementation of decentralisation will, paradoxically, require a stronger, if less encompassing (and reformed) centre. Various national institu-tions will need to ensure that policy making effectively mediates among, and ultimately coordinates, various contesting interests as the decentralisation framework evolves. Contradictory regulations in such areas as the civil service, themselves reflective of incomplete or contested areas of reform, will need to be addressed to avoid undermining the prospect of better governance and service delivery through decentralisation. At the same time, central oversight will be critical to ensuring that regional autonomy is not simply a licence for transgres-sions on the part of local bureaucrats and elites, especially in a context where downward mechanisms of accountability remain weak or incomplete. While developments in the latter arena remain critical, the evolution of the overall decentralisation policy framework and the centre’s ability to implement it effec-tively are equally paramount. As echoed by the subtitle of the book, Redesigning the State, it remains to be seen how deep the transformation is in this respect of the old centralist political and bureaucratic state legacies, once, so to speak, the initial bang’s dust has settled.
At the time of writing, revisions to the decentralisation framework are being deliberated by the national parliament (DPR), after earlier attempts at revision by the executive had to be retracted in the face of strong opposition. Ideally such bodies as the new Regional Representative Council (DPD) can now provide the requisite institutional capacity to compensate for some of the early deliberation deficits. Whether the prospects of better governance at the national and local lev-els will be realised—and under what conditions—will only become clear over time. In the interim, it is to be hoped that these developments will prove the
ject of much further good analysis, which will in turn feed back into the process of decentralisation design and implementation.
Kai Kaiser2
World Bank, Washington DC Notes
1 See, for example, the recent volume by Richard Robison and Vedi Hadiz, Reorganising Power in Indonesia(RoutledgeCurzon, 2004), and the limited degree of potential reform in fundamental governance outcomes flowing from electoral democracy.
2 The views reflected here are those of the reviewer, and not of the World Bank.
Sven Wunder (2004), Oil and the Fate of the Forest: A Comparative Study of Eight Tropical Countries, Routledge Explorations in Environmental Economics,
London, pp. 256. Cloth: £65.00.
Sven Wunder has produced a valuable book that will help economists under-stand the environmental effects of macroeconomic policies, especially deforest-ation. As a book on economics, it may not reach many foresters, geographers and environmentalists, though its plain language aims to help them understand macroeconomic influences on deforestation and land use change.
Wunder’s core hypothesis is that ‘forests in oil-exporting tropical countries tend to face fewer pressures for conversion and degradation than forests in non-oil-producing countries’. Over time, these ‘oil countries’ face lower forest loss and degradation pressure during boom periods than during bust periods (p. 4). Wun-der details the links between ‘Dutch Disease’ (economic distortions due to a financial windfall such as an influx of oil wealth) and land use changes, forest loss and forest degradation (p. 43).1Straightforward explanation of the linkages
allows non-specialists to understand that mineral export wealth influences com-petitiveness (exchange rates, relative prices), which influences both agricultural production and commercial timber production, which in turn affect land use and forest loss and degradation (p. 340). Wunder also presents an impressive amount of data and history that support the argument in five primary case study coun-tries (Gabon, Venezuela, Cameroon, Ecuador and Papua New Guinea) and in three secondary case studies (Mexico, Nigeria and Indonesia).
Most of the cases confirmed the core hypothesis, at least in relative terms: ‘oil wealth reduces pressure to degrade and convert forests’ (p. 359). Though Wun-der does demonstrate these effects with statistically meaningful results for the five primary cases, we should probably add ‘other things equal’ to the core hypothesis, since results vary widely among the eight countries, and many other important factors are at play. In particular, if governments spend windfall rev-enue in ways that damage forests, they can easily swamp the forest-benefiting effects of the Dutch Disease phenomenon.2Wunder claims that the policies that
mattered most were road building, trade policies, spending on urbanisation, and management of the exchange rate. Relatively less important were resettlement policies and direct spending on agriculture, forestry and conservation.
Of the eight countries studied, Indonesia3had the highest (or nearly the
high-est) land area, GDP, population and long-term economic growth rate, but nearly the lowest GDP per capita and population growth rate. In terms of oil wealth, Indonesia had among the highest absolute windfalls, but among the lowest per capita. Indonesia fits reasonably well with Wunder’s general observations about the political economy of oil countries. They have greater autonomy to pursue and pay for specific development policies (guided or misguided). Central govern-ment power increases, while accountability decreases (because the governgovern-ment is not dependent on tax revenues). Provinces holding mineral wealth can contest central power, and this can lead to conflict or separatism. Finally, Wunder notes that oil countries tend to be corrupt.
During most of the period of study (1970–2000), Indonesia maintained fiscal discipline, promoted agriculture and adopted protective currency devaluations. So Indonesia had a ‘mild and tightly managed version of the Dutch Disease’ (p. 315) and should not see substantial forest-conserving benefits of that disease in its full form. For example, Wunder shows that Indonesia’s repeated rupiah devaluations helped to restore competitiveness quickly in the agricultural sector, thus diminishing the impact of the Dutch Disease, and reducing the potential for indirect forest-conserving benefits. Wunder concludes that Indonesia’s approach has been, in general, good for the economy but bad for the forests. Still, he finds that Indonesia probably provides relative confirmation(p. 333) of the core hypothe-sis. With little or inconclusive data on pre-boom deforestation, Wunder does not overstate these results, however.
For countries where Wunder was able to confirm the core hypothesis (e.g. Gabon), oil wealth played a significant role in the economy. For larger, more diversified economies, such as Indonesia, the effects of the oil boom and bust cycles were relatively smaller and the roles of other factors greater, possibly masking the relevance of the ‘core hypothesis’.
Wunder’s overview of macroeconomic linkages provides important under-standing. Still, there are specific local features in any country that do not conform. Wunder notes several characteristics that make Indonesia relatively unusual among the eight country studies. For example, it did not have significantly urban-biased policies, but did have a large labour-intensive urban manufacturing sector that depended on a competitive rupiah to absorb labour. Further, forest-based industries and estate crops are more important causes of deforestation in Indonesia than in any other case study (p. 321). Agricultural expansion as a cause of deforestation was minimised by the intensification of rice cultivation (p. 320). There are also many complex and contradictory influences on forest cover in any time period. For example, Wunder notes (p. 319) that after 1997 economic col-lapse reduced support for road construction, benefiting forests but, at the same time, political crisis reduced authority to control exploitation, to the detriment of forests.
Wunder introduces some relative measures of deforestation that help us think differently about Indonesia. For example, in per capita terms, Indonesia is rela-tively forest poor in comparison to other countries in the study. Though average annual forest loss is relatively high, forest loss per capita and deforestation per unit GDP are only moderate. But Indonesia’s diversity confounds comparison through ‘averaging’, when one considers the disparity between people-rich,
forest-poor Java (like Nigeria?) and the forest-rich, people-poor Outer Islands (like Gabon?).
Sven Wunder’s new book identifies long-term structural trends in the way resource extraction and price cycles affect land use through promotion of agricul-ture and exportable products. It does not offer specific prescriptions for reducing forest destruction, but some general guidelines that take into account broad macroeconomic issues, not just direct forest-influencing factors. This is a reason-able approach, given the diverse and local factors in each country that contribute to its ‘fit’ with the core hypothesis. In Indonesia, we can hope that this book will help to frame a larger debate about how overall policy-enabling conditions affect forest outcomes, not just specific forest sector policies such as establishment of a cartel or an export ban.
Wunder offers two brief win–win policy recommendations to those who wish to preserve forests or slow their rate of loss. The first is fairly standard: manage oil rents to support urbanisation and maintain macroeconomic stability (reduce short-term fluctuations, provide long-term certainty). The second will be contro-versial in some circles: liberalise trade in sectors where land demand competes directly with forests.
Timothy H. Brown USAID/NRM (Natural Resources Management) III Project, Jakarta
Notes
1 ‘Dutch Disease’ refers to the economic effects of (windfall) earnings from an export commodity boom such as an oil boom: the government increases public spending, which raises wages and demand, which benefits sheltered, non-traded sectors of the economy that can grow and raise prices, and undermines the traded sectors, which are in direct competition with foreign products and cannot raise prices. The traded sectors are squeezed between rising (domestic) input prices and exchange rate appreciation (making them less competitive abroad), so they decline (or expand more slowly). In the Dutch case in the 1960s, manufacturing for export declined. In most developing coun-tries, where the traded sectors produce agricultural commodities, reduced investment in or expansion of these sectors can be good for the forests.
2 In Ecuador, for example, forest loss was high during both boom and bust, because of policies supporting expansion of cattle production.
3 Indonesia was a secondary case study; apparently, it lost its place among the primary case studies because of the ‘highly complex and contradictory situation’ of land use and forest cover data.
Christopher M. Edmonds (ed.) (2003), Reducing Poverty in Asia: Emerging Issues in Growth, Targeting and Measurement, Edward Elgar, Cheltenham, pp. 384.
Cloth: £69.95; Paper: £29.95.
This is a rich collection of papers by distinguished authors. The book’s three broad themes are: macroeconomic questions relating to poverty reduction efforts in Asia; the importance of targeting anti-poverty interventions at particular sec-tors or demographic groups; and issues of poverty measurement as applied to selected Asian nations. As the 15 papers were presented at a forum held in Feb-ruary 2001, some of the questions covered are no longer ‘emerging issues’. Nev-ertheless, the book offers intriguing challenges to existing poverty reduction policy approaches. In this short note, I will focus particularly on the discussion of anti-poverty targeting and poverty measurement, and compare the experience discussed with the problems faced in Indonesia.
Following the macroeconomic section, the second part of the book, on the tar-geting of anti-poverty interventions at particular urban and industrial sectors, looks at the role of information and communication technology (ICT) in develop-ment and poverty reduction in the Asian region. Sanjaya Lall reviews the techno-logical aspects of manufacturing competitiveness in recent years and the strategies adopted by leading East Asian countries. He argues that a combination of attaining competitiveness and upgrading technical structure was necessary for sustained income and employment growth. Both Lall and Randep Sudan, who examined the role of ICT in Andhra Pradesh, conclude that technology develop-ment offers valuable opportunities for application in poverty reduction efforts. However, neither paper provides systematic evaluations that offer proof that the high-cost investment in technology will indeed give the ‘best bang for the buck’ in reducing poverty. Faced with tight budgets, developing countries need to allo-cate their poverty alleviation funding cautiously to policies and programs that give the best outcomes. The problem of designing a poverty reduction strategy is not lack of innovation, but that there are too few systematic studies of what inno-vations work best in reducing poverty.
The experience of poverty targeting programs in Indonesia illustrates the need to learn what works. The types of poverty alleviation programs chosen are often not aligned with what the poor need most. Current schemes rely too heavily on ineffective transfer mechanisms, such as rice and kerosene subsidies, that absorb much of the poverty alleviation budget.
Another impediment to achieving effective targeting in Indonesia is the high cost of implementation and leakages. Administration of centrally owned pro-grams such as the Raskin (‘rice for the poor’) subsidy is costly and ineffective. Past experience of safety net programs indicates that local governments have not been accountable for ensuring that benefits get to the right people. Alatas and Pradhan (2003)1found that 78% of errors in the targeting of Social Safety Net (JPS)
scholar-ship programs occurred at the local level, while the remaining 22% were due to poor allocation of funds from the central government to districts. These findings demonstrate the need to build into the system of allocation incentive mechanisms for pro-poor spending, policies and programs at the district level.
The third part of the book explores the measurement and characterisation of
poverty in Asian and Pacific countries. Kaushik Basu proposes changing the def-inition of the poor from one based on absolute income-metric poverty to one based on relative poverty. He argues that because quintile income is likely to cor-relate with other non-economic indicators, policies should focus on assisting indi-viduals whose income places them in the lowest quintile.
However, the Indonesian poverty profile suggests that quintile income cannot be used as the sole or lead proxy of multi-dimensional poverty in Indonesia. The 2002 National Socio-Economic Survey (Susenas) shows that poverty has declined to around 18%. But when the concept is expanded to include all the dimensions of human wellbeing—adequate consumption, education, health, and access to basic infrastructure—poverty is still a major problem experienced by half of the population. Although expenditure-poor people, a group closely correlated with individuals in the lowest quintile, have a tendency also to experience other kinds of deprivation, other dimensions of deprivation are far from being perfectly cor-related with quintile poverty.
Measurement of poverty thus must cover many dimensions. Approaches to aggregating measures of the different dimensions of poverty include using a wel-fare function and a composite index such as the human development index. However, choosing the appropriate weights for aggregation has proven a difficult task, with current practice generally assigning arbitrary (usually equal) weights to each component. The book does not cover this important issue of measuring multi-dimensional poverty.
Another dimension of poverty that is receiving attention in the literature is vul-nerability to poverty, defined as the risk that a household or individual will expe-rience an episode of poverty over time. Measuring a dynamic concept such as this is difficult and requires comprehensive panel data that help to quantify the volatility of the poverty experience. In Indonesia, vulnerability to poverty remains a big issue. People and households move into and out of poverty fre-quently. The huge difference between the Indonesian national poverty headcount of 18%, currently at approximately $1.55 PPP (purchasing power parity) a day, and the $2 PPP poverty headcount of 53.4% indicates that a large proportion of the population is ‘near poor’ and therefore highly vulnerable. This book falls short in addressing the issue of poverty vulnerability.
Instead, it dedicates a chapter to discussing the trade-off between defining the national poverty line or lines that most accurately measure poverty across the dis-tinct situations found in a country (specificity), and defining poverty lines that provide a basis for comparing poverty incidence across geographic areas and time (comparability). Comparison of specificity and comparability is indeed an interesting issue, but an old one. Measuring poverty for finer targeting has replaced the trade-off question as the current issue in poverty measurement, especially for Indonesia, which has embarked on decentralisation.
Poverty mapping offers an exciting new development in poverty measure-ment. This recent advance, in combination with comprehensive data sources, has made it possible to target expenditures at a geographic area as small as a village. Geographic targeting, using poverty mapping to identify finer poverty levels, has more to offer Indonesia.
In conclusion, although some of the issues it covers are no longer new, and are not the most pertinent poverty issues faced in Indonesia, this book clearly
tributes to the empirical understanding of poverty in Asia, and can spur debate and better understanding in designing poverty reduction strategies in Asia. It will certainly be important reading for policy makers and scholars of develop-ment economics and Asian studies.
Vivi Alatas World Bank, Jakarta Note
1 Alatas, Vivi, and Menno Pradhan (2003), Geographic Targeting in Indonesia, World Bank, Washington DC, mimeo.
James J. Fox and Dionisio Soares (eds) (2003), Out of the Ashes: Destruction and Reconstruction of East Timor, Australian National University E Press, Canberra,
pp. 304. A$24.95; online document available at no charge from <epress.anu.edu.au/>.
This valuable book was published by Crawford House in 2000, and reprinted in 2003 by ANU E Press, making it available electronically at no cost to a wide audi-ence. Its 18 chapters by academics, political specialists, bureaucrats and others cover the history, politics, administrative arrangements, social anthropology and prospects for the future of the new nation of Timor L’Este.
James Fox traces the history of Timor and surrounding islands, documenting the fragmented authority and shifting political alliances of the Dutch, Portuguese and local parties, and making fascinating references to groups including the ‘Black Portuguese’, Atoni and Chinese traders. Terence Hull assesses the new nation’s demography, and Gavin Jones examines education and human resource develop-ment, including the continuing language issue. Dionisio Babo Soares addresses political developments leading to the referendum on 30 August 1999, while Grayson Lloyd scrutinises the diplomatic history, and especially the manoeu-vrings from 1998 under Indonesia’s President Habibie which led to independence. Fernando de Araujo intriguingly recalls the discussions of the CNRT (Con-selho Nacional da Resistencia Timorense) leading up to the vote on independ-ence. Catharina Williams describes her work as an electoral officer of UNAMET (United Nations Mission in East Timor) preceding the large and orderly turnout for the referendum, and UNAMET’s Ian Martin deals with the referendum and subsequent violence. Harold Crouch covers Indonesia’s formulation of East Timor policy and the interactions with this policy of the Indonesian military (TNI). He points to the TNI’s close relations with the pro-Indonesian militia, and explores its possible connections with human rights abuses and destruction. John Haseman complements Crouch’s discussion, while suggesting that few of the armed forces were responsible for planning the atrocities.
Alan Dupont addresses strategic questions, emphasising the need for the bet-ter ties with Indonesia that have subsequently been achieved. Januar Achmad vividly recalls the atmosphere of fear in both East and West Timor surrounding the evacuation of refugees. This leader of an Indonesian NGO recounts the hor-rific experiences of these displaced people, albeit countered in West Timor
through government and popular assistance. He graphically reports militia atroc-ities, also describing an incident near Kupang entailing a menacing inspection by Aitarak militia of a car in which he and an Australian nun were travelling, and frighteningly recalling a similar encounter by this reviewer.
Fiona Crockford looks at the East Timorese ‘diaspora’ in Sydney, covering the 1,500 mainly young persons who were asylum seekers in 2000, and echoing their perspectives on eventual return to their homeland. Andrew MacIntyre usefully analyses ‘an international strategy’ for East Timor, highlighting necessary rela-tionships with the UN, Indonesia, Australia, Japan, Portugal and other countries, and exploring underlying needs for economic and security assistance. He advo-cates ‘quiet bargaining that captures the attention of international bureaucrats and politicians’, suggesting that the ‘searing criticism that captures the attention of the … media’, and has been associated with Ramos Horta, is unlikely to be per-tinent in future (p. 226).
Peter Timmer canvasses questions for the United Nations team then beginning to manage East Timor, while Sarah Cliffe reports on the ‘Joint Assessment Mis-sion’ of foreign specialists and East Timorese which looked in 1999 at priorities in reconstruction. João Mario Saldanha identifies fiscal issues facing the new nation, while Dionisio Soares considers the future, emphasising difficulties such as polit-ical feuds, cultural and legal challenges, language and human rights problems, and land rights questions, where he urges ‘re-institutionalisation’ of the tradi-tional land tenure system.
While the book is dated, its coverage of the spheres mentioned is excellent. It is particularly helpful in its examination of the historical, social and political back-ground, in its account of early reconstruction, and in its consideration of the new country’s international strategies. Although some topics have been addressed in other books and papers, they are usefully brought together in this volume.
But the work disappoints in barely addressing key problems of reconstruction, especially those connected with realising the potential of agriculture. Here an expansion in coffee planting and coffee yields is desirable, with the ‘organic’ nature of East Timorese coffee likely to earn substantial premia. There is scope as well for building up cattle, and rice and other crop production, mainly for export to Indonesia, while much can be done to improve subsistence agriculture, which has a direct impact on most people’s livelihoods. The volume is deficient too in hardly mentioning the challenges of health development, the major difficulties of infrastructure improvement, and the debate over Timor Gap oil as a source of fur-ther revenue. João Saldanha refers to the possibilities of ‘casino tourism’ (p. 251), but little else is said about tourism in general.
The book’s publication in the first flush of enthusiasm for Timor L’Este’s future may explain its neglect of problems that had not really crystallised in 2000. Now four more years of independence have elapsed, with the UN departing as admin-istering power in 2002 and with less external aid than expected being available to support the economy. The political and language disputes have continued with lit-tle sign of resolution and, although there have been advances in education, health and infrastructure, these have been small. The pace of agricultural development has been slow, and the expansion of tourism, on which high hopes are placed, does not appear substantial. The debate on Timor Gap oil has raged fiercely, and now it seems that, following talks between Ramos Horta and Alexander Downer
in August 2004, Australia may allocate reasonable tax revenues from oil to East Timor. All these and other neglected issues, together with those already treated in this book, deserve inclusion in a foreshadowed ‘next volume’ (Preface, p. x).
Parts of the book suggest that the future of this tiny, impoverished country on the edge of Southeast Asia is uncertain and difficult. Yet James Fox cites one fea-ture that will surely stand the new nation in good stead. This is the exceptional ‘resilience’ of the people, which ‘has been evident throughout their history … and will continue to play an important role in the development of East Timor’ (p. 23). It is exhibited in the fashioning by local peoples of amazingly robust farming sys-tems for their dry and uncertain weather, and in the tying down for several years, following the 1972 invasion, of massive Indonesian forces by the tiny Falintil (Forcas Armadas de Timor Leste) guerrilla units. Despite adverse economic prog-noses, such resilience will be a major asset in years ahead.
Colin Barlow Wolfson College, Oxford, and ANU
Kathryn Robinson and Sharon Bessell (eds) (2002), Women in Indonesia: Gender, Equity and Development, Institute of Southeast Asian Studies, Singapore, pp. 284. Paper: S$39.90/US$24.90; Cloth: S$64.90/US$39.90.
This book is an outcome of one of the Indonesia Update conferences held annually at the Australian National University. The 2001 conference marked a significant moment in post-Soeharto politics, with a woman appointed president for the first time. Megawati’s shift to power was a time of hope, after bitter disappointment with Abdurrahman Wahid’s brief presidency. The 20 articles highlight this hope, mingled with an awareness of the complex and often contradictory social, eco-nomic and political conditions that mutually influence the spaces available for women. The collection, introduced by the editors’ comprehensive overview of the issues, offers a wide variety of empirical analyses of closely inter-related themes. The two chapters by Sen and Aspinall concentrate on the implications of elite politics for the symbolic and practical meanings of gender politics. The role of Megawati is seen primarily as a symbolic manifestation of the politics of represen-tation. She is viewed by many as lacking in political leadership and particularly silent on women’s issues, but by others as a symbol of women’s role in the public sphere and of opposition to Islamic prescriptions of womanhood. Some interpret her silence as ‘strength’ (Bianpoen). A review of the economy by Mari Pangestu (appointed trade minister in the new SBY government in October 2004) analyses the challenges Megawati’s government faced after a brief period in office.
Parawansa’s chapter points to the change in the name of the Ministry for the Role of Women to the Ministry for Women’s Empowerment in 1999 as under-lining the reformist Habibie government’s determination to deliver more equi-table treatment for women at various levels of society. Parawansa and Surbakti introduce the catchword ‘gender mainstreaming’ (bringing women into the cen-tre of public institutions and social welfare programs). One result of this is reflected in women’s attitudes to contraception (Hull and Adioetomo): a policy at
first coercive in nature became more voluntary as women participated in family planning programs. However, Surbakti cautions that gender mainstreaming will never be properly implemented without careful monitoring and data gathering. Oey-Gardiner looks at the still low representation of women in cabinet and high public office, arguing that this is balanced by the more visible presence of the women’s movement in highlighting violence against women and the effects of the crisis on the wellbeing of the nation’s children. Saparinah Sadli points to the devel-opment of Kajian Wanita, a research centre at the University of Indonesia, and the Convention Watch Working Group established in 1994, as showing that the pub-lic spaces available to women had begun to open up before Megawati’s appoint-ment.
Other authors look at local contexts, providing insights into both the structures that constrain women and the spaces that women create within them. Marcoes discusses local initiatives by gender-sensitive Islamic organisations and Muslim women’s groups, which have tried to redefine ideologies about women and to reduce violence against them, particularly in the domestic sphere. She admits that these initiatives are still small in number and subject to pressure from Islamic political organisations. Taking a more developmentalist approach, and focusing on East Nusa Tenggara, Gondowarsito stresses that without women’s involve-ment, community development projects would never reach their targets.
Discussing the link between regional autonomy and the adoption of syariahlaw in Aceh and other regions, Noerdin underlines the social marginalisation of women through regulations on their conduct outside the home and their dress. In contrast to the accounts of limitations placed on women by legislation or discrim-inatory policy, Boellstorff and Hatley show the spaces created for them by cultural images in the media, theatre and literary work. Their two chapters illustrate the diverse paths taken by artists in addressing issues previously considered taboo.
Cameron and Hugo discuss the economic dimension of women’s position. Cameron shows that women have been somewhat sheltered from the crisis, unemployment having risen less for them than for men. However, her argument rests on her view that women work primarily in the informal sector, which is con-sidered less affected by economic fluctuations. A conspicuous response to the cri-sis has been the migration of women overseas. Hugo analyses the differentiated character of women’s transnational migration in terms of how they migrate, where they migrate from and the gendered nature of such migrations. The inter-national migration of women has created dilemmas in family relations and house-hold division of labour. This is poignantly reflected in the chapter by Jones: with the trend towards smaller households, the rising proportion of young women who are household heads, and the declining number of household members available for care of the elderly, create their own problems for society in general.
The depth of the empirical analyses varies. The book would have benefited from more conceptual grounding, particularly regarding gender politics, citizen-ship and local identities, and some international comparisons. Nevertheless, it provides a useful overview of the condition of Indonesian women and the inter-ests of scholars in this field.
Ratna Saptari International Institute of Social History, Amsterdam
Thomas R. Leinbach (ed.) (2004), The Indonesian Rural Economy: Mobility, Work and Enterprise, Institute of Southeast Asian Studies,
Singapore, pp. xvi + 350. S$39.90/US$25.90.
This is a useful volume on an important theme in Indonesian economic develop-ment: the changing role of rural non-farm employment, enterprise and entre-preneurs. Although the title is somewhat of a misnomer—the book focuses only marginally on agriculture, and stretches the non-farm definition broadly to include international migration—the connections with an earlier literature of the 1970s and 1980s relating to agricultural and non-farm growth will be recognised by many BIESreaders.
The chapters were written specifically for the book from a range of theoretical perspectives and discipline backgrounds (especially economics, geography and planning). In all there are 12 chapters, an informative introduction and conclusion and one longer case study contributed by the author, and nine other chapters. The chapters are organised into three parts: an overview of the ‘Development Context’ (really the presentation of material collected at a national level); case studies of entrepreneurship, gender and mobility (both international and inter-regional); and case studies focusing mainly on rural non-farm enterprises.
It is not a volume for beginners. Several chapters deal with quite specialised topics and literature, one by Rachel Silvey on gender and non-farm enterprise in West Java and another by the editor, Leinbach, in particular. Nevertheless, the papers in the first part do provide an informative overview of national trends and policies. Aside from the editor’s introductory essay, Anne Booth sets the scene with a discussion of national trends in agricultural and non-agricultural employ-ment before the crisis. Peter van Diermen takes a sceptical look at national policies towards small and medium enterprises, and Robert Rice examines trends in cot-tage and small-scale employment and value added, including an instructive examination of (surprisingly quite successful) micro credit policies in recent years. My favourite chapter comes in the second section: written by Graeme Hugo, it deals with international labour migration out of East Nusa Tenggara, with a focus on the district of East Flores. This is one of the most interesting papers I have seen on the social and economic impact of migration on poor ‘sending’ regions in Indonesia, or indeed anywhere in Southeast Asia. As is often the case, it details some important demographic and social problems (such as marital breakdowns in a region where males dominate outmigration, mainly to Sabah). But at the same time, Hugo draws attention to very substantial economic gains for the region of East Flores from international migration, which has both circular and permanent elements. Remittances drive the latter, much of them spent locally, although there is little impact back home in the form of new skills learnt abroad. Each of the other case studies raises some interesting issues, although these are more for the specialist than the general reader. Thus one chapter analyses determi-nants of the ‘propensity to stay’ (Doen, Gorter, Nijkamp and Rietveld), another looks at ‘fungibility’ or flexibility of rural households and enterprises in South Sumatra (Leinbach) and a third at the growth of the rural rattan industry in Cire-bon (SMERU Institute). One other chapter (by Hugh Evans) looks at some of the successes and failures of an action policy program for improving rural–urban
ages with the goal of assisting non-farm enterprises. I became a little frustrated by the lack of any common theme that might tie these chapters together, besides the broad subject matter of non-farm enterprise. This is especially the case because the authors use different data sets and often examine developments at different time periods, some pre- and some post-crisis.
Chris Manning ANU
Ian Coxhead and Sisira Jayasuriya (eds) (2003), The Open Economy and the Environment: Development, Trade and Resources in Asia, Edward Elgar,
Cheltenham, pp. 256. £55.00.
This book examines the interdependence between the environment and the econ-omy in Asian developing economies that are dependent on natural resources. It asks what different trade regimes mean for these countries’ use of environmental and natural resource assets, and how agricultural and environmental policies affect their economies as well as their environment. The main goal of the book is to contribute to economic and environmental policy in developing economies through creating appropriate analytical models, conducting empirical analysis and making policy recommendations.
The first part of this book looks at the scope of natural resource depletion and degradation problems in Asian developing countries. It presents various envi-ronmental indicators such as the deforestation rate, the land degradation rate, fresh water availability and air pollution emissions, and argues that natural resource depletion and degradation has reached an alarming level in several Asian countries.
The second part of the book concerns the environmental–economic models used to explain the impact of trade, agricultural and environmental policies on the economy and the environment. The authors begin by describing a production frontier model of two goods in an open economy. This simple model effectively explains that trade reform causes a change in the relative prices of a dirty good (one whose production activity emits pollution) and a clean good, making the dirty good more valuable, and that the impact of such reform on the country’s level of pollution, or its demand for natural resources, depends on three things. The first is the composition effect, associated with higher pollution emissions, because the production ratio of clean to dirty goods changes as a result of the change in their relative prices. The second is the scale effect, associated with even higher pollution emissions, because at the new relative price the country is able to produce more of the dirty good. The third is the technological effect, associated with a reduction in pollution emitted, because the new relative price provides an incentive to improve the technology used in producing the dirty good.
The second model is a partial equilibrium demand model of a dirty good. This model is able to show that a combination of a Pigovian tax (one introduced to counter the effects of a negative externality such as the use of cigarettes) and com-plete trade liberalisation will lead to a socially optimal quantity of dirty goods
being produced. The production still emits pollution; however, the tax ensures that each unit of additional pollution increases producer costs by an amount equal to its marginal social cost.
The third model is a general equilibrium model, which forms the heart of the book. The authors present a standard general equilibrium model of a small open economy in which the production of goods generates pollution which affects con-sumer welfare but not the output of other industries. This model shows that the best policy is to set the amount of environmental taxes to equal marginal damage, and to pursue a free tax regime. The authors then modify the standard model into a stylised two-region (uplands and lowlands) model, to reflect conditions in many Asian developing countries. The uplands produce food and non-food agri-cultural products, while the lowlands produce food and manufacturing products. Using this stylised model, it is still possible to derive the impact of trade and agri-cultural policies; however, the interpretation of the derivation is not very obvi-ous. It depends on the explicit functions used in the model and the parameters of those functions. This is why the book then refers to several country case studies, of the Philippines, Sri Lanka and Thailand. The general findings of these studies are: (1) that freer trade and greater integration with the global economy may have a pro-environment effect in terms of deforestation and land degradation; and (2) that a ‘Green Revolution’ in the lowlands sharply reduces incentives for defor-estation and land degradation in the uplands. These findings are important, because many still believe that integration in the global economy causes greater environmental destruction, and that the Green Revolution has removed resources for the development of agriculture in the uplands, leading to more deforestation and land degradation there.
The value of this book lies in its clear explanation of the environmental– economic models, which allow readers to understand the links between trade and agricultural policies in their effect on the environment. The book progresses from simple to increasingly complicated models, certainly a helpful approach to understanding the applied general equilibrium models and the results of the case studies. The authors also provide good examples of how to translate results from an economic model into applicable policies.
However, the book covers only relatively few environmental issues. It does not include Indonesia among the case studies, despite its wealth and diversity of nat-ural resources. Given the book’s title, its limited coverage of environmental issues and the lack of an Indonesian case study creates an impression of incompleteness. Furthermore, the authors do not provide the actual number of parameters and syntax computer codes used in the applied general equilibrium model. Hence it is difficult for readers to replicate and extend the case studies.
However, I congratulate the authors on making an important contribution to the field of environmental and development economics, particularly in the Asian economic context. I recommend this book to scholars, particularly graduate stu-dents, who wish to deepen their understanding of the impact of trade liberalisa-tion and agricultural policy on the environment in developing Asian countries, and to master the applied general equilibrium model.
Budy P. Resosudarmo ANU
