00074918.2014.938423

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Bulletin of Indonesian Economic Studies

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

The Sum Is Greater Than the Parts: Doubling

Shared Prosperity in Indonesia through Local and

Global Integration

Peter McCawley

To cite this article: Peter McCawley (2014) The Sum Is Greater Than the Parts: Doubling Shared Prosperity in Indonesia through Local and Global Integration, Bulletin of Indonesian Economic Studies, 50:2, 300-302, DOI: 10.1080/00074918.2014.938423

To link to this article: http://dx.doi.org/10.1080/00074918.2014.938423

Published online: 30 Jul 2014.

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300 Book Reviews

The result of a decade of research during and after the conlict, A Few Poorly Organized Men is a comprehensive historical study distinct from other reports on Poso, including those by Indonesia’s National Commission on Human Rights and its National Commission on Women. The book will be a valuable source for readers seeking a deeper understanding of the Poso conlict and its participants. Yet, in my mind, it lacks a detailed discussion of two important aspects. First, as the National Commission on Women has made clear, the Poso conlict was dis-tinct in its targeting of women, in terms of both the identities of the victims and the forms of violence used. Women of the ‘enemy’ were not only raped and sexu-ally abused; there were also cases of mutilation. How can the division of labour analysis explain what happened to these women and why it happened? Second, McRae argues that the state was not a direct combatant in Poso, and that state intervention in effect ended the conlict. Yet political will—in particular, the gov-ernment’s sense of crisis—was the main reason that it intervened. Explaining this would require a more macro-level analysis, but even until recently there have been cases where the state has taken advantage of conlicts.

Sri Lestari Wahyuningroem The Australian National University

The Sum Is Greater Than the Parts: Doubling Shared Prosperity in Indonesia through Local and Global Integration. By Harvard Kennedy School, Ash Center for Democratic Governance and Innovation. Jakarta: Gramedia Pustaka Utama, 2013. Pp. xlviii + 274. Paperback: Rp 97,750. PDF: http://

www.ash.harvard.edu/extension/ash/docs/indonesia2013.pdf.

Is Indonesia’s economy growing fast enough to double its real income per capita over the next decade? What is the quality of growth? Is the growth sustainable? Is it equitable? And what strategies might Indonesian policymakers consider in view of the oft-stated goal of lifting the average rate of economic growth to at least 7% per year? This study by an interdisciplinary team from the Harvard Kennedy School Indonesia Program sets out to answer these questions.

The study’s central argument is that Indonesia’s economic outlook is discour-aging: ‘The growth rate is far below the level necessary to reach upper middle-income status by 2025, and this modest growth has been characterized by lack of job creation, declining competitiveness, and rising inequality’. In response to this mediocre performance the study suggests that Indonesia can take one of three approaches to development—reactive, proactive, or transformative. Only the transformative approach, it says, will move the economy onto a robust, sustain-able, and equitable development trajectory.

The Harvard team argues that Indonesian policymakers should address both domestic and international market problems; a ‘lack of attention to extending and integrating the domestic market’ has accompanied Indonesia’s failure to ‘exploit its dynamic comparative advantage abroad’. They see three ways of overcoming

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Book Reviews 301

these domestic and international problems: investing more heavily in hard infra-structure (roads, ports, power); improving soft infrainfra-structure (better government and governance); and developing human resources.

The study’s strengths are that it focuses on key policy problems, identiies the main constraints to growth, and discusses responses to these constraints. Wel-come, too, is its emphasis on the need for domestic reform. Some international surveys of Indonesia’s growth put too much weight on international trade and suggest that liberalising the country’s trade policy would magically promote much of the reform needed to boost overall economic growth. In contrast, the Harvard team discusses the value of reforming labour markets, the inancial sec-tor, and infrastructure investment.

The study also discusses some of the key structural issues that have attracted attention in recent public policy debates in Indonesia. Some observers, such as the authors of this study, have argued that during the past decade the Indone-sian economy has suffered from Dutch disease—or the dwindling international competitiveness of the manufacturing sector, among other symptoms—owing to strong external demand for natural resources overvaluing the rupiah. Other trad-able goods sectors (such as manufacturing, which is relatively labour-intensive) have therefore been unable to compete in international markets. But the study notes (p. 109, box 3.4) that other observers argue that there is no Dutch disease and that policymakers should look to promote structural change rather than worry about (or, worse, curb) the growth of resource-oriented export sectors.

On balance, the Harvard study concludes that recent trends ‘relect an adverse shift in Indonesia’s ability to compete in world markets’ and that ‘taken together, they are evidence of Dutch Disease’. To the extent that this diagnosis is cor-rect—recent growth in Indonesia’s manufacturing sector has been sluggish—the marked depreciation of the rupiah in the latter part of 2013 was welcome and presumably provided some relief from the adverse effects of Dutch disease to producers in, for example, export-oriented manufacturing.

These broad arguments capture some of the dilemmas facing economic policy-makers in Indonesia, but the study is arguably stronger in outlining these dilem-mas than in considering their details. For one thing, many of the constraints to growth identiied in the study are well known and frequently discussed in Indo-nesia. What is less clear is what can be done to remove them. For example, it is well known that infrastructure investment in Indonesia has been grossly inad-equate since the 1997–98 Asian inancial crisis. The Harvard team argues that underinvestment in infrastructure ‘has been the result of muddled processes that have resulted in a lack of understanding on how to balance the role of the exist-ing state-owned agencies with those of private developers’. Yet surely the prob-lem is more complicated. There is an acute shortage of inance for infrastructure, for example, and suppressed prices in the sector do much damage as well. The study does not address in any detail the lack of infrastructure inance or the need to reform infrastructure pricing. Nor does it address Indonesia’s broader lack of inance—it discusses the need to reform the higher education system (and thereby increase the productivity of the labour force) but not the costs of doing so or how to pay for these costs.

This lack of detail gives rise to another issue that the study does not address— the extreme shortage of inancial and human resources available in Indonesia to

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302 Book Reviews

implement the ambitious reform programs outlined in the study. The uncomfort-able truth is that the capacity of governments at all levels in Indonesia is tightly constrained. In rich, Western, OECD countries, national governments often spend well over $10,000 per person per year to deliver national programs. In contrast, in Indonesia the 2012 national budget allowed President Yudhoyono to spend around $600 per person. The resources available to district and provincial gov-ernments are even more constrained; in Central Java, for example, the 2012 pro-vincial budget provided for only $20 per person for a population of more than 30 million. Ambitious reform is dificult with such scarce resources.

It is puzzling, too, that the authors do not seem to have surveyed the rich Indonesian-language discussion of public policy in Indonesia. The thorough reference list of close to 400 items includes numerous English-language articles and reports on Indonesian policy but only one or two references to Indonesian- language materials.

In surveying the demands on Indonesia’s economy, the study concludes that a ‘transformative program of reform’ holds the best prospects for rapid, sustained, and equitable growth. The Harvard team presents a strong case, but their pro-posal is very bold. The incoming administration will most likely introduce more modest reforms.

http://dx.doi.org/10.1080/00074918.2014.938423

Land for the People: The State and Agrarian Conlict in Indonesia. Edited by Anton Lucas and Carol Warren. Athens, Ohio: Ohio

University Press, 2013. pp xx + 405. Paperback: $32.95.

This collection includes a series of useful papers about the Southeast Asian devel-opment policy that never quite happens: effective land reform and agricultural policy of the sort that primed high-yield household farming and superior devel-opment experiences in Japan, South Korea, Taiwan, China, and Vietnam. The focus is Indonesia, but many of the issues raised are painfully familiar in the Phil-ippines, Malaysia, and, of course, Thailand—a nation that has come close to a civil war undergirded by rural inequality and injustice. More than half a century on from the enactment of Indonesia’s Law 5/1960 on Basic Agrarian Principles, which was supposed to deliver a Northeast Asian–style revolution in agricultural productive relations, ineffectual land reform and path-dependent agricultural policy characterise Indonesia’s economic development.

Land for the People divides into three parts, although this division is not made explicit by the editors. The irst three chapters review the history of the agrar-ian law, the loopholes that meant it would never lead to wholesale land redistri-bution, the 1965 pogrom against the peasant-based, pro-land-reform Indonesian Communist Party, the retreat from land reform objectives under Soeharto, and the available survey evidence on trends in land ownership inequality. After 1971 the