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In memoriam: Widjojo Nitisastro, 1927–2012

Peter McCawley & Thee Kian Wie

To cite this article: Peter McCawley & Thee Kian Wie (2012) In memoriam: Widjojo Nitisastro, 1927–2012, Bulletin of Indonesian Economic Studies, 48:2, 275-280, DOI: 10.1080/00074918.2012.694158

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IN MEMORIAM:

WIDJOJO NITISASTRO, 1927–2012

Peter McCawley Thee Kian Wie

Australian National University Indonesian Institute of Sciences (LIPI)

Widjojo Nitisastro was one of Indonesia’s best known and most respected

eco-nomic policy makers. He died quietly in Jakarta on 9 March 2012 at the age of 84.

Later in the day, after a ceremony attended by President Susilo Bambang Yudho-yono and numerous other friends and colleagues, he was buried at the Kalibata

Heroes Cemetery in South Jakarta at a ceremony led by Vice President Boediono. Widjojo was for many years Indonesia’s most inluential economic policy

maker and economist within the government and the academic community. This

was particularly the case during the early years of the Soeharto era (1967–83), although the president continued to consult him frequently until losing ofice

in 1998. Overseas, he was universally respected as a highly effective and relia-ble leader of Indonesian delegations at international meetings. One of his main

achievements was to secure a irm position for highly qualiied economic techno -crats within the cabinet who could play a key role in arguing the case for sound

economic policy. In this respect, his inluence continues to be felt to the present

day.

EARLY YEARS, EDUCATION AND CAREER

The son of a retired inspector of primary schools, Widjojo was born in Malang,

East Java, on 23 September 1927. His father was an activist in the Great Indonesia

Party (Partai Indonesia Raya, Parindra), and Widjojo’s strong sense of nationalism was nurtured by the activities of his father during this time. Like many other stu-dents, he took up arms against the Dutch after Indonesia declared independence on 17 August 1945. After graduating from high school he decided to study

eco-nomics, enrolling at the newly established Faculty of Economics at the University of Indonesia (FEUI) (Thee 2001).

In the early 1950s many of the faculty’s staff were Dutch, although academics from other parts of the world were also beginning to take an increasing interest

in Indonesia. While studying at FEUI, Widjojo met the Canadian demographer Nathan Keyitz. Together they wrote Soal Penduduk dan Pembangunan Indonesia

[The Population Problem and Indonesia’s Development] (Keyitz and Nitisastro 1955),

which was Widjojo’s irst book. An outstanding student, Widjojo graduated cum laude from FEUI in 1955. But even before he had formally graduated, the dean of the faculty, Professor Sumitro Djojohadikusumo, appointed him the irst director of FEUI’s newly established Institute of Economic and Social Research (LPEM).

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276 Peter McCawley and Thee Kian Wie

The next few years were dificult ones for Indonesia. Anticipating an exodus of

Dutch teaching staff as the dispute between Indonesia and the Netherlands over

West Irian worsened, Professor Sumitro established an afiliation program with the University of California at Berkeley (Sumitro 1986: 33). In 1957 he arranged for Widjojo and several other FEUI graduates to undertake postgraduate studies

at Berkeley under this program.

Widjojo received his doctorate in economics from the University of California

for a thesis on demographic and economic issues in Indonesia (Nitisastro 1961). He returned home in 1961 and the following year, at the age of 34, was appointed

a professor of economics at the University of Indonesia. In his inaugural lecture

in 1963, he discussed the role of development planning in economic policy mak -ing.1_{He served as dean of the faculty from 1964 to 1968, and also during this time}

as director of the newly established National Institute of Economic and Social Research at the Indonesian Institute of Sciences (Leknas–LIPI) (Anwar, Ananta

and Kuncoro 1997: vi).

In mid-1967, at the invitation of George Kahin from Cornell University, Widjojo

revised his PhD thesis for publication. The resulting book, Population Trends in Indonesia, has become the standard reference work for scholars studying popula-tion trends in Indonesia from the early 19th_{century through to the 1960s}

(Niti-sastro 1970).

Widjojo’s career as government adviser and minister began following the

emer-gence of General Soeharto as the second president of Indonesia. In 1966, Soeharto

appointed Widjojo to lead a special Team of Economic Advisers whose other

members included four senior FEUI economists: Ali Wardhana, Mohamad Sadli,

Emil Salim and Subroto. The following year Widjojo was placed in charge of the

National Development Planning Agency (Bappenas). Further appointments fol

-lowed: he became head of a Team of Economic Experts in 1968, was promoted to Minister for Development Planning in 1973, and was simultaneously appointed to the senior ministerial post of Coordinating Minister for Economic, Financial and Industrial Affairs, a post he held for 10 years from 1973 until 1983 (Anwar, Ananta and Kuncoro 1997: vi). After retiring from the cabinet in 1983, he con -tinued to serve President Soeharto as an economic adviser, including during the

Asian inancial crisis of 1997–98.

SOEKARNO AND SOEHARTO

This summary of Widjojo’s professional life does not capture the drama of the turmoil surrounding economic policy in Indonesia towards the end of the

Soekarno presidency. In the early 1960s the staff at FEUI were divided on the

merits of Soekarno’s economic policies. One group of left-wing staff were sym-pathetic to Soekarno’s preference for socialism and bold economic nationalism, while another group of younger staff were more cautious. The position of the lat-ter group was not an easy one. The former dean of the faculty, Professor Sumitro,

had led Indonesia in 1957 after taking the side of the failed PRRI and Permesta rebellions in West Sumatra and North Sulawesi. In these dificult circumstances,

1 Entitled ‘Analisa ekonomi dan perencanaan pembangunan [Economic analysis and de-velopment planning]’, this lecture has been reprinted as chapter 1 in Nitisastro (2011).

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Widjojo – identiied by Sumitro as one of the most promising economists of his

generation – became the unchallenged leader of the younger members of the

fac-ulty because, in the words of Mohamad Sadli (1993: 39), ‘he was the brightest and

had the most forceful personality’.

It was in this strained environment that the commander of the Army Staff and Command School (Seskoad) in Bandung, Lt General Soewarto, invited Widjojo

and some of his colleagues to present a series of seminars to army oficers in Bandung in August 1966. Soewarto organised the seminars because he believed that senior army oficers needed to be ready to take on social as well as mili -tary responsibilities as part of an anticipated dual role (dwifungsi) for the military

(Sadli 1993: 41). His approach relected the view that the army represented the only signiicant countervailing power against the inluential Indonesian Commu

-nist Party during the Guided Democracy period (1959–65). The same group of FEUI economists who were represented at the army seminar had been thinking about the future for some time. In January 1966, as part of a week-long seminar

organised by the faculty’s students association – the Indonesian Students Action Association (Kesatuan Aksi Mahasiswa Indonesia, KAMI) – Widjojo, Salim, Sadli, Subroto, Ali Wardhana and others had presented papers on the key economic and

inancial problems facing Indonesia (Nitisastro 1966).

Soeharto was one of the oficers who attended the economists’ lectures in

August. Thus, the basis for the economic policies to be pursued by Soeharto’s New Order government was set down at the Second Army Seminar in Bandung

in August 1966 during the earliest days of the New Order (Sadli 1993: 40). But

much of the groundwork had been done even earlier and was presented at the

KAMI seminar in January of the same year.

THE RISE OF THE ECONOMIC TECHNOCRATS

After coming to power in 1966, Soeharto turned to the FEUI economists for eco

-nomic advice. His conidence in them had been strengthened by the lectures given

at the Seskoad seminar in Bandung. The economists in the president’s Team of

Economic Advisers installed in September 1966 would later become known as the

‘economic technocrats’.

Soeharto directed the team to draw up a comprehensive Program for Stabilisa-tion and RehabilitaStabilisa-tion, which was then incorporated almost word-for-word in a

much discussed decree (Decree No. 23) submitted to the Provisional People’s Con

-sultative Assembly in 1966.2_{The decree proposed sweeping changes to economic}

policy and replaced emotional appeals to economic nationalism with a far more measured approach. It included policies to encourage both foreign and domestic investment as well as strict guidelines to achieve a balanced budget, strengthen the balance of payments, rehabilitate dilapidated physical infra structure, and

promote food production and agricultural development (Salim 1997: 57; Subroto 1998: 74–5; Thee 2002: 196).

The results were dramatic. Inlation, which had climbed to almost 600% in 1965, fell quickly and by 1970 was below 10% per annum (Grenville 1981: 108).

The economy stabilised and then began to grow as new investment got under

2 See Nitisastro (2011: ch. 5) for a detailed discussion.

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way. For the next three decades, until the Asian inancial crisis of 1997–98, the

Indonesian economy grew at a sustained rate of close to 7%. This rapid growth was accompanied by a steady decline in the level of absolute poverty across

Indo-nesia, from 40% of the population in 1976 to 11% in 1996 according to estimates by

the central statistics agency.

WIDJOJO’S ROLE IN ECONOMIC POLICY

The successful economic policies implemented in Indonesia during the 1970s,

1980s and 1990s relected the inluence of many political and economic factors,

and of many policy makers. But Widjojo played a key role, helping to guide

eco-nomic policy for much of the period. His personal inluence, both as a trusted

adviser to President Soeharto and as a highly effective coordinator of the

presi-dent’s economic team, helped ensure irst that the cabinet adopted good policies

and then that they were implemented across the bureaucracy.

Widjojo’s ideas were by no means radical. He and his colleagues placed a strong emphasis on sound macroeconomic and microeconomic policies, underpinned by a deep concern with Indonesia’s longer-term development challenges. Wid-jojo’s own thinking is best set out in his collected articles and speeches, published in Indonesian in 2010 and translated into English the following year (Nitisastro 2010, 2011).3 The collection highlights a number of central themes that Widjojo focused on consistently during his period as a policy maker and adviser. Among

them, perhaps three stand out: the need for growth, leadership and stability.

On the matter of broad economic policy, Widjojo always strongly emphasised the need for sustained economic growth to overcome poverty and promote devel-opment. He favoured high levels of sound public and private investment,

effec-tive iscal policies, continual economic reform and clear sectoral policies – all

because they would underpin strong economic growth. But he also underlined

the need to ensure that the beneits of growth were shared across Indonesia. He

spoke of the importance of rural development, and of investing in primary edu-cation, village health clinics, nutrition and family planning programs as well as

rural infrastructure. For Widjojo, the link between good policy and reductions in

poverty was clear.

Second, Widjojo had clear views about leadership and governance. He spoke of the importance of effective leadership and good, sensible management in devel-oping countries. Again and again in his articles and speeches, he emphasised the need for commonsense policies, and for what would today be called good gov-ernance. He criticised government waste and mismanagement, and discussed in detail the steps that could be taken to improve government administration.

Policy makers in rich countries who wanted developing countries to take more responsibility for their own development certainly welcomed these views. But they may not have noticed some of the implications of Widjojo’s approach

– including the possibility that, as the conidence of the leaders of developing

countries grew, their views were likely to diverge increasingly from those of the

rich world. India, for example, had irm views on trade that contributed to the

failure to reach agreement during the Doha round of trade negotiations in 2008,

3 A review of the Indonesian-language version is in McCawley (2011).

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and China’s determination to protect its interests complicated efforts to reach agreement during the UN climate change negotiations in Copenhagen in 2009. In matters such as these, Widjojo blended a deeply felt sense of nationalism with a strong awareness of international considerations. On the one hand, he held

irm views about the need for developing countries to strengthen their economic

diplomacy so as to protect their own interests, but on the other, he believed that it was clearly in Indonesia’s interests to interact closely with the global community.

Finally, both in his writings and in his private conversations with friends and

colleagues, Widjojo constantly noted the importance of using policy to manage risk. By the standards of policy making in most rich countries, the degree of eco-nomic instability that Widjojo and his colleagues had to deal with was at times remarkable. In some cases, such as the Pertamina crisis in 1975, the crisis was largely the result of domestic mistakes; in others, the economic shock was caused by unexpected events overseas. But for Widjojo, the source of the shock was far less important than the awareness that it was necessary to be waspada (cautious, and alert). According to him, the country’s top policy makers had to be waspada

at all times towards the need to respond quickly to economic shocks when they occurred. Given the turmoil in the international economy today, Widjojo’s mes-sage could hardly be more relevant.

Towards the end of his life Widjojo lived quietly in Jakarta working on his

papers. Many friends and colleagues visited to request his views on economic matters and to pass on recent publications and international reports. He in turn would often get in touch with economic policy makers whom he trusted to urge them to pay more attention to particular aspects of current policy that he had become worried about.

Over the sweep of his remarkable life, the themes that Widjojo espoused were straightforward but profound. He consistently supported good economic policy making because he believed that sound policies would strengthen Indonesia as a nation and bring down levels of poverty across the country quickly. He and his colleagues were instrumental in creating the mix of policies that brought rapidly rising living standards to many millions of Indonesians in the latter part of the 20th_{century. But Widjojo played the central role in that process. According to Emil} Salim, one of the inner team:

... it was Widjojo who was the real architect of the economic policies of the New Order. He was the dalang, or puppeteer, who directed the play, while we, the other economic technocrats, were the players, the wayang. We used to call him lurah (vil-lage head) ... Widjojo was able to carry out his economic policies because Soeharto trusted him; the President knew that he did not have a ‘hidden agenda’. Widjojo was also able to rely on us, his fellow economists, because we all shared similar views on the need to pursue sound economic policies (Salim 1997: 65).

Widjojo has now passed the task of good economic management on to the next generation of policy makers. Many of those who will need to take on that task

were present at the funeral ceremonies in Jakarta to honour him and bid him fare

-well. His inluence on economic policy making will live on because the policies

he supported brought dramatic economic progress to his nation, and because so many of the next generation of policy makers are keen to see that success repeated in the decades to come.

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REFERENCES

Anwar, M.A., Ananta, A. and Kuncoro, A. (eds) (1997) Widjojo Nitisastro 70 Tahun. Pem-bangunan Nasional: Teori, Kebijakan, dan Pelaksanaan [Widjojo Nitisastro at 70. National Development: Theory, Policy and Implementation], Penerbit Fakultas Ekonomi, Universitas Indonesia, Jakarta.

Grenville, S. (1981) ‘Monetary policy and the formal inancial sector’, in The Indo nesian Economy during the Soeharto Era, eds A. Booth and P. McCawley, Oxford University Press, Kuala Lumpur: 102–25.

Keyitz, N. and Nitisastro, W. (1955) Soal Penduduk dan Pembangunan Indonesia [The Popula-tion Problem and Indonesia’s Development], PT Pembangunan, Jakarta.

McCawley, P. (2011) ‘Review article: Widjojo Nitisastro and Indonesian development’, Bulletin of Indonesian Economic Studies 47 (1): 87–103.

Nitisastro, W. (1961) ‘Migration, population growth, and economic development: a study of the economic consequences of alternative patterns of inter-island migration’, PhD dissertation, University of California, Berkeley CA.

Nitisastro, W. (1966) ‘Kebidjaksanaan ekonomi dan keuangan yang tidak bijaksana [Eco -nomic and inancial policies that are unwise]’, in Jalur Baru sesudah Runtuhnya Ekonomi Terpimpin (The Leader, the Man and the Gun) [The New Path after the Collapse of Guided Economy (The Leader, the Man and the Gun)], Seminar KAMI, Usaha Penerbit Nasional PT Matoa, Jakarta. Reprinted by Penerbit Sinar Harapan, Jakarta, 1984.

Nitisastro, W. (1970) Population Trends in Indonesia, Cornell University Press, Ithaca NY. Nitisastro, W. (2010) Pengalaman Pembangunan Indonesia: Kumpulan Tulisan dan Uraian

Wid-jojo Nitisastro [The Experience of Development in Indonesia: A Collection of the Writings of Widjojo Nitisastro], Penerbit Buku Kompas, Jakarta.

Nitisastro, W. (2011) The Indonesian Development Experience: A Collection of Writings and Speeches, Institute of Southeast Asian Studies, Singapore.

Sadli, M. (1993) ‘Recollections of my career’, Bulletin of Indonesian Economic Studies 29 (1): 35–51.

Salim, E. (1997) ‘Recollections of my career’, Bulletin of Indonesian Economic Studies 33 (1):

45–74.

Subroto (1998) ‘Recollections of my career’, Bulletin of Indonesian Economic Studies 34 (1): 67–92.

Sumitro, D. (1986) ‘Recollections of my career’, Bulletin of Indonesian Economic Studies 22 (3): 27–39.

Thee, K.W. (2001) ‘In memoriam: Professor Sumitro Djojohadikusumo, 1917–2001’, Bulletin of Indonesian Economic Studies 37 (1): 173–81.

Thee, K.W. (2002) ‘The Soeharto era and after: stability, development and crisis, 1966–2000’, in The Emergence of a National Economy: An Economic History of Indonesia, 1800–2000, eds H. Dick, V.J.H. Houben, J.T. Lindblad and Thee K.W., Allen & Unwin, Sydney: 194–245.