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BOOK REVIEWS
To cite this article: (2002) BOOK REVIEWS, Bulletin of Indonesian Economic Studies, 38:1, 119-131, DOI: 10.1080/000749102753620310
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This volume offersan overview ofthe political economy of development in EastAsia,reviewingboththeempirical recordandtheoreticalandpolicydebates inthewakeofthe1997–98regionaleco
-nomiccrisis. Itis self-consciously syn
-thetic:ratherthanpresentingnovelideas orevidence,theauthors’contribution is tobringasynopticbutanalyticallysharp perspectivetobearonmaterialcurrently onthetable.Anotherdefiningfeatureof thevolumeisitsgenuineefforttointe
-gratethegeneraltheoretical analysesof botheconomistsandpoliticalscientists, aswell asthe more empirically based workofregionalspecialistsofbothvari
-eties.In this theauthors reflect a now rapidlyspreadingawarenessthatmost ofthebigquestionsoutstanding inthe fieldofdevelopment lieattheinterstices ofthestudyofgovernmentandmarkets, and thus require serious intellectual cross-fertilisation.
Theauthorsleadwithtwolargechap
-tersreviewingfirsttheevolutionofthe literatureon development upuntilthe mid 1990s, and then the debates that have evolved in the wake of the eco
-nomic crisis. These are thorough and crisplydone,butparticularly inthefirst thereis much thatis familiar. Thesec
-ondchapter, with its focus ondebates aboutthecrisis, totalfactor productiv
-ity,andgovernanceandinstitutional re
-form,hasgreateredge.Thenfollowfour substantive c hapters o n particular
themes: capital flo ws an d m acr o
-economicmanagement;financialliber
-alisation and prudential regulation; labour relations; and poverty and in
-equality. Running throughall ofthese chaptersisacriticalevaluationoftheo
-reticalliteraturepertainingtothesevari
-ous subfields, and a discussion of the policyrecordsinparticularcountries.
Althoughthebookisprimarilyasur
-vey of the state of the field, woven throughoutistheideathattheAsiancri
-sishasexposedimportantproblemsin theneoclassically inspiredmainstream ofdevelopment economics.Itcomesto a headinthefinalchapterthatreflects ontheemergenceaof‘post-Washington’
consensusfordevelopment theoryand praxis inAsia.This isnot so muchan ex-cathedra critiqueasonethatdraws
onStiglitz, Krugman,Sachsand,more distantly, Romer, aswell,of course,as thenewdrumbeatforgoodgovernance.
Echoingand extending the work of others, Islam andChowdhurystrikea numberofimportantcriticalnotes,but thereisalsosomethingnotquitesatis
-fyingaboutthesupposednewagenda. Pointingvaguelytotheneedforreform oftheinternationalfinancialarchitecture and theimportanceofallowingdevel
-oping countries sovereignty over their ownmacroeconomic policy(andinpar
-ticular,theoptionofKeynesiancounter
-cyclical spending) is not really an agendafor action—even if such senti
-BOOK
REVIEWS
IyanatulIslamandAnisChowdhury(2001),ThePoliticalEconomyofEastAsia:Post
CrisisDebates,OxfordUniversityPress,Melbourne,pp.288.Paper:£17.99;A$39.95.
ments are now widely held in Asia. There ismuchthatneedstobepinned downhere.Asurprisingomissioninthe discussionaboutarenewalofKeynesian principlesisanyexamination ofJapan’s extended crisis throughthe1990s and intothenewcentury.
More broadly,although theauthors doindeedspeakforagrowingnumber ofobservers,Ifoundmyselfuneasywith the finger-pointingata WallStreet–US
Treasury–IMFcomplex(evenwhenthe
fingers borrowed for the purpose are Stiglitz’s). Yes, it is assuredly the case thatUSfinancialinterestsareforcefully represented intheIMF,andthatwecan see thisshapingaspectsofthe‘rescue’ operation of 1997–98, particularly in
Korea.Itisatruismthatpowerfulstates gettoadvancetheirinterestsattheex
-penseofothers.Butinternational politi
-caleconomyisalsomuchmorecomplex thanthis.Letusnotforgetthatinmuch of Asia it was primarily Japaneseand Europeanbanks,followedbytheirKo
-reanandSingaporeancounterparts,that weredoingthebiglendinginliberalised, pre-crisisAsia.Inthisrespect,the‘Wash
-ington consensus’ label conceals as muchasitreveals.Undoubtedly,Wash
-ingtonisthesinglebiggestforcebehind the policiesof theFundandtheBank. But duringthe 1980sand 1990s, these broad ideas were also shared by eco
-nomic thinkers and economic policy elitesacrossmuchoftheOECDandin
-deedmuch(ifnotall)ofAsia.
IslamandChowdhuryaretobecon
-gratulatedparticularlyforincorporating awidereadingofpoliticalsciencecon
-tributionstothedebate.Thisaddscon
-siderablevalue.ButImaketwomodest qualifications. First,aswitheconomists,
there is considerable theoretical and ideological variation among political scientists. Bynomeansdidallpolitical scientists who wrote about states and state capacity subscribe to deeply
dirigistepolicy preferences (see for ex
-ample Haggard vs Wade). Secondly, largelyoverlookedisamorerecentbody ofliteraturefocusing ontheincentives fordifferentcategoriesofpolicymakers embedded in different institutional structures. (San Diegoreviewers must beexcusedformentioningthis,sincea goodlyportionofthatliteraturecomes from UCSD.) This is important for a numberofthegovernancedebates,and itmovesuswellbeyondtheearlierstate
-capacityliterature.
Overall, Islam and Chowdhury do whatnooneelsehasyetdone,oratleast donesoeffectively—provideacompre
-hensive, analytically sharp and highly readable overview of the big debates aboutdevelopment inAsia,beforeand especially after the regional crisis. If thereis something indeterminate and not entirely satisfying about the pre
-scriptionstheybrieflysketch,Isuspect this reflects more the genuineuncer
-taintyandevenconsternation thatcur
-rentlyprevailsinthefield,ratherthan anyseriousshortcoming onthepartof the authors.Thereis a powerfulsense inwhich importantcomponents ofthe theoryandpraxisofthe1980sand1990s areindeednowsubjecttocriticalscru
-tiny,andthereiscertainlyanewinter
-estinequityandgovernanceissues,but wearestillfarfromseeingtheoutlines ofanynew‘consensus’emerging
AndrewMacIntyre
UniversityofCalifornia,SanDiego(UCSD)
PeterBoomgaardandIanBrown(eds)(2000),WeatheringtheStorm:TheEconomies
of SoutheastAsia in the1930sDepression,ISEAS,Singapore,pp. xii+ 332.Paper:
S$45.90/US$29.90;Cloth: S$65.90/US$39.90.
Abookontheeconomiccrisisofthe1930s is very timely, given thatmanycasual parallelshavebeendrawnbetweenthe 1997–98crisisandpastexperience.How
-ever,thisbookmaydisappointareader insearchofmoresubstantive parallels. First, only the introduction presents a cursory exploration of the similarities betweentheearly1930sandthelate1990s (pp.12–16),suggesting thatthe differ
-encesexceedthesimilarities.Ifthe1930s holdanylesson forthefutureit isthat ‘the people’areresilient,andthat rem
-ediesprescribedfrom‘outside’(i.e.inthe 1930sbycolonialmastersandinthe1990s bytheIMF)arenotnecessarilythebest. Secondly,astheeditorsunderlineinthe introduction,theemphasisofthebookis onthehumansufferingthatthedepres
-sioncaused.Consequently mostcontri
-butionsareratherdescriptiveanddevoid of analytical economics.Alast general complaintisthattheessaysarenotplaced inthecontextoftheinternationallitera
-ture on the 1930s depression. For in
-stance, there is no discussion of the monetaryaspects of thedepression in SoutheastAsia.
Still,historiansofSoutheastAsiawill appreciatethisbook,whichforthefirst timepullstogetherresearchondifferent countriesthathadhithertobeendonein isolation.Ratherthandiscussingeachof the 14 contributions, this review will highlightthefindings ofthose involv
-ingIndonesia,whichdominatethebook. Boomgaard findslittle evidence for thesuggestionthatthedepressionwas a period ofgreatsufferingforIndone
-sians,particularly inJava.Lindbladde
-scribes trends in Indonesia’s foreign tradeandpointstotheconsequences of fallingexportrevenuesandreducedjob opportunities inexportproduction. He concludes that thedepression marked thebeginningofastructuralshiftfrom dependenceonprimaryexportstowards industrialisation,eventhoughthistook untilthe1970stomaterialise infull.
Touwenfocusesonthestrategiesthat smallholders in the OuterIslandsem
-ployed to combat falling commodity prices.Themainreactionwastoincrease output ratherthantodiversify orstop exportproduction. Touwenoffersthree explanations:supplywasprice-inelastic,
marginalcostsofproductionwerelow, and cash crop production was notthe mainmeansofsubsistence. Nawiyanto pointsoutthatfarmersinBesuki(Java) increased the production of rice and smallholder tobacco for domesticcon
-sumptionaftertobaccoplantations can
-celledlandleases.Clarence-Smithgives
a fascinating but inconclusive glimpse of the hitherto neglected world o f HadhramiArabentrepreneurs incolo
-nialIndonesia.Generallyactiveintrade, somewerewipedoutbythedepression, butothers diversified activities totake advantageofnewopportunities indo
-mesticshipping,manufacturingandreal estate.
Booth’sanalysisofthedifferentfor
-eigntradeandexchangepoliciesinthe Philippines, Indonesia and Indochina goes well beyondthe recession of the 1930s,covering 1900–40.Sheposesthe
challengingquestionwhethertradepro
-tectionandcurrencydepreciationwould
have encouragedindustrialisation ear
-lierbeyondthebasicprocessingofcom
-modities for export,perhaps reducing the impactof thedepression. Heran
-swer is that alternative policies could havemadeadifference.Butwouldthey? Counterfactuals likethis help tofocus onthequestionsthatmatter.However, thelongerthetimeperiodtowhichthey are applied,thegreaterthe numberof affected variables, thus clouding the analysis. Forinstance, a depreciating andvariableexchangerateoftheIndo
-nesian guilderrelative togoldand the
Dutchguildermayhavereducedready access of business and government in colonialIndonesiatotheDutch capital market,andtheexchangeriskmayhave increased the cost of finance.How to factorthatintoacounterfactual?
Thisbookisasignificantcontribution tothehistoriography ofadefiningmo
-mentinSoutheastAsia’seconomicde
-velopment.Anyoneinterestedinfurther researchwilldrawinspiration fromit.
PierrevanderEng
ANU
Hotbin Sigalingging (ed.) (2001), Profil Pinjaman Luar Negeri Indonesia dan
Permasalahannya [The Profile and Problems ofIndonesia’s Foreign Debt],Pusat
PendidikandanStudiKebanksentralan[CenterforTrainingandCentralBanking Studies],BankIndonesia,Jakarta,pp.xiii+254.
ThisisthefirstmajorpublicationofBank Indonesia’sCenterforTrainingandCen
-tralBankingStudiessinceitsestablish
-ment inJune 2000. It comprises seven chapters on Indonesia’s foreign debt, including debtmanagement policies, implicationsforthemonetarysectorand fiscalmanagement,andalternative for
-eigndebtmanagementpoliciesthrough various debt conversion schemes. It offers inonevolume acomprehensive overviewofthetopic,alongwithuseful data that are difficult to obtain else
-where.
Thebookbeginswithahistoryoffor
-eigndebtmanagement, althoughforthe most part this deals only with proce
-duralissues.Therearehelpfuldescrip
-tionsofthetypesofforeignloans,based onsourceandtime-frame,andwhether
theyaregovernmentorprivate,conces
-sional orsemi-concessional. Lessclear,
however,arethereasonsforthegovern
-mentobtainingforeignloans,andhow itdeterminestheiramounts.Theneed
forforeignloansinthecontextofagen
-eralsavings–investmentgapframework
is described only briefly, without any realfocusonthemorespecificIndone
-siancontext.
Chapter 3,on foreign debt, profiles offerssomeofthebook’smostinterest
-ing and useful insights, especially the profiles for1996–2000of selected debt
indicatorsandtheunderlyingproblems debtcausesforIndonesia.The1996data ontheDebtServiceRatio(DSR)pointed topotentialdebtproblems,astheratio wasalready inexcess ofthe 25%level conventionally considered safe. The problemcanbetracedtothealarmingly rapidincreaseofprivatedebtoversev
-eralyearspriortothecrisis,muchofit unrecordedandunknownofficiallyun
-til1998,whenthegovernmentmadere
-porting compulsory.Ashortcoming of thischapteristheinclusionofsubtopics on debtmonitoring and management policies,whichwouldhavebeenbetter suitedtothepreviouschapter.
Chapter 4 on private foreign debt managementprovidesanoutlineofsuc
-cessive government policies from the onsetof thecrisis tothedissolution of the Team to Overcome Private Debt Problems.Aside from a chronological listing ofsummariesof these policies, however, it fails to offerdetails of the causes and consequences of the huge privateforeigndebtortodiscusstheef
-fectsofthesemeasuresontheeconomy. Inotherwords,chapter4dealstoosu
-perficially with private debt manage
-mentpolicies,withoutanyattemptata morein-depthanalysis.
Theauthorexplainstheimplications of foreign debt for the monetary and bankingsectorby focusingonthebal
-anceofpaymentsmechanism.Hesees theculpritasbeingtheexcessivegrowth inforeignprivatesectordebt—aidedby
theabsenceof anyhedging protection andthevirtuallynon-existentmonitor
-ing system—which had increased the
economy’svulnerability toanychange in exchange rate expectations.This is exactlywhathappenedin1997and1998, resulting in sudden and large capital outflow, and a corresponding drastic devaluation ofthecurrency.
Theimpactofallthisonimportand exportperformanceisinteresting.While thecurrentaccounthasbeeninsurplus since1998,thishasbeenduemainlyto asharpcontraction inimports.Exports ofgoodsand servicesdidnotincrease asexpected,andthelatterstillregistera deficitatthetimeofwriting.However, a sharp improvement in merchandise exportswasrecordedin2000,whentheir value jumped by about 25% from the previousyear.
The surplus on thecurrent account has lessened the impactof the capital account deficiton thebalance ofpay
-ments.Several factorsarecited forthe persistence of private capital outflow: socio-political andsecurity conditions,
poor overallmacroeconomic perform
-ance, the downgrading of Indonesia’s creditrating,and theeconomicdown
-turninseveralmajorwesterncountries, aswellasJapan—Indonesia’smaintrad
-ingpartnerandinvestor.Lackingfrom theanalysis,however,aretheproblems ofthebankingsectorthatcontributed to the worsening of thecrisis. Conspicu
-ously absent,too,aretheeffectsofthe scandal-riddenBankIndonesiaLiquid
-itySupportprogram,introducedinre
-sponse tothelate1997 andearly 1998 bankrush.Failuretosterilise themon
-etaryimpactofthisprogramamounted to financing speculation against the rupiah whilealso fuelling inflationary pressures,withdrasticconsequences for both the banking secto r and price stability.
Readersmaybedisappointed bythe chapteronforeigndebtimplications for fiscalmanagement,asthesubjectisdealt withrathersuperficially.Whileforeign debtanditseffectonthefiscalsustain
-ability ofthecentralgovernmentbud
-get are described,nomentionis made of another aspect that directly deter
-minesthegovernment’sfiscalposition: the growing burden of domestic debt since the crisis. There are lengthy dis
-cussionsonseveralaspectsofregional economicmatters—GrossDomesticRe
-gionalProduct,regionalincomeinequal
-ity,andtheamountandcomposition of domestic revenues going to regional governments—butoverallthisanalysis
lacksanyclearlinktotheroleofforeign debt.
Inthefinalchapter,afterbrieflydis
-cussing debtrestructuring, debtrelief andthepossibilityofadebtmoratorium, theauthorfocusesonthedebtconver
-sion mechanism asthe preferred debt managementpolicy.Althoughitsusein Indonesia is still limited, with more widespread use it may have positive side-effects on the economy through
variousprograms,suchas debtforna
-tureswapsordebtreductionsinreturn foranti-povertyprograms.Thebigques
-tionposedishowtomakethesemecha
-nismsmoreattractiveandapplicableto
Indonesian circumstances—a question
towhichtheauthorprovidesnoanswer.
ArmidaS.Alisjahbana
Padjadjaran University, Bandung
HalHillandJoãoSaldanha(eds)(2001),EastTimor:Development Challengesforthe
World’sNewest Nation,InstituteofSoutheastAsianStudies,Singapore, andAsia
Pacific Press,ANU,Canberra, pp.xxv +381.Paper:S$39.90/US$24.90;A$50.00; Cloth:S$59.90/US$36.90.
InMarch2001agroupofdevelopment analysts,mainlyeconomists, metinDili with EastTimoresepolicy makers and academics to discuss ways to achieve rapid, broadly-based, sustained eco
-nomic growth.Theresulting volume’s 21 chapters, drawing on extensive knowledgeofdevelopment elsewhere, cover macroeconomics, international relations,agriculture,institutions(prop
-erty rightstoland,and political struc
-tures), banking and finance, social policy, and lessons from international experience.
This review considers answers the participants gavetoquestionsraisedin Xanana Gusmao’s preface, and which concerned the National Council of Timorese Resistance/NationalCouncil (CNRT/CN) August 2000 Congress: what development strategy topursue; whichcurrencytoadopt;whethertofol
-low abalancedbudgetpolicy;whether toofferfiscalincentivestoinvestment; how to manage therevenues to come fromtheTimorGap;whethertodevelop otherresources;whethertoestablishfree economic zones,or offshore financial centres;andhowbesttoprovidefarm
-erswithaccesstomarketsandcredit. DeBrouwer(chapter2)setsoutEast Timor ’s currency options in choosing whethertohaveitsowncurrencyorto usethatofanothercountry,andargues
that,whiletheAustraliandollarwould be equally appropriate for economic management purposes, the US dollar optionavoidsriskstoAustralia–Indone
-siarelations.Itseemsoddtobaseacur
-rencychoice onrelationsbetweentwo othercountries,and sincetheAustral
-iandollaris muchmorea‘commodity currency’ than the US dollar, its use wouldplacelesspressureonotherprices in East Timor,particularly wages,in ma nagi ng ad justm en t to ex te rn al shocks.
A‘bottom-up’strategyofagricultural
development isstrongly preferredtoa ‘top-down’strategyofindustrialdevel
-opment.WithmostEastTimoreseliving inrural areas,Timmer(chapter6)and Booth(chapter15)urgethatpublic in
-vestmentfocus on raising agricultural productivity throughresearch and de
-velopment; improving infrastructure, particularlyroadandseatransport;and strengtheningprimary and secondary education and primary preventative healthcare. Itisessentialthat most of theaidandexpectedTimorGapoiland gasrevenuesbechannelledtotherural ratherthantheurbansector,toprevent development ofadualeconomy—with
wide urban–rural income inequalities
andhighurbanunemployment,crime, corruption and social dysfunction—as
hasoccurredinothercountriesexperi
encing large aid and resource rent windfalls.
DaCosta(chapter9)showshowthe ‘booming sector ’ implications of large oilandgasrevenue inflowsmaycom
-promise exploitation of East Timor ’s apparentcomparative advantageinag
-riculture, and suggests developing a com parative advantage in labour
-intensiveactivities. Thisdoesnotseem feasible in low-cost, standard-technol
-ogymanufacturing,however,given al
-read y high wage le vels and wage pressuresfromaidandoilandgasrev
-enues, especially in the urban sector. Instead,asinMauritiusandsomeCar
-ibbeanstates,theemphasisshouldbe on education, to move the economy into high-skill industrial and serv
-icesactivities.
Onpromotingagriculturalproductiv
-ity through research and extension, Barlow (chapter 7) presents a strategy that takesgood account of social rela
-tionshipswithinEastTimor’sruralcom
-munities. Fox (chapter 10) describes challengestoagricultural development intheregionborderingWestTimor,be
-cause of its population loss through deportations bytheIndonesianmilitary andthemilitia in1999.Westernregion politicians havelostcredibility,andFox seespoliticsbeingdominatedbypeople fromtheeast,creatingabiasagainstgov
-ernment service provision and invest
-mentinthewest.Ifthewesternregion istodevelopagriculturally,EastTimor andWestTimorneedtocollaborate on tradeandlabourmovements,andpar
-ticularlyonsharingrightstowater. Severalauthorsrecognisetheneedto resolvelanddisputesandcreatesecure individual titletolandifdevelopment isnottoberetardedbysub-optimallev
-elsofcredit,investmentandproductiv
-ity.ButFitzpatrick (chapter11)predicts thisprocesswillbedrawnoutandcostly. Alikelytendencytoreverttotraditional
clan titles, rather than move towards individualtitle,willimpedeagricultural development, andmostalienatedland available around urban centres will probablybeusedforhigh-costindustrial
development.
Withoutsecureindividualland title, thecreditmarketwillremainimmature, butMcLeod(chapter13)warnsagainst government responding to perceived credit shortages by involving itself in lending.Governmentcreditrarelygoes tothose best abletouse it,isproneto ‘capture’,andcreatesacontingentbud
-get liability. Failing resolution of land titles anddevelopment ofa strong,in
-dependent judiciary, McLeod recom
-mendsthatEastTimormoveslowlyon developingformalfinancialinstitutions, relyinginsteadonforeignfinancialbod
-ies.SomeNGOshavebeguntoprovide micro-credit but, as Barlow notes, it
would be a pityif traditional rural re
-volving community fundswere to be crowded out by subsidised foreign micro-creditschemes.
On macroeconomic management, Rosengard (chapter 3) and authors grouped under ‘Lessons from Interna
-tionalExperience’ providegoodadvice ontaxationregimes;managingaidflows and resource rents; civil service func
-tionsandsalarylevels;andfiscaldecen
-tralisation. Authors discuss lessons learnedfromthemanagementofsmall countries(SaldanhaandTavares,chap
-ter17);ofwar-torncountries(Haughton,
chapter 18);ofthesmall Pacific island economies and Papua New Guinea (Chand,chapter19,andElek,chapter20, respectively); and of the small sub
-Saharan African countries (Collier, chapter21).
Rosengardsaysrunningafiscaldefi
-citshouldnotcauseconcernintheshort tomediumterm—providedthemoney
is spentonimportantthingslikeinfra
-structure, healthand education—since
itcanbefinancedthroughaid.Interna
-tional experience suggests a focuson creationofanenablingenvironment for privatesectordevelopment (goodinfra
-structure,securelandtitle,low-costutili
-ties and policy stability, rather than investmentincentives), andasmallbut highqualityandwellpaidcivilservice. Colliergivesusefuladviceoninformed publicinvolvementinmanagingaidand resourcerevenues.Wellmanagedsmall countries grow fasteron average than largerones,so EastTimorhas nothing tofearfrombeingsmall.Butsmallcoun
-tries are forcedto be more open than largeonesand are,forthisreasonand becausetheyarenothighlydiversified, more prone toexternalshocks.Hence, good management is critical. Located nearlargecountriesandwithalongland border with Indonesia, EastTimor is ‘borntotrade’(Hill,chapter4).Itshould not need to consider free economic zones—itshouldbeone.
Onemayquibblewithafew recom
-mendations. Hill argues for removing thelowtariffsandshiftingtoaturnover tax.Butwithapooradministrative and physical infrastructure and mostof its consumergoodsimported,compliance with a value added tax regime will
probablybepoorandcostly,andretain
-ing a low ‘revenue’ tariff may be a betteroptionat present.Thebook rec
-ommendsthatEastTimorjointheSouth PacificForum(SPF)aswellasASEAN (andAFTA).Butithasnothingtogain from joining the SPF, whosemembers havetogetherembarkedonapreferen
-tialtradearrangementinvolvinganago
-nisinglyslowprocessoftariffreduction. Booth(chapter15)hassomeworrying recommendationsfor social policy, in
-cludingfertility controlprograms,ana
-tional food storagepolicy,and income transfersas a social safety net.Raising incomelevelsisthebestmeansofachiev
-ingreducedfertility,anditispreferable forgovernmenttoavoidbothcrowding outofprivatestorageandassumptionof familywelfareresponsibilities.
Thevolumehasgoodanswerstoall ofXananaGusmao’squestions.Beinga latecomer,EastTimorcan benefitfrom other countries’ experience, and this bookisfullofexcellentadvice,notjust forEastTimorbut forthemany small countriesintheregion.Letushopeitis followed.
RonDuncan
ANU
JeroenTouwen(2001),ExtremesintheArchipelago: TradeandEconomicDevelopment
in theOuter Islands of Indonesia,1900–1942,KITLVPress, Leiden,pp.xvii + 459.
31.76.
Thehistoriography ofeconomicchange inIndonesiahaslongbeendominated byJava.Slowlybutsteadily,theOuter Islandsandtheirspecificdevelopment problemsarereceivinggreaterattention. Thisbookisamilestoneinthatprocess, becauseitseekstodescribeandgener
-alise theprewar development experi
-ence ofallpartsof the Outer Islands.
Evenitstitleindicatesthatthisisnot easy,asthe experiences diverge con
-siderably.Touwensolvesthisissuein chapter2 byidentifyingfourclusters of regions, using foreign and inter
-regionaltradeasayardstick.This ex
-plainstheyearthebookbegins:export productionbyforeign-ownedplanta
-tio ns, m in ing v entu res and sm all
farmers increased significantly only after1900.
Thefirsttwoclusterscontainregions whereplantations(EastSumatra,Palem
-bang,SoutheastKalimantan) andmin
-ing companies (Bangka,Belitung and Riau)generate products forexport. In chapter3(‘EuropeanDynamics’),Tou
-wendescribestheorganisation andfi
-nancing of production and trade, and therecruitment oflabour.Heconcludes thatthegrowthofexportsintheregions wasgenerallyhigh,butthattheventures generated few backward linkages and no forward linkages that could have benefitedthelocaleconomies.Thesere
-gionsgeneratedtradesurpluses,indi
-cating that foreign companies used part of their exportrevenues forfor
-eignremittances,particularlytoover
-seasshareholders, which constituted a‘drain’offunds.
Thiscontrastswithchapter4(‘Asian Dynamics’), which generalises theex
-perience of a third cluster of regions whereexportsweregeneratedmainly by smallholders(Aceh, WestSumatra, Jambi, Lampung, West Kalimantan, SouthSulawesi,Manado).Exportswere largelyusedtofinanceimportsofcon
-sumptiongoods.Touwendetailsthisby discussing the production, financing, transportandmarketingoffoursmall
-holderproducts: pepper, coffee,copra and,particularly,rubber.Thisis possi
-blythemost innovative chapterof the study,becauseitelaboratestheconsid
-erabledynamicsofsmallholder agricul
-ture,whichhaveeludedmanystudents ofeconomicchangeinIndonesia.Tou
-wenemphasisestheimportanceofChi
-nese traders who organised trade, financingand transport, often to and fromSingapore.
Thelastclustercontainslargelyself
-sufficient areas, where foreign trade playedamarginalrole(Tapanuli,Beng
-kulu,Bali, Malukuand [West] Timor).
Chapter5(‘InthePeriphery’)explains thateconomicchangewaspreventedby theabsenceofamajordynamicsector, bylowinvestmentininfrastructureand socialoverheads,andbyisolation aris
-ing from a lack of regular and cheap shippingcontacts.
Thelastchapteranalysestheimpact of government policy on thedevelop
-mentoftheOuterIslands.Touwencon
-cludesthatthe‘EthicalPolicy’targeted Javaandlargelybypassedtherestofthe country. This wasnota matterof out
-rightneglect.Implementation ofpolicies inthe OuterIslandswashamperedby the very gradual development of the colonial presence, with officials over
-whelmedbythetaskofdevelopingof
-ten va st regions without adequate manpower and financial resources (pp.293–4).Secondly,thecolonialgov
-ernmentfounditdifficulttoformulate a consistentsetofpoliciesforthevery heterogeneous Outer Islands,most of whichwereinastateofflux(pp.264–6).
Aninteresting findingisthatpercapita publicexpenditurewasmoreevenlydis
-tributedacrosstheregionsthanwereper capita exports. Ifregional income and publicrevenuebothdependedonexport revenues, this meansthat the govern
-mentredistributed income(pp.272–4).
Itisnotpossible tohighlightallthe significant details that Touwen un
-earthed.Perhapsafewminorcriticisms can be mentioned.Touwenreadily re
-gardsthegrowthofcommodityexports asaproxyforeconomicgrowth,which isnotnecessarily thecase.Hediscusses commoditytradeonly,notthetradein services.Thisisrelevant,becauseheas
-sociatesacommoditytradesurpluswith a ‘drain’offunds.Such asurplusmay simply reflect a deficitin the trade in services. Touw en extensively uses Hirschman’s linkages concept, which was actually developedto analysethe impact of industrialisation ona closed
economy,ratherthantoexaminetheim
-pactofexportproduction,forwhichthe conceptofcomparative advantagemay wellhavebeenmoreimportant.Lastly, an explicit discussion of the develop
-mentofthedomesticshippingnetwork ismissing.
Thesecommentsaside,thebookisa majorcontributiontothehistoriography of economic change inIndonesia,and deservestobewidelyread.
PierrevanderEng
ANU
MohamedAriffandAhmedM.Khalid(2000),Liberalization, GrowthandtheAsian
FinancialCrisis,EdwardElgar,Cheltenham,pp.544.Cloth:£75.00.
This is an insightful, important, and goodbook.
Thebookisinsightfulbecauseitcriti
-callyexaminestheprocessofgrowthin 13diverseeconomiesindevelopingAsia
—theearlymarket-orientedreformersof
Indo nesia, South Korea, M alaysia , Singapore, Taiwan and Thailand, the hesitant mixed-economy reformersof
Bangladesh, India,Pakistan,thePhilip
-pinesandSriLanka,andthetransitional centralisedeconomiesofChinaandViet
-nam.Itconsidersthreemodelsofdevel
-opment and explicitly looks through politicalandideologicalrhetorictoiden
-tifytheforcesunderpinningsustainable economicgrowthanddevelopment.
Itarguesthatamarket-basedliberal
policy regime,asopposedtomixedor controlled policy regimes,is themost likelytosecureeconomicdevelopment. Afterexaminingtheeconomicperform
-anceoftheeconomiesunderreview,the authors identifytwo preconditions for development and sevenelements of a successfulliberalpolicyregime.
Thefirstpreconditionistheabsence ofwar;thesecondisinstitutionbuild
-ingtostrengthenprivate-sectorinitia
-tiv es thro ugh pro perty ri ghts, an independentjudiciary,effectivebank
-ruptcylaws andlow taxation.
Theelementsofaliberalpolicymix
-ture includepromoting competition in the real andfinancial sectors (through
international opennessandlowtariffs); anopencapitalaccount(althoughthere maybearoleforselectivecapital con
-trols); an open current account; fiscal prudence;solidprudentialsupervision of financial institutions; and an inde
-pendentcentral bank. The arguments aremadepersuasively,withreferenceto apracticalanalysisofpolicyregimesand economicoutcomesinthe13economies studied,andsupportedbymanyother studies.
The book is important because it standsagainstrevisionisminthepost
-crisis period. It provides a well bal
-ancedandnon-stridentargumentfor
oneof the world’smost dynamic re
-gions to maintain its commitment to market-based liberal econom ics. It
highlights the gains from open com
-petitive marketsand resists the calls oftheSirenstonationalandregional insularity and economic demagogu
-ery.The authors recognise thefragil
-ityofthemarketeconomy:theyargue the need for market discipline, well functioningpublicinstitutions,andef
-fectivefinancialsupervisionandregu
-lation.Buttheycontendthatthisisnot atimeforretreatfromfinancialdevel
-opmentandsophistication.Tosupport their argument they provide econo
-metricevidenceofthe importanceof financialdevelopmentingrowingsav
-ings,investmentandoutput.
Thebookisalsoimportantbecauseit puts theAsian financial crises of1997 and1998incontext.Thevulnerabilities that were exposed by the crises were serious,butthisdoesnotmeanthatAsia shouldbewrittenoffbytherestofthe world.It is still adynamic region, the more so if dealswith its financial and governanceweaknesses.
Thebookisgoodbecause,whileitis alittlefolksyattimes(especially inthe footnotes), it is well structured, well written, and accessible to the non
-technicalandeconomistreaderalike.It issetoutinfiveparts.Chapters1and2 provideanoverviewofthe arguments and an interpretation of the financial crisis.Chapters3to8provideadetailed analysis of economic, financial and policydevelopmentsinsixearlyreform
-ingeconomiesofAsia. Chapters9and 10 look at developments in the com
-mandeconomiesofChinaandVietnam, andthecorerolethatadoptingmarket policieshasplayedineconomicandso
-cial progress. Chapters11 to 15assess
the mixed performance of the mixed market–state economies. Chapters 16
and 17analysetheeconomiceffectsof financialliberalisationanddrawlessons aboutpolicyframeworks. Thematerial is well indexed. It looks comprehen
-sively at developing Asia, rather than justfocusingoneastorsouthAsia.
I have very few complaints about the book.Attimestheauthorssignal importantissues,suchasspeculation, butdonotanalysethem,whichIthink isanimportantomission.Andattimes they overgeneralise: HongKong and Singapore may have hadopen inter
-national financial marketsfor a long tim e, but they have o nly recently opened their domestic financial sys
-temstointernationalcompetition.But thesearequibbles.Thebookisavalu
-able additionto thedebate onpolicy making and structures in Asia and will, Ihope,bean influentialone.
GordondeBrouwer
ANU
GeorgeJunusAditjondro (2000),Cahaya BintangKejora: Papua Baratdalam Kajian
Sejarah, Budaya,Ekonomi danHakAsasiManusia[TheBeam oftheMorning Star:
WestPapuanStudiesinHistory,Culture,EconomicsandHumanRights],Elsham, Jakarta,pp.318.A$38.00;Rp16,000.
A Papuan, in a traditional headdress withclenchedfistholdingtheMorning Star Flag (Bendera Bintang Kejora)
proudly aloof, graces the cover o f GeorgeAditjondro’s book.Itis one of theimages thatbestreflects theasser
-tion of Papuan political and cultural valuesduringthe‘PapuanSpring’.
The cover is misleading. The book does notdiscuss theevents, valuesor conflictsofthepost-Soehartorevivalof
Papuan nationalism.Althoughit was publishedinmid2000,atthetimeofthe Kongres Papua, which, in retrospect,
seems to mark the high point of pro
-independencepoliticalactivity,thebook is a collection of writings about the 1980s.Aditjondrolivedandworkedin Papua for five years inthe 1980s,and much of the material dates from that timeordiscussesthedevelopments that Aditjondro participated in and wit
-nessed.Thesearethewritingsofasym
-pathetic and scho la rly participant observer.
Thecollectioncoversadiverserange ofaspectsof Papua’shistory andsoci
-ety, including the neglect of Papuan
nationalism inIndonesian historiogra
-phy,thecomposition ofPapuansociety, theculturalandartisticrevivalinitiated byArnoldAp,humanrightsabusesand transmigration. The publishernotes in the introduction that the collection mightgivethe impressionofgadogado
(anIndonesiandishofmixedvegetables andsalad),buttherewasacoherentfo
-cus around the problematic of Papua. Indeed,issuessuchashumanrightsand transmigration are as relevant for an understandingofcontemporary devel
-opments astheywereinthe1980s.As someone interested in both political changeintheDutchcolonialperiodand contemporary developments, Aditjon
-dro’swritingshelpfillsomeofthemany gapsinmyunderstanding.
Section2discussesculturalissuesand humanrights.Aditjondromakesthecon
-nectionbetweenthePapuanculturaland artisticrevivalinwhichArnoldApwas a leading figure, his murder and the emergenceofhumanrightsasapolitical issue.Thelatterisanimportanthistori
-cal discussion and he notes the roles playedbyMulyaLubis,PhilErari,Agus Rumansara, Michael Manufandu and AristidesKatoppoaseditoroftheJakarta dailySinarHarapan.Theabuseofhuman rights in Indonesian Irian Barat/Irian Jayahas becomecentral tothe Papuan politicalstruggleagainstJakarta’sauthor
-ityover theprovince.Thecommon ex
-perienceofhumanrightsabuseinmost sectionsofPapuansocietyispartofthe reasonindependenceactivistswereable to mobilise support so quickly and broadly.AsusefulasAditjondro’sdiscus
-sionofthe1980sis,itisapitythatitcould not beextendedtoincorporate the role ofthechurchesinthemid1990sandthe centrality of Elsham(the Institute for HumanRightsStudyandAdvocacy)in Papuanpoliticstoday.
Chapter7 discusses transmigration and isareprintofa1985article inthe
journal Prisma. Transmigration—and
theresultingdemographictransforma
-tion of the province’s population—is
oneof the structuralfeatureswithout which no understanding of political, culturalandeconomicconflictinPapua ispossible.ThescaleoftheIndonesian settlercommunityanditsdominationof theeconomy haveincreased markedly since1985.Therehasalsobeenconsid
-erable research undertaken by both Papuandemographersandoutsiders.
Aditjondro’sinsightsintothecolonial relationship are of particular value. Scattered throughoutthebook areob
-servations and analysisabouthow In
-donesians interact with Papuansand howIndonesianconceptualisation and stereotyping ofPapuansociety hasde
-veloped.Forexample,heassociatesthe prevalence of human rights abuses against Papuans with the conception manyIndonesians holdofthemasnot reallybeinghumaninsomesortof‘hier
-archyofcivilisations’.Aditjondronotes thesimilaritywiththewaymanyAus
-tralianshaverationalised thetreatment ofAboriginesatthehandsofEuropean settlers.Inasimilarvein,theJavanese, Buginese and Moluccan soldiers sta
-tionedinPapua forsixmonthperiods ofdutytendtobecome‘triggerhappy’ notsomuchthroughbravado,butrather as aresultofthefearand suspicion in whichtheycometoholdPapuans.Adi
-tjondrocomparestheattitudeoftheIn
-donesian soldiers to that of European settlersin north America:‘There is no goodIndianexceptadeadIndian’(sic). Inamoreanalyticmode,Aditjondro examinesIndonesianperceptions inthe contextofPapua’sheterogeneous ethnic composition. The artistic and material cultureoftheDaniandtheAsmathave shaped Indo nesian co nceptio ns of Papuanculture.Northcoastandisland Papuans (Biak and Serui) are well knownfortheirsportingprowess.The
impressive Papuan intellectuals who featureso prominently inAditjondro’s writings are littleknown elsewhere in Indonesia. He notes that Papuans are betterknownfortheirbrawnthantheir brain.
Aditjondro’swritingswillmakeasig
-nificantcontribution tohisIndonesian readers’understandingofPapuansoci
-ety and the history of its political struggle.Muchofchapter1isachrono
-logicaloutlineofOPM’sstrugglefromits
establishment in1965toTomWanggai’s activities in 1988.Chapter 3 presents typologiesofPapuanlanguages,ecosys
-temsandmaterialculture.Aditjondro’s discussionofthepatternsofleadership shouldbecompulsoryreadingforJakar
-ta’sintelligenceanalystsbeforetheynext examine the ‘Papuan political con
-spiracy’.
RichardChauvel
VictoriaUniversity
