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Bulletin of Indonesian Economic Studies

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Book reviews

James Fox , Yogi Vidyattama , Elan Satriawan , Anton H. Gunawan , Hugh

Patrick , Andrew Elek , Kathryn Robinson & Andrew McWilliam

To cite this article: James Fox , Yogi Vidyattama , Elan Satriawan , Anton H. Gunawan , Hugh Patrick , Andrew Elek , Kathryn Robinson & Andrew McWilliam (2010) Book reviews, Bulletin of Indonesian Economic Studies, 46:3, 387-399, DOI: 10.1080/00074918.2010.522508

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ISSN 0007-4918 print/ISSN 1472-7234 online/10/030387-13 DOI: 10.1080/00074918.2010.522508

BOOK REVIEWS

S. Ann Dunham (2009) Surviving Against the Odds: Village Industry in Indonesia,

edited with a preface by Alice G. Dewey and Nancy I. Cooper, Duke University Press, Durham NC, pp. 440. Cloth: US$27.95.

Ann Dunham, US President Barack Obama’s mother, was a consummate ethnographer with an intimate knowledge of Indonesian village life. She combined her anthropological skills with a keen interest in the development of

policies that would beneit the communities she studied. Surviving Against the Odds relects her passion, commitment and intelligence. It is a study of Indonesian

village industries, focusing on blacksmithing on Java, and is based on extensive

ieldwork over a period of 14 years from 1977 to 1991. During much of this time,

Dunham supported herself by working as a consultant on projects relating to local-level industries and small-scale enterprises. This allowed her to situate her

diverse ieldwork efforts within both a regional and a national context.

The book begins with a trenchant critique of J.H. Boeke’s once inluential ideas

on dualism in Indonesia’s economy – the supposedly unbridgeable gap between a capital-intensive modern economy and cooperative village enterprises. Boeke’s conceptions – or rather misconceptions – postulated egalitarian, non-competitive village communities. These notions led to the enactment of policies intended to shelter village industries from the effects of a developing colonial economy.

This book endeavours to dispel the lingering remnants of these ideas. It emphasises the long-term stability and competitive advantages of small-scale industries in a rural context. It also examines the changing realities of these local village industries in reference to government policies that have affected their development over the past 20 years. Small-scale smithing industries are the test case and a single village, Kajar, in the Gunung Kidul region of Yogyakarta, with a heavy concentration of small smithies, provides an illustrative – ‘living’ – example. Most of the book is directed to the examination of village industries at the macro-level and the effects of ‘New Order’ policies on rural development. The patterns of smithing industries are analysed in formal terms: the division of skilled labour, production levels, supply requirements, trading and marketing, the seasonal variations that affect these industries, and recent technical developments that have altered village practices.

Trends identiiable in national statistics are tellingly illustrated in speciic

developments at the village level. Thus, for example, smithies have become

smaller because electriication has eliminated the need for a full-time bellows

operator. But most mechanical bellows systems have not been dismantled, because frequent power outages threaten production, and someone – a child, wife, neighbour – may have to be called upon quickly to maintain the bellows.

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This book is concerned with understanding the transformations in village industries that have occurred and are occurring in Indonesia, but particularly

those in Java. Stratiication in the rural industrial sector has paralleled stratiication in the agricultural sector. The book emphasises that it is not simply income but assets and access to credit that underlie this stratiication. Increase in trade is fundamental. In Kajar village, the wealthiest individual is given honoriic

recognition as the empu pedagang, the ‘smith-trader’. Although he himself does no smithing at all, he controls much of the supply of iron and charcoal that the smiths rely upon, and he markets the tools that they produce.

Alice Dewey, Ann Dunham’s thesis supervisor, and Nancy Cooper have done a skilful job of editing this dissertation into a focused, beautifully presented volume. Although closely based on the dissertation, the book presents only a portion of the work. The original dissertation was submitted in August 1992 in two volumes with a more optimistic title, Peasant Blacksmithing in Indonesia: Surviving and Thriving Against All Odds. It was a much larger and far more wide-ranging work than the present volume. It included three fascinating chapters on

the early history of metal-working in Indonesia; on metal-working technologies

in Indonesia, including a section on the origins of the technology of Javanese kris creation; and on the cultural dimensions of blacksmithing throughout Indonesia. (In myth and legend, the smith, who harnesses ire for his creations, is accorded

a special aura.) These three chapters, excerpted from the thesis, could well constitute a valuable monograph on their own. The dissertation also had another comparative chapter on different kinds of metal-working villages in other parts of Indonesia – in the Minangkabau highlands of Sumatra, in the Toraja and the Bugis areas of South Sulawesi, on Bali and in Central Java – all of which demonstrated Ann’s remarkable ethnographic coverage of the smithing industry.

I had the good fortune to have known Ann Dunham as a feisty friend and tough-minded colleague. We shared many mutual interests, especially in Indonesia’s national program for the provision of rural credit (Kupedes). This book is a tribute to her spirit and dedication.

James Fox

ANU

Coen J.G. Holtzappel and Martin Ramstedt (eds) (2009) Decentralization and Regional Autonomy in Indonesia: Implementation and Challenges, Institute of

South-east Asian Studies (ISEAS), Singapore, pp. 433. Cloth: S$89.90/US$79.90.

Published a decade after the enactment of Laws 22/1999 and 25/1999, which became the basis for decentralisation in Indonesia, this book takes the discussion beyond consideration of a suitable blueprint for decentralisation, looking more closely at implementation in its infant stages. The introduction by Holtzappel nicely summarises all the issues that form the basis for the rest of the book.

The volume begins with two overviews of the irst few years of decentralisa -tion. Abidin presents a critical view of IRDA (Indonesia Rapid Decentralization

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Appraisal), the Asia Foundation-supported decentralisation monitoring project. He reveals the various steps taken by stakeholders to adapt to the new system, and points out that most stakeholders have taken a ‘New Order’ approach to

implementation. Suharyo presents the results of ield research conducted by the

independent SMERU Research Institute on the dynamics of the reform process.

She highlights the main challenge in the ield – the lack of public sector capacity,

especially at the local level.

Hofman, Kaiser and Schulze then look at the more speciic issue of corruption.

They compare the dire predictions of massive corruption – given possible leakage in the transfer mechanism and the greater authority given to local governments –

with the equally bleak picture of corruption, collusion and nepotism relected in the results of the irst Governance and Decentralisation Survey conducted in 2002

by the World Bank and Gadjah Mada University, and in a Regional Autonomy Watch report on the regional investment climate. Nevertheless, they reveal that most of these practices bear a resemblance to what has happened in the past.

Rukmo looks at another speciic issue: regional differences in the ways that

local-level people’s representative councils are operating.

Sadli and Ray have written complementary but distinct chapters on how decentralisation may affect the business climate in Indonesia. The chapter by Sadli, the late professor and former minister in the Soeharto era, provides a nice end point, giving his thoughts on how the decentralisation changes, especially in the budget transfer system, may affect local government taxation behaviour and hence the business environment. Ray offers some suggestions about how to develop the system further to maintain a healthy business climate. At this point, the next chapter, by Sandee, on how small business is coping, is perfectly placed.

Two chapters by Brodjonegoro and Nas complete the irst section of the book.

Being heavily involved in the process, Brodjonegoro comments on how the new

transfer system affects the iscal sustainability and economies of local govern -ments in this infant period of decentralisation. He concludes that most of the adaptation process has been remarkably successful. Nevertheless, the focus of local governments on the budget rather than the economy may hurt them in the longer term. Nas discusses the administrative entity to which authority and responsibility has been transferred – the district (kabupaten) and municipality (kota), known as the second level of local authority. He presents links between the history of this entity and the current transfer of authority: the Netherlands-Indies administration created this level of government precisely to decentralise some powers and allow representation of local interests to the central colonial administration.

Nas’s chapter is a good introduction to the second section of the book, which

looks more closely at several speciic regional cases. Although discussing differ

-ent regions and differ-ent sorts of problems, the irst four chapters of this section

offer similar views about the authority and ownership tug-of-war among local elites and the large role played by cultural background and traditional authority. De Jong looks at the issue of authority and power struggles between traditional

Tana Toraja leaders and the current political elite in South Sulawesi; Franz and

Keebet von Benda-Beckmann present a similar picture in West Sumatra’s Minang-kabau region. Bali, as represented by Ramstedt, faces similar problems, but in

the context of conlict between state law and traditional law and the ways they

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are enforced. Prabowo, in the irst chapter in this section, looks at another type

of power struggle, the land ownership quarrel between private companies and some community groups in Riau – an excellent site for research on the impact of decentralisation. Syafrinaldi looks at intellectual property legislation in the same area, while Chou discusses the impact of decentralisation on the economy of the Riau growth triangle.

With contributions from prominent authors who have looked at the process

closely, this overview of the irst few years after decentralisation covers many

different angles. One book cannot capture everything, however, and there are sev-eral noticeable omissions. The changed role of the military in the process is surely

one story that will be missed. Another concerns the way ethnic conlicts esca -lated after the central government lost its grip on some regions, and how far these

conlicts have been resolved. Nonetheless, the book gives a clear picture of the

bumpy but relatively successful implementation of this new governing system in Indonesia. It reveals the existence of many problems and much confusion among stakeholders, and illustrates the ways stakeholders still look to the old system for the answers. The contributions will provide valuable insights to those who praise or criticise the process from the outside, and can offer guidance to other countries that may contemplate doing something similar.

Yogi Vidyattama

University of Canberra

Neil McCulloch (ed.) (2009) Rural Investment Climate in Indonesia, Institute of Southeast Asian Studies (ISEAS), Singapore,

pp. xxvi + 337. Paper: S$59.90/US$49.90.

Rural conditions and rural development remain important to academic and

pol-icy discussion in Indonesia. Most areas are still classiied as rural, and about 60%

of the population still live in rural areas. Thus any policy aimed at improving the welfare of Indonesia’s population should take serious account of rural econo-mies and populations. This, in turn, calls for intensive study of various aspects of rural economic development. Surprisingly, the literature on rural development in Indonesia is relatively thin. There are also few studies that focus on the rural investment climate, particularly with reference to developing countries. This

book therefore ills a signiicant gap in the rural economy literature.

It concentrates particularly on the potentially signiicant role of rural

non-farm enterprises (RNFEs) in inducing growth in other sectors and in the rural economy as a whole. The nine chapters cover topics from agricultural demand linkages (Suryahadi et al.) to the impact of labour market regulation and

infor-mal market practices on the performance of RNFEs (Alisjahbana and Manning); inancial services and constraints (Ikhwan and Johnston); the role of infrastruc

-ture in RNFE performance (Gibson); technological knowledge diffusion among RNFEs (Tambunan and Thee); marketing and competition (Hill and Simatupang); local taxation and its effect on the rural business climate (Lewis and Sjahrir); the

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political economy of investment climate reform at the local level (Von Luebke);

and how insecurity affects RNFEs (Haughton and MacDougall).

The editor’s introduction provides the framework for analysis and outlines the

main indings of the chapters. It argues that the ‘growth of the RNFEs has the

potential to be an important route out of poverty …’ (p. 5). While the topics cov-ered in the book are diverse, they are designed to complement each other, so that the conclusions converge to provide a ‘to do list’ of strategies to advance RNFEs and hence the rural economy. This is done by designing each chapter to address four similar research questions: (i) the size and nature of the constraints faced by

RNFEs; (ii) the impact of these constraints on RNFE performance; (iii) the policy and institutional environment and how it gives rise to constraints; and (iv) policy

reforms at the national and local level that may produce a better investment cli-mate (p. 17).

The chapter by Suryahadi et al. demonstrates the importance of agricultural demand in stimulating non-agricultural sectors and thus the rural economy as a whole. Other chapters explore factors that affect the performance of RNFEs –

and of the rural economy: labour regulation; credit; infrastructure; technology; marketing channels; local tax; local institutions; and security. Through empirical

investigation as well as literature surveys, these chapters highlight the importance

of removing constraints and inluencing determinants of improved performance

by RNFEs. Ikhwan and Johnston, for example, show that of 15.8 million micro and small non-farm informal enterprises in 2003, more than half faced problems,

and 37% faced inancing constraints. Using data from the Rural Investment Cli -mate Survey (RICS), this chapter shows that micro and small enterprises are much

more likely than medium and large irms to face credit constraints (pp. 90–1). The

chapter by Gibson, though not necessarily suggesting a causal relationship,

dem-onstrates a signiicant and positive correlation between non-farm activity and lev -els of road infrastructure and electricity.

The studies in the book use data sources that are rich in relevant informa-tion on many aspects of RNFEs and the determinants of their success. In par-ticular, the chapters by Alisjahbana and Manning, Ikhwan and Johnston, Gibson, and Haughton and MacDougall directly exploit data from surveys such as the National Socio-Economic Survey, RICS and the Indonesian Family Life Survey to reach their conclusions. Some chapters, especially that by Gibson, discuss how modern empirical methods use survey data to establish the causal relationships that lead to the authors’ conclusions.

If the book has a law, perhaps it is an excessive focus on constraints. Eight of

the chapters discuss factors that constrain the success of RNFEs, or related prob-lems. The chapter by Suryahadi et al. seems to stand alone in identifying factors that can stimulate the growth of RNFEs. The discussions in this chapter imply that there are two potential paths through which the agricultural sector can induce RNFE growth: direct linkages and indirect ones through poverty reduction. The latter is an area that could be explored in future studies of RNFEs.

A further limitation of the collection is that the contributors’ access to information-rich and relevant survey data seems not yet to have been exploited fully. The chapters that use survey data have, unfortunately, used it only to describe the existence of constraints on RNFEs. Future studies on these topics may go further and answer analytical causality questions about the impact of

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policy on the existence of constraints and therefore on the performance of RNFEs and the rural economy.

Overall this book is highly recommended for researchers in the area. Even its less technical content offers readers the chance to gain a better understanding of the importance of RNFEs and a comprehensive knowledge of the main obstacles to their advancement. It is an important reference for anyone whose interest lies in issues related to RNFEs and the rural economy in general.

Elan Satriawan

Gadjah Mada University, Yogyakarta

Eko B. Supriyanto, Mucharor Djalil and Iwan Gunadi (eds) (2007)

10 Tahun Krisis Moneter: Kesiapan Menghadapi Krisis Kedua [10 Years of Monetary Crisis: Readiness to Face the Second Crisis],

InfoBank Publishing, Jakarta, pp. xi + 390.

This book contains 26 brief articles and an overview by the lead editor, Eko B. Supriyanto. The articles are written by, or based on interviews with, 26 econ-omists, former economic ministers or central bankers, and business people (including bankers). Divided into four sections, the book tries to lay out various perspectives on the 1997–98 monetary and banking crisis in Indonesia, and its impact 10 years later on the economy and the banking sector. As explained in the

overview, the initial idea for publishing this book came after the then inance min -ister, Sri Mulyani Indrawati, returned in mid-2007 from a ministerial meeting with the Asian Development Bank in Tokyo, and noted the similarity between the 2007 economic situation and that before the 1997–98 Asian crisis. Both periods were

characterised by a massive inlux of liquidity into Asian emerging markets as the

economies grew rapidly. The book is thus trying to assess – but unsuccessfully so – how well prepared Indonesia was in 2007 to face a possible second economic crisis

resulting from the reversal of massive short-term foreign capital inlows.

The second and third sections contain analyses of the triggers, causes and impact of the crisis. Most of the authors seem to agree that the 1997–98 economic crisis in Indonesia – the book uses the term ‘krisis moneter’ (monetary crisis) instead – was triggered by contagion from a speculative attack on the Thai baht in

July 1997, amid signals of overheating in the economy. High current account dei

-cits (as high as 8% of GDP for Thailand and 3.5% for Indonesia), resulting from relatively fast economic growth, had to be inanced by external debt, especially

private debt. Because of its poor system of private external debt data reporting and monitoring, the government was caught by surprise when private external debt proved to be much higher than it had estimated. To make matters worse, most of the external debt was unhedged, because the government’s monetary and exchange rate policies encouraged businesses not to hedge. Furthermore, as

pointed out by Mar’ie Muhammad, the inance minister at the onset of the 1997–

98 crisis, the banking sector was facing currency and maturity mismatches, with many loans imprudently extended to the bubbling domestic property sector and

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to the conglomerates that owned the banks. This effectively transformed a

cur-rency crisis into a larger banking and inancial crisis.

The contribution by J. Soedradjad Djiwandono, who was governor of Bank Indonesia at the time of that crisis, argues that its main causes – the Thai con-tagion, weaknesses in the banking sector, and the government’s policy failures – were compounded by structural weaknesses in the economy (ersatz capitalism), society (wide income inequality) and politics (an authoritarian regime with no clear system of succession). These weaknesses deepened the economic crisis and transformed it into a multi-dimensional crisis. It is no wonder that Indonesia’s

year-on-year economic growth rate in 2008 declined to –13.6%.

Several former ministers during the Abdurrahman Wahid and Soeharto presi-dencies, such as Rizal Ramli, Kwik Kian Gie and Fuad Bawazier, blame the government and the International Monetary Fund (IMF) for mistaken policy prescriptions. We mention here two kinds of policy failures that exacerbated the crisis: (1) the IMF ‘recipe’ of closing 16 ailing banks without a deposit

insur-ance system in place; and (2) the tightening of monetary and iscal policy, result

-ing in signiicantly higher interest rates and a loss of public conidence in the

government. These steps are the standard IMF approach to balance of payments problems, but they further squeezed an already ailing business sector (hit by

a signiicant depreciation of the rupiah), thus pushing the economy into deep

recession. Learning from the mistakes of 1997–98, the IMF and the monetary,

banking and iscal authorities of economies affected by the 2008–09 crisis have

taken a completely different approach, cutting interest rates to very low levels,

injecting considerable liquidity into the inancial system, and providing signii

-cant iscal stimulus, which led to much larger iscal deicits and sovereign debt

problems.

The last section of the book focuses on the issues surrounding the banking sec-tor at the height of the crisis and in the subsequent recovery process. Besides the currency and maturity mismatches prevailing in Indonesia’s banking sector at the onset of the crisis, the sector was also beset by rampant violations of legal lending limits. As discussed by Binhadi, a former director of Bank Indonesia, and Pradjoto, a banking sector lawyer, the government – including Bank Indonesia as the monetary and banking sector authority, since it was then not yet independ-ent of the governmindepend-ent – adopted at least three major policies to save the ailing banking sector during the crisis. These were: (1) a massive injection of liquidity

support; (2) the introduction of a blanket guarantee of the banking sector and the

establishment of the Indonesian Bank Restructuring Agency (IBRA) in January

1998 to help restore public conidence in and restructure the banking sector; and

(3) the recapitalisation of the surviving and saved banks.

These unavoidable policies have proved very costly, with government bonds and promissory notes equivalent to almost Rp 650 trillion issued. They will

con-tinue to burden the government’s iscal position until 2018, when all of the bank

recapitalisation bonds will have matured. Contributors to the book give mixed evaluations of IBRA’s success in restructuring the banks and recovering the costs of saving the ailing banking sector during the crisis. Binhadi, Pradjoto and Eko

Supriyanto give positive assessments, since IBRA achieved a 30% cost recovery

rate, while Faisal Basri is very critical of IBRA’s role. In his view, the existence of IBRA simply exacerbated the problem of moral hazard.

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On a inal note, the book fails to address the issue mentioned in the sub-title

– readiness for the second crisis. None of the authors, except in the overview sec-tion, discusses this question. Further weaknesses exist in the form of poor

edit-ing and laws that arise because the majority of articles are based on interviews:

there is little solid academic analysis and some sections are very emotionally written. In spite of these weaknesses, I believe the book is an important addition to the very limited literature in Indonesian on the 1997–98 Indonesian economic crisis, especially for lay people and college students. Unfortunately the book can-not be found in major bookstores in Indonesia. It is, however, available from the publisher.

Anton H. Gunawan

PT Bank Danamon Indonesia, Jakarta

K. Kesavapany and Hank Lim (eds) (2009) APEC at 20: Recall, Relect, Remake, Institute of Southeast Asian Studies (ISEAS), Singapore, pp. 120.

Cloth: S$39.90/US$29.90.

This very nice book is a brief but substantive introduction to and evaluation of the

Asia-Paciic Economic Cooperation (APEC) forum over its irst 20 years. APEC is committed to non-discriminatory ‘open regionalism’; its core objective is to

achieve free and open trade and investment liberalisation for its members. This is an excellent primer: succinct, positive, sceptical and straightforward. The eight largely complementary chapters are by outstanding academics and policy mak-ers who have long been deeply involved in APEC, both as supportmak-ers and crit-ics: Andrew Elek, Peter Drysdale, Charles Morrison, Man-jung Mignonne Chan, Zhang Yunling and Shen Minghui, the late Hadi Soesastro, Ippei Yamazawa, and Tom Koh with Lee Tsao Yuan and Arun Mahizhnan. They provide an objective evaluation of APEC’s achievements, weaknesses and failures, tracing its evolu-tion and proposing constructive changes to its architecture and policies. The

sub-title – ‘Recall, Relect, Remake’ – well deines the book’s intellectual thrust.

APEC is unusual in its membership and form of decision making. It is the only inter-governmental organisation for economic cooperation with member

econo-mies on both sides of the Paciic. Its decisions are based on ‘concerted unilat -eralism’, a subtle dialogue process aimed at a consensus-based understanding through which individual members, subject to considerable informal peer pres-sure, voluntarily take liberalisation actions. APEC is an exercise in soft power, not the hard power of a governmental organisation negotiating binding, enforce-able agreements. Its processes deepen relationships and build norms among its

members. APEC’s value is dificult to assess because its processes are not binding.

This is the only way APEC could operate, given its members’ extraordinary diver-sity of size, level of development, history, political systems and national interests.

What binds the members are the beneits of economic cooperation. I share the

authors’ positive assessment of APEC’s contributions – far better a weak institu-tion than none at all.

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APEC’s early success is epitomised by its Leaders Meetings, held annually since 1993, and the declaration in 1994 of the ambitious Bogor Goals of ‘free and

open trade and investment in the Asia-Paciic’ for developed economy members

by 2010 and the entire group by 2020. However, the failure of the ‘early voluntary sectoral liberalisation’ initiative in 1998 demonstrated the limitations of APEC’s voluntary approach, and over the past decade the forum has become less impor-tant, making only small, laborious progress through its individual action plans. Perhaps in response, its focus has shifted constructively to trade facilitation and capacity building programs.

Over the past 20 years the world and East Asia have evolved more deeply

and rapidly than APEC. East Asian trade integration has intensiied, primarily

through private sector responses to market opportunities rather than government

policy initiatives. APEC could not deal with the 1997–98 Asian inancial crisis.

Major APEC players shifted their trade liberalisation efforts to negotiated bilat-eral or sub-regional ’free trade’ agreements. The ASEAN+3 and the East Asian

Summit meetings have become signiicant institutions that do not include the US.

The G-20, of which nine are APEC countries, adds a new dimension to institu-tional arrangements.

The tension between the voluntary, non-binding model and the negotiated, binding model has surfaced in a proposal to make APEC binding by establishing

a Free Trade Area of the Asia-Paciic (FTAAP). This was on the agenda of recent

APEC annual meetings and always tabled for future consideration, but is unlikely to be negotiated soon, as several authors note.

The book successfully describes and evaluates the essence of APEC but, given its brevity, does not consider important related issues. For instance, APEC’s agenda has expanded to include many sustainable development issues, with about 150 meetings annually. The supportive roles of the APEC Business

Advi-sory Council and the broad-based Paciic Economic Cooperation Council are not

addressed.

This volume provides an excellent basis for thinking about APEC’s future rel-evance and role. A nice plus is its visual elegance, notably the 35 charming colour photographs, including those of summit leaders in national attire at their annual meetings.

Hugh Patrick

Columbia University, New York

Ikuo Kuroiwa (ed.) (2009) Plugging into Production Networks: Industrialization Strategy in Less Developed Southeast Asian Countries, Institute of Southeast

Asian Studies (ISEAS), Singapore, pp. 313. Cloth: S$69.90/US$49.90.

This volume, based on research funded by Japan’s Institute of Developing Econo-mies, is a useful addition to the analysis of international commerce and economic integration in the 21st century. Trade in goods is now only a part of inter-twined international movements of investment, services, components, expertise and

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information. Intra-irm and intra-industry trade are growing far more rapidly than trade in commodities and inished manufactures.

Production networks are a new paradigm made possible by massive improve-ments in information and communications technology that allow the production of goods or services to be broken into several stages, each located where value can

be added most eficiently.

This new model for conducting international business opens opportunities for economies to raise their productivity. As chapter 9 explains, developing econo-mies no longer need to tread the ‘arduous path’ of exporting commodities and the least sophisticated manufactured exports. They can leapfrog to adding some value to quite sophisticated products with higher income elasticities.

Very poor economies can choose to engage in the global economy even if they have no more to offer than cheap land and labour. Investors can provide tech-nological and marketing expertise along with their capital. The ability to engage in international production networks has become a new source of comparative advantage, which can be tapped by using the practical advice in this volume.

The early chapters explain the nature of production networks and the way value is added in production bases linked by services along international supply chains. Chapter 1 summarises the main features needed for locations to become involved. Besides low costs of land and labour, they need market access, which is

no longer deined in terms of absence of protection against new exporters, but in

terms of good communications and trade logistics.

The country studies in the later chapters explain how economies can begin to engage with others along their physical borders, then build on these links to

become more deeply involved. Some early successes can generate beneicial posi

-tive feedback, as new skills are acquired and reputations gained. Signiicant econ -omies of scale emerge as the volume of trade expands along new transport links. Contributors emphasise that early engagement in simple low-skill stages of pro-duction networks can lead to a progressively wider set of opportunities. Indeed locations need to ensure this happens to avoid being supplanted by competitors offering even lower factor costs. A predictable legal environment is essential to encourage arms-length transactions with potential domestic suppliers of inputs. Institutions to support skill development and innovation are critical to harness-ing the opportunities that investors create. Since it is hard to create a good policy environment for the whole economy, the contributors favour special economic zones, which can test policies to be applied economy-wide in due course.

They recommend policies that have generic application, rather than special concessions to particular investors. The chapter on Laos shows the value of consulting with potential investors to identify policies needed to engage in pro-duction networks. The study of Myanmar shows that bad policy can preclude engagement in production networks. An awful regulatory environment and lack of infrastructure mean that the only way its workers are becoming engaged is by crossing the border.

The volume provides a wealth of relevant data and references. These conirm

that economic integration in East Asia is driven by market signals about evolv-ing patterns of comparative advantage. Governments can do a lot to facilitate such market-driven integration, but this need not mean the negotiation of more preferential trade agreements. Chapter 4 explains that the rules of origin of such

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inter-governmental deals can make it harder for new entrants to engage in pro-duction networks. Businesses managing supply chains seldom have time to take advantage of preferences, and have shown little interest in trade negotiations focused on traditional border barriers to trade.

A few criticisms: the book contains many models and diagrams explaining stages of engagement in production networks. They are mutually consistent, but could confuse and deter policy makers. The latter would be well advised to read chapter 1, then the case studies, before the more theoretical chapters. In addition to praising the effort to integrate ASEAN economies, the volume could point to the even greater potential gains from integrating them with the rest of the world. Finally, it would have been useful to present an additional case study of an econ-omy such as Taiwan, which has demonstrated the many ways to be involved in,

and eventually manage, the diverse types of production networks that have lour -ished in East Asia.

Andrew Elek

ANU

Gerry van Klinken and Joshua Barker (eds) (2009) State of Authority: The State in Society in Indonesia, Southeast Asia Program Publications,

Cornell University Press, Ithaca NY, pp. 232. Paper: US$23.95; Cloth: US$46.95.

How do we understand ‘state–society’ relations in post-Soeharto, decentralised

Indonesia� What is speciic about this relationship in Indonesia’s contemporary

democratic polity? In a globalising world in which many assumptions about states are challenged, how relevant are current ways of theorising the state to under-standing current Indonesian politics? The papers in this volume are the outcome of a project that is part of the Research Program on Contemporary Indonesia at KITLV (the Royal Netherlands Institute of Southeast Asian and Caribbean

Stud-ies). They present ine-grained studies of local actors and political cultures across

Indonesia. The focus is on relations between the formal institutions of politics, on the ways in which the institutions are being transformed and on the social rela-tions of power at local levels.

Which social groups now control state institutions and state power (and patron-age)? Are they the same groups that wielded power under Soeharto, or have subtle shifts taken place? The seven case studies – from all over the archipelago – address these questions through ‘the micropolitics of everyday life’ (p. 5). They are prefaced by a review article in which the editors present a history of scholarly approaches to the Indonesian state.

Papers by Barker and Ryter explore continuities between the New Order and

reformasi periods in the roles of key local political actors, with Ryter showing how members of the old youth groups of the New Order era were able to use their net-works to obtain political positions in the new district parliaments. This has led to increased opportunities in politics for people from non-military families. Several papers address the ‘money politics’ of reformasi, and in this vein Simandjuntak

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demonstrates the continued importance of political links to the centre. Olle analy-ses the rise of another New Order institution, the Majelis Ulama Islam, illustrating

how political igures can draw advantage from the intensiication of public piety

in post-Soeharto Indonesia. Vel presents an interesting case study from Sumba in eastern Indonesia, showing the intersection of ideas of ‘gift exchange’ and

politi-cal donations, supported from the increased low of central funds to the regions. Fougères examines the tensions for an elected village oficial as he negotiates the expectations of his behaviour as an elected oficial and as a local patron. Hidayat

and Van Klinken investigate the money politics of a local election.

These closely worked case studies are a signiicant contribution to research on

the complexities of political and social life in democratic Indonesia. They illus-trate the varied ways that emerging common themes – such as corruption, local chauvinism over ownership and exploitation of resources, and the constitution

of elites – are worked out in speciic local settings. Through its engagement with

the traditions of political analysis in Indonesia, and with the state of play in local politics across the archipelago, this volume brings ‘up to date’ approaches to the analysis of Indonesian politics in the post-Soeharto era.

Kathryn Robinson

ANU

Guy Boggs, Bruce Campbell, Natasha Stacey and Will Steffen (eds) (2009)

Prepare for Impact! When People and Environment Collide in the Tropics, CDU Press, Darwin, pp. 120. Paper: A$33.00.

This concise volume presents a selection of the edited proceedings of the 2008 Charles Darwin Symposium, sponsored by the Charles Darwin University in Australia‘s Northern Territory. The symposium brought together a wide range of scientists to debate the multiple impacts of development on the environment in tropical Australia and the wider region of Southeast Asia.

The papers are presented in four sections: ‘Setting the scene’; ‘Drivers of change’; ‘Values and livelihoods’; and ‘What are the changes and their impacts�’.

They explore a diversity of inter-related issues and challenges, and include a focus on the rapid economic development of the region and its linkages to the fast-emerging economic powerhouses of China and India. Related questions of burgeoning population growth, demand for increased food production and the multiple dependencies on environmental services for growing prosperity all form part of a complex and interactive picture. The future of the region is made all the more uncertain by dynamic climate change, as Steffen’s contribution on climate change in the tropics makes clear.

A number of papers deal explicitly with the prospects for northern Australia, where conditions and trends contrast markedly in many respects with those in

neighbouring Southeast Asia. Nevertheless the need to ind effective accommoda -tions between natural resource development, economic growth and sustainable

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indigenous futures is a challenge shared in different ways across the societies of the region.

Issues affecting Indonesia are also canvassed in the volume, although for the most part articulated as a regional component of the broader trends affecting Southeast Asia. Indonesia, like other countries of the region, is responding to the rapid growth of China and the industrial demands of wealthy but resource-poor economies in East Asia by increasing its rate of natural resource extraction. Trade

in isheries, forestry and mining development is a key area of economic interest,

with environmental protection regimes poorly regulated in the race to generate revenue streams. Indonesia’s well publicised record of forest conversion, illegal logging and habitat loss is highlighted in a number of papers, and represents just one regional example of a wider threat to biodiversity across Southeast Asia.

Poli-cies of decentralisation in Indonesia have conferred signiicant beneits in terms of

policy devolution and democratisation, but little in the way of better management of natural resources.

The volume certainly achieves its aim of drawing attention to the extensive and continuing deleterious environmental effects of rapid economic development in the booming regions to the north of Australia. But the complexity of natural resource management in this context, and the need for analysis and interventions at multiple scales of policy and practice, preclude easy solutions. The contribu-tors are keen to stress that economic growth and environmental destruction need not be direct correlates, but recognise that present trajectories require concerted action from many directions and diverse interest groups if a more sustainable future is to be secured.

Andrew McWilliam

ANU