00074918.2014.938409

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Bulletin of Indonesian Economic Studies

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

The Impact of Indonesia–China Trade

Liberalisation on the Welfare of Indonesian Society

and on Export Competitiveness

Sulthon Sjahril Sabaruddin

To cite this article: Sulthon Sjahril Sabaruddin (2014) The Impact of Indonesia–China Trade Liberalisation on the Welfare of Indonesian Society and on Export Competitiveness, Bulletin of Indonesian Economic Studies, 50:2, 292-293, DOI: 10.1080/00074918.2014.938409

To link to this article: http://dx.doi.org/10.1080/00074918.2014.938409

Published online: 30 Jul 2014.

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292 Abstracts of Doctoral Theses on the Indonesian Economy

spillovers occur among agglomerated, homogeneous industries. The positive

effects of high levels of competition and of domination by small irms suggest that Porter’s externalities stimulate irm-level eficiency—competition drives irms to innovate, which in turn makes them more eficient and accelerates productivity growth. These effects were evident for irms in urban regions and in industrial complexes, which conirms that an adequate business environment and asso

-ciated infrastructure play a crucial role in improving irm-level eficiency. The results also show that irm age and irm size have a positive effect on irm-level eficiency, suggesting that older irms tend to be more eficient than younger irms and that larger irms tend to be more productive than smaller irms.

The decomposition analysis inds that technical change is the main source of productivity growth, and less so scale eficiency change and technical eficiency change. The year-on-year trend, however, shows that productivity growth luctu -ates. The motor vehicle industry most frequently achieves the highest level of productivity growth among industries in Indonesia. Testing the effects of agglom-eration economies on productivity growth suggests that specialisation is more conducive than diversity to improving productivity growth. The Indonesian government should therefore consider prioritising agglomeration in its spatial industrial policy, by focusing on encouraging agglomeration and increasing the competitiveness of agglomerated areas. Industrial complexes, for example, have

a positive effect on irm-level eficiency—sustained industrial development relies

on the continued development of such complexes, as well as of special economic zones and integrated economic development zones. The government should also consider fostering agglomeration in urban regions, which themselves promote productivity growth.

The Impact of Indonesia–China Trade Liberalisation on the Welfare of Indonesian Society and on Export Competitiveness

Sulthon Sjahril Sabaruddin (sulthon.sjahril@kemlu.go.id)

Accepted 2012, University of Indonesia

This dissertation evaluates the impact of a hypothetical 2009 bilateral trade

lib-eralisation between Indonesia and China on the welfare of Indonesian society

and the competitiveness of Indonesia’s exports. To do so, it uses structural path analysis, the multiplier effects of Indonesia’s Social Accounting Matrix (2008), and a Software for Market Analysis and Restrictions on Trade (SMART) model, together with other analytical tools, including product mapping analysis, the nor-malised revealed comparative advantage indicator, and the trade balance index. It assumes that tariffs would be reduced to zero across all tariff lines and does not evaluate non-tariff barriers.

An increase in Indonesia’s consumer surplus and a decrease in its deadweight

loss since 2009 suggest that trade liberalisation with China would have a posi -tive impact on Indonesian society, largely because of its dismantling of tariffs, which would increase the disposable income of all Indonesian households. Yet

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Abstracts of Doctoral Theses on the Indonesian Economy 293

the net income multiplier effects on different groups of households (society’s net income), based on the Social Accounting Matrix, show that despite the increases in disposable income, which would be highest in households in urban areas and lowest in households of agricultural workers, the total net income of households

would fall—that is, household expenditure on imports from China would exceed household income from exports to China. This trend would be more visible

among high-income households in rural and urban areas than among households of agricultural workers and households with low incomes.

The estimation results show that, in general, Indonesia’s liberalisation of trade

with China would have a negative impact on the competitiveness of Indonesian

exports and producers. In manufacturing, for example, Indonesian producers

would have to compete with Chinese producers, and most products from China

would outperform similar products from Indonesia. Yet the distribution of com-petitiveness would vary among products and sectors; many manufacturing

prod-ucts from Indonesia would compete iercely with, and in some cases outperform, similar products from China. As for primary commodities, such as rubber, palm

oil, and natural gas, Indonesia, which relies on the exports of such commodities,

would outperform China.

The increasing competitiveness of Indonesia’s primary commodities within

ASEAN and to China suggests that Indonesia would have the greatest comparative

advantage in producing these commodities and that its income from them would

increase over time. In contrast, China would have the greatest comparative dis -advantage within the region, and the estimation results suggest that the competi-tiveness of its primary commodities would decrease over time. In manufactured products, however, Indonesia would be disadvantaged, and this condition (which

has deteriorated since 2000) would steadily worsen. China’s comparative advan -tage in manufacturing would increase rapidly, especially because of the

imple-mentation of the ASEAN–China Free Trade Area in January 2010.

The Rise of the Managerial State in Indonesia:

Institutional Transition during the Early Independence Period, 1950–1965

Farabi Fakih (farabi.fakih@gmail.com)

Accepted 2014, Leiden University

Indonesia obtained its sovereignty as an independent republic at the end of 1949, after a protracted four-year war with its former colonial master, the Netherlands.

From the early years of independence, ineficiency, corruption, labour shortages,

and managerial incapacity became major problems that the Indonesian state seemed incapable of addressing. Turning to foreign, especially American, aid, the state initiated a series of institutional developments. It sent thousands of Indone-sian students to study in American universities and invited thousands of experts into the country. It cemented institutional and personal relationships between Indonesian and American universities. It imported and developed its own dis-course on development, to transfer elite domination from nationalist-revolutionary