As was the case exactly 11 years ago, the ‘Survey of recent developments’ in this issue, contributed by Vincent Ashcroft and David Cavanough, was being finalised just at the time that Indonesia appeared to be moving unexpectedly and rapidly in the direction of a financial crisis. The second-quarter national income accounts showed continuing strong economic growth. The budget deficit was well under control. Inflation was a good deal higher than in the run-up to the previous major crisis, but the exchange rate had been steady for an extended period, notwithstanding the emergence of a small current account deficit in the second quarter. There had been a significant downturn in share prices, but this had not been regarded as of major concern. It was not until September and October that the foreign exchange and capital markets began to be significantly disturbed by the sudden and severe global financial upheaval.
Prior to this, the major economic event was the announcement in mid-August of the 2009 budget. The original plan was for this to follow similar lines to that of 2008, but at the last moment the government decided to undertake significant modifications. The first was to reduce substantially the assumed average world oil price for the fiscal year in view of the rapid decline that began in July. The second was in response to a finding by the Constitutional Court that previous years’ budgets had infringed the Constitution by failing to allocate at least 20%of spending to education; accordingly, it was decided to implement a dramatic doubling of education spending. The government decided to modify the 2009 budget even further in October, after the stock market deteriorated so rapidly that the authorities felt obliged to close the stock exchange for three days. Details were sketchy at the time the survey was completed, and their fiscal impact has not been analysed here. Plans were also introduced hurriedly to boost liquidity and to guarantee the safety of bank deposits, in a bid to calm the markets and stave off any significant downturn in the real economy. The survey also discusses poverty, electricity supply problems, and the changing nature of Indonesia's relationship with aid donors.
Gerry van Klinken contributes this year's discussion of recent political events, based on his Indonesia Update conference presentation at the Australian National University in September. He draws attention to the ‘ambiguities of democratic change’. On the negative side of the ledger, he perceives in some groups an apparentyearning for the centralised power and even the capacity for repressive intolerance of the Soeharto era. A first example was that of two closely run gubernatorial elections, in which the outcomes were so strongly contested that eventually they had to be decided in Jakarta. A second example was the violent persecution of the Ahmadiyah sect by hardline traditionalist Islamic groups, culminating in a ‘semi-ban’ of the movement—an outcome interpreted as showing that democracy can create spaces for groups that are fundamentally anti-democratic. On the other hand, the author reports progress on the human rights front, and highlights the extraordinarily vigorous campaign of the Corruption Eradication Commission (KPK). A senior intelligence officer alleged to have been responsible for the 2004 murder of human rights activist Munir has been brought to trial, although some witnesses have withdrawn their earlier testimony. Meanwhile, KPK has been so successful in its campaign to bring corrupt officials—including parlia-mentarians—to justice that it now risks a backlash and possible emasculation at the hands of those whose interests it threatens.
This issue of BIES includes the latest in our series of papers on relatively recent economic legislation. Howard Dick analyses the 2008 shipping law, within a historical context that highlights the ongoing general conflict in government between protectionism and development. He argues that the restoration of democracy since 1998 has been accompanied by a revival of economic nationalism. Whereas in the 1980s the government deregulated the highly protected and inefficient shipping industry to facilitate a non-oil export drive, since 1999 there has been a gradual process of re-regulation, which has restored some of the old protectionist devices. This is likely to frustrate attempts to improve logistics and facilitate trade, notwithstanding a mild liberalisation of state control over the ports sector.
Hal Hill, Budy Resosudarmo and Yogi Vidyattama examine provincial data on economic growth, inequality, convergence, structural change and social indicators over the last three decades. Their analysis shows that although there continues to be great diversity in economic and social outcomes, growth and social progress have been remarkably even throughout Indonesia. Surprisingly, perhaps, the poorest regions, located mainly in Eastern Indonesia, have generally performed about as well as the national average. The top performing provinces have been quite diverse, and the list has changed significantly over time. For example, in terms of per capita non-mining GRP growth, none of the top six performers in the first sub-period studied (1976–90) was still in the top six in the second (1991–2004). For the period as a whole, the three provinces best ‘connected’ to the global economy performed very well, although the other three of the top six performed just as well collectively.
We also present here a new set of 11 abstracts of recently completed PhD dissertations on the Indonesian economy and closely related fields. The number of such abstracts has increased steadily each year since the inception of this series in December 2003. Commencing in 2009, we will include new abstracts in each issue of the journal.
The book review section in this issue covers a study of regional bureaucracies and their efforts to reform and promote competitiveness; an analysis of small and medium enterprise wood furniture manufacturing clusters in Central Java; an edited collection of regional case studies on women and work in Indonesia; a book analysing the motives for and circumstances surrounding Eastern Indonesian women's travel from their place of origin; and a study of sharia and constitutionalism that argues that the two can co-exist in Indonesia.
Selamat membaca!