Our new ‘Survey of recent developments’, by Mark Baird and Maria Monica Wihardja, indicates that Indonesia's economic performance has remained strong in the face of the political turmoil reported in the last survey, even though that turmoil has culminated in the resignation of the former Minister of Finance. Two well-respected individuals have been appointed as the new minister and deputy, and the markets have responded well. The greatest threat to the economy now appears to be from problems with sovereign debt in Europe, and the potential for these to stifle the rebound in global trade and commodity prices. Inflation continues its gentle acceleration, suggesting a possible need for monetary tightening. Fiscal policy remains conservative, and the main challenge is to achieve spending targets and to improve the quality of spending. The new five-year development plan does little to clarify spending priorities, including those intended to boost ‘connectivity’ (such as investment in transport and telecommunications infrastructure).
The global financial crisis has not interrupted the declining overall trend of either unemployment or poverty, but recent studies highlight negative effects on particular groups within the community. This raises a question about whether policy responses to such episodes should be economy-wide or tailored specifically to assist the groups most affected. Over the last several years there has been a pronounced shift of employment from the formal to the informal sector, in parallel with very slow growth of manufacturing. It is possible that both trends are related to labour market policies that have made it too expensive to employ low-skilled labour, and too risky to take on new workers in general because of costly severance arrangements. A new mining law has various features that may prove counter-productive, including a shortening of regulated time horizons and a requirement for domestic processing of mine outputs. Ongoing efforts by the central government to restore greater control over local governments can be seen in a new law relating to local government taxes and user charges, and in attempts to strengthen the role of provincial governors and governments as representatives of the centre.
Indonesia's intellectual community has suffered an incalculable loss with the passing of Hadi Soesastro in May 2010. In their obituary, Hal Hill and Mari Pangestu describe him as arguably Indonesia's leading public intellectual in the fields of international economic policy and political economy, ASEAN economic cooperation and East Asian economic integration. Hadi was a long-serving member of the editorial board of this journal, and a much loved and admired colleague of the Indonesianist community at the Australian National University.
This issue contains the second in our new series of Policy Dialogues, in which we invite two experts to present their differing views on a topical aspect of policy. This second Dialogue, contributed by Adam Schwarz and Colin Hunt, focuses on Indonesia's role as one of the world's greatest contributors to carbon emissions, and on the implications of its recent commitment to reduce those emissions significantly in coming years by reducing deforestation and forest degradation. These contributions to the debate on climate change policy in Indonesia could not be more timely, given the recently announced offer of substantial development assistance from Norway in return for reductions in Indonesia's largely forestry-related carbon emissions.
Indonesia achieved a significant reduction in infant mortality from about 1993–94. Ranjan Shrestha undertakes an empirical analysis of the highly plausible hypothesis that this can be attributed to the introduction of over 50,000 midwives into villages during the 1990s to provide primary care to women who would otherwise have lacked access to health facilities. His paper estimates the village midwife program's impact on infant mortality using data from the Indonesia Family Life Survey. Somewhat surprisingly, his results do not support the hypothesis, implying that the observed decline in infant mortality must have had other causes, as yet unknown.
A second paper on health, contributed by Nguyen Thi Nhu Nguyet and Eiji Mangyo, focuses on the economic impact of illness and injury shocks on households, relying on indices of ‘activities of daily living’ that measure several kinds of physical capabilities of the persons concerned. As expected, they find that both labour hours and household consumption are negatively influenced by health shocks, and that farm households are more seriously affected than non-farm households. However, the magnitude of the health effect on household consumption is small, implying that even farm households are well protected on average by the presence of formal and informal risk-coping mechanisms.
In their note on policies for the oil and gas sector Michael Boyd, Anne Devero, Jennifer Frias, Jeff Meyer and Greg Ross take as their starting point the steady decline during the last decade of Indonesia's production of oil and gas. Although policy makers are keen to encourage new exploration, producers are concerned about cost-recovery rules and about the legal and regulatory environment more generally, which is to some extent being affected negatively by resource nationalism, the anti-corruption drive, and decentralisation.
This issue contains our annual acknowledgment of the invaluable contribution of referees to the work of the journal in 2009. Our regular set of abstracts of recently completed PhD dissertations on Indonesia includes studies of the taxation of individual incomes; infrastructure investment; and poverty reduction through smallholder cocoa production. The book review section covers works on financial practices in Indonesia in historical perspective; the place of sub-contracting in Indonesia's economic development, contrasted with Japanese experience; Australia's fisheries links with Indonesia and Southeast Asia more broadly; decentralisation and local governments in developing countries; the evolution of Jakarta toward ‘mega-city’ status; interactions between the military, Islam and the state in Indonesia; the separatist rebellion in Aceh; and the process of reforming Indonesia's Constitution.
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