00074910012331338933
Bulletin of Indonesian Economic Studies
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
Book Reviews
Walter P. Falcon , Ken Young , Terence H. Hull , Henry Sandee & Chris
Manning
To cite this article: Walter P. Falcon , Ken Young , Terence H. Hull , Henry Sandee & Chris
Manning (2000) Book Reviews, Bulletin of Indonesian Economic Studies, 36:2, 143-155, DOI:
10.1080/00074910012331338933
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Download by: [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RA JA ALI HA JI
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Date: 19 January 2016, At: 22:06
y [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RAJA ALI HAJI TANJUNGPINANG, KEPULAUAN RIAU] at 22:06 19
Bulletin of Indonesian Economic Studies
Vol 36 No 2, August 2000, pp. 143–55
BOOK REVIEWS
David Glover and Timothy Jessup (eds) (1999), Indonesia’s Fires and Haze:
The Cost of Catastrophe, Institute of Southeast Asian Studies, Singapore,
and International Development Research Centre, Ottawa, pp. xviii + 149.
Cloth: S$59.90; US$36.00; Paper: S$28.90; US$17.00.
Indonesia’s Fires and Haze is a remarkable small volume—broad and
comparative in scope, and interesting and important in substance. Yet its
quantitative conclusions are flawed. The book definitely deserves to be
read by those interested in Indonesia, forest management, regional air
pollution, and social-cost analysis. But caveat emptor is also in order, and
the chapters are best read in conjunction with additional writings in these
fields.
The El Niño-related drought of 1997–98 was among the worst ever
recorded for Indonesia. Large portions of the country went without
significant rainfall for more than six months, leaving extensive areas as
tinderboxes. Although tropical rainforests are generally resistant to fires,
they burn fairly readily in times of severe drought. There were thus
potential fire hazards arising from lightning or from cooking fires gone
astray. The sad fact is, however, that virtually all of the Indonesian fires
that so polluted the atmosphere for months were set deliberately.
Everyone seemed to have a large supply of matches: tree-crop
concessionaires who saw the dry period as the ideal time to clear
additional land for extending their plantations; developers who set fire
to groundcover (even on peat land!) for rice projects; and slash and burn
agriculturists of all sizes interested in expanding their holdings.
While the government did not supply the matches, it did little by
way of fire prevention or control. Nor did it spend much time in
apprehending even the most flagrant violators. This particular drought
occurred at a time when the endgame for the Soeharto regime was in
play. Although the resulting regional pollution proved an acute personal
embarrassment to then President Soeharto—especially when it
necessitated closure of the region’s airports—both his poor health and
his lack of political clout left him with little power to prevent or control
the disaster.
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Indonesia’s Fires and Haze says less about Indonesia and the causes of
the forest fires than it does about their consequences. The volume, which
focuses on valuation methods, is the product of organisational efforts by
the World Wide Fund for Nature (WWF) and the Economy and
Environment Program for Southeast Asia (EEPSEA). Four of the seven
contributing authors have been associated with these organisations; the
others are academics or journalists in the Southeast Asia region.
Collectively, they assess the costs of the Indonesian fires and haze to
Malaysia, Singapore and parts of Indonesia. They quantify damages to
forests, wildlife, water, tourism and human health, using a more or less
common template across countries. In total, they estimate that 5 million
hectares were burned in 1997, causing fire- and haze-related damages of
about $4.5 billion for the three countries; directly or indirectly, some 70
million people were affected by the fires and related smoke.
These sums are impressive, and so too are the details behind the
estimates. These detailed calculations are what make the book worth
reading. At the same time, the volume has a rush-to-judgment quality
about it that is unnerving. With the word ‘catastrophe’ in the subtitle, I
was concerned that there might be a tendency for authors to ‘round
upwards’ on all assumptions and calculations. In fact, I believe that the
opposite is true and that the costs are substantially higher than those
suggested in the text. It is on this point that the rush to press may have
lessened the potential usefulness of the volume. For example, no damage
estimates for Java are included in the Indonesia calculations. An areaburned figure of 5 million hectares is used for all of Indonesia, although
a more reasonable estimate is probably in excess of 8 million hectares—
at least if the fires that continued into 1998 are included. Health effects
reported relate only to 1997 and assume zero costs for longer-run health
consequences in the form of afflictions like asthma.
The inclusion of actual spreadsheets makes parts of the volume less
than totally reader-friendly, although these working tables do highlight
a number of key assumptions. For example, the incremental cost of illness
because of the haze over Malaysia during 1997 is simply doubled to
estimate Malaysians’ willingness to pay for avoiding the smoke and haze.
Therefore, great care must be taken in citing the volume’s summary
statistics on the various social costs, for without significant qualifications
and annotations the summary data are likely to mislead.
Unfortunately, fires in Indonesia have not gone away. On 28 August
1999, the New York Times carried the headline ‘Smoke from Indonesia
Fires Again Threatens the Region’. Nor has the new regime put into place
an active fire prevention program or legal initiatives designed to prosecute
those who deliberately start fires for clearing and other purposes. Given
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the serious nature of these continuing problems, Indonesia’s Fires and Haze
is useful as a sobering reminder about how costly fires are, especially for
Indonesia, but also for all of Southeast Asia.
Walter P. Falcon
Stanford University
Jeffrey A. Winters (1996), Power in Motion: Capital Mobility and the
Indonesian State, Cornell University Press, Ithaca NY, pp. xvi + 241. Cloth:
US$36.90; A$54.25.
Jeffrey Winters’s book traces the interior tensions and the major strategic
shifts in policy formation in the Soeharto era up to the late 1980s. It is not
a comprehensive analysis of the exercise of state power in New Order
Indonesia. Through a detailed examination of the Indonesian case,
Winters aims to show the nature and limitations of the structural power
exercised by capitalists over the state, even over an authoritarian state
that is largely insulated from electoral pressure. He seeks to show how,
and in what circumstances, ‘control over resources translates into power’
(p. 192), and how that power is exercised by those key individuals and
institutions (he refers to them as the ‘capital controllers’) who manage
capital that is not strongly bound to any national investment site. Since
the power of capital controllers is to a significant extent structural, and
because the nature of their choices is governed by the logic of capital
accumulation, he is talking about ‘capital’s ability to exercise structural
leverage without first having to organise as a class’ (p. 32).
The New Order was born out of the ruins of Sukarnoist experiments
in radical nationalist politics and the Old Order’s fatal lack of concern
for sound economic management. Winters’s second chapter on the ‘preboom years 1965–1974’ is one of the best in the book, leaving readers in
no doubt that Soeharto and his associates understood how economic
incompetence had destroyed Sukarno’s government. The new economic
ministers were given full powers to warmly welcome international
investors, to encourage the repatriation of Sino-Indonesian capital and
to cooperate with multilateral aid agencies. There is a fascinating account
of crucial meetings in Geneva in 1967, at which New Order ministers
displayed a finely honed awareness that state policy would have to be
written in ways that wooed private capital as if it were a ‘bashful, shy
maiden’ (p. 72).
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The more interesting developments begin with the consolidation of
Soeharto’s control of the state and the huge windfall in state revenues
that followed in the years after the OPEC oil crisis of 1973. The second,
stronger surge in oil revenues between 1978 and 1982 gave the regime
control over vast sums with which it could pursue development priorities
and move to recast the terms of engagement with mobile capital (both
foreign and domestic). Once again Winters illustrates the shift in policy
orientation through an extended examination of the pervasive growth of
bureaucratic mechanisms (linking the president, the state secretariat, and
the government political party, Golkar) that undertook control of state
contracts and procurements down to district levels. All this routine and
development expenditure was coordinated from the top by a body known
as ‘Team 10’ which became, in Winters’s estimation ‘... perhaps the most
powerful and notorious non-military body to exist in Indonesia since
Ibnu Sutowo’s heyday at Pertamina’ (p. 125).
The attempts to micro-manage the economy while distributing vast
amounts of patronage to government insiders were matched with
increasing regulation of investment and other forms of intervention that
discouraged major investors. Once it became clear that the boom was
over, the policy pendulum swung back again towards policy makers who
favoured allocation of resources through impersonal market forces.
Much of this story is well known. Winters’s contribution is to show
the extent to which the tension in policy (between market-mediated
resource allocation and state intervention) was driven on both sides by
structural factors. Many of us have been inclined, for example, to
characterise the interventionist side in terms of the government’s
nationalist rhetoric, whereas Winters’s evidence suggests that patronage
was an indispensable constant in the political economy of the New Order
with or without the nationalist rationales. Winters’s empirical material
is illuminating in its examination of the thinking of economic ministers,
other senior Indonesian officials and key decision makers in the private
sector, as well as among US and multilateral aid agencies. Curiously, it
reveals very little that is new about Soeharto’s own orientation. My
disappointment on this point is not a plea for personality-based analysis.
The issue of Soeharto’s judgment becomes important once we ask how
much Winters’s approach can tell us about the New Order’s demise. I
am sure it tells us much, though this is not the place to pursue that
question. However, Soeharto, who responded so decisively to the advice
of his economic ministers in 1967 and again in the 1980s, appears to have
himself contributed significantly to the New Order’s collapse in 1997–98
by a series of very clumsy decisions that attempted to uphold a bloated
edifice of patronage and corruption.
y [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RAJA ALI HAJI TANJUNGPINANG, KEPULAUAN RIAU] at 22:06 19
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147
The post-boom period is only partly examined in the book, but it is a
period that poses many questions. Winters’s emphasis is on ‘mobile
capital’, and while he talks about a ‘locational revolution’ (p. 218–21), it
seems that there is so much more that needs to be elaborated about how
globalised economic processes in the 1990s confer significantly enhanced
discretion on investors, and appear correspondingly to have increased
‘market’ disciplines on national governments. Winters takes pains to point
out that these structural imperatives are mediated by a host of other
contingent variables defying any mechanistic attempt to read off
outcomes from structural imperatives. His final chapter includes brief
comparative studies of NAFTA and Nigeria. The Nigerian experience
illustrates graphically that governments can refuse to respond to the
demands of the controllers of mobile capital, albeit with disastrous
consequences.
On balance, Winters succeeds in his objective of demonstrating the
structural power that mobile capital has over states. Among all the postmortems about to be administered to the New Order, Jeffrey Winters’s
precisely focused analysis of the foundational vulnerabilities of that
regime deserves to be widely read.
Ken Young
Swinburne University of Technology
Donald K. Emmerson (ed.) (1999), Indonesia Beyond Suharto: Polity,
Economy, Society, Transition, M.E. Sharpe, Armonk NY and London,
published in cooperation with The Asia Society, pp. xxviii + 395. Cloth:
US$69.95; Paper: US$26.95. Not available in Australia and Southeast Asia.
STOP PRESS! BIES readers have been waiting for this book. A
comprehensive, intelligent, lucid and readable explanation of what
constituted the New Order and what brought it down should draw a
wide readership among policy makers, journalists and academics, and
this book offers just such content and more. With writers like Cribb, Liddle
and Malley we are guaranteed analyses of politics that show an
appreciation of 20th century economic history, and Booth, Borsuk and
Habir have written chapters on economics set deftly in historical and
political frameworks. Similarly the editor made good choices when he
invited Hefner to write on religion, Robinson to analyse the impact of
the New Order on women, and Hooker to describe the creative arts under
authoritarian repression. The trouble, and the reason for a review to rush
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to print, is the strange title of the book: Indonesia Beyond Suharto. Events
clearly overtook the team when the book on the later part of the New
Order was suddenly turned into a commentary on the late New Order.
The editor had to add two additional chapters on ‘Transition’ to give the
appropriate necrological tone and finality to the volume.
Each of the first nine chapters of this book is engaging in the depiction
of how conditions and events shaped the New Order. Each makes just
enough of a tip of the hat to the future to convince the reader that this
history is indeed relevant in attempts to understand the present. Malley’s
chapter on regionalism stands out as being particularly relevant to the
headlines of July 2000. The terrain he covers (the nature of central control
in a diverse nation) is filled with precedents for understanding the
potential impact of the implementation of Laws 22 and 25 of 1999 on
regional autonomy (see the Survey of Recent Developments in this issue).
Academic readers in particular will find this a useful book. In addition
to a painstakingly detailed index, there are eight pages of sources
including monographs, websites and videos. Specialists will no doubt
complain that some of their favourite resources are missing (the website
for the Indonesian Observer is listed, but not the sites for Kompas, Republika
or the Jakarta Post) and that the list has a distinctly American bias.
There are also many little points on which readers might like to
challenge a particular assumption or simplification that seems to be a
hangover from the ideological rigidities of the New Order. For instance,
on map 4 (p. xxviii) Indonesian Religious Affiliations are presented
according to the five official and compulsory religions recognised by the
Ministry of Religious Affairs under Soeharto. Some discussions of the
political and economic importance of religion refer back to this map. At
times the use of terms like ‘majority Muslim’ implies that affiliation to
Islam is a homogeneous and valid social category. Because indigenous
religious groups (e.g. the various animist groups throughout the
archipelago) are ignored, and the homogeneity of Muslim orientation
and religiosity is not critically questioned, it is easy to be misled into
simplistic notions of political Islam and ‘mass responses’ to political
change.
Such interpretations, as Hefner’s chapter carefully reminds us, are
not useful for either interpreting the past or predicting the future.
Ironically, the Population Census carried out in June and July this year
tried to deal with religious diversity by adding a category for ‘Other’ to
the five official categories (Muslim, Catholic, Protestant, Hindu and
Buddhist). However, the central statistics agency (BPS) was overtaken
by the speed of Gus Dur induced change when it found that Kong Hu
Cu (Confucian beliefs) should now be acknowledged in Indonesia. Since
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149
the millions of forms were already printed the interviewers were
instructed to make a special double code; thus marking the spaces for
both ‘Buddhist’ and ‘Other’ on the form will be translated by the scanners
as ‘Confucian’. From this very pragmatic response to the rapidly changing
political positions on religion it would be a small step to include the
kebatinan groups that claim millions of followers across Java, or indigenous
belief systems that have survived the mission activities of Christians and
Muslims in West Papua. If such religious groups are recorded as exclusive
choices the number of Muslims would probably drop substantially, while
if people could give multiple responses then Islam would be shown to
be remarkably heterogeneous. In either case the simplicities of New Order
religious authoritarianism would be corrected for all to see.
Yes, this is a book that BIES readers have been waiting for, and one
they would undoubtedly want to read, debate, question and commend.
Unfortunately most BIES readers live in Southeast Asia and Australia,
and the publisher’s announcement from last year says the book is not
available in these regions. However, if you manage to get your hands on
a copy, you can be assured of some good reading on the New Order, and
lots of food for thought to complement the newspapers and seminars
that are daily unfolding the complex stories ‘Beyond Suharto’.
Terence H. Hull
ANU
Tulus Tahi Hamonangan Tambunan (2000), Development of Small-scale
Industries during the New Order Government in Indonesia, Ashgate,
Aldershot, pp. 218. Cloth: £37.50.
Tulus Tambunan is one of Indonesia’s most productive scholars on smallscale industrial development, publishing widely inside and outside
Indonesia. Throughout the years Tambunan has kept in touch with the
theoretical and policy debates on small-scale industries (SSI). This book
provides an overview of his publications on this topic.
The first three chapters are based on the author’s PhD research at the
Erasmus University in Rotterdam. They discuss aggregate patterns of
SSI development both in general and for the Indonesian case. Special
attention is given to the linkages between SSI and other sectors of the
economy, notably agriculture and large-scale manufacturing.
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Anderson’s (1982) overview article on the changing size structure of
employment in the manufacturing sector plays a crucial role in
Tambunan’s analysis. Tambunan finds that the role of cottage industries
in Indonesia declines when incomes per capita rise. Economic
development offers new opportunities for small and medium-scale
enterprises, and increasingly also for large-scale manufacturing. He
concludes in chapter 2 that SSI in Indonesia lack the dynamism of their
western counterparts because policy is biased towards larger
establishments. Chapter 3 shows that SSI in Indonesia are dominated by
agro-processing industries which are firmly embedded in the rural
economy. The linkages between SSI and large manufacturing enterprises
are much less extensive, and industrial subcontracting is underdeveloped
in comparison with neighbouring countries.
Chapter 4 concentrates on ‘strategic alliances’ within the private sector.
Tambunan argues that SSI that want to compete successfully in both
domestic and foreign markets benefit from the development of stable
long-term relationships with other firms. A field study assessing the
importance of such alliances in Indonesia finds that SSI are often firmly
embedded in production and trade networks, and points to many
examples of long-term marketing arrangements and purchaser–supplier
linkages. It suggests that this offers interesting policy options for
promoting collaboration and private sector associations.
Chapter 5 looks at a characteristic feature of SSI in many developing
countries: the tendency of small firms to cluster geographically and by
economic sector. In principle, clustering offers opportunities for small
firms to grow by cooperating in the purchase of inputs, in production, or
in marketing. Tambunan shows that clusters are significant in virtually
all Indonesian provinces, but his fieldwork in West Java suggests that
most clusters are not very dynamic, and that it will be a long time before
they become more than pockets of poverty.
Chapter 6 summarises a study by Thee Kian Wie, Mangara Tambunan,
Peter van Diermen and Tulus Tambunan, commissioned in 1998 by The
Asia Foundation to assess the likely impact of the IMF agreements on
small-scale enterprises in Indonesia. Written in 1998, soon after the
outbreak of the crisis, this chapter is tentative, hypothetical and somewhat
outdated, since much more is now known about the impact of the crisis.
Tambunan presents some worrying 1998 data which suggest that only
2% of SSI were able to react to the crisis in a ‘viable and promising’ way,
while another survey shows that 43% of small businesses have closed.
More recent evidence indicates that SSI are weathering the crisis better
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than expected, many being more successful than large firms because of
their limited dependence on formal markets and formal credit. The Asia
Foundation study forecasts that in the long run the IMF structural reforms
will benefit SSI if fully implemented and not replaced with other market
restrictions and regulations.
Finally, chapter 7 discusses the role of the government in promoting
SSI development in Indonesia. Tambunan analyses the shift in
government thinking away from less effective ‘subsidise and protect’
policies towards the more market-oriented demand-driven programs
advocated by the international donor community. In this new role, the
government is a facilitator, regulator, stimulator and stabiliser of small
business development, rather than a direct provider of support programs.
This book offers a good coverage of the main issues, except for the
financial side of SSI development. It pays close attention to linkages
among SSI (e.g. clusters) and to backward and forward linkages between
SSI and other firms. It would have been interesting if the last two chapters
had also focused on the linkages through which SSI are embedded in
wider economic environments, and how such SSI have fared through
the crisis. Almost all chapters commence with a theoretical review of the
issues, but Tambunan does not always do justice to the theories, in my
view; for example, the chapter on clustering appears to judge the
performance of Indonesian clusters against that of the dynamic industrial
districts in western Europe. It thus comes as no surprise that Tambunan
does not think highly of clusters in his country. Finally, the book would
have benefited from more careful editing: there are unnecessary mistakes
in grammar, and repetitions of arguments and sections that could have
been avoided.
Henry Sandee
Vrije Universiteit Amsterdam
Reference
Anderson, D. (1982), ‘Small-scale Industry in Developing Countries: A Discussion
of the Issues’, World Development 10 (11): 913–48.
y [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RAJA ALI HAJI TANJUNGPINANG, KEPULAUAN RIAU] at 22:06 19
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C.H. Kwan, Donna Vandenbrink and Chia Siow Yue (eds) (1998), Coping
with Capital Flows in East Asia, Nomura Research Institute, Tokyo, and
Institute of Southeast Asian Studies, Singapore, pp. xiii + 319. Cloth:
S$78.90; US$49.90; Paper: S$49.90; US$32.90.
This book is the outcome of a conference held in Tokyo in January 1997
and sponsored by the Tokyo Club Foundation for Global Studies for the
members of its network of East Asian think-tanks. The bulk of the book
is taken up by studies on a country-by-country basis of capital inflows,
the relaxation of capital controls and the removal of financial repression
in East Asia. In addition to an overview chapter on coping with capital
flows in Asia—and two chapters on the currency crisis that were added
after the conference—there are separate chapters on Korea, Taiwan, Hong
Kong, Singapore, Thailand, Malaysia, Indonesia, the Philippines and
China. Several of these document gradual moves towards more flexible
exchange rate policies: Singapore had already adopted a heavily managed
floating exchange rate system before the crisis, and the intervention bands
for the rupiah, the won and the New Taiwan dollar had all been widened
before 1997. These moves to floating rates culminated in an undignified
rush in 1997 as all the countries with fixed rates, except China and Hong
Kong, abandoned the attempt to peg their currencies. Malaysia of course
reverted to a fixed exchange rate in 1998, but this move is unlikely to be
permanent.
According to the preface, the Tokyo Club was inspired to choose the
subject of coping with capital flows partly by Mexico’s experience in
1994–95 and partly by an anxiety that East Asia might not be as different
from Latin America as was popularly believed. In this sense, as the preface
claims, the choice of topic could not have been more timely. But since,
like most of the economics profession, the authors did not foresee the
coming Asian crisis, the book was overtaken by events. One sympathises
with the authors as one might with someone who had written a biography
of Lenin in 1916, or of Winston Churchill in 1938. Many of the fixed
exchange rate systems described at the conference have since been
abandoned; some countries—such as Korea—have liberalised the capital
controls that were in place in 1997, while others—such as Malaysia—
have introduced controls that did not then exist.
The Tokyo Club managed, at least in part, to rescue the project by
delaying the publication of the book until February 1998 to allow authors
to write an ‘update’ about the effects of the crisis on their chosen countries.
In some cases at least, the original chapters appear not to have been
revised, and now contain some striking hostages to fortune. On page
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233, for example, the reader is assured that ‘Malaysia is unlikely to suffer
serious contagion effects [from a Mexican-type crisis] because of its strong
economic fundamentals, its high national savings rate of 34 percent of
GNP, and the fact that the floating ringgit is not the monetary anchor’.
In addition to the updates, two new chapters were added after the
conference: one on the causes of the crisis, and one on its effects on the
Japanese economy. Obviously, the various addenda can only be partially
satisfactory: they are brief and had to be finished before February 1998.
At that date, the crisis was far from over; its extent was not fully
appreciated, and many of the policy responses to it had yet to occur: for
example, Soeharto was still president of Indonesia, and people had not
begun to appreciate the eventual cost to taxpayers of bailing out bank
depositors in the most seriously affected countries.
It is a pity that there is no index, since in an edited volume of country
studies this lack makes it difficult to follow particular themes across the
various countries. However, the editors have done an excellent job in
ensuring that every chapter gives a competent and clear picture of capital
account developments and monetary and exchange rate policies in the
chosen country in the period leading up to the crisis.
These historical summaries are the book’s main merit, since most of
the updates on events in 1997 are too short, and too hurriedly written, to
be of much use. Several authors draw the lesson that premature removal
of capital and financial controls can be disastrous, but do not carefully
analyse the problem of how to know whether or not particular reforms
would be premature, or whether particular systems of capital or financial
controls are likely to be effective. All the countries hit by the crisis had
set up elaborate systems of prudential controls well before 1997, but in
most cases they proved completely ineffective. With the exception of Hong
Kong, all the countries studied try to limit the scope for speculation against
their currencies by imposing restrictions on direct lending to non-residents
in domestic currency, and on indirect lending through the swap and
forward foreign exchange markets. Although these controls were
tightened in 1997 in Korea, Malaysia, Indonesia and Thailand, they failed
to stem the currency crises in these four countries.
George Fane
ANU
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International Labour Organisation (1999), Indonesia: Strategies for
Employment-Led Recovery and Reconstruction, Jakarta, pp. 404.
This book makes an important contribution to the discussion of
employment and equity in Indonesia in the wake of the financial crisis.
Even if the title provides rather an exaggerated view of the potential role
of employment policy, there is no doubt that creation of new jobs is critical
to assisting many people recovering from the shock of the crisis.
The book consists of an ambitious 16 chapters, arising from a special
ILO ‘mission’ led by Mr Rizwanul Islam from the ILO Geneva office over
two weeks in April–May 1999. The coverage is broad: from employment
in various sectors of activity (agriculture, manufacturing, the ‘informal’
sector) to labour market institutions, education and training, social
protection, labour mobility and labour statistics.
What is the main message? Mr Islam and his colleagues do not suggest
anything radically new for an ‘employment-led strategy’. A two-pronged
approach is recommended, consisting of a more employment-friendly
growth process and direct employment programs of a Keynesian kind
(the latter to be financed through a special employment fund).
Although the components of the employment-friendly strategy are
not summarised in the text, it seems that they would include policies
such as switching from domestic production to exports, support of small
and medium industry through removal of taxes, levies and controls, and
diversification in agriculture. Three chapters in particular, dealing with
agriculture, the informal sector and small and medium industries, contain
much interesting information to support such a strategy. They quite
rightly criticise over-regulation (the transport industry is singled out)
and the multitude of relatively ineffective subsidised credit schemes for
cooperatives and small industry.
The recommended Employment Fund, on the other hand, would
primarily support public works type employment projects (padat karya),
the retraining of retrenched workers and self-employment through micro
credit schemes. This seems a worthwhile proposal, especially in light of
the fragmentation of employment–income support schemes across
government departments. However, it would have helped if the authors
were to suggest how the fund might be financed and administered
(through the Ministry of Finance? the Ministry of Manpower?), especially
given the tendency of ‘KKN’ (corruption, collusion and nepotism) to
siphon off scarce public funds, even in the reformasi era.
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The chapters on labour issues are useful reviews of developments
during the crisis, especially the chapters on labour migration (both
domestic and international) and on training, although the latter would
appear to give a little too much support to costly (and inefficient?) public
rather than private initiatives in the area of skill upgrading. This reviewer
was surprised that there was no discussion of industrial relations policies
or labour protection legislation, which have major implications for job
creation during the recovery: prolonged industrial unrest, for example,
is bound to affect employment, especially given the unfavourable
investment climate; severance pay, which may reduce employment, is
another controversial policy area.
In sum, this is a useful book and should be circulated widely as a
reference on employment issues and policies in Indonesia in the postcrisis period. In scope, the book reminds one of the influential ILO
employment strategy reports of the 1970s—on the Philippines and Kenya
in particular. Unfortunately, it falls down compared with these earlier
publications on technical grounds: there is no list of references even of
works cited; numerous mistakes appear in the tables and in the text; and
there was insufficient editing of some of the weaker chapters—several of
which might have been excluded altogether.
Chris Manning
ANU
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
Book Reviews
Walter P. Falcon , Ken Young , Terence H. Hull , Henry Sandee & Chris
Manning
To cite this article: Walter P. Falcon , Ken Young , Terence H. Hull , Henry Sandee & Chris
Manning (2000) Book Reviews, Bulletin of Indonesian Economic Studies, 36:2, 143-155, DOI:
10.1080/00074910012331338933
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y [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RAJA ALI HAJI TANJUNGPINANG, KEPULAUAN RIAU] at 22:06 19
Bulletin of Indonesian Economic Studies
Vol 36 No 2, August 2000, pp. 143–55
BOOK REVIEWS
David Glover and Timothy Jessup (eds) (1999), Indonesia’s Fires and Haze:
The Cost of Catastrophe, Institute of Southeast Asian Studies, Singapore,
and International Development Research Centre, Ottawa, pp. xviii + 149.
Cloth: S$59.90; US$36.00; Paper: S$28.90; US$17.00.
Indonesia’s Fires and Haze is a remarkable small volume—broad and
comparative in scope, and interesting and important in substance. Yet its
quantitative conclusions are flawed. The book definitely deserves to be
read by those interested in Indonesia, forest management, regional air
pollution, and social-cost analysis. But caveat emptor is also in order, and
the chapters are best read in conjunction with additional writings in these
fields.
The El Niño-related drought of 1997–98 was among the worst ever
recorded for Indonesia. Large portions of the country went without
significant rainfall for more than six months, leaving extensive areas as
tinderboxes. Although tropical rainforests are generally resistant to fires,
they burn fairly readily in times of severe drought. There were thus
potential fire hazards arising from lightning or from cooking fires gone
astray. The sad fact is, however, that virtually all of the Indonesian fires
that so polluted the atmosphere for months were set deliberately.
Everyone seemed to have a large supply of matches: tree-crop
concessionaires who saw the dry period as the ideal time to clear
additional land for extending their plantations; developers who set fire
to groundcover (even on peat land!) for rice projects; and slash and burn
agriculturists of all sizes interested in expanding their holdings.
While the government did not supply the matches, it did little by
way of fire prevention or control. Nor did it spend much time in
apprehending even the most flagrant violators. This particular drought
occurred at a time when the endgame for the Soeharto regime was in
play. Although the resulting regional pollution proved an acute personal
embarrassment to then President Soeharto—especially when it
necessitated closure of the region’s airports—both his poor health and
his lack of political clout left him with little power to prevent or control
the disaster.
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Indonesia’s Fires and Haze says less about Indonesia and the causes of
the forest fires than it does about their consequences. The volume, which
focuses on valuation methods, is the product of organisational efforts by
the World Wide Fund for Nature (WWF) and the Economy and
Environment Program for Southeast Asia (EEPSEA). Four of the seven
contributing authors have been associated with these organisations; the
others are academics or journalists in the Southeast Asia region.
Collectively, they assess the costs of the Indonesian fires and haze to
Malaysia, Singapore and parts of Indonesia. They quantify damages to
forests, wildlife, water, tourism and human health, using a more or less
common template across countries. In total, they estimate that 5 million
hectares were burned in 1997, causing fire- and haze-related damages of
about $4.5 billion for the three countries; directly or indirectly, some 70
million people were affected by the fires and related smoke.
These sums are impressive, and so too are the details behind the
estimates. These detailed calculations are what make the book worth
reading. At the same time, the volume has a rush-to-judgment quality
about it that is unnerving. With the word ‘catastrophe’ in the subtitle, I
was concerned that there might be a tendency for authors to ‘round
upwards’ on all assumptions and calculations. In fact, I believe that the
opposite is true and that the costs are substantially higher than those
suggested in the text. It is on this point that the rush to press may have
lessened the potential usefulness of the volume. For example, no damage
estimates for Java are included in the Indonesia calculations. An areaburned figure of 5 million hectares is used for all of Indonesia, although
a more reasonable estimate is probably in excess of 8 million hectares—
at least if the fires that continued into 1998 are included. Health effects
reported relate only to 1997 and assume zero costs for longer-run health
consequences in the form of afflictions like asthma.
The inclusion of actual spreadsheets makes parts of the volume less
than totally reader-friendly, although these working tables do highlight
a number of key assumptions. For example, the incremental cost of illness
because of the haze over Malaysia during 1997 is simply doubled to
estimate Malaysians’ willingness to pay for avoiding the smoke and haze.
Therefore, great care must be taken in citing the volume’s summary
statistics on the various social costs, for without significant qualifications
and annotations the summary data are likely to mislead.
Unfortunately, fires in Indonesia have not gone away. On 28 August
1999, the New York Times carried the headline ‘Smoke from Indonesia
Fires Again Threatens the Region’. Nor has the new regime put into place
an active fire prevention program or legal initiatives designed to prosecute
those who deliberately start fires for clearing and other purposes. Given
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the serious nature of these continuing problems, Indonesia’s Fires and Haze
is useful as a sobering reminder about how costly fires are, especially for
Indonesia, but also for all of Southeast Asia.
Walter P. Falcon
Stanford University
Jeffrey A. Winters (1996), Power in Motion: Capital Mobility and the
Indonesian State, Cornell University Press, Ithaca NY, pp. xvi + 241. Cloth:
US$36.90; A$54.25.
Jeffrey Winters’s book traces the interior tensions and the major strategic
shifts in policy formation in the Soeharto era up to the late 1980s. It is not
a comprehensive analysis of the exercise of state power in New Order
Indonesia. Through a detailed examination of the Indonesian case,
Winters aims to show the nature and limitations of the structural power
exercised by capitalists over the state, even over an authoritarian state
that is largely insulated from electoral pressure. He seeks to show how,
and in what circumstances, ‘control over resources translates into power’
(p. 192), and how that power is exercised by those key individuals and
institutions (he refers to them as the ‘capital controllers’) who manage
capital that is not strongly bound to any national investment site. Since
the power of capital controllers is to a significant extent structural, and
because the nature of their choices is governed by the logic of capital
accumulation, he is talking about ‘capital’s ability to exercise structural
leverage without first having to organise as a class’ (p. 32).
The New Order was born out of the ruins of Sukarnoist experiments
in radical nationalist politics and the Old Order’s fatal lack of concern
for sound economic management. Winters’s second chapter on the ‘preboom years 1965–1974’ is one of the best in the book, leaving readers in
no doubt that Soeharto and his associates understood how economic
incompetence had destroyed Sukarno’s government. The new economic
ministers were given full powers to warmly welcome international
investors, to encourage the repatriation of Sino-Indonesian capital and
to cooperate with multilateral aid agencies. There is a fascinating account
of crucial meetings in Geneva in 1967, at which New Order ministers
displayed a finely honed awareness that state policy would have to be
written in ways that wooed private capital as if it were a ‘bashful, shy
maiden’ (p. 72).
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The more interesting developments begin with the consolidation of
Soeharto’s control of the state and the huge windfall in state revenues
that followed in the years after the OPEC oil crisis of 1973. The second,
stronger surge in oil revenues between 1978 and 1982 gave the regime
control over vast sums with which it could pursue development priorities
and move to recast the terms of engagement with mobile capital (both
foreign and domestic). Once again Winters illustrates the shift in policy
orientation through an extended examination of the pervasive growth of
bureaucratic mechanisms (linking the president, the state secretariat, and
the government political party, Golkar) that undertook control of state
contracts and procurements down to district levels. All this routine and
development expenditure was coordinated from the top by a body known
as ‘Team 10’ which became, in Winters’s estimation ‘... perhaps the most
powerful and notorious non-military body to exist in Indonesia since
Ibnu Sutowo’s heyday at Pertamina’ (p. 125).
The attempts to micro-manage the economy while distributing vast
amounts of patronage to government insiders were matched with
increasing regulation of investment and other forms of intervention that
discouraged major investors. Once it became clear that the boom was
over, the policy pendulum swung back again towards policy makers who
favoured allocation of resources through impersonal market forces.
Much of this story is well known. Winters’s contribution is to show
the extent to which the tension in policy (between market-mediated
resource allocation and state intervention) was driven on both sides by
structural factors. Many of us have been inclined, for example, to
characterise the interventionist side in terms of the government’s
nationalist rhetoric, whereas Winters’s evidence suggests that patronage
was an indispensable constant in the political economy of the New Order
with or without the nationalist rationales. Winters’s empirical material
is illuminating in its examination of the thinking of economic ministers,
other senior Indonesian officials and key decision makers in the private
sector, as well as among US and multilateral aid agencies. Curiously, it
reveals very little that is new about Soeharto’s own orientation. My
disappointment on this point is not a plea for personality-based analysis.
The issue of Soeharto’s judgment becomes important once we ask how
much Winters’s approach can tell us about the New Order’s demise. I
am sure it tells us much, though this is not the place to pursue that
question. However, Soeharto, who responded so decisively to the advice
of his economic ministers in 1967 and again in the 1980s, appears to have
himself contributed significantly to the New Order’s collapse in 1997–98
by a series of very clumsy decisions that attempted to uphold a bloated
edifice of patronage and corruption.
y [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RAJA ALI HAJI TANJUNGPINANG, KEPULAUAN RIAU] at 22:06 19
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The post-boom period is only partly examined in the book, but it is a
period that poses many questions. Winters’s emphasis is on ‘mobile
capital’, and while he talks about a ‘locational revolution’ (p. 218–21), it
seems that there is so much more that needs to be elaborated about how
globalised economic processes in the 1990s confer significantly enhanced
discretion on investors, and appear correspondingly to have increased
‘market’ disciplines on national governments. Winters takes pains to point
out that these structural imperatives are mediated by a host of other
contingent variables defying any mechanistic attempt to read off
outcomes from structural imperatives. His final chapter includes brief
comparative studies of NAFTA and Nigeria. The Nigerian experience
illustrates graphically that governments can refuse to respond to the
demands of the controllers of mobile capital, albeit with disastrous
consequences.
On balance, Winters succeeds in his objective of demonstrating the
structural power that mobile capital has over states. Among all the postmortems about to be administered to the New Order, Jeffrey Winters’s
precisely focused analysis of the foundational vulnerabilities of that
regime deserves to be widely read.
Ken Young
Swinburne University of Technology
Donald K. Emmerson (ed.) (1999), Indonesia Beyond Suharto: Polity,
Economy, Society, Transition, M.E. Sharpe, Armonk NY and London,
published in cooperation with The Asia Society, pp. xxviii + 395. Cloth:
US$69.95; Paper: US$26.95. Not available in Australia and Southeast Asia.
STOP PRESS! BIES readers have been waiting for this book. A
comprehensive, intelligent, lucid and readable explanation of what
constituted the New Order and what brought it down should draw a
wide readership among policy makers, journalists and academics, and
this book offers just such content and more. With writers like Cribb, Liddle
and Malley we are guaranteed analyses of politics that show an
appreciation of 20th century economic history, and Booth, Borsuk and
Habir have written chapters on economics set deftly in historical and
political frameworks. Similarly the editor made good choices when he
invited Hefner to write on religion, Robinson to analyse the impact of
the New Order on women, and Hooker to describe the creative arts under
authoritarian repression. The trouble, and the reason for a review to rush
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to print, is the strange title of the book: Indonesia Beyond Suharto. Events
clearly overtook the team when the book on the later part of the New
Order was suddenly turned into a commentary on the late New Order.
The editor had to add two additional chapters on ‘Transition’ to give the
appropriate necrological tone and finality to the volume.
Each of the first nine chapters of this book is engaging in the depiction
of how conditions and events shaped the New Order. Each makes just
enough of a tip of the hat to the future to convince the reader that this
history is indeed relevant in attempts to understand the present. Malley’s
chapter on regionalism stands out as being particularly relevant to the
headlines of July 2000. The terrain he covers (the nature of central control
in a diverse nation) is filled with precedents for understanding the
potential impact of the implementation of Laws 22 and 25 of 1999 on
regional autonomy (see the Survey of Recent Developments in this issue).
Academic readers in particular will find this a useful book. In addition
to a painstakingly detailed index, there are eight pages of sources
including monographs, websites and videos. Specialists will no doubt
complain that some of their favourite resources are missing (the website
for the Indonesian Observer is listed, but not the sites for Kompas, Republika
or the Jakarta Post) and that the list has a distinctly American bias.
There are also many little points on which readers might like to
challenge a particular assumption or simplification that seems to be a
hangover from the ideological rigidities of the New Order. For instance,
on map 4 (p. xxviii) Indonesian Religious Affiliations are presented
according to the five official and compulsory religions recognised by the
Ministry of Religious Affairs under Soeharto. Some discussions of the
political and economic importance of religion refer back to this map. At
times the use of terms like ‘majority Muslim’ implies that affiliation to
Islam is a homogeneous and valid social category. Because indigenous
religious groups (e.g. the various animist groups throughout the
archipelago) are ignored, and the homogeneity of Muslim orientation
and religiosity is not critically questioned, it is easy to be misled into
simplistic notions of political Islam and ‘mass responses’ to political
change.
Such interpretations, as Hefner’s chapter carefully reminds us, are
not useful for either interpreting the past or predicting the future.
Ironically, the Population Census carried out in June and July this year
tried to deal with religious diversity by adding a category for ‘Other’ to
the five official categories (Muslim, Catholic, Protestant, Hindu and
Buddhist). However, the central statistics agency (BPS) was overtaken
by the speed of Gus Dur induced change when it found that Kong Hu
Cu (Confucian beliefs) should now be acknowledged in Indonesia. Since
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the millions of forms were already printed the interviewers were
instructed to make a special double code; thus marking the spaces for
both ‘Buddhist’ and ‘Other’ on the form will be translated by the scanners
as ‘Confucian’. From this very pragmatic response to the rapidly changing
political positions on religion it would be a small step to include the
kebatinan groups that claim millions of followers across Java, or indigenous
belief systems that have survived the mission activities of Christians and
Muslims in West Papua. If such religious groups are recorded as exclusive
choices the number of Muslims would probably drop substantially, while
if people could give multiple responses then Islam would be shown to
be remarkably heterogeneous. In either case the simplicities of New Order
religious authoritarianism would be corrected for all to see.
Yes, this is a book that BIES readers have been waiting for, and one
they would undoubtedly want to read, debate, question and commend.
Unfortunately most BIES readers live in Southeast Asia and Australia,
and the publisher’s announcement from last year says the book is not
available in these regions. However, if you manage to get your hands on
a copy, you can be assured of some good reading on the New Order, and
lots of food for thought to complement the newspapers and seminars
that are daily unfolding the complex stories ‘Beyond Suharto’.
Terence H. Hull
ANU
Tulus Tahi Hamonangan Tambunan (2000), Development of Small-scale
Industries during the New Order Government in Indonesia, Ashgate,
Aldershot, pp. 218. Cloth: £37.50.
Tulus Tambunan is one of Indonesia’s most productive scholars on smallscale industrial development, publishing widely inside and outside
Indonesia. Throughout the years Tambunan has kept in touch with the
theoretical and policy debates on small-scale industries (SSI). This book
provides an overview of his publications on this topic.
The first three chapters are based on the author’s PhD research at the
Erasmus University in Rotterdam. They discuss aggregate patterns of
SSI development both in general and for the Indonesian case. Special
attention is given to the linkages between SSI and other sectors of the
economy, notably agriculture and large-scale manufacturing.
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Anderson’s (1982) overview article on the changing size structure of
employment in the manufacturing sector plays a crucial role in
Tambunan’s analysis. Tambunan finds that the role of cottage industries
in Indonesia declines when incomes per capita rise. Economic
development offers new opportunities for small and medium-scale
enterprises, and increasingly also for large-scale manufacturing. He
concludes in chapter 2 that SSI in Indonesia lack the dynamism of their
western counterparts because policy is biased towards larger
establishments. Chapter 3 shows that SSI in Indonesia are dominated by
agro-processing industries which are firmly embedded in the rural
economy. The linkages between SSI and large manufacturing enterprises
are much less extensive, and industrial subcontracting is underdeveloped
in comparison with neighbouring countries.
Chapter 4 concentrates on ‘strategic alliances’ within the private sector.
Tambunan argues that SSI that want to compete successfully in both
domestic and foreign markets benefit from the development of stable
long-term relationships with other firms. A field study assessing the
importance of such alliances in Indonesia finds that SSI are often firmly
embedded in production and trade networks, and points to many
examples of long-term marketing arrangements and purchaser–supplier
linkages. It suggests that this offers interesting policy options for
promoting collaboration and private sector associations.
Chapter 5 looks at a characteristic feature of SSI in many developing
countries: the tendency of small firms to cluster geographically and by
economic sector. In principle, clustering offers opportunities for small
firms to grow by cooperating in the purchase of inputs, in production, or
in marketing. Tambunan shows that clusters are significant in virtually
all Indonesian provinces, but his fieldwork in West Java suggests that
most clusters are not very dynamic, and that it will be a long time before
they become more than pockets of poverty.
Chapter 6 summarises a study by Thee Kian Wie, Mangara Tambunan,
Peter van Diermen and Tulus Tambunan, commissioned in 1998 by The
Asia Foundation to assess the likely impact of the IMF agreements on
small-scale enterprises in Indonesia. Written in 1998, soon after the
outbreak of the crisis, this chapter is tentative, hypothetical and somewhat
outdated, since much more is now known about the impact of the crisis.
Tambunan presents some worrying 1998 data which suggest that only
2% of SSI were able to react to the crisis in a ‘viable and promising’ way,
while another survey shows that 43% of small businesses have closed.
More recent evidence indicates that SSI are weathering the crisis better
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than expected, many being more successful than large firms because of
their limited dependence on formal markets and formal credit. The Asia
Foundation study forecasts that in the long run the IMF structural reforms
will benefit SSI if fully implemented and not replaced with other market
restrictions and regulations.
Finally, chapter 7 discusses the role of the government in promoting
SSI development in Indonesia. Tambunan analyses the shift in
government thinking away from less effective ‘subsidise and protect’
policies towards the more market-oriented demand-driven programs
advocated by the international donor community. In this new role, the
government is a facilitator, regulator, stimulator and stabiliser of small
business development, rather than a direct provider of support programs.
This book offers a good coverage of the main issues, except for the
financial side of SSI development. It pays close attention to linkages
among SSI (e.g. clusters) and to backward and forward linkages between
SSI and other firms. It would have been interesting if the last two chapters
had also focused on the linkages through which SSI are embedded in
wider economic environments, and how such SSI have fared through
the crisis. Almost all chapters commence with a theoretical review of the
issues, but Tambunan does not always do justice to the theories, in my
view; for example, the chapter on clustering appears to judge the
performance of Indonesian clusters against that of the dynamic industrial
districts in western Europe. It thus comes as no surprise that Tambunan
does not think highly of clusters in his country. Finally, the book would
have benefited from more careful editing: there are unnecessary mistakes
in grammar, and repetitions of arguments and sections that could have
been avoided.
Henry Sandee
Vrije Universiteit Amsterdam
Reference
Anderson, D. (1982), ‘Small-scale Industry in Developing Countries: A Discussion
of the Issues’, World Development 10 (11): 913–48.
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C.H. Kwan, Donna Vandenbrink and Chia Siow Yue (eds) (1998), Coping
with Capital Flows in East Asia, Nomura Research Institute, Tokyo, and
Institute of Southeast Asian Studies, Singapore, pp. xiii + 319. Cloth:
S$78.90; US$49.90; Paper: S$49.90; US$32.90.
This book is the outcome of a conference held in Tokyo in January 1997
and sponsored by the Tokyo Club Foundation for Global Studies for the
members of its network of East Asian think-tanks. The bulk of the book
is taken up by studies on a country-by-country basis of capital inflows,
the relaxation of capital controls and the removal of financial repression
in East Asia. In addition to an overview chapter on coping with capital
flows in Asia—and two chapters on the currency crisis that were added
after the conference—there are separate chapters on Korea, Taiwan, Hong
Kong, Singapore, Thailand, Malaysia, Indonesia, the Philippines and
China. Several of these document gradual moves towards more flexible
exchange rate policies: Singapore had already adopted a heavily managed
floating exchange rate system before the crisis, and the intervention bands
for the rupiah, the won and the New Taiwan dollar had all been widened
before 1997. These moves to floating rates culminated in an undignified
rush in 1997 as all the countries with fixed rates, except China and Hong
Kong, abandoned the attempt to peg their currencies. Malaysia of course
reverted to a fixed exchange rate in 1998, but this move is unlikely to be
permanent.
According to the preface, the Tokyo Club was inspired to choose the
subject of coping with capital flows partly by Mexico’s experience in
1994–95 and partly by an anxiety that East Asia might not be as different
from Latin America as was popularly believed. In this sense, as the preface
claims, the choice of topic could not have been more timely. But since,
like most of the economics profession, the authors did not foresee the
coming Asian crisis, the book was overtaken by events. One sympathises
with the authors as one might with someone who had written a biography
of Lenin in 1916, or of Winston Churchill in 1938. Many of the fixed
exchange rate systems described at the conference have since been
abandoned; some countries—such as Korea—have liberalised the capital
controls that were in place in 1997, while others—such as Malaysia—
have introduced controls that did not then exist.
The Tokyo Club managed, at least in part, to rescue the project by
delaying the publication of the book until February 1998 to allow authors
to write an ‘update’ about the effects of the crisis on their chosen countries.
In some cases at least, the original chapters appear not to have been
revised, and now contain some striking hostages to fortune. On page
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233, for example, the reader is assured that ‘Malaysia is unlikely to suffer
serious contagion effects [from a Mexican-type crisis] because of its strong
economic fundamentals, its high national savings rate of 34 percent of
GNP, and the fact that the floating ringgit is not the monetary anchor’.
In addition to the updates, two new chapters were added after the
conference: one on the causes of the crisis, and one on its effects on the
Japanese economy. Obviously, the various addenda can only be partially
satisfactory: they are brief and had to be finished before February 1998.
At that date, the crisis was far from over; its extent was not fully
appreciated, and many of the policy responses to it had yet to occur: for
example, Soeharto was still president of Indonesia, and people had not
begun to appreciate the eventual cost to taxpayers of bailing out bank
depositors in the most seriously affected countries.
It is a pity that there is no index, since in an edited volume of country
studies this lack makes it difficult to follow particular themes across the
various countries. However, the editors have done an excellent job in
ensuring that every chapter gives a competent and clear picture of capital
account developments and monetary and exchange rate policies in the
chosen country in the period leading up to the crisis.
These historical summaries are the book’s main merit, since most of
the updates on events in 1997 are too short, and too hurriedly written, to
be of much use. Several authors draw the lesson that premature removal
of capital and financial controls can be disastrous, but do not carefully
analyse the problem of how to know whether or not particular reforms
would be premature, or whether particular systems of capital or financial
controls are likely to be effective. All the countries hit by the crisis had
set up elaborate systems of prudential controls well before 1997, but in
most cases they proved completely ineffective. With the exception of Hong
Kong, all the countries studied try to limit the scope for speculation against
their currencies by imposing restrictions on direct lending to non-residents
in domestic currency, and on indirect lending through the swap and
forward foreign exchange markets. Although these controls were
tightened in 1997 in Korea, Malaysia, Indonesia and Thailand, they failed
to stem the currency crises in these four countries.
George Fane
ANU
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International Labour Organisation (1999), Indonesia: Strategies for
Employment-Led Recovery and Reconstruction, Jakarta, pp. 404.
This book makes an important contribution to the discussion of
employment and equity in Indonesia in the wake of the financial crisis.
Even if the title provides rather an exaggerated view of the potential role
of employment policy, there is no doubt that creation of new jobs is critical
to assisting many people recovering from the shock of the crisis.
The book consists of an ambitious 16 chapters, arising from a special
ILO ‘mission’ led by Mr Rizwanul Islam from the ILO Geneva office over
two weeks in April–May 1999. The coverage is broad: from employment
in various sectors of activity (agriculture, manufacturing, the ‘informal’
sector) to labour market institutions, education and training, social
protection, labour mobility and labour statistics.
What is the main message? Mr Islam and his colleagues do not suggest
anything radically new for an ‘employment-led strategy’. A two-pronged
approach is recommended, consisting of a more employment-friendly
growth process and direct employment programs of a Keynesian kind
(the latter to be financed through a special employment fund).
Although the components of the employment-friendly strategy are
not summarised in the text, it seems that they would include policies
such as switching from domestic production to exports, support of small
and medium industry through removal of taxes, levies and controls, and
diversification in agriculture. Three chapters in particular, dealing with
agriculture, the informal sector and small and medium industries, contain
much interesting information to support such a strategy. They quite
rightly criticise over-regulation (the transport industry is singled out)
and the multitude of relatively ineffective subsidised credit schemes for
cooperatives and small industry.
The recommended Employment Fund, on the other hand, would
primarily support public works type employment projects (padat karya),
the retraining of retrenched workers and self-employment through micro
credit schemes. This seems a worthwhile proposal, especially in light of
the fragmentation of employment–income support schemes across
government departments. However, it would have helped if the authors
were to suggest how the fund might be financed and administered
(through the Ministry of Finance? the Ministry of Manpower?), especially
given the tendency of ‘KKN’ (corruption, collusion and nepotism) to
siphon off scarce public funds, even in the reformasi era.
y [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RAJA ALI HAJI TANJUNGPINANG, KEPULAUAN RIAU] at 22:06 19
Book Reviews
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The chapters on labour issues are useful reviews of developments
during the crisis, especially the chapters on labour migration (both
domestic and international) and on training, although the latter would
appear to give a little too much support to costly (and inefficient?) public
rather than private initiatives in the area of skill upgrading. This reviewer
was surprised that there was no discussion of industrial relations policies
or labour protection legislation, which have major implications for job
creation during the recovery: prolonged industrial unrest, for example,
is bound to affect employment, especially given the unfavourable
investment climate; severance pay, which may reduce employment, is
another controversial policy area.
In sum, this is a useful book and should be circulated widely as a
reference on employment issues and policies in Indonesia in the postcrisis period. In scope, the book reminds one of the influential ILO
employment strategy reports of the 1970s—on the Philippines and Kenya
in particular. Unfortunately, it falls down compared with these earlier
publications on technical grounds: there is no list of references even of
works cited; numerous mistakes appear in the tables and in the text; and
there was insufficient editing of some of the weaker chapters—several of
which might have been excluded altogether.
Chris Manning
ANU