Manajemen | Fakultas Ekonomi Universitas Maritim Raja Ali Haji 0007491042000231557
Bulletin of Indonesian Economic Studies
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
Book reviews
To cite this article: (2004) Book reviews, Bulletin of Indonesian Economic Studies, 40:3,
401-418, DOI: 10.1080/0007491042000231557
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Published online: 19 Oct 2010.
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Date: 19 January 2016, At: 20:09
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Carfax Publishing
Bulletin of Indonesian Economic Studies, Vol. 40, No. 3, 2004: 401–18
Taylor & Francis Group
BOOK REVIEWS
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Thee Kian Wie (ed.) (2003), Recollections: The Indonesian Economy, 1950s–1990s,
Institute of Southeast Asian Studies, Singapore, pp. xv + 276.
Paper: S$39.90/US$25.90; Cloth: S$59.90/US$36.90.
Reading these recollections of former Indonesian economic policy makers is like
having a seat in the room as Thee Kian Wie conducts the interviews on which the
memoirs are based. That is an experience only few have had at first hand. Collected in one place, the memoirs make clear, as Dr Thee and his associates hoped,
that extended face-to-face interviews could add significantly to our understanding of ‘how policy-makers attempted to solve the economic problems they
encountered, which constraints they faced, and what compromises they had to
make in order to achieve their goals’.
Readers of the Bulletin of Indonesian Economic Studies between the late 1980s and
late 1990s will recall the occasional appearance of these memoirs, most entitled
‘Recollections of My Career’. Thee Kian Wie participated in the planning and
conduct of all the interviews, accompanied over time by a variety of colleagues
from the editorial board of BIES. It is appropriate that this distinguished historian
of the Indonesian economy should now serve as editor of the anthology that
brings the memoirs together in one place. He introduces the collection with a
short review of the major economic challenges that policy makers faced during
the early independence period and the Soeharto era that followed, providing useful context for readers not familiar with these earlier years.
What stands out in such a collection? One feature clearly is the strength of the
personalities captured in the interviews. There is the prideful wit of the godfather
of Indonesian economists, Sumitro Djojohadikusumo: ‘I tend to like writing
sweeping statements and leave it to the clever people to worry about whether it
is 2.5 or 2.6’. There is the sombre reflection of Subroto on the end of the New
Order: ‘I feel very sad about what has been happening in Indonesia since the
monetary and financial crisis hit the country in July 1997. The work of the past 30
years has been evaporating before our eyes’. There is also down-to-earth musing
by the socialist-turned-businessman Soedarpo Sastrosatomo on his experience in
leading a major private firm: ‘We think … we contribute in our own little world
to the betterment of things. But it is hard to transfer this model to the whole society’. And there is earnest speculation by Emil Salim, a year and a half before the
fall of Soeharto: ‘In our next stage of development I sense that we will need a
leader who places more emphasis on democracy and decentralisation, to give
substance to the notion of diversity with unity’. The memoirists all project the
strong self-image that is to be expected in a group that filled posts of great
responsibility in a large and complex nation.
ISSN 0007-4918 print/ISSN 1472-7234 online/04/030401-18
DOI: 10.1080/0007491042000231557
© 2004 Indonesia Project ANU
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Also notable is the change that occurred in the preparation of the memoirists
for their roles as economic policy makers over five decades. Sjafruddin
Prawiranegara, who served as Minister of Finance in early post-independence
cabinets, looked back to his training in law in the 1930s and boasted: ‘I had a
Western education—I know Dutch perhaps better than many Dutch people. But
I never left Indonesia’. A generation later, Mohammad Sadli, Emil Salim, Subroto
and Suhadi Mangkusuwondo, all of whom played major roles in government at
home and abroad after 1965, are describing their experiences at Berkeley, Harvard
and MIT, listing the professors under whom they studied in the 1950s, including
some who in later years were to win the Nobel Prize for Economics. One already
knows that this generation gap existed, but its significance becomes powerfully
clear in the individual recounting.
Do the memoirs tell us more than we knew about Indonesian economic policy
making? Not much new is learned about policies in the early years of the Republic; the survivors of that period were too few and too elderly when the interviews
began. The volume is especially rich on the Soeharto era from 1966 to 1996. Subroto and Suhadi describe the roles that they and others played in the student
army that fought the Dutch effort to return to power in Java after 1945—roles that
enabled them to find common cause with army leaders after 1965. Suhadi
recounts how he, as chairman of the student council, recruited Sumitro to become
dean of the Faculty of Economics of the University of Indonesia, where they all
eventually taught. Sadli describes how they came to become advisers to president-to-be Soeharto in 1966.
Emil Salim, who was a presidential adviser or cabinet minister continuously
from 1966 until 1993, gives the most complete exposition of the views of the
group of policy makers known as the economic ‘technocrats’. Their first task was
to establish macroeconomic stability, and Salim explains how they did this. There
is a valuable account of the decision to end the control of foreign exchange as
early as 1967, making Indonesia the first developing country to do so, and establishing an open orientation to external market forces after a long period of
inward-looking statist policies. He also discusses the broad consensus that developed early among civilian and military advisers to Soeharto that Indonesia
should give priority to agriculture, unlike India and China, which invested heavily in capital-intensive industry very early on. The consequences that flowed
from these choices for the rural populations of the three countries were enormous. Emil Salim candidly expresses the frustration of former economic ministers with critics who question whether the government was ever seriously
committed to equity in the process of development. When oil income rose in the
1970s, much of it was directed also to the rural population. As he sees it, such
decisions empowered rural people.
Abdul Raoef Soehoed, who was a major figure in industrial policy during
much of the 1970s and 1980s, provides a wide-ranging exposition of a second
group of economic policy makers, the engineers who called for the setting up of
basic industries to make use of available natural resources. This school was often
in opposition to the technocrats, who failed to develop a strategy of industrialisation of their own. When the private sector is unable or unwilling to act, these
engineers argued, it is proper for the state to act. Their position became a realistic choice with the rise of oil revenues by the late 1970s. Soehoed goes on to dis-
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cuss some of the issues that followed from this approach, including the management of state-owned enterprises, the pros and cons of privatisation, and the use
of subsidies to encourage indigenous entrepreneurs to push the industrialisation
process downstream. Soehoed also expresses his impatience with the economists
who counselled caution when presented with major capital investment proposals, leaving some major opportunities to be taken up by other countries.
Salim and Soehoed together lament the failure of both groups to do more to
train a younger generation of Indonesians to replace themselves.
What is missing from this anthology? Widjojo Nitisastro and Ali Wardhana,
who served as Soeharto’s chief economic strategist and chief financial guardian
respectively, were still advising the government when the project came to an end
with the onset of the Asian monetary crisis in 1997, as a result of which neither
was interviewed for this series. One also notes the absence from the collection of
any Sino-Indonesians, except in the person of its indefatigable editor. And only
the editor is looking back at a time when it is possible to begin to consider what
went wrong to cause the economy to plummet so much more deeply than others
in the region in 1997–98. But one does not wish to appear ungenerous. The memoirs as they stand constitute valuable guides to the thinking of key figures at
strategic points during half a century of Indonesian economic history. I read them
again from start to finish in just two sittings, and I expect other readers of this
journal will do the same.
John Bresnan
Columbia University
World Bank (2003), Decentralizing Indonesia: A Regional Public Expenditure Review
Overview Report, World Bank Report No. 26191-IND,
World Bank, Jakarta, available at .
Indonesia was once known as the largest country in Asia managed under a strong
centralised government. Suddenly in 2001 it was transformed into one of the
world’s most decentralised countries. This report analyses various problems arising from this ‘Big Bang’ transformation, including those related to the two decentralisation laws (Nos 22 and 25/1999) and their associated regulations; to
unbalanced revenue and expenditure assignments; to establishing accountability;
and to political battles between government officials at different levels. The
report also discusses near-term challenges faced by Indonesia in the new era of
decentralisation.
The first of the five chapters discusses why Indonesia adopted the ‘Big Bang’
approach—a radical decentralisation concept. According to the report, the main
reason was a build-up of dissatisfaction with decentralisation policy on the part
of many regions, in particular the resentment of resource-rich regions which
believed that the central government had ‘stolen’ their natural resources. An
additional reason was that the parliament, mainly with an eye to gaining popularity, agreed to a fiscal decentralisation scheme that transferred a significant
amount of funding from the central government to regional governments. Hence,
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the central government had no choice but to transfer more responsibilities to the
regions.
This report implicitly argues that Indonesian decentralisation policy does not
achieve the common decentralisation objective of bringing public services closer
to the people; nor does the basic design adhere to the principle of ‘money following functions’, since the devolution of functions was driven by financial decentralisation, rather than the reverse. These arguments are very difficult to prove,
however.
Chapter 2 discusses Law No. 22/1999, which sets out the basic rules for decentralising government functions and authority. This chapter identifies three major
problems. First, Law No. 22/1999 does not spell out local government (district
and municipality) functions, but merely specifies the residual functions of the
centre and the province. This has left many interpretations open, and created
overlapping activities among levels of regional government. Second, regulations
to support the laws were not available when implementation of Law No. 22/1999
began. This led to confusion in many regional governments about how to implement the law properly. Third, a minimum standard of services has never been formulated. There is thus no benchmark for judging the quality of services provided
by local governments. This conclusion is supported by the results of a field survey, which show that individuals and businesses see no improvement in the quality of local public services; moreover, decentralisation has left many business
people facing new charges for local government licences.
The rest of chapter 2 focuses on the local civil service and the reorganisation of
local government. What this chapter does not deal with is the question of the
appropriate authority for service delivery; for example, whether the centre or the
provincial or local government should be responsible for providing higher education and training.
Chapter 3 discusses Law No. 25/1999, which sets out the design of the new
intergovernmental fiscal relationships. According to this chapter, there are four
elements of Indonesian fiscal decentralisation that distinguish it from the models
adopted elsewhere. First, although it has only recently implemented decentralisation, Indonesia is one of the few countries in the world to adopt such a comprehensive set of fiscal decentralisation instruments, including a general purpose
grant (DAU), a specific purpose grant (DAK) and a natural resource sharing
arrangement. Second, each fiscal decentralisation instrument requires regulations
and a complicated allocation formula. Third, a huge proportion of central government transfers are used by local government without any specific guidelines or
assistance from the centre, the DAK being the exception. Fourth, each type of fiscal instrument has a different impact on the economy, in terms of local fiscal
capacity and fiscal equalisation across regions. This chapter provides very
informative data, enriched by quantitative analysis, to show the impact of transfers on inter-regional financial disparity.
Chapter 4 describes the challenges of the Indonesian tradition of national planning. Despite its decentralisation policy, the central government continues to prepare a national plan, known as Propenas (Program Pembangunan Nasional, the
National Development Plan), which must be followed in any planning done by
regional governments. However, it is unclear what would happen if a region
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decided largely to ignore the Propenas in its planning. In the end, there appears
to be no fiscal consequence at all for a region that does not follow the national
planning mechanism. The report seems to challenge whether Indonesia still
needs a national plan, but unfortunately there is no further elaboration of this
interesting question.
Chapter 5 deals with the difficult issue of local accountability. Unexpectedly, it
reports that audits by the Supreme Audit Authority (BPK) show financial
accountability to be stronger in the regions than at the centre. Furthermore,
results from a survey show that while citizens do believe there is a significant
amount of corruption in their regional governments, they consider central government officials to be the most corrupt.
I found this report highly informative, and commend it to those interested in
understanding Indonesian decentralisation policy.
Raksaka Mahi
University of Indonesia
Mark Turner and Owen Podger with Maria Sumardjono and Wayan K.
Tirthayasa (2003), Decentralisation in Indonesia: Redesigning the State, Asia Pacific
Press, Australian National University, pp. 181. A$38.00.
Indonesia’s 2001 ‘Big Bang’ decentralisation was rapidly implemented and, when
contrasted with the preceding decades of highly centralised rule under the New
Order, radical. Much like the closely associated ascendance of electoral democracy, realised in the 1999 and 2004 national elections, the transition to decentralisation unfolded far more smoothly than many sceptics would have predicted. Yet
the full ramifications of these reforms for improved governance in Indonesia at
the national and local levels remain open to question.1
The book provides an engaging chronicle of the policy context and process
associated with the emergence of the new legal framework, particularly its legal,
administrative and political contours. Sympathetic to the overall decentralisation
thrust to date, the authors bring out some of the major challenges for consolidation of the framework, and its prospective developmental gains. The decentralisation framework—as embodied by Laws 22 and 25/1999 on governance and
fiscal balance—was forged and implemented on a remarkably short timetable,
ultimately by a small group of highly engaged bureaucrats, but with limited popular participation.
In retrospect, many observers will no doubt wonder whether a more gradual
and broadly deliberated decentralisation would have been preferable. Alternatively, one might ask whether a more gradual process would have been feasible,
given the context. The book underscores the unique window of political upheaval
that defined the process. The historical circumstances—including the previous
decades of still-born decentralisation initiatives and pent-up demands for
reform—probably did not offer significant alternatives. At the root of the ensuing
decentralisation framework were Indonesian political considerations and actors,
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and at least some national legacy of decentralisation thinking, coming to a head
with the spectre of national disintegration and the desire for reform.
Although rapid implementation undoubtedly strained existing capacities, it
remains debatable whether many parts of the central bureaucracy (and sceptical
local counterparts for that matter) would have availed themselves of any extra
time to strengthen strategic implementation measures or enhance bureaucratic
coordination. Many of the changes undoubtedly remain unpopular in certain
quarters, including central bureaucracies that saw their power, prestige and
resources curtailed. At the margin, the time-bound implementation of the decentralisation probably maintained a degree of momentum that averted gridlock to
the process.
While readers can conclude that the first phase of Indonesia’s decentralisation
progressed remarkably smoothly, with some commendable features in the framework, the ensuing phase will necessarily be more contested, more complicated on
the ground, and probably generally ‘messier’. The fact that the making of Indonesia’s decentralisation policy had ‘considerable continuity with the New Order
style policymaking, in which top-down policy directives were issued by the central government for implementation across the archipelago’ (p. 22), potentially
presages some of the more fundamental weaknesses the policy must overcome in
the future. Moreover, some of the structural problems of late New Order policy
making, including rent-seeking and lack of accountability, were themselves reasons for reformers to embrace a more radical tack of decentralisation.
The effective implementation of decentralisation will, paradoxically, require a
stronger, if less encompassing (and reformed) centre. Various national institutions will need to ensure that policy making effectively mediates among, and
ultimately coordinates, various contesting interests as the decentralisation
framework evolves. Contradictory regulations in such areas as the civil service,
themselves reflective of incomplete or contested areas of reform, will need to be
addressed to avoid undermining the prospect of better governance and service
delivery through decentralisation. At the same time, central oversight will be
critical to ensuring that regional autonomy is not simply a licence for transgressions on the part of local bureaucrats and elites, especially in a context where
downward mechanisms of accountability remain weak or incomplete. While
developments in the latter arena remain critical, the evolution of the overall
decentralisation policy framework and the centre’s ability to implement it effectively are equally paramount. As echoed by the subtitle of the book, Redesigning
the State, it remains to be seen how deep the transformation is in this respect of
the old centralist political and bureaucratic state legacies, once, so to speak, the
initial bang’s dust has settled.
At the time of writing, revisions to the decentralisation framework are being
deliberated by the national parliament (DPR), after earlier attempts at revision by
the executive had to be retracted in the face of strong opposition. Ideally such
bodies as the new Regional Representative Council (DPD) can now provide the
requisite institutional capacity to compensate for some of the early deliberation
deficits. Whether the prospects of better governance at the national and local levels will be realised—and under what conditions—will only become clear over
time. In the interim, it is to be hoped that these developments will prove the sub-
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ject of much further good analysis, which will in turn feed back into the process
of decentralisation design and implementation.
Kai Kaiser2
World Bank, Washington DC
Notes
1
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2
See, for example, the recent volume by Richard Robison and Vedi Hadiz, Reorganising
Power in Indonesia (RoutledgeCurzon, 2004), and the limited degree of potential reform
in fundamental governance outcomes flowing from electoral democracy.
The views reflected here are those of the reviewer, and not of the World Bank.
Sven Wunder (2004), Oil and the Fate of the Forest: A Comparative Study of Eight
Tropical Countries, Routledge Explorations in Environmental Economics,
London, pp. 256. Cloth: £65.00.
Sven Wunder has produced a valuable book that will help economists understand the environmental effects of macroeconomic policies, especially deforestation. As a book on economics, it may not reach many foresters, geographers and
environmentalists, though its plain language aims to help them understand
macroeconomic influences on deforestation and land use change.
Wunder’s core hypothesis is that ‘forests in oil-exporting tropical countries
tend to face fewer pressures for conversion and degradation than forests in nonoil-producing countries’. Over time, these ‘oil countries’ face lower forest loss and
degradation pressure during boom periods than during bust periods (p. 4). Wunder details the links between ‘Dutch Disease’ (economic distortions due to a
financial windfall such as an influx of oil wealth) and land use changes, forest
loss and forest degradation (p. 43).1 Straightforward explanation of the linkages
allows non-specialists to understand that mineral export wealth influences competitiveness (exchange rates, relative prices), which influences both agricultural
production and commercial timber production, which in turn affect land use and
forest loss and degradation (p. 340). Wunder also presents an impressive amount
of data and history that support the argument in five primary case study countries (Gabon, Venezuela, Cameroon, Ecuador and Papua New Guinea) and in
three secondary case studies (Mexico, Nigeria and Indonesia).
Most of the cases confirmed the core hypothesis, at least in relative terms: ‘oil
wealth reduces pressure to degrade and convert forests’ (p. 359). Though Wunder does demonstrate these effects with statistically meaningful results for the
five primary cases, we should probably add ‘other things equal’ to the core
hypothesis, since results vary widely among the eight countries, and many other
important factors are at play. In particular, if governments spend windfall revenue in ways that damage forests, they can easily swamp the forest-benefiting
effects of the Dutch Disease phenomenon.2 Wunder claims that the policies that
mattered most were road building, trade policies, spending on urbanisation, and
management of the exchange rate. Relatively less important were resettlement
policies and direct spending on agriculture, forestry and conservation.
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Of the eight countries studied, Indonesia3 had the highest (or nearly the highest) land area, GDP, population and long-term economic growth rate, but nearly
the lowest GDP per capita and population growth rate. In terms of oil wealth,
Indonesia had among the highest absolute windfalls, but among the lowest per
capita. Indonesia fits reasonably well with Wunder’s general observations about
the political economy of oil countries. They have greater autonomy to pursue and
pay for specific development policies (guided or misguided). Central government power increases, while accountability decreases (because the government is
not dependent on tax revenues). Provinces holding mineral wealth can contest
central power, and this can lead to conflict or separatism. Finally, Wunder notes
that oil countries tend to be corrupt.
During most of the period of study (1970–2000), Indonesia maintained fiscal
discipline, promoted agriculture and adopted protective currency devaluations.
So Indonesia had a ‘mild and tightly managed version of the Dutch Disease’
(p. 315) and should not see substantial forest-conserving benefits of that disease
in its full form. For example, Wunder shows that Indonesia’s repeated rupiah
devaluations helped to restore competitiveness quickly in the agricultural sector,
thus diminishing the impact of the Dutch Disease, and reducing the potential for
indirect forest-conserving benefits. Wunder concludes that Indonesia’s approach
has been, in general, good for the economy but bad for the forests. Still, he finds
that Indonesia probably provides relative confirmation (p. 333) of the core hypothesis. With little or inconclusive data on pre-boom deforestation, Wunder does not
overstate these results, however.
For countries where Wunder was able to confirm the core hypothesis (e.g.
Gabon), oil wealth played a significant role in the economy. For larger, more
diversified economies, such as Indonesia, the effects of the oil boom and bust
cycles were relatively smaller and the roles of other factors greater, possibly
masking the relevance of the ‘core hypothesis’.
Wunder’s overview of macroeconomic linkages provides important understanding. Still, there are specific local features in any country that do not conform.
Wunder notes several characteristics that make Indonesia relatively unusual
among the eight country studies. For example, it did not have significantly
urban-biased policies, but did have a large labour-intensive urban manufacturing
sector that depended on a competitive rupiah to absorb labour. Further, forestbased industries and estate crops are more important causes of deforestation in
Indonesia than in any other case study (p. 321). Agricultural expansion as a cause
of deforestation was minimised by the intensification of rice cultivation (p. 320).
There are also many complex and contradictory influences on forest cover in any
time period. For example, Wunder notes (p. 319) that after 1997 economic collapse reduced support for road construction, benefiting forests but, at the same
time, political crisis reduced authority to control exploitation, to the detriment of
forests.
Wunder introduces some relative measures of deforestation that help us think
differently about Indonesia. For example, in per capita terms, Indonesia is relatively forest poor in comparison to other countries in the study. Though average
annual forest loss is relatively high, forest loss per capita and deforestation per
unit GDP are only moderate. But Indonesia’s diversity confounds comparison
through ‘averaging’, when one considers the disparity between people-rich,
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forest-poor Java (like Nigeria?) and the forest-rich, people-poor Outer Islands
(like Gabon?).
Sven Wunder’s new book identifies long-term structural trends in the way
resource extraction and price cycles affect land use through promotion of agriculture and exportable products. It does not offer specific prescriptions for reducing
forest destruction, but some general guidelines that take into account broad
macroeconomic issues, not just direct forest-influencing factors. This is a reasonable approach, given the diverse and local factors in each country that contribute
to its ‘fit’ with the core hypothesis. In Indonesia, we can hope that this book will
help to frame a larger debate about how overall policy-enabling conditions affect
forest outcomes, not just specific forest sector policies such as establishment of a
cartel or an export ban.
Wunder offers two brief win–win policy recommendations to those who wish
to preserve forests or slow their rate of loss. The first is fairly standard: manage
oil rents to support urbanisation and maintain macroeconomic stability (reduce
short-term fluctuations, provide long-term certainty). The second will be controversial in some circles: liberalise trade in sectors where land demand competes
directly with forests.
Timothy H. Brown
USAID/NRM (Natural Resources Management) III Project, Jakarta
Notes
1
2
3
‘Dutch Disease’ refers to the economic effects of (windfall) earnings from an export
commodity boom such as an oil boom: the government increases public spending,
which raises wages and demand, which benefits sheltered, non-traded sectors of the
economy that can grow and raise prices, and undermines the traded sectors, which are
in direct competition with foreign products and cannot raise prices. The traded sectors
are squeezed between rising (domestic) input prices and exchange rate appreciation
(making them less competitive abroad), so they decline (or expand more slowly). In the
Dutch case in the 1960s, manufacturing for export declined. In most developing countries, where the traded sectors produce agricultural commodities, reduced investment
in or expansion of these sectors can be good for the forests.
In Ecuador, for example, forest loss was high during both boom and bust, because of
policies supporting expansion of cattle production.
Indonesia was a secondary case study; apparently, it lost its place among the primary
case studies because of the ‘highly complex and contradictory situation’ of land use
and forest cover data.
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Christopher M. Edmonds (ed.) (2003), Reducing Poverty in Asia: Emerging Issues
in Growth, Targeting and Measurement, Edward Elgar, Cheltenham, pp. 384.
Cloth: £69.95; Paper: £29.95.
This is a rich collection of papers by distinguished authors. The book’s three
broad themes are: macroeconomic questions relating to poverty reduction efforts
in Asia; the importance of targeting anti-poverty interventions at particular sectors or demographic groups; and issues of poverty measurement as applied to
selected Asian nations. As the 15 papers were presented at a forum held in February 2001, some of the questions covered are no longer ‘emerging issues’. Nevertheless, the book offers intriguing challenges to existing poverty reduction
policy approaches. In this short note, I will focus particularly on the discussion of
anti-poverty targeting and poverty measurement, and compare the experience
discussed with the problems faced in Indonesia.
Following the macroeconomic section, the second part of the book, on the targeting of anti-poverty interventions at particular urban and industrial sectors,
looks at the role of information and communication technology (ICT) in development and poverty reduction in the Asian region. Sanjaya Lall reviews the technological aspects of manufacturing competitiveness in recent years and the
strategies adopted by leading East Asian countries. He argues that a combination
of attaining competitiveness and upgrading technical structure was necessary for
sustained income and employment growth. Both Lall and Randep Sudan, who
examined the role of ICT in Andhra Pradesh, conclude that technology development offers valuable opportunities for application in poverty reduction efforts.
However, neither paper provides systematic evaluations that offer proof that the
high-cost investment in technology will indeed give the ‘best bang for the buck’
in reducing poverty. Faced with tight budgets, developing countries need to allocate their poverty alleviation funding cautiously to policies and programs that
give the best outcomes. The problem of designing a poverty reduction strategy is
not lack of innovation, but that there are too few systematic studies of what innovations work best in reducing poverty.
The experience of poverty targeting programs in Indonesia illustrates the need
to learn what works. The types of poverty alleviation programs chosen are often
not aligned with what the poor need most. Current schemes rely too heavily on
ineffective transfer mechanisms, such as rice and kerosene subsidies, that absorb
much of the poverty alleviation budget.
Another impediment to achieving effective targeting in Indonesia is the high
cost of implementation and leakages. Administration of centrally owned programs such as the Raskin (‘rice for the poor’) subsidy is costly and ineffective. Past
experience of safety net programs indicates that local governments have not been
accountable for ensuring that benefits get to the right people. Alatas and Pradhan
(2003)1 found that 78% of errors in the targeting of Social Safety Net (JPS) scholarship programs occurred at the local level, while the remaining 22% were due to
poor allocation of funds from the central government to districts. These findings
demonstrate the need to build into the system of allocation incentive mechanisms
for pro-poor spending, policies and programs at the district level.
The third part of the book explores the measurement and characterisation of
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poverty in Asian and Pacific countries. Kaushik Basu proposes changing the definition of the poor from one based on absolute income-metric poverty to one
based on relative poverty. He argues that because quintile income is likely to correlate with other non-economic indicators, policies should focus on assisting individuals whose income places them in the lowest quintile.
However, the Indonesian poverty profile suggests that quintile income cannot
be used as the sole or lead proxy of multi-dimensional poverty in Indonesia. The
2002 National Socio-Economic Survey (Susenas) shows that poverty has declined
to around 18%. But when the concept is expanded to include all the dimensions
of human wellbeing—adequate consumption, education, health, and access to
basic infrastructure—poverty is still a major problem experienced by half of the
population. Although expenditure-poor people, a group closely correlated with
individuals in the lowest quintile, have a tendency also to experience other kinds
of deprivation, other dimensions of deprivation are far from being perfectly correlated with quintile poverty.
Measurement of poverty thus must cover many dimensions. Approaches to
aggregating measures of the different dimensions of poverty include using a welfare function and a composite index such as the human development index.
However, choosing the appropriate weights for aggregation has proven a difficult
task, with current practice generally assigning arbitrary (usually equal) weights
to each component. The book does not cover this important issue of measuring
multi-dimensional poverty.
Another dimension of poverty that is receiving attention in the literature is vulnerability to poverty, defined as the risk that a household or individual will experience an episode of poverty over time. Measuring a dynamic concept such as this
is difficult and requires comprehensive panel data that help to quantify the
volatility of the poverty experience. In Indonesia, vulnerability to poverty
remains a big issue. People and households move into and out of poverty frequently. The huge difference between the Indonesian national poverty headcount
of 18%, currently at approximately $1.55 PPP (purchasing power parity) a day,
and the $2 PPP poverty headcount of 53.4% indicates that a large proportion of
the population is ‘near poor’ and therefore highly vulnerable. This book falls
short in addressing the issue of poverty vulnerability.
Instead, it dedicates a chapter to discussing the trade-off between defining the
national poverty line or lines that most accurately measure poverty across the distinct situations found in a country (specificity), and defining poverty lines that
provide a basis for comparing poverty incidence across geographic areas and
time (comparability). Comparison of specificity and comparability is indeed an
interesting issue, but an old one. Measuring poverty for finer targeting has
replaced the trade-off question as the current issue in poverty measurement,
especially for Indonesia, which has embarked on decentralisation.
Poverty mapping offers an exciting new development in poverty measurement. This recent advance, in combination with comprehensive data sources, has
made it possible to target expenditures at a geographic area as small as a village.
Geographic targeting, using poverty mapping to identify finer poverty levels, has
more to offer Indonesia.
In conclusion, although some of the issues it covers are no longer new, and are
not the most pertinent poverty issues faced in Indonesia, this book clearly con-
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tributes to the empirical understanding of poverty in Asia, and can spur debate
and better understanding in designing poverty reduction strategies in Asia. It
will certainly be important reading for policy makers and scholars of development economics and Asian studies.
Vivi Alatas
World Bank, Jakarta
Note
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1
Alatas, Vivi, and Menno Pradhan (2003), Geographic Targeting in Indonesia, World
Bank, Washington DC, mimeo.
James J. Fox and Dionisio Soares (eds) (2003), Out of the Ashes: Destruction and
Reconstruction of East Timor, Australian National University E Press, Canberra,
pp. 304. A$24.95; online document available at no charge from
.
This valuable book was published by Crawford House in 2000, and reprinted in
2003 by ANU E Press, making it available electronically at no cost to a wide audience. Its 18 chapters by academics, political specialists, bureaucrats and others
cover the history, politics, administrative arrangements, social anthropology and
prospects for the future of the new nation of Timor L’Este.
James Fox traces the history of Timor and surrounding islands, documenting
the fragmented authority and shifting political alliances of the Dutch, Portuguese
and local parties, and making fascinating references to groups including the ‘Black
Portuguese’, Atoni and Chinese traders. Terence Hull assesses the new nation’s
demography, and Gavin Jones examines education and human resource development, including the continuing language issue. Dionisio Babo Soares addresses
political developments leading to the referendum on 30 August 1999, while
Grayson Lloyd scrutinises the diplomatic history, and especially the manoeuvrings from 1998 under Indonesia’s President Habibie which led to independence.
Fernando de Araujo intriguingly recalls the discussions of the CNRT (Conselho Nacional da Resistencia Timorense) leading up to the vote on independence. Catharina Williams describes her work as an electoral officer of UNAMET
(United Nations Mission in East Timor) preceding the large and orderly turnout
for the referendum, and UNAMET’s Ian Martin deals with the referendum and
subsequent violence. Harold Crouch covers Indonesia’s formulation of East
Timor policy and the interactions with this policy of the Indonesian military
(TNI). He points to the TNI’s close relations with the pro-Indonesian militia, and
explores its possible connections with human rights abuses and destruction. John
Haseman complements Crouch’s discussion, while suggesting that few of the
armed forces were responsible for planning the atrocities.
Alan Dupont addresses strategic questions, emphasising the need for the better ties with Indonesia that have subsequently been achieved. Januar Achmad
vividly recalls the atmosphere of fear in both East and West Timor surrounding
the evacuation of refugees. This leader of an Indonesian NGO recounts the horrific experiences of these displaced people, albeit countered in West Timor
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through government and popular assistance. He graphically reports militia atrocities, also describing an incident near Kupang entailing a menacing inspection by
Aitarak militia of a car in which he and an Australian nun were travelling, and
frighteningly recalling a similar encounter by this reviewer.
Fiona Crockford looks at the East Timorese ‘diaspora’ in Sydney, covering the
1,500 mainly young persons who were asylum seekers in 2000, and echoing their
perspectives on eventual return to their homeland. Andrew MacIntyre usefully
analyses ‘an international strategy’ for East Timor, highlighting necessary relationships with the UN, Indonesia, Australia, Japan, Portugal and other countries,
and exploring underlying needs for economic and security assistance. He advocates ‘quiet bargaining that captures the attention of international bureaucrats
and politicians’, suggesting that the ‘searing criticism that captures the attention
of the … media’, and has been associated with Ramos Horta, is unlikely to be pertinent in future (p. 226).
Peter Timmer canvasses questions for the United Nations team then beginning
to manage East Timor, while Sarah Cliffe reports on the ‘Joint Assessment Mission’ of foreign specialists and East Timorese which looked in 1999 at priorities in
reconstruction. João Mario Saldanha identifies fiscal issues facing the new nation,
while Dionisio Soares considers the future, emphasising difficulties such as political feuds, cultural and legal challenges, language and human rights problems,
and land rights questions, where he urges ‘re-institutionalisation’ of the traditional land tenure system.
While the book is dated, its coverage of the spheres mentioned is excellent. It is
particularly helpful in its examination of the historical, social and political background, in its account of early reconstruction, and in its consideration of the new
country’s international strategies. Although some topics have been addressed in
other books and papers, they are usefully brought together in this volume.
But the work disappoints in barely addressing key problems of reconstruction,
especially those connected with realising the potential of agriculture. Here an
expansion in coffee planting and coffee yields is desirable, with the ‘organic’
nature of East Timorese coffee likely to earn substantial premia. There is scope as
well for building up cattle, and rice and other crop production, mainly for export
to Indonesia, while much can be done to improve subsistence agriculture, which
has a direct impact on most people’s livelihoods. The volume is deficient too in
hardly mentioning the challenges of health development, the major difficulties of
infrastructure improvement, and the debate over Timor Gap oil as a source of further revenue. João Saldanha refers to the possibilities of ‘casino tourism’ (p. 251),
but little else is said about tourism in general.
The book’s publication in the first flush of enthusiasm for Timor L’Este’s future
may explain its neglect of problems that had not really crystallised in 2000. Now
four more years of independence have elapsed, with the UN departing as administering power in 2002 and with less external aid than expected being available to
support the economy. The political and language disputes have continued with little sign of resolution and, although there have been advances in education, health
and infrastructure, these have been small. The pace of agricultural development
has been slow, and the expansion of tourism, on which high hopes are placed,
does not appear substantial. The debate on Timor Gap oil has raged fiercely, and
now it seems that, following talks between Ramos Horta and Alexander Downer
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in August 2004, Australia may allocate reasonable tax revenues from oil to East
Timor. All these and other neglected issues, together with those already treated in
this book, deserve inclusion in a foreshadowed ‘next volume’ (Preface, p. x).
Parts of the book suggest that the future of this tiny, impoverished country on
the edge of Southeast Asia is uncertain and difficult. Yet James Fox cites one feature that will surely stand the new nation in good stead. This is the exceptional
‘resilience’ of the people, which ‘has been evident throughout their history … and
will continue to play an important role in the development of East Timor’ (p. 23).
It is exhibited in the fashioning by local peoples of amazingly robust farming systems for their dry and uncertain weather, and in the tying down for several years,
following the 1972 invasion, of massive Indonesian forces by the tiny Falintil
(Forcas Armadas de Timor Leste) guerrilla units. Despite adverse economic prognoses, such resilience will be a major asset in years ahead.
Colin Barlow
Wolfson College, Oxford, and ANU
Kathryn Robinson and Sharon Bessell (eds) (2002), Women in Indonesia:
Gender, Equity and Development, Institute of Southeast Asian Studies,
Singapore, pp. 284. Paper: S$39.90/US$24.90; Cloth: S$64.90/US$39.90.
This book is an outcome of one of the Indonesia Update conferences held annually
at the Australian National University. The 2001 conference marked a significant
moment in post-Soeharto politics, with a woman appointed president for the first
time. Megawati’s shift to power was a time of hope, after bitter disappointment
with Abdurrahman Wahid’s brief presidency. The 20 articles highlight this hope,
mingled with an awareness of the complex and often contradictory social, economic and political conditions that mutually influence the spaces available for
women. The collection, introduced by the editors’ comprehensive overview of the
issues, offers a wide variety of empirical analyses of closely inter-related themes.
The two chapters by Sen and Aspinall concentrate on the implications of elite
politics for the symbolic and practical meanings of gender politics. The role of
Megawati is seen primarily as a symbolic manifestation of the politics of representation. She is viewed by many as lacking in political leadership and particularly
silent on women’s issues, but by others as a symbol of women’s role in the public
sphere and of opposition to Islamic prescriptions of womanhood. Some interpret
her silence as ‘strength’ (Bianpoen). A review of the economy by Mari Pangestu
(appointed trade minister in the new SBY government in October 2004) analyses
the challenges Megawati’s government faced after a brief period in office.
Parawansa’s chapter points to the change in the name of the Ministry for the
Role of Women to the Ministry for Women’s Empowerment in 1999 as underlining the reformist Habibie government’s determination to deliver more equitable treatment for women at various levels of society. Parawansa and Surbakti
introduce the catchword ‘gender mainstreaming’ (bringing women into the centre of public institutions and social welfare programs). One result of this is
reflected in women’s attitudes to contraception (Hull and Adioetomo): a policy at
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first coercive in nature became more voluntary as women participated in family
planning programs. However, Surbakti cautions that gender mainstreaming will
never be properly implemented without careful monitoring and data gathering.
Oey-Gardiner looks at the still low representation of women in cabinet and high
public office, arguing that this is balanced by the more visible presence of the
women’s movement in highlighting violence against women and the effects of the
crisis on the wellbeing of the nation’s children. Saparinah Sadli points to the development of Kajian Wanita, a research centre at the University of Indonesia, and the
Convention Watch Working Group established in 1994, as showing that the public spaces available to women had begun to open up before Megawati’s appointment.
Other authors look at local contexts, providing insights into both the structures
that constrain women and the spaces that women create within them. Marcoes
discusses local initiatives by gender-sen
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
Book reviews
To cite this article: (2004) Book reviews, Bulletin of Indonesian Economic Studies, 40:3,
401-418, DOI: 10.1080/0007491042000231557
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Published online: 19 Oct 2010.
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Carfax Publishing
Bulletin of Indonesian Economic Studies, Vol. 40, No. 3, 2004: 401–18
Taylor & Francis Group
BOOK REVIEWS
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Thee Kian Wie (ed.) (2003), Recollections: The Indonesian Economy, 1950s–1990s,
Institute of Southeast Asian Studies, Singapore, pp. xv + 276.
Paper: S$39.90/US$25.90; Cloth: S$59.90/US$36.90.
Reading these recollections of former Indonesian economic policy makers is like
having a seat in the room as Thee Kian Wie conducts the interviews on which the
memoirs are based. That is an experience only few have had at first hand. Collected in one place, the memoirs make clear, as Dr Thee and his associates hoped,
that extended face-to-face interviews could add significantly to our understanding of ‘how policy-makers attempted to solve the economic problems they
encountered, which constraints they faced, and what compromises they had to
make in order to achieve their goals’.
Readers of the Bulletin of Indonesian Economic Studies between the late 1980s and
late 1990s will recall the occasional appearance of these memoirs, most entitled
‘Recollections of My Career’. Thee Kian Wie participated in the planning and
conduct of all the interviews, accompanied over time by a variety of colleagues
from the editorial board of BIES. It is appropriate that this distinguished historian
of the Indonesian economy should now serve as editor of the anthology that
brings the memoirs together in one place. He introduces the collection with a
short review of the major economic challenges that policy makers faced during
the early independence period and the Soeharto era that followed, providing useful context for readers not familiar with these earlier years.
What stands out in such a collection? One feature clearly is the strength of the
personalities captured in the interviews. There is the prideful wit of the godfather
of Indonesian economists, Sumitro Djojohadikusumo: ‘I tend to like writing
sweeping statements and leave it to the clever people to worry about whether it
is 2.5 or 2.6’. There is the sombre reflection of Subroto on the end of the New
Order: ‘I feel very sad about what has been happening in Indonesia since the
monetary and financial crisis hit the country in July 1997. The work of the past 30
years has been evaporating before our eyes’. There is also down-to-earth musing
by the socialist-turned-businessman Soedarpo Sastrosatomo on his experience in
leading a major private firm: ‘We think … we contribute in our own little world
to the betterment of things. But it is hard to transfer this model to the whole society’. And there is earnest speculation by Emil Salim, a year and a half before the
fall of Soeharto: ‘In our next stage of development I sense that we will need a
leader who places more emphasis on democracy and decentralisation, to give
substance to the notion of diversity with unity’. The memoirists all project the
strong self-image that is to be expected in a group that filled posts of great
responsibility in a large and complex nation.
ISSN 0007-4918 print/ISSN 1472-7234 online/04/030401-18
DOI: 10.1080/0007491042000231557
© 2004 Indonesia Project ANU
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Also notable is the change that occurred in the preparation of the memoirists
for their roles as economic policy makers over five decades. Sjafruddin
Prawiranegara, who served as Minister of Finance in early post-independence
cabinets, looked back to his training in law in the 1930s and boasted: ‘I had a
Western education—I know Dutch perhaps better than many Dutch people. But
I never left Indonesia’. A generation later, Mohammad Sadli, Emil Salim, Subroto
and Suhadi Mangkusuwondo, all of whom played major roles in government at
home and abroad after 1965, are describing their experiences at Berkeley, Harvard
and MIT, listing the professors under whom they studied in the 1950s, including
some who in later years were to win the Nobel Prize for Economics. One already
knows that this generation gap existed, but its significance becomes powerfully
clear in the individual recounting.
Do the memoirs tell us more than we knew about Indonesian economic policy
making? Not much new is learned about policies in the early years of the Republic; the survivors of that period were too few and too elderly when the interviews
began. The volume is especially rich on the Soeharto era from 1966 to 1996. Subroto and Suhadi describe the roles that they and others played in the student
army that fought the Dutch effort to return to power in Java after 1945—roles that
enabled them to find common cause with army leaders after 1965. Suhadi
recounts how he, as chairman of the student council, recruited Sumitro to become
dean of the Faculty of Economics of the University of Indonesia, where they all
eventually taught. Sadli describes how they came to become advisers to president-to-be Soeharto in 1966.
Emil Salim, who was a presidential adviser or cabinet minister continuously
from 1966 until 1993, gives the most complete exposition of the views of the
group of policy makers known as the economic ‘technocrats’. Their first task was
to establish macroeconomic stability, and Salim explains how they did this. There
is a valuable account of the decision to end the control of foreign exchange as
early as 1967, making Indonesia the first developing country to do so, and establishing an open orientation to external market forces after a long period of
inward-looking statist policies. He also discusses the broad consensus that developed early among civilian and military advisers to Soeharto that Indonesia
should give priority to agriculture, unlike India and China, which invested heavily in capital-intensive industry very early on. The consequences that flowed
from these choices for the rural populations of the three countries were enormous. Emil Salim candidly expresses the frustration of former economic ministers with critics who question whether the government was ever seriously
committed to equity in the process of development. When oil income rose in the
1970s, much of it was directed also to the rural population. As he sees it, such
decisions empowered rural people.
Abdul Raoef Soehoed, who was a major figure in industrial policy during
much of the 1970s and 1980s, provides a wide-ranging exposition of a second
group of economic policy makers, the engineers who called for the setting up of
basic industries to make use of available natural resources. This school was often
in opposition to the technocrats, who failed to develop a strategy of industrialisation of their own. When the private sector is unable or unwilling to act, these
engineers argued, it is proper for the state to act. Their position became a realistic choice with the rise of oil revenues by the late 1970s. Soehoed goes on to dis-
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cuss some of the issues that followed from this approach, including the management of state-owned enterprises, the pros and cons of privatisation, and the use
of subsidies to encourage indigenous entrepreneurs to push the industrialisation
process downstream. Soehoed also expresses his impatience with the economists
who counselled caution when presented with major capital investment proposals, leaving some major opportunities to be taken up by other countries.
Salim and Soehoed together lament the failure of both groups to do more to
train a younger generation of Indonesians to replace themselves.
What is missing from this anthology? Widjojo Nitisastro and Ali Wardhana,
who served as Soeharto’s chief economic strategist and chief financial guardian
respectively, were still advising the government when the project came to an end
with the onset of the Asian monetary crisis in 1997, as a result of which neither
was interviewed for this series. One also notes the absence from the collection of
any Sino-Indonesians, except in the person of its indefatigable editor. And only
the editor is looking back at a time when it is possible to begin to consider what
went wrong to cause the economy to plummet so much more deeply than others
in the region in 1997–98. But one does not wish to appear ungenerous. The memoirs as they stand constitute valuable guides to the thinking of key figures at
strategic points during half a century of Indonesian economic history. I read them
again from start to finish in just two sittings, and I expect other readers of this
journal will do the same.
John Bresnan
Columbia University
World Bank (2003), Decentralizing Indonesia: A Regional Public Expenditure Review
Overview Report, World Bank Report No. 26191-IND,
World Bank, Jakarta, available at .
Indonesia was once known as the largest country in Asia managed under a strong
centralised government. Suddenly in 2001 it was transformed into one of the
world’s most decentralised countries. This report analyses various problems arising from this ‘Big Bang’ transformation, including those related to the two decentralisation laws (Nos 22 and 25/1999) and their associated regulations; to
unbalanced revenue and expenditure assignments; to establishing accountability;
and to political battles between government officials at different levels. The
report also discusses near-term challenges faced by Indonesia in the new era of
decentralisation.
The first of the five chapters discusses why Indonesia adopted the ‘Big Bang’
approach—a radical decentralisation concept. According to the report, the main
reason was a build-up of dissatisfaction with decentralisation policy on the part
of many regions, in particular the resentment of resource-rich regions which
believed that the central government had ‘stolen’ their natural resources. An
additional reason was that the parliament, mainly with an eye to gaining popularity, agreed to a fiscal decentralisation scheme that transferred a significant
amount of funding from the central government to regional governments. Hence,
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the central government had no choice but to transfer more responsibilities to the
regions.
This report implicitly argues that Indonesian decentralisation policy does not
achieve the common decentralisation objective of bringing public services closer
to the people; nor does the basic design adhere to the principle of ‘money following functions’, since the devolution of functions was driven by financial decentralisation, rather than the reverse. These arguments are very difficult to prove,
however.
Chapter 2 discusses Law No. 22/1999, which sets out the basic rules for decentralising government functions and authority. This chapter identifies three major
problems. First, Law No. 22/1999 does not spell out local government (district
and municipality) functions, but merely specifies the residual functions of the
centre and the province. This has left many interpretations open, and created
overlapping activities among levels of regional government. Second, regulations
to support the laws were not available when implementation of Law No. 22/1999
began. This led to confusion in many regional governments about how to implement the law properly. Third, a minimum standard of services has never been formulated. There is thus no benchmark for judging the quality of services provided
by local governments. This conclusion is supported by the results of a field survey, which show that individuals and businesses see no improvement in the quality of local public services; moreover, decentralisation has left many business
people facing new charges for local government licences.
The rest of chapter 2 focuses on the local civil service and the reorganisation of
local government. What this chapter does not deal with is the question of the
appropriate authority for service delivery; for example, whether the centre or the
provincial or local government should be responsible for providing higher education and training.
Chapter 3 discusses Law No. 25/1999, which sets out the design of the new
intergovernmental fiscal relationships. According to this chapter, there are four
elements of Indonesian fiscal decentralisation that distinguish it from the models
adopted elsewhere. First, although it has only recently implemented decentralisation, Indonesia is one of the few countries in the world to adopt such a comprehensive set of fiscal decentralisation instruments, including a general purpose
grant (DAU), a specific purpose grant (DAK) and a natural resource sharing
arrangement. Second, each fiscal decentralisation instrument requires regulations
and a complicated allocation formula. Third, a huge proportion of central government transfers are used by local government without any specific guidelines or
assistance from the centre, the DAK being the exception. Fourth, each type of fiscal instrument has a different impact on the economy, in terms of local fiscal
capacity and fiscal equalisation across regions. This chapter provides very
informative data, enriched by quantitative analysis, to show the impact of transfers on inter-regional financial disparity.
Chapter 4 describes the challenges of the Indonesian tradition of national planning. Despite its decentralisation policy, the central government continues to prepare a national plan, known as Propenas (Program Pembangunan Nasional, the
National Development Plan), which must be followed in any planning done by
regional governments. However, it is unclear what would happen if a region
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decided largely to ignore the Propenas in its planning. In the end, there appears
to be no fiscal consequence at all for a region that does not follow the national
planning mechanism. The report seems to challenge whether Indonesia still
needs a national plan, but unfortunately there is no further elaboration of this
interesting question.
Chapter 5 deals with the difficult issue of local accountability. Unexpectedly, it
reports that audits by the Supreme Audit Authority (BPK) show financial
accountability to be stronger in the regions than at the centre. Furthermore,
results from a survey show that while citizens do believe there is a significant
amount of corruption in their regional governments, they consider central government officials to be the most corrupt.
I found this report highly informative, and commend it to those interested in
understanding Indonesian decentralisation policy.
Raksaka Mahi
University of Indonesia
Mark Turner and Owen Podger with Maria Sumardjono and Wayan K.
Tirthayasa (2003), Decentralisation in Indonesia: Redesigning the State, Asia Pacific
Press, Australian National University, pp. 181. A$38.00.
Indonesia’s 2001 ‘Big Bang’ decentralisation was rapidly implemented and, when
contrasted with the preceding decades of highly centralised rule under the New
Order, radical. Much like the closely associated ascendance of electoral democracy, realised in the 1999 and 2004 national elections, the transition to decentralisation unfolded far more smoothly than many sceptics would have predicted. Yet
the full ramifications of these reforms for improved governance in Indonesia at
the national and local levels remain open to question.1
The book provides an engaging chronicle of the policy context and process
associated with the emergence of the new legal framework, particularly its legal,
administrative and political contours. Sympathetic to the overall decentralisation
thrust to date, the authors bring out some of the major challenges for consolidation of the framework, and its prospective developmental gains. The decentralisation framework—as embodied by Laws 22 and 25/1999 on governance and
fiscal balance—was forged and implemented on a remarkably short timetable,
ultimately by a small group of highly engaged bureaucrats, but with limited popular participation.
In retrospect, many observers will no doubt wonder whether a more gradual
and broadly deliberated decentralisation would have been preferable. Alternatively, one might ask whether a more gradual process would have been feasible,
given the context. The book underscores the unique window of political upheaval
that defined the process. The historical circumstances—including the previous
decades of still-born decentralisation initiatives and pent-up demands for
reform—probably did not offer significant alternatives. At the root of the ensuing
decentralisation framework were Indonesian political considerations and actors,
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and at least some national legacy of decentralisation thinking, coming to a head
with the spectre of national disintegration and the desire for reform.
Although rapid implementation undoubtedly strained existing capacities, it
remains debatable whether many parts of the central bureaucracy (and sceptical
local counterparts for that matter) would have availed themselves of any extra
time to strengthen strategic implementation measures or enhance bureaucratic
coordination. Many of the changes undoubtedly remain unpopular in certain
quarters, including central bureaucracies that saw their power, prestige and
resources curtailed. At the margin, the time-bound implementation of the decentralisation probably maintained a degree of momentum that averted gridlock to
the process.
While readers can conclude that the first phase of Indonesia’s decentralisation
progressed remarkably smoothly, with some commendable features in the framework, the ensuing phase will necessarily be more contested, more complicated on
the ground, and probably generally ‘messier’. The fact that the making of Indonesia’s decentralisation policy had ‘considerable continuity with the New Order
style policymaking, in which top-down policy directives were issued by the central government for implementation across the archipelago’ (p. 22), potentially
presages some of the more fundamental weaknesses the policy must overcome in
the future. Moreover, some of the structural problems of late New Order policy
making, including rent-seeking and lack of accountability, were themselves reasons for reformers to embrace a more radical tack of decentralisation.
The effective implementation of decentralisation will, paradoxically, require a
stronger, if less encompassing (and reformed) centre. Various national institutions will need to ensure that policy making effectively mediates among, and
ultimately coordinates, various contesting interests as the decentralisation
framework evolves. Contradictory regulations in such areas as the civil service,
themselves reflective of incomplete or contested areas of reform, will need to be
addressed to avoid undermining the prospect of better governance and service
delivery through decentralisation. At the same time, central oversight will be
critical to ensuring that regional autonomy is not simply a licence for transgressions on the part of local bureaucrats and elites, especially in a context where
downward mechanisms of accountability remain weak or incomplete. While
developments in the latter arena remain critical, the evolution of the overall
decentralisation policy framework and the centre’s ability to implement it effectively are equally paramount. As echoed by the subtitle of the book, Redesigning
the State, it remains to be seen how deep the transformation is in this respect of
the old centralist political and bureaucratic state legacies, once, so to speak, the
initial bang’s dust has settled.
At the time of writing, revisions to the decentralisation framework are being
deliberated by the national parliament (DPR), after earlier attempts at revision by
the executive had to be retracted in the face of strong opposition. Ideally such
bodies as the new Regional Representative Council (DPD) can now provide the
requisite institutional capacity to compensate for some of the early deliberation
deficits. Whether the prospects of better governance at the national and local levels will be realised—and under what conditions—will only become clear over
time. In the interim, it is to be hoped that these developments will prove the sub-
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ject of much further good analysis, which will in turn feed back into the process
of decentralisation design and implementation.
Kai Kaiser2
World Bank, Washington DC
Notes
1
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2
See, for example, the recent volume by Richard Robison and Vedi Hadiz, Reorganising
Power in Indonesia (RoutledgeCurzon, 2004), and the limited degree of potential reform
in fundamental governance outcomes flowing from electoral democracy.
The views reflected here are those of the reviewer, and not of the World Bank.
Sven Wunder (2004), Oil and the Fate of the Forest: A Comparative Study of Eight
Tropical Countries, Routledge Explorations in Environmental Economics,
London, pp. 256. Cloth: £65.00.
Sven Wunder has produced a valuable book that will help economists understand the environmental effects of macroeconomic policies, especially deforestation. As a book on economics, it may not reach many foresters, geographers and
environmentalists, though its plain language aims to help them understand
macroeconomic influences on deforestation and land use change.
Wunder’s core hypothesis is that ‘forests in oil-exporting tropical countries
tend to face fewer pressures for conversion and degradation than forests in nonoil-producing countries’. Over time, these ‘oil countries’ face lower forest loss and
degradation pressure during boom periods than during bust periods (p. 4). Wunder details the links between ‘Dutch Disease’ (economic distortions due to a
financial windfall such as an influx of oil wealth) and land use changes, forest
loss and forest degradation (p. 43).1 Straightforward explanation of the linkages
allows non-specialists to understand that mineral export wealth influences competitiveness (exchange rates, relative prices), which influences both agricultural
production and commercial timber production, which in turn affect land use and
forest loss and degradation (p. 340). Wunder also presents an impressive amount
of data and history that support the argument in five primary case study countries (Gabon, Venezuela, Cameroon, Ecuador and Papua New Guinea) and in
three secondary case studies (Mexico, Nigeria and Indonesia).
Most of the cases confirmed the core hypothesis, at least in relative terms: ‘oil
wealth reduces pressure to degrade and convert forests’ (p. 359). Though Wunder does demonstrate these effects with statistically meaningful results for the
five primary cases, we should probably add ‘other things equal’ to the core
hypothesis, since results vary widely among the eight countries, and many other
important factors are at play. In particular, if governments spend windfall revenue in ways that damage forests, they can easily swamp the forest-benefiting
effects of the Dutch Disease phenomenon.2 Wunder claims that the policies that
mattered most were road building, trade policies, spending on urbanisation, and
management of the exchange rate. Relatively less important were resettlement
policies and direct spending on agriculture, forestry and conservation.
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Of the eight countries studied, Indonesia3 had the highest (or nearly the highest) land area, GDP, population and long-term economic growth rate, but nearly
the lowest GDP per capita and population growth rate. In terms of oil wealth,
Indonesia had among the highest absolute windfalls, but among the lowest per
capita. Indonesia fits reasonably well with Wunder’s general observations about
the political economy of oil countries. They have greater autonomy to pursue and
pay for specific development policies (guided or misguided). Central government power increases, while accountability decreases (because the government is
not dependent on tax revenues). Provinces holding mineral wealth can contest
central power, and this can lead to conflict or separatism. Finally, Wunder notes
that oil countries tend to be corrupt.
During most of the period of study (1970–2000), Indonesia maintained fiscal
discipline, promoted agriculture and adopted protective currency devaluations.
So Indonesia had a ‘mild and tightly managed version of the Dutch Disease’
(p. 315) and should not see substantial forest-conserving benefits of that disease
in its full form. For example, Wunder shows that Indonesia’s repeated rupiah
devaluations helped to restore competitiveness quickly in the agricultural sector,
thus diminishing the impact of the Dutch Disease, and reducing the potential for
indirect forest-conserving benefits. Wunder concludes that Indonesia’s approach
has been, in general, good for the economy but bad for the forests. Still, he finds
that Indonesia probably provides relative confirmation (p. 333) of the core hypothesis. With little or inconclusive data on pre-boom deforestation, Wunder does not
overstate these results, however.
For countries where Wunder was able to confirm the core hypothesis (e.g.
Gabon), oil wealth played a significant role in the economy. For larger, more
diversified economies, such as Indonesia, the effects of the oil boom and bust
cycles were relatively smaller and the roles of other factors greater, possibly
masking the relevance of the ‘core hypothesis’.
Wunder’s overview of macroeconomic linkages provides important understanding. Still, there are specific local features in any country that do not conform.
Wunder notes several characteristics that make Indonesia relatively unusual
among the eight country studies. For example, it did not have significantly
urban-biased policies, but did have a large labour-intensive urban manufacturing
sector that depended on a competitive rupiah to absorb labour. Further, forestbased industries and estate crops are more important causes of deforestation in
Indonesia than in any other case study (p. 321). Agricultural expansion as a cause
of deforestation was minimised by the intensification of rice cultivation (p. 320).
There are also many complex and contradictory influences on forest cover in any
time period. For example, Wunder notes (p. 319) that after 1997 economic collapse reduced support for road construction, benefiting forests but, at the same
time, political crisis reduced authority to control exploitation, to the detriment of
forests.
Wunder introduces some relative measures of deforestation that help us think
differently about Indonesia. For example, in per capita terms, Indonesia is relatively forest poor in comparison to other countries in the study. Though average
annual forest loss is relatively high, forest loss per capita and deforestation per
unit GDP are only moderate. But Indonesia’s diversity confounds comparison
through ‘averaging’, when one considers the disparity between people-rich,
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forest-poor Java (like Nigeria?) and the forest-rich, people-poor Outer Islands
(like Gabon?).
Sven Wunder’s new book identifies long-term structural trends in the way
resource extraction and price cycles affect land use through promotion of agriculture and exportable products. It does not offer specific prescriptions for reducing
forest destruction, but some general guidelines that take into account broad
macroeconomic issues, not just direct forest-influencing factors. This is a reasonable approach, given the diverse and local factors in each country that contribute
to its ‘fit’ with the core hypothesis. In Indonesia, we can hope that this book will
help to frame a larger debate about how overall policy-enabling conditions affect
forest outcomes, not just specific forest sector policies such as establishment of a
cartel or an export ban.
Wunder offers two brief win–win policy recommendations to those who wish
to preserve forests or slow their rate of loss. The first is fairly standard: manage
oil rents to support urbanisation and maintain macroeconomic stability (reduce
short-term fluctuations, provide long-term certainty). The second will be controversial in some circles: liberalise trade in sectors where land demand competes
directly with forests.
Timothy H. Brown
USAID/NRM (Natural Resources Management) III Project, Jakarta
Notes
1
2
3
‘Dutch Disease’ refers to the economic effects of (windfall) earnings from an export
commodity boom such as an oil boom: the government increases public spending,
which raises wages and demand, which benefits sheltered, non-traded sectors of the
economy that can grow and raise prices, and undermines the traded sectors, which are
in direct competition with foreign products and cannot raise prices. The traded sectors
are squeezed between rising (domestic) input prices and exchange rate appreciation
(making them less competitive abroad), so they decline (or expand more slowly). In the
Dutch case in the 1960s, manufacturing for export declined. In most developing countries, where the traded sectors produce agricultural commodities, reduced investment
in or expansion of these sectors can be good for the forests.
In Ecuador, for example, forest loss was high during both boom and bust, because of
policies supporting expansion of cattle production.
Indonesia was a secondary case study; apparently, it lost its place among the primary
case studies because of the ‘highly complex and contradictory situation’ of land use
and forest cover data.
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Christopher M. Edmonds (ed.) (2003), Reducing Poverty in Asia: Emerging Issues
in Growth, Targeting and Measurement, Edward Elgar, Cheltenham, pp. 384.
Cloth: £69.95; Paper: £29.95.
This is a rich collection of papers by distinguished authors. The book’s three
broad themes are: macroeconomic questions relating to poverty reduction efforts
in Asia; the importance of targeting anti-poverty interventions at particular sectors or demographic groups; and issues of poverty measurement as applied to
selected Asian nations. As the 15 papers were presented at a forum held in February 2001, some of the questions covered are no longer ‘emerging issues’. Nevertheless, the book offers intriguing challenges to existing poverty reduction
policy approaches. In this short note, I will focus particularly on the discussion of
anti-poverty targeting and poverty measurement, and compare the experience
discussed with the problems faced in Indonesia.
Following the macroeconomic section, the second part of the book, on the targeting of anti-poverty interventions at particular urban and industrial sectors,
looks at the role of information and communication technology (ICT) in development and poverty reduction in the Asian region. Sanjaya Lall reviews the technological aspects of manufacturing competitiveness in recent years and the
strategies adopted by leading East Asian countries. He argues that a combination
of attaining competitiveness and upgrading technical structure was necessary for
sustained income and employment growth. Both Lall and Randep Sudan, who
examined the role of ICT in Andhra Pradesh, conclude that technology development offers valuable opportunities for application in poverty reduction efforts.
However, neither paper provides systematic evaluations that offer proof that the
high-cost investment in technology will indeed give the ‘best bang for the buck’
in reducing poverty. Faced with tight budgets, developing countries need to allocate their poverty alleviation funding cautiously to policies and programs that
give the best outcomes. The problem of designing a poverty reduction strategy is
not lack of innovation, but that there are too few systematic studies of what innovations work best in reducing poverty.
The experience of poverty targeting programs in Indonesia illustrates the need
to learn what works. The types of poverty alleviation programs chosen are often
not aligned with what the poor need most. Current schemes rely too heavily on
ineffective transfer mechanisms, such as rice and kerosene subsidies, that absorb
much of the poverty alleviation budget.
Another impediment to achieving effective targeting in Indonesia is the high
cost of implementation and leakages. Administration of centrally owned programs such as the Raskin (‘rice for the poor’) subsidy is costly and ineffective. Past
experience of safety net programs indicates that local governments have not been
accountable for ensuring that benefits get to the right people. Alatas and Pradhan
(2003)1 found that 78% of errors in the targeting of Social Safety Net (JPS) scholarship programs occurred at the local level, while the remaining 22% were due to
poor allocation of funds from the central government to districts. These findings
demonstrate the need to build into the system of allocation incentive mechanisms
for pro-poor spending, policies and programs at the district level.
The third part of the book explores the measurement and characterisation of
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poverty in Asian and Pacific countries. Kaushik Basu proposes changing the definition of the poor from one based on absolute income-metric poverty to one
based on relative poverty. He argues that because quintile income is likely to correlate with other non-economic indicators, policies should focus on assisting individuals whose income places them in the lowest quintile.
However, the Indonesian poverty profile suggests that quintile income cannot
be used as the sole or lead proxy of multi-dimensional poverty in Indonesia. The
2002 National Socio-Economic Survey (Susenas) shows that poverty has declined
to around 18%. But when the concept is expanded to include all the dimensions
of human wellbeing—adequate consumption, education, health, and access to
basic infrastructure—poverty is still a major problem experienced by half of the
population. Although expenditure-poor people, a group closely correlated with
individuals in the lowest quintile, have a tendency also to experience other kinds
of deprivation, other dimensions of deprivation are far from being perfectly correlated with quintile poverty.
Measurement of poverty thus must cover many dimensions. Approaches to
aggregating measures of the different dimensions of poverty include using a welfare function and a composite index such as the human development index.
However, choosing the appropriate weights for aggregation has proven a difficult
task, with current practice generally assigning arbitrary (usually equal) weights
to each component. The book does not cover this important issue of measuring
multi-dimensional poverty.
Another dimension of poverty that is receiving attention in the literature is vulnerability to poverty, defined as the risk that a household or individual will experience an episode of poverty over time. Measuring a dynamic concept such as this
is difficult and requires comprehensive panel data that help to quantify the
volatility of the poverty experience. In Indonesia, vulnerability to poverty
remains a big issue. People and households move into and out of poverty frequently. The huge difference between the Indonesian national poverty headcount
of 18%, currently at approximately $1.55 PPP (purchasing power parity) a day,
and the $2 PPP poverty headcount of 53.4% indicates that a large proportion of
the population is ‘near poor’ and therefore highly vulnerable. This book falls
short in addressing the issue of poverty vulnerability.
Instead, it dedicates a chapter to discussing the trade-off between defining the
national poverty line or lines that most accurately measure poverty across the distinct situations found in a country (specificity), and defining poverty lines that
provide a basis for comparing poverty incidence across geographic areas and
time (comparability). Comparison of specificity and comparability is indeed an
interesting issue, but an old one. Measuring poverty for finer targeting has
replaced the trade-off question as the current issue in poverty measurement,
especially for Indonesia, which has embarked on decentralisation.
Poverty mapping offers an exciting new development in poverty measurement. This recent advance, in combination with comprehensive data sources, has
made it possible to target expenditures at a geographic area as small as a village.
Geographic targeting, using poverty mapping to identify finer poverty levels, has
more to offer Indonesia.
In conclusion, although some of the issues it covers are no longer new, and are
not the most pertinent poverty issues faced in Indonesia, this book clearly con-
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tributes to the empirical understanding of poverty in Asia, and can spur debate
and better understanding in designing poverty reduction strategies in Asia. It
will certainly be important reading for policy makers and scholars of development economics and Asian studies.
Vivi Alatas
World Bank, Jakarta
Note
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1
Alatas, Vivi, and Menno Pradhan (2003), Geographic Targeting in Indonesia, World
Bank, Washington DC, mimeo.
James J. Fox and Dionisio Soares (eds) (2003), Out of the Ashes: Destruction and
Reconstruction of East Timor, Australian National University E Press, Canberra,
pp. 304. A$24.95; online document available at no charge from
.
This valuable book was published by Crawford House in 2000, and reprinted in
2003 by ANU E Press, making it available electronically at no cost to a wide audience. Its 18 chapters by academics, political specialists, bureaucrats and others
cover the history, politics, administrative arrangements, social anthropology and
prospects for the future of the new nation of Timor L’Este.
James Fox traces the history of Timor and surrounding islands, documenting
the fragmented authority and shifting political alliances of the Dutch, Portuguese
and local parties, and making fascinating references to groups including the ‘Black
Portuguese’, Atoni and Chinese traders. Terence Hull assesses the new nation’s
demography, and Gavin Jones examines education and human resource development, including the continuing language issue. Dionisio Babo Soares addresses
political developments leading to the referendum on 30 August 1999, while
Grayson Lloyd scrutinises the diplomatic history, and especially the manoeuvrings from 1998 under Indonesia’s President Habibie which led to independence.
Fernando de Araujo intriguingly recalls the discussions of the CNRT (Conselho Nacional da Resistencia Timorense) leading up to the vote on independence. Catharina Williams describes her work as an electoral officer of UNAMET
(United Nations Mission in East Timor) preceding the large and orderly turnout
for the referendum, and UNAMET’s Ian Martin deals with the referendum and
subsequent violence. Harold Crouch covers Indonesia’s formulation of East
Timor policy and the interactions with this policy of the Indonesian military
(TNI). He points to the TNI’s close relations with the pro-Indonesian militia, and
explores its possible connections with human rights abuses and destruction. John
Haseman complements Crouch’s discussion, while suggesting that few of the
armed forces were responsible for planning the atrocities.
Alan Dupont addresses strategic questions, emphasising the need for the better ties with Indonesia that have subsequently been achieved. Januar Achmad
vividly recalls the atmosphere of fear in both East and West Timor surrounding
the evacuation of refugees. This leader of an Indonesian NGO recounts the horrific experiences of these displaced people, albeit countered in West Timor
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through government and popular assistance. He graphically reports militia atrocities, also describing an incident near Kupang entailing a menacing inspection by
Aitarak militia of a car in which he and an Australian nun were travelling, and
frighteningly recalling a similar encounter by this reviewer.
Fiona Crockford looks at the East Timorese ‘diaspora’ in Sydney, covering the
1,500 mainly young persons who were asylum seekers in 2000, and echoing their
perspectives on eventual return to their homeland. Andrew MacIntyre usefully
analyses ‘an international strategy’ for East Timor, highlighting necessary relationships with the UN, Indonesia, Australia, Japan, Portugal and other countries,
and exploring underlying needs for economic and security assistance. He advocates ‘quiet bargaining that captures the attention of international bureaucrats
and politicians’, suggesting that the ‘searing criticism that captures the attention
of the … media’, and has been associated with Ramos Horta, is unlikely to be pertinent in future (p. 226).
Peter Timmer canvasses questions for the United Nations team then beginning
to manage East Timor, while Sarah Cliffe reports on the ‘Joint Assessment Mission’ of foreign specialists and East Timorese which looked in 1999 at priorities in
reconstruction. João Mario Saldanha identifies fiscal issues facing the new nation,
while Dionisio Soares considers the future, emphasising difficulties such as political feuds, cultural and legal challenges, language and human rights problems,
and land rights questions, where he urges ‘re-institutionalisation’ of the traditional land tenure system.
While the book is dated, its coverage of the spheres mentioned is excellent. It is
particularly helpful in its examination of the historical, social and political background, in its account of early reconstruction, and in its consideration of the new
country’s international strategies. Although some topics have been addressed in
other books and papers, they are usefully brought together in this volume.
But the work disappoints in barely addressing key problems of reconstruction,
especially those connected with realising the potential of agriculture. Here an
expansion in coffee planting and coffee yields is desirable, with the ‘organic’
nature of East Timorese coffee likely to earn substantial premia. There is scope as
well for building up cattle, and rice and other crop production, mainly for export
to Indonesia, while much can be done to improve subsistence agriculture, which
has a direct impact on most people’s livelihoods. The volume is deficient too in
hardly mentioning the challenges of health development, the major difficulties of
infrastructure improvement, and the debate over Timor Gap oil as a source of further revenue. João Saldanha refers to the possibilities of ‘casino tourism’ (p. 251),
but little else is said about tourism in general.
The book’s publication in the first flush of enthusiasm for Timor L’Este’s future
may explain its neglect of problems that had not really crystallised in 2000. Now
four more years of independence have elapsed, with the UN departing as administering power in 2002 and with less external aid than expected being available to
support the economy. The political and language disputes have continued with little sign of resolution and, although there have been advances in education, health
and infrastructure, these have been small. The pace of agricultural development
has been slow, and the expansion of tourism, on which high hopes are placed,
does not appear substantial. The debate on Timor Gap oil has raged fiercely, and
now it seems that, following talks between Ramos Horta and Alexander Downer
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in August 2004, Australia may allocate reasonable tax revenues from oil to East
Timor. All these and other neglected issues, together with those already treated in
this book, deserve inclusion in a foreshadowed ‘next volume’ (Preface, p. x).
Parts of the book suggest that the future of this tiny, impoverished country on
the edge of Southeast Asia is uncertain and difficult. Yet James Fox cites one feature that will surely stand the new nation in good stead. This is the exceptional
‘resilience’ of the people, which ‘has been evident throughout their history … and
will continue to play an important role in the development of East Timor’ (p. 23).
It is exhibited in the fashioning by local peoples of amazingly robust farming systems for their dry and uncertain weather, and in the tying down for several years,
following the 1972 invasion, of massive Indonesian forces by the tiny Falintil
(Forcas Armadas de Timor Leste) guerrilla units. Despite adverse economic prognoses, such resilience will be a major asset in years ahead.
Colin Barlow
Wolfson College, Oxford, and ANU
Kathryn Robinson and Sharon Bessell (eds) (2002), Women in Indonesia:
Gender, Equity and Development, Institute of Southeast Asian Studies,
Singapore, pp. 284. Paper: S$39.90/US$24.90; Cloth: S$64.90/US$39.90.
This book is an outcome of one of the Indonesia Update conferences held annually
at the Australian National University. The 2001 conference marked a significant
moment in post-Soeharto politics, with a woman appointed president for the first
time. Megawati’s shift to power was a time of hope, after bitter disappointment
with Abdurrahman Wahid’s brief presidency. The 20 articles highlight this hope,
mingled with an awareness of the complex and often contradictory social, economic and political conditions that mutually influence the spaces available for
women. The collection, introduced by the editors’ comprehensive overview of the
issues, offers a wide variety of empirical analyses of closely inter-related themes.
The two chapters by Sen and Aspinall concentrate on the implications of elite
politics for the symbolic and practical meanings of gender politics. The role of
Megawati is seen primarily as a symbolic manifestation of the politics of representation. She is viewed by many as lacking in political leadership and particularly
silent on women’s issues, but by others as a symbol of women’s role in the public
sphere and of opposition to Islamic prescriptions of womanhood. Some interpret
her silence as ‘strength’ (Bianpoen). A review of the economy by Mari Pangestu
(appointed trade minister in the new SBY government in October 2004) analyses
the challenges Megawati’s government faced after a brief period in office.
Parawansa’s chapter points to the change in the name of the Ministry for the
Role of Women to the Ministry for Women’s Empowerment in 1999 as underlining the reformist Habibie government’s determination to deliver more equitable treatment for women at various levels of society. Parawansa and Surbakti
introduce the catchword ‘gender mainstreaming’ (bringing women into the centre of public institutions and social welfare programs). One result of this is
reflected in women’s attitudes to contraception (Hull and Adioetomo): a policy at
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first coercive in nature became more voluntary as women participated in family
planning programs. However, Surbakti cautions that gender mainstreaming will
never be properly implemented without careful monitoring and data gathering.
Oey-Gardiner looks at the still low representation of women in cabinet and high
public office, arguing that this is balanced by the more visible presence of the
women’s movement in highlighting violence against women and the effects of the
crisis on the wellbeing of the nation’s children. Saparinah Sadli points to the development of Kajian Wanita, a research centre at the University of Indonesia, and the
Convention Watch Working Group established in 1994, as showing that the public spaces available to women had begun to open up before Megawati’s appointment.
Other authors look at local contexts, providing insights into both the structures
that constrain women and the spaces that women create within them. Marcoes
discusses local initiatives by gender-sen