00074910012331339003
Bulletin of Indonesian Economic Studies
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
Indonesia–Harvard University: Lessons From A
Long-Term Technical Assistance Project
Joseph J. Stern
To cite this article: Joseph J. Stern (2000) Indonesia–Harvard University: Lessons From A LongTerm Technical Assistance Project, Bulletin of Indonesian Economic Studies, 36:3, 113-125
To link to this article: http://dx.doi.org/10.1080/00074910012331339003
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Bulletin of Indonesian Economic Studies
Vol 36 No 3, December 2000, pp. 113–25
INDONESIA–HARVARD UNIVERSITY:
LESSONS FROM A LONG-TERM TECHNICAL
ASSISTANCE PROJECT
Joseph J. Stern*
John F. Kennedy School of Government, Harvard University
On 30 June 2000 the Economic Analysis Project, housed in the Ministry
of Finance in Jakarta, closed its doors, ending over 30 years of technical
assistance delivered through one agency, the Harvard Institute for
International Development (HIID). On that same date the Institute was
reorganised and effectively ceased to exist as a separate University entity.1
Although no other HIID project lasted as long as the Indonesia project,
the Institute has provided technical assistance to a large number of
developing economies, often remaining in a country for an extended
period. In this regard Harvard University’s overseas advisory work has
probably been unique.
Harvard University first became involved in overseas economic
development work in 1954 when it agreed to provide technical assistance
to the Planning Commission of the Government of Pakistan. This initial
effort, together with an Iran project that followed, was administered by
the Graduate School of Public Administration. In 1962 the University
established the Development Advisory Service to oversee a growing
portfolio of overseas activities, including projects in Argentina, Colombia,
Liberia, Ghana and Greece, as well as Indonesia. Between 1962 and 1974,
when it was transformed into HIID, the Development Advisory Service
had administered some 17 projects in 14 countries. Most of the funding
for these activities came from the Ford Foundation and the United Nations
Development Programme, as well as from the host countries. At the time
of its dissolution HIID had activities in 12 countries, including
Mozambique, the Ukraine, Vietnam, India and Ghana, in addition to the
ongoing Bank Rakyat Indonesia project.2
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Joseph J. Stern
While it is not clear whether HIID’s 30-year effort of providing
technical assistance to the Government of Indonesia set a record for the
longest sustained technical assistance project ever mounted, it almost
certainly will rank as one of the longest. Those interested in the history
of technical assistance efforts may wonder how the relationship between
the Indonesian government and Harvard University evolved and,
perhaps more importantly, what the various HIID projects, especially
those working in the macroeconomic area, accomplished. Finally, what
lessons, if any, can be drawn from this effort?
Because HIID worked with a number of ministries and institutions
in Indonesia, it would require a very long study to cover all of them.
Here we deal only with the macroeconomic projects. Hence we exclude
from our review the assistance provided to Bank Rakyat Indonesia in the
development of a highly successful micro-finance program, the work on
urban planning, the research and training activities undertaken by the
Center for Policy Implementation Studies, and a number of smaller
projects. Some of these activities have been described elsewhere, but a
complete review covering the entire range of HIID activities in Indonesia
remains to be written.3
History
The Leknas Project. Harvard’s association with Indonesia can be traced
back to March 1963, when HIID, with Ford Foundation financing,
provided a small group of advisers to Leknas (Lembaga Ekonomi dan
Kemasyarakatan Nasional), the National Economic and Social Research
Institute. This institute served as a research base for a number of Ford
Foundation trained economists who had returned to Indonesia, including
Professors Widjojo Nitisastro and Ali Wardhana, both University of
Indonesia faculty members. The first HIID advisers to Indonesia included
Professor Donald Blake, formerly of the University of Indonesia, and
Professor Everett Hawkins, University of Wisconsin, as well as Nathan
Keyfitz, then of the University of Chicago, who served as a consultant on
demographic issues. The advisers worked with the Leknas staff on a
research program that dealt with the economic and social aspects of
Indonesia’s development. But as research of this kind was seriously
constrained, their chief function was to help identify and select promising
Indonesians for foreign training. Given the chaotic political and economic
conditions that prevailed in Indonesia, it is not surprising that Edward
Mason, one of the founders of HIID, wryly noted in his history of the
early years of the institute, that the latter activity ‘… was probably more
effectively performed than the first’ (Mason 1986: 51). When President
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Indonesia–Harvard University: A Long-term Technical Assistance Project
115
Sukarno broke relations with foreign donors, the Ford Foundation
suspended its activities in Indonesia, and HIID’s work at Leknas ended.
The project’s work with Leknas was resumed when relations with foreign
donors were reestablished and some measure of stability returned to
Jakarta. Over time many of the economists working at Leknas were either
drawn into government employment or decided to pursue their research
in a more traditional academic environment, and the Harvard University
project with Leknas concluded at the end of 1972.
The Bappenas Project. After the New Order government was
established in 1966, President Soeharto appointed five economists from
the University of Indonesia as an expert team under the leadership of
Professor Widjojo to advise him on economic matters. Topping the agenda
was the need to deal with Indonesia’s rampant inflation, running at an
annual rate in excess of 600% (Gillis 1984: 235–9). A number of HIID
advisers from the old Leknas project had maintained contact with
members of the new economic team, but it was a meeting between
Professor Ali Wardhana and David Cole, who had recently joined HIID,
that most directly led to a new HIID advisory project in Indonesia.
As a member of the economic advisory team, Professor Wardhana
undertook a tour of a number of Asian countries to study their experience
with stabilisation efforts. Visiting Korea, a country that had just gone
through a successful stabilisation program, Professor Wardhana learned
of the role that Cole, a former USAID adviser, had played in that program.
As Cole had already left Korea, it was only when Professor Wardhana
travelled to Cambridge to meet with Leknas scholars studying there that
he met Cole, and the two then engaged in a long discussion of alternative
stabilisation programs. Two months later, after the Indonesian
government had announced its own stabilisation program, Cole was
asked to come to Jakarta to work with the Widjojo team to strengthen the
program further, and to help in designing policies that would lead to a
resumption of economic growth.
In 1967, Professor Widjojo was appointed Chairman of Bappenas, the
National Development Planning Agency, and the locus of economic policy
formulation and foreign aid shifted to that agency. Soon thereafter HIID
was asked to provide a full-scale economic advisory team—a project that
once again received Ford Foundation support. That project, begun in mid
1968, not only provided assistance to Bappenas, but also placed one
adviser in the Ministry of Finance and one in the Ministry of
Communications. Under a separate contract, HIID also provided
assistance to the Directorate of State Investment in the Ministry of Finance.
At times concern was expressed about the number of advisers working
in the government, and especially at Bappenas, where a number of donor
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Joseph J. Stern
countries, including Japan, Germany, The Netherlands and the UK,
funded advisers. In response to these developments, it was decided to
shift some of the advisory assistance from Bappenas to the Ministry of
Finance, where such help was also needed. As a consequence HIID’s work
with Bappenas effectively ended in 1976/77.4
From 1977 to 1980, HIID had no resident presence in Jakarta, although
once again a number of former advisers stayed in touch with their
Indonesian colleagues. During this period Malcolm Gillis, who had been
a resident adviser on the Bappenas project, suggested that the government
might benefit from the preparation of a series of policy papers that would
provide quantitative information to decision makers.5 This suggestion
apparently struck a responsive chord, and a project was eventually
decided upon. This time the advisory effort would use only short-term
consultants who, since many were drawn from academic institutions,
would work in Indonesia largely during the (northern) summer months.
The proposal was accepted, and HIID proceeded to recruit the consultants
needed to undertake the work program that had been agreed upon.
During the summers of 1978 and 1979 the consultants, working in Jakarta,
produced a series of studies on a broad range of issues, including small
business lending, urban development, pollution abatement and energy
pricing.6
The Ministry of Finance Projects. One of the studies focused on
government revenues and noted that over three-quarters of tax and export
revenues were derived from oil, with the not surprising result that tax
revenues were relatively inelastic. Moreover, the study concluded that
the tax base would not be up to the task of mobilising the resources needed
to support Indonesia’s economic transformation. By 1980, Ali Wardhana,
who had become Minister of Finance in 1968, realising that oil revenues
might indeed have peaked and would almost certainly begin to decline
in real terms, began to work with Gillis on a project to help reform the
tax system. That project, the Fiscal Reform Project, began in 1981 but,
unlike previous HIID activities, was entirely financed by the Indonesian
government. The Fiscal Reform Project relied primarily on short-term
consultants, and recruited an international team of fiscal economists, as
well as experts in tax law. Gillis, who served as the project director,
remained resident in Cambridge, making frequent trips to the field.
The Fiscal Reform Project, sometimes called the ‘Tax Reform Project’,
helped put together the information and analysis needed for Indonesia
to shift to a simpler and more modern tax system. As the project
proceeded, however, it became clear that ‘… attempts to increase the
simplicity and neutrality of the tax system would make more sense if
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Indonesia–Harvard University: A Long-term Technical Assistance Project
117
some of the major distortions in the structure of import duties and other
elements of trade policy could also be removed’ (Barichello and Flatters
1991). In 1983, with the concurrence of the government, the project staff
began to shift their focus to issues of trade and industrial policy reform,
increasingly relying on long-term resident advisers, rather than
consultants, to carry out the work.7 Staff began to collect information on
the structure and major economic effects of the trade policy regime,
providing senior officials in the Ministry of Finance with quantitative
information on the impact of trade distortions and their economic cost.
These detailed case studies, with their well documented ‘horror stories’,
provided the policy makers with the information needed to argue for
policy change (Barichello and Flatters 1991: 273). Trade policy continued
to be a major part of the work of the macroeconomic projects until they
came to an end in June 2000.
When the Tax Reform Project concluded in 1987, it was replaced by a
new project, the Customs and Economic Management (CEM) Project,
whose terms of reference formally recognised the shift from fiscal reform
to a broader focus on trade policy issues. In 1994 the project contract was
again extended, but by then the work on reforming customs procedures
had run into decreasing returns, and the project was renamed the
Economic Analysis Project (EAP), a name change that more accurately
reflected the change in focus. Unlike previous projects in the Ministry of
Finance, all of which were under the direction of the Minister of Finance,
the EAP was responsible to the offices of both the Minister of Finance
and the Coordinating Minister for Economy, Finance and Industry
(EKUIN). Despite subsequent ministerial changes in both portfolios, that
relationship was maintained until the project ended in June 2000.
Another major HIID activity in the Ministry of Finance focused on
training staff in monetary analysis. The initial program sought to develop
a Center for Financial Policy Studies and Training. This activity was a
direct outgrowth of a short monetary course that HIID and the Directorate
for Financial Institutions had jointly conducted for a number of years.
However, it was soon realised that the creation of a new centre was an
over-ambitious goal, and it was decided to concentrate on strengthening
the staff and programs of the Directorate of Financial Institutions. The
project, renamed the Program for Financial Policy Studies and Training,
began in 1983 and continued until 1994. Over the years, this program
broadened its focus to include studies that led to reform of the banking
sector, and looked at the myriad issues that relate to the establishment of
a modern financial market. As a result, the project’s activities also included
work on the legal and institutional aspects of a capital market,
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Joseph J. Stern
strengthening and reforming the existing insurance and pension systems,
and developing a range of policies that could underpin the rapidly
developing and expanding financial market.8
Operational Style and Accomplishment
Over the years, more than 100 advisers and an even larger number of
consultants worked on various HIID projects. During some years in the
late 1980s and early 1990s, there were often 20 resident advisers, and
sometimes an equal number of consultants, working in Indonesia.
Although this represented the staff of all HIID projects, including those
not covered here, the bulk worked in the Ministry of Finance. But even
with their focus restricted to the macroeconomic work, these advisers
and consultants brought a range of skills and backgrounds to the project,
from economics and law to plant biology, which allowed it to deal with
an astoundingly wide range of issues. Assembling such a range of talent
was possible because the terms of reference for the various projects were
fairly broad and flexible. This made it possible for the minister and senior
officials to ask that additional tasks be carried out by the project without
a need to amend the basic contract, even though these new tasks often
involved calling on additional staff or consultants with the requisite
specialised skills.
This contracting style had in fact been applied earlier to the Bappenas
project, and made it possible for the head of Bappenas and the senior
counterparts to request assistance on a variety of issues, many of which
were not foreseen when the contract was signed. As a result, the Bappenas
project assisted in the development of prototype mining contracts,
provided analytic support in the area of food security, and helped in the
development of a district (kabupaten) level public works program. It also
made it possible for an adviser to design a program to combat soil erosion
on Java—an effort that involved local government in the coordination
and financial management of village activities—while another helped
define and measure a series of performance indicators for the transport
and communications sector.
Years later, when the contract for the Customs and Economic
Management Project was signed, its scope of work was also broadly
defined. Three objectives were set forth. The first was to provide assistance
to the Customs Service in the design of customs procedure and in the
development of training capacity. The second was to assist the Ministry
of Finance in the analysis of ‘… macroeconomic issues including
monetary, fiscal and expenditure policies’, while the third called on the
project to help develop data systems relating to important economic
variables. The CEM contract provided for a large pool of consultants,
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Indonesia–Harvard University: A Long-term Technical Assistance Project
119
some of whom were used to work on the three main project objectives.
While the project met its immediate goals, the consultant funds were
used, with the concurrence of the minister, for a range of other activities,
including supporting an adviser who worked on integrated pest
management. The CEM Project also helped mount a poverty study that
extended and updated work from earlier studies, and it provided
consultants to Garuda, the national airline, as well as to SekKab
(Sekretariat Kabinet), the office of the cabinet secretary, on staff
development. It was this flexibility in the terms of reference that often
made the projects extremely useful to policy makers who could, and often
did, ask for immediate assistance on issues that had become important,
but that had not been foreseen when the original terms of reference were
drafted.
The knowledge that the various projects had the flexibility to
undertake work on a wide range of activities did not go unnoticed by
other departments and agencies. Not infrequently other ministries or
government bodies would seek assistance from one of the HIID projects.
Because such requests often came from senior government officials, it
was difficult to turn them aside. However, each of the project directors
knew that the use of funds for work other than for the project’s immediate
clients had to receive explicit approval from either the Minister of Finance
or the Coordinating Minister. This often enabled requests to be deflected,
avoiding potential conflicts between ministries.
Although the staff recruited by the CEM Project worked on a variety
of issues, its main work focused on macroeconomic analysis. The project
helped set up a comprehensive debt database that provided input for an
early debt projection model and, as called for in its terms of reference,
began the construction of a comprehensive database for tariff and nontariff barriers. This was an activity that was continued until the final
days of the project.9 The CEM Project, and later the Economic Analysis
Project, undertook the preparation of a monthly macroeconomic report
which, by the time the project closed its doors on 30 June 2000, covered
86 consecutive months, giving a detailed review of the rise, fall and
recovery of the Indonesian economy.
Important as flexibility may have been to the success of the HIID
projects, even more important was the fact that the funding for them
came directly from the government. While the early HIID advisory efforts
in Indonesia, as elsewhere, were financed by the Ford Foundation, this
changed in the early 1970s when the Foundation decided it would no
longer support large advisory projects, focusing instead on other ways
of supporting development. As a result HIID was forced to seek other
sources of funding, which in effect meant that USAID became a major
financing source. However, this was not the case in Indonesia, where on
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Joseph J. Stern
the whole the projects were financed directly by the government. One
major advantage of this financing arrangement was that the advisers
clearly knew for whom they were working. This effectively meant that
they never had to consider whether their policy recommendations might
conflict with the goals of a donor agency. This not only made it easier for
the advisers, but also provided some assurance to the ministers and senior
officials that policy recommendations reflected only Indonesia’s policy
goals and objectives, and were not skewed to reflect those of a particular
donor.
Over the years the project staff enjoyed substantial direct contact with
senior government officials. Advisers and consultants had an opportunity
to present their analyses directly to senior policy makers in sessions that
at times led to long and probing discussions of the assumptions used,
the quality of the data collected, and the likely impact of the suggested
recommendations.10 These meetings had a number of benefits. Not
infrequently they yielded new insights. But most importantly they
ensured that the analysis was heard and considered even if, as was
frequently the case, the recommendations were not accepted or
implemented. These meetings also provided indications of the political
realities that in the final analysis always constrain policy actions. Useful
as these meetings were, they had a downside. Junior and even middlelevel ministry staff resented the relatively easy access to senior
government officials enjoyed by the advisers. Not unexpectedly, this
resentment at times found expression in an unwillingness to share
information which, it was felt, would enhance the standing of the adviser
with relatively little credit being given to junior staff.
It is probably inevitable that any single institution that places a large
number of advisers in a small number of ministries and banks, and
maintains their presence year after year, should come in for criticism and
be subject to rumours and innuendo. The HIID projects were no exception.
The situation was hardly helped by the fact that advisers produced few
public reports and generally declined to participate in public discussions
or seminars. The advisers maintained that their work was intended solely
for ministry staff, and that dissemination of their analysis should be at
the discretion of their counterpart staff. While this low-key approach, a
hallmark of all the HIID projects, may have helped to build trust between
the advisers and the senior decision makers, it did little to inform the
public about what was going on.11 This allowed observers to charge that
the HIID projects had undue influence in setting Indonesia’s economic
policies.
Throughout the many years that HIID worked in Indonesia, but
especially during the first 20 years or so, all its projects paid particular
attention to staff development. At independence a weak educational
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Indonesia–Harvard University: A Long-term Technical Assistance Project
121
structure was Indonesia’s unfortunate colonial inheritance. Although
many of the senior government officials were well trained and highly
capable, the lower echelon staff of many ministries and agencies were
considerably less competent. As far back as the Leknas project, HIID made
staff development and training a top priority. In early 1971 Lester Gordon,
then director of HIID’s predecessor, the Development Advisory Service,
and J. Price Gittinger of the World Bank undertook a study of Bappenas’s
development needs. A number of the recommendations from that report
were put into effect, including the establishment of a mid-career program,
the Program Perencanaan Nasional (National Planning Program), at the
University of Indonesia. HIID also initiated a seminar series in Bappenas,
and Clive Gray, one of the resident advisers, developed a full-time twomonth planning course, offered in the Department of Communications,
which was later continued by the department’s own staff. Gray eventually
taught courses for four years in the full-time mid-career program that
had been created at the University of Indonesia, and a text book, Pengantar
Evaluasi Proyek [Introduction to Project Evaluation], which he co-authored
with Kadariah and Lien Karlina, was published by the University of
Indonesia (Gray, Kadariah and Karlina 1975).
In 1981 the Fiscal Reform Project realised that a massive overseas
training effort would be needed to prepare the tax and other ministry
officials to manage the new tax system. This led to the creation of a special
training office at HIID that helped in the selection, placement and
supervision of literally hundreds of Ministry of Finance staff who were
sent abroad for training. Over the next nearly 20 years, some 700 officials
undertook overseas training. The trainees came from the state banks,
Bappenas, the Cabinet Secretariat, the Board for Finance and Development
Supervision, the Center for Policy Implementation Studies, and of course
the Ministry of Finance. Most of these trainees returned to their posts. As
a result, the quality of the Ministry of Finance staff was markedly
strengthened, undoubtedly reducing the need for foreign technical
assistance. All the macroeconomic projects also mounted numerous
courses, conferences and seminars on macroeconomics, fiscal matters,
banking and finance, and public enterprise policy. Many individual
advisers also worked to improve staff capacity. The staff of the Program
for Financial Policy Studies and Training recruited numerous junior
professionals and actively mentored their progress, while the CEM Project
ran weekly seminars for a number of years that focused on economic
policy analysis, using case materials drawn from Indonesia.12
The role that the HIID advisers performed can be described as offering
the best possible analysis of complex policy issues using their professional
training, often combined with expertise gained from working in other
developing countries. But it is important to remember that, while the
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Joseph J. Stern
HIID projects were important contributors to economic policy debates,
they were by no means the only voice arguing for any particular policy
change. The government received suggestions, analysis and advice from
a number of sources: from multilateral donor agencies, from other
advisers, and from government officials. In the end Indonesia’s economic
policy was set by a group of senior and highly competent policy makers
who chose from an array of often conflicting recommendations.
Perhaps the strongest asset that the advisers brought to their task
was the wealth of information collected through field visits and
interviews. Because they were frequently able to report the results of
such field visits directly to senior government officials, they gave such
officials a unique insight into what was happening in the field. Much of
the work of the trade reform project involved visits to factories or head
offices, collecting data that would then be used to evaluate requests for
tariff assistance. As each case study was completed the results, with
recommendations, were passed on to the appropriate decision makers.
In 1985, when a consolidated and detailed review of the trade reform
work was requested by the government, its conclusions and policy
recommendations were buttressed by well documented information on
how the trade regime actually worked, providing senior decision makers
with the information that eventually helped change policy. Such field
reports became a standard feature of much of the analytic work
undertaken by the various projects over the years. In the final analysis, it
may well be that the information based on field visits and interviews
proved more persuasive than any argument based on economic principles
alone.13
Lessons Learned
Over the years the design of individual HIID projects in the Ministry of
Finance evolved from responding to specific technical assistance needs
to providing a more flexible source of expertise on a broad array of issues
of relevance to the ministry. This design permitted advisers to respond
quickly to a range of requests from ministry staff while, at the same time,
enabling the advisers to raise important issues on their own initiative.
No matter how the projects evolved, the question remains: what allowed
HIID to carry on its work for some 30 years, and why was it so effective?
Undoubtedly numerous reasons could be put forward but four, it seems,
are critical in explaining HIID’s effectiveness.
First, and probably most importantly, Indonesia’s economic leaders
were well trained and highly capable. Equally importantly, coming from
academia, they were open to hearing alternative views, debating
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Indonesia–Harvard University: A Long-term Technical Assistance Project
123
conclusions, and evaluating policy recommendations on their merits.
Moreover, the fact that many served in senior economic management
positions for a long period of time not only provided some measure of
policy stability but also allowed strong links to develop between
individual advisers and the policy leadership. The trust between the
senior policy makers and the economic advisers created a climate in which
policy recommendations would be heard and fairly reviewed.
Second, over the years, HIID developed considerable expertise on
Indonesian economic issues. The fact that a large number of people from
HIID and from other university faculties had worked in Indonesia meant
that there was a capacity in HIID to access expert advice quickly on
specific issues. This not only helped the field staff but also assured the
economic team that the earlier expertise and insights were not lost.
Third, HIID made a concerted effort to recruit advisers and consultants
on a global basis. This brought an international perspective to the work
of the team, and assured the government that the policy recommendations
did not reflect only American practices.
Fourth, the unique funding arrangement that supported the HIID
activities was critical. Because the funding came directly from the
Government of Indonesia, and because the recruitment was done through
an academic institution and not a commercial firm, the advisers knew
precisely for whom they were working. No adviser or consultant was
ever concerned that the policies he or she espoused might be in conflict
with the policies of the funding agency or a ‘home office’. In turn, this
assured the government that the recommendations reflected the best
assessment of the advisers, who put them forward in the belief that the
proposed policy actions would help Indonesia.
While there is always a tinge of sadness when a long and productive
relationship ends, it is important to realise that the conditions that made
the Indonesia–HIID relationship so productive changed over time, and
probably cannot be replicated in Indonesia or elsewhere. Some of the
insights learned from this relationship have general applicability,
however. Over the years the Ministry of Finance staff gained strength
and experience, reducing the need for continued foreign assistance. But
it took many years before this point was reached. This reinforces the well
known, but often neglected, fact that institutional development requires
a long-term commitment by all parties: the donor, the implementing
agency, and the recipient.
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Joseph J. Stern
NOTES
*
Special thanks are due to Professor Widjojo Nitisastro and Professor Ali
Wardhana, who generously shared with me their recollections of how Harvard
University became engaged in Indonesia. I am deeply indebted to them for
giving so freely of their time and for encouraging me to write this brief history.
Reconstructing the early history of HIID’s Indonesia projects would have been
difficult, perhaps even impossible, without their assistance and support.
Numerous colleagues and friends, many of whom lived through all or
substantial parts of the history described here, commented on earlier drafts. I
am particularly grateful to David Cole, Malcolm Gillis, Louis T. Wells, Jr, Lester
E. Gordon, Clive Gray, Walter P. Falcon and John J. Bresnan, all of whom
provided information on the early history of HIID in Indonesia, and to Timothy
Buehrer and Soedradjad Djiwandono, who commented on earlier drafts and
corrected numerous factual errors. Even with all the generous help received,
it is likely that I do not have the full story of HIID’s work in Indonesia entirely
correct. But I trust that at least the broad outlines are accurate. As always, full
responsibility for errors and misstatements remains with the author.
1
A report submitted in January 2000 recommended that Harvard University
close HIID and move many of its functions to different schools within the
University, most notably to the John F. Kennedy School of Government. As
part of the reorganisation, HIID’s ongoing technical assistance project with
Bank Rakyat Indonesia was moved to the Kennedy School.
2
Although the DAS was formally reconstituted as HIID in 1974, for simplicity’s
sake we refer to HIID throughout the remainder of the paper.
3
Some of the excluded activities are described in Perkins et al. (1997).
4
HIID was also part of a Bappenas project that relied on the work of a substantial
number of non-HIID consultants, financed under various bilateral aid
programs. In addition to its policy work, that project also mounted a major
staff development effort. That activity ended in mid 1976.
5
Gillis had also undertaken a World Bank consultancy on mineral taxation,
and pursued some of his ideas on tax reform while working on this project in
Indonesia.
6
A number of other projects eventually evolved from these short-term studies,
including the Development Policy Implementation Studies (DPIS) Project that
eventually became the Center for Policy Implementation Studies (CPIS), as
well as the still ongoing micro-finance project at Bank Rakyat Indonesia.
7
A separate project, working directly with the tax office, focused on
improvements in property tax assessment and collection. That project ended
in 1994.
8
Much of the financial sector work is described in Cole and Slade (1996).
9
Ministry staff frequently used the databases maintained by the project’s staff,
and electronic copies were provided to other agencies as requested, for
example, Bapeksta (Badan Pelayanan Kemudahan Ekspor dan Pengolahan
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Indonesia–Harvard University: A Long-term Technical Assistance Project
125
Data Keuangan), the Agency for Export Facilitation and Financial Data
Processing. When the EAP ended, all data and data files were turned over to
the Ministry of Finance.
10 At the end of a particularly gruelling review of a policy paper, one of the
advisers commented that the sessions reminded him of his doctoral
examination!
11 Gillis argued that the work on tax reform could not be carried out in public,
especially given the role that foreign experts played in drafting some of the
tax regulations. He was undoubtedly correct, given the subject he was working
on and the strong nationalistic feelings that still prevailed in the early 1980s.
Whether that style of operation served the project so well as the years
progressed is an issue that at times was hotly debated among HIID staff. Some
argued for a more open work style and more active participation in the public
discussions about policy that began to take place in the 1990s. Others continued
to feel that participation in public debates would not be productive, especially
as remarks by the advisers would be taken by some as an expression of
government policy.
12 The seminars were held on Saturday mornings, when the pace of work in the
ministry was often less hectic. They became a casualty of the 1994 move to a
five-day working week for government employees.
13 The selection of sites to be visited, whether agricultural regions or small-scale
manufacturing units located in remote regions, or factories sited in industrial
zones, was not based on any statistical sample. This obviously limited the
generalisations one could draw from such data.
REFERENCES
Barichello, Richard R., and Frank R. Flatters (1991), ‘Trade Policy Reform in
Indonesia’, in Dwight H. Perkins and Michael Roemer (eds), Reforming
Economic Systems in Developing Countries, Harvard Institute for International
Development, Cambridge MA.
Cole, David C., and Betty F. Slade (1996), Building a Modern Financial System: The
Indonesian Experience, Cambridge University Press, Cambridge UK.
Gillis, Malcolm (1984), ‘Episodes in Indonesian Economic Growth’, in Arnold C.
Harberger (ed.), World Economic Growth: Case Studies of Developed and
Developing Nations, ICS Press, San Francisco CA: 231–64.
Gray, Clive, Kadariah and Lien Karlina (1975), Pengantar Evaluasi Proyek
[Introduction to Project Evaluation], University of Indonesia Economics
Faculty Press, Jakarta.
Mason, Edward S. (1986), The Harvard Institute for International Development and Its
Antecedents, Harvard Institute for International Development, Cambridge MA.
Perkins, D., et al. (eds) (1997), Assisting Development in a Changing World, Harvard
Institute for International Development, Cambridge MA.
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
Indonesia–Harvard University: Lessons From A
Long-Term Technical Assistance Project
Joseph J. Stern
To cite this article: Joseph J. Stern (2000) Indonesia–Harvard University: Lessons From A LongTerm Technical Assistance Project, Bulletin of Indonesian Economic Studies, 36:3, 113-125
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Bulletin of Indonesian Economic Studies
Vol 36 No 3, December 2000, pp. 113–25
INDONESIA–HARVARD UNIVERSITY:
LESSONS FROM A LONG-TERM TECHNICAL
ASSISTANCE PROJECT
Joseph J. Stern*
John F. Kennedy School of Government, Harvard University
On 30 June 2000 the Economic Analysis Project, housed in the Ministry
of Finance in Jakarta, closed its doors, ending over 30 years of technical
assistance delivered through one agency, the Harvard Institute for
International Development (HIID). On that same date the Institute was
reorganised and effectively ceased to exist as a separate University entity.1
Although no other HIID project lasted as long as the Indonesia project,
the Institute has provided technical assistance to a large number of
developing economies, often remaining in a country for an extended
period. In this regard Harvard University’s overseas advisory work has
probably been unique.
Harvard University first became involved in overseas economic
development work in 1954 when it agreed to provide technical assistance
to the Planning Commission of the Government of Pakistan. This initial
effort, together with an Iran project that followed, was administered by
the Graduate School of Public Administration. In 1962 the University
established the Development Advisory Service to oversee a growing
portfolio of overseas activities, including projects in Argentina, Colombia,
Liberia, Ghana and Greece, as well as Indonesia. Between 1962 and 1974,
when it was transformed into HIID, the Development Advisory Service
had administered some 17 projects in 14 countries. Most of the funding
for these activities came from the Ford Foundation and the United Nations
Development Programme, as well as from the host countries. At the time
of its dissolution HIID had activities in 12 countries, including
Mozambique, the Ukraine, Vietnam, India and Ghana, in addition to the
ongoing Bank Rakyat Indonesia project.2
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Joseph J. Stern
While it is not clear whether HIID’s 30-year effort of providing
technical assistance to the Government of Indonesia set a record for the
longest sustained technical assistance project ever mounted, it almost
certainly will rank as one of the longest. Those interested in the history
of technical assistance efforts may wonder how the relationship between
the Indonesian government and Harvard University evolved and,
perhaps more importantly, what the various HIID projects, especially
those working in the macroeconomic area, accomplished. Finally, what
lessons, if any, can be drawn from this effort?
Because HIID worked with a number of ministries and institutions
in Indonesia, it would require a very long study to cover all of them.
Here we deal only with the macroeconomic projects. Hence we exclude
from our review the assistance provided to Bank Rakyat Indonesia in the
development of a highly successful micro-finance program, the work on
urban planning, the research and training activities undertaken by the
Center for Policy Implementation Studies, and a number of smaller
projects. Some of these activities have been described elsewhere, but a
complete review covering the entire range of HIID activities in Indonesia
remains to be written.3
History
The Leknas Project. Harvard’s association with Indonesia can be traced
back to March 1963, when HIID, with Ford Foundation financing,
provided a small group of advisers to Leknas (Lembaga Ekonomi dan
Kemasyarakatan Nasional), the National Economic and Social Research
Institute. This institute served as a research base for a number of Ford
Foundation trained economists who had returned to Indonesia, including
Professors Widjojo Nitisastro and Ali Wardhana, both University of
Indonesia faculty members. The first HIID advisers to Indonesia included
Professor Donald Blake, formerly of the University of Indonesia, and
Professor Everett Hawkins, University of Wisconsin, as well as Nathan
Keyfitz, then of the University of Chicago, who served as a consultant on
demographic issues. The advisers worked with the Leknas staff on a
research program that dealt with the economic and social aspects of
Indonesia’s development. But as research of this kind was seriously
constrained, their chief function was to help identify and select promising
Indonesians for foreign training. Given the chaotic political and economic
conditions that prevailed in Indonesia, it is not surprising that Edward
Mason, one of the founders of HIID, wryly noted in his history of the
early years of the institute, that the latter activity ‘… was probably more
effectively performed than the first’ (Mason 1986: 51). When President
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Indonesia–Harvard University: A Long-term Technical Assistance Project
115
Sukarno broke relations with foreign donors, the Ford Foundation
suspended its activities in Indonesia, and HIID’s work at Leknas ended.
The project’s work with Leknas was resumed when relations with foreign
donors were reestablished and some measure of stability returned to
Jakarta. Over time many of the economists working at Leknas were either
drawn into government employment or decided to pursue their research
in a more traditional academic environment, and the Harvard University
project with Leknas concluded at the end of 1972.
The Bappenas Project. After the New Order government was
established in 1966, President Soeharto appointed five economists from
the University of Indonesia as an expert team under the leadership of
Professor Widjojo to advise him on economic matters. Topping the agenda
was the need to deal with Indonesia’s rampant inflation, running at an
annual rate in excess of 600% (Gillis 1984: 235–9). A number of HIID
advisers from the old Leknas project had maintained contact with
members of the new economic team, but it was a meeting between
Professor Ali Wardhana and David Cole, who had recently joined HIID,
that most directly led to a new HIID advisory project in Indonesia.
As a member of the economic advisory team, Professor Wardhana
undertook a tour of a number of Asian countries to study their experience
with stabilisation efforts. Visiting Korea, a country that had just gone
through a successful stabilisation program, Professor Wardhana learned
of the role that Cole, a former USAID adviser, had played in that program.
As Cole had already left Korea, it was only when Professor Wardhana
travelled to Cambridge to meet with Leknas scholars studying there that
he met Cole, and the two then engaged in a long discussion of alternative
stabilisation programs. Two months later, after the Indonesian
government had announced its own stabilisation program, Cole was
asked to come to Jakarta to work with the Widjojo team to strengthen the
program further, and to help in designing policies that would lead to a
resumption of economic growth.
In 1967, Professor Widjojo was appointed Chairman of Bappenas, the
National Development Planning Agency, and the locus of economic policy
formulation and foreign aid shifted to that agency. Soon thereafter HIID
was asked to provide a full-scale economic advisory team—a project that
once again received Ford Foundation support. That project, begun in mid
1968, not only provided assistance to Bappenas, but also placed one
adviser in the Ministry of Finance and one in the Ministry of
Communications. Under a separate contract, HIID also provided
assistance to the Directorate of State Investment in the Ministry of Finance.
At times concern was expressed about the number of advisers working
in the government, and especially at Bappenas, where a number of donor
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Joseph J. Stern
countries, including Japan, Germany, The Netherlands and the UK,
funded advisers. In response to these developments, it was decided to
shift some of the advisory assistance from Bappenas to the Ministry of
Finance, where such help was also needed. As a consequence HIID’s work
with Bappenas effectively ended in 1976/77.4
From 1977 to 1980, HIID had no resident presence in Jakarta, although
once again a number of former advisers stayed in touch with their
Indonesian colleagues. During this period Malcolm Gillis, who had been
a resident adviser on the Bappenas project, suggested that the government
might benefit from the preparation of a series of policy papers that would
provide quantitative information to decision makers.5 This suggestion
apparently struck a responsive chord, and a project was eventually
decided upon. This time the advisory effort would use only short-term
consultants who, since many were drawn from academic institutions,
would work in Indonesia largely during the (northern) summer months.
The proposal was accepted, and HIID proceeded to recruit the consultants
needed to undertake the work program that had been agreed upon.
During the summers of 1978 and 1979 the consultants, working in Jakarta,
produced a series of studies on a broad range of issues, including small
business lending, urban development, pollution abatement and energy
pricing.6
The Ministry of Finance Projects. One of the studies focused on
government revenues and noted that over three-quarters of tax and export
revenues were derived from oil, with the not surprising result that tax
revenues were relatively inelastic. Moreover, the study concluded that
the tax base would not be up to the task of mobilising the resources needed
to support Indonesia’s economic transformation. By 1980, Ali Wardhana,
who had become Minister of Finance in 1968, realising that oil revenues
might indeed have peaked and would almost certainly begin to decline
in real terms, began to work with Gillis on a project to help reform the
tax system. That project, the Fiscal Reform Project, began in 1981 but,
unlike previous HIID activities, was entirely financed by the Indonesian
government. The Fiscal Reform Project relied primarily on short-term
consultants, and recruited an international team of fiscal economists, as
well as experts in tax law. Gillis, who served as the project director,
remained resident in Cambridge, making frequent trips to the field.
The Fiscal Reform Project, sometimes called the ‘Tax Reform Project’,
helped put together the information and analysis needed for Indonesia
to shift to a simpler and more modern tax system. As the project
proceeded, however, it became clear that ‘… attempts to increase the
simplicity and neutrality of the tax system would make more sense if
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Indonesia–Harvard University: A Long-term Technical Assistance Project
117
some of the major distortions in the structure of import duties and other
elements of trade policy could also be removed’ (Barichello and Flatters
1991). In 1983, with the concurrence of the government, the project staff
began to shift their focus to issues of trade and industrial policy reform,
increasingly relying on long-term resident advisers, rather than
consultants, to carry out the work.7 Staff began to collect information on
the structure and major economic effects of the trade policy regime,
providing senior officials in the Ministry of Finance with quantitative
information on the impact of trade distortions and their economic cost.
These detailed case studies, with their well documented ‘horror stories’,
provided the policy makers with the information needed to argue for
policy change (Barichello and Flatters 1991: 273). Trade policy continued
to be a major part of the work of the macroeconomic projects until they
came to an end in June 2000.
When the Tax Reform Project concluded in 1987, it was replaced by a
new project, the Customs and Economic Management (CEM) Project,
whose terms of reference formally recognised the shift from fiscal reform
to a broader focus on trade policy issues. In 1994 the project contract was
again extended, but by then the work on reforming customs procedures
had run into decreasing returns, and the project was renamed the
Economic Analysis Project (EAP), a name change that more accurately
reflected the change in focus. Unlike previous projects in the Ministry of
Finance, all of which were under the direction of the Minister of Finance,
the EAP was responsible to the offices of both the Minister of Finance
and the Coordinating Minister for Economy, Finance and Industry
(EKUIN). Despite subsequent ministerial changes in both portfolios, that
relationship was maintained until the project ended in June 2000.
Another major HIID activity in the Ministry of Finance focused on
training staff in monetary analysis. The initial program sought to develop
a Center for Financial Policy Studies and Training. This activity was a
direct outgrowth of a short monetary course that HIID and the Directorate
for Financial Institutions had jointly conducted for a number of years.
However, it was soon realised that the creation of a new centre was an
over-ambitious goal, and it was decided to concentrate on strengthening
the staff and programs of the Directorate of Financial Institutions. The
project, renamed the Program for Financial Policy Studies and Training,
began in 1983 and continued until 1994. Over the years, this program
broadened its focus to include studies that led to reform of the banking
sector, and looked at the myriad issues that relate to the establishment of
a modern financial market. As a result, the project’s activities also included
work on the legal and institutional aspects of a capital market,
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Joseph J. Stern
strengthening and reforming the existing insurance and pension systems,
and developing a range of policies that could underpin the rapidly
developing and expanding financial market.8
Operational Style and Accomplishment
Over the years, more than 100 advisers and an even larger number of
consultants worked on various HIID projects. During some years in the
late 1980s and early 1990s, there were often 20 resident advisers, and
sometimes an equal number of consultants, working in Indonesia.
Although this represented the staff of all HIID projects, including those
not covered here, the bulk worked in the Ministry of Finance. But even
with their focus restricted to the macroeconomic work, these advisers
and consultants brought a range of skills and backgrounds to the project,
from economics and law to plant biology, which allowed it to deal with
an astoundingly wide range of issues. Assembling such a range of talent
was possible because the terms of reference for the various projects were
fairly broad and flexible. This made it possible for the minister and senior
officials to ask that additional tasks be carried out by the project without
a need to amend the basic contract, even though these new tasks often
involved calling on additional staff or consultants with the requisite
specialised skills.
This contracting style had in fact been applied earlier to the Bappenas
project, and made it possible for the head of Bappenas and the senior
counterparts to request assistance on a variety of issues, many of which
were not foreseen when the contract was signed. As a result, the Bappenas
project assisted in the development of prototype mining contracts,
provided analytic support in the area of food security, and helped in the
development of a district (kabupaten) level public works program. It also
made it possible for an adviser to design a program to combat soil erosion
on Java—an effort that involved local government in the coordination
and financial management of village activities—while another helped
define and measure a series of performance indicators for the transport
and communications sector.
Years later, when the contract for the Customs and Economic
Management Project was signed, its scope of work was also broadly
defined. Three objectives were set forth. The first was to provide assistance
to the Customs Service in the design of customs procedure and in the
development of training capacity. The second was to assist the Ministry
of Finance in the analysis of ‘… macroeconomic issues including
monetary, fiscal and expenditure policies’, while the third called on the
project to help develop data systems relating to important economic
variables. The CEM contract provided for a large pool of consultants,
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Indonesia–Harvard University: A Long-term Technical Assistance Project
119
some of whom were used to work on the three main project objectives.
While the project met its immediate goals, the consultant funds were
used, with the concurrence of the minister, for a range of other activities,
including supporting an adviser who worked on integrated pest
management. The CEM Project also helped mount a poverty study that
extended and updated work from earlier studies, and it provided
consultants to Garuda, the national airline, as well as to SekKab
(Sekretariat Kabinet), the office of the cabinet secretary, on staff
development. It was this flexibility in the terms of reference that often
made the projects extremely useful to policy makers who could, and often
did, ask for immediate assistance on issues that had become important,
but that had not been foreseen when the original terms of reference were
drafted.
The knowledge that the various projects had the flexibility to
undertake work on a wide range of activities did not go unnoticed by
other departments and agencies. Not infrequently other ministries or
government bodies would seek assistance from one of the HIID projects.
Because such requests often came from senior government officials, it
was difficult to turn them aside. However, each of the project directors
knew that the use of funds for work other than for the project’s immediate
clients had to receive explicit approval from either the Minister of Finance
or the Coordinating Minister. This often enabled requests to be deflected,
avoiding potential conflicts between ministries.
Although the staff recruited by the CEM Project worked on a variety
of issues, its main work focused on macroeconomic analysis. The project
helped set up a comprehensive debt database that provided input for an
early debt projection model and, as called for in its terms of reference,
began the construction of a comprehensive database for tariff and nontariff barriers. This was an activity that was continued until the final
days of the project.9 The CEM Project, and later the Economic Analysis
Project, undertook the preparation of a monthly macroeconomic report
which, by the time the project closed its doors on 30 June 2000, covered
86 consecutive months, giving a detailed review of the rise, fall and
recovery of the Indonesian economy.
Important as flexibility may have been to the success of the HIID
projects, even more important was the fact that the funding for them
came directly from the government. While the early HIID advisory efforts
in Indonesia, as elsewhere, were financed by the Ford Foundation, this
changed in the early 1970s when the Foundation decided it would no
longer support large advisory projects, focusing instead on other ways
of supporting development. As a result HIID was forced to seek other
sources of funding, which in effect meant that USAID became a major
financing source. However, this was not the case in Indonesia, where on
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Joseph J. Stern
the whole the projects were financed directly by the government. One
major advantage of this financing arrangement was that the advisers
clearly knew for whom they were working. This effectively meant that
they never had to consider whether their policy recommendations might
conflict with the goals of a donor agency. This not only made it easier for
the advisers, but also provided some assurance to the ministers and senior
officials that policy recommendations reflected only Indonesia’s policy
goals and objectives, and were not skewed to reflect those of a particular
donor.
Over the years the project staff enjoyed substantial direct contact with
senior government officials. Advisers and consultants had an opportunity
to present their analyses directly to senior policy makers in sessions that
at times led to long and probing discussions of the assumptions used,
the quality of the data collected, and the likely impact of the suggested
recommendations.10 These meetings had a number of benefits. Not
infrequently they yielded new insights. But most importantly they
ensured that the analysis was heard and considered even if, as was
frequently the case, the recommendations were not accepted or
implemented. These meetings also provided indications of the political
realities that in the final analysis always constrain policy actions. Useful
as these meetings were, they had a downside. Junior and even middlelevel ministry staff resented the relatively easy access to senior
government officials enjoyed by the advisers. Not unexpectedly, this
resentment at times found expression in an unwillingness to share
information which, it was felt, would enhance the standing of the adviser
with relatively little credit being given to junior staff.
It is probably inevitable that any single institution that places a large
number of advisers in a small number of ministries and banks, and
maintains their presence year after year, should come in for criticism and
be subject to rumours and innuendo. The HIID projects were no exception.
The situation was hardly helped by the fact that advisers produced few
public reports and generally declined to participate in public discussions
or seminars. The advisers maintained that their work was intended solely
for ministry staff, and that dissemination of their analysis should be at
the discretion of their counterpart staff. While this low-key approach, a
hallmark of all the HIID projects, may have helped to build trust between
the advisers and the senior decision makers, it did little to inform the
public about what was going on.11 This allowed observers to charge that
the HIID projects had undue influence in setting Indonesia’s economic
policies.
Throughout the many years that HIID worked in Indonesia, but
especially during the first 20 years or so, all its projects paid particular
attention to staff development. At independence a weak educational
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Indonesia–Harvard University: A Long-term Technical Assistance Project
121
structure was Indonesia’s unfortunate colonial inheritance. Although
many of the senior government officials were well trained and highly
capable, the lower echelon staff of many ministries and agencies were
considerably less competent. As far back as the Leknas project, HIID made
staff development and training a top priority. In early 1971 Lester Gordon,
then director of HIID’s predecessor, the Development Advisory Service,
and J. Price Gittinger of the World Bank undertook a study of Bappenas’s
development needs. A number of the recommendations from that report
were put into effect, including the establishment of a mid-career program,
the Program Perencanaan Nasional (National Planning Program), at the
University of Indonesia. HIID also initiated a seminar series in Bappenas,
and Clive Gray, one of the resident advisers, developed a full-time twomonth planning course, offered in the Department of Communications,
which was later continued by the department’s own staff. Gray eventually
taught courses for four years in the full-time mid-career program that
had been created at the University of Indonesia, and a text book, Pengantar
Evaluasi Proyek [Introduction to Project Evaluation], which he co-authored
with Kadariah and Lien Karlina, was published by the University of
Indonesia (Gray, Kadariah and Karlina 1975).
In 1981 the Fiscal Reform Project realised that a massive overseas
training effort would be needed to prepare the tax and other ministry
officials to manage the new tax system. This led to the creation of a special
training office at HIID that helped in the selection, placement and
supervision of literally hundreds of Ministry of Finance staff who were
sent abroad for training. Over the next nearly 20 years, some 700 officials
undertook overseas training. The trainees came from the state banks,
Bappenas, the Cabinet Secretariat, the Board for Finance and Development
Supervision, the Center for Policy Implementation Studies, and of course
the Ministry of Finance. Most of these trainees returned to their posts. As
a result, the quality of the Ministry of Finance staff was markedly
strengthened, undoubtedly reducing the need for foreign technical
assistance. All the macroeconomic projects also mounted numerous
courses, conferences and seminars on macroeconomics, fiscal matters,
banking and finance, and public enterprise policy. Many individual
advisers also worked to improve staff capacity. The staff of the Program
for Financial Policy Studies and Training recruited numerous junior
professionals and actively mentored their progress, while the CEM Project
ran weekly seminars for a number of years that focused on economic
policy analysis, using case materials drawn from Indonesia.12
The role that the HIID advisers performed can be described as offering
the best possible analysis of complex policy issues using their professional
training, often combined with expertise gained from working in other
developing countries. But it is important to remember that, while the
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Joseph J. Stern
HIID projects were important contributors to economic policy debates,
they were by no means the only voice arguing for any particular policy
change. The government received suggestions, analysis and advice from
a number of sources: from multilateral donor agencies, from other
advisers, and from government officials. In the end Indonesia’s economic
policy was set by a group of senior and highly competent policy makers
who chose from an array of often conflicting recommendations.
Perhaps the strongest asset that the advisers brought to their task
was the wealth of information collected through field visits and
interviews. Because they were frequently able to report the results of
such field visits directly to senior government officials, they gave such
officials a unique insight into what was happening in the field. Much of
the work of the trade reform project involved visits to factories or head
offices, collecting data that would then be used to evaluate requests for
tariff assistance. As each case study was completed the results, with
recommendations, were passed on to the appropriate decision makers.
In 1985, when a consolidated and detailed review of the trade reform
work was requested by the government, its conclusions and policy
recommendations were buttressed by well documented information on
how the trade regime actually worked, providing senior decision makers
with the information that eventually helped change policy. Such field
reports became a standard feature of much of the analytic work
undertaken by the various projects over the years. In the final analysis, it
may well be that the information based on field visits and interviews
proved more persuasive than any argument based on economic principles
alone.13
Lessons Learned
Over the years the design of individual HIID projects in the Ministry of
Finance evolved from responding to specific technical assistance needs
to providing a more flexible source of expertise on a broad array of issues
of relevance to the ministry. This design permitted advisers to respond
quickly to a range of requests from ministry staff while, at the same time,
enabling the advisers to raise important issues on their own initiative.
No matter how the projects evolved, the question remains: what allowed
HIID to carry on its work for some 30 years, and why was it so effective?
Undoubtedly numerous reasons could be put forward but four, it seems,
are critical in explaining HIID’s effectiveness.
First, and probably most importantly, Indonesia’s economic leaders
were well trained and highly capable. Equally importantly, coming from
academia, they were open to hearing alternative views, debating
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Indonesia–Harvard University: A Long-term Technical Assistance Project
123
conclusions, and evaluating policy recommendations on their merits.
Moreover, the fact that many served in senior economic management
positions for a long period of time not only provided some measure of
policy stability but also allowed strong links to develop between
individual advisers and the policy leadership. The trust between the
senior policy makers and the economic advisers created a climate in which
policy recommendations would be heard and fairly reviewed.
Second, over the years, HIID developed considerable expertise on
Indonesian economic issues. The fact that a large number of people from
HIID and from other university faculties had worked in Indonesia meant
that there was a capacity in HIID to access expert advice quickly on
specific issues. This not only helped the field staff but also assured the
economic team that the earlier expertise and insights were not lost.
Third, HIID made a concerted effort to recruit advisers and consultants
on a global basis. This brought an international perspective to the work
of the team, and assured the government that the policy recommendations
did not reflect only American practices.
Fourth, the unique funding arrangement that supported the HIID
activities was critical. Because the funding came directly from the
Government of Indonesia, and because the recruitment was done through
an academic institution and not a commercial firm, the advisers knew
precisely for whom they were working. No adviser or consultant was
ever concerned that the policies he or she espoused might be in conflict
with the policies of the funding agency or a ‘home office’. In turn, this
assured the government that the recommendations reflected the best
assessment of the advisers, who put them forward in the belief that the
proposed policy actions would help Indonesia.
While there is always a tinge of sadness when a long and productive
relationship ends, it is important to realise that the conditions that made
the Indonesia–HIID relationship so productive changed over time, and
probably cannot be replicated in Indonesia or elsewhere. Some of the
insights learned from this relationship have general applicability,
however. Over the years the Ministry of Finance staff gained strength
and experience, reducing the need for continued foreign assistance. But
it took many years before this point was reached. This reinforces the well
known, but often neglected, fact that institutional development requires
a long-term commitment by all parties: the donor, the implementing
agency, and the recipient.
y [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RAJA ALI HAJI TANJUNGPINANG, KEPULAUAN RIAU] at 22:07 19
124
Joseph J. Stern
NOTES
*
Special thanks are due to Professor Widjojo Nitisastro and Professor Ali
Wardhana, who generously shared with me their recollections of how Harvard
University became engaged in Indonesia. I am deeply indebted to them for
giving so freely of their time and for encouraging me to write this brief history.
Reconstructing the early history of HIID’s Indonesia projects would have been
difficult, perhaps even impossible, without their assistance and support.
Numerous colleagues and friends, many of whom lived through all or
substantial parts of the history described here, commented on earlier drafts. I
am particularly grateful to David Cole, Malcolm Gillis, Louis T. Wells, Jr, Lester
E. Gordon, Clive Gray, Walter P. Falcon and John J. Bresnan, all of whom
provided information on the early history of HIID in Indonesia, and to Timothy
Buehrer and Soedradjad Djiwandono, who commented on earlier drafts and
corrected numerous factual errors. Even with all the generous help received,
it is likely that I do not have the full story of HIID’s work in Indonesia entirely
correct. But I trust that at least the broad outlines are accurate. As always, full
responsibility for errors and misstatements remains with the author.
1
A report submitted in January 2000 recommended that Harvard University
close HIID and move many of its functions to different schools within the
University, most notably to the John F. Kennedy School of Government. As
part of the reorganisation, HIID’s ongoing technical assistance project with
Bank Rakyat Indonesia was moved to the Kennedy School.
2
Although the DAS was formally reconstituted as HIID in 1974, for simplicity’s
sake we refer to HIID throughout the remainder of the paper.
3
Some of the excluded activities are described in Perkins et al. (1997).
4
HIID was also part of a Bappenas project that relied on the work of a substantial
number of non-HIID consultants, financed under various bilateral aid
programs. In addition to its policy work, that project also mounted a major
staff development effort. That activity ended in mid 1976.
5
Gillis had also undertaken a World Bank consultancy on mineral taxation,
and pursued some of his ideas on tax reform while working on this project in
Indonesia.
6
A number of other projects eventually evolved from these short-term studies,
including the Development Policy Implementation Studies (DPIS) Project that
eventually became the Center for Policy Implementation Studies (CPIS), as
well as the still ongoing micro-finance project at Bank Rakyat Indonesia.
7
A separate project, working directly with the tax office, focused on
improvements in property tax assessment and collection. That project ended
in 1994.
8
Much of the financial sector work is described in Cole and Slade (1996).
9
Ministry staff frequently used the databases maintained by the project’s staff,
and electronic copies were provided to other agencies as requested, for
example, Bapeksta (Badan Pelayanan Kemudahan Ekspor dan Pengolahan
y [Universitas Maritim Raja Ali Haji], [UNIVERSITAS MARITIM RAJA ALI HAJI TANJUNGPINANG, KEPULAUAN RIAU] at 22:07 19
Indonesia–Harvard University: A Long-term Technical Assistance Project
125
Data Keuangan), the Agency for Export Facilitation and Financial Data
Processing. When the EAP ended, all data and data files were turned over to
the Ministry of Finance.
10 At the end of a particularly gruelling review of a policy paper, one of the
advisers commented that the sessions reminded him of his doctoral
examination!
11 Gillis argued that the work on tax reform could not be carried out in public,
especially given the role that foreign experts played in drafting some of the
tax regulations. He was undoubtedly correct, given the subject he was working
on and the strong nationalistic feelings that still prevailed in the early 1980s.
Whether that style of operation served the project so well as the years
progressed is an issue that at times was hotly debated among HIID staff. Some
argued for a more open work style and more active participation in the public
discussions about policy that began to take place in the 1990s. Others continued
to feel that participation in public debates would not be productive, especially
as remarks by the advisers would be taken by some as an expression of
government policy.
12 The seminars were held on Saturday mornings, when the pace of work in the
ministry was often less hectic. They became a casualty of the 1994 move to a
five-day working week for government employees.
13 The selection of sites to be visited, whether agricultural regions or small-scale
manufacturing units located in remote regions, or factories sited in industrial
zones, was not based on any statistical sample. This obviously limited the
generalisations one could draw from such data.
REFERENCES
Barichello, Richard R., and Frank R. Flatters (1991), ‘Trade Policy Reform in
Indonesia’, in Dwight H. Perkins and Michael Roemer (eds), Reforming
Economic Systems in Developing Countries, Harvard Institute for International
Development, Cambridge MA.
Cole, David C., and Betty F. Slade (1996), Building a Modern Financial System: The
Indonesian Experience, Cambridge University Press, Cambridge UK.
Gillis, Malcolm (1984), ‘Episodes in Indonesian Economic Growth’, in Arnold C.
Harberger (ed.), World Economic Growth: Case Studies of Developed and
Developing Nations, ICS Press, San Francisco CA: 231–64.
Gray, Clive, Kadariah and Lien Karlina (1975), Pengantar Evaluasi Proyek
[Introduction to Project Evaluation], University of Indonesia Economics
Faculty Press, Jakarta.
Mason, Edward S. (1986), The Harvard Institute for International Development and Its
Antecedents, Harvard Institute for International Development, Cambridge MA.
Perkins, D., et al. (eds) (1997), Assisting Development in a Changing World, Harvard
Institute for International Development, Cambridge MA.