00074918.2012.728689
Bulletin of Indonesian Economic Studies
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
Abstracts of doctoral theses on the Indonesian
economy
To cite this article: (2012) Abstracts of doctoral theses on the Indonesian economy, Bulletin of
Indonesian Economic Studies, 48:3, 429-436, DOI: 10.1080/00074918.2012.728689
To link to this article: http://dx.doi.org/10.1080/00074918.2012.728689
Published online: 20 Nov 2012.
Submit your article to this journal
Article views: 148
View related articles
Full Terms & Conditions of access and use can be found at
http://www.tandfonline.com/action/journalInformation?journalCode=cbie20
Download by: [Universitas Maritim Raja Ali Haji]
Date: 18 January 2016, At: 00:30
Bulletin of Indonesian Economic Studies, Vol. 48, No. 3, 2012: 429–36
Downloaded by [Universitas Maritim Raja Ali Haji] at 00:30 18 January 2016
ABSTRACTS OF DOCTORAL THESES
ON THE INDONESIAN ECONOMY
Tax Policy, Growth, and Income Distribution in Indonesia:
A Computable General Equilibrium Analysis
Hidayat Amir (hamir@iskal.depkeu.go.id)
Accepted 2012, University of Queensland, Brisbane
This study analyses the impacts of Indonesia’s 2008 income tax policy reform on
its economy, using a computable general equilibrium (CGE) framework.
In 2008, parliament approved a proposal to amend Indonesia’s income tax
laws. Essential amendments included adjusting the personal income tax (PIT)
rates and adopting a single corporate income tax (CIT) rate. These amendments
are part of a tax reform and iscal adjustment program implemented gradually
since the early 2000s, with a value added tax and luxury sales tax reform still on
the agenda. These policies have two objectives: to increase tax revenue and to
promote sustainable economic growth. Income equality is also an important tax
policy objective.
A good tax system should protect low-income households from paying excessive tax and reduce the number of households below the poverty line. The relationship between tax policy reforms and the economy is complex; in some cases,
large-scale tax reform can have multiple impacts through inter-industry linkages
simultaneously, making it dificult to explain, in theoretical terms, what the economic impacts are. However, identifying important relationships among these
inter-industry linkages may help to measure and evaluate these impacts.
For this study, three policy scenarios were simulated: an adjustment in the PIT
rate structure; the application of a single rate to the CIT; and a combination of
these two policies. The simulations were conducted under a balanced budget condition (budget neutrality) – where government spending and revenue move in a
way that maintains a constant budget balance – and under a non-balanced budget
condition. They were run under short- and long-run scenarios.
The results suggest that under a balanced budget condition the income tax
reform that comprises the adjustment of the PIT rate structure and the application of a single CIT rate (the combined scenario) beneits the overall economy. In
the long run, the policies increase aggregate welfare, as indicated by increases in
real GDP and consumption expenditure. The results also show that income taxes
tend to have a distortionary effect on the economy. As a result, the tax cut policy
increases economic welfare.
The policies also cause production factors to be reorganised. Excess labour,
particularly in the government sector, is reallocated to other industries; this
ISSN 0007-4918 print/ISSN 1472-7234 online/12/030429-8
http://dx.doi.org/10.1080/00074918.2012.728689
Downloaded by [Universitas Maritim Raja Ali Haji] at 00:30 18 January 2016
430
Abstracts of doctoral theses on the Indonesian economy
re-allocation of labour occurs not only between sectors but also between labour
categories – from skilled labour categories (management/professional and clerical) to more unskilled labour categories (production and agricultural).
While the policy simulations cause only a small reduction in poverty incidence,
they do increase income inequality. A closer look at the policies’ impacts indicates
that the adjustment of the PIT rate structure and the application of a single CIT
rate provide more beneits to those in higher income groups than to those with the
lowest income. The impact on lower income groups arises more from the indirect
effects of economic growth. The CIT policy is more successful than the PIT policy
in promoting exports, controlling inlation and attracting investment.
This study improves our understanding of how Indonesia’s tax policies affect
the economy. Importantly, it examines the taxation policy’s impact both at a macro
level, through changes in economic growth and employment, and at a micro level,
through changes in poverty and income distribution. The indings provide important lessons for similar developing countries that are reforming their tax systems.
© 2012 Hidayat Amir
The Impact of State Restructuring on Indonesia’s
Regional Economic Convergence
Adiwan Fahlan Aritenang (a.aritenang@gmail.com)
Accepted 2012, University College London
In recent decades, state restructuring policies such as trade liberalisation and
decentralisation have emerged globally as part of attempts to promote more equal
economic growth. This occurred in Indonesia following the Asian inancial crisis
of 1997–98. Indonesia provides two important examples of the impact of state
restructuring on regional convergence, the process that occurs when poor countries or regions grow faster than rich ones and begin to catch up with them. First,
Indonesia, as a member of the ASEAN Free Trade Area (AFTA), is free to choose
the sectors and determine the schedules for its own trade liberalisation. Second,
Indonesia’s transition from a centralised to a decentralised regime relects a rapid
shift in politico-economic and social institutional arrangements. These external
and internal forms of state restructuring can be expected to inluence patterns of
regional economic development and convergence.
This research aims to analyse the impact of state restructuring on disparities at the district level for the period 1993–2005 and two subperiods, the pre
decentralisation years (1993–2000) and the decentralisation era (2001–05).
Borrowing ideas from the ield of new institutional economics, the study argues
that state restructuring provides opportunities to accelerate economic growth by
promoting property rights and lowering transaction costs.
The thesis employs three empirical studies to test these hypotheses. First, using
economic indices, it examines levels of inequality in district economic growth and
industry concentration. The measures used are coeficients of variation (CV) and
the Lorenz curve for inequality patterns; the Theil index for inequality decomposition analysis; and the Herindahl index (Hindex) for industry agglomeration
analysis. Second, econometric analysis is conducted to explore the impact of trade
Downloaded by [Universitas Maritim Raja Ali Haji] at 00:30 18 January 2016
Abstracts of doctoral theses on the Indonesian economy
431
liberalisation and decentralisation on regional economic growth. The analysis
uses traditional ß convergence aspatial and spatial dependence autocorrelation
analysis. The third empirical study adopts the methods of comparative political
analysis, using a historical institutionalism approach to explain variations in the
impact of state restructuring. In this approach, critical antecedents (the institutional knowledge and experience previously gained) are available to economic
agents during critical junctures at which choices about institutional paths need to
be made. However, the chosen institutional path is not static, but is reproduced
through an iterative process of institutional learning and feedback. In this process, property rights and transactions are arranged and regulated, for example,
through raising regional shares of natural resource revenues and introducing onedoor policies for investments. Thus the study proposes that regional economic
variation is related to past institutional capacity.
The indings show that, despite evidence of regional convergence, disparities
are persistent and severe in the post–state-restructuring period. The quantitative
analysis shows that AFTA has had an insigniicant impact on regional economic
growth, while decentralisation has signiicantly contracted it. Qualitative case
studies in Batam and Bandung ind that institutional history and path development have strongly inluenced the progress and discourses of development.
Hence, placespeciic spatial development policy should be a priority. Given that
path dependence and nontraded industries are embedded within speciic locations, policies should embrace local values and knowledge. Regions that exhibit
strong capacity for innovative policy making, and a dynamic form of governance
capable of mobilising local actors, are better able to gain from state restructuring.
For a country such as Indonesia, with a long history of authoritarian rule, the role
of the nation-state remains important in promoting balanced local development.
© 2012 Adiwan Fahlan Aritenang
The Management of Liquidity Risk in Islamic Banks:
The Case of Indonesia
Rifki Ismal (rifki_ismal@yahoo.com)
Accepted 2010, University of Durham
Islamic banking and inance has made progress all over the world since its inception as a commercial banking model in the mid-1970s. As the world’s largest
Muslim nation, Indonesia has initiated a number of policies to expand its Islamic
banking industry.
Like conventional banks, Islamic banks face areas of risk that may affect their
performance and operations. One such area is liquidity risk, which has additional
features in the case of Islamic banks. Both international banking standards and
syariah guidelines suggest that, to manage liquidity risk, banks should have robust
liquidity risk management policies; a responsive asset and liability committee;
effective information and internal control systems; and methods for managing
deposits to reduce on-demand liquidity. The aim of this research is to analyse the
management of liquidity risk in Islamic banks through the balancing of assets and
liabilities, with a view to recommending policies to improve the management of
Downloaded by [Universitas Maritim Raja Ali Haji] at 00:30 18 January 2016
432
Abstracts of doctoral theses on the Indonesian economy
such risk. This is done through an examination of the Indonesian Islamic banking
industry.
The data collection and analysis methods employed in this research involved
triangulation using a combination of quantitative and qualitative approaches.
Both industry performance analysis and econometric time-series analysis were
conducted to assess liquidity risk and its management in the context of Islamic
banking. The study used monthly data published by Bank Indonesia for the Indonesian Islamic banking industry from December 2000 to November 2009. It examined the liquidity behaviour of both banking depositors and Islamic banks. In
addition, primary data were assembled through a questionnaire survey, with the
aim of identifying the actual practices and problems involved in managing liquidity risk. The survey investigated the perceptions of Islamic banking depositors
and Islamic bankers to shed further light on liquidity risk issues that were not
captured in the time series analysis.
The empirical analyses conducted in the study demonstrate: (i) the sub-optimal
organisational structure of Islamic banks for managing liquidity; (ii) the signiicant demand for liquidity withdrawals from depositors and the fragility of Islamic
banks in terms of their ability to mitigate certain liquidity withdrawal scenarios;
(iii) the factors that are critical to explaining the liquidity behaviour of banking
depositors and Islamic banks; (iv) the reasons depositors withdraw funds from
Islamic banks, and the suboptimal management of funds by Islamic banks; and
(v) the limited Islamic money market instruments available to manage demand
for liquidity from depositors.
Based on these indings, the study then constructs an integrated and comprehensive program for managing liquidity risk. It consists of three elements:
(i) institutional deepening; (ii) restructuring of liquidity management on the asset
and liability sides; and (iii) revitalisation of the use of Islamic liquid instruments.
This integrated and comprehensive program of liquidity risk management recommends a better way of managing liquidity risk based on syariah-compliant
instruments and international standard banking practices.
© 2012 Rifki Ismal
The Determinants of Indonesian Exports
Titik Anas (titik.anas@csis.or.id)
Accepted 2012, Australian National University
This thesis examines Indonesia’s export performance since the 1970s. It aims to
contribute to the limited discussion of this ield by providing a rigorous and comprehensive analysis of issues relating to Indonesia’s trade. There are three main
research questions. How good has Indonesia’s export performance been over the
last 30 years? How does it compare with the performance of its close competitors?
What factors contributed to Indonesia’s performance?
The thesis begins with a discussion of economic policy dynamics in Indonesia
since the 1970s, with a particular focus on the economic reforms undertaken from
the mid-1980s. This is followed by chapters devoted to discussion of Indonesia’s
comparative advantage and competitiveness relative to its close competitors, and
of the determinants of exports at the macro and irm levels.
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Abstracts of doctoral theses on the Indonesian economy
433
On comparative advantage, the thesis shows that the number of products for
which Indonesia has a comparative advantage has increased over time, owing
mainly to changes in the manufacturing sector. Closer assessment of the sector
conirms Indonesia’s comparative advantage in labourintensive and resource
based labour-intensive industries. However, recent data show that exports in
these industries have weakened.
The study shows that, relative to China, Malaysia, Thailand and Vietnam, Indonesia is more competitive in agriculture (especially in recent times); relatively less
competitive in manufacturing; and on a par in the mining sector except during
the last few years, when Indonesia has been relatively more competitive. More
detailed analysis reveals that Indonesia is relatively more competitive in resourcebased labour-intensive and resource-based capital-intensive industries.
One chapter traces the long-run relationship of exports to the real exchange
rate and demand and supply factors. The effect of each of these variables differs in
sign and magnitude across sectors and sub-sectors. For manufactured exports, the
coeficients for the real exchange rate and demand and supply factors are positive
and statistically signiicant. For agricultural exports, the coeficients for the real
exchange rate, world demand and supply capacity are also positive. However,
only the coeficients for world demand and supply capacity are statistically significant. For the mining sector, although the real exchange rate, world demand and
supply capacity exhibit positive effects on exports, only world demand shows a
statistically signiicant impact. This chapter also illustrates the particular impact
of economic reform on the manufacturing sector, and reveals that there were differences in export performance among manufacturing sub-sectors during the
1997–98 Asian inancial crisis.
At the irm level, the thesis shows the impact of irm heterogeneity and spill
over effects on export decisions and export performance. The results are relatively
consistent for the pre-crisis and post-crisis periods. On export decisions, the data
show that labour productivity, size, foreign ownership, and sectoral and regional
spillovers have a positive effect. On export performance, the effects of irm hetero
geneity and spillovers are also relatively consistent for the pre- and post-crisis
periods, while the magnitudes are generally higher for the post-crisis period,
except in the case of sectoral spillovers. Labour-intensive sub-sectors show superior export performance to other manufacturing sub-sectors. An assessment of
the Batam free trade zone reveals that its export performance is superior to that
of other regions.
© 2012 Titik Anas
Why Is Indonesia Left Behind in Global Production Networks?
Moekti Prasetiani Soejachmoen (utibrata@gmail.com)
Accepted 2012, Australian National University
International trade in the electronics and automotive industries, including manufacture of parts and components, has grown rapidly in the last two decades, but
Southeast Asia’s largest economy, Indonesia, is lagging behind in its export performance. This research uses a comparative perspective to examine Indonesia’s
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Abstracts of doctoral theses on the Indonesian economy
role in electronics and automotive production networks, in the context of the contemporary debate on opportunities for reaping gains from economic globalisation
through engagement in global production networks.
The study aims to answer two questions: the irst concerns the determinants of
a country’s participation in global production networks, the second the reasons
why Indonesia is being left behind in these networks. To the author’s knowledge,
this study is the irst systematic attempt to answer the second question.
The analysis is conducted at both the macroeconomic and the irm level. The
macroeconomic analysis is based on fragmentation theory. An unbalanced panel
trade data set covering the electronics and automotive sectors in 98 countries over
the period 1988–2007 is estimated using the least square dummy variable method.
Meanwhile, the irmlevel analysis is based on a model of irm heterogeneity and
its implications for international trade. This random-effect probit dynamic model
is adopted for the estimation, which uses irmlevel data on the Indonesian electronics and automotive sectors for the period 1990–2007.
The macroeconomic analysis shows that service link cost variables are more
important than production cost variables in determining a country’s participation
in global production networks. Infrastructure is the most important determinant
in developing countries for both sectors, followed by labour quality and openness
to foreign direct investment. For developed countries, trade openness is the most
important determinant in the electronics sector, and trade cost the most important
in the automotive sector. The second most important determinant is labour quality in the electronics sector and infrastructure in the automotive sector.
The study demonstrates that Indonesia is being left behind in electronics global
production networks because of the poor condition of its infrastructure; its relatively restrictive investment policies towards foreign investment; and its low education levels, which hamper irms’ capacity to absorb technology – a crucial factor
in the electronics sector.
With Indonesia’s huge domestic market, which creates economies of scale, it
would be expected that the country’s automotive industry could participate more
fully in global production networks than it does at present. However, its participation is hampered by its investment policies, trade costs and continuing high
protection in the automotive sector.
The irmlevel analysis reveals that a decision to engage in global production
networks through export activities depends on irm characteristics as well as sunk
cost and location spillover effects. For both the electronics and automotive sectors,
larger and foreignowned irms with higher labour quality and located in close
proximity to each other are more likely than other irms to participate in production networks.
The study concludes that Indonesia needs to improve its infrastructure, investment policies and education levels to increase its participation in global production networks.
© 2012 Moekti P. Soejachmoen
Abstracts of doctoral theses on the Indonesian economy
435
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Global Value Chains and Technological Capabilities:
Analysing the Dynamics of Indonesia’s Garments
and Electronics Manufacturers
Yohanes Berenika Kadarusman (kadarusman69@yahoo.com)
Accepted 2010, University of Manchester
The Indonesian manufacturing sector faces signiicant challenges in attempting
to upgrade its capabilities and remain competitive in both domestic and global
markets. Its irms are increasingly integrated into global markets via global value
chain ties. Yet little is known about how such integration affects the ability of
Indonesian irms to upgrade the skill content of their activities and functions.
This study aims to understand the nature of upgrading processes within the Indonesian manufacturing sector through a comparison of garment and consumer
electronics irms.
The analysis integrates the conceptual frameworks of technological capability
(TC) and global value chains (GVC). The GVC literature provides insights into
the role global value chain leaders play in assisting, or constraining, through the
ways in which they govern value chain ties, the upgrading processes of local producers. The TC framework helps to explain the role played by the capabilities of
local irms in the upgrading process. Combining these two frameworks, the study
asked what roles governance and technological capability play in upgrading processes within Indonesian garment and consumer electronics value chains.
Quantitative and qualitative data were gathered in 2008 through surveys and
indepth interviews of irm personnel. Eleven irmlevel case studies were analysed to obtain detailed insights into the process and dynamics of upgrading,
value chain governance and capability acquisition in these irms.
The evidence from the surveys and case studies suggests that forms of value
chain governance and types of technological capability both played important
roles in upgrading processes. Process and product upgrading took place within
captive value chains (in which suppliers with low-level capabilities are dependent on larger buyers for complex transactions). Functional upgrading took place
to a lesser extent within modular governance structures (where suppliers with
highlevel capabilities make products to customer speciications) and hierarchical governance structures (where transactions are complex, supplier capabilities
are low and production is often vertically integrated within a single irm), and
to a greater extent within market-based structures (where buyer–seller transactions are simple and suppliers capable). Meanwhile, the distinct types of upgrading processes required different types of capability and knowledge. To undertake
process upgrading, irms needed to possess both operative and innovative process capabilities to improve production eficiency and product quality. To achieve
functional upgrading, irms needed product innovative capabilities, to undertake
design and product and market development.
The results demonstrate that Indonesian irms that engaged in global value
chains obtained support from global buyers that led them to acquire process operative and innovative capabilities, but not product innovative capabilities. They
acquired product innovative capabilities through their own efforts. Furthermore,
upgrading processes in Indonesian irms took place not only in global but also
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Abstracts of doctoral theses on the Indonesian economy
in domestic value chains. Insertion into domestic value chains may, in fact, assist
some Indonesian irms to undertake functional upgrading, for example, in product design and market development. Within domestic value chains, Indonesian
irms were able to exploit not only process operative and innovative capabilities
but also product innovative capabilities. They were involved in design, product
development and marketing functions.
By demonstrating that the technological capability of Indonesian garment and
consumer electronics manufacturing irms can play an important role in upgrading when irms are engaged in domestic value chains, but that this role is less
pronounced when irms are engaged through hierarchical ties in global value
chains, this study provides a more dynamic perspective than standard studies on
upgrading and value chain linkages.
© 2012 Yohanes Berenika Kadarusman
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
Abstracts of doctoral theses on the Indonesian
economy
To cite this article: (2012) Abstracts of doctoral theses on the Indonesian economy, Bulletin of
Indonesian Economic Studies, 48:3, 429-436, DOI: 10.1080/00074918.2012.728689
To link to this article: http://dx.doi.org/10.1080/00074918.2012.728689
Published online: 20 Nov 2012.
Submit your article to this journal
Article views: 148
View related articles
Full Terms & Conditions of access and use can be found at
http://www.tandfonline.com/action/journalInformation?journalCode=cbie20
Download by: [Universitas Maritim Raja Ali Haji]
Date: 18 January 2016, At: 00:30
Bulletin of Indonesian Economic Studies, Vol. 48, No. 3, 2012: 429–36
Downloaded by [Universitas Maritim Raja Ali Haji] at 00:30 18 January 2016
ABSTRACTS OF DOCTORAL THESES
ON THE INDONESIAN ECONOMY
Tax Policy, Growth, and Income Distribution in Indonesia:
A Computable General Equilibrium Analysis
Hidayat Amir (hamir@iskal.depkeu.go.id)
Accepted 2012, University of Queensland, Brisbane
This study analyses the impacts of Indonesia’s 2008 income tax policy reform on
its economy, using a computable general equilibrium (CGE) framework.
In 2008, parliament approved a proposal to amend Indonesia’s income tax
laws. Essential amendments included adjusting the personal income tax (PIT)
rates and adopting a single corporate income tax (CIT) rate. These amendments
are part of a tax reform and iscal adjustment program implemented gradually
since the early 2000s, with a value added tax and luxury sales tax reform still on
the agenda. These policies have two objectives: to increase tax revenue and to
promote sustainable economic growth. Income equality is also an important tax
policy objective.
A good tax system should protect low-income households from paying excessive tax and reduce the number of households below the poverty line. The relationship between tax policy reforms and the economy is complex; in some cases,
large-scale tax reform can have multiple impacts through inter-industry linkages
simultaneously, making it dificult to explain, in theoretical terms, what the economic impacts are. However, identifying important relationships among these
inter-industry linkages may help to measure and evaluate these impacts.
For this study, three policy scenarios were simulated: an adjustment in the PIT
rate structure; the application of a single rate to the CIT; and a combination of
these two policies. The simulations were conducted under a balanced budget condition (budget neutrality) – where government spending and revenue move in a
way that maintains a constant budget balance – and under a non-balanced budget
condition. They were run under short- and long-run scenarios.
The results suggest that under a balanced budget condition the income tax
reform that comprises the adjustment of the PIT rate structure and the application of a single CIT rate (the combined scenario) beneits the overall economy. In
the long run, the policies increase aggregate welfare, as indicated by increases in
real GDP and consumption expenditure. The results also show that income taxes
tend to have a distortionary effect on the economy. As a result, the tax cut policy
increases economic welfare.
The policies also cause production factors to be reorganised. Excess labour,
particularly in the government sector, is reallocated to other industries; this
ISSN 0007-4918 print/ISSN 1472-7234 online/12/030429-8
http://dx.doi.org/10.1080/00074918.2012.728689
Downloaded by [Universitas Maritim Raja Ali Haji] at 00:30 18 January 2016
430
Abstracts of doctoral theses on the Indonesian economy
re-allocation of labour occurs not only between sectors but also between labour
categories – from skilled labour categories (management/professional and clerical) to more unskilled labour categories (production and agricultural).
While the policy simulations cause only a small reduction in poverty incidence,
they do increase income inequality. A closer look at the policies’ impacts indicates
that the adjustment of the PIT rate structure and the application of a single CIT
rate provide more beneits to those in higher income groups than to those with the
lowest income. The impact on lower income groups arises more from the indirect
effects of economic growth. The CIT policy is more successful than the PIT policy
in promoting exports, controlling inlation and attracting investment.
This study improves our understanding of how Indonesia’s tax policies affect
the economy. Importantly, it examines the taxation policy’s impact both at a macro
level, through changes in economic growth and employment, and at a micro level,
through changes in poverty and income distribution. The indings provide important lessons for similar developing countries that are reforming their tax systems.
© 2012 Hidayat Amir
The Impact of State Restructuring on Indonesia’s
Regional Economic Convergence
Adiwan Fahlan Aritenang (a.aritenang@gmail.com)
Accepted 2012, University College London
In recent decades, state restructuring policies such as trade liberalisation and
decentralisation have emerged globally as part of attempts to promote more equal
economic growth. This occurred in Indonesia following the Asian inancial crisis
of 1997–98. Indonesia provides two important examples of the impact of state
restructuring on regional convergence, the process that occurs when poor countries or regions grow faster than rich ones and begin to catch up with them. First,
Indonesia, as a member of the ASEAN Free Trade Area (AFTA), is free to choose
the sectors and determine the schedules for its own trade liberalisation. Second,
Indonesia’s transition from a centralised to a decentralised regime relects a rapid
shift in politico-economic and social institutional arrangements. These external
and internal forms of state restructuring can be expected to inluence patterns of
regional economic development and convergence.
This research aims to analyse the impact of state restructuring on disparities at the district level for the period 1993–2005 and two subperiods, the pre
decentralisation years (1993–2000) and the decentralisation era (2001–05).
Borrowing ideas from the ield of new institutional economics, the study argues
that state restructuring provides opportunities to accelerate economic growth by
promoting property rights and lowering transaction costs.
The thesis employs three empirical studies to test these hypotheses. First, using
economic indices, it examines levels of inequality in district economic growth and
industry concentration. The measures used are coeficients of variation (CV) and
the Lorenz curve for inequality patterns; the Theil index for inequality decomposition analysis; and the Herindahl index (Hindex) for industry agglomeration
analysis. Second, econometric analysis is conducted to explore the impact of trade
Downloaded by [Universitas Maritim Raja Ali Haji] at 00:30 18 January 2016
Abstracts of doctoral theses on the Indonesian economy
431
liberalisation and decentralisation on regional economic growth. The analysis
uses traditional ß convergence aspatial and spatial dependence autocorrelation
analysis. The third empirical study adopts the methods of comparative political
analysis, using a historical institutionalism approach to explain variations in the
impact of state restructuring. In this approach, critical antecedents (the institutional knowledge and experience previously gained) are available to economic
agents during critical junctures at which choices about institutional paths need to
be made. However, the chosen institutional path is not static, but is reproduced
through an iterative process of institutional learning and feedback. In this process, property rights and transactions are arranged and regulated, for example,
through raising regional shares of natural resource revenues and introducing onedoor policies for investments. Thus the study proposes that regional economic
variation is related to past institutional capacity.
The indings show that, despite evidence of regional convergence, disparities
are persistent and severe in the post–state-restructuring period. The quantitative
analysis shows that AFTA has had an insigniicant impact on regional economic
growth, while decentralisation has signiicantly contracted it. Qualitative case
studies in Batam and Bandung ind that institutional history and path development have strongly inluenced the progress and discourses of development.
Hence, placespeciic spatial development policy should be a priority. Given that
path dependence and nontraded industries are embedded within speciic locations, policies should embrace local values and knowledge. Regions that exhibit
strong capacity for innovative policy making, and a dynamic form of governance
capable of mobilising local actors, are better able to gain from state restructuring.
For a country such as Indonesia, with a long history of authoritarian rule, the role
of the nation-state remains important in promoting balanced local development.
© 2012 Adiwan Fahlan Aritenang
The Management of Liquidity Risk in Islamic Banks:
The Case of Indonesia
Rifki Ismal (rifki_ismal@yahoo.com)
Accepted 2010, University of Durham
Islamic banking and inance has made progress all over the world since its inception as a commercial banking model in the mid-1970s. As the world’s largest
Muslim nation, Indonesia has initiated a number of policies to expand its Islamic
banking industry.
Like conventional banks, Islamic banks face areas of risk that may affect their
performance and operations. One such area is liquidity risk, which has additional
features in the case of Islamic banks. Both international banking standards and
syariah guidelines suggest that, to manage liquidity risk, banks should have robust
liquidity risk management policies; a responsive asset and liability committee;
effective information and internal control systems; and methods for managing
deposits to reduce on-demand liquidity. The aim of this research is to analyse the
management of liquidity risk in Islamic banks through the balancing of assets and
liabilities, with a view to recommending policies to improve the management of
Downloaded by [Universitas Maritim Raja Ali Haji] at 00:30 18 January 2016
432
Abstracts of doctoral theses on the Indonesian economy
such risk. This is done through an examination of the Indonesian Islamic banking
industry.
The data collection and analysis methods employed in this research involved
triangulation using a combination of quantitative and qualitative approaches.
Both industry performance analysis and econometric time-series analysis were
conducted to assess liquidity risk and its management in the context of Islamic
banking. The study used monthly data published by Bank Indonesia for the Indonesian Islamic banking industry from December 2000 to November 2009. It examined the liquidity behaviour of both banking depositors and Islamic banks. In
addition, primary data were assembled through a questionnaire survey, with the
aim of identifying the actual practices and problems involved in managing liquidity risk. The survey investigated the perceptions of Islamic banking depositors
and Islamic bankers to shed further light on liquidity risk issues that were not
captured in the time series analysis.
The empirical analyses conducted in the study demonstrate: (i) the sub-optimal
organisational structure of Islamic banks for managing liquidity; (ii) the signiicant demand for liquidity withdrawals from depositors and the fragility of Islamic
banks in terms of their ability to mitigate certain liquidity withdrawal scenarios;
(iii) the factors that are critical to explaining the liquidity behaviour of banking
depositors and Islamic banks; (iv) the reasons depositors withdraw funds from
Islamic banks, and the suboptimal management of funds by Islamic banks; and
(v) the limited Islamic money market instruments available to manage demand
for liquidity from depositors.
Based on these indings, the study then constructs an integrated and comprehensive program for managing liquidity risk. It consists of three elements:
(i) institutional deepening; (ii) restructuring of liquidity management on the asset
and liability sides; and (iii) revitalisation of the use of Islamic liquid instruments.
This integrated and comprehensive program of liquidity risk management recommends a better way of managing liquidity risk based on syariah-compliant
instruments and international standard banking practices.
© 2012 Rifki Ismal
The Determinants of Indonesian Exports
Titik Anas (titik.anas@csis.or.id)
Accepted 2012, Australian National University
This thesis examines Indonesia’s export performance since the 1970s. It aims to
contribute to the limited discussion of this ield by providing a rigorous and comprehensive analysis of issues relating to Indonesia’s trade. There are three main
research questions. How good has Indonesia’s export performance been over the
last 30 years? How does it compare with the performance of its close competitors?
What factors contributed to Indonesia’s performance?
The thesis begins with a discussion of economic policy dynamics in Indonesia
since the 1970s, with a particular focus on the economic reforms undertaken from
the mid-1980s. This is followed by chapters devoted to discussion of Indonesia’s
comparative advantage and competitiveness relative to its close competitors, and
of the determinants of exports at the macro and irm levels.
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On comparative advantage, the thesis shows that the number of products for
which Indonesia has a comparative advantage has increased over time, owing
mainly to changes in the manufacturing sector. Closer assessment of the sector
conirms Indonesia’s comparative advantage in labourintensive and resource
based labour-intensive industries. However, recent data show that exports in
these industries have weakened.
The study shows that, relative to China, Malaysia, Thailand and Vietnam, Indonesia is more competitive in agriculture (especially in recent times); relatively less
competitive in manufacturing; and on a par in the mining sector except during
the last few years, when Indonesia has been relatively more competitive. More
detailed analysis reveals that Indonesia is relatively more competitive in resourcebased labour-intensive and resource-based capital-intensive industries.
One chapter traces the long-run relationship of exports to the real exchange
rate and demand and supply factors. The effect of each of these variables differs in
sign and magnitude across sectors and sub-sectors. For manufactured exports, the
coeficients for the real exchange rate and demand and supply factors are positive
and statistically signiicant. For agricultural exports, the coeficients for the real
exchange rate, world demand and supply capacity are also positive. However,
only the coeficients for world demand and supply capacity are statistically significant. For the mining sector, although the real exchange rate, world demand and
supply capacity exhibit positive effects on exports, only world demand shows a
statistically signiicant impact. This chapter also illustrates the particular impact
of economic reform on the manufacturing sector, and reveals that there were differences in export performance among manufacturing sub-sectors during the
1997–98 Asian inancial crisis.
At the irm level, the thesis shows the impact of irm heterogeneity and spill
over effects on export decisions and export performance. The results are relatively
consistent for the pre-crisis and post-crisis periods. On export decisions, the data
show that labour productivity, size, foreign ownership, and sectoral and regional
spillovers have a positive effect. On export performance, the effects of irm hetero
geneity and spillovers are also relatively consistent for the pre- and post-crisis
periods, while the magnitudes are generally higher for the post-crisis period,
except in the case of sectoral spillovers. Labour-intensive sub-sectors show superior export performance to other manufacturing sub-sectors. An assessment of
the Batam free trade zone reveals that its export performance is superior to that
of other regions.
© 2012 Titik Anas
Why Is Indonesia Left Behind in Global Production Networks?
Moekti Prasetiani Soejachmoen (utibrata@gmail.com)
Accepted 2012, Australian National University
International trade in the electronics and automotive industries, including manufacture of parts and components, has grown rapidly in the last two decades, but
Southeast Asia’s largest economy, Indonesia, is lagging behind in its export performance. This research uses a comparative perspective to examine Indonesia’s
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role in electronics and automotive production networks, in the context of the contemporary debate on opportunities for reaping gains from economic globalisation
through engagement in global production networks.
The study aims to answer two questions: the irst concerns the determinants of
a country’s participation in global production networks, the second the reasons
why Indonesia is being left behind in these networks. To the author’s knowledge,
this study is the irst systematic attempt to answer the second question.
The analysis is conducted at both the macroeconomic and the irm level. The
macroeconomic analysis is based on fragmentation theory. An unbalanced panel
trade data set covering the electronics and automotive sectors in 98 countries over
the period 1988–2007 is estimated using the least square dummy variable method.
Meanwhile, the irmlevel analysis is based on a model of irm heterogeneity and
its implications for international trade. This random-effect probit dynamic model
is adopted for the estimation, which uses irmlevel data on the Indonesian electronics and automotive sectors for the period 1990–2007.
The macroeconomic analysis shows that service link cost variables are more
important than production cost variables in determining a country’s participation
in global production networks. Infrastructure is the most important determinant
in developing countries for both sectors, followed by labour quality and openness
to foreign direct investment. For developed countries, trade openness is the most
important determinant in the electronics sector, and trade cost the most important
in the automotive sector. The second most important determinant is labour quality in the electronics sector and infrastructure in the automotive sector.
The study demonstrates that Indonesia is being left behind in electronics global
production networks because of the poor condition of its infrastructure; its relatively restrictive investment policies towards foreign investment; and its low education levels, which hamper irms’ capacity to absorb technology – a crucial factor
in the electronics sector.
With Indonesia’s huge domestic market, which creates economies of scale, it
would be expected that the country’s automotive industry could participate more
fully in global production networks than it does at present. However, its participation is hampered by its investment policies, trade costs and continuing high
protection in the automotive sector.
The irmlevel analysis reveals that a decision to engage in global production
networks through export activities depends on irm characteristics as well as sunk
cost and location spillover effects. For both the electronics and automotive sectors,
larger and foreignowned irms with higher labour quality and located in close
proximity to each other are more likely than other irms to participate in production networks.
The study concludes that Indonesia needs to improve its infrastructure, investment policies and education levels to increase its participation in global production networks.
© 2012 Moekti P. Soejachmoen
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Global Value Chains and Technological Capabilities:
Analysing the Dynamics of Indonesia’s Garments
and Electronics Manufacturers
Yohanes Berenika Kadarusman (kadarusman69@yahoo.com)
Accepted 2010, University of Manchester
The Indonesian manufacturing sector faces signiicant challenges in attempting
to upgrade its capabilities and remain competitive in both domestic and global
markets. Its irms are increasingly integrated into global markets via global value
chain ties. Yet little is known about how such integration affects the ability of
Indonesian irms to upgrade the skill content of their activities and functions.
This study aims to understand the nature of upgrading processes within the Indonesian manufacturing sector through a comparison of garment and consumer
electronics irms.
The analysis integrates the conceptual frameworks of technological capability
(TC) and global value chains (GVC). The GVC literature provides insights into
the role global value chain leaders play in assisting, or constraining, through the
ways in which they govern value chain ties, the upgrading processes of local producers. The TC framework helps to explain the role played by the capabilities of
local irms in the upgrading process. Combining these two frameworks, the study
asked what roles governance and technological capability play in upgrading processes within Indonesian garment and consumer electronics value chains.
Quantitative and qualitative data were gathered in 2008 through surveys and
indepth interviews of irm personnel. Eleven irmlevel case studies were analysed to obtain detailed insights into the process and dynamics of upgrading,
value chain governance and capability acquisition in these irms.
The evidence from the surveys and case studies suggests that forms of value
chain governance and types of technological capability both played important
roles in upgrading processes. Process and product upgrading took place within
captive value chains (in which suppliers with low-level capabilities are dependent on larger buyers for complex transactions). Functional upgrading took place
to a lesser extent within modular governance structures (where suppliers with
highlevel capabilities make products to customer speciications) and hierarchical governance structures (where transactions are complex, supplier capabilities
are low and production is often vertically integrated within a single irm), and
to a greater extent within market-based structures (where buyer–seller transactions are simple and suppliers capable). Meanwhile, the distinct types of upgrading processes required different types of capability and knowledge. To undertake
process upgrading, irms needed to possess both operative and innovative process capabilities to improve production eficiency and product quality. To achieve
functional upgrading, irms needed product innovative capabilities, to undertake
design and product and market development.
The results demonstrate that Indonesian irms that engaged in global value
chains obtained support from global buyers that led them to acquire process operative and innovative capabilities, but not product innovative capabilities. They
acquired product innovative capabilities through their own efforts. Furthermore,
upgrading processes in Indonesian irms took place not only in global but also
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in domestic value chains. Insertion into domestic value chains may, in fact, assist
some Indonesian irms to undertake functional upgrading, for example, in product design and market development. Within domestic value chains, Indonesian
irms were able to exploit not only process operative and innovative capabilities
but also product innovative capabilities. They were involved in design, product
development and marketing functions.
By demonstrating that the technological capability of Indonesian garment and
consumer electronics manufacturing irms can play an important role in upgrading when irms are engaged in domestic value chains, but that this role is less
pronounced when irms are engaged through hierarchical ties in global value
chains, this study provides a more dynamic perspective than standard studies on
upgrading and value chain linkages.
© 2012 Yohanes Berenika Kadarusman