What’s new in the December issue of BIES

Bulletin of Indonesian Economic Studies

by Pierre van der Eng

The latest ‘Survey of recent developments’ by Paul Burke and Budy Resosudarmo reports that Indonesia’s economy is weathering global and regional economic uncertainties thanks to sustained high growth of domestic demand. Inflation has stayed within Bank Indonesia’s target range despite a recent increase in food prices. Fiscal policy remains conservative, even though government efforts to reduce growing electricity and fuel subsidies have so far been ineffective. The authors note that falling international commodity prices have further reduced export revenues, while strong domestic demand continues to fuel imports. The rising current account deficit is largely covered by net inward investment, but the survey highlights new divestment and domestic processing requirements that may further reduce investor interest in Indonesia, particularly in mining.

The survey then focuses on three key themes: first, the contrast between President Yudhoyono’s passion for ‘green growth’ and policies that appear to thwart its effects, such as continued loss of natural forests and heavy subsidisation of coal-fired electricity production; second, the tension, evident in the commodity boom in coal and palm oil, between high economic growth and environmental goals; and third, the scope for increasing international tourism through infrastructure improvements and a renewed focus on the conservation of natural resources.

Sandra Hamid discusses recent political trends, highlighting flaws in Indo­nesia’s democracy. The paper contends that the way coalitions are built in Indonesia serves political needs rather than reflecting ideological common ground, and that it is hard for voters to hold particular politicians or parties to account for their policies. The size and diversity of the president’s ‘grand coalition’ has led to conflict within the alliance, and this has had implications for expression of religious freedom, as different parts of government display contradictory responses to attacks on such freedom. The author points out that Jakarta’s gubernatorial election in September shows that a worthy candidate can succeed without the backing of a large coalition, and argues the benefits of this for accountability.

This is the last of 72 issues of BIES edited by Liz Drysdale, our Associate Editor since 1988. Liz retires at the end of 2012, and her close colleagues at the Indonesia Project express their appreciation for her contribution to quality and innovation in the journal’s production over 25 years.

The paper by Emmanuel Skoufias, Roy Katayama and B. Essama-Nssah investigates the welfare impact of delayed rainfall and rain shortfalls on rice farming households in rural Java. This research fills a gap in understanding the vulnerability of low-income households to climate-induced shocks. Given predicted increases in rainfall shocks, the results may inform policies to mitigate their effects and support coping mechanisms. Using data on regional rainfall patterns and the 2000 Indonesian Family Life Survey (IFLS), the paper concludes that rainfall delay has no significant impact on welfare; that rain shortfalls lead households to reduce non­food expenditure in favour of food expenditure; and that credit and public works projects best moderate the impact of rainfall shocks on household welfare.

Cut Dian Agustina, Wolfgang Fengler and Gunther Schulze use data for 2009 and 2010 to analyse the regional impact of Indonesia’s fuel policies. They compare the benefits provinces receive from sharing in government oil and gas revenues (as direct transfers and through grants) with those they receive through consuming subsidised fuel. The authors explore the possible impact of the proposed changes in the fuel subsidy policy, identifying significant inequities in the net benefits that provinces draw from fuel policies, particularly because the fuel subsidies flowing to provinces are often more significant than the oil and gas­related transfers and grants, and because fuel subsidies favour richer provinces that consume more fuel. Hence the proposed policy changes would increase not only efficiency but also inter­provincial equity in the distribution of fuel policy benefits.

Anu Rammohan and Elisabetta Magnani investigate whether the need to care for ill or elderly parents influences migration decisions of working-­age adults in Indonesia. Intra-regional labour migration, particularly from rural to urban areas, has been a major contributor to sustained economic growth and the escape from rural poverty of many Indonesians. The paper asks whether the need to care for parents will impinge on this trend in the absence of social safety nets. Using 2000 and 2007–08 IFLS data, the authors find evidence of a negative correlation between caregiving responsibilities and migration, particularly for female adults.

This issue sadly notes the passing of two former colleagues who made outstanding behind-the-scenes contributions to the early development of BIES. Anne Booth and colleagues pay tribute to Ruth Daroesman, a scholar of Indonesia who worked closely with the journal’s founding editor, the late Professor Heinz Arndt, as Assistant Editor between 1967 and 1983. Hal Hill recalls Margaret Easton’s pivotal role in supporting the work of Heinz Arndt from 1951 to 1980.

Our regular set of abstracts of recently completed PhD dissertations on Indonesia looks at the economic impact of tax policy reform; the effect of state restructuring (exemplified by trade policy reform and decentralisation) on regional economic convergence; liquidity risk management in Islamic banking; and determinants of export performance. Two studies of global production networks examine what determines participation and why Indonesia lags behind neighbouring countries, and what role global and domestic value chains play in technological upgrading.

The book review section discusses a significant political memoir by Jusuf Wanandi; collections of essays on inclusive and green growth in Indonesia, and on poverty and global recession in Southeast Asia; an appraisal of post­-tsunami and post­-conflict Aceh; and a study of the role of law in the fight against corruption.

This is the first issue of BIES under my editorship. I thank my predecessor Ross McLeod and interim editor Hal Hill for leaving the journal in such tremendous shape, Associate Editor Liz Drysdale for teaching me the ‘ropes’ during 2012, and Beth Thomson for her fine editing of this issue. I look forward to working with publisher Taylor & Francis, the journal’s Editorial and Advisory Boards, colleagues at the ANU, the Australian Agency for International Development (AusAID), and authors and referees. Together, I am confident that we will continue to produce an academic journal that meets the highest possible standards and informs public interest in various aspects of Indonesia’s economic development. I close by recalling Ross’s invitation to readers: Selamat membaca!

The December 2012 issue of the Bulletin of Indonesian Economic Studies is now available. For more information, visit Taylor & Francis Online.