|
|
|
|
The Modern Political Economy
New York
1993
10. Deregulating Industry
The outbreak of protest in Tanjung Priok in 1984 was not unrelated to the insecurity created among the urban poor as a result of recession in the world economy. Indonesia's economic growth slowed, government resources declined, consumer subsidies were reduced, and prices of daily commodities increased. In a port district where many were already living close to the margin, the situation was ripe for calls to action.
The economic situation pressed not only on the urban poor and the government budget; it presented an unaccustomed set of problems for private and state enterprises as well. In the early 1970s manufacturing was still dominated by traditional light consumer goods that were relatively impervious to economic slumps—principally processed food, beverages, tobacco, and weaving. A decade later the intermediate and capital goods industries were much more important, mainly as a result of the rapid growth in production of fertilizer, pharmaceuticals, motor vehicles, rubber tires, electronic goods, and plywood. 1 By 1982 domestic markets for most of these latter products were shrinking rapidly.
A vigorous program was begun to protect Indonesian manufacturers from adversity. A campaign was launched to "buy Indonesian." Imports were placed under physical controls. New investment was subjected to elaborate "guidelines." The manufacturing sector of the Indonesian economy was wrapped in an elaborate protective cocoon.
Then in the late 1980s, with foreign exchange in short supply, and even manufacturers disillusioned with the way the government's protection was impinging on prices, steps were taken to reverse the direction of government policy. The financial services industry was opened further than ever before to private interests, domestic and foreign. A large portion of the nation's imports of manufactured goods was freed of physical controls. Foreign investment was encouraged as it had not been since 1974. The result by the early 1990s was a rapid improvement in investments, exports, and government revenues.
The process of regulation and deregulation was clearly one that involved conflicting interests. And it left behind continuing debate about the future of the public sector, about the dominant position of Chinese Indonesians in the private sector, and about the favored positions being acquired by the president's relatives and friends. The process and the debate went to the heart of money and power at the peak of the Indonesian political economy as the nation entered the 1990s.
Controlling Imports
Control of key imports was an established feature of Indonesia's trade regime. The Dutch had controlled imports to protect domestic industry during the depression of the 1930s. From early on in the New Order, the Logistics Agency had had the sole right to import rice and later a variety of other foods, and Pertamina had the sole right to import petroleum products. Some manufactured goods also were banned, such as fully assembled motor vehicles, in order to protect domestic manufacturers. Most other goods, however, could be imported by any general trading company holding a license from the Ministry of Trade, and manufacturers could import the raw materials and intermediate goods they needed for their own production.
This freedom ended with the introduction of an "approved traders" system in November 1982. The system established a list of categories of raw materials, components, and products that could be imported only by specified agencies. Initially the categories included a large number of agricultural products: cotton, wheat flour, milk and milk products, soybeans and soy flour, cloves, and sugar. The list also included industrial materials and products, and over time the number of these expanded greatly to include a wide array of iron and steel goods, plastics, chemicals, textiles, pharmaceuticals, paints, fertilizers, rubber goods, leather goods, wood pulp, paper, glass, vehicles, machinery, electrical equipment, and minerals. It was estimated in early 1986 that 1,484 items were by this time under import license controls, of which 1,360 were in the manufacturing sector, and that 296 items were under physical import quotas, of which 231 were in manufacturing. These items amounted to $2.7 billion worth of imports in 1985, more than half the value of Indonesia's total imports. 2
Import licenses were sometimes granted for an entire category, leaving the "approved trader" free to import any amount or type of item in the category. Other licenses were granted only for goods of a specified type and quantity, and were subject to periodic renewal or amendment. Still other licenses established sole agents for the importation of particular brands. The "approved traders" were often state trading companies, but not always. Some were state enterprises that were themselves manufacturers or users of the goods they were to control; thus Krakatau Steel was given control of eighty-two types of iron and steel. In addition, some "approved traders" were private firms. 3
Several explanations were offered for this elaborate system of controls.
The fundamental problem was that the economy was already highly protected by the time the recession of the early 1980s began, and in the conditions of recession still more protection was needed than before. An economic minister of the time recalled: "They all needed protection. An inward industrialization policy does that. It creates a situation that requires it. Everyone was yelling for help." 4
Another factor was disarray in the cabinet. The same economic minister said:
The strongest pressure came from the private sector, including foreign investors. . . . We fought it but . . . the minister of industry . . . believed in building plants . . . and . . . the minister of trade said he was under orders from the president.
There was a big debate over the merits of import-substitution versus export-promotion. Some members of the cabinet didn't even believe in exporting. It is unfortunate, but we had no alternative plan. 5
Mohammad Sadli has said that the government turned to physical quotas because it felt constrained by the General Agreement on Tariffs and Trade from imposing high tariffs, and, in addition, feared that high tariffs would only encourage smuggling. 6 Another consideration was that the "approved traders" could accumulate capital for further industrial expansion. According to Sadli:
The argument of the government is that there is no better way to establish the needed industry because under competitive conditions no investor would want to come in; also the capital requirements are too high for the degree of risk. This protection solves the problem of competition and capitalization. 7
How the system of "approved traders" worked in practice may be seen from the cases of plastics and steel.
The Case of Plastics
A decree of the Minister of Trade on October 24, 1984, placed the importation of a variety of basic materials for the plastics industry under government control. The decree was concerned with polyethylene, which was widely used in making plastic bowls, buckets, and pans for household use; polypropylene, used in making plastic bags for marketing food and other products; polystyrene, the hard, clear plastic often used in place of glass; polyvinyl chloride, used in making pipes and tubing; acetate; and acrylic. These materials were henceforth to be imported solely by three state trading corporations—P. T. Panca Niaga, P. T. Cipta Niaga, and P. T. Mega Eltra—in effect, by subsidiaries of the trade ministry. Each was given an approximately equal quota, stated in tons for each type of material. According to the decree, the purpose of the new policy was "to give operating assurance to the domestic plastics industry . . . and to assure the continuous availability of its basic materials." 8
The bulk of plastics imports was in two of the six categories. Total imports in all six categories were valued at $361 million in 1984, and polyethylene and polypropylene alone accounted for more than $300 million. Neither polyethylene nor polypropylene was manufactured in Indonesia, however. At the time two Japanese joint ventures were producing polyvinyl chloride, and a third company was producing polystyrene. This last was P. T. Polychem Lindo, part of the Bimantara Citra Group, led by Bambang Trihatmodjo, one of President Soeharto's sons. 9
The decision by the Minister of Trade was followed by a further announcement in March 1985 at a meeting of plastics industry executives in Jakarta, that the three state trading companies were appointing a single private company as their sole agent for all plastics imports. The agent was Panca Holding Ltd., based in Hong Kong. A prominent businessman and relative of the president, Sudwikatmono, was introduced as a director of the firm. Steven Jones of the Asian Wall Street Journal later reported that records in Hong Kong showed Panca Holding was owned by two corporations registered in Vanuatu, a small South Pacific tax haven, and that two of President Soeharto's sons, Bambang and Sigit, were members of the board of directors. 10
The state trading companies charged a fee equivalent to $23 a ton. Panca Holding charged an additional $20 a ton, later raised to $70 a ton, plus 2 percent of the value of the transaction. In 1986, with polyethylene selling at about $500 a ton, these markups added 21 percent to the cost of importing polyethylene. A survey of industry executives found other objections to the system. Big users continued to work directly with their long-term foreign suppliers, and no function was performed by the state trading houses or by Panca Holding other than passing the orders along. Even this was not done efficiently; about a month was added to the lead time on orders, and goods often arrived before the documents that were needed to clear them through customs, which meant added costs for storage. It was estimated that Panca Holding earned $30 million for its role in handling the paperwork in 1985. 11
Industry unhappiness grew when the government announced in August 1986 that only a single state trading company, P. T. Mega Eltra, would manage the plastics quotas, still retaining Panca Holding as its agent. Industry sources were reported as saying that the waiting time for goods had been lengthened. In late 1986, following a devaluation that meant higher domestic prices for imports, the state trading company and Panca Holding did lower their fees, reducing the markup by about half, "to help the industry." 12
In short, the plastics monopoly was a transparent scheme that had little to do with protecting local industry and a lot to do with making money for the president's family and friends.
The Case of Steel
The state-owned steel corporation, P. T. Krakatau Steel, had been given control of the import of steel and steel products by presidential decree in 1979. It was said that, in addition to protecting the domestic market for Krakatau Steel, the controls were needed because importers were engaging in "statistical smuggling"—bringing steel into the country with documents identifying it as something else with a lower tariff. It was also said that the big domestic steel users, the automobile assemblers, had tie-ins with auto manufacturers in Japan and their steel suppliers, so that the Indonesian monopoly was not expected to lead to any price advantage. A series of decrees by trade officials designated one or another of several trading companies as agents of Krakatau Steel in importing steel and steel products and distributing them domestically. 13 In April 1984 a private company, P. T. Giwang Selogam, formed earlier that year, was named to carry out the import of cold-rolled steel on behalf of Krakatau Steel. From 1985 the trading companies were removed from the steel trade altogether, and the entire field was reserved for Krakatau Steel and Giwang Selogam. Krakatau controlled the importation of hot-rolled steel in a variety of forms, which is what it was producing itself. Giwang Selogam was given control of the import of cold-rolled steel and its products, which is what a sister company to Krakatau was to begin producing in 1987. The import monopolies collected a commission of $20 per ton and a "handling fee" of 2.5 percent of the value. In 1984 and 1985, with Indonesia importing more than $400 million in cold-rolled steel, the private monopoly was roughly comparable in value to that in plastics. 14
The key figures in P. T. Giwang Selogam were familiar ones. The chairman of the board was Liem Sioe Liong, who held a 20 percent interest in the firm. The executive director was the president's relative, Sudwikatmono, who held 6.7 percent of the shares. Most of the rest were held by relatives and business associates of Liem. Liem had a substantial interest in cold-rolled steel. P. T. Cold Rolling Mill Indonesia Utama, a joint venture between Krakatau Steel and Liem Sioe Liong, was scheduled to begin production in 1987. 15
The World Bank, in its 1986 report on Indonesia, estimated that these import arrangements raised domestic steel prices 25 to 45 percent above international levels. 16 A domestic study found that users of every type of steel reported that prices increased significantly. Users also reported that the majority of steel was being imported by both monopolies exclusively from Japan, whereas much lower prices were being quoted by suppliers in other countries. Lead time on orders through Krakatau was up to seven months, twice the time required when producers could import on their own. 17
The steel import monopoly thus worked badly for all parties but the monopolists: a large and costly state enterprise and a group of private investors associated with the president, who were earning easy money without performing any economic services.
Controls on Private Investment
The control of imports was only one strand to the government's program. Another was control of new investments. Foreign investment had been closely controlled from 1974 on. Domestic investment also required some form of government approval. The means of control grew more elaborate with the passing of years.
In October 1981 the head of the Capital Investment Coordinating Agency, Suhartoyo, announced at a news conference that the annual priority lists he had just issued for the year were "the most comprehensive guidelines ever issued" by his organization. The lists included 56 "top-priority" areas in which the government would permit domestic or foreign investment under certain conditions, and more than 275 specific ventures for which the government was seeking investors. Some ventures were highly specific as to location, capacity, and ownership. For example, a pulp and paper mill was listed that was to be established at Sesayap in East Kalimantan, was to be based on mixed tropical hardwood, was to have a capacity of 62,000 cubic meters of sawn timber, 81,500 cubic meters of plywood, and 165,000 tons of pulp a year, and was to be a joint venture with equity participation by an Indonesian state-owned corporation. 18
This approach continued under the leadership of Ginandjar Kartasasmita, who was named head of the investment agency in 1985 and retained his leadership of the "buy Indonesia" program. The 1985 investment priority list included four hundred projects open to foreign investors, others restricted to domestic investors, and areas closed to investment altogether. The 1986 list included nine hundred projects open to foreign investment. By 1988 the list ran to 238 pages. 19
Private investment in manufacturing fell off considerably. Approvals by the Capital Investment Coordinating Agency did increase in 1983, reflecting a rush of applications to beat the new tax deadlines. Otherwise, domestic and foreign investment approvals remained down and well below 1982 levels through the mid-1980s. Domestic investment approvals in 1986 were still 15 percent below 1982 in real terms. Foreign investment approvals remained below 1982 levels even in nominal terms. 20
Government approvals also did not translate into a comparable flow of investment capital. Hal Hill has estimated that the flow of foreign capital into Indonesia in the form of direct investment, realized and in real terms, peaked in 1975 and remained at around a fourth of that level through at least 1985. The impact on Indonesian manufacturing was substantial; of all realized foreign investment from 1967 through 1985, 59 percent was in manufacturing. 21
In comparative terms, foreign investment in Indonesia from 1970 through 1984 was dwarfed by foreign investment in Malaysia and Singapore, and also by foreign investment in such oil-producing countries as Mexico and Nigeria. The totals in billions of U.S. dollars were: Mexico, 13.2; Singapore, 12.9; Malaysia, 9.0; Nigeria, 4.0; and Indonesia, 3.0. Even Thailand, which lagged behind Indonesia in the 1975-79 period, ran some 30 percent ahead in the period of 1980-84. Only the Philippines, of the ASEAN economies, ran behind Indonesia throughout. 22
The critical element in so far as foreign investment in manufacturing in Indonesia was concerned was Japan. When petroleum was excluded, private investment from Japan amounted to 68 percent of all foreign investment. 23 Japanese assessments, however, were turning increasingly negative. Japanese trade representatives in Jakarta issued statements to the effect that only 60 percent of Japanese joint ventures in Indonesia were operating profitably and that Indonesia's attractiveness for Japanese investors was rapidly falling below that of other countries in Southeast Asia. 24 In January 1987 a Japanese survey found this latter opinion widespread among Japanese corporations. 25
Several reasons accounted for the decline in investments. Private economists judged that the devaluations of 1978 and 1983 were a significant cause, especially in their impact on Japanese investment. Also, import substitution was reaching a saturation point in some sectors, especially with the decline of domestic demand beginning in 1982. In the face of these obstacles the investment policy was ineffective. Indeed, it is difficult to avoid the impression that the bureaucracy's effort to give detailed direction to private investment was counterproductive.
The State Sector
A powerful lobby for government protection from foreign manufacturers was the state sector itself. The Economic Census of 1986 counted 589 large and medium-sized state enterprises operating in 1985, owned by the national government, local governments, and a variety of joint ventures among these and the private sector. Data on 215 enterprises owned and operated by the national government at the end of March 1986 provided further information. By sector, the total included thirty-eight in manufacturing, thirty-eight in agriculture, twenty-two in banking and finance, nineteen in public works, seventeen in transportation, and eight in mining and energy. Still others were involved in a variety of other activities ranging from international trade to hotels and printing. 26
The state enterprise sector experienced massive expansion during the years from 1979 to 1985. The total assets of the 215 enterprises grew at an annual rate of 25 percent, and their sales grew from 20 to 30 percent of Gross Domestic Product (GDP). 27 Much of this was accomplished as a result of government infusions of capital. The state enterprises as a group consistently showed a significant deficit in their operations, averaging the equivalent of 4.8 percent of GDP in the 1980 to 1983 period, declining in subsequent years to become 2.8 percent in 1986. Investment in the state enterprises was not financed from their own savings for the most part; savings provided only 28 percent of investment in the enterprises in 1980 to 1983, and rose to only 40 percent in 1986. The deficit being run by the state sector enterprises was among the most important factors contributing to the resource gap of the public sector as a whole. 28 This swelling of the role of state enterprises in the heyday of oil price rises flowed from several sources. One of these was undoubtedly ideological. The 1945 Constitution, reflecting the broadly socialist views of most national leaders at the time, provided for government ownership of mineral resources and other "important" sectors of the economy. Another source of support for the state sector was political. The state enterprises were the uncontested terrain of indigenous Indonesians, and so provided an essential counterweight to the Chinese firms that tended to dominate the private sector. In addition, the state enterprises enjoyed significant bureaucratic support. Almost every government department had one or more enterprises under its supervision, and these were sources of various perquisites, including posts for senior bureaucrats long in the department's service. We have seen that the trade ministry assigned lucrative monopolies to its own enterprises, until these were lost to more powerful interests. The armed forces also had a strong bureaucratic interest in the state sector. The great majority of state enterprises were widely believed to be headed by military personnel and retired military personnel in the mid-1980s. The expansion of the state enterprises thus served the interests of a wide swath of the political elite.
For all these reasons, when resources narrowed, the state enterprises and their managers and patrons came to constitute a powerful lobby for maintaining the status quo. 29
The Private Sector
In comparison with the state sector, private enterprise became a significant consideration in public policy only at a relatively late date. Indigenous enterprise was all along an interest after Indonesia's independence, for the reason that the indigenous population was poorly
represented in businesses beyond those small in scale, and the government tried to promote indigenous firms through a variety of public programs. But private enterprise as such was not given much attention, and, when it was, it was usually seen as a kind of activity that needed to be "guided."
The Fourth Five-Year Plan, announced in early 1984, introduced a view of the private sector that represented a sharp departure from the previously prevailing official attitude. The Fourth Plan estimated that the economy would have to create 9.0 million new jobs over the five-year period, and calculated that the economy would have to grow at a rate of 5 percent a year in order to do that. This, in turn, would require the investment of Rupiah 145.2 trillion, and the central government budget would be able to provide from oil revenue, taxes, and foreign aid only a little more than half that amount. The remainder—Rupiah 67.5 trillion—would have to come from the private sector and state enterprises. The announcement of this conclusion created something of a sensation in Jakarta. Who in the private sector would be able to invest so much? Surely, said Tempo magazine, the bulk would have to come from the business "giants" like Liem Sioe Liong, William Soeryadjaya, Lie Siong Thay, The Nin King, and Agus Nursalim, all well-known figures in the ethnic Chinese business community. 30
The Indonesian Chamber of Commerce and Industry sponsored a meeting in late March 1984, attended by about four hundred of the country's leading indigenous and ethnic Chinese businessmen, to discuss the government plan. The conference was addressed by General Moerdani, commander of the armed forces, and by Lieutenant General Sudharmono, then the state secretary and chairman of Golkar, both of whom appealed for an end to racial discrimination in the interest of harmony and continued economic growth. The conference ended with the issuance of a joint statement calling for the "mobilization of all national business resources, irrespective of racial origin, to make the fourth five-year plan a success." 31
Relations between the government and the ethnic Chinese business community were already controversial. The government had, by this time, encouraged private investment, sometimes jointly with government investment, in cement, flour, basic chemicals, paper, petrochemicals, fertilizers, pharmaceuticals, shipbuilding, electric power generation, and coal production. 32 It was estimated that three-fourths of government bank loans were going to ethnic Chinese firms. And it was widely believed that ethnic Chinese businessmen were secretly in partnership with numerous high military and civilian officials.
Feelings were mixed on both sides at the prospect of the Chinese playing a larger role. Speaking of his fellow Chinese-Indonesians, Sofyan Wanandi said, "They really have the capital for expansion. But they are still afraid, whether the society will accept them." 33 Mohammad Sadli, now an official of the Chamber of Commerce, which was a preserve of indigenous businessmen, said the problem was "the tendency for capital and ownership to become centered in a small group of Chinese firms." It would help if there were incentives for them to "go public"; if the public was not ready, the government could establish a trust fund to buy and hold the shares temporarily. It also was time, Sadli said, to think about antimonopoly or antitrust legislation. 34
Of a total Indonesian population of 147 million in 1981, 4.1 million, or 2.8 percent, were estimated to be ethnic Chinese. Although this was the smallest proportion of ethnic Chinese in any ASEAN state other than the Philippines, their integration with the rest of the national society was still limited. Some Chinese families had been in Indonesia for generations and had prospered under Dutch rule. Others had arrived after World War II, and some 1.0 million were still not Indonesian citizens as late as 1970. Added to the separateness these circumstances implied was an undercurrent of resentment over the phenomenon of alliances between Chinese businessmen and high officials. It was even said that some Chinese businessmen had settled their families abroad so as to make it easy to leave themselves should that become necessary. 35
The sensitivity of the subject could be judged from the absence of systematic data on Chinese-owned business, and from the government's efforts to suppress attention to the topic in the press. The magazine Expo undertook in early 1984 to compile and publish brief biographies of Indonesia's one hundred "millionaire" businessmen, the great majority of whom, it said, were of Chinese descent. After two issues and having gotten no further than millionaire number 44, Expo was banned from publication. The topic was then taken up by the magazine Fokus , which published a list of two hundred millionaires in April and May of 1984 and analyzed some of the country's largest business conglomerates. Fokus then also was banned. 36 Despite their brief existence, these sources did begin to reveal the increasing scale, complexity, and maturity of the Indonesian private sector.
Many private corporations were established from the late 1960s on by individuals who already owned one or more corporations. More than half the private equity capital invested between 1970 and 1986 was found by one study to be in 125 corporate groups owned by single individuals or families. Most were owned by Chinese Indonesians (thirty-nine of the top forty-seven). Most of these had gotten started on a small scale in the colonial period (thirty-six of thirty-nine). Most indigenous Indonesian owners (eight of the top forty-seven) had gotten started only in the 1950s. 37
The development of these large family concerns in the late 1960s and early 1970s was made possible, at least in part, by alliances with foreign partners in fields where technology was crucial, mainly textiles, chemicals, metals, paper products, electrical appliances, and transportation equipment. Families went into several unrelated fields at the same time, perhaps seeking safety in diversity. Military and bureaucratic favoritism also was thought to be a significant factor in the start-up period by way of government licenses, contracts, and loans. 38
The oil boom years were highly favorable to the prosperity and further expansion of these new manufacturing ventures, in part because of the January 15 "disaster" of 1974. The nationalistic policy regime—the effort to keep new foreign investment out, and the encouragement of local business by means of tax holidays and subsidized bank loans—during a period of expanded government spending was generating increased demand. One conglomerate, the Astra group, owned by William Suryadjaya and his family, had 197 companies under its control by 1986. 39
By the 1980s many of the new conglomerates were thus well established in the manufacture of intermediate and consumer goods. And when the boom ended they were hard hit. Auto sales peaked at 208,000 units in 1981 and fell to 150,000 after 1983. Electric appliances fell 35 percent from 1980 to 1986. 40 Thus the calls for help, and the step-up of government protection beginning in 1982.
That the bulk of these firms were Chinese ensured that, whatever the quality of their management and whatever the justification for government protection, an undercurrent of dissent from the government program of protection would exist, both in and out of government, and this was to be a factor in bringing the program to an eventual end.
The President's Family and Friends
There was, in addition to the state and private sectors, a growing third sector usually referred to as "the palace group" or, simply, "the family." Stories about the financial interests of the president's family and friends were long a staple of Jakarta gossip. It was left largely to the foreign press, however, to deal directly with the topic.
The first foreign press account to receive major attention in Jakarta appeared in the Sydney Morning Herald on April 10, 1986, only days after the flight of Ferdinand Marcos from the Philippines. The article, by David Jenkins, the author of a well-known book on the Indonesian military, began: "As Philippine investigators peel back the covers on the hidden Marcos millions, Indonesians are asking new questions about assets of between $2 and $3 billion piled up by the family and business associates of President Soeharto." 41 The article went on to describe a number of cases involving two of the president's sons, one of his daughters, his half-brother, his foster brother, and another relative, all of whom in only a few years had acquired major interests in a wide range of businesses, including banking, the spot oil market, the clove trade, flour milling, cement, logging, hotels, textiles, and fertilizer distribution, often in collaboration with the president's long-time associate, Liem Sioe Liong. 42
Photocopies of this report proliferated rapidly in Jakarta. The Indonesian government lodged a formal protest with the Australian government and banned all Australian journalists from Indonesia. When President Ronald Reagan of the United States visited Indonesia briefly in early May, two Australian correspondents accompanying him as part of the White House press corps were turned back at the airport. 43
The story was thus kept alive for some weeks. It was as if security officers had overreacted as a way of warning the president, of trying to protect him from himself. In June retired Brigadier General Suhardiman, the head of the army-sponsored Soksi labor union since 1962, and at this point a leading survivor of the Nasution era in the Golkar group in Parliament, said it was time to start thinking about the presidency and how long any one person should serve in it. 44
Reaction apparently had reached a point at which the military leadership was concerned. In early July Soeharto met for three hours with the senior officers of the armed forces. At a press conference immediately following the meeting, General L. B. Moerdani said that many issues had arisen lately and that the meeting had been called to review them. One issue, he said, was the impression that the president and his wife were engaging in business. According to Moerdani, Soeharto told the service commanders that this was simply not true. He did receive many gifts, and he accepted all that were offered. Possibly foreigners thought the gifts went into his own pocket, but that was not so; they all went into foundations for humanitarian purposes. General Moerdani said the meeting also dealt with a number of other current issues, including the office of the presidency. He did not say what the president had had to say on this topic, nor did he commit the armed forces on the succession issue. 45
Many in the Jakarta elite, in and out of government, were more depressed than angry. The facts had long been known to them. One of Soeharto's principal advisers had earlier reflected on the situation with foreboding:
The involvement of members of the president's family in all sorts of business deals has been the great weakness of his administration. It is an easy target, and the one eventuality that can't be predicted is the possibility that some army colonel, or group of colonels, will use that weakness as the basis for a take-over. If you count all the changes of government in the Third World since World War II, the number that have taken place as a result of a coup probably easily outnumbers those that have resulted from an election. So the possibility is there. 46
By July 1986 those in the elite were in general agreement that the situation with regard to the family had to be "cleaned up." Said a Muslim political leader: "It might be true what has happened in the Philippines could not happen in Indonesia because the two countries are very different. But we don't really know much about the Philippines, and many people think that if Marcos could fall, Soeharto could too." 47
Those in the Chinese business community also thought Soeharto had to bring his family under control. But an economic adviser to the president said that Soeharto had not taken any action in response to the criticism, real and implied, in the mid-1986 events. "The president told his economic ministers in 1975 that he wanted his family's firms treated like any others," the adviser said. "But he hasn't done that since." 48
Still further information about the financial interests of the Soeharto family and friends was revealed in a series of articles that appeared in the Asian Wall Street Journal in November 1986. According to two Journal correspondents, Steven Jones and Raphael Pura, those who benefited included Liem Sioe Liong; Sudwikatmono, a cousin of the president, also sometimes referred to as his foster brother; Probosutedjo, a half-brother; Sigit Harjojudanto, the president's eldest son, then age thirty-five; Bambang Trihatmodjo, the president's second son, age thirty-three; Hutomo Mandala Putera, the president's youngest son, age twenty-four; Indra Rukmana Kowara, married to the president's eldest daughter, Siti Hardijanti Hastuti; and the president's regular golfing partner, Mohamad "Bob" Hasan, an ethnic Chinese who was raised by a Muslim army officer.
These Soeharto relatives and associates, according to the two Journal correspondents, had substantial interests in companies that had exclusive or semiexclusive rights to import, produce, or distribute flour, cement, steel, tin plate, and plastics raw materials. They also had favored or protected positions in oil trading, LNG (liquified natural gas) shipping, insurance, and foodstuffs. Son Bambang alone, they said, had interests in more than fifty companies. Jones and Pura reported that businessmen and bankers in Jakarta estimated that the groups controlled by the president's family and friends were generating "hundreds of millions of dollars in revenue each year." 49
(Liem Sioe Liong alone was estimated in 1989 to be the single richest private person in Southeast Asia, and one of the world's fifty billionaires, with a net worth in excess of $2 billion. 50 His operations were reported to have had a total turnover in 1990 of about $8 billion, accounting for about 5 percent of Indonesia's GDP . 51 )
It was undeniable that the president's family and friends had a major stake in the government's program of industrial promotion and protection.
Pressures for Deregulation
In such circumstances, why did deregulation occur at all? We have it on the authority of Ali Wardhana, who was Coordinating Minister for the Economy, Finance, and Industry from early 1983 to early 1988, and who was a major force for reform, that deregulation was a necessity. In his first public assessment after leaving public office, Wardhana said:
Economic reform is rarely if ever undertaken for its own sake. Pressures for reform generally emerge from some crisis. . . . In Indonesia, our crisis was the slump in world prices of oil that began in 1985. Given that shock, a simple chain of economic reasoning makes it clear why economic policy makers were drawn inexorably down the path of structural adjustment. 52
This was entirely true, but it was not the entire story. As Hadi Soesastro later observed, the negative aspects of the external environment made it possible for the government to take a "low politics" approach, focusing on resource constraints and addressing the elimination of monopoly rights, special privilege, distortions, and rent-seeking, case by case, issue by issue. This made it possible to avoid the "high politics" of normative considerations, such as distributional equity, uneasiness with increased market competition, and overall structural reform. 53
Division within the governing elite in the mid-1980s was very much as it had been at the beginning of the decade when the second oil windfall had led to a surge of heavy industrial projects, many of which were scaled down, slowed down, or postponed when the price of oil sagged. The division was between economists, led by Wardhana and Sumarlin, and a group of ministers concerned with industrial affairs, led by Habibie, still the Minister of Research and Technology, and also head of the state aircraft industry. Others in the "engineers" camp included Ginandjar Kartasasmita, who had his early experience in Pertamina and was Junior Minister for Domestic Product Promotion, as well as head of the Capital Investment Coordination Board, and Hartarto Sastrosoenarto, with long experience in the state chemical industry, who was Minister of Industry. The issue between the "technocrats" and the "engineers" was the "high politics" of economic nationalism versus integration with the global economy, or, as the deregulators saw it, how deeply the bureaucracy was to intrude into the economy.
A principal strategist of the deregulation campaign reflected on this aspect of the matter:
The deregulation program is in part a technical response to negative external forces. But it also is a strategic response to encroachments of the bureaucracy, not to reduce the role of the government in the economy, but to limit the government to its proper role.
It isn't the government at the top that thinks it always knows best. It's the bureaucracy down the line that wants to make rules and regulations for everything. . . .
Look at internal sea transport. The ministry was trying to decide what ships should be going where, and when. It was much too complicated a subject for this kind of treatment, but that's the bureaucratic mind. So we got a decision that all this detailed licensing had to stop, so the shipping companies could do their job properly. And do you know what the sea transport people said? They wanted to know, what are we supposed to do now? We said, well, you could look after the harbors, see they are dredged when needed, that sort of thing. They seemed to think that was not very interesting.
Or take the case of coffee. At one time there was an international coffee agreement, Indonesia had a quota, and the quota was divided among the firms on a list of approved coffee exporters. There is no international coffee agreement anymore, but our ministry of trade still limits exports to firms on the approved list. This is really crazy. The thing to do is to let the whole thing go, to let anybody export as much coffee as he can.
But the people on the approved list have become a powerful lobby, and they are tied in with officials of the ministry of trade. So they continually produce arguments why the coffee trade can't be deregulated. . . . Just think. We got rid of import monopolies held by the president's family. That was easier than getting rid of the export controls on coffee. Who would ever believe such a thing was possible? 54
Still another element in the deregulation movement was the consideration that government protection inevitably meant protection of industry owned and operated by the Chinese minority. A cabinet officer who played a major role in the drive for deregulation said later: "People in government were giving the Chinese a lot of facilities. If they had come up as a result of fair competition, it would be all right. But they didn't. Now it's too late in some cases. They've already profited from the corruption. But it's why we need to deregulate." 55
Inexorable though the chain of reasoning might have been, the chain of action was not. It was necessary that the president himself and others at the very top of the government had to agree. No pressure was exerted on the government "from below" to act as it did. Reform had to come from the top.
Soeharto, to his credit, displayed his understanding of economic issues—and his caution in approaching change. He took his economic ministers' advice, as he had on earlier occasions when resources were constrained. He also set the pace of reform. The most controversial delay had to do, of course, with the plastics and steel industries, because of the involvement of his family and Liem Sioe Liong, but it can be assumed that many others also had to be prepared as the process of deregulation unfolded.
Cabinet ministers also counted. Wardhana and his fellow economic ministers began where they had the formal authority, bureaucratic strength, and political support to act, which was with exchange rates, interest rates, and taxes. The reelection of Soeharto in 1988, followed by new cabinet appointees, also provided opportunities for policy change. In particular, a change in the leadership of the investment coordinating agency was a signal that Soeharto saw little future in what remained of the protectionist regime.
The nature of the oil crisis also influenced the process. The oil crisis was not a single event that made "shock treatment" necessary, but rather an extended crisis that made gradualism possible. This was fortunate for two reasons. Policymakers and their staffs were able to work within their capacities to plan and execute the reforms. The long-drawn-out process also had the advantage of making it possible for each round of reforms to show results before the next round had to be pushed through the system. 56
This incremental approach included bank reforms in 1983, a tax reform at the end of that year, reform of the customs service in 1985, a devaluation of the rupiah in 1986, and partial trade reforms in May 1986, October 1986, January 1987, and December 1987. Investment controls were eased by the opening of more areas for foreign and domestic investment in 1986 and 1987. As a result of all these measures deregulation was paying off in 1988, and that helped make possible the major actions taken at the end of that year.
On November 21, 1988, a "package" of deregulation measures was announced by Radius Prawiro, now Coordinating Minister for the Economy, Finance, and Industry. He characterized the measures as "broader and more sweeping than any other in the area of trade and industry." 57
There were two key decrees. One was a decree of the Minister of Trade which provided that, effective January 1, 1989, a large number of items would no longer be under the control of "approved traders" but could again be imported by any licensed trading house and by any manufacturer. Included were 82 items in the chemical industry, among them plastics, feedstocks, and pharmaceuticals; 30 types of iron and steel; 110 items used in textile production; 50 types of food and beverages; and 46 other agricultural products—318 types of imports altogether, which more than doubled the number of products freed from import controls under previous "packages" of deregulation. 58 The second key decree was one by the Minister of Finance that established revised, often higher, tariff levels for 190 of these items. 59
The victory of the deregulators was substantial, but it was not complete. Imports of materials for the plastics industry would no longer be controlled, and that was considered a major accomplishment in light of the involvement of the president's family in the lucrative Hong Kong agency. Imports of most types of iron and steel, representing 83 percent in value of total iron and steel imports, also would no longer be controlled. 60 Some 35 percent of all imports were said to have been affected by the November decrees, but that reportedly left 16 percent still under continuing nontariff protection. 61
Further trade deregulation measures were announced in May 1990 and June 1991. Tariffs were reduced and nontariff barriers were removed for a wide range of commodities, mostly manufactured goods. Some tariffs and tariff surcharges were increased. 62 A World Bank report, completed just before the June 1991 measures, assessed the government's performance in positive terms. The share of domestic manufacturing protected by licenses was reduced from 68 percent of production in 1986 to 33 percent in May 1990. This was seen as restoring a substantial portion of the nation's manufacturing to the marketplace, reducing the costs and uncertainties of doing business, and improving quality and the prospects for entering markets abroad. 63 At the same time the net effect of changes in tariffs between 1987 and 1990, according to World Bank staff estimates, was to reduce the effective rate of protection from 68 percent to 59 percent. The real rate of protection for manufacturing, which takes into account the effect of trade policy on general prices, fell from 50 percent to 43 percent. Indonesian industry was still protected in large measure, but the system was more transparent than before. 64
By now it seemed the deregulation process might be running out of steam. Several of the goals of deregulation had been met in large measure. Much of the nontariff protection that remained involved the rice industry; deregulation could not go much further without touching the agricultural sector. Meanwhile, retrogression was beginning to take place, and some long-held objections to the growth of the private sector began to reemerge.
The Impact of Deregulation
As it was, by early 1992, deregulation had produced several demonstrable results. A recovery was evident in private investment, foreign as well as domestic, most of it in manufacturing. Non-oil exports increased significantly, and the economy was made dramatically less dependent on oil in other respects as well. The financial services sector was surging with new dynamism. The private sector was now, for the first time since independence, the driving force behind economic growth, which in 1990 increased at a real rate of 7.25 percent for the second consecutive year.
The rapid growth in domestic and foreign private investment was impressive. Domestic investment approvals, after sagging in the mid-1980s, doubled in 1987 and continued to rise through 1990, when they reached $30 billion. Foreign investment approvals went from a total of $1.5 billion in 1987 to $8.75 billion in 1990. Not all these projects were implemented, but it was estimated that private investment increased by more than 10 percent per annum during 1986-88 and by more than 18 percent per annum during 1989-90. 65 These developments were not wholly attributable to Indonesian government policy by any means. The same years also saw a general surge of investment into Southeast Asia as a result of the Plaza Accord of 1985 and the realignment that resulted in currency values. As elsewhere in Southeast Asia, the principal sources of foreign private investment in manufacturing in Indonesia after 1985 were Japan, Hong Kong, South Korea, and Taiwan. 66 In sheer volume, Thailand tended to attract more of this investment than Indonesia did. 67 Nevertheless, Indonesia's deregulation of investment was a significant factor; without it, it is highly doubtful Indonesia would have captured anything approaching the volume it did.
The economy became dramatically less dependent on oil between 1981 and 1990. The oil and natural gas sector grew more slowly than the economy as a whole, declined as a source of export earnings, and declined as a source of government revenues. The oil sector grew at an annual average rate of only 2.7 percent between 1983, when the world recession hit, and 1990. Oil sector exports fell from a high of 81.9 percent of total merchandise exports in 1981-82 to an estimated 44.9 percent in 1990-91. Government revenues from oil and gas fell from 70.6 percent of total revenues in 1981-82 to 44.2 percent in 1990-91. 68
During this same period, according to World Bank staff estimates, non-oil manufacturing grew at an annual average rate of 12.2 percent, and banking and finance grew at an annual average rate of 10.7 percent. Exports other than oil also performed better than oil did in the last half of the 1980s. Non-oil exports more than doubled from $6.7 billion in 1986-87 to an estimated $14.3 billion in 1989-90, an average annual increase of about 29 percent. Much of this growth was believed to have come from a diversifying base of manufactured goods. 69
The reform of banking and finance was possibly the most outstanding element of the deregulation program. At the start of the 1980s the financial system was dominated by banking, and banking was dominated by a handful of state banks. As a result of early deregulation of interest rates, the assets of the banking system grew at a rate of 21 percent per annum between 1982 and 1988. As a share of GDP, assets held by the banking system increased from 33 percent in 1982 to 57 percent in 1988. A second round of reforms in 1988-90 reduced the barriers to entry into the banking system and reduced the privileges of state banks. The banking system's assets grew at 26 percent per annum between 1988 and 1990, and as a share of GDP reached 66 percent. Forty new domestic banks were established in a two-year period, and fifteen new joint-venture banks. Bank branches grew from 1,640 in April 1988 to 2,842 in March 1990. The period also saw dramatic growth in the Jakarta stock exchange. A World Bank report judged the reforms to have given Indonesia "one of the most dynamic and least-distorted financial sectors in the developing world." 70
There seemed no doubt that under the pressure of international oil prices, and in the face of unfavorable exchange rates, Indonesian policymakers had accomplished a major restructuring of the economy, reducing the role of oil and increasing that of manufacturing and finance. A dramatic example of the political consequences was Soeharto's decision in October 1991 to postpone almost $10 billion in four major oil-related projects, including two refineries planned by Pertamina. 71 At the same time, the deregulation process was generating or reactivating a variety of countervailing forces that were beginning to define the possible limits of deregulation, raise the question of how enduring the technocrats' victory would be, and suggest that many issues still remained unsettled in government-business relations.
Government-Business Relations
One indication that the deregulation process was losing its momentum was the slowdown in plans for privatizing state-owned corporations. President Soeharto had called for reform of the state enterprises in December 1986, and public comment in early 1987 had led to widespread expectations that some would be offered for sale in whole or in part on the Jakarta stock exchange. If a policy decision had been made, however, its implementation was exceedingly slow. The finance ministry initiated an evaluation of 188 enterprises only in 1989, and announced that 52 were ready to "go public" only in 1990. Little more was then heard of the matter, and the finance minister was said to have suggested that "privatization" had perhaps not been a helpful term. This experience led two seasoned observers, Mackie and Sjahrir, to predict that there would be "no sudden and far-reaching leap towards full privatization of the vast public sector at all, but more probably a goulash of measures introducing some degree of involvement of private capital in some state enterprises." 72
Another setback to privatization was Soeharto's decision in 1989 to place ten "strategic" state enterprises under the protection of a new Strategic Industry Administration Board headed by Habibie. The firms included not only enterprises engaged in manufacturing armaments, but such others as Krakatau Steel, a shipyard, a producer of railroad rolling stock, a telecommunications enterprise, and an electronics production unit. The president's action raised a question about the solidity of his own support of deregulation at this point. 73
Well-publicized instances of new or renewed cases of the regulation of manufacturing also increased the ambiguity of government policy. A ban was imposed on the export of semiprocessed rattan in August 1988, following a ban on the export of raw rattan in 1986. These steps were intended to generate increased employment and export earnings by promoting the production of rattan furniture. The actions mirrored those taken early in the decade banning timber exports in order to promote plywood production. Both were seen to exemplify the power of the logging and allied industries, which were organized in a loggers association, a sawmillers association, a plywood manufacturers association, and a furniture makers association, each headed by the same individual, Bob Hasan, the president's golfing partner. 74 These associations were reportedly setting export volumes and influencing prices.
Another consortium of private traders, which included among its members a son of the president, was granted exclusive rights to trade in cloves, which were highly prized as the spice that flavored Java's distinctive clove cigarettes. This last development was enough to arouse a special critique in the World Bank's confidential annual report. 75
While the management of public trade policy by private parties, such as the wood and clove consortia, had some precedent in Indonesian government behavior, the event that occurred on March 3, 1990, did not. In his budget address of January 1990 Soeharto had made a strong plea for cooperatives as a means of distributing the gains of development equitably. He proposed that leading companies should transfer 25 percent of their equity to cooperatives as a way of sharing their wealth. The cooperatives might be made up of their employees or of others linked to the firms in some way. As the cooperatives could not afford to buy the shares, Soeharto suggested that the firms should lend money to the cooperatives so they could buy them. On March 3, 1990, Soeharto invited the owners of thirty of the country's largest corporations, all or almost all of them Chinese-Indonesians, to his farm outside Jakarta to press the case before television cameras. In due course the company heads announced they would transfer 1 percent of their listed share capital to cooperatives. 76
Privately, members of the economic profession and the business community in Jakarta were embarrassed by the entire episode. The assumption was that Soeharto was simply cleaning up his image in order to run for reelection in 1993. Cooperatives no longer had much support as a serious economic vehicle. The cooperative movement was heavily dependent on government patronage. Soeharto was seen as positioning himself politically more closely to the Islamic community by following the traditional Indonesian pattern of finding fault with the Chinese. 77
In addition, anti-Chinese opinion was on the rise. The growth of the Jakarta stock exchange was probably one reason for this. With interest rates on investment credit holding steady at 21 percent from 1986 through 1990, an increasing number of large, Chinese-owned business houses were raising funds by "going public," which usually meant selling to the public a minority portion of shares of one of their better-known subsidiaries. The information being released for the first time about these firms, and the prices their shares were attracting, raised eyebrows in Jakarta; the owners of the big conglomerates were far richer than most had realized. And the exchange itself was operating increasingly in the glare of public attention. It was estimated in 1990 that some twenty thousand to thirty thousand Indonesians had invested in the stock market, and the composite share price index ran up rapidly until April 1990, when it began a sharp fall. 78
Many signs of unease were evident. Industries minister Hartarto in early 1991 was urging large business houses, most of which were Chinese, to help smaller indigenous firms by using them as suppliers, distributors, subcontractors, and retailers. Some were of the opinion that if such voluntary schemes failed, something along the lines of Malaysia's New Economic Policy would have to be considered. 79 A Malaysia-style approach would be an improvement over the measures being rumored in Jakarta in mid-1991—that dozens of indigenous firms were obtaining credit at interest rates that were 4 to 5 percent below prevailing commercial rates, and that some seventy "giant" projects valued at a total of $70 billion were being allocated to big indigenous firms. 80
One set of observers, which included many professional economists, believed that the system of government controls was primarily responsible for the rapid rise in the private fortunes of these "rupiah billionaires." From this perspective the "hot house" environment of the 1980s was responsible for the creation of a wide array of coalitions between senior bureaucrats and major business houses, and the remedy lay in reducing government controls. If the controls were eliminated, the coalitions would lose their reason for being. A second set of observers, which included many others in the political elite, believed that the system of deregulation itself made possible the amassing of huge fortunes. From this perspective, the structure of politics was driving the creation of coalitions between officials and entrepreneurs. No matter what the government policy might be, the government-business coalitions would be enduring. 81
One thing was clear: since the late 1960s, when Indonesia was one of the world's least industrialized countries for its size, the nation's industrial capacity had experienced dramatic development, not only in the rapid growth of output and employment, but also in the transition to more capital-intensive and skill-intensive industries, a narrowing of the earlier large productivity differentials, and strong growth in productivity and wages. 82 The emergence of big corporate conglomerates, predominantly led by ethnic Chinese, also was almost entirely a phenomenon of the Soeharto era. Political connections were extremely important in the rise of these groups. The principal source of capital was credit from state banks, often at subsidized rates. 83 The Indonesian state had created a large private industrial sector. Now the society had to learn to live with it.
Note 1: Thee Kian Wie, "Industrial Restructuring in Indonesia." Back.
Note 2: Pangestu, "Survey of Recent Developments," p. 28; see also Wardhana, "Structural Adjustment in Indonesia," p. I3. Back.
Note 3: Pangestu, "Survey of Recent Developments," p. 27. Back.
Note 4: Personal interview, August I5, I989. Back.
Note 6: Sadli, "Private and State Enterprise Sectors," pp. 2I7-I8. Back.
Note 8: Republic of Indonesia, Minister of Trade, "Surat Keputusan Menteri Perdagangan nomor I208/Kp/X/1984." Back.
Note 9: Steven Jones, Asian Wall Street Journal , November 25, I986; unpublished data, Institute of Economic and Social Research, Faculty of Economics, University of Indonesia. Back.
Note 10: Jones, Asian Wall Street Journal , November 25, I986. Back.
Note 11: Ibid.; unpublished data, Institute of Economic and Social Research, Faculty of Economics, University of Indonesia. Back.
Note 12: Jones, Asian Wall Street Journal , November 25, I986. 323 Back.
Note 13: Unpublished data, Institute of Economic and Social Research, Faculty of Economics, University of Indonesia. Back.
Note 14: Ibid.; Steven Jones and Raphael Pura, Asian Wall Street Journal November 24, 1986. Back.
Note 16: World Bank, East Asia and Pacific Regional Office, Indonesia: Adjusting to Lower Oil Revenues , May 20,1986, p. 73. Back.
Note 18: National Development Information Office, Republic of Indonesia, Indonesia Development News , vol. 5, no. 2 (October 1981), pp. I and 7. For a survey of the legal regime as regards foreign investment, see Hornick and Nelson, "Foreign Investment in Indonesia." Back.
Note 19: Indonesia Development News , vol. 8, no. 12 (August 1985); Investment News Update (August 1986); Indonesia Development News , vol. 12, no. 8 (August 1989). Back.
Note 20: Hobohm, "Survey of Recent Developments," pp. 18-I9. Back.
Note 21: Hill, Foreign Investment and Industrialization , pp. 35-4I. Back.
Note 24: Hobohm, "Survey of Recent Developments," p. I9. Back.
Note 25: Thee Kian Wie, "Promoting Investment into Export-oriented Industries." Back.
Note 26: Soesastro et al., Report: Financing Public Sector Development Expenditure , pp. 110-12. Back.
Note 27: Ibid., pp. 114-15, 119-20. Back.
Note 28: Ibid., pp. 121-23. Back.
Note 30: Tempo , March 31, I984, p. 66. Back.
Note 32: Rice, "The Origins of Economic Ideas," p. I43. Back.
Note 33: Ibid., pp. 66-67. Back.
Note 35: Tan, "The Role of Ethnic Chinese Minority," pp. 367-7I; Robison, Indonesia , pp. 272-75. Back.
Note 36: Indonesia Reports: Business e Economy Supplement , no. 20 (February I987); no. 2I (June I987); no. 23 (October I987); no. 24 (November I987); and no. 25 (August I988); see also Indonesia Mirror , no. 7 (December I987). Back.
Note 37: Sato, The Development of Business Groups . Back.
Note 38: Robison, Indonesia , provides the most extended argument on this last point. Back.
Note 39: Sato, The Development of Business Groups , p. 85. Back.
Note 41: David Jenkins, "After Marcos, Now for the Soeharto Billions: A Herald Investigation," Sydney Morning Herald , April IO, I986. Back.
Note 43: Tempo , April I9, 1986, p. 17; April 6, 1986, p. I4; May 3, 1986, p. 13. Back.
Note 44: Tempo , June 8, I986, p. I. Back.
Note 45: Tempo , July I2, 1986, p. 3 Back.
Note 46: Personal interview,July 3I, I983. Back.
Note 47: Personal interview, July 6, I986. Back.
Note 48: Personal interview, July 6, I986. Back.
Note 49: Steven Jones and Raphael Pura, Asian Wall Street Journal , November 4, I986. See also Steven Jones, Asian Wall Street Journal , November 5, I986, and Raphael Pura, Asian Wall Street Journal , November 6, I986. Back.
Note 50: Forbes , July 24, 1989, p. IO. Back.
Note 51: Adam Schwarz, "Empire of the son," Far Eastern Economic Review [hereafter FEER ], March I4, I99I. Back.
Note 52: Wardhana, "Structural Adjustment in Indonesia." Back.
Note 53: Soesastro, "Political Economy of Deregulation," pp. 866-67; see also M. Hadi Soesastro and Peter Drysdale, "Survey of Recent Developments," Bulletin of Indonesian Economic Studies , vol. 6, no. 3 (December I990), p. 33. Back.
Note 54: Personal interview, August 3, I989. Back.
Note 55: Personal interview, August IS, I989. Back.
Note 56: Wardhana, "Structural Adjustment in Indonesia," pp. 5 and 3. Back.
Note 57: Michael Vatikiotis, "Reform without Favor," FEER , December I, I986, p. 61. Back.
Note 58: Republic of Indonesia, Minister of Trade, "Keputusan Menteri Perdagangan nomor 37s/Kp/XI/Ig88," reproduced in Himpunan Peraturan Perundang-undangan Paket Kebijaksanaan Deregulasi 2I Nopember I988 (Jakarta: CV Eko Jaya, n.d.), pp. 76-Iog. Back.
Note 59: Republic of Indonesia, Minister of Finance, "Keputusan Menteri Keuangan nomor II60/KMK.oo/I988," in ibid., pp. I3-38. Back.
Note 61: Asia Week , December 9, I988, p. 64. Back.
Note 62: FEER , June 7, I990; Nasution, "Survey of Recent Developments," p. 8. Back.
Note 63: World Bank, Country Department V, Asia Regional Office, Indonesia: Developing Private Enterprise , Report No. g4g8-IND (Washington, D.C.: World Bank, May 9, I991), pp. 58. Back.
Note 64: Ibid., pp. 58-6. Back.
Note 65: Republic of Indonesia, National Development Information Office, Indonesia Development News , vol. I4, no. 3 aanuary/February 199I) p. 4. Back.
Note 66: Lim and Pang, Foreign Direct Investment and Industrialization . Back.
Note 67: Guisinger, "Foreign Direct Investment," p. 35, Table 3. Back.
Note 68: World Bank, Indonesia: Developing Private Enterprise , pp. 6-8. Back.
Note 69: Ibid., pp. 5-8. Back.
Note 71: The Asian Wall Street Journal Weekly , October 2I, I99I. Back.
Note 72: Mackie and Sjahrir, "Survey of Recent Developments," p. 27. Back.
Note 75: World Bank, Indonesia: Developing Private Enterprise , p. 64. Back.
Note 76: Pangestu and Habir, "Survey of Recent Developments," pp. 33-36. Back.
Note 77: MacIntyre, "Political Dimensions to Controversy," pp. I22-28. Back.
Note 78: Nasution, "Survey of Recent Developments," p. 25; FEER , April I9, I990; Soesastro and Drysdale, "Survey of Recent Developments," pp. 22-23. Back.
Note 79: Adam Schwarz, "Piece of the action," FEER , May 2, I99I. Back.
Note 80: Max Wangkar et al., "Yang Mengumbar, Yang Terancam," Tempo (July 20, I99I). Back.
Note 81: Soesastro et al., Financing Public Sector Development Expenditure , pp. 868-69; Mackie and Sjahrir, "Survey of Recent Developments," pp. 32-33. Back.
Note 82: Hill, "Indonesia's Industrial Transformation," pp. 79-I20. Back.
Note 83: Mackie, "The Indonesian Conglomerates," pp. I08-28. Back.
Email this citation