Showing papers in "Bulletin of Indonesian Economic Studies in 2003"
TL;DR: Indonesia has an impressive record of economic growth and poverty reduction over the past two decades as discussed by the authors, however, the growth-poverty nexus appears strong at the aggregate level.
Abstract: Indonesia has an impressive record of economic growth and poverty reduction over the past two decades. The growth-poverty nexus appears strong at the aggregate level. However, newly constructed pan...
147 citations
TL;DR: In this article, a legal framework for the democratisation of local-level politics and village institutions is presented, where representative councils have been elected in all Indonesian villages and the village head is no longer the sole authority in the community, and village governments are provided with far-reaching autonomy and do not need the approval of higher authorities to take decisions and implement policies.
Abstract: The political reforms that began in Indonesia in 1998 have created new opportunities for a revised relationship between state and community, replacing the New Order's centralistic and uniform framework with local-level institutions that are strong and responsive. This paper presents the new legal framework for the democratisation of local-level politics and village institutions. Representative councils have been elected in all Indonesian villages, and the village head is no longer the sole authority in the community. Village governments are provided with far-reaching autonomy and do not need the approval of higher authorities to take decisions and implement policies. However, decentralisation and democratisation are necessary but not sufficient preconditions for developing the countryside and alleviating poverty. An active government and civil society engagement must ensure that regulations are not distorted during implementation, and that ordinary people are included in public policy making and local gov...
135 citations
TL;DR: In this article, the authors found that the imposition of minimum wages has a negative and statistically significant impact on employment in the urban formal sector and that the disemployment impact is greatest for female, young and less educated workers.
Abstract: Since the late 1980s, minimum wages have become an important plank of the Indonesian government's labour policy. Their levels have increased faster in real terms than those of average wages and per capita gross domestic product and, as a result, minimum wages have become binding for the majority of formal sector workers. This study finds that the imposition of minimum wages has a negative and statistically significant impact on employment in the urban formal sector. The disemployment impact is greatest for female, young and less educated workers, while the employment prospects of white-collar workers are enhanced by increases in minimum wages. Some workers who lose jobs in the formal sector and have to relocate to the informal sector face lower earnings and poorer working conditions.
105 citations
TL;DR: In this paper, the authors evaluate the different paths of trade liberalisation the country has followed, and measure their effects on the economy, and show that the full implementation of UR and APEC liberalisation would greatly benefit Indonesia, and that unilateral liberalisation, carried out in conjunction with the UR commitment, would lead to large welfare gains.
Abstract: Indonesia has undergone comprehensive trade liberalisation by participating in multilateral and regional trade arrangements and by conducting unilateral liberalisation. This paper evaluates the different paths of liberalisation the country has followed, and measures their effects on the economy. It considers the impact of several liberalisation scenarios: unilateral liberalisation; regional liberalisation through APEC (Asia Pacific Economic Cooperation) and AFTA (the ASEAN Free Trade Area); and multilateral trade liberalisation through the Uruguay Round (UR). The results show that the full implementation of UR and APEC liberalisation would greatly benefit Indonesia, and that unilateral liberalisation, carried out in conjunction with the UR commitment, would lead to large welfare gains. On the other hand, the creation of AFTA is expected to add little to welfare in Indonesia or in the other ASEAN member countries.
52 citations
TL;DR: This article found that only around 40% of all newly authorised subnational taxes and charges were submitted to the centre for review as required by law; the remainder were presumably implemented without central evaluation and therefore illegally.
Abstract: Under fiscal decentralisation, regional governments have been given the authority to create new taxes and charges. Many observers have criticised the regions for being too aggressive in establishing new revenue instruments, and the central government for allowing too many of them to stand. Regional governments authorised nearly 1,000 new taxes and charges in the run-up to and through fiscal year 2001, many of them focused on primary sector goods and factors. The analysis here suggests that only around 40% of all newly authorised subnational taxes and charges were submitted to the centre for review as required by law; the remainder were presumably implemented without central evaluation and therefore illegally. Regional governments argue that they create new taxes and charges out of fiscal need, but this paper finds no evidence to support the claim that lack of fiscal capacity is a driving force in the creation of new revenue instruments.
51 citations
TL;DR: In this article, the authors argue that there is a close medium to long-term relationship between money growth and inflation in Indonesia, and that this has not been greatly disturbed by the crisis, and they argue that the country's disappointing performance in relation to maintaining the value of the rupiah can be explained by the failure to sterilise the monetary impact on base money of its last-resort lending to the banks.
Abstract: Indonesia's depreciation vastly exceeded that of all other countries hit by the Asian crisis. Indonesia also experienced far higher inflation. This paper argues that there is a close medium to long-term relationship between money growth and inflation in Indonesia, and that this has not been greatly disturbed by the crisis. It argues that the country's disappointing performance in relation to maintaining the value of the rupiah can be explained by the central bank's failure to sterilise the monetary impact on base money of its last-resort lending to the banks. The fundamental lesson is that Bank Indonesia would be well advised to adopt slow and steady growth of base money as the nominal anchor for monetary policy, now that the pre-crisis policy of slow and steady depreciation of the rupiah has been abandoned.
39 citations
TL;DR: In this paper, the authors trace the stages of the Indonesian banking crisis of the late 1990s and identify the lessons of how quickly things can get out of hand in an apparently strongly performing economy; that at the outset of a crisis information will be very limited; and that management of crisis will be an evolving process, and that transparency too is indispensable, to generate public trust and support, and to ensure that actions taken by the authorities are irreversible.
Abstract: This article traces the stages of the Indonesian banking crisis of the late 1990s. Almost every stage of the handling of the crisis was complicated by governance issues. Beyond these, among the lessons identified are how quickly things can get out of hand in an apparently strongly performing economy; that at the outset of a crisis information will be very limited; and that management of a crisis will be an evolving process. A blanket guarantee covering all bank liabilities may be indispensable; however, the authorities are 'buying time', and the more time that has to be bought the more expensive the process will be. Transparency too is indispensable, to generate public trust and support, and to ensure that actions taken by the authorities are irreversible. Overall, while not everything was done right, the strategy put in place had positive elements that have served to protect a core banking system and establish conditions for recovery.
31 citations
TL;DR: The changes in grant allocation among regions have been less revolutionary than the 1999 decentralisation legislation envisaged because the resource-rich regions were able to force the government to modify the proposed fiscal gap formula for allocating general purpose grants so as to put more weight on the status quo as mentioned in this paper.
Abstract: The changes in grant allocation among regions have been less revolutionary than the 1999 decentralisation legislation envisaged because the resource-rich regions were able to force the government to modify the proposed fiscal gap formula for allocating general purpose grants so as to put more weight on the status quo. Partly for this reason, and partly because no major tax was decentralised, there has not been much increase in autonomy for the regions that have few natural resources. In addition, it is argued here that the procedures for grant allocation in 2002 created incentives for regional fragmentation and did not take account of poverty in an appropriate way.
29 citations
TL;DR: In this paper, the authors outline the key challenges confronting the textile and apparel sector and highlight the potential of preferential trade agreements (PTAs) in the context of low-cost non-member producers such as Indonesia.
Abstract: International rules governing textiles and apparel trade are undergoing transformation. The Multi-Fibre Arrangement (MFA) is being phased out, and as of January 2005 textiles and apparel trade will be conducted under World Trade Organization (WTO) rules. For Indonesia, this presents challenges and opportunities. The global trading system is increasingly seeing the introduction of preferential trade agreements (PTAs) that liberalise trade among members but discriminate against nonmembers. Major markets are negotiating new PTAs that divert trade away from low-cost non-member producers such as Indonesia. China's entry into the WTO allows producers there to take advantage of liberalised quotas and the integration of textile and apparel products into the tariff-based trade system as of 2002. With rising domestic production costs, increased local government interventions and poor tax administration, Indonesian producers face a 'double squeeze'. This paper outlines the key challenges confronting the sector and m...
28 citations
TL;DR: The separation of North Sulawesi and Gorontalo into two provinces in 2001 complicated the issue of making regional autonomy work for northern Sulawensis, a region far removed from Indonesia's centre of power as mentioned in this paper.
Abstract: The separation of North Sulawesi and Gorontalo into two provinces in 2001 complicated the issue of making regional autonomy work for northern Sulawesi, a region far removed from Indonesia's centre of power. Although the region had come through the economic crisis relatively well, the over-reliance on coconuts and the lack of a focus for dynamic development remained a challenge. Tourism, mining and services were the most dynamic sectors but, for different reasons, none of these sectors can be relied on for steady long-term growth. With the selection of the corridor from Manado to Bitung as one of Indonesia's 13 integrated economic development zones (Kapet), and given the new North Sulawesi province's potential role as a ‘gateway’ to Northeast Asia, the longer-term prospects for this province are brighter than those of Gorontalo. Nevertheless, capitalising on North Sulawesi's potential remains a formidable challenge.
10 citations
TL;DR: The Indonesian parliament recently passed Law 17/2003 on State Finance as mentioned in this paper, which aims to ensure that public finances are managed in an efficient, effective, transparent, and accountable manner.
Abstract: After a lengthy process of deliberation, the Indonesian parliament recently passed Law 17/2003 on State Finance. The prime objective of the legislation is to ensure that public finances are managed in an efficient, effective, transparent and accountable manner. To achieve this objective, the law stipulates the implementation of a number of reforms in the management of state finance. It therefore marks a major step forward in Indonesia's drive to establish a sound system of public finance management and realise good governance. This paper highlights some of the salient features of the new law and discusses its potential contribution to addressing Indonesia's chronic problems of corruption. It also highlights several problems that could affect the capacity of government to implement the new law effectively.
TL;DR: The authors argued that McLeod's monetarist explanation of inflation in Indonesia is unsatisfactory in theory and is not consistent with the evidence: traded goods prices rose before, and substantially more than, non-traded goods prices during the crisis of 1997-98, which is inconsistent with the monetarist view that inflation was caused by excessive base money growth.
Abstract: This comment argues that inflation-focused policy is appropriate for Indonesia but that it should be directed at underlying inflation over the medium term. It contends that McLeod's monetarist explanation of inflation in Indonesia is unsatisfactory in theory and is not consistent with the evidence: traded goods prices rose before, and substantially more than, non-traded goods prices during the crisis of 1997–98, which is not consistent with the monetarist view that inflation was caused by excessive base money growth.
TL;DR: The papers described here document the methodology of certain statistical series, and explore data-related questions, aimed mainly at users outside BPS, and cover series on the national accounts, industry, the labour force and agriculture.
Abstract: This note discusses a series of papers produced by the USAID-funded STAT project at the Indonesian Statistics Agency (BPS). The project's goal was to help BPS design new activities based on improved statistical techniques, so as to enhance the agency's provision of accurate and timely data, and to increase its openness and transparency through documentation of sources and methods, and soliciting of user feedback. The papers described here document the methodology of certain statistical series, and explore data-related questions. They are aimed mainly at users outside BPS, and cover series on the national accounts, industry, the labour force and agriculture.