Indonesia - Abstracts


From Subsistence Crises to Trade Cycle Depressions,
Java 1800-1940

by Peter Boomgaard
Leiden, the Netherlands

It has been argued that the 1930s Depression was the first Western or international Depression of any importance to hit Southeast Asia. However, there are indications that the so-called Agricultural Depression of the period 1870s to 1890s made itself felt in the area as well, at least in Indonesia.
In my paper for this conference I will look at several ‘recessions' between 1800 and 1940, trying to find out whether there is a moment in time when trade-cycle depressions imported from the West are added to the so-called ‘crises de subsistence', or whether this is too primitive a notion.

State, society and institutional learning: lessons of the 19-20th centuries
by Howard Dick, Associate Professor
Australian Centre for International Business
University of Melbourne, Australia

Does authoritarian, state-directed development accelerate or retard institutional learning and why? Development requires a double transition, from a poor to a rich nation and from an authoritarian to a democratic one. Countries may achieve one transition but not the other or may, like Indonesia, flip-flop between economic and political development without completing either transition. This challenge may be reconceptualised as one of search strategy and institutional learning. For most of the 19 and 20th centuries, Indonesia's development has been directed by an authoritarian state, first colonial, later New Order, causing economic development to run ahead of political development. The meltdown after the Asian Crisis showed up the weaknesses of the country's formal institutions and the unsustainability of economic development built upon those foundations. The recommended solution has been reform of governance, but progress looks to be agonisingly slow and is breeding disillusionment. An alternative approach is to identify and analyse the informal institutions which govern economic and political life and the extent of their replacement by or assimilation to the formal institutions of the state. There evidence of a viable popular culture of independence from and resistance to the claims of the state. The elite, by contrast, appears to have acculturated quite successfully to the modern state. However, even at the elite level, institutional learning seems to be slow because oligopolistic rivalry between competing sectional interests, which a strong state can suppress but not resolve. Institutions therefore remain contested. From a different social basis, a similar problem seems to arise in the Philippines. In both cases the outcome is a nation riven by intra-elite rivalries and struggling to achieve social and political cooperation towards goals of national development.

A quest of industrial district: An empirical study of small and cottage industries in Java
by Mudrajad Kuncoro
Faculty of Economics, Gadjah Mada University
Yogyakarta, Indonesia

Java is an excellent laboratory for testing the traditional industrial district and New Industrial Distrcit (NID) theory for Small & Cottage Establishments (SCE), since there are many clusters of SCE throughout the island. To analyze them we depart from previous methodologies that apply a case study approach and examine only a small set of clusters (Bachruddin et al., 1996; Sandee & Weijland, 1989; van Diermen, 1997; Weijland, 1999). Unlike previous narrowly focused case studies, this study covers all manufacturing subsectors and regions in Java by analyzing the unprocessed data of 1996 Economic Census (SE96). This census is the most comprehensive database in Indonesia, providing detailed information with respect to establishments by various size of establishment (large, medium, small, cottage), sector, and region, from provincial to district level.
This paper showed that industrial district theory, rather than the New Economic Geography (NEG) theory, better explained the clustering of SCE. None of the key hypothesized by NEG factors to explain the uneven distribution of manufacturing activities obviously applies to SCE. Increasing returns, economies of scale and imperfect competition are the key factors that explain spatial concentration of Large & Medium Establishments (LME) in and around urban regions (Fujita et al., 1999: 345-6; Krugman, 1996). Yet, the explanatory power of these factors is questioned when one attempts to illuminate SCE clustering. This suggests that NEG virtually ignores the role and presence of SCE in the regional clusters.
The NEG model of agglomeration forces may apply only to the SCE within metropolitan regions. This study found that there were SCE within the metropolitan areas that do show high spatial concentration. According to NEG theory, market size is one of the centripetal forces that attract industries to concentrate in metropolitan regions. Yet, the discriminant analysis showed that the market size was the least important factors affecting SCE in clustering in the regions. As the great majority of LME are heavily concentrated in the metropolitan regions due to the agglomeration forces, this suggests there is an overlapping spatial pattern of SCE and LME in metropolitan regions. Nevertheless, our empirical study showed that the sub-contracting relation between SCE and LME in Java is still in the 'embryonic' stage.
Important distinguishing features of the industrial district have been identified by discriminant analysis. The results suggest that the best predictor was average wages, followed by proportion of family workers, proportion of residing in rural regions, and productivity of labour, age of firm, foster parent proportion, number of skilled workers and population. Thus, SCE in industrial districts differ statistically from the rest of Java in terms of those key variables. However, further detailed analysis shows that all three forms of industrial districts, namely Marshallian industrial districts, industrial complex clusters, and mature clusters, can be found in Java. This supports Harrison's suggestion that 'the conception of the district surely goes beyond Marshallian externality and agglomeration theory' (Harrison, 1992: 478). Our study provides at least some justification for integrating the industrial district theory and agglomeration theory to understand the SCE and LME clustering in Java.

The importance of indonesianisasi during the transition from the 1930s to the 1960s
by J. Thomas Lindblad
Leiden University
Leiden, the Netherlands

The term indonesianisasi stands for the removal of Dutch tutelage and a fundamental reorientation of the economy in Indonesia at the time of decolonization and immediately after Dutch acknowledgement of Indonesian independence. This contribution forms a first exploration of this theme. I will essentially demonstrate the following:
(a) that the process of indonesianisasi had its roots already in the late colonial period, specifically in the 1930s,
(b) that this process needs to be considered within a wider framework of reorientation and structural transformation of the Indonesian economy.
The argument is that indonesianisasi became important for future economic developments in Indonesia precisely because it was not an isolated event.

Accelerations in Java Sea trade. Foreign and domestic trade and shipping in late colonial Indonesia, 1870-1940
by Jeroen Touwen
Leiden University
Leiden, the Netherlands

In the past decade, the relationship between trade and economic development in the Indonesian archipelago has often been subject of study. Departing from various theories on the growth effects of trade, which were either critical or more supportive of trade expansion, the impact of trade on economic development has been studied for specific regions and specific sectors of the economy. Trade flows have been analysed in various commodities and also by origin and destination.
This contribution will concentrate on traded volumes in late colonial Indonesia. Thus we reduce the attention for price changes, which naturally influences the representation of trade in terms of value (when trade flows are drawn up in current prices). The assumption is that price changes will take effect in the composition and volume of exports and imports within a number of years. When the market price of export commodities falls, the income earned by exports may decrease, but this decrease can be offset by deflation, by a simultaneous fall in import prices and food prices, or even by an increase in volume. An analysis in terms of volume focuses on the trading activities of merchants and in a more indirect manner on the macroeconomic effects of trade. We may assume that, if traders decided to export or import goods, there may have been a comparative advantage in doing so – whatever was traded at whatever price.
Time series will be analysed to compare the volume of overseas and inter-island (coastal) trade. In addition, trade statistics will be compared for several specific commodities or categories of goods. The shipping statistics add an extra dimension to the analysis of trade statistics. The period 1870-1940 will be divided in several sub-periods in order to analyse the association between coastal and international trade, the rates of change, the dominance of specific types of exports and imports, and the regional differences within the Indonesian archipelago.
This contribution draws upon the source publication Shipping and trade in the Java Sea region, 1870-1940; A collection of statistics on the major Java Sea port. This collection of statistics was published in 2001 as part of the project ‘The Java Sea Region in an Age of Transition, ca 1870-1970’. The database which was constructed contains data on the twelve major ports around the Java Sea – six located on the northern coast of Java, six located in the Outer Islands. It contains data both on shipping (number of shipping movements, the aggregate cargo transported, the types of ships, the nationalities of ships) and on trade (using a selection of products, including foreign trade and interregional trade). The twelve ports around the Java Sea constitute a selected sample of all ports scattered along the coastlines of the Java Sea. Within the network of domestic and international trade they display a wide range of characteristics, typical of the diversity of the Indonesian archipelago.

Economic growth in Java 1820-1940. Is it possible to reconstruct the Javanese historical national accounts?
by Jan Luiten van Zanden
University of Utrecht / IISG
Utrecht / Amsterdam, the Netherlands

In the paper it is argued that in order to analyse and understand the long-term development of the economy of Indonesia/Java in the 19th and 20th century, a detailed reconstruction of the national accounts are both necessary and feasible. Next the paper explains how this may be done for Java between c. 1820 and 1880, and also applies the methods developed in this part of the study for a reconstruction of the regional/national accounts for the period 1880-1940. Finally the highly tentative results of this experiment are presented and discussed briefly.