Basic Need in Indonesia: Economics, Politics, and Public Policy 9789814379120

This study attempts to look at the basic needs condition in Indonesia from 1969 to 1984, using economics, politics and p

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Basic Need in Indonesia: Economics, Politics, and Public Policy

Table of contents :
List of Tables
List of Figures
I. Indonesian Economic and Political Development and the Basic Needs Relation
II. Basic Needs Results in New Order Indonesia
III. Basic Needs Results: A Public Policy Perspective
IV. Summary and Conclusion: A Prospective Appraisal of Basic Needs
Newspapers and Periodicals

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BASIC NEEDS IN INDONESIA Economics, Politics and Public Policy

Institute of Southeast Asian Studies The Institute of Southeast Asian Studies was established as an autonomous organization in May 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia, particularly the multi-faceted problems of development and modernization, and political and social change. The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. A ten-man Executive Committee oversees day-to-day operations; it is chaired by the Director, the Institute's chief academic and administrative officer.

BASIC NEEDS IN INDONESIA Economics, Politics and Public Policy

Sjahrir Center for Policy Studies


Published by Institute of Southeast Asian Studies Heng Mui Keng Terrace Pasir Panjang Singapore 0511 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies.

© 1986 Institute of Southeast Asian Studies

Cataloguing in Publication Data

Sjahrir Basic needs in Indonesia: economics, politics and public policy. 1. Basic needs - Indonesia. 2. Indonesia- Economic policy. 3. Indonesia - Social policy. I. Title. HC450 S62 1986. ISBN 9971-988-44-5 Typeset by Art Communication Workshop Printed in Singapore by MCD Pte Ltd.

Contents Page

List of Tables List of Figures Foreword Preface

vi vii ix xii

Indonesian Economic and Political Development and the Basic Needs Relation Introduction Indonesian Political Development Issues Related to Basic Needs in the New Order Era

23 37

Basic Needs Results in New Order Indonesia The Macro and Micro Orientation The Sectoral Results Single Indicators

50 50 56 69

III. Basic Needs Results: A Public Policy Perspective

88 88 88 94 110



Introduction Scope and Methodology Applications Conclusion


IV. Summary and Conclusion: A Prospective Appraisal of Basic Needs




Newspapers and Periodicals



List of Tables Page

1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


2.10 2.11 2.12 2.13

Index of per Capita Income at Constant Prices, 1951-57 Index of per Capita GNP at Constant Prices, 1958-67 Budget Deficit as a Percentage of Government Revenues Jakarta's Inflation Rate or Cost of Living Index Percentage Increases in the Cost of Living Index, 1966-77 Changes in Sectoral Output Shares Distribution and Size of Work Force in Indonesia (OJo), 1961-80 Ratio between Share of GOP and Share of Labour Force, Changes, 1971-80 Indonesian Rice Production and Trade, 1968-81 The Four Main Parties and their Votes (OJo) The 191~ and 1977 Parliamentary Elections (Votes in Thousands) Comparative Labour Profiles of Poor and Non-Poor Household, Java (OJo), April1976 Apparent Consumption of Staple Foods in Indonesia Comparison of Spending: SUSENAS Data Versus GOP Accounts SUSENAS and Dapice's Consumption Difference Ratio Proportion of Population at or Below Specified Expenditure Levels Percentage and Cause of Mortality, 1972 and 1980 Population Distribution and Growth by Island, 1930-80 Percentage of Married Women Aged 10-49 Years Using Contraceptive Method Currently (1980 Used) PQLI Performance and per Capita GNP Growth Rates for Selected Countries c. 1950, 1960 and 1970 (Ranked by "1950" PQLI) Level and Trends of Poverty in Indonesia 1970-76 Based on Various Poverty Thresholds: Sayogyo's Estimates and World Bank Collections Poverty Line Changes in Indonesia, 1970-76 Poverty Threshold Using Sayogyo's Guideline in Rice Equivalent (RE) for the Whole of Indonesia, 1980 Poverty Line Estimates, 1980 Calculations of Revised 1980 Income Distribution vi

9 9 12 12 14 19 19 20 20 28 35 39 59 59 60

61 65 66 69


74 75 75 76 77

2.14 Poverty Line Changes, 1970-80 2.15 Calorie Consumption Adding to Food Items from Expenditure Group, Average Calorie Price and Total Population, 1976 3.1 Three-Year Averages of Area, Production and Yield, Java and Off-Java, 1968-70 to 1979-81 3.2 BIMAS Programme Participation, 1971-82 3.3 Current Uses Rates by Province, June 1982


79 101 101 109

List of Figures Page

1.1 Share of Primary Sectors in GOP and Labour Force 2.1 Demographic Transitions in Indonesia and Selected Asian Countries, 1960-80 3.1 Distribution Channels for BIMAS Input Supplies


18 68 96


Foreword This book on Basic Needs in Indonesia is a revision of Dr Sjahrir's dissertation submitted to Harvard University for a Ph.D. degree in Political Economy and Government. This is a somewhat old-fashioned degree. It harks back to the very origins of economics as a discipline and reflects a Ricardian concern for the application of the tools of economic analysis to the problems of the body politic. To do this usefully, the scholar must understand not only economics as an analytical science bU:t also government as a collective process of decision making. Hence the degree is in political economy and government. A candidate's dissertation is meant to demonstrate skills in both dimensions and a keen awareness of links between them. There is no better topic than basic needs to provide a stage for such a demonstration. At its simplest, a basic needs development strategy argues for high priorities on increasing the poor's consumption of a package of essential goods and services - food, health care, education, housing, clothing, water and sanitation, and so on. Just what to include in this package of basic needs has been a constant source of argument, with radical strategists calling for political liberation, freedom of speech, and other human rights, while development economists tended to focus on key economic factors more amenable to incrementalist approaches. Of these, food and education programmes leading to literacy, and basic primary health care have come to be seen as most important because of their combined effects on improving welfare in the short run and potential payoff in the long run as return on investment in human capital. It is these three sectors that Sjahrir examines in an Indonesian context. This context needs no explanation from a Western scholar to readers of the Bahasa Indonesia version, but readers of an English edition may not have similar detailed knowledge of modern Indonesian history. For Indonesian readers, there are also comparative perspectives that might be illuminating indeed, and the following comments are offered to both sets of readers. To the Western world, Indonesia is the least well known or understood society relative to its size. Despite being the world's fifth most populous country, a diverse and rich culture that spans two millennia, and one of the most astonishing development records in modern economic history, Indonesia remains a mystery to most Americans and Europeans. The ix

reasons are no doubt complex, but at least part of the reason must be the relative paucity of Indonesian scholars writing for an international community of scholars. For whatever reason, most Indonesian scholars, and especially the economists, have stayed at home and worked on the problem of their own society, for the benefit of their society. Important as this is to the success of the development process itself, the result has been an incomplete and spotty analysis of the Indonesian record accessible to outsiders. Sjahrir's thesis stands as a welcome addition to this literature. What is so unusual about the Indonesian story? Firstly, the record spotlights the crucial interplay between political stability and economic growth. No one can come away from Sjahrir's discussion of the 1950s and 1960s without sensing a house of cards about to tumble, as political ideology puslred aside economic reality. But the political concept of Indonesia as a nation was cemented in these two decades despite all the economic costs. Without this concept as reality, none of modern Indonesia's economic achievements would have been possible. By the same token, political integration could very easily have been sacrificed if economic reality had not been asserted in time. Perhaps only countries that have stepped to the very edge of economic chaos are prepared to make the long-term political commitments needed to set the process of economic development firmly in place. How else can we explain the strikingly different development paths of Asian countries compared with Africa and Latin America? Sjahrir's overview of Indonesian economic and political development weaves these themes together very persuasively. The contrast between the political orientation of the pre-New Order government and the economic orientation of the New Order highlights the enormity of the basic needs tasks confronting development strategists in 1967 when Sjahrir's story really begins. Here, the government's concern for growth and rehabilitation was paramount, with meeting basic needs well back in priority. As Emil Salim put it in 1970, "there is little point in dividing up evenly such a tiny pie." For many governments around the world, in Brazil or the Philippines, for example, the pie never seems to become large enough for concerns about equity to be acted upon. Why is Indonesia different? Despite all the remaining problems of poverty and the inadequacies of implementing programmes that Sjahrir correctly notes, why is the Indonesian record on alleviation of poverty and improvement in basic needs so dramatic? Once again, the answer lies in the realm of politics and economics. It is a story that is particularly fascinating in Sjahrir's telling because he was one of the key actors who helped bridge a widespread political concern for more equitable results of the development process in the early 1970s with a revised economic strategy that responded to that challenge. X

Sjahrir's analysis shows clearly how this integration came about, and no single part of the story can give a complete picture. The economic analysis in Chapter II, for example, demonstrates quite conclusively the dramatic progress achieved during the 1970s in increased food intake, primary schooling, and access to rural clinics where family planning facilities were available. No matter whether micro-economic surveys, sectoral patterns, or macro-economic results are used to measure progress in achieving basic needs, progress is very impressive even if not complete. It is fair to say that the degree of progress surprised even Sjahrir himself, and the next chapter to be written is a search for explanations beyond just the economic policies themselves. The public policy perspective of Chapter III will probably not fully make sense to readers who have not seen how the story unfolds up to that point. In this chapter Sjahrir is asking why - given the economic and political history in Chapter I and the achievements cited in Chapter II the results are so successful and the remaining failures so troubling. His analysis in depth of the implementation of three key programmes BIMAS rice intensification, INPRES SD (primary school), and family planning - from the perspective of policy functions and decision order reaches some important conclusions. Economic benefits are the key to participation in government programmes. Better incentives and less directiveness increase the efficiency of programmes. And basic needs can be provided only through progressive alleviation of poverty. For the latter, a healthy rural economy is essential, and with this lesson Sjahrir's analysis comes full circle. In his concluding chapter Sjahrir rightly emphasizes Hirschman's concepts of entrepreneurial and reform functions of government, with a key task being how to redress a perpetual bias on the part of most elite-based governments towards urban-oriented development strategies. Indonesia has escaped much of the worst of this bias, which is the ultimate explanation for her success in meeting basic needs. Sjahrir's analysis of this success, when read as an integrated whole which links the economic strategies with the political context, provides the best understanding yet as to why Indonesia is so different. C. Peter Timmer John D. Black Professor of Agriculture and Economics Harvard Business School


Preface I have been motivated to undertake this study because of my deep concern for socio-economic equity and democracy in Indonesia. This in turn came from my experience as a student activist in Indonesia. The discussions with several friends from that period to the present day shaped many of the ideas behind this study. It is to these friends that I owe my gratitude. This study would not have been possible but for the constant encouragement, help, guidance, and constructive criticism given to me by my advisors C. Peter Timmer and John D. Montgomery . As the primary advisor, C. Peter Timmer has proved that the word "guru" has a universal meaning. Throughout this long period of study he was as generous with his patience, understandin g and help as he was in demanding high quality academic work. I had the pleasure of working as a teaching assistant to my other advisor, John D. Montgomery , and this valuable experience contributed greatly to my understandin g of the relevance of the study of public policy. \ This study is the result of academic work in the most splendid academic setting that I have ever experienced at Harvard University. The Ford Foundation funded my tuition and living expenses for nearly five years and I thank them for their generosity. In particular, I thank Theodore Smith, Tom G. Kessinger, and John Newmann. The advice, help and criticism of Soedjatmok o gave me a better insight on trying to combine functions as an academic and social critic. My study and stay in Cambridge could not have been productive without the care of Gustav F. Papanek and Hanna Papanek. The Rector of the Universitas Indonesia, Mahar Mardjono, encouraged me to go to Harvard University for higher studies in 1978. I am grateful to him for his confidence in me. David 0. Dapice, and S. Malcolm Gillis improved my knowledge and methodological skills to undertake this study. The important role played by the former is particularly evident in the work. I must acknowledge the invaluable help that I received from Paul Streeten of Boston University and Allan Strout of MIT. My fellow graduate students, Richard Monteverde and Rama Subba Rao helped me significantly, particularly in the final stages of this study. Janet Hoskins helped me in the early stages of the study. Amy Rodriguez and Nalini Subba Rao helped with the typing of the draft as well as the final thesis. I am thankful to Widigdo Sukarman for generously lending xii

his word processor to prepare the final thesis. My mother-in-law, Mrs B. Pandjaitan showed patience and care throughout the entire period of my study and my deep gratitude for her help. It is a matter of personal grief that by the time I completed this study both my father, Maamoen AI Rasjid and my father-in-Jaw Bonar Pandjaitan passed away. This work could not have come to the successful end but for the loving and understanding family that I am fortunate to have. My wife Kartini never hesitated to sacrifice in every possible way to support my study. My son Pandu and daughter Gita, both in their own way gave me the pleasure of being a father and the inspiration for this study. This book is dedicated to my late mother, Rusma Malik, who sacrificed the most throughout the period of my life until she passed away in August 1984. For the publication in the present book form by the Institute of Southeast Asian Studies, I wish to thank Professor K. S. Sandhu for the research fel1owship which gave me time to revise and update my original work. The assistance and help from Dr Sharon Siddique, Mrs Triena Ong and Mrs Betty Kwan helped my work considerably. Of course, the responsibility for the views in this publication is my own. Sjahrir



Indonesian Economic and Political Development and the Basic Needs Relation


Since Indonesia proclaimed its independence on 17 August 1945 and gained its sovereignty from the Dutch in December 1949, tremendous changes have taken place in nearly every aspect of the economic and political life of this new state. And yet, some constants loom large for the people of Indonesia. David Dapice, an astute observer of Indonesia put it this way: ''watching Indonesia is like watching a race between the possible and the inevitable". 1 What he meant by "possible" is using the natural and human resources for the benefit of its population and by "inevitable", the population increase and labour surplus that endangers the "survival" of Indonesia itself. The Indonesian population in 1984 exceeded 161 million 2 making it the fifth most populous nation in the world. There are two factors that make population pressure in Indonesia even more serious. The first is the population distribution. The islands of Java and Madura which have only 6.89 per cent of the total arable land absorb 61.9 per cent of the total population. In 1982, Java and Madura had 718 persons per sq km 3 which makes them two of the most densely populated areas in the world. The second problem is that Indonesia's population is very young. In 1980, 40.9 per cent of the total population was in the 0-14 age group. This implies a large dependence ratio for the people in the work-force and pressure to increase employment in the immediate future as well as pressure for more education. Yet the World Bank, in its World Development Report, 1982, 4 has promoted Indonesia from the category of low income countries to that of middle income countries with a Gross National Product (GNP) per capita of US$430 in 1980 and recorded increased well being in many social indicators, as well as high food production. In 1984 Indonesian Gross Domestic Product stood at US$560 per capita. An overview5 of Indonesian economic and political development will give us the chance to see to what extent the possibilities have been exhausted as well as missed. It covers the period 1950-59 called the parliamentary democracy period which saw eight cabinets and the so-called Guided Democracy era (1959-66) under President Soekarno for the Old



Order or pre-New Order. The New Order began with the abortive coup on 30 September 1965 which saw the end of Soekarno and the entry of General Soeharto who became president in 1967. Much emphasis will be placed on the New Order, instituted in 1966, since not only are the data to be scrutinized for basic needs research from the New Order era, but also from the fact that it was only during the New Order era that growth and stability exist in Indonesian history. The characteristics of the New Order will be compared with those of the preceding era which will be called the pre-New Order era. The path of post-independence Indonesian economy over time is characterized by both continuity and change. Continuity persisted mostly for the twenty years of independence and in some way too, for the last fifteen years. Change occurred mostly within the last fifteen years. The continuities are: increase in population, underemployment, poverty, and inequity as a result of low purchasing power and low access to public utilities and public facilities, inefficiency in the bureaucracy, corruption, and the low level of economic growth with a high level of inflation especially from 1957 to 1966. Since the New Order took power some of these continuities are still in existence such as bureaucratic inefficiency and corruption, but changes have taken place in many other sectors such as changes in the economic structure. And for the last fifteen years, there has been continuous high level of economic growth and a lower level of inflation. But since 1982, the Indonesian economy has been affected by the world recession and the growth in 1982 was a mere 2.2 per cent and in 1983 4.2 per cent, both based on 1973 constant price. One other aspect of the economy during the New Order era that requires attention is the increased role of market forces in the economic system, which is complicated by the strong existence of the state's involvement in the economy. 6 In order to understand the continuity and changes as well as some of the roots of the economic conditions of both eras (pre-New Order and the New Order) the following reviews of the economy of each era will be divided into two parts, namely, planning and economic policy, and income, production, and structural dimension.

The Pre-New Order Era

The pre-New Order era saw great changes in the government as well as the political system, but it was also an era in which there were many negative continuities in the economy. Some New Order proponents might argue that the low standard of living was a result of the political instability then. 7 But to a large extent the low level of economic development in post-independence Indonesia was the heritage of the colonial economy. 8



However, it is also true though that some of the problems of the economy were results of missed opportunities, particularly during the period of parliamentary democracy (1950 to 1958-59) and the pre-occupation with politics during the so-called Guided Democracy and "guided economy" era (1958-59 to 1965-66) where the predominant political actor was President Soekarno who was not interested to say the least, in the technicalities and intricacies of the economic affairs of the state.

Planning and Economic Policy The discussion on the state's role in this period will be further divided into two periods that have different political systems; the period of parliamentary democracy (from 1950 to 1957-58) and the Guided Democracy and guided economy period (1957-58 to 1965-66). The difference in the political system resulted in differences in the perception of the state's role in the economy as well as differences in the society's responses, especially the private sector, towards the declared policy of the state. The interaction between the state and society with regard to economic policy and planning is hence very significant. It has a strategic effect on real economic conditions.

Planning: Economic Urgency Plan 1951, Five-Year Plan (1955-60), Eight-Year Plan (1961-69) Although Indonesia proclaimed independence in 1945, the transfer of sovereignty occurred only in December 1949 and in the interim even though there was an economic plan committee headed by Vice President Hatta, the whole programme of the Indonesian Government was political diplomacy and war with the Dutch who attempted to regain their former colony. For this reason and as there are no statistics for the period 1945-50, 9 this study begins in 1950-51. However, in the period of parliamentary democracy and Guided Democracy there were many changes in the government. From the Hatta Cabinet (when Indonesia was a federal republic) to the Djuanda Cabinet (the last cabinet in which parliamentary democracy was in operation) there existed eight cabinets over a span of less than ten years. What is amazing is the preoccupation of the successive cabinets with planning and not surprisingly and to be discussed later, the utter failure in the implementation of their plans. Since independence, Indonesia has had a formal development plan in every period. Chronologically, they are the Committee for Strategic Development in 1947 10 (organized during the bitter fight against the Dutch that made it impossible to carry out economic planning); the



1951 11 Economic Urgency Plan (Rencana Urgensi Perekonomian) continued in 1956 12 with an economically rational five-year plan made by a

planning agency; in 1961 13 this was replaced by the National Comprehensive Development Plan for the next eight years; and finally, to the successive REPELITAs I, II and III and the present REPELITA IV which will end on 31 March 1989. This means that from 1947 until the present Indonesia always had a development plan supposedly in effect. The 1951 Economic Urgency Plan, the 1955 five-year plan and finally the 1961 eightyear plan will be discussed here. Economic Urgency Plan and its Economic Policy When the plan was made in 1951, the per capita income of Indonesia was 28.3 guilders which was even lower than the per capita income of the Dutch East Indies in the worst year of depression in 1933, at 30 guilders. 14 This level of living existed within an economic structure which was essentially still a colonial economy, albeit, under a different government political structure, namely, an independent Indonesian Government. The logical step for a new independent country was to increase the standan;l of living of its population and to change the economic structure to reflect its political independence. Unfortunately increasing the well-being of the Indonesian population and building a national economic structure was a zero sum game at that time. This dilemma was reflected in the Economic Urgency Plan (EUP) which was a stronger form of indicative planning compared to the subsequent two plans in the pre-New Order era. The EUP consisted of programmes which were nationalistic in nature, "developing small national (indigenous) industry to produce import substitutes in the hope of reducing dependence on foreign trade; by means of capital assistance to indigenous sellers, including specific import licences for indigenous importers" Y The EUP also called the Sumitro Plan, after the then Minister of Trade and Industry, Dr Sumitro Djojokadikusomo- gave a direction which clearly assume!;! a greater role for the state in the economy. For example, in the EUP there is a "provision that the government would control new 'key industries' including defence plants, basic chemical industries, cement plants, power plants, water works and transport enterprises''. 16 The EUP was preceded by the Benteng programme (fortress programme) aimed at creating indigenous Indonesian entrepreneurs by creditbacking deeree legislation. 17 The Benteng programme influenced the EUP in its change of direction frop1 the colonial economic structure to the national economic structure. The EUP and Benteng programme were implemented at a time when the standard of living of most of the population was low as was the level



of expertise that could implement and monitor the plan bureaucratically thus creating a serious problem by trying to do more than they could. Part of the problem came from the fact that the economic structure was still a colonial structure "that was dominated by export oriented foreign enterprises in the modern sector and peasant agriculture in the traditional sector'' . 18 The Central Bank was not yet nationalized in 1951 19 and public transportation such as the Sea Transportation Company, KPM (Koningklyke Paketvaart Maatschappy) was still owned by the Dutch. In this situation it was difficult to radically alter economic power. Although successive cabinets pronounced "socialist" slogans, it is clear that throughout the parliamentary democracy period, the changes in the economic structure were painfully slower than the decrees or slogans might suggest. The only option available in economic policy for the governments practising parliamentary democracy was whether to enhance the state's power through increased build-up and strengthening the public corporations or indigenous enterprises (as opposed to Chinese Indonesian or non-Indonesian Chinese) through the implementation of the Benteng programme. The lack of real options may explain why the EUP as well as the Benteng programme seemed politically bound to the preceding cabinet. In theory, each consecutive cabinet has a new mandate and this should give them power to build a new economic policy. The fact of the matter is that every cabinet from the Hatta Cabinet to the first Ali Cabinet (that is, from December 1949 to July 1955) announced and implemented an economic policy that was an implementation of the EUP and the Benteng programme. The policies implemented were: monetary tightening, budget tightening to control inflation, manipulation of exchange rates and trade policies to direct and control foreign exchange through differential exchange rates, import tightening, export certificate system and other regulations. lndigenization in the private sector was mostly through credit facilities and decrees allowing specific indigenous companies the privilege of importing certain material. In the public sector the national banking system was started during the Natsir Cabinet (1950-51) and Sukiman Cabinet (1952) with the creation of the Commercial State Bank and nationalization of the Central Bank from the Javasche Bank to Bank Indonesia. 20 Looking at the agricultural sector the importance of rice in the economy and the need for a clear government policy concerning it was another legacy of the colonial period. Timmer stated in 1975 Looking back with a thirty-year perspective reveals how thoroughly the Dutch actions of the 1930s laid the path for what was to follow. The physical apparatus in the form of the Stichting Het Voedings middel en fonds (VMF) and regulations carefully organizing all aspects



of trade in rice were put in place. In addition, and perhaps more importantly a philosophy was established. It argued that rice was too important to be left alone and that the proper government response was direct intervention in the market place, frequently with trade barriers, price ceilings and floors and an ultimate reliance on cheap foreign imports to maintain stability. 21

The quote above stresses the continuing importance of rice in the economy which will be discussed under the New Order era as BULOG (Logistics Board or Badan Urusan Logistik) still greatly influences the rice economy even now. 22 Rice rations were distributed in 1950-51 to civil servants and continued through the post -independence period to the present. The colonial institution that intervened in the rice market called VMF was renamed BAMA (Jajasan Bahan Makanan or Foundation for Food) in the pre-New Order era in 1950 and subsequently changed to JUBM (Jajasan Urusan Bahan Makanan) in 1952. What happened throughout the EUP and the Benteng programme was that socialist decrees although repeatedly proclaimed were not implemented in the modern sector. The Benteng programme which was supposed to produce strong indigenous enterprise failed to do so because favouritism (by decree with special licences as well as soft credit loans that were given without clear business criteria) produced only corruption at the government level and the so-called Ali-Baba enterprises ("Ali" is the nominal Indonesian and "Baba" the Chinese Indonesian). 23 But to say that the national economy was more of a private sector economy would be inaccurate if we take into consideration the state's influence on the functioning of the rice market through many policy instruments as well as the increased role of the state's Commercial Bank and public enterprises. What caused the failure of the EUP as well as the Benteng programme was1hat the Dutch influence in the economy was still strong until December 1957, when existing Dutch firms were taken over by the Indonesian Government. 24 The existence of Dutch enterprises hindered the effort to produce a national economy since it conflicted with their own interests. However, the takeover of the Dutch firms also produced a situation in which the national economy became more an economy in which the state had increased influence as opposed to the private sector. This became apparent in the five-year and eight-year plans. First Five-Year Plan (1955-56 to 1960-61)

The first five-year plan which was supposed to be implemented from 1955 to 1960 was completed and ratified as a national plan only during the Ali Sastroamidjojo Cabinet (April1956), although technically Ali Sastroamidjojo did not play a part in the planning and was under no obligation to



carry out the plan. 25 Again as during the EUP this showed that the preoccupation of the political elites with planning transcended the legal aspect as well as parliamentary procedure. The five-year plan was actually prepared before the second Ali Cabinet came to power as a result of the first Indonesian general election. But without much debate the second Ali Cabinet adopted the plan as the new cabinet economic plan in September 1956. What happened to the plan is a classic example of how good economic plans fail because of political problems. The Indonesian first five-year plan was proposed by a special newly established National Planning Board (BPN or Biro Perancang Negara)26 and was formulated with the help of a group of foreign experts. BPN was established with a permanent staff, attached to the office of the Prime Minister. The plan was the result of efforts spanning more than four years and at least five cabinets. 27 Although an indicative plan, it was comprehensive and covered volumes/ 8 the first presenting the proposed planning law, the second, the plan framework and major projects, and the third, specifications of individual projects. In the plan, the ICOR (incremental capital output ratio) was used in the calculation of investment needs and output desired. 29 What is ironic about this first five-year plan is that it failed when Djuanda was Prime Minister as he was one of the principal architects of the plan and the Minister of Planning during the second Ali Cabinet which adopted the plan. This was a result of the increasingly volatile political situation when anti-Dutch sentiments on the West Irian issue resulted in the takeover of Dutch firms under Djuanda. 30 The economic policies suggested as a consequence of the adoption of the first five-year plan were not implemented at all, except for the submission of the foreign investment bill to ParliamentY What happened in short, was the increased importance of political issues at the cost of economics. 32 The influence of politics over economics was vividly reflected in the eight-year plan. The rise of President Soekarno from a symbolic role as head of state to a powerful president became apparent in the appointment of Djuanda as Prime Minister responsible to Soekarno and inevitably when President Soekarno himself took executive power in 1959. Eight-Year Plan (1961-69) Whereas the five-year plan (1955-60) was proposed and formulated by the BPN consisting mostly of technocrats, the eight-year plan was formulated by DEPERNAS (Dewan Perancang Nasional or the National Planning Council) whose members were mostly politicians under a senior politician, Mohammad Yamin. 33 This plan consisted of two projects:



Project A for the lists of projected expenditures and Project B was the projection of anticipated total resources available to finance Project A. Although Douglas Paauw in an understatement commented, for example on the composition of Project A, that ''the government was unable to maintain any semblance of its investment programme ... " ,34 it seems that development centred on industry and infrastructure needs was clear, and reliable foreign exchange resources was targeted as its input. But Project B which was supposed to list sources of financing seemed very obscure and, in fact, appeared as more wishful thinking than rational calculation of expected financing. Project B relied heavily on profit-sharing from foreign investment which was hard to realize considering the heavy anti-Western tone in the Indonesian political scene throughout President Soekarno's period as Chief Executive (1959-65). The orientation towards basic needs, for example, was lacking when we see that financing for agriculture was only 11.2 per cent of total planning. The allocations for education and research (7 .8 per cent), and health and housing welfare (3.4 per cent) were relatively small compared to industry (27 .4 per cent), and transport and communication (24.6 per cent). This happened because the politically oriented eight-year plan favoured the more glamorous heavy industry and import substitution industry in their investment priority at the cost of agricultural investment and basic needs services. The plan was, in effect, dropped entirely in late 1965 because of an abortive coup allegedly by the communists on 30 September 1965. Thus, economic policy as a consequence of the adoption of the eight-year plan was implemented only in mid-1965. It is difficult to figure out what kind of policy was implemented as a result of the eight-year-plan as politics became increasingly more important and expenditure for the struggle for West Irian was high. It was partially funded by Soviet military aid which in turn made it more difficult to obtain Western aid or attract Western investment. The remnants of the heavy industry oriented plan could be seen in the iron ore factory project at Cilegon, West Java, and the Krakatan Steel among others. The former project was never finished and remains incomplete during the New Order era, while the latter's future as a highly subsidized state-owned steel industry remains in doubt. These examples lead us to the record of the Indonesian economy during the preNew Order era. Income, Production and Structural Dimension of the Indonesian Economy in the Pre-New Order Period (1950-51 to 1965-66) Since all three economic plans in the pre-New Order era failed because of the political constraints as well as technical limitations it is not necessary



to divide this section into three separate parts. Instead the record will be divided according to differences in the level of growth along two separate time series, that is 1951-57 and 1958 to 1965-66. The attempt to calculate the Indonesian national income3 5 was first done by S.D. Neumark in 1954, for the year 1951-52. 36 Since Neumark's attempt, Muljatno and Baranski have attempted extensions of the Neumark estimates37 in August 1957. Tables 1.1. and 1.2 show changes in per capita income for 1951 to 1957 and 1958 to 1967. In 1957 the national income (in Rp thousand million) was 165.0 and in 1958 it was 174.238 when the Indonesian population was 87,514,000 and 89,441,000 respectively. 39 In per capita income there was an increase of 3.3 per cent from 1957 to 1958, from Rp 1885.4 to Rp 1947.6. This was the real transition period since from 1958 the index of growth produced TABLE l.l. INDfX OF PER CAPITA INCOME AT CONSTANT PRICES; 19-'1-57



Index · (1951 "" 100)

1951 1952 1953 1954 1955 1956 1957

100.0 100.8 126.8 128.6 133.4 136.4 144.4

Growth (in per cent)

3.8 22.1

1.4 2.7 2.2 5.8

United Nations (1963), p. 188.




Index (1958 = 100)

1958 1959 1960 1961 1962 1963 1964 1965 1966 1967

100.0 98.2 96.7 98.4 95.7 93.1 95.3 95.8 96.4 98.6

United Nations (1963), p. 186.

Growth (in per eent)

... 1.8. -1.5

1.7 -2.7 -2.7

2.4 0.5 0.6 2.3



a stagnant condition as can be seen in Table 1.2. From these figures one can conclude that the economy stagnated mostly during the period in which political consideration and Soekarno's increasing importance in national politics became apparent. In contrast, despite problems with the "indigenization" process and the existence of Dutch firms from 1951 to 1957, the economic growth increased steadily during that period. However, one has to take into consideration the result of the Korean boom for the staggering growth in 1953 at a level of 22.1 per cent. Hence, despite problems of cabinet changes during the parliamentary democracy system it seems clear that the modern sector growth was not stagnant. At the production and consumption level the difference in the two periods seems less obvious. The fluctuation and rise in the two time periods in which growth differed significantly did not produce considerable differences in rice consumption. From 1950 to 1957, per capita consumption rose from 77.7 to 85, whereas from 1958 to 1966 the changes were from 90 to 94 kg per capita. But the fluctuation seemed sharper in the latter period when there was a drop in consumption from 109 kg in 1960 to only 101 kg in 1961 and even 92 kg in 1963. 40 What can be concluded from the rice consumption figure was that there existed a relatively stagnant consumption since 1954 which declined after 1960. An analysis of the contribution of industrial origin of domestic product will contribute to the understanding of sectoral changes over time in the economy. Whereas in 1951 and 1952, the contribution of agriculture was 55.7 per cent and 56.2 per cent of net income by industrial origin, it became 51.5 per cent in 1964, which means practically an absence of structural change over time. 41 It shows the static condition of the structural variable. The primary sector covering agriculture, forestry, fishery, mining and quarrying, changed very little from 53 per cent in 1958 to 59.6 per cent in 1966. It was 57.9 per cent in 1951 and 58.8 per cent in 1952. 42 In other words it is clear that since independence Indonesia until the New Order came to power saw no structural change or transformation throughout that period. Since there was no structural change, and as growth stagnated during the Guided Economy period, it seems logical to conclude that dissatisfaction arose against the Old Order and with the advantage of hindsight there seems more and more justification to assume that the reason for the rise of the New Order was economic. Of course, this explanation is only partially correct, but it is clear from the pre-New Order economic record that the New Order will put their priority on economic issues. Development became more justified as the new ideology for the New Order as opposed to the "politics first" theme during President Soekarno's leadership.



The New Order Era

The earlier period of the New Order era was characterized by political conflict initiated by the attempted coup on 30 September 1965 to probably untill967, when General Soeharto finally assumed presidency. The fact that when the New Order first came to power the inflation rate was 650 per cent for 1966 meant that the early phase of the era was concerned with stabilization and rehabilitation, and it was only after April 1969, the first five-year plan (REPELITA I) finally came to the fore. With regard to the five-year plan, I will discuss the preparation and formulation of three five-year plans (REPELITAs I, II, III) and part of REPELITA IV. The last part of the New Order era will be a discussion on economic changes over time. REPELITAs I (1969-70 to 1973-74), II (1974-75 to 1978-79), III (1979-80 to 1983-84) and IV (1984-85 to 1988-89) and the Economic Policy (1966-84/ 3

The political condition within which the five-year plans were formulated and implemented was diametrically different from the previous periods in Indonesian history. For the first time since independence, political stability was maintained for a much longer time than before. In discussing the period for the preparation of REPELIT A I which was actually a rehabilitation period (1966 to 1968-69) it is important to deal with the nature of inflation in Indonesia which was a runaway inflation in 1966, since the origin of inflation was budget deficit during the pre-New Order era. In fact, since early independence, Indonesia was troubled with a budget deficit which worsened during Soekarno's term as Chief Executive in 1959. As shown in Table I. 3, it was only in 1951 at the height of the Korean boom that Indonesia had a surplus in its budget. 44 Also as seen from the table in the last four years of Soekarno's term, budget deficit became so huge that it even surpassed government revenue. During the pre-New Order era, the percentage changes in the Jakarta cost of living index were as in Table 1.4. 45 As can be seen from the figures there seems to be a close relation between price increases and deficit in the budget especially from 1962 to 1966. One other factor that contributed strongly to the inflation was the government policy towards international trade. Regulation of exports on the uses of foreign exchange as well as import licences only produced an overvalued rupiah which in turn increased prices of imported consumer goods and raw materials needed for production. This was the result of the foreign exchange blackmarket and importers' difficult access to the



TABLE 1.3.







1950 1951 1952 1953 1954 1955 1956 1957 1958

24.3 -10.2 22.9 15.4 32.8 14.6 8.7 24.2 51.5

1959 1960 1961 1962 1963 1964 1965 1966

45.1 20.3 42.3 63.0 103.4 140.4 173.8 127.3

Newman (1974).

TABLE 1.4.








1951 1952 1953 1954 1955

36.2 3.0 6.0 10.9 24.0

1956 1957 1958 1959 1960

0.8 41.9 17.9 19.4 29.5

1961 1962 1963 1964 1965 1966

29.5 156.8 128.1 135.1 594.1 635.4

official exchange rate. The regulation on exports also decreased the capacity to tax exports and that, in turn, reduced government revenue which eventually increased budget deficit. The only way to overcome budget deficit was printing money which indeed was done especially in 1965-66. Even during Soekarno's high inflation period, there was a chance to halt the inflationary pressure with outside sources, namely, the International Monetary Fund (IMF) and the U.S. Government. Cheryl Payer stated that there was a striking "dress rehearsal" for the events of 1966-67 (when the Soeharto government began its stabilization and rehabilitation programmes) in 1962-63. 46 Payer stated that an economic survey team from the United States visited Indonesia and issued a report in November 1962, recommending a five-year US$390 million aid programme to which the United States would contribute US$233 million. 47 She stated that the aid however was contingent on Indonesia's co-operation with the IMF in the matters of devaluation of the rupiah and budgetary restraints .... In August 1963, Indonesia entered into a stand-by



arrangement with the IMF, reportedly signed under U.S. initiative, which would enable it to draw up to US$50 million over the coming year. 48

It seemed, initially that some discipline in the economy was implemented; for example, in Soekarno's address called DEKON (Deklarasi Ekonomi or Economic Declaration) on 28 March 1963. 49 DEKON was planned as a start for a more realistic economic policy in which less regulations would be imposed on trade and more discipline would be enforced in government expenditure. Soon, however, the "dynamics" of Soekarno's politics caught on, that is, his formula of using a common enemy to integrate conflicting factions in the domestic political scene. He was initially successful when the issue was to gain from the Dutch the integration of West Irian in Indonesia. But in September 1963 he went too far when he launched an anti-Malaysia confrontation. Payer stated that after the anti-Malaysia confrontation was launched, "Almost immediately the United States and the IMP announced the cancellation of their recently concluded aid arrangements" .50 The attempted coup on 30 September 1965 changed the political scene radically as the influence of the army increased significantly and the communist party was crushed. In the aftermath it seems clear that since March 1966, power had been transferred from Soekarno to Soeharto51 and the international dimension and the national political scene seemed ripe for a fundamental change on the social scene. Although not necessarily a "dress rehearsal" that Payer suggested, it seems clear that the preoccupation of the rehabilitation or stabilization (or preparation stage for planning) period was to contain inflation and to change the price distortion to a more reasonable price setting. This would, in effect, reduce inefficiency in the economy, for example, in the high oil subsidy. On the international scene, unlike in 1963, this time a new stand-by arrangement between the Indonesian Government and the IMF was fully implemented. The stand-by arrangement is an agreement between the IMF and a specific country which has difficulty in its balance of payments and the country is given the right to obtain foreign currency according to certain conditions made by the IMF. 52 For Indonesia, the IMF and the International Bank for Reconstruction and Development (IBRD) representatives in Jakarta decide on a quarterly basis the ceiling level on the increase of money supply, budget implementation and the uses of foreign exchange _53 The rehabilitation policy was announced on and became known as the 3 October 1966 regulations. This was, in effect, the first drastic measure taken to stabilize the economy and stop inflation. 54 The policy consisted of five presidential instructions involving: (a) policies on subsidies and



fixed prices (to reduce price distortion and subsidies, and maintain certain neccessities such as rice and fertilizer); (b) credit regulations (reducing the role of the highly inefficient state enterprises); (c) policies on curbing inflation and making available credit at a more reasonable instead of negative rate; (d) foreign exchange regulations (replacing the complex regulations of the previous period by one which gave more incentive to exporters); furthermore, with the help of foreign aid and the control of volume and composition of import the regulations aided the production of raw materials and infrastructure needed for future development, and ensured the importation only of essential goods; (e) it also included devaluation of the rupiah. With a more favourable international setting, a political leadership more committed to stability and a more than able team of economists in strategic positions, the economy changed, soon for the better, with regard to inflation. The annual increase of the Jakarta cost of living index during the stabilization period is seen in Table 1.5. 55 With inflation under control, foreign aid assured through IGGI (InterGovernment Group on Indonesia, which conferred annually to decide the amount of aid given from respective donor countries) and political stability (which was military-backed and with its attendant problems to be discussed in the political section of this chapter) ensured, the New Order government seemed ready to launch five-year plans, beginning with its first one on 1 April 1969. TABLE 1.5. PERCENTAGE INCREASES IN THE COST OF LIVING INDEX 1966-77



December to December

Annual Averages

1966 1967 1968 1969 1970

635 112 85 10 9

1045 171 125 18 12

Newman (1974).


What the three five-year plans have in common is that they were formulated by the same agency called BAPPENAS (Badan Perencanaan Pembangunan Nasional or National Planning Agency Board) under the same chairman, Widjojo Nitisastro, implemented by the same President, Soeharto, and helped by continuous flow of foreign aid, albeit, with dif-



ferent conditions. They were implemented among others with a continuous balanced budget strategy, although one might argue on the purity of the "balance" since a significant source of government revenue, particularly in the earlier period, came from foreign sources or foreign aid which have to be repaid in the future. Another aspect in the period of REPELIT As I, II and III was the attempt by the Indonesian Government to attract foreign investments with tax holidays and other attractions that were instituted in a special law on foreign investment called UUPMA (Undang Undang Penamaan Modal Asing). Although foreign investment seemed heavily concentrated in the secondary sector including an import substitution type manufacturing, REPELITAs I, II and III put quite a heavy emphasis on agriculture and the fulfilment of basic needs. The latter was a definite change from the heavy orientation to industry of the eight-year plan. Another sharp difference was the clear and sound planning of resources expected to finance the plan in contrast to Project B of the eight-year plan which was more a list of wishes as mentioned earlier. What is also striking was that REPELITAs I, II and III have the same format and sequences in its table of contents as well as volumes. 56 The Indonesian Government aimed a modest increase of 5 per cent growth for PELIT A I (Five-Year Development Plan) 57 and assuming a population growth of 2.5 per cent, it aimed for 2.5 per cent growth of income per capita in PELIT A I. What is also significant is that PELIT A I aimed at fulfilling basic needs as the main development target 58 with emphasis on agriculture. The result of PELITA I (further discussed in the section on income, production and structural dimension) gave the planner more confidence to target a higher growth rate for PELITA II (1974-75 to 1978-79) which aimed for a 7.5 per cent annual growth rate. 59 Assuming a 2.3 per cent growth of population per year during the PELIT A II, it was hoped that Indonesia would achieve a 5 per cent growth in income per capita at the end of it. 60 But for the third five-year plan (1979-80 to 1983-84), the stress for equity became more of an issue. Although the growth target was still high at 6.5 per cent per year (if we assume the population growth was 2.3 per cent then the target for growth per capita was 4.2 per cent which is lower than the PELITA II period), the eight paths to equity which include equity for basic needs became a more explicit target. 61 The eight paths to equity gave utmost importance to the fulfilment of basic needs (since the first and second paths covered basic needs such as food, clothing, housing, education and health). To implement the five-year plan the government of the New Order succeeded in making the price system more sensible as reflected, for ex-



ample, in the price of rice which moved towards a realistic national price level. 62 In banking, the credit system was more relaxed after the tight money policy during the rehabilitation and stabilization stage. This, of course, does not necessarily mean that the banking sector became an efficient "financial intermediary" overnight. In fact the banking sector was more an "agent of development" rather than that of a traditional ''financial intermediary''. This will change in REPELITA IV. With respect to budget, uninterrupted balanced budgets have been successfully implemented for the last fourteen years (1968-82). The only difference is the size of the budget which increased more than two-fold when measured as a percentage of Gross Domestic Product (GOP) from 1967 to 1984_63 With regard to the balance of payments there is no doubt that Indonesia gained tremendous strength from the oil price increases in 1973-74 and 1978-79. The combination of balanced budget (with foreign aid), "oil shock", successful credit and monetary policy, foreign investment and domestic investment, the success of food production increases, produced an uninterrupted growth of the Indonesian economy from 1968 to 1982 at the rate of 7 to 8 per cent per year.

REPELITA IV The effect of the world-wide recession finally caught up with the growth of the Indonesian economy. The growth in 1982 was only 2.2 per cent and 4.2 per cent in 1983, and in 1984 growth did not exceed 5 per cent, all measured in 1973 constant prices. The reduction of oil prices by the Organization of Petroleum Exporting Countries (OPEC) in 1983 and early 1984 and the production quota imposed by OPEC on its members changed the Indonesian planning environment. For REPELIT A IV, Indonesian growth target goes down to 5 per cent annual growth, which is the same rate of growth as in REPELITA 1. 64 With the lowering of the growth target, and increased reduction of foreign exchange earning, the New Order government faces a different and uncertain path of growth and equity issue. This will affect the basic needs condition in the 1980s and poverty and employment.

Income, Production and Structural Dimension of the New Order Economy (1966-67 to 1984-85) There is no better indicator of the state of the Indonesian economy today than the promotion of Indonesia by the World Bank from the category of low income economies to that of middle income economies. 65 The basic indicators showed improvement in all sectors of the economy with GNP per capita of US$430 in 1980 and US$580 in 1983 at current prices.



Other social indicators too, showed increases, such as life expectancy at birth (53 years) and adult literacy of 62 per cent in 1977. In 1967, after a record of hyper-inflation of 650 per cent a year, Indonesia's GOP was Rp 44.80 billion at constant 1960 prices and in 1979, it became Rp 1019.5 billion, a 226 per cent increase in twelve years. 66 Critics of the present regime were quick to point out that Indonesia was lucky to get windfall profits from its oil resources in 1973-74 and in 1978-79. In fact, the leftist view on Indonesia's economic growth success was that development was "externally pushed" as foreign investments and foreign aid play a strategic role, that the economy grew because of unprocessed primary exports, such as oil, timber, rubber; that the huge population only served as cheap labour with the middle class as consumers of imported goods and manufactured goods of an import substitution type that was highly subsidized, protected and owned by the ruling elite together with foreigners and ethnic Chinese Indonesians. 67 Of course, there are many persistent problems. One should not readily accept what happened in Indonesia as an "economic miracle", nor assume that with the increases in productivity in all sectors of the economy the time for a "take off" into self-sustained growth will come in the next couple of years. However, the left critique was a gross simplification of the nature of the Indonesian economy and in many cases it was simply wrong. An analysis of the Indonesian economy during the New Order era should first look at the income and production side and then observe the two important sectors, agriculture and industry, in order to obtain a clearer insight into the changes in the structural dimensions and the nature of these changes, their effect on the future Indonesian economy and the fulfilment of the basic needs of its people as well. The GOP at constant 1960 market prices by industrial origin, from 1966 to 198068 increased tremendously in the fifteen years of the New Order economy. The annual rate of growth from 1966 to 1980 was 7.5 per cent, and with a growth of population at 2.34 per cent, the growth per capita in GOP was more than 5 per cent per year since the New Order was instituted. This is, by any account, very high. However, the growth was uneven by sectors. For example, in agriculture the annual growth rate was 3.1 per cent and in manufacturing 11.5 per cent per year. Whereas in agriculture the growth rate barely surpassed the population growth; in manufacture which has a small labour force the growth was more than three-fold compared to agriculture. 69 However, for the last two years (particularly from 1982-84) the growth in agriculture was very high. There are therefore explanations to be sought in the relation between production and labour force or the share of sector in GOP and the share of labour force among sectors as percentage of total labour force. Figure



1.1 shows a "normal" relation between primary sector share in GOP and labour force. 70 If the share in the output gave a drastic structural change as for example in agriculture, it showed a decline from 51.8 per cent of GOP in 1967 to 31.4 per cent in 1980, then the labour force situation did not follow at the same level of change (which is normal according to Figure 1.1.). FIGURE 1.1.



Primary Share in Labour Force






600 800 1000 1964 Per Capita Income ($)



Chenery and Syrquin (1975).

Before looking at the pattern of primary sector share in GDP and labour force, Table 1.6 shows changes in sectoral output as percentage of total output.


TABLE 1.6.



Sector Agriculture Mining Manufacturing Construction Trade Public Administration Services All Others Total





51.8 3.7 8.4 1.6 15.8 5.5 6.4 6.8

44.0 9.9 8.8 3.0 16.7 5.9 4.5 7.2

34.7 12.2 11.9 4.6 16.2 8.0 3.3 9.1

31.4 9.4 14.3 5.7 16.4 8.8 2.9 11.4





Table 1. 7 shows the labour force distribution and size among sectors from 1961 to 1971, 1976 and 1980. Since electricity, gas, water and labour force were very small (0.16 per cent of labour force and 0. 7 per cent as share of GDP), Table 1.8 shows the changes from 1971 to 1980 in the ratio between the share of GDP and the sectors with a labour force. What the ratio shows is that there was increased productivity per labourer in the secondary sector, a nearly stable productivity per labourer in the tertiary sector, and a definite decrease in productivity per labourer in agriculture or the primary sector (all in relative terms compared to other sectors' shares; in absolute terms there are increases in all sectors). The relative decrease is even sharper. To continue this observation we need to look at the nature of changes and growth in agriculture, and industry and manufacturing. TABLE 1.7.







Agriculture Manufacturing Trade Services

73.6 7.8 8.9 9.7

66.2 9.9 13.5 10.4

62.0 10.1 17.3 10.6

56.8 ll.8 16.2 15.2








TABLE 1.8.



Ratio for 1971

Ratio for 1980

0.814 1.192 1.435

0.718 1.695 1.248

Primary Secondary Tertiary

Agriculture Every discussion on Indonesian agriculture should begin with the production of rice. Table 1.9 shows Indonesian rice production and trade from 1968 to 1981. 74 Except in 1972 and 1975 the rice production increased consistently, and it increased much more since 1977 which showed an annual increase of 9 per cent until 1981. Besides an absolute increase of production, the Indonesian rice productivity (in kilogram per hectare [kg/ha]) was quite high compared to other Asian countries. Indonesia's productivity was 2,180 kg/ha in 1968-69 and 2,860 kg/ha in 1977-78 which showed that increased productivity was impressive. But from the import of rice, which showed TABLE 1.9.




Year End Stock

Indonesian Rice Imports

Total World Export

Rice Price Thai SOJo (f.o.b.) US $/ton

1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981

11.67 12.25 13.14 13.72 13.18 14.61 15.28 15.18 15.84 15.88 17.52 17.87 20.25 21.67

0.50 0.26 0.53 0.53 0.17 0.58 0.85 0.63 0.54 0.51 1.18 0.81 1.71 2.50*

0.71 0.61 0.96 0.51 0.73 1.66 1.13 0.69 1.30 1.97 1.84 1.92 2.01 0.55

7.94 8.43 8.82 9.31 9.06 9.37 8.78 8.61 8.99 10.87 9.69 11.86 12.55 13.07

201.6 186.9 144.0 129.0 147 .I 350.0 542.0 363.1 254.5 272.2 367.5 331.3 435.8 478.3

* Preliminary estimate. SouRCE: Falcon et al., The Cassava Economy of Java (Stanford: Stanford University Press, 1984), p. 164.



a significant percentage (around 14-16 per cent) of total world tradeable rice it seems clear how dependent the Indonesian people were on rice. At the same time the fluctuation of rice prices signifies the importance of Indonesian dependence on rice for the country's foreign exchange reserves and international trade. Rice production increased tremendously by 4.8 per cent in 1983 and more than 6 per cent in 1984. By 1985, Indonesia for all practical purposes had achieved "rice self-sufficiency". BULOG's stock is now 2. 7 million tons and Indonesia does not need to arrange new imports. The current problem is one of management of the overabundance of rice so that it will not create disincentives for the farmer. Now BULOG insists on "quality specification" that is, higher quality than before and as a result many farmers have difficulty in selling their rice at the floor price level within the sub-district. In fact the price of rice in the first quarter of 1985 decreased by around 4 per cent compared to the first quarter of 1984.75 There is no doubt that the increase in productivity is a result of the farmer's work and various government programmes such as the BIMAS (Bimbingan Massa!) and INMAS (Intensifikasi Massa!) programme which includes subsidies for fertilizers and provision of credit. BULOG's market operation to stabilize the rice price with its floor price is a great help to the farmers. Production of other food crops also showed increases. 76 Corn from 3,166,000 tons in 1968 to 3,855,000 tons in 1978; cassava, the staple starch mostly used by the low income farmers, increased from 11,356,000 tons in 1968 to only 12,961,000 tons in 1978, an annual1.3 per cent increase. Dapice calculated that food crop output increased from 100 in 1968 to 137 in 1978. 77 In matters of distribution as well as ownership of land, changes are difficult to calculate. If the above productivity increase is seen within a context of relative productivity decrease (compared to other sectors) and that the BIMAS programme was only available to people who owned land, plus the fact that the area of farmland could not be increased in Java (from 1973 to 1980 landlessness increased from 3.2 per cent to 14.9 per cent according to the 1980 population census) then one can conclude that problems such as landlessness, under-utilization of labour, and poverty continue to exist. 78 Industry/Manufacture

The manufacturing and construction sector has grown rapidly as illustrated by the relative productivity ratio. 79 Within the industrial sector itself there lies a big difference in productivity between the large and medium establishments and the small scale or informal sector. However, any measure of the difference is difficult in part because of the various



definitions of large and small scale industrylill and the difficulty in finding more accurate and complete data such as time series data. Dapice described the state of the art of Indonesian industry correctly: Again, the very striking pattern of low employment and high output gains in the "modern" sector is combined with high employment and low output gains in the traditional sector. Output per worker in the modern (large and medium establishment) sector is growing at 15 per cent per person per year, while output per worker in the traditional (small scale) sector is falling by perhaps 8-10 per cent per year. 81

The growth of capital intensive industry was attributed partly to the success of large foreign investment82 (56 per cent of total foreign investment approved was for the manufacturing sector) with its efficiency and the existence of cheap labour and domestic consumers with the expansion of the middle class. Another explanation of this sector's success was the high tariff system which created an extremely high effective rate of protection or a quasi-monopoly situation. 83 This high rate of effective protection in the manufacturing sector in turn was made possible because of the oil money that came with the oil boom in 1973-74 and 1979-80. Now that the oil boom is over the growth of the manufacturing sector in 1982 to 1984 has been significantly reduced with 1.2 per cent in 1982, 2.2 per cent in 1983 and an estimated 4.5 per cent growth in 1984. Furthermore, since the Indonesian Government could not provide the industry with many supply and construction contracts, many industries laid off their labour, particularly the motor-cycle industry which has a negative domestic value added. 84

Conclusion There is no doubt that the near tripling of GDP, was the result of hard work and skilful management at the top level. The leftist perspective that the results of the GDP were due only to the foreign investment and oil boom as well as the increase in several primary exports, does not sufficiently explain the uninterrupted annual growth of more than 7 per cent for the last fifteen years (1967-82). Although in several sectors foreign investment did explain the high growth rate, the increase in agricultural production especially for the last three years (1982-84) was a result of increased productivity among farmers who still form the majority of the work force and the population. However, there are difficulties when one attempts to look deeper into the problems of underemployment and unemployment. For example, in employment statistics the term "employed" was used in a "soft" manner when people who work for one hour per day for a week were



qualified as employed. 85 There is no doubt that despite the high growth in the last fifteen years, the problem of unemployment is still very serious for the majority of the population. Underemployment in turn produces a low level of income which inevitably results in low purchasing power for the basic necessities of life. This is particularly so after 1982 when economic growth was reduced significantly. Furthermore, government resources have been largely cut back because of the drop in oil prices making it difficult to improve public services and basic needs subsidies. From the review it appears that some of the problems were "structural" seen in the fact that the ratio of the GDP to the share of labour force decreased from 1971 to 1980; landlessness increased from 3.2 per cent in 1973 to 14.9 per cent; the work-force in the informal sector increased while the value added decreased; and that 25.6 per cent of the labour force work less than 24 hours per week. 86 All these indicators showed that the New Order has to face several challenges in the economic structure.


As in the economy, Indonesian political development is also a process of continuity and change. The strength of primordial forces, such as regional loyalty and religion (especially Islam), will always be present in contemporary Indonesian politics even in important national political events. What also seems to be permanent in Indonesian politics is the elitist nature of decision making in all important political and economic issues. However the distinction between the New Order and pre-New Order eras, essentially one of political stability versus instability, was another way of stating a changing role for the Indonesian armed forces. In the pre-New Order era, the role of the armed forces was not as dominant as during the New Order period.

Pre-New Order Era This era, which started from the proclaimed independence date, 17 August 1945 until 1965-66 was one of changing political system, political instability, changing political parties in power as well as political actors, yet consistent throughout was the elitist nature of Indonesian politics. Herbert Feith, in his seminal work on Indonesian politics87 perceived Indonesian society as the image of three concentric circles ... the political elite constitutes the inside circle. The middle circle, consisting of men of lesser political



influence, will be designated the political public. It will include all those who saw themselves as capable of taking action which could affect national government or politics. Finally, there is the outer circle, the group of the least influential, which we shall call the mass or those outside the political public. 88

The above is Feith's description on the elite model in the analysis of the politics in what was known as the constitutional democracy period from 1950 to 1957-58. It is my view that throughout post-independence Indonesia politics was more or less the politics of the political elite and the political public89 and the popular forces were always excluded from decision making process. The pre-New Order era can be divided into four distinctive periods: The revolutionary period, from the proclaiming of independence to the transfer of sovereignty, December 1949. 2 The constitutional democracy period, from early 1950 to March 1957 (that is, until the end of second Ali Sastroamidjojo Cabinet). 3 The transition period, from constitutional democracy to Guided Democracy, from March 1957 to July 1959. 4 The Guided Democracy period, from July 1959 to September/ October 1965. Throughout these periods the important political issues that divided the political elites almost never included the public in decision making as shall be discussed. During the revolutionary period, the issue was how to gain real independence that had been proclaimed by Soekarno and Hatta, that is, how to take a stand towards the Dutch who wanted to return to their former colony. Stated simply the issue was diplomacy versus war. Among the "diplomacy" proponents were Sutan Sjahrir (he was Prime Minister in three of the several cabinets during this period), Muhammad Hatta (Vice President and Prime Minister in the first parliamentary democracy period, during the first and last federal republic of Indonesia) and Soekarno (President, but his charisma was so strong that even the ''war'' proponents gave him grudging respect). Those who were for war against the Dutch came mainly from the new Indonesian army which was created on the 5 October 1945. They were: Sudirman (the First Commander of the army), Oerip Soemohardjo and Nasution who had a more important role in the following period. Ironically Nasution's influence later diminished in the New Order period. Although the transfer of sovereignty from the Dutch to the new Republic of Indonesia was really a result of the combination of both strategies, each proponent gave their strategy as the main reason, 90 and these claims became potential issues for conflicts in the following period.



In the Guided Democracy period, a description of political parties will show the ideological underpinnings and primordial forces at work. During this period, of the important politicalparties (PNI, MASJUMI, NU, PKI and PSI), Anspach gave a political economic description as follows: 91





PNI (Partai Nasional Indonesia). This party's ideology was strongly nationalist and anti-colonialist (although it was riven by factional strife, as B. Higgins pointed out to Anspach). Its leadership came largely from the vestigial aristocracy that had been utilized by the Dutch in their native civil service. Hence, it was the party with the stronger tie to the bureaucracy. MASJUMI (Majelis Syura Muslimin Indonesia). This Islamic party drew its support from "social groups with an interest in such government as would restrain the pace of social change". In respect of specific policies, MASJUMI was "against any major nationalization moves in the immediate future ... and advocated ... steps should be taken to protect existing foreign enterprises and attract larger amount of foreign investment''. 92 PKI (Partai Komunis Indonesia or Indonesian Communist Party). It was, of course, strongly opposed to foreign private capital but for tactical reasons tended towards a conciliatory position on national capital. NU (Nahdlatul Ulama). This is a splinter group from MASJUMI. NU's withdrawal weakened MASJUMI's rural base particularly in eastern Java. PSI (Partai Socialis Indonesia). This was a small elite party led by Western trained intellectuals. It was social democratic in the sense that its socialist ideology was tempered by a preference for evolutionary change.

Looking at Anspach's description the nature of the political system in this period was as follows: ideologically it ranged from right to centre (since PKI never came to share part of the power), governed by MASJUMI or PNI and often with PSI ministers in the economic sectors. The power of traditional Javanese culture (reflected through PNI) as well as Islam (reflected by MASJUMI and NU members who were always in the cabinet) were represented in the political system of either cabinet or parliament. Another important aspect was the election issue. During the constitutional democracy period (1950-57) no election was held until late 1955. The parliamentary distribution of members according to parties was a heritage of the period of the Federal Republic in Hatta's cabinets. 93 And as in the election in 1955 and particularly the election for regional seats in 1957, it by no means represented the real power among parties.



Mass participation in national politics was limited to the extent that the election of Parliament (1955) and Constituent Assembly (1955) and regional election (1957) were held in a free atmosphere and the interactions between parties in the respective institutions were a true democratic process. The problem then was that the elite was not patient and restrained enough to work out a delicate balance on the specific issues which separated elite groups. This ultimately resulted in their diminished power and influence and in turn increased the role of Soekarno and the army in the latter period of the pre-New Order. The issue involved during the parliamentary democracy period remained to some extent in the transition to the Guided Democracy period. These were: (a) the governing of economic affairs and political issues; (b) the problem of the basic state philosophy Panca Sila versus Islam; (c) the regional problems on the allocation of economic resources, related to (a). As in the revolutionary period the elites were divided as follows: (a) On the governance of the economy and political affairs with regard to foreign investment, including Dutch investment there was a conflict described by Feith as "administrator versus solidarity maker". Thus "administrator" competed for power on the basis of their technical skills and of the status which they had acquired on account of their technical skills and accomplishments. They claimed leadership positions for themselves, in both bureaucracy, civil and military and the political parties, on the grounds of the idea, which colonialism fostered as part of its own rationalization, that the educated had a right to govern ... "Solidarity maker" on the other hand competed on the basis of their mass appeal and of the status they had acquired as a result. Thus they claimed leadership positions, opposing both the bureaucracy and political parties, on the grounds that they were close to the people and understood their wishes. And they emphasized that the proper determinants of prestige were not formal qualifications, but true (political) leadership and service to the nation and the people."4

The ''administrator'' type was symbolized most accurately by Hatta and the ''solidarity maker'' type clearly symbolized by Soekarno. The period of constitutional democracy was one of constant struggle between the two elite forces in which the influence of the administrator type diminished in each consecutive cabinet (with the exception of the Burhanuddin Harahap Cabinet appointed by Hatta while Soekarno was abroad in mid-1955). It was expressed symbolically when Hatta was Prime Minister in December 1949 and ended definitely when Soekarno took over in July 1959.



(b) The state constitution which was supposed to be decided by the constituent assembly became an issue between the Islamic political party and other political parties including Soekarno, over the secular nature of the 1945 constitution. The state ideology Panca Sila embraced five principles namely: belief in God, humanism, nationalism, democracy and social equity. This deep ideological division resulted in an impasse since neither side could gain the two-third majority needed for the adoption of the constitution although the secular group had a majority. 95 (c) The regional problems created a division among the regionalists. Initially, this involved the army regional commanders, but later on MASJUMI leaders joined the fray when they felt the increasing influence of Soekarno was a danger as it would give the communist party (PKI) more possibilities of sharing power in the future. All the regionalists (mostly the army national leaders but also army divisional heads on Java) opposed a stronger unitary republic. Soekarno was seen as the chief enemy of these regional leaders. This conflict created an armed rebellion in 1958. The transition period from constitutional democracy to Guided Democracy showed the crystallization of the issues which ultimately produced an increase in Soekarno's influence as well as the army's role. The tussle between "administrators" and "solidarity makers" ended in the victory of the latter. The result of the constitutional conflict was a diminished influence of MASJUMI and the co-option of the NU by Soekarno. The result of regional uprisings was an increased military role, since only military power could crush armed rebellion. After that the military received political prominence and it was simply impossible to reduce their political existence. For example, regions that have been defeated (such as West Sumatra and North Sulawesi) needed a semi-military government for security reasons. While there may have been a chance for greater political participation by the masses because of the free election for Parliament and Constituent Assembly in 1955 and the regional elections in several but not all regions for security reasons in 1957, Soekarno's charisma and the army's impatience towards democratization prevented the prospect of democracy on the Indonesian political scene. The regional election saw the political stake rise for only one party, the PKI, and to prevent the PKI from having more seats in the future there were strong anti-PKI alliances among non-communist parties.% Because of the new PKI strength, other parties felt a devastating psychological loss, particularly MASJUMI. Fighting the PKI by having a deadlock in the Constituent Assembly ultimately gave the momentum for



Soekarno to gain power which was not a wise decision in the long run. Table 1.10 shows the PKI improvement in the local election which could not be compared nationally with the 1955 election, since several regions did not have elections for security reasons. The difference between NU and PKI (Table 1. 10) clearly shows the emergence of the PKI as the strongest political party and looking at the regional results it is difficult to explain why the PKI would follow Soekarno and his ''guided democracy" concept. TABLE 1.10.


Percentage of Total Parliament Vote, 1955

Percentage of Major Party Vote, 1955 Parliament

Percentage of Major Party Vote in Several Regions, 1955

Percentage of Major Party Vote Regional Elections


22.3 20.9 18.4 16.4

28.8 26.8 23.5 20.9

30.5 19.5 25.7 24.0

24.8 19.0 25.1 30.9

Total votes






(in millions)

NoTE: The regions are Jakarta, West Java, Central Java and South Sumatra. SOURCE:

Lev (1966), p. 97.

Some political observers have mistakenly assumed that President Soekarno was in power for a longer period than only six years as Indonesia has had only two presidents since independence. Undoubtedly Indonesian history so far will place Soekarno as the most popular, charismatic, ambitious and internationally well-known politician. His political ideas on Indonesia and the world were well known and his role as a host for the Afro-Asia Conference gave him a historical place in the struggle of the non-aligned movement. The ideology of Panca Sila which, was largely his idea, combined and adopted all important ideologies (nationalism, social equity, faith or belief in God, and humanism and democracy), and has to this day become the formal ideology of the 97 state. His preoccupation with unity (persatuan), was reflected in one of the popular slogans of the time: NASAKOM, an acronym for nationalism, religion and communism, which in the end brought about his downfall. The PKI backed Soekarno because he was the only one among non-communist political leaders who stated that the communists had the right to be in the cabinet. 98 This was important for the PKI since all other post-independence cabinets always excluded it. But Soekarno did



not deliver his promise and in fact used the "promise" for bargaining with the army. 99 Throughout the Guided Democracy period, the elitist nature of politics was unaltered. And since there was no election, the distribution of power in the Parliament as well as the Consultative Body (Majelis Permus Yawaratan Rakyat Sementara) was in the main decided by Soekarno, hence setting a stage for "palace politics" as the political reality. The PKI, although advanced in their organization (reflected in the 1957 regional election) was, in fact, "domesticated" by Soekarno, for example, in its "tactical" acceptance of Panca Sila. This meant a communist party had accepted belief in God as one of the key principles of social unity. They did so because of the psychological need for acceptance in the main stream of politics, which they did not get until the end. From the first Soekarno Cabinet, 100 in which no PKI member was appointed until the end of Soekarno's Cabinet in the abortive coup (allegedly staged by the PKI or its sympathizers) in September 1965, the PKI never had a full share of power such as cabinet positions with portfolio. Although PKI members became ministers, they had ex-officio status which meant they had no real political power. The difference between the Guided Democracy period and the previous period was the increase in importance of international politics starting with the West Irian issue. After consecutive diplomatic moves in the United Nations failed to give Indonesia the two-third majority, Soekarno in a brilliant manoeuvre combined diplomatic tactics and military power. Since President Kennedy was worried that Soekarno's effort could alter Soekarno's position towards the communist countries (seen in Soviet military assistance to the Indonesian armed forces), he put pressure on the Dutch to reach an agreement with Indonesia which practically assured that West Irian would become Indonesian territory. But when Soekarno tried to fight against the creation of Malaysia as a state, he went too far. In promising the existence of a fifth force (the armed forces consist of army, navy, air force and police force) which essentially accommodated PKI pressure, he went too far left internationally. This was expressed in his own slogan of an AXIS: PekingPyongyang-Hanoi-Jakarta. At home it became much more difficult to obtain support from the armed forces for this idea of a fifth force. As a result the "palace politics" of Soekarno began to crumble. In the economic sphere as Indonesia excluded itself from the IMF and the Soviet Union could only help with military assistance since it lacked hard currency for Indonesia's import needs, inflation spiralled and economic growth ground to a halt. Soekarno's domestic political manoevring became much tougher since every step that could accommodate the PKI was



opposed by the armed forces. Finally his fragile domestic balance broke with an attempted coup by several officers allegedly backed by the PKI, on 30 September 1965. This coup, called the Thirtieth September Movement, involved the slaying of six generals and the creation of a Revolutionary Council. It lasted only a couple of days when Major General Soeharto crushed the uprising in early October 1965. 101 These events gave way to the New Order and General Soeharto's emergence as the second Indonesian president.

The Politics of the New Order Analysis of the politics of the New Order means discussing the role of armed forces in politics, the diminished role of political parties, the changing role of the students and intellectuals and not surprisingly, the still elitist nature of the political system. Additional issues that must be discussed are the role of bureaucracy, the emergence of a larger middle class with technocratic and professional positions, and the role of elections, which have been held in 1971, 1977, and 1982, in the political process of the New Order. Although throughout the New Order period the political system as well as actors remain unchanged, it can nevertheless be divided into three sub-periods which reflect the strengthening of Soeharto's political base and the armed forces. The transition period from "dualism" (when Soekarno was still the formal President and Soeharto, Acting President, in 1967) to early legitimization- 30 September 1965 to 1968. 2 The legitimization period from 1968 to 1978. 3 The search for institutional stability, from 1979 to the present. When the I 965 attempted coup began, Major General Soeharto was the commander of the army's strategic reserve and was on his way to retirement. The killing of six generals which included the army commander and his staff and the attempted killing of General Nasution, resulting in the death of his daughter and an adjutant, catapulted General Soeharto into the position of the strong man of the army, and in the political chaos thereafter, as the strong man of the nation as well. However, Soekarno remained as president in 1967, when the Constituent Assembly (MPRS) 102 appointed Soeharto as Acting President. Only in 1968, after another special session of the MPRS, did Soeharto become the President and the "dualism" of power ended. This period started when President Soekarno lost most of his power, and the political parties were in a state of disarray. MASJUMI was banned by Soekarno in 1959. PKI was crushed



as an aftermath of the coup, PNI was in a state of confusion and many of its members were accused of taking part in the coup. Only NU was more or less intact but the leadership was split on what to do about the ''dualism''. Throughout the Guided Democracy period the majority of the students did not approve of Soekarno's politics. The so-called progressive and revolutionary students, members of leftist student organizations like the CGMI (Consentrasi Gerakan Mahasiswa Indonesia) from PKI, GMNI (Gerakan Mahasiswa Nasional Indonesia) from PNI, PERHIMI (Perhimpinan Mahasiswa Indonesia) from the crypto-communist organization BAPERKI (Badan Permusyawaratan Kewarganegaraan Indonesia) were on the offensive and dominated all student life. They were a minority of the university students, the majority of whom came from middle class families and supported popular democracy as opposed to "guided democracy''. Student life was affected by this revolutionary situation, for example, the ban on American films which were popular among the students (although American films were regularly shown in the palace). The failure of the coup created a vacuum which was filled by the students. A new student organization called KAMI (Kesatuan Aksi Mahasiswa Indonesia) was created with the help of the Minister of Education, General Sjarif Thayeb. On the 10 January 1966 it started its first demonstration with a mass gathering at the campus of the University of Indonesia. 103 One of the speakers at the gathering was General Sarwo Edhie Wibowo, commander of the elite troop RPKAD (Resimen Para Komando Angkatan Darat), the regiment of the para-commando of the army. The gathering created the momentum for ninety days of demonstrations centred on the motto TRITURA (Tri Tuntutan Rakjat), the three demands of the people: ban the PKI; retool the cabinet (from Soekarno's members to a new composition) and reduce prices (inflation was at 650 per cent in 1966). The immediate post-coup period saw student demonstrations, Soeharto's own palace politics (claiming allegiance to Soekarno and simultaneously consolidating his base in the armed forces), political chaos in the countryside with the army ferreting out alleged communist sympathizers in the former's mission to "stabilize" the country. But all these stopped and the New Order was formally installed with the SP II Maret 1966 (Surat Perintah Sebelas Maret 1966). This was a letter of order, from President Soekarno to General Soeharto to maintain social order and stability. In effect, it was a formal transfer of power from Soekarno to Soeharto. Almost immediately General Soeharto exercised his power by banning the PKI and arresting influential ministers whom he considered to have been involved in the attempted coup. Among those who were arrested and then tried were the Foreign Minister, Dr Subandrio, and the



First Vice-Prime Minister, Omar Dhani who was also Commander of the Air Force. Even after the New Order took power the "dualism" continued with Soekarno as President until 1967. A special meeting of MPRS was held in 1966 to "purify" the 1945 constitution. Previous MPRS decisions (during Soekarno's Guided Democracy period) had appointed Soekarno as a life-long president. This was a direct violation of the constitution which stated a five-year term for the president, although there was no limit to the number of terms. Fourteen students were co-opted as Members of Parliament (creating a division inside KAMI between the so-called "moral force" who were against the appointments and the "pragmatists") as well as hundreds of new appointees who ensured Soeharto's appointment as Acting President. Political parties played a minimal role although Soeharto did ask some influential party leaders to join his cabinet, but not in important positions. The MPRS meeting in 1968 ended the "dualism" as Soeharto became President and not an Acting President as in 1967. Through using the MPRS he created a political format 104 where the MPRS (after the election it was called MPR) became the forum where he gave his report. 105 This was the early legitimization period, because it was during the MPRS session that General Soeharto produced a blue print of the first five-year economic plan of the New Order which was ratified by the MPRS as the task for the new cabinet. This process was duly repeated every five years. During this period of legitimization (1968 to 1978) when three MPRS and MPR (this is an elected body) meetings and two elections were held. Two Developmental Cabinets (Kabinet Pembangunan) were established by General Soeharto to implement Development Plans I and II, and the cabinets were named Development Cabinets I and II respectively. Before discussing these processes, it is important to deal with the changing relationship between the students and the armed forces or more precisely with General Soeharto. The relationship changed from cooperation (1965-66 to 1970) to constructive criticism (1970-71) to polari• 106 zatiOn. These changes may be explained by the fact that the students have never meant to become a political power as parties, but are always critical of the government in power , 107 The students initially shared a common enemy with Soeharto in the PKI and also by implication, Soekarno. When both were gone and with many student leaders co-opted, the rest of the students were disoriented. But loyal to the "moral force", they took on a new issue, anti-corruption. This move was also co-opted by Soeharto when he appointed a "task force'' from University of Indonesia with the responsibility of eliminating corruption within the government. 108 However in 1970, for the first time the students demonstrated against Soeharto, and an organization called



"Students Accused" went to several ministries and had dialogues with the ministers on corruption within the government. 109 Soeharto, in this "constructive criticism" stage of relationship responded by nominating a commission of four respected civilian political leaders (Komisi-Empat), and appointed Indonesia's most respected statesman, Dr Mohammad Hatta, as the adviser to the commission. As soon as the commission produced its report, in which it called for among others, reforms in the state's oil corporation (PERT AMINA), and the national food logistics board (BULOG), the students established Komite Anti Korupsi (KAK or Committee Against Corruption) which pressed the President to act on the commission's recommendations. In responding to the student demands, President Soeharto received the students four times to discuss the corruption issue. no The KAK climax was the resolution of the Governor of Jakarta who asked all Jakarta residents to switch off their electric lights for fifteen minutes, from 8 pm to 8.15 pm. 111 Every citizen, including the residents of Jalan Cendana where President Soeharto lived agreed and the lights were out in nearly all of Jakarta on 15 August 1970. But after this event, the constructive criticism period became more and more difficult to maintain. It ended after student demonstrations intensified with the visit of Japanese Prime Minister Tanaka on 15 January 1974. 112 Jakarta became a city of chaos during the MALARI Affair (Malapetaka Limabelas Januari or 15 January Disaster). Japanese cars were burned, hundreds of thousands of people came onto the streets to demonstrate. To this day no full explanations can be given for the events. Partial explanations include student demonstrations for equity and against the government's policy towards foreign investments and corruption, and that General Soemitro had an eye on power (he was fired after calm was restored); that so-called OPSUS (Operasi Khusus or Special Operation) headed by General Ali Moertopo considered the most "political" general was involved in one way or the other. The fact of the matter was that 1974 was the beginning of the polarization between the students and General Soeharto. Eleven persons died during MALAR! rampage, fortytwo students and intellectuals including university professors were arrested and two student leaders and one graduate from the University of Indonesia were tried and sentenced to six, four, and six and half years in prison respectively. 113 This ended the constructive criticism period. General Soeharto's impatience towards the students was made obvious in 1977-78 when in response to the Student Councils' resolution to the MPR not to re-elect Soeharto, he sent army troops to' the campuses, arrested hundreds of students and tried all the student council leaders of the major universities of Jakarta, Bandung, Yogyakarta, Surabaya, Ujung Pandang and Medan. The students did not recover from this crackdown and no



longer posed as a political factor. Meanwhile, two issues became extremely important: (a) development which had become the New Order ideology with commitment to five-year plans (REPELIT As I, II and III), and the implementation of a balanced budget; (b) general elections became the most important, and the only legitimization tool for the New Order to implement its own brand of democracy, called Demokrasi Panca Sila. It would be pointless to compare the 1955 election with the elections of the New Order because the regulations on the election and the results simply ensured Soeharto's election and re-election. 114 Of the 920 members of the MPR who appointed the President, only 360 were elected, 307 members were appointed by the President and 253 members representing the region were either selected by provincial legislatures with the approval of the President or other groups considered by the President to be underrepresented and were also appointed by the President. 115 This clearly shows the President's disregard for political parties as a potential democratic institution. He initially gave a different signal by giving a new party, PARMUSI (the Muslim Party of Indonesia) for the banned MASJUMI followers. But when, at the first congress of the new party, the members tried to select an old MASJUMI leader as the chairman, Soeharto opposed this and the party members duly elected as chairman, Hadji Djarnawi who had been cleared by Soeharto. In fact all political parties' appointees in their own organizations as well as their candidates in the general elections had to be approved by the government. In the election for the chairman's post, with the possible exception of NU, although even NU was interfered with or pressured, the government had its own candidates and usually, as in the PNI case and PARMUSI, the government candidates were duly elected. ln the 1977 elections, the government reduced the number of parties from ten in 1971 to only two, namely, the PPP (the Muslim confederation of four Muslim parties); PDI (the non-Muslim parties which included PNI and other small parties such as PARTAI KATH 0 LIK and P ARKINDO) and one government party GOLKAR (Golongan Karya or Functional Groups). GOLKAR or the government party consisted of the armed forces and the bureaucracy. The armed forces have a mission to ensure GOLKAR's victory as they argue that only a GOLKAR victory could provide political stability, and uphold Panca Sila. Although the armed forces were not allowed to vote but have 100 appointed members in Parliament, their mission gave rise to intimidation or pressure, sometimes violent, down to the village level. At the village level there was an armed forces representation called BABINSA (Bintara Bantuan Desa). As for the bureaucracy, civil servants were part of an organization called KORPRI (which had more than two million members meaning two million households) with



a hierarchical line down to the village level which ensured an election victory for GOLKAR. The general election itself could hardly be considered democratic with the "screening" and "clearing" of party candidates and frequent use of physical intimidation and violence by the forces in control. The army machinery and bureaucratic apparatus both supported GOLKAR, and had access to extensive funds. Yet, although hardly "free"- the election was perceived as important for the legitimization of those in power. Table 1.11 gives the votes secured by different political parties in the 1971 and 1977 parliamentary elections. Although it is difficult to draw clear conclusions from the relatively unfree election, two points are apparent: the importance of the PNI (then PDI, the largest party in 1955) had evaporated and the power of the nationalist group was nearly negligible. Part of the explanation is that one of their biggest sources of power, the bureaucracy, had been "robbed" by GOLKAR. Another explanation is that the aftermath of the attempted coup, in which many leaders were arrested still had a negative impact on the party. The other important factor is that Islam emerged as the only force that could become a threat. Securing nearly 30 per cent of the votes, despite heavy government interference provided a clear sign that the Islamic force was to be reckoned with. The disappearance of student activities on the political scene, the weakened position of most political parties with the possible exception TABLE 1.11.








34,349 (5,517)

62.8 (10.1)

39,750 5,505

62.1 8.6

3,793 733 48 388 604 (14,834) 10,214 2,930 1,308 381

6.9 1.3 0.6








I. I



of Islamic parties, the strength and stability of the armed forces and the bureaucracy, and the increasing middle class would have a major influence on the political picture in the third stage of the New Order; namely the search for institutional stability from 1978 until the present. While Feith stated that politics during the constitutional democracy period was elitist with the political elite and political public the only important factors in the national politics, William Liddle holds a similar view on the New Order. Liddle stated, Hypothesize a two tiered political structure in the New Order Indonesia. In the first tier are members of the primary elite, defined as those individuals now at the centre of power or in positions from which they may aspire to the centre. In the second are individuals who do not determine basic policy or choose key personnel but who nonetheless possess political resources with which they can influence the outcomes of the struggles for power within the primary elite. 117

It appears that the elitist nature of politics which began from early independence steadfastly held to the present. Currently, President Soeharto, high ranking military officers, high ranking civilian officials and lower ranking military and civilian officials, could be considered as having a disproportionate share of power in Indonesian politics. But this is not the total picture. Although most political parties have lost their influence including PNI, the power of Islam as a party (PPP) as well as a faith is still a potential threat. Another possible challenge could come from the middle class which include professionals as well as those less skilled white collar workers. Their number and importance continue to grow, particularly, in the service sector but also include businessmen and new industrialists in the manufacturing and construction sectors. Their existence was also felt by the government as demonstrated by the government's interest in the Indonesian Chamber of Commerce (KADIN or Kamar Dagang Indonesia) and the lawyer's organization, PERADIN (Persatuan Advokat Indonesia). The interest of these organizations was not only professional but also in other universal values such as human rights and democracy. The Legal Aid Institution (Lembaga Bantuan Hukum), for example, has some say in disputes between the bureaucracy and citizens, 118 such as labour disputes. It is too early to tell if the increased size of the middle class would have an effect on the future political scene on issues such as the democratization of the society. In relative terms, although the number of middle class people is increasing, it is still small compared to the population as a whole. It is definitely smaller than the middle class in countries such as Singapore and Malaysia. 119 Meanwhile election in May 1982 was in many ways a replica of the



1977 elections but with the exclusion of student activities and an increased militancy within the Islamic Party. The result was again predictable, GOLKAR won with a 67.2 per cent share of the votes, a sharp gain from 1977, PPP had 26.1 per cent and PDI 6.7 per cent 120 which practically meant a near liquidation of the nationalist party. In March 1983, the MPR re-elected Soeharto as President for the fourth time, and as expected he formed Development Cabinet IV. This cabinet has the task of implementing the fourth five-year plan (1984-85 to 1988-9). There are three possible scenarios of political development at this third stage of the New Order period. An institutional stability will be established and there will be some kind of democratic process as a result of a growing middle class which has more bargaining leeway vis-ii-vis the state in ensuring a more meaningful election in 1987-88. 2 Instability may come to the fore again as in 1965-66 with Islam increasing its political influence and possibly crushing the elitist nature of the Indonesian politics which has always excluded mass participation. 3 Students may raise their voice again and with the combination of Islamic dissatisfaction and military officers sympathetic to the students, could open a possibility of a new government at the top and reform within the political system. As in the period of Soeharto's early tenure, issues such as corruption, inequity and foreign investments could surface again. 121 Of course, there are many other scenarios that can be visualized such as an inner "palace coup", but the real test is the succession. How will the transfer of power from Soeharto to his successor take place? This is a major question and no political scientist can predict how it will be without losing his credibility. Indonesia, like the majority of Third World countries has still not solved the problem of succession in a democratic manner.


The above economic and political overview clearly cannot explain fully the economic and political process in Indonesia. In the current context, the overview is constructed with issues of basic needs in mind. The economic overview argued that there are structural imbalances in the economy. Poverty, inspite of the uninterrupted growth of more than 7 per cent from 1968 to 1982 is still widespread, partly because Indonesian income is still very low. Another issue is that in national politics, decision making has never included the mass and is limited to the political elite.



Both of these important issues were not created by the New Order but were in place since independence. One might argue that New Order strengthened the imbalance, or that the New Order further excluded political participation, and they remain as issues that have to be faced by the New Order.

Structural Imbalances and Poverty

Using census data for 1961, 1971 and 1976, Dapice found that structural changes in the labour force were more apparent outside Java even though the concentration of resources and investment was in Java. 122 One might argue whether this trend showed that the "dual structure" was persistent in Java. 123 In fact, since Boeke's dual economy theory 124 to Higgins description of "technological dualism", 125 "dual structure" has become a classic issue facing developing countries. In this dualism, the open economy and foreign investments, on the one hand, lead to either an import substitution manufacturing or industry, or export oriented industry, which is highly capital intensive with more or less fixed proportions of capital to labour. On the other hand, the primary sector, mostly agriculture is labour intensive with variable proportions. My as well as other calculations on relative productivity per sector was a slight change from the ratio used by Kuznets. Both calculations show clearly that in the modern sector relative productivity increased over time as opposed to the agricultural or primary sector. 126 In addition, the level of unemployment or underemployment in rural areas was consistently higher than the urban areas in which the capital intensive industry was mostly concentrated. The LEKNAS (Lembaga Ekonomi Nasional) survey based on household income and not expenditure (the latter tends to have an upward bias in stating the poverty level), and using the classic Sayogyo poverty line (monetary equivalents of 20 kg rice per capita per month for rural areas and 30 kg for urban areas) showed a labour profile as shown in Table 1.12. 127 Even if it is assumed that the LEKNAS survey over emphasized the poverty level, and even if 1976 is quite outdated for the present, it seems clear that the labour profile does seem to show that underemployment and poverty at the rural level were real problems. This does not mean that the productivity increases in agriculture should be neglected. But it does show how the structural imbalances present a real issue. Sayogyo, in his calculation using his standard poverty line (used in the LEKNAS survey) stated that there has been improvement in the villages 128 but he predicts the most difficult areas with poverty problems are rural and urban Java. This is consistent with Dapice's observation in









6.2 4.0

5.1 2.0

2.1 1.1

2.6 0.6

9.5 8.7

9.6 7.1

22.3 20.6

10.4 18.1

19.1 44.8

12.1 31.0

32.5 53.3

7.5 11.7


52.0 36.1

4.1 1.2

34.0 16.4

Labour unemployed Males Females Labour working less than 35 hrs/week Males Females Labour working 35 hours or more but earning less than poverty line income Males Females Labour with more than 6 years of education Males Females SOURCE:


World Bank Resident Staff (Indonesia, 1981).

that the "structural" persistence either in the labour force (Dapice's) or poverty (Sayogyo's) was essentially a Javanese problem. I will conclude a note on an imbalance with political overtones. This is the socio-economic imbalance between the indigenous and nonindigenous (Chinese) Indonesian. 129 This imbalance has been formulated by Dorodjatun as the rapid growth and expansion of various private-public and semi-public conglomerates or "groups" in the Indonesian economy "have greatly exacerbated the essentially racial problem" . 130 This problem, as mentioned was political since the rise of the "groups" of strong economic corporations (often in joint ventures with the Japanese), was also perceived by many Islamic organizations as a growth that had been produced at the cost of the reduced or shrinking number of Muslim entrepreneurs. 131 Increased landlessness (as seen in the 1980 census), underemployment, poverty (mainly in Java) and the possible racial/socio-economic imbalances are potential threats for the government. They should be overcome while the government is working on the development process and on increasing the basic needs supply and services.



Stability, Institutionalization and Participation No one could doubt the political stability that has been achieved by the New Order for the last fifteen years. Despite the MALARI Affair, incidents in every general election, student activities, and the Islamic militancy which once involved a hijacking attempt, and lately, in 1984 and 1985 the bombs and fires in public places particularly in Jakarta, most political observers still consider Indonesia a stable country in Southeast Asia. 132 Samuel P. Huntington in his comprehensive study discussed the problems of the country involving stability, institutionalization and political participation. 133 On formulating the impact of modernization he gave the following equations: 134 1 Social Mobilization

Social Frustration

Economic Development 2 Social Frustration

Political Participation

Mobility Opportunities 3 Political Participation =

Political Stability

Political Institutionalization On political institutionalization he defined it as follows: Institutionalization is the process by which organizations and procedures acquire value and stability. The level of institutionalization of any political system can be defined by the adaptability, complexity, autonomy and coherence of its organizations and procedures. 135

Using his equations and definitions, Indonesian political development could be explained in that instability has not occurred. There has been a low level of participation resulting in less social frustration because economic development (as shown by increased GNP) was successful. Another aspect of Huntington's analysis was that the Indonesian level of institutionalization was low and for this reason he included Indonesia as a praetorian society which in the future could become a civic society or it could fall into political decay. 136 Using Huntington's framework, the future of Indonesia depends on the success of the Soeharto government towards institutionalization. On this, several indicators are not encouraging. The existence of KOPKAMTIB (Komando Opetasi Pemulihan Keamanan dan Ketertiban), a supraconstitutional body that could change and reach every aspect of the country's social and political life is one such example. In other words, despite the "democratic political format" such as the MPR, and political



parties, the fact of the matter is that the political institutions are highly centralized. Not much could be said for their autonomy, which is needed for increasing the level of political institutionalization. For the rest of this study, participation will not only mean political participation. In fact for a basic needs study, participation in the decision making process in the implementation of a specific economic polity that has already been decided will be important. In John D. Montgomery's terms "the third order decision" has "a collective impact that is a crucial ingredient of development" . 137





3 4 5





10 11

David 0. Dapice, "An Overview of the Indonesian Economy", in The Indonesian Economy, ed. Gustav F. Papanek (New York: Praeger, 1980), p. 3. Assuming an increase of 2.3 per cent per annum from the 1980 population of 147.5 million from "A Brief Note on 1980 Population Census" (Jakarta: Central Bureau of Statistics, 1982). Ibid. Assuming a 2 per cent increase of population from 690 persons per sq km in 1980. World Bank, World Development Report 1982 (New York: Oxford University Press, 1982). On 1984, see World Bank Atlas 1985. For an overview of the economy, during the New Order period see Dapice (1980) and Anwar Nasution, "Marco Economic Policies, Financial Institutions and a Short Run Monetary Model of the Indonesian Economy" (Ph.D. dissertation, Tufts University, 1982), p. 112. Two exceptionally good overviews of the pre-New Order era are Douglas S. Paauw, "From Colonial to Guided Economy", in Indonesia, ed. Ruth T. McVey (New Haven: Yale University Press, 1963), pp. 155-247; and J.A.C. Mackie, "The Indonesian Economy, 1950-63", in The Economy of Indonesia, ed. Bruce Glassburner (Ithaca: Cornell University Press, 1971), p. 16-69. On politics the work of Herbert Feith, The Decline of Constitutional Democracy in Indonesia (Ithaca: Cornell University Press, 1962) and "Dynamics of Guided Democracy", in Ruth McVey, ed. (1963) are the best description and analyses of the pre-New Order politics. During the New Order era an overview of the politics seems to be absent not because of lack of attention but because of the shift towards more specialized subjects such as the bureaucratic polity, the military role, the political economy approach, and others. As a result we have a richer and deeper analysis of the New Order politics although not necessarily a wider and general perspective. Significant books among others are Karl D. Jackson and Lucian W. Pye, eds., Political Power and Communications in Indonesia (Berkeley: University of California Press, 1978) and Harold Crouch, The Army and Politics in Indonesia (Ithaca: Cornell University Press, 1979). A Marxian political economy analysis of the New Order is seen in Rex Mortimer, ed., Showcase State: The Illusion of Indonesia's Acceleration Modernization (Sydney: Angus and Robertson, 1973) and Ingrid Palmer, The Indonesian Economy since I965: A Case Study of Political Economy (London: Frank Cass, 1978). On the "market force" and state power see Mortimer (1973) and Richard Robinson "Toward a Class Analysis of the Indonesian Military Bureaucratic State", in Indonesia, Cornell University Modern Indonesian Project, No. 25, 1978; and for a review of the leftist analysis see Bruce Glassburner, "Political Economy and the Soeharto Regime", Bulletin of Indonesian Economic Studies 14 (November 1978). See among others on the criticism of the Old Order (or pre-New Order) era, articles by Ali Wardhana (28 June 1966), Moh Sadli (27 June 1966), Emil Salim (throughout 1966-67) in Kompas and Kami (for Emil Salim). Paauw (1963). A more detailed description on the heritage of colonialism in Indonesian economic structure is forcefully explained in Ralph A. Anspach, "The Problem of a Plural Economy and its Effects on Indonesia's Economic Structure: A Study in Economic Policy" (Ph.D. dissertation, University of California, 1963). Attempts to produce a national income account of independent Indonesia began with the work of S.D. Neumark, "The National Income of Indonesia, 1951-57", Economi dan Keuangan Indonesia 7 (1953). See Kompas, 14 August 1972, article by Emil Salim. For discussion on this plan see Glassburner, "Economic Policy Making in Indonesia, I950-57", in The Economy of Indonesia, ed. Bruce Glassburner (Ithaca: Cornell University Press, 1971), pp. 70-98.



12 Mackie (1971), pp. 16-69; Glassburner (1971) and Paauw (1963). 13 Dorodjatun Kuntjoro Jakti, "The Political Economy of Development: The Case of Indonesia under the New Order Government" (Ph.D. dissertation, University of California, 1981), pp. 28-39, explains the political nature of the eight-year plan. A more sympathetic if critical study of Soekarno and Yamin's eight-year plan is in Paauw (1963). Yamin was chairman of the planning council which drew up the plan. 14 From Ralph Anspach (1963). Population estimates are from Statistical Pocketbook I94I (Jakarta: Central Bureau of Statistics). 15 Glassburner (1971), p. 85. 16 See Yahya A. Muhaimin, "Indonesian Economic Policy, 1950-80: The Politics of Client Businessmen" (Ph.D. dissertation, MIT, 1982), p. 34. 17 For a discussion on the Benteng programme see Anspach (1963), Yahya (1982) and Glassburner (1971). 18 Glassburner (1971), p. 3. 19 Ibid. 20 C. Peter Timmer, "The Political Economy of Rice in Asia Indonesia" (Working Paper No. 2, Stanford Rice Project, Stanford University, 1975), p. 208. 21 Ibid. 22 Yahya (1982), p. 199. 23 Glassburner (1971), p. 97. 24 Glassburner (1971), p. 90. It appeared in May 1956 but was approved in September 1956. 25 Dorodjatun (1981), p. 31. 26 Glassburner (1971), p. 90. 27 Benjamin Higgins, Indonesia's Economic Stabilization and Development (New York: Institute of Pacific Relations, 1957), pp. 47-53. 28 Biro Perancang Negara, Garis Garis Besar Rencana Pembangunan Lima Tahun, I965-60, Jakarta, 1956. 29 Ibid., p. 48. 30 Glass burner (1971 ), p. 97. 31 Ibid. 32 These include the nationalization of Dutch firms as a reflection of anti-Dutch feeling because of West Irian, confrontation against Malaysia, and also other domestic political issues. 33 From Dorodjatun (1981), p. 34. 34 Compiled from Table 22 of Paauw (1963). 35 Paauw (1963), p. 221. 36 Biro Perancang Negara, National Income of Indonesia, I951-52 (Jakarta, 1954). 37 Glassburner (1971 ), p. 11. 38 Compiled from Anspach (1963), p. 100, based on 1938 prices (in guilders). Other information were obtained from Leon Mears, "Economic Development in Indonesia through 1958", Ekonomi dan Keuangan Indonesia 13 (January-February 1961), p. 28 for national income figures through 1955. Population growth was assumed at 2 per cent since 1951. For 1956 and 1957 figures have been interpolated from statistics obtained directly from the lndonesian Planning Bureau. Growth in percentage is from the previous year. Note from Anspach (1963). lnstead of the 45 per cent increase in per capita income from 1951 through 1957 shown above, an analysis of per capita income figures based on 1955 prices shows only an 18 per cent increase over the same period. My view is that 18 per cent was still a considerable figure compared to zero or negative growth of income per capita from 1958 to 1966-67. 39 United Nations, Economic Survey of Asia and Far East I962(New York: 1963), p. 188.



40 United Nations (1963), p. 186. 41 Glassburner (1971), p. II. Growth in percentage is from previous year. 42 From Anspach (1963), p. 106, Table II-4 for 1950-53. For 1954-67, from Leon A. Mears, The New Rice Economy of Indonesia (Yogyakarta: Gajah Mada University Press, 1981), p. 55, Table 31. 43 From, "Treatise on the Indonesian Economy", author anonymous, pp. 1-55, Table 1-27. 44 Ibid. 45 For 1958 and 1959 from Nugroho, Facts and Figures (Jakarta: Penerbit Bhratara, 1967). For 1958 to 1959 the total100 per cent was Net National Product. For 1960 to 1966, from Pendapatan Nasiona!Indonesia (National Income of Indonesia) 1960-68. (Central Bureau of Statistics, November 1970). For 1960-66, the total 100 per cent was Gross Domestic Product at market prices (at constant 1960 prices), see John M. Newmann, "Inflation in Indonesia: A Case Study of Causes, Stabilization Policies and Implementation" (Ph.D. dissertation, Tufts University, 1974), p. 107, Table 13. 46 Cheryl Payer, The Debt Trap: The International Monetary Fund and the Third World (New York: Monthly Review Press, 1974), Ch. 4, p. 77. 47 Ibid. 48 Ibid., p. 78. 49 See Newmann (1974), pp. 46-8, which showed that there was an attempt initiaJly to balance the budget and dismantle price controls. 50 Payer (1974), p. 78. 51 In a typical Indonesian power play, Soekarno signed a letter of order (on II March 1966) to Soeharto which gave the latter the full power of the state to ensure political stability. 52 On this see Anwar Nasution, "DPR dan IGGI dan Hak Budget", Kompas, 23 November 1973; also Payer (1974). 53 Ibid. 54 Newmann {1974), p. 197-98. 55 Newmann (1974), p. 200. 56 See Departemen Penerangan (Department of Information), First Five-Year Development Plan (1969-70 to 1973-74), Jakarta, 1969. It consists of Volume I (Chapter I: Aim, Target and Policy, Chapter II: Financing, Chapter III: International Balance of Payment, Chapter IV: Regional and Rural Development, Chapter V: Government Administration); Volume 2A (Chapter VI: Agriculture and Irrigation); Volume 2B (Chapter VII: Industry, Mining and Electric Power; Chapter VIII: Communication and Tourism); Volume 2C (Chapter IX: Religion, Chapter X: Education and Manpower, Chapter XI: Health and Family Planning, Chapter XII: Housing and Social Welfare); Volume 3 (Specification according to regions); Volume 4 (Related material). Again in REPELIT A II (Rencana Pembangunan Lima Tahun Kedua 1974175-1978179), there are four volumes. Volume 1: Aim and Target; Volume 2: Financing; Volume 3: Sectoral Issues; and Volume 4: Regional Development; Departemen Penerangan R.I. Finally the third five-year plan (Rencana Pembangunan Lima Tahun Ke Tiga 1979180-83184) has three volumes with the same sequence as in the first and the second five-year plans. 57 Departemen Penerangan, First Five-Year Development Plan, p. 25. 58 Ibid., p. II. 59 Departemen Penerangan, Rencana Pembangunan Lima Tahun Kedua 1974175-1978179 (REPELITA II), p. 46. 60 Ibid., p. 46. 61 Departemen Penerangan, Rencana Pembangunan Lima Tahun Ke Tiga: 1979180-1983184 (REPELITA III), pp. 1-5.



62 See C. Peter Timmer, "A Model of Rice Marketing Margins in Indonesia", Food Research Institute Studies 13 (1974). The subsidies for rice and petroleum were still high even when this work was being written. 63 See Center for Policy Studies, "The Indonesian Economy". Special Issue, Jakarta, March 1985. 64 See Departemen Penerangan, Rencana Pembangunan Lima Tahun Ke Empat: 1984185 - 1988189 (REPELITA IV). 65 World Bank, World Development Report 1982 (New York: Oxford University Press, 1982); World Development Report 1984 (New York: Oxford University Press, 1984). 66 From Anwar (1982), p. 98, Tables 1-18. 67 This was the view among others in Mortimer (1973); R.J. Robinson, "The Transformation of the State in Indonesia", Bulletin of Concerned Asian Scholars 14 (1982) and (1978). For a more sectoral analysis from the left see Palmer, The Indonesian Economy since 1965: A Case of Political Economy (London: Frank Cass, 1978). 68 From Anwar (1982), p. 98, for 1967-79. 69 Anwar (1982), p. 103. Note, growth is from previous years. 70 Taken from C. Peter Timmer, "Energy and Structural Change in the Asia-Pacific Region", mimeographed {1982). 71 For 1967, 1971-77 from Dapice (1980), p. 18, Table 16. For 1967 in 1960 constant prices and for 1971-77 and 1980 in 1973 constant prices; 1980 is calculated from National Income of Indonesia 1975-80 (Jakarta: Central Bureau of Statistics, 1980). 72 For 1961, 1971, and 1976 from Dapice (1980), p. 9. Information for 1980 was from the Population Census 1980, Preliminary Tables, "Results of the Sub-Sample of the 1980 Population Census", p. 170. For 1980, agriculture includes mining and quarrying; manufacturing includes electricity, gas, water and construction and trade includes transportation, finance, insurance. Input not stated inside agriculture (1.3 per cent). 73 Using Tables 1.6 and 1.7, where the primary sector means agriculture and mining; secondary includes manufacturing and construction, and the rest as tertiary. 74 From Walter P. Falcon et al. The Cassava Economy of Java (Stanford: Stanford University, 1984), p. 164. 75 See Bulletin Ringkas, Central Bureau of Statistics, April 1985. 76 From Falcon eta!. (1984), p. 164. 77 From Dapice (1980), p. 41, Table 1.4. 78 Ibid. 79 There are not many studies on industrialization. Known, well researched works are Peter McCawley, "Industrialization in Indonesia: Developments and Prospects", (Occasional Paper No. 13, Australian National University, 1979); World Bank, Selected Issues of Industrial Development and 1/"ade Strategy (July 1981a). A rather out of date work although quite useful for its general framework is Juergen B. Donges eta!. "Industrialization in Indonesia", in The Indonesian Economy, ed. Papanek (New York: Praeger, 1980). 80 See World Bank (1981a), p. 24, Appendix I on changes of definition by the Central Bureau of Statistics of large, medium, small and cottage firms from after the 1974-75 industrial census. 81 Dapice (1980), p. 47. 82 From McCawley (1979). His notes which have been condensed are: (a) Several weaknesses in the data should be noted. Firstly, data for large and medium firms are for 1974. Data for small firms are for 1975. Data for cottage firms are for August 1974 to July 1975. The data for value added, however, has been deflated to 1974 prices by deflating data for small firms by 20 per cent and for cottage firms by 10 per cent. Secondly, officials from the Central Bureau of Statistics suspect that


83 84 85 86 87 88 89

90 91 92 93 94 95

96 97 98 99


coverage of the small and cottage firms especially, may have been rather poor and that the estimates (particularly the value added estimates) for these two groups may be substantially understated. Thirdly, while all large, medium and small establishments throughout Indonesia were intended to be included, cottage firms in rural areas were not covered in several provinces. (b) Strictly speaking, a worker in the cottage sector (defined as "participant" in the industrial census data) is qualitatively different from the workers in the other sectors because intensity of work (as measured in annual man-days of work per worker) in the cottage sector is low. (c) 1976 SUPAS (Sensus Pekerja Antar Sektor) work force data. (d) Sectoral National Income Estimates, 1974. No explanation is available for the large discrepancy, see note (a). Dapice (1980), pp. 46-9. See Center for Policy Studies (1985). Central Bureau of Statistics, ''Labour Force Situation in Indonesia, Sub Round: I-1979, Preliminary Figures", March 1980. Ibid., p. 33. Feith (1962). Ibid., p. 108. Feith (1962) described the composition of political elites as "200 to 500 persons, mainly Jakarta residents, ... members of the elite were professionally either bureaucrats (secretaries general of ministries, divisional heads, army commanders, and officers of the general staff) or politicians (cabinet members, parliamentarians, or full time employees of parties or their affiliated organizations). A small number were practising lawyers, doctors, professors, teachers, and newspaper editors .... " For political public, Feith described "persons of a middle range of political effectiveness, persons outside the political elite who nevertheless saw themselves as capable of taking action which could affect national government politics". He stated, "a very high proportion of members of the political public as here defined were persons of relatively high social status, persons in white-collared occupations and their status equivalent, village officials, religious functionaries, labour leaders, middle size traders and revolutionary veterans". In short the number of political elite and political public were a miniscule number compared to the masses. An imaginative description of this period can be seen from Benedict Anderson, Java in a Time of Revolution (Ithaca: Cornell University Press, 1972). Anspach (1963), pp. 87-91. Ibid. On the distribution of the seats for political parties in Parliament, see Feith (1962), p. 128. Ibid., pp. 113-15. 264 were in favour of the more secular constitution and 203 were opposed (or preferred a more Islamic constitution) and 2 abstained. From DanielS. Lev, The Transition to Guided Democracy: Indonesian Politics, 1957-59 (Ithaca: Cornell University Press, 1966). Ibid., pp. 84-105 on the practical "displacement of the PNI" as the strongest party by the PKI. On the view that others have also contributed towards the idea of Panca Sila, see Nugroho Notosusanto, "Lahirnya Panca Sila", Kompas, n.d. Lev (1966), p. 212. Taking a horse as an analogy, Soekarno stated it must have four legs which meant the four biggest political parties, PNI, MASJUMI, NU, and PKI. See Feith (1962), pp. 309-409.



100 Lev (1966), pp. 280-81. 101 On 30 September there were two popular versions. The first was, Benedict Anderson and Ruth McVey's, "A Preliminary Analysis of the October 1 1965 Coup in Indonesia", Cornell Modern Indonesia Project Interim Report, 1971. This version essentially argues that the movement was an internal army conflict and the PKI had no involvement in the movement. The second version, which is the present Government of Indonesia version, essentially considered that the movement was a PKI attempt to overthrow the group in power. See "Tentang Peristiwa Gerakan Tiga Puluh September" (Jakarta: Pusat Sejarah Angkatan Besenjata, n.d.). Whatever the original cause, the real impact of these events was that hundreds of thousands of Indonesians were killed particularly in the countryside as a result of open physical conflict with communists and alleged communists versus the Islamic parties' organizations and armed forces. 102 According to the 1945 constitution, the highest authority is the Legislative Council (MPR) which must appoint the President. Since the election was not held until1971, the Council was a temporary Legislative Council (MPRS) and the composition was drastically changed by Soeharto to ensure his appointment in 1967 as well as 1968. 103 At the same date the KAMI section at the Faculty of Economics of the University of Indonesia held a seminar on "Economic and Financial Issues" on the same campus. In a private conversation, Dr Widjojo Nitisastro, the former co-ordinator Minister for Economic-Financial and Industrial Affairs, told me that time (I was one of the three chairmen of the seminar which included Mustopadidjaja A.R. and Amir Iman Puro) that 69 out of 71 decisions made by the MPRS on economic policy were a direct result of the seminar policy recommendations. The policy that was decision number XXIII of MPRS in 1966 became known as the foundation of the New Order economy. To compare the seminar's recommendations and the MPRS decisions see the seminar proceedings, The Leader, The Man and The Gun (Jakarta: KAMIFEUI, 1966), and Kementerian Penerangan, Himpunan Ketetapan-Ketetapan MPRS, 1966 (1 akarta, 1966). On the lack of concept in this period among political parties, Dr Widjojo Nitisastro told me that the parties also asked for an economic concept from him and his comrades (later known as the "Berkeley Mafia" because most of the members received their Ph.D. from Berkeley) and when they compared notes with the armed forces they found that they had the same concept. 104 See William R. Liddle, "The 1977 Indonesian Elections and New Order Legitimacy", in South East Asian Affairs, 1978 (Singapore: Institute of Southeast Asian Studies, 1978). 105 See also Herbert Feith, "Soeharto's Search for a Political Format", Australia's Neighbours (May-June 1968). I 06 On the student movement and its impact on the New Order see Prisma (December 1977). 107 See Seymour Martin Lipset and Philip G. Altback, Students in Revolt (Boston: Beacon Press, 1969). On Indonesian student political socialization see Stephen A. Douglas, Political Socialization and Student Activism in Indonesia (Urbana: University of Illinois Press, 1970). 108 The task force was appointed by Soeharto as chairman of the Cabinet Presidium and it had the power to investigate corruption within the bureaucracy. Needless to say the task force (and I was a member) failed just like a new Team Pembrantasan Korupsi (Team for Crushing Corruption) named by the Attorney-General (which included intellectuals and journalists as members). Both teams failed as they did not have sufficient power. 109 See newspapers in January 1970, Kompas, Sinar Harapan, Harian Kami, Pedoman and my statement that corruption in the government was top-heavy corruption involving top political powerholders and the business community. See Nusantara, 18 January 1980.



110 Ibid., August 1970. 111 On the origin of the Governor's resolution it began when the KAK student leaders tried to prevent a large demonstration in support of the masses' solidarity for the fight against corruption at Thamrin Street on the night of 15 August 1970. Since General Soemitro had stated that as the deputy commander general of the powerful KOPKAMTIB apparatus he would crush the demonstration, the student leaders were considering a graceful exit as they did not consider the army as their "enemy". Their idea was to replace the demonstration with a turning-off of lights for fifteen minutes from 8.00 to 8.15 p.m., on the same day at the request of Governor Ali Sadikin which was a solution offered to him. The Governor promptly accepted the students' suggestion. This background information is given as I was one of the students involved in the solution and was one of those who met the Governor. 112 On the MALAR! Affair see Harold Crouch, "The 15 January Affair in Indonesia", mimeographed (Melbourne: Dyason House Papers, 1974). 113 The student leaders were Hariman Siregar (University of Indonesia), Aini Chalid (University of Gajah Mada) and the graduate student from the University of Indonesia was myself. We were released before our sentences were completed and we appealed to the Supreme Court. I was released in late 1977 after nearly four years in prison, the last of the three. On the students' view on the MALARI Affair, see my defence at the trial in Pleidoi, mimeographed, 7 April1975 and Kompas, 8 April1975. Among my other arguments was that throughout the trial not a single witness could show that the students were involved in the burning of Japanese cars and looting. 114 See Liddle (1978). 115 Ibid., p. 124. 116 Ibid., p. 130. From 460 Parliament members (who also became MPR members), 360 were elected and 100 were appointed by the President. Data for 1971 from "Daftar Pembagian Kursi, Hasil Pemilihan Umum Anggota DPR Tahun 1971" (Jakarta: Lembaga Pemilihan Umum, 1971) and for 1977 from Kompas (9 June 1977). 117 Liddle, "The 1977 Indonesian Elections. The New Order's Second Parliamentary Election", Asian Survey (Spring 1977): 175. 118 In a private conversation, the Director of Litigation of Lembaga Bantuan Hukum, T. Mulya Lubis said to me that if he visits the cities outside Jakarta he is treated by regional government official as a Central Government Officer (Pejabat Pusat). 119 See Harold Crouch, Domestic Political Structures and Regional Economic Co-operation. (Singapore: Institute of Southeast Asian Studies, 1984). 120 Sinor Harapan, 28 September 1982. 121 On anti-corruption or inequity, see Prisma (various issues) or for more "diplomatic" reports in Kompas, various days in 1982-83. Reports on OPSTIB (Operation against Corruption) which was launched by the government only produced headlines for several days. 122 Dapice (1980). 123 See my review "Ekonomi Orde Baru Dinilai" of Papanek's book, The Indonesia Economy in Prisma (November 1981). 124 Boeke, Economics and Economic Policy of Dual Societies (New York: Institute of Pacific Relations, 1953). For a critique on Boeke, see Sadli Mohammad, "Reflections on Boeke's Theory of Dualistic Economies", in The Economy of Indonesia, ed. Bruce Glass burner (Ithaca: Cornell University Press, 1971) pp. 99-124. 125 Discussed by Paauw (1963). 126 On Kuznets's Ratio, see Dawam M. Rahardjo, "Peranan 1ndustri Kecil", in Prisma (December 1976). The ratio was the result of percentage share of agriculture at the Gross Domestic Product divided by percentage share of agricultural labour force as


127 128 129 130 131

132 133 134 135 136 137


percentage of labour force divided by percentage share of non-agriculturallabour force from total force. Kuznets gave 0.42 as an average ratio. From "Poverty in Indonesia: Incidence, Nature and Policy Framework", World Bank Resident Staff in Indonesia (Draft), Jakarta, May 1981. Kompas, 5 January 1983. See Dorodjatun (1981). Ibid., especially Chapter 6, pp. 194-248 and Chapter 7, pp. 249-82. This was also the argument put forward by Yahya Muhaimin (1982). It was strongly argued that the military plays a great role in strengthening Chinese businessmen's domination in industry and agricultural import (for example Liem Sioe Liong, and for car manufacturing William Surjajaya to name two of the economic magnates in the New Order economy). The potential political polarization between government and Islam was greatly increased by this economic imbalance. My own view is that an even greater potential political conflict could occur between the mass and the Chinese. The racial incidents in 1981 in several cities showed how deeply rooted this problem was. However, this does not mean that the government did not make policies to rectify this imbalance such as giving credits to small scale industries. This compliment was from President Ronald Reagan when President Soeharto visited the White House in 1982. Samuel P. Huntington, Political Order in Changing Societies (New Haven: Yale University Press, 1968). Ibid., p. 55. Ibid., p. 12. Ibid., pp. 79-85, 192-263. John D. Montgomery, Technology and Civic Life: Making and Implementing Development Decisions (Cambridge Mass.: MIT Press, 1974), p. 215. The definition of the third order decision is that "it prescribes the incentives systems by which administrators are to elicit modernizing responses from citizens participating in the programme".


Basic Needs Results in New Order Indonesia


The last five years (1980-84) in Indonesia have been years of impressive records in rice production. 1 The logical corollary of this should be an increase in rice consumption by the population which certainly was the case on an average basis. Yet, throughout those years there were reports of malnutrition and hunger in various villages, in Irian Java in early 1983, and Gunung Kidul district in Central Java has been mentioned quite frequently as being affected by malnutrition since early independence until as late as November 1981. 2 This apparent paradox of production records and average consumption increases versus poverty and malnutrition is not an unusual situation. It merely describes the problems, importance and difficulties in relating food production and poverty. Amartya K. Sen, for example, questions the wisdom of stressing per capita food availability as an indicator of starvation. He argues on the danger of what he calls "Malthusian Optimism" 3 which becomes the case when "food supply out-running population one might well end up being quite unworried, even smug" .4 An attempt will be made in this chapter to analyse the data that shows the importance of production at the macro level, and at the same time to observe in greater depth the real condition of the population at the individual or micro level. Fortunately for Indonesia, topics that are related to food, at the macro and micro level have appeared quite frequently in many publications and research works during the New Order period. However on basic needs results, such as those pertaining to education and health, the number of published works, with the exception of those on family planning are sparse. If they do exist, they are not at a stage in which a meaningful synthesis can be done with confidence. As such the attempt to review and synthesize the macro and micro works is limited in this study to the most important need, that is, food. In food-related studies there are micro and macro oriented works of quality, a result of well-researched observations from several disciplines, particularly economics and sociology, but also from public policy science and the field of development administration. The studies touch areas as broad as agro-economic studies, village structure observation and economic behaviour at both the macro and micro




levels. The literature on education and health-related topics will be discussed in the section on sectoral results. The last part of the chapter will be an attempt to quantify basic needs results in a single indicator.

The Macro Findings and Analysis

Studies with a macro orientation which deal mainly with economic policy were by economists such as Leon Mears, 5 Peter Timmer, 6 Walter Falcon, Saleh Afiff, Atje Partadiredja to mention a few. 7 Characteristically these studies were amplified with the use of macro secondary data and analysed along macro- and micro-economic concepts, such as elasticities. Timmer's food consumption analyses using the 1976 consumer survey data is an important work. 8 Timmer finds that the income elasticity for rice shows that Indonesians do have strongly held food preferences and exercise them as income permits. But the price elasticities reflect an ability to adjust consumption patterns in economically rational directions despite those preferences at least among the bottom 30 to 40 per cent of the population. Income and price elasticities will meet with very sensitive and appropriate response. 9 Farmers and consumers will act and react according to their resources for maximum profit and maximum satisfaction. Price policy is and could become a potent policy for a multi-staple food in the future to ensure maximum consumption optimization. 10 The macro analysis also produce results that can be used to estimate the condition of the poor. Especially important is Timmer's work on income elasticity for starchy staple calories in Indonesia. 11 He showed that every increase in income for the poor, like the bottom 39.2 per cent of the population which has more or less a calorie elasticity of 0.6, will increase their calorie consumption significantly. 12 This finding is very important and has implications and possibilities towards a stronger multi-staple food policy in the future as opposed to a monocrop policy of rice that has been the reality throughout Indonesian agricultural history. A shift in price policy from a "rice centred" to a multi-staple policy seems possible. The only problem with this possibility, which if combined with nutritional supplements for people who choose the low protein staples such as cassava with increased food consumption, is that the price formation of rice has historically been very political, since the early colonial period, as has been acknowledged by TimmerY Mears and Timmer also found that the Old Order rice policy intervention which prevented the creation of a more normal and national price formation has been abandoned for the well-being of the total population. Soon after the abandonment of a too-heavy rice interventionist policy



which included the restriction of rice movement between provinces, it was found that Indonesia could have a national rice price policy with some insignificant regional variations which allowed for a decent marketing margin. 14 Even with the findings of the macro works such as a recent Stanford University study by Falcon and others on cassava, it seems clear that the efforts for a multi-staple food policy in the future will not be an easy task because of political and not economic considerations. 15 The role of BULOG in Indonesian price formation on rice is important. Since rice is always a political case, to leave the price of rice fully to the market is out of question in Indonesia. But BULOG's role is extensive and too large for any government agency. It includes establishing the floor and ceiling prices for rice, buying rice from farmers, importing rice for the national stockpile, and distributing rice to civil servants and military personnel (which involves supplying at least two million households) as well as importing and distributing wheat. Beside its huge task in its main operation, BULOG also operates in the private sector including trade (PT Wotraco, dealing with exports and also imports of anaesthetics and medical equipment), dock handling (PT Ujung Lima, which is involved in a good percentage of BULOG's commodity dock's handling), banking and insurance (PT Bank Duta Ekonomi and PT Timur Jauh), production in manufacture (batik cloth unit in Jakarta), ranch for cattle-raising (BULOG Sulawesi ranch, PT Andini Sakti, PT Kapas Indah). 16 Finally, as the head of BULOG, Bustanil Arifin is also the Minister for Co-operative Affairs and since 1983, BULOG has been responsible for co-operative operations. The search for an ideal role for government intervention in food policy, where the strength of market forces can be combined with proper government policy to ensure minimum food consumption for the lowest 40 per cent of the population, is needed in future economic policy. Knowing that the Indonesian people will act rationally and economically cannot itself solve poverty and malnutrition even if the policy is mostly in favour of more rational economic behaviour. To know the causes and factors underlying poverty it is necessary to analyse the micro perspectives. The Micro Perspective

Gillian Hart stresses succinctly the importance of micro studies for policy when she states It should however be borne in mind that the primary contribution of detailed micro studies lies less in the specific data than in the underlying process which the data revea1. 17



The micro studies are centred in Bogor with institutions such as AgroEconomic Survey (SAE) and Bogor's Institute of Agriculture (Institute Pertanian Bogor or IPB). The most prominent among the researchers are Rudolf Sinaga, 18 Gunawan Wiradi, 19 Faisal Kasryno, and their research consultants or associates such as William Collier, 20 Benjamin White, 21 and Gillian Hart. Theirs were largely micro studies of villages, within districts and regencies. Research was done with in-depth interviews and data collection from the respondents, mostly farmers, sometimes using secondary data for analysing distributional problems. The studies were almost always characterized by the following distinctive features: The studies focused their analysis on the effect of the national government programme in agriculture on small farmers and landless labourers. The programmes studied were the Rural Credit Programme, 22 HighYielding Varieties Intensification Programme/3 and others included in the Mass Guidance (BIMAS), Mass Intensification (INMAS), and Special Intensification (INSUS) which were almost always concerned with rice production. The studies often argue that despite recognizable production increase, the well-being of the poor farmers and the landless labourers in the villages stagnated or improved only at a very slow rate until 1978 and early 1979. They argue that this was because the delivery of the government programmes was more accessible to the well-to-do who already owned more land and had more access to the irrigation channels or the bank's official rural credit. Critics of these government programmes generally expressed the opinion that the wider community was not participating in the decision-making process in some of the government programmes such as Village Subsidy (INPRES Desa). 2 Until1978, micro studies on employment and wages in villages showed stagnation or very small increases in the wage levels of poor farmers and landless labourers. 24 The studies suggested that the changes in the relationship between labour and landowners as a result of use of highyielding rice varieties and better technology, produced a worsened income distribution. Collier25 and Gunawan 26 point out that landowners tended to change labour relations in favour of labour saving. 3 The micro studies were then combined with a macro perspective to show the following elements: that the worsening of employment conditions and lack of access to governmental resources produced a weakening of the bargaining power of the poor against the rich landowners. In short, the argument brought forward by the micro studies was that there exist issues in the structure (for example, power relationships in the village) and institution (village institutional arrangements and the increasing importance of government institutions).



To sum up this micro view in a more national perspective, there existed unfavourable conditions that hindered the basic needs of the people because of: (a) (b) (c) (d)

strong decline of elasticity of employment with respect to output; 27 vast increase in urban-rural disparity; increase in rural landlessness; and the tendency towards land concentration.

But some of the most important proponents of the micro perspective, such as Collier and Gunawan, have shifted their pessimistic views to a position of cautious optimism; they now believe that according to their survey of twelve villages in Java (nearly all their previous studies were also Java-centred)/8 the thesis that the poor farmer and the landless labourer were worse off or improved very little has changed and there are now increased job opportunities for villagers. In fact, in some villages there are labour shortages because of the increased opportunities for jobs outside of rural areas and off-farm jobs in the villages. This is undoubtedly strongly related to the impressive increases in rice production during the last five years which were a combined result of the success of the new variant of the high-yielding variety (IR-38), improved irrigation systems and changes in the price ratio of rice to fertilizer which moved in favour of the farmer, and the favourable weather conditions. But the pre-1979 situation which showed the importance of issues in institution and structure does not disappear instantaneously as a result of the rice production record. In fact the warning of Sen on the danger of "Malthusian Optimism" is still valid. An attempt to synthesize the macro and micro studies is necessary before this work can come up with the calculation of the sectoral results.

Strength and Weaknesses of Basic Needs Studies in Indonesia The observation of the macro and micro perspectives does not give a direct indicator of the basic needs condition. But the macro orientation does give explanations on factors underlying the economic conditions of the society, especially of the poor. 29 There are no discussions on the issue of the urban poor as well as distribution among and inside households with regard to consumption distribution. However, the macro and micro works produce important findings and observations on the conditions and prospects of basic needs in the future. 30 The findings clearly showed that the Indonesian economy has the strength to react to economic stimuli in a favourable direction. The elasticity studies, especially those by Timmer showed that consumers react



to price and income changes in such a way as to substantially protect calorie intake. His study shows that a serious multi-staple food policy, not in mere declaration but in real implementation, is justified economically since it has been proven in the past that Indonesian consumers will react to proper stimuli through appropriate income, cross and own price elasticities. It is an opportunity for the future implementation of a proper multi-price and nutrition policy, which would correct the absence of protein in a calorie-rich staple diet consisting mainly of cassavaY The farmer also showed that changes in price ratio between rice and fertilizer could directly result in increases in production. Although in itself this does not mean fulfilling basic needs product, it is definitely a necessary condition for basic needs fulfilment since it increases supply. Paddy/urea price ratios as well as total paddy production showed changes for paddy production from 11.21 million tons of paddy in 1970 and 20.09 million tons in 1981, while changes in paddy/urea price ratio was from 0.79 in 1972 to 1.71 in 1981. 32 The so-called Rumus Tani or farmer's formula, which was proposed among others by Mubyarto as a way of increasing productivity is a calculation of rice against fertilizer prices in kilograms. This was proposed around 1967 when the price ratio was less than 1.0 reflecting the relatively expensive price of fertilizer compared to rice. 33 In 1984 the ratio was close to 2, which is way above the ideal ratio. The economic optimism of the macro view must also give consideration to the realities of the micro perspective. Even though one of the proponents of the micro perspective, Collier, now holds a more optimistic view, the problems of institutional and structural issues are still valid for future consideration. For example, on the institutional side, the Indonesian Government gave increased importance towards the building of village co-operatives (KUD or Koperasi Unit Desa). The government stipulates that the supply of rice by the national logistics board (BULOG) must be met by buying from KUD. This produces a situation in which the private sector bribes the village official to get their produce "stamped" as if it were a product of KUD. This kind of corruption will only hurt the consumer. 34 Such co-operatives will only increase the cost for consumers and generate more wealth for the village officials. The decrease in old institutional arrangements in crop-sharing could, according to Collier and others, 35 be dangerous if such a decrease is only replaced by government intervention and subsidies. The increasing disappearance of the village welfare institutions (bawon, ngasak, sakap, lumbungdesa) has been replaced by heavy government subsidy such as cash subsidies to villages, mass guidance and other government-sponsored village works. This happened at the end of 1970s and in the early 1980s when the oil boom was in full gear. The world recession and the reduction of oil prices will reduce the government's capacity to subsidize farmers



or increase village development. This became clear in the harvest season in Aprill985 when BULOG insisted on ''quality specification'' which directly reduced the farmers' selling price and quantity to KUD/BULOG. The ideal situation could be a more economically rational government price policy which will increase optimum caloric consumption through multiple pricing and nutritional supplement subsidy. But the danger of depending too much on government institutions such as co-operatives without popular participation could be serious. The fact that the ownership of land caused more land concentration and increased landlessness must also be taken into consideration as a dangerous signal for ensuring basic needs for the poor. 36 The long term solution for a substantial improvement in basic needs can only be more productive jobs outside agriculture. How the macro-economic forces and micro-structural and institutional forces work and interact can be seen from sectoral results which will be discussed in the next section.


The lack of data and literature forces this study to exclude basic needs such as housing, water supply, and clothing. Even though there exist only three needs to be observed, these have distinctive differences. Whereas food should be seen as an essential need involving production, distribution, and consumption, a product needed for people's survival and health; the need for education and health services and family planning are essentially service-oriented and more difficult to describe accuratelyY For example, the number of literate people ten years of age and older as a percentage of the population in the age group is difficult to relate to expenditure on education. This is because there are difficulties in calculating the cost of expenditure on education exclusively related to literacy except in the obvious case of increase in primary school education and the literacy level. With respect to family planning, it is extremely difficult to relate the effort of family planning to real demographic changes. The number of acceptors has a limited use if one tries to relate that to the decrease in population. Even with a sophisticated technique it is difficult to explain the importance of contraceptive methods to a decline in population growth, since so many other factors are involved. For example, one could mention time lag and the quality of data gathering in a developing country such as Indonesia. But in the case of food, the relation between production, distribution, and consumption within a context of a whole food system is more feasible for analysis. Even though there is always the danger of "Malthusian Optimism", it seems clear that there is sufficient data on consumption as well as distribution and production. The basic needs of



Indonesian population with regard to food can be reported with reasonable confidence.

Food Production, Consumption and Distribution

Production and Consumption President Soeharto's report to the People's Consultative Assembly mentioned that 23 million tons of rice were produced in 1982. 38 The production figures for rice, presented in this chapter, show that during the third five-year plan (1979-80 to 1983-84) in particular, which ended on 31 March 1984, rice production had increased tremendously. In 1982 rice production was the highest ever and surpasses the target of 20.5 million tons set for the third five-year plan. 39 The annual increase was 13 per cent in 1980, 9.45 per cent in 1981 and 3.8 per cent in 1982. In 1983 and 1984 the annual increase was respectively 4.8 per cent and more than 6 per cent40 and in 1984 production reached 25.6 million tons. The success was a combination of the farmers' work, tremendously good weather, government price policy with regard to fertilizer and highyielding variety, and government subsidy in BIMAS, INMAS and INSUS as well as better irrigation and extension services. The increase from 107 kg in 1970 to at least 145 kg in 1984 in per capita rice consumption is more than an impressive record. 41 This figure shows that in absolute terms the consumption of rice by the population rose to such a magnitude that a monocrop situation could become a reality if the trend does not change in the future. The increase in the production of other staple foods like cereals such as corn, and starchy staples such as cassava and sweet potatoes did not match the magnitude of rice production increases. The comparative productivity of cassava and rice in Indonesia and other selected Asian countries showed that in rice production Indonesia is surpassed only by China and has higher production than Malaysia, Burma, Pakistan and Philippines among others. But in cassava Indonesia is below Malaysia, Philippines and Thailand. 42 Since cassava could be and has been produced for export, as well as for admixture (mixing cassava with wheat flour to lower the import of wheat), as well as for livestock, the market prospect for the future is good. But also important is that increased cassava production helps the poorest 30 per cent of the population if they cannot afford rice and must consume other food for their basic needs requirement. Here the role of cassava with additional government help could be important to prevent malnutrition. As Falcon stated "Gaplek (dried cassava) would probably have to be laced with chillies (to deter its use as animal feed) and possibly



with vegetable protein or oil supplements to meet nutrient requirements other than calories". 43 For the poor, as Falcon stated, "the commodity would thus 'self target' among the most vulnerable groups, and the resource costs and leakages would be much less than if rice were used" .44 The consumption of calorie per man day showed an increase from 2,097 in 1970 to 2,442 in 1980. 45 Between 1980 and 1984 impressive increases in rice production were seen and it is safe to say that in 1984, at least the average calorie consumption per capita will be 2,500 calories or more, 46 making it much higher than the F AO (Food and Agricultural Organization) requirement of 1,900 net calories intake per capita. 47 But the New Order's success in productivity increases must also be seen in the light of protein intake. Here the figures are not that rosy. It shows the per capita average daily supply of protein for domestic consumption by kind of food increased only slowly from 44.9 grams in 1970 to 47.1 grams in 1979. 48 As Napitupulu stated at the Indonesian Nutrition Seminar in 1963, ''the average Indonesian needs a daily intake of 1,950 calories and a total of 48 grams of protein of which 12 grams should be animal protein" .49 As late as 1979, the protein per capita intake was 47.1 grams and only 5.3 grams came from fish, meat, eggs, and milk. The percentage change from 1970 to 1979 is only 4. 9 per cent which is not as impressive as the 16.5 per cent increase in calorie consumption. However, it is also true that compared to the era before the New Order, the use of cereal as staple food increased compared to tubers or starchy food. Again Napitupulu suggested a system of "separating cereals from tubers, treating cereals as staple food and tubers as food supplement". 5° Following Napitupulu's logic that cassava or non-cereal starchy food is an inferior staple for protein compared to cereals it is worth considering the percentage of noncereal starchy food from the total main food consisting of cereals and non-cereal starchy food in calories. In 1970, 14.4 per cent of the staple calorie consumption came from non-cereal starchy staples and in 1979 it was only 12.9 per cent 51 which means increased calorie consumption from the superior (higher protein intake) cereals. The fact that in 1980, 1981 and 1982 the increase in cassava production was small (the small staple form of non-cereal starchy foods) meant that for 1982 the percentage of calories from non-cereal starchy staple was lower than 12.9 per cent in 1979. Dapice calculated the consumption of staple foods in Indonesia (in thousand tons) in Table 2.1. 52 From this table and Table 2.2, it can be seen that overall, the production and consumption figures show improvement at a very impressive rate which includes increase in food quality related to proteins.



Distribution Since Sen has warned us not to rely too much on production or per capita consumption figures as indicators of poverty, mentioning the 1943 famine in Bengal which occurred when the production increased two years before the famine, it is appropriate to look at distribution. Unfortunately, the consumer surveys that have been undertaken frequently and that are supposed to help this study in looking at the distributional issue, have some methodological problems. The biggest problem is the tendency to under-report in the consumer survey reports. 53 For example, if one takes the monthly per capita consumption and multiply it by twelve (number of months) the figure should approximate private TABLE 2.1


Year 1970



Rice Corn Cassava Sweet potato Wheat flour Rice Equivalent (RE)

12720 2457 9612 2175 355 18584

14710 2692 12243 2433 516 21728

Population (millions) Kg. RE per capita



20246 3000 11275 2025 1161 27837 147.4




SOURCE: Dapice (1981).

TABLE 2.2.


Year Item





Nominal per capita expenditure Price index Real per capita expenditure Population (millions) SUSENAS total consumption GOP total consumption SUSENAS/GDP

1356 0.63 2156 116.5

4490 I. 73 2595 134.2 4179 6032 0.69

5572 2.21 2521 140.6 4387 7866 0.62

8423 3.08 2735 147.4 4838 8927 0.54

3014 3814




consumption in the GNP account. Dapice calculated the changes of SUSENAS/GDP consumption from the private consumption expenditure part in GDP as in Table 2.2. He further observed that the difference came particularly with the SUSENAS (Survei Sosial Ekonomi Nasional) non-food consumption. By estimating total food consumption from production, trade, and industry data and comparing the result to the SUSENAS estimates he found his own food consumption estimate and then compared it with the SUSENAS food consumption. The residual of total consumption minus food consumption is then compared to the SUSENAS non-food consumption. Table 2.3 shows the difference between Dapice and SUSENAS', calculations (in billions of rupiah). 55 TABLE 2.3.



1976 1978 1980

Total Consumption







Dapice (D)

Ratio (C/D)

4876 5927 10324

5285 7161 12106

0.91 0.82 0.85

1971 3008 4574

5179 8023 15371

0.38 0.38 0.30

Which data are the most reliable, SUSENAS or GDP? From the concern for food consumption it seems that the SUSENAS trend is less reliable. For instance, SUSENAS reports rice consumption per capita (1976 to 1980) decreased from 114 kg to 111 kg. A combination of BULOG's production figures with the population census show an increase in per capita rice supply from 119 kg in 1976 to 137 kg in 1980. Since for this study the consumer survey (SUSENAS) must be used, as it is the only study relevant for distributional investigation, and taking into consideration the comparison with Dapice's findings, it appears that SUSENAS (1976) is the most accurate consumer survey report that one can use. Works by Timmer showed that three-quarters of the population of rural Java spent Rp 4,000 per month or less per capita while less than one-quarter of urban Java existed on such a small expenditure. 56 Timmer and Alderman reported that the poorest 30 per cent of the population spent 37 per cent of their budget on rice and their rice consumption in kilograms per capita is well below the national average of 114 kg. 57 In 1976 the per capita total expenditure of the population at Rp 3,000 or below is at 29.1 per cent of total consumer survey and using population weights from the 1971 census they are estimated at about 39.1 per



cent of the total population. 58 Table 2.4 shows the proportion of population at or below specified expenditure levels. 59 TABLE 2.4. PROPORTION OF POPULATION AT OR BELOW SPECIFIED EXPENDITURE LEVELS Per Capita Total Expenditure (Rp per month) 1000 2000 3000 4000 5000 8000 10000 20000 30000 Over 30000 Population weights from 1971 census

Rural Java

Rural Off-Java

Urban Java

Urban Off-Java

0.015 0.232 0.547 0.748 0.859 0.966 0.983 0.999 1.000 1.000

0.012 0.092 0.275 0.477 0.640 0.885 0.942 0.995 0.999 1.000

0.001 0.018 0.099 0.239 0.384 0.678 0.785 0.953 0.983 1.000

0.001 0.032 0.126 0.279 0.438 0.757 0.856 0.980 0.994 1.000

0.009 0.106 0.291 0.470 0.612 0.839 0.902 0.983 0.995 1.000






All Indonesia Sample Weight

0.012 0.154 0.391 0.582 0.715 0.897 0.941 0.992 0.997 1.000

SouRCE: Central Bureau of Statistics, SUSENAS V (1976).

Assuming that the increase in rice production, particularly since the 1980s, affects more positively the poor because their income elasticities for calories from rice, corn and cassava are higher than those in the higher income bracket, it is clear that the trend of staple food consumption in the 1980s is better than in 1976.60 This is an obvious conclusion and there are studies that look more deeply into the distributional issue. For example, there are the calculations of the consumption distribution by Sayogyo61 and later by Pos M. Hutabarat. 62 But these are more appropriately discussed in the single indicator sector, in the last section of this chapter, because their calculations, as in the Physical Quality of Life Index (PQLI) is used to define the overall condition of the poor. Suffice it to say that although the trend, especially for the last five years (1980-85) is much brighter, it is clear that the distribution of food consumption is still far from ideal. Poverty seems to be located in rural Java. To what extent the distribution really relates to malnutrition and poverty will be discussed in the single indicator sector. Education The commitment to better education of the Indonesian people has been foremost in the minds of every Indonesian political leader since early in-



dependence. Ruth Oaroesman's report indicates the commitment of previous governments to education. In 1940 enrolment in the three years of primary schools that were being run by the Netherlands Indies Government was 806,000. After primary schools were run by the Republic of Indonesia, it was reported to be 5 million. By the 1960 they had reached 9 million and by 1970 nearly 15 million. 63

In the first five-year plan, there was so little emphasis on education such as the building of primary schools, that the President made an "appeal" to the society and the private sector to build classrooms and school buildings. 64 Students and intellectuals felt that the first five-year plan only benefited foreign investors, especially Japanese and Chinese Indonesians, and did not benefit the public in terms of education and health services. This led to demonstrations, discussions and ultimately political instability, which reached a climax during the visit of Prime Minister Tanaka to Jakarta on 15 January 1974. 65 This in turn induced BAPPENAS to formulate the special presidential instruction (INPRES SO or Instruksi Presiden Tentang Sekolah Oasar) on primary school in 1973. 66 The changes in the number of pupils, teachers, schools by level of education from 1970 to 1980 ( 1970 = 100) showed tremendous increase from .89 in 1973 to 168 in 1980. 67 The role of the INPRES SO is strategic in reversing the downward trend index in REPELITA I to an impressive upward swing until 1980. 68 In 1980, with an enrolment rate of 85 per cent for the population aged 7-12 the target for the end of REPELITA II was almost achieved, and in 1984 the World Bank Atlas 1985 reported that Indonesian enrolment rate was 100 per cent. 69 To a large extent the success of enrolment rates and pupil index is a direct result of the INPRES SD programme. 70 But this macro result does not satisfactorily answer the important question on the quality of education. The two indicators that will help in some degree to evaluate the quality are the number of dropouts and repeaters, and the literacy rate. With regard to dropouts it appears that since 1973 the effect of the programme shows a positive result as it was reduced from 10.1 per cent in 1973 to 5.1 per cent in 1981. But the frequency of repeaters does not show much improvement, that is, at 12.3 per cent of previous year enrolment in 1971 to 10.1 per cent in 1982. On literacy rates, the figures show an improvement that is quite impressive by any standards. From a 60.9 per cent literacy rate to 72 per cent in nine years is no mean achievement. This is particularly so in the age group I0-14 which is an important group since it will become the early labour force age group and the literacy rate has improved from 81.2



per cent in 1971 to 90.4 per cent in 1980. 71 It should be noted that the World Bank defines adult literacy rate as the percentage of persons aged 15 and above who can read and write. 72 Within this definition the literacy rate is lower and the World Bank gives 62 per cent for Indonesia in 1977. For 1980, from a population of 86,770,436 who were 15 years and above, 27,504,730 or 31.54 per cent were illiterate. This put the literacy rate at 68.46 per cent in 1980. 73 In this light it should be stated that female illiteracy dropped significantly in the 10-14 age group from 20.9 per cent to only 10.2 per cent in 1980.

Micro Studies Unfortunately micro studies on education among the poor are few. But one study by Daan Dumara of Chendrawasih University (Irian Java) in the sub-district of Pula Gadung, in eastern Jakarta, showed how small income affects the enrolment as well as the dropout rate. 74 He also found the importance of informal education, organized by the private sector to absorb the dropouts. In his study, Daan Dumara found that three sources of informal education - typing, driving lessons and sewing lessons had a strong relationship with the increased earning capacity of households.75 This micro study only shows that the prospects of youths who resort to this kind informal education in the short term are much better off than those who cannot continue their primary education to the secondary or tertiary level. In REPELITA IV (1984-85 to 1988-89) the issue of primary education will shift from mere enrolment rate (which is already 100 per cent for this age group) to the quality of education. It is imperative that the government should pay greater attention to the continuation of education beyond the primary level, and this will not be an easy task. Informal education with its aim to increase the skills at the lower and middle level of the work force undoubtedly relieves the government from the high costs of higher education.

Health and Family Planning

The Central Bureau of Statistics showed the changes in infant mortality rates (from 1,000 births) as follows: 76 1961-71 (annually) 1976 1980

137 110 98



The figures on life expectancy at birth show changes as follows: 77 Year 1961-71 1971-75 1980

Male 45.0 50.3


Female 48.0 53.3


Basic needs are in many ways products of several programmes. The problems of interlinkages are never more difficult than when discussing the sectoral results of health. The effect of increased food production for example, has a great bearing on the reduction of the infant mortality rate and increase in life expectancy. It is impossible to have time series data on both cases and it is also difficult to gather data and find a method that can differentiate the reasons for the better health services or as an indirect result of increased income of the people. All these reasons force this study to be more descriptive than analytical. What can clearly be said is that, as in the educational sector, there is a definite increase in the quantity of government services as well as improvement of the health of the people reflected in the health indicator. This can be seen partially from the number of beds and hospitals by type and the number of health facilities by type. On health conditions, besides infant mortality rate and life expectancy, data is available for morbidity. General hospitals increased from 608 in 1973-74 to 642 in 1980-81, and beds from 61,241 to 75,766. 78 The small increase in the number of government hospitals is because hospital costs are much higher than health facilities at public health centres. The public health centres or PUSKESMAS can be considered a unique New Order phenomenon. The operation of PUSKESMAS went down to the sub-district kecamatan level. It is possible to operate these since all graduates of medical schools have to work in PUSKESMAS for three to five years after their graduation. 79 Public health centres increased from 1,058 in 1969-70 to 4, 753 in 1980-81 and ratio of physicians to paramedics was .207 in 1969-70 and .182 in 1980-81.80 However, to say that the Indonesian Government places increasing importance on health services for the lower income group or the villagers, is probably stretching things too far. If one assumes health personnel (aside from physicians) to be paramedics, and if the ratio of paramedics to physicians is calculated, the result shows only a slight decrease from 0.207 in the early first five-year plan to .182 in 1980-81. What these figures show is that although there is a high increase in the absolute number of health personnel, the strategy is still a health strategy that is relatively more expensive (although health services cannot be cheap). In other words, the possibility of increasing the number of paramedics to a higher level which will lower the ratio of doctors as a percentage of health personnel



has not been considered by public policymakers. 81 The World Bank in the World Development Report 1982 stated that in 1960 in Indonesia the number of patients per physician was 46,780 and in 1977 it was 13,760. 82 This is a significant improvement. But in 1960 there were 4,520 people per nursing person, and in 1977 it increased to 8,870 per nursing person which means there was no improvement. 83 Training of paramedics is relatively cheap and the possibility of paramedics living in the villages is higher than medical doctors. Many preventive services like immunization and information dissemination on the importance of sanitation can easily be done by the paramedics and the result of their presence can have a positive effect towards lowering the mortality rate. The number of patients suffering from cholera increased from 1, 723 to 19,649 from 1969 to 1981, and the mortality rate was 5.7 per cent in 1973-74 and 3.3 per cent in 1981. 84 Table 2.5 shows the percentage of mortality and that there were more deaths caused by upper respiratory tract infection and diarrhoea. 85 TABLE 2.5.


Cause of Death



Lower respiratory tract infection Diarrhoea Cardio-vascular diseases Tuberculosis Tetanus Nervous system diseases Typhoid Injuries and accidents Complications at pregnancy and delivery Neo-natal condition Others

12.0 17.0 5.1 6.0 4.6 5.1 2.1 2.1 2.2 2.4 41.3

23.5 22.2 11.7 9.9 7.5 5.9 3.9 4.9 3.0





NOTE: The large percentage under "others" in 1972 is probably due to the lack of information on the exact cause of death. SowRCE: Department of Health, 1972 and 1980 Household Health Surveys.

The two tables show that like other developing countries the health conditions of Indonesia still leaves a great deal to be desired. But there were improvements in health conditions more clearly reflected in the family planning programmes.

TABLE 2.6.













1ava and Madura Sumatra Kalimantan Sulawesi Other Islands

41.7 8.2 2.2 4.2 4.4

68.7 13.55 3.6 6.9 7.8

63.0 15.7 4.1 7.1 7.1

65.0 16.2 4.2 7.3 7.3

76.1 20.8 5.2 8.5 8.6

63.8 17.5 4.4 7.1 7.2

91.3 28.0 6.7 10.4 11.1

61.9 19.0 4.5 7.1 7.5

1.3 2.1 2.1 1.7 1.6

1.9 2.9 2.4 1.8 2.0

2.0 3.3 2.8 2.2 2.8














NOTE: Excluding East Timor before 1971. SOURCE: McNicholl and Masri (1982), p. 3.



Family Planning Table 2.6 shows the population distribution and growth by island as well as in the total for the last half century. 86 If one were to compare the increase in population in 1971-80 to the periods before it, it is difficult to assess the population policy in Indonesia as a success. In fact, demographers and population specialists have always had difficulty in trying to explain the relation between the population control policy and the demographic changes of population growth. In the Indonesian case, it seems clear that the population control did reduce the birth rate from the early 1960s to early 1980s by probably a fifth. McNicol! and Masri stated that the crude birth rate in the 1980 census was 36 per 1,000 and in early 1960s it was between 40 and 45 _87 They also reported a fertility decline (where fertility means the number of children born to a woman during her reproductive life at the prevailing age-specific fertility rates). The figures are as follows: 1967-70 1970-75 1976-79

5.6 5.1 4.7

Their study, which makes great use of the latest 1980 census results, also shows that mortality rate fell and it fell further than the birth rate. The crude death rate for 1976-79 is 14 per 1,000 population and this is a reduction by a third compared to the early 1980s. 88 The reduction in the infant mortality rate contributed significantly in reducing the death rate. Figure 2.1 shows the Indonesian demographic transition compared to other Asian countries from 1960 to 1980. 89 It is evident from Figure 2.1 that the increase in population growth from 1971 to 1980 is understandable despite its increase compared to the other period. The increase in health conditions as well as food consumption has decreased the death rate. The rate of natural increase is, however, still high at 23.2 per 1,000 population from 1975 to 1980. 90 But to attribute the success of birth control solely to the family planning programme may over-simplify the situation in Indonesia. However, it is not possible to ignore the success of the programme by using every available indicator. International organizations have often held up the Indonesian ·ramily planning programme as a model to be emulated by other developing countries. 91 Table 2. 7 shows the percentage of married women aged 10-49 years using contraceptive method and percentage to ever married women 10-49 years of age. 92 From the sectoral results it seems that throughout the last twelve years health and family planning programmes, as in education have been relatively successful partly because of increased availability of








• c. 1980


~ ... " ... ~








'0 ::l


u Malaysia 5


0 ~------r-------r-------r-------r-------r-------r 50 45 40 35 30 25 20 Crude Birth Rate (Per I ,000) SOURCE:

McNicholl and Masri (1982), p. 4.

funds especially in the INPRES SO programme and the building of PUSKESMAS and partly as result of good co-operation between the people and the government mostly and probably only in the family planning programme. 93


As was discussed in the first chapter, economists agree that despite its weakness, the Gross National Product or income per capita in US dollars is still a relatively good indicator of a country's level of living. 94 On income distribution and poverty there have been several attempts to find a single indicator, but none have been as successful as GNP per capita as a single indicator of wealth. For example, the use of the Gini index as a measure of income distribution has been criticized by many. Gary S. Field regards it as a weak indicator because of its possible neglect of



TABLE 2. 7. PERCENTAGE OF MARRIED WOMEN AGED 10-49 YEARS USING CONTRACEPTIVE METHOD CURRENTLY (1980 USED) Contraceptive Method Currently Used Pill IUD Condom Combination Other methods Not stated Total Percentage to ever-married women



Urban + Rural

44.4 21.3 6.3 0.5 26.2 1.3

55.6 25.4 2.4 0.6 14.7 1.3

53.4 24.5 3.2 0.6 17.0 1.3







SouRCE: Central Bureau of Statistics, "A Brief Note on 1980 Population Census" (Jakarta, 1982).

income changes for the poorer income groups. 95 The PQLI is an attempt to find a single indicator to measure physical well-being, particularly of those living in Third World countries. No single indicator relating to basic needs conditions can be used with full confidence. But single indicators combined with the sectoral results and macro and micro studies can give us a better picture of the basic needs condition in Indonesia throughout the New Order regime. In this context looking at changes in the PQLI over time is useful. Since complete time-series data are not available, the PQLI will be compared for 1971 and 1980. This section will also try to apply and develop other single indicator methods that have been used by Indonesian academics to describe living conditions in Indonesia. The work of Sayogyo on the poverty threshold and the work of Pos M. Hutabarat on the sufficiency level will be discussed and developed. 96

Physical Quality of Life Index (PQLI) The PQLI has many problems which militate against it being accepted as a single indicator of basic needs. Nonetheless, it is worth looking at the changes in the PQLI during the New Order. Unfortunately, the available data is limited and therefore, a time series is impossible to work out. 97 But the data for 1971 and 1980 are available and a calculation of the change helps the study determine the overall direction and magnitude of movement in the physical well-being of the population as a whole. In 1971, the PQLI of Indonesia showed the following: 98



Life expectancy at aged one Years 53.3 Index no. 59.2 Infant mortality per 1,000 births Number 125.3 46.7 Index no. Literacy Percentage and index no. 59.6 PQLI 49.0 The PQLI is the number obtained by averaging equally three component indices, life expectancy at aged one, infant mortality, and adult literacy. Life expectancy at aged one is converted into an index number by the following formula. 99 Index number

Life expectancy at aged one - 38

= ------------~-------------3.9

The infant mortality rate is converted into an index number according to the following formula: 100 Index number


229 - Infant mortality rate per 1,000 . 2 22

The index number for literacy is equal to the percentage of literate adults. For 1980, the population census gives the following data: 101 infant mortality per 1,000 births is 98 and life expectancy at birth is 53 years. 102 This study's own calculations showed that among the population aged 15 years and above, 68.4 per cent are literate. 103 To convert life expectancy at birth to life expectancy at aged one the following formula is used: 104 eo -


+ qo (1 - ko)

el - ________-.::.----:::----1 - if



is the infant mortality rate per 1,000 births,

~ is the average survival period (0-2 years) during the first year

e0 is the life expectancy at birth, and e 1 is the life expectancy at aged one. therefore


e =

53 - I + 0.098 (I - 0.2) I - 0.098


. 57 7

The figures show that within nine years the Indonesian PQLI increased from 49 to 59. It is useful to explain the dimension of the positive changes



with regard to the concept of Disparity Reduction Rate (DRR) developed by James P. Grant of the Overseas Development Council. 105 When employed with the PQLI, it measures the rate at which the disparity between a country's PQLI performance and the best projected performance 106 decreases between two periods. Thus a high DRR indicates a rapid annual reduction, and a low DRR reflects a slow reduction in the gap between current performance and a PQLI of 100. Unlike the normal percentage rate of change the DRR permits meaningful comparison of performance towards fixed goals to be made. Such comparisons are distorted by the ordinary percentage rate of change. Morris used the DRR for PQLI with the formula: 107

xt + n lin

DRRt1 + n

-----1 X 1/n t

where X 1 is the disparity between actual PQLI performance and 100 in time t. The calculation yields a negative number when the disparity is being reduced. However, for the convenience of discussion, the rate at which the gap between the actual PQLI and 100 is narrowed is shown as a positive number. Thus a negative rate indicates that the PQLI is declining, that is, the disparity is becoming greater. For Indonesia we arrive at the following figures for DRR:

PQLI 49 59


1971 1981

Disparity 51 41

Average Percentage Annual DRR 1971-80: 2.4. The DRR was calculated as follows: DRRt + t



=-I = 511/9



2.395 (in per cent)

During the same period, the average annual per capita GNP growth rate for Indonesia was around 5 per cent, as shown in Chapter I. Although for different time periods than that used for the Indonesian calculation, Table 2.8 shows the PQLI performance and per capita GNP growth rates for various countries circa 1950, 1960 and 1970. 108 It can be seen from Table 2.8 that the average annual DRR for Indonesia is comparable to that of other countries. It is also true that the average annual per capita GNP growth rate of Indonesia is much more impressive compared to that of other countries. What this might mean is that compared to countries that put high priority on meeting basic needs





PQLI Country India Turkey Egypt Algeria Nicaragua Malaysia Columbia Ecuador El Salvador Brazil Mauritius Mexico Philippines Thailand Venezuela Portugal Chile Taiwan Sri Lanka Costa Rica Jamaica Panama Trinidad Martinique Cyprus Bulgaria Puerto Rico Argentina Hungary Greece Italy Israel United States SOURCE:

c. 1950

c. 1960

c. 1970

14 30 32 34 42 47 47 48 51

30 42 42 36 53 47 66 60 61 63 67 65 60 58 69 69 65


53 55 55 55 55 58 62 62 63 65 67 68 68 69 72 72 74 74 77 80 82 80 84 89


75 78 80 73 81 78 82 79 83 82 87 84 87 86 91

55 43 41 54 67 71 68 64 66 71 71 72 70 79 80 77

87 80 86 87 81 87 86 85 89 91 85 90 88 92 89 93

Average Annual DRR 1950s-70s 1.7 2.1 0.8 0.6 1.2 2.2 3.1 2.7 1.5 2.6 2.4 2.3 2.2 1.7 3.2 3.2 2.8 5.1 3.4 3.7 4.6 2.5 4.1 4.2 2.8 5.6 5.2 2.1 3.2 2.4 5.0 1.9 2.1

Ave. Annual per Capita GNP Growth Rate 1950-70 1.8 3.5 1.2 1.8 3.2 2.3 1.6 2.0 2.0 2.7 -1.9 3.1 2.6 3.8 3.0 1.5 5.3 1.9 2.4 4.7 3.2 4.0 3.8 1.9 5.8 5.0 4.7 2.4

Morawetz (1977), Table A-1.

(such as Taiwan with 5.1 per cent average annual ORR from 1950 to 1970) Indonesia lags behind. But there is no doubt that the basic needs condition in Indonesia has improved considerably. Other indicators give this study more insight on the degree of change in the basic needs condition.



Other Indicators: Sayogyo and Pos M. Hutabarat Methods The methods developed by Sayogyo and Pos M. Hutabarat give a better picture of the basic needs situation in Indonesia. A problem with the two methods is that both rely heavily on the SUSENAS data. When they began their studies, both of them used the SUSENAS V (1976) data. As discussed in the preceding section, SUSENAS V is the best survey of real expenditure levels. But for other studies that would like to continue and develop Sayogyo and Pos Hutabarat methods, it must be remembered that the SUSENAS VI in 1978 and SUSENAS VII in 1980 showed increased underreporting. They cannot be used without some sort of adjustment.

The Sayogyo Method The World Bank country study on Indonesia describes Sayogyo's concept as follows: Sayogyo defined poverty thresholds in terms of annual per capita consumption levels in rice equivalent below which people were classified as poor, very poor and destitute. The threshold stated in terms of rice equivalents were 320, 240 and 180 kg in rural areas for both Java and outside Java. To calculate the poverty threshold of the society what is needed is the price of rice in the respective areas (Java or off-Java) and the expenditure pattern that is taken from the SUSENAS V. The price of rice was taken to be Rp 37.5 in 1970 and Rp 120 in 1976 for Java, and Rp 50 in 1970 and Rp 125 in 1976 for off-Java, the same prices were used in urban and rural areas in both locations. 109

From the consumer survey, Sayogyo and the World Bank computed the level and the trends of poverty in Indonesia, shown in Table 2. 9. 11 0 The correction by the World Bank was because Sayogyo had used the 1976 data in terms of annual per capita expenditures in rice equivalents by using the distribution of household by total households expenditure classes, not the distribution of the population by per capita expenditure classes which he used for 1970. 111 The World Bank correction in this study can be found in the fifth and sixth columns of Table 2. 9. 112 From this table, the poverty threshold for all Indonesia and the trend from 1970 to 1976 is given in Table 2.10. 113 The trend seems to be an improvement in the poverty threshold. For 1980 this study uses SUSENAS 1980 with the necessary adjustment. This study will use Dapice's method for adjusting SUSENAS data to find the total income. 114 Rp 250 is taken as the price of rice in 1980. 115 Dapice adjusted the food spending by 1.2 for each spending group while for non-food spending this adjustment is higher for the higher-spending groups . This is only logical as the poor use their income increases mostly


Poverty Thresholds (annual per capita expenditures, in rice equivalent) JAVA-Urban Poor (480 kg) Very poor (360 kg) Destitute (270 kg) JAVA-Rural (320 kg) Poor Very poor (240 kg) Destitute (180 kg) OUTSIDE JAVA-Urban Poor (480 kg) Very poor (360 kg) Destitute (270 kg) OUTSIDE JAVA-Rural (320 kg) Poor Very poor (240 kg) Destitute (180 kg)

Sayogyo's Estimates, January-April 1970 lifo of Total

Number (Millions)

Sayogyo's Estimates, January-April 1976 DJo of Total

Number (Million)

Estimates Using Per Capita Distribution and Rice* January-April 1976 OJo of Total

Number (Million)

Estimates Using Per Capita Distribution and Essential Commodities Index* January-April 1976 OJo of Total

Number (Millions)

55.90 43.70 26.05

7.13 5.37 3.32

42.50 28.49 17.75

6.89 4.62 2.88

45.99 27.68 13.73

6.81 4.10 2.03

35.85 14.68 8.79

1.30 2.18 1.30

61.00 39.49 20.93

37.97 24.58 13.03

58.60 39.78 24.95

40.48 27.48 17.24

57.11 33.92 17.14

38.48 22.86 11.55

47.95 25.31 13.06

32.31 17.06 8.80

61.44 38.96 20.78

4.43 2.81 1.50

43.51 27.13 14.55

4.12 2.57 1.38

42.41 22.83 10.18

3.66 1.97 0.88

42.71 23.04 10.27

3.68 1.99 0.89

44.80 27.78 15.01

15.77 9.78 5.28

41.65 25.83 14.44

16.83 10.44 5.83

35.63 19.54 9.32

13.98 7.67 3.66

34.21 18.61 8.97

19.42 7.30 3.52

• Population totals for urban and rural Indonesia are taken from the 1976 Intercensal Survey. The division of each into Java and outside Java is based on proportion from SUSENAS (1976). SouRCE: Sayogyo (1977). Corrected estimates use SUSENAS (1976) data and Nine Essentials Commodities Index from Table 4.1.



for food and this is not so for the more affluent. What can be done is to calculate the total income for all Indonesia and then relate it to the poverty threshold at a different rice equivalent as has been done by Sayogyo but using the Sayogyo measurement as a guideline. 116 Table 2.11 shows the new poverty threshold in 1980, using Sayogyo's guideline but readjusted according to the urban or rural areas and taking into consideration the percentage of population in urban areas. TABLE 2.10.



Estimates 1976

Percentage of Total

Number (Million)

Percentage of Total

Number (Million)

47.1 27.4 13.6

62.9 36.6 18.1

55.9 36.5 19.8

65.3 42.5 23.1

Poor Very poor Destitute

SouRCE: Central Bureau of Statistics, lndikator Ekonomi (April 1982). TABLE 2.11. POVERTY THRESHOLD USING SAYOGYO'S GUIDELINE IN RICE EQUIVALENT (RE) FOR THE WHOLE OF INDONESIA, 1980 Rural


Sayogyo's RE (kg)

Sayogyo's RE (kg)


Poor Very Poor Destitute Total population in thousands


Urban Population Weight

320 240 180



Population Weight

RE Approx.


480 360 270



350 267 200


SouRCE: Based on Sayogyo (1977).

The Indonesian rice equivalent is calculated for each category by rice equivalent in kilograms multiplied by population weight, divided by one hundred in each area and the total of urban and rural is added to get the rice equivalent. Since the 1980 SUSENAS uses a monthly expenditure group the rice equivalent in rupiah (monthly) is as in Table 2.12. Table 2.13 shows the spending groups in rupiah (monthly). For this study what is important is columns 2 and 9. 117 Thus the non-food adjustment factor was neglected totally, making the calculation of poverty in 1980



TABLE 2.12.



Rice Equivalent per Annum

Price of Rice (Rp/kg)

Monthly Expenditure (Rp)

Poor Very poor Destitute

360 270 200

250 250 250

7500 5625 4167

SouRCE: Based on Sayogyo (1977) and Dapice (1983).

a very conservative estimate. The reason for this exclusion is simply because the non-food SUSENAS data is extremely unreliable and a non-food adjustment as it is seen in column 3 seems too risky for an adjustment. This conservative estimate shows a more than impressive record with destitutes defined as having a monthly income of Rp 4,167 and less, and constituting less than 12.1 per cent of the population. In fact they are closer to 6.1 per cent of the population. The number of destitutes is calculated as 6.1 per cent or above since Rp 4, 167 cover the first three of the spending groups (less than Rp 2,000; Rp 2,000-Rp 3,000; Rp 3,000-Rp 4,000 with the adjusted food spending of Rp 1,616, Rp 2,498 and Rp 3,385), that is, from column 9, a total of 6.1 per cent share of income (0.3 per cent plus 1.6 per cent plus 4.2 per cent). The very poor with monthly income between Rp 4,167 and Rp 5,625 make up less than 27.3 per cent of the population and might be not much above 19.8 per cent of the population. This number is taken since Rp 5,625 - cover mostly the first five rows of spending groups (which means from column 9, a 19.8 per cent share of income), and a small part of the sixth row of the spending group (a small size of the additional 7.5 per cent share of income). With regard to the poor, the figure is between 47.8 per cent and 35 per cent of the population. These percentages are taken since Rp 7,500 cover most of the first seven rows of the spending group (35 per cent of the share of income of the population), and some of the eighth row of the spending group (covering some of the additional 12.8 per cent of the population). The changes from 1970 to 1980 are shown in Table 2.14. Although the range is large for the 1980 estimate, the changes from 1970 to 1980 point unmistakably in the direction of a reduction of poverty. But it is also true that even with the more optimistic calculation, close to 20 per cent of the population is very poor. 118 Even if the destitutes are only 6 per cent of the population, this is still a high figure. In numbers, 8.9 million people in 1980 were destitute. If one takes an approximation of 20 per cent of the population as poor people, the result of nearly 30 million poor people will still be a staggering problem for the country in the future.

TABLE 2.13.


Spending Group (Thousand Rp)

Adjusted Food Spending

Non-food Adj. Factor

Adjusted Non-Food Spending

Total Adj. Spending

Assumed OTo Savings Rate

Estimated Savings

Total Income

Share of Income










1616 2498 3385 4248 5096 5969 6768 7884 10150 13210 16439 23270 6318

2.0 2.0 2.5 2.5 3.0 3.0 3.5 3.5 4.0 5.0 6.0 7.0

644 1088 1930 2500 3849 4671 6524 8299 14652 30340 59922 161084 8367

2260 3586 5315 6748 8945 10640 13292 16183 24802 43550 76361 184354 14685

0 0 0 0 2 4 6 8 10 15 20 30 9.2

0 0 0 0 179 426 798 1295 2480 6532 15272 55306 1486

2260 3586 5315 6748 9124 11066 14090 17478 27282 50082 91633 239660 16171

0.3 1.6 4.2 6.0 7.7 7.5 7.7 12.8 20.9 10.8 10.8 9.8 10.0

0 u.t. 2 " 3 " 4 " 5 " 6 " 7 " 8 " 10 " 15 " 20 " 30+

2 3 4 5 6 7 8 10 15 20 30

Average NoTES: Column Column Column Column Column Column Column Column Column


I: The reported per capita spending per month (Rp thousand) in 1980. The adjusted per capita food consumption in 1980 multiplied by 1.2. Multiplication factors applied to unadjusted 1980 non-food spending. The results of multiplying column 3 by reported non-food spending. The sum of adjusted food and non-food spending. The estimated ratio of saving/spending of each spending group. The product of columns 5 and 6. 8: The sum of total spending and savings. 9: The total income multiplied by the share of population of each group relative to total income.

2: 3: 4: 5: 6: 7:

The percentage of each spending group in population is reported in Appendix II of the data source. The percentage of income going to the top 10 per cent is approximately 40 per cent. SOURCE: Central Bureau of Statistics, SUSENAS (1980). All figures are preliminary.



TABLE 2.14.


Estimates 1970


Poor Very Poor Destitute

Estimates 1976

Estimates 1980

% of Total

Number (million)

% of Total

Number (million)

o/o of Total (approx.)

55.9 36.5 19.8

65.3 42.5 23.1

47.1 27.4 13.6

62.9 36.6 18.1

35-47 20-27 12-6

SouRCE: Based on Sayogyo (1977) and Dapice (1983).

The Pos M. Hutabarat Method The shortcoming of SUSENAS was nowhere more prevalent than what is seen in the study by Pos M. Hutabarat. 119 His most optimistic projection for 1990 of the average calorie intake is 2,479. In 1980 Indonesia had appeared to reach 2,500 calories and in 1984 it definitely had a calorie intake beyond 2,500 as a direct result of the rice production explosion in the last five years. Pos M. Hutabarat used the 1976 SUSENAS which divided households into twelve expenditure groups. 120 He modified the classification, reducing the number of groups to nine. All food items were converted to calories according to the guidelines of the Ministry of Health. Next, he constructed a table relating calorie consumption to spending level. The value of the parameter relationship between spending and calorie consumption is calculated with a simple regression model in semi-logarithmic form: C; = a



+ bIn X;

average calorie consumption per capita in expenditure group i; average expenditure pattern per capita in a month in expenditure group i; a and b are parameters.

He found the semi-logarithmic relationship with t-statistic and R 2 as statistically significant. He used the semi-logarithmic form because the caloric consumption elasticity with respect to income that is e = blc becomes smaller with increased income. From SUSENAS 1976 and his method he produced Table 2.15 which shows the percentage of population in specific income groups consuming specific calorie consumption per capita. 121 He then used 1,900 calories consumption per capita as the recommended level. From his account, 58.6 per cent of the population still









Over 15000












588 (50.6)

937 (59.9)

1146 (62.0)

1302 (62.5)

1396 (61.0)

1501 (59.3)

1612 (52.6)

1511 (46.0)

1129 (58.8)



169 (15.0)

138 ( 8.8)

115 ( 6.2)

93 ( 4.5)

81 ( 3.5)

72 ( 2.8)

1548 (55.3) 77 ( 2.8)

70 ( 2.1)

115 ( 6.0)



1 ( 0.1)

2 ( 0.1)

4 ( 0.2)

9 ( 0.4)

13 ( 0.6)

26 ( 1.0)

38 ( 1.4)

69 ( 2.1)

11 ( 0.6)


Starchy staple

226 (20.0)

207 (13.2)

196 (10.6)

186 ( 8.9)

199 ( 7.9)

224 ( 8.0)


11 ( 0.9)

19 ( 1.2)

26 ( 1.2)

40 ( 1.9)

61 ( 2.4)

75 ( 3.2)

83 ( 2.7)

35 ( 1.8)



1 (01. )

3 ( 0.2)

8 ( 0.4)

13 ( 0.6)

20 ( 0.9)

49 ( 1.8)

74 ( 2.4)

16 ( 0.8)



2 ( 0.1)

6 ( 0.3)

8 ( 0.3)

20 ( 0.7)

32 ( 1.0)

66 ( 2.0)

154 (13.40)

258 (16.5)

435 (20.9)

518 (22.6)

630 (24.9)

963 (24.4)

903 (35.0)

1151 (35.0)

7 ( 0.4) 401 (20.9)



3 ( 0.2) 348 (18.8)

41 ( 1.2) 13 ( 0.5)

194 ( 5.9) 99 ( 3.0) 123 ( 3.7)

205 (10.7)


202 ( 8.8) 50 ( 2.2)

78 ( 2.8) 50 ( 1.6) 234 ( 7.6)























Population (thousands)











Percentage to total











Expenditure Group Average Expenditure

-Food Item: Rice

Egg & milk

Percentage of recommended

NoTE: The figures in parentheses are the percentages of the expenditure on that item to the total. SoURCE: Central Bureau of Statistics, SUSENAS V (1976).

Average Calorie (Price Rp) 1000 cals.




have a calorie intake below the recommended level even though average calorie consumption is 101 per cent of the recommended level. The problem with his calculation is his data base. The Food Balance Sheet published by the Central Bureau of Statistics shows 2,231 calories as the average consumption in 1976 as against 1,919 for his weighted average. 122 The Pos M. Hutabarat method as applied to the 1980 data is clearly unreliable if one uses the 1980 data without adjustment. This study calculates that by 1980 calorie consumption per capita increased to approximately 2,500 calories. For a conservative estimate, one would be more confident if one uses 2,500 calorie consumption in 1982. With this, knowing that the calorie elasticity is higher, with respect to lower income group, as has been stated by Timmer and used by Timmer and Pos M. Hutabarat one can increase the calorie consumption in 1982 among the income groups (still using Pos M. Hutabarat's 1976 division) with a multiplication of 2,500 divided by 2,231 or 1.12 (where 2,231 is the Food Balance Sheet in 1976). With the above adjustments, the Pos M. Hutabarat method will be for 1982 as follows: Calorie consumption: Percentage of population: Percentage of recommendation:

1381 15.3 72

1879 23.8 99

2219 19.5 117

Only the three lowest expenditure groups are used since it is clear that with a conservative estimate there was a significant reduction of people living below the recommended level, from 58.6 per cent in 1976 to 39.1 per cent in 1982 with an important finding that 23.8 per cent out of the 39.1 per cent is very close to the recommended level (99 per cent). The update arrived through the Sayogyo and Pos M. Hutabarat methods consistently shows the same results as the PQLI. There exists an impressive improvement in all three single indicators, which reflect reduction in the poverty level. Conclusion

From the macro and micro studies, and the attempt to synthesize both studies, as well as from the sectoral results and the single indicator used, a very general, though confident, conclusion can be reached with regard to the basic needs in Indonesia. The conclusion can be summarized as follows: The increase in income per capita for the last fifteen years (1967 -82) and rice production for the last five years (1980-84) had a direct effect on increasing the basic needs condition in nearly every aspect, that is food consumption, education and health services.



2 Looking at the impressive results, it is also evident that there are many aspects of the basic needs condition that could and need to be further improved in the future. The 27.5 million illiterate adults that still exist in 1980 must be seen as a challenge for the future basic needs programme. About 20 per cent of the population still live in very poor conditions and this shows that the "business as usual" attitude might not reach the lowest 20 per cent group which could become a source of concern if there are no special programmes targeted at them. 3 The problems of "structure" and "institution" must be dealt with in the future if the development goal is to reach the poorest of the poor. 4 The increase in funding until the 1980s, particularly in primary education and health services as well as agricultural extension services shows that there is a need to look at the basic needs programme in a context of a public administration and public policy issue. After 1982, as a result of the recession and oil price decrease, the government must look at efficiency in the programme implementation as an absolute necessity.




2 3 4




8 9 10 11


I3 14 15

Production figures in thousands of tons for 1980 to 1982 were as follows: 20,246 (a 13 per cent increase from the previous year), 22,160 (a 9.45 per cent increase from 1980), and at least 23,000 for 1982. See Tempo, 21 November 1981 (for 1980 and 1981) and 26 February 1983 (for 1982). The 1981 production surpassed the target for PELITA TIL The target of 20,500 tons was supposed to be reached by 31 March 1985 (Business News, 2 March 1983). In 1983 and 1984 the rice production increased respectively by 4.8 per cent and more than 6 per cent and it stands at 25.6 million tons in 1984, see Ekonomi dan Keuangan Indonesia XXXII, no. 4 (December 1984). Tempo, 21 November 1981. See Amartya K. Sen, "The Food Problem: Theory and Policy", in Third World Quarterly 4 (July 1982), p. 450. Ibid. He mentions the case of Bengal in India in 1943. Increased food production at that time resulted in complacency among British officials; poverty reports were neglected. The Bengal tragedy took the lives of three million people. Leon Mears was the first among foreign economists to produce research highly related to basic needs. Among his works the most important is Rice Marketing in the Republic of Indonesia (Jakarta: PT Pembangunan, 1959); and The New Rice Economy of Indonesia (Yogyakarta: Gajah Mada University Press, 1981). C. Peter Timmer's work on issues related to Indonesian basic needs from 1970 to the present, and cover issues such as marketing, choice of technology in agriculture, food consumption and political economy. Among his works are the following: "Estimating Rice Consumption", Bulletin of Indonesian Economic Studies 7 (July 1971); "Choice of Techniques in Rice· Milling in Java", Bulletin of Indonesian Economic Studies 9 (July 1973); "A Model of Rice Marketing Margins in Indonesia", Food Research Institute Studies 14 (1975) and with Harold Alderman, "Food Policy and Food Demand in Indonesia", Bulletin of Indonesian Economic Studies 16 (November 1980). There are works from others, including the newer agricultural economists such as Alfian Lains and Dibjo Prabowo. But it is no exaggeration to say that works by Mears and Timmer have shaped most of the arguments on the macro orientation which is essentially the belief that the rules of economic behaviour or homo economicus will be the case in Indonesia despite Indonesia's claimed uniqueness. The consumption analysis is based on SUSENAS V, collected by the Central Bureau of Statistics. Based on these important statistics Timmer has produced several works. Alderman and Timmer (1980), p. 90. See Timmer (1973), p. 76. Timmer, "Food Policy Analysis and Protein-Calorie Malnutrition" (Paper prepared for the World Bank, September 1978b). He explained that since the income elasticity for calories for the poor of foodstuffs other than rice, such as maize and cassava is likely to be at least as high as the income elasticity for rice consumed by the rich, the weighted income elasticity for calories from these three basic foodstuffs can be considered a lower bound to the true income elasticity for calories. This finding is very similar to Engel's Law which states that with given tastes or preferences, the proportion of income spent on food diminishes as income increases. But the income elasticity for starchy staple calories is a much closer measure of basic needs than income elasticities for specific foods, since it relates to income elasticities of food weighted by calories. See Tirnmer (1975). See Timmer (1974). Walter Falcon et a!. (1984).



16 See Dorodjatun (1981), especially p. 278b, also pp. 249-82. 17 See Gillian Hart, "Labour Allocation Strategies in Rural Javanese Households" (Ph.D. dissertation, Cornell University, 1978), pp. 263-64. 18 See Rudolf Sinaga and Faisal Kasryno, "Aspek Ekonomi dari Undang Undang Bagi Hasil dan Penerapannaya'' (Economic Aspects of the Agricultural Product Distribution Law and its Implementation), Prisma (September 1980). 19 Gunawan Wiradi, Rural Development and Rural Institutions: A Study of Institutional Changes in West Java, Rural Dynamics Series No. 8 (Bogor: Agro-Economic Survey, 1978). 20 William Collier, "Agriculture Evolution in Java: The Decline of Shared Poverty and Involution", mimeographed (Agriculture Development Council, 1978). Also Collier's "Food Problems, Unemployment and the Green Revolution in Rural Java", English edition, Prisma (March 1978). His latest publication shows a shift in his view from a pessimistic to a more optimistic position. See The Acceleration of Rural Development of Java: From Village Studies to a National Perspective, Rural Dynamics Study, Occasional Paper No.6 (Bogor: Agro-Economic Survey, 1982). 21 See Benjamin White, Political Aspect of Poverty, Income Distribution, and their Measurement: Some Examples from Rural Java, Rural Dynamic Study (Bogar: AgroEconomic Survey, 1978). 22 W. Staub et al., "The Market for Production Credit Among Farmers in Java", English edition, Prisma (May 1976). 23 Collier, "Tebasan System, High Yielding Varieties and Rural Change", English edition, Prisma (May 1975). 24 Sri Hartoyo Makali, "Perkembangan Tingkat Upah Dan Kesempatan Kerja Buruhtani Di Pedasaan Jawa", Prisma {April 1978). 25 Collier (1975). 26 Gunawan (1978). 27 Hart (1978). 28 Collier et al. (1982). 29 See Gustav Papanek, "Penduduk Miskin Di Jakarta" (The Poor in Jakarta), Prisma (January 1976). A more recent study on the urban poor is Kemiskinan dan Kebutuhan Pokok (Poverty and Basic Needs), ed. Mulyanto Sumardi and Hans-Dieter Evers (Jakarta: Radjawali, for Yayasan Ilmu Ilmu Sosial, 1982). 30 The importance of Sayogyo's work (it is difficult to assess as a macro or micro work), "Garis Kemiskinan dan Kebutuhan Minimum Pangan", Kompas, 17 November 1977, will be discussed in the latter part of this chapter. Sayogyo's work is locationally and institutionally closer to the micro view but his methodology is closer to the macro view. He used secondary data at the national level as in the consumer survey. 31 See Timmer (1978b). 32 World Bank, "Indonesia. Policy Options and Strategies for Major Food Crops, !982", (May 1982b) Annex 2, Table 3.7, p. 107. 33 The precise Rum us Tani or farmer's formula is that one kilogram of urea should cost no more to the farmer than a kilogram of milled rice sold "at the farm gate". See Saleh Afiff and C. Peter Timmer, "Rice Policy in Indonesia", Food Research Institute Studies !0 (1971), p. 146. 34 Tempo, 21 November 1981, for example, estimates that this practice is about 50 per cent of the total procedure. 35 Collier (1982). 36 See Central Bureau of Statistics, Sensus Penduduk 1980 (Population Census, 1980). The percentage of households who owned less than 0.5 ha. of land for all of Indonesia increased from 45.7 per cent to 63 per cent. The percentage of landless labourers


37 38 39 40 41

42 43 44 45 46 47

48 49 50 51 52



55 56 57 58 59 60 61


increased from 3.2 per cent (Agricultural Census) in 1973 to ll.5 per cent of total households in 1980 (Population Census, 1980). Other sources such as the BIMAS survey (preliminary survey of Harvard Institute for International Development) showed that among BIMAS participants, the average land holding increased. Services are more difficult to price than goods. Business News, 2 March 1983. Ibid. See Ekonomi dan Keuangan Indonesia XXXII, no. 4 (December 1984). Dapice estimates that consumption of rice as a percentage of total consumption of staples has increased from 68 per cent in 1970 and 1975 to 72 per cent of total staple consumption in 1980. Increased production in 1981 and 1982 will make the percentage even higher. See David Dapice, "Indonesia's Food and Nutrition Policy: Some Major Issues" (Paper for the World Bank, 21 October 1981). Increased production from 1981 that far surpassed population growth until1984, gave us the figure of at least 145 kg consumption per capita. Falcon eta!. (1984), p. 164. Ranking is my own, taken by sample number. Ibid., Chapter 7, pp. 173-74. Ibid. From Central Bureau of Statistics, "Welfare Indicators 1980-81", May 1982, p. llO. Dapice (1981) estimated that 2,500 calories per day per capita will be approached as early as 1980. See Sayogyo, "Basic Human Needs Approaches in Development Efforts to Improve Nutritional Status of the Poor" (Paper for the Third Asian Congress of Nutrition, Jakarta, 6-10 October 1980). From Central Bureau of Statistics, "Welfare Indicators", p. 112. B. Napitupulu, "Hunger in Indonesia", Bulletin of Indonesia Economic Studies, 5 (February 1969): 63. Ibid., p. 66. Central Bureau of Statistics, "Welfare Indicators", p. 110. From Dapice (1981) and his note: Based on production and imports less exports, feed, seed and waste. BULOG stock changes of rice are also included. No adjustment is made for non-food industrial use of cassava, storage losses or waste within home. Rice is multiplied by 1.0; corn by 0.97; cassava by 0.268; sweet potato by 0.26; and wheat flour by 0.956 to calculate rice equivalents. Flour is calculated as 72 per cent of wheat imports. 1980 figures are based on estimates. I have inserted real figures for rice and population. During the New Order, regional consumption surveys were taken in 1969-70, 1976, 1978, 1979, and 1980. Dapice (1983). He uses a price index that is the GDP private consumption deflator (1973 = 100). Real per capita expenditure is nominal expenditure/price index. Population is in millions. Total consumption is in billions of rupiah. Both GDP total consumption and private consumption are in 1973, p. 2. Ibid., p. 5. Timmer, "Factors Affecting Food Consumption in Indonesia. Some Preliminary Results" (Paper for the Ford Foundation, Jakarta, June 1978a). Alderman and Timmer (1980). Timmer (1978a). Ibid. Ibid., and Central Bureau of Statistics, source of rice consumption from SUSENAS v (1976). Sayogyo (1977).



62 Pos M. Hutabarat, "Melihat Distribusi Konsumsi Bahan Makanan di Indonesia Sampai Tahun 1990'' (Looking at the Distribution of the Consumption of Food Staples in Indonesia until 1990), Prisma (October 1980). 63 Ruth Daroesman, "Finance of Education, Part I", Bulletin of Indonesian Economic Studies 7 (November 1971). Her figures seem somewhat high but they do show the trend. 64 See Kementerian Penerangan, "Pidato Kenegaraan Presiden RI Di Depan Sidang DPR, Lampiran" (Annual Speech of the President of the Republic of Indonesia to Parliament), Jakarta, 16 August 1969. 65 On the so called "MALARI Riot" see Harold Crouch (1974). Also discussed in Chapter I. 66 See Donald R. Snodgrass et al. "Inpres Sekolah Dasar, An Analytical History", Development Program Implementation Study (DPIS), Working Paper No. 2, December 1980. 67 From Central Bureau of Statistics, "Welfare Indicators", p. 64. 68 See DPIS "December Report 1982" (Jakarta and Cambridge: Harvard Institute for International Development HIID, 1982a), p. 16. 69 See World Bank Atlas 1985. 70 See DPIS (1982a) pp. 5-59. 71 From "Statistik Persekolahan, 1982" (Jakarta: Department of Education's BP3K, 1982). 72 Central Bureau of Statistics, "A Brief Note on 1980 Population Census", Jakarta, July 1982, p. 16. 73 Calculated from Central Bureau of Statistics, "Results of the Sub-sample of the 1980 Population Census", Population of Indonesia, Series I, 1982 (Jakarta, May 1982) for the population size, pp. 1-2. The illiteracy percentage was taken from the Central Bureau of Statistics, "A Brief Note of 1980 Population Census", p. 16. 74 Daan Dumara, "Pengaruh Pendapatan Rumah Tangga pada Pendidikan" (The Effects of Household Income on Education) in Kemiskinan dan Kebutuhan Pokok, ed. Mulyanto Sumardi and Hans-Dieter Evers (Jakarta: Yayasan Ilmu Ilmu Sosial, 1982), pp. 293-342. 75 Ibid., p. 336. He used 120 households as his respondents for his questionnaire and took his conclusion from 117 young dropouts (90 among the dropouts from primary school) from 68 households. Among the dropouts, 48 children attended informal education. 76 Central Bureau of Statistics, Profil Statistik Anak dan Ibu di Indonesia (Statistical Profile of Children and Mothers of Indonesia 1980-81). Jakarta, January 1982. 77 Ibid., for 1961-71 and 1971-75. For 1980 from the World Bank, World Bank Report, 1982. 78 Central Bureau of Statistics, "Welfare Indicators", p. 93. 79 On the experience of doctors with PUSKESMAS see article by 0. Hashem, "Peranan Dokterdalan Peningkatan Kesehatan Masjarakat. Pengalaman Seorang Dokter Didaerah" (Experience of a Medical Doctor in the Countryside), Prisma (October 1974). 80 Central Bureau of Statistics, "Welfare Indicators", p. 94. 81 There is an increasing need for paramedics and priority should be given now as stated by the Minister of Health. See Kompas, 28 April 1983. 82 World Bank, World Bank Report, 1982, p. 152. 83 Ibid., p. 97. 84 Central Bureau of Statistics, "Welfare Indicators". 85 Ibid. 86 Geoffrey McNicoll and Masri Singarimbun, "Fertility Decline in Indonesia, I. Background and Proximate Determinants'', Center for Policy Studies Working Paper No. 92 (New York: The Population Council 1982), p. 3.

86 87 88 89 90 91 92 93 94 95

96 97



100 101 102

I 03 104 105


Ibid., pp. 1, 3. Ibid., p. 3. Ibid., p. 4. United Nations, Demographic Yearbook I980 (New York, 1982), p. 148. United Nations Fund for Population Activities (UNFPA), Indonesia, Population Profile No. 14, n.d. Central Bureau of Statistics, "A Brief Note on 1980 Population Census". See UNFPA, "Indonesia". See Irving B. Kravis et al., A System of International Comparisons of Gross Product and Purchasing Power (Baltimore: John Hopkins University Press, 1975). Gary S. Field, Poverty and Inequality and Development (Cambridge: Cambridge University Press, 1980). See also Gary S. Field and John C.H. Fei, "On Inequality Comparisons", Econometrica (March 1978), pp. 303-16. The changes between the mid-40 per cent to upper 40 per cent as Field has argued could increase or decrease the Gini ratio even if the lower 20 per cent of the population live poorly and have not changed their level of living. On the uses of the index and the interest of some Indonesian economists, see Emil Salim, "Perencanaan Pembangunan dan Perataan Pendapatan" (Speech at the University of Indonesia for Accepting a Professionship, 14 February 1976). My own earlier view was to stress the importance of changes in the Gini index as a measure of the five-year plan's effect on income distribution. See Sjahrir's defence speech, "Pleidoi 7" (April 1975). The World Bank includes income distribution and uses the breakdown among income groups such as the highest 20 per cent, the middle 40 per cent and the lowest 40 per cent. Then it calculated their respective percentages as percentage of total income between periods where from that some assessment could be made with regard to trends in income distribution as well as level of living of the poor (lowest 40 per cent). See World Bank, "Employment and Income Distribution in Indonesia" (1980a). This is called by Field a fractile measure. See Sayogyo (1977) and Pos M. Hutabarat (1980). The data from the Central Bureau of Statistics as well as the United Nations Demographic Yearbook and other sources such as World Population Data Sheet all point in the direction that indeed there has never been an attempt made by the Indonesian Government to report PQLI components (infant mortality rate, life expectancy, and adult literacy) on a yearly basis. David Morris, Measuring the Condition of the World's Poor: The Physical Quality of Life Index (New York: Pergamon Press, 1979). See Appendix C and Table 1 for PQLI index and p. 154, Table 2. Ibid., p. 45. 38 is used because it is the lowest life expectancy reported for the entire post World War II period, and 39 because the maximum life expectancy with the highest index (100) is 77 years. So 77 minus 38 (the lowest) is 39. Ibid., p. 45. Here the range is also taken to be between 229 and 7, so 2.22 will result in a one point change in the index. Central Bureau of Statistics, "A Brief Note on the 1980 Population Census". World Bank, World Development Report 1982, puts Indonesian infant mortality at 93 per 1000 births, but it appears that the World Development Report estimate is a prediction. Indonesian officials such as Dr Harjono of the Population Council (BKKBN) as late as March 1983 put the infant mortality rate at 98, see Fokus, l7 March 1983. Central Bureau of Statistics, "Results of the Sub-sample of the 1980 Population Census" (Jakarta, 1982), and "A Brief Note on 1980 Population Census", p. 16. Morris (1977), p. 126. James P. Grant, "Disparity Reduction Rates in Social Indicators: A Proposal for Measuring and Targeting Progress in Meeting Basic Needs", Monograph No. 11


106 107 108 109 110 111 112 113



116 117 118

119 120

121 122


(Washington D.C.: Overseas Development Council, 1978). Morris (1977), p. 74. Ibid., p. 121. Ibid., p. 75. World Bank (1980a). Ibid., p. 79. Ibid., p. 78. Columns 7 and 8 will be more difficult to find if one tries to calculate the trend for 1980. Estimated from a population on 24 September 1971 of II ,208,229 where annual increase is 2.32 per cent for 1976 and decrease for 1970 is 2.10 (annual decrease of 1%1-71}. Data from Central Bureau of Statistics, Indikator Ekonomi (April ~982), p. 195. From Dapice (1983). He made a conservative estimate since the non-food spending of SUSENAS (1980) was heavily under-reported which would show an even higher gap with consumption expenditure in the GOP data. Central Bureau of Statistics, lndikator Ekonomi (April 1982), p. 43 shows Rp 245.81 as the average price of rice in December 1982. By taking a higher price this study will slightly overestimate the poverty level. In fact the 1980 SUSENAS has been readjusted several times. In every instance the Central Bureau of Statistics stated the figure was preliminary. Dapice (1983}. Dapice, in fact stated in his calculations that only 10 to 20 per cent of the population have expenditures below Rp 5,000 per month. He arrived by this more impressive figure because he included non-food adjustments and this study does not. He also used 240 kg rice equivalent as the poverty threshold for the very poor (or medium poverty). The difference between 10 to 20 per cent and 20 to 27 per cent is large, but I did mention that it is closer to 20 per cent. Pos M. Hutabarat (1980). Ibid. The article is a summary of Pos M. Hutabarat's M.A. thesis at the Bogor Agriculture Institute (IPB). The explanation of his method is a translation of his summary on p. 62. Ibid., p. 63. Central Bureau of Statistics, Neraca Bahan Makanan Indonesia 1979 (Jakarta 1982).


Basic Needs Results: A Public Policy Perspective*


The description and calculation of basic needs results in Chapter II gave a picture of the level of living of the Indonesian population, especially of the poorest 20 to 40 per cent. What was also evident is that the New Order government put the utmost importance on achieving rapid economic growth, and funded a series of programmes and delivery services that have had a substantial effect on fulfilling the basic needs of its people. But as many public policy researchers have noted, mere intentions and the provision of sufficient funds do not necessarily lead to better economic and social performance. The road between the starting point of government intention and programme and the terminal point of achievement or outcome, whatever the government is never a straight line. En route, there are problems on the efficiency and effectiveness of the bureaucracy, the socio-political context within which the bureaucracy implements public policies, and the interaction between government and society at large and the effect of this on policy outcomes. This study will use public policy and public administration methodology together with the quantitative methods used in specific policy areas for better insight in interpreting policy and programme outcomes, economic results and bureaucratic effectiveness and efficiency; in short to assess policy and programme outcomes. The socio-political context within which the government of Indonesia tried to fulfil its basic needs is discussed later in this chapter when we apply public policy methodology to specific programmes. SCOPE AND METHODOLOGY

Three national programmes that are highly responsible for fulfilling basic needs will be analysed. The first BIMAS/INMAS programme was


This chapter benefited from the HIID Project called Development Programme Implementation Studies (DPIS) funded by the Ministry of Finance, Indonesia. The programme gave me an opportunity to participate in a workshop, to interview the project leaders, and have access to some of their work. However, it should be clarified that this study is an independent undertaking.



originally instituted to promote rice intensification, and later developed to include other staple food crops. It includes the provision of seeds, fertilizers and pesticides, concessional credit for payment of these supplies, and extension services. The purpose of the programme is to increase rice production and thus food availability, to supply the most basic need, food. The other two programmes discussed are service delivery programmes. The INPRES Sekolah Dasar (INPRES SD) programme is responsible for the building and operation of primary schools. The Keluarga Berencana (KB) programme which is on planned parenthood promotes family planning. All three programmes have similar characteristics: a commitment at the national level, implementation responsibilities in all of the provinces down to the village level, involvement with many bureaucratic institutions which creates problems of inter- and intra-bureaucratic linkages, and no less important, a dependence on the successful interaction between bureaucracy and society down to the village level. The programme descriptions are as follows: BIMAS/INMAS (Rice Intensification) involves extension service, credit, input supply, and output marketing. BIMAS involves all four elements (sometimes called the BIMAS package) and INMAS excludes concessional credit. 2 INPRES SD (Presidential Instruction for Primary School Programme) has its main emphasis on all activity necessary for the opening of schools, particularly the building of schools. It also includes provision of books, other teaching aids, and assignment and payment of teachers. The operation of the school will only be discussed briefly. The lack of data and studies makes an evaluation of the quality of education difficult. 1 3 Keluarga Berencana (KB or Family Planning Programme)2 consists of a contraceptive delivery service and IEC (informa~on, education and communication) activities on birth control. BIMAS/INMAS although a service programme to the producer cannot be considered in the same way as the other two service delivery programmes because as opposed to the latter, the intended outcome of BIMAS/INMAS involves goods, not services; that is, rice production. Consequently, unlike the latter, many exogenous factors such as weather conditions, price changes between input and rice, and construction of tertiary irrigation channels have a strategic effect on the outcome. In comparison, the INPRES SO and KB programmes are less complex, 3 and the job of relating these to their outcomes is less arduous. Adding to the complexity of comparing the different nature of the three delivery service programmes will be the socio-political context within which each programme is implemented. The BIMAS/INMAS programme



must be seen in the light of the Indonesian policymakers and the general public obsession with rice self-sufficiency instead of food self-sufficiency. The INPRES SO programme should be evaluated in the context of the strong voice of Indonesian elites outside the government, who have pressured the government to address the problems of equity. The KB programme should be seen in the light of the changing perceptions of the national leaders, specifically the change which took place from President Soekarno to President Soeharto on the function or role of family planning in the national development. How the socio-political context affects and interacts with the public policy programme will be described and analysed in the application section, which will also include a discussion on the nature of the Indonesian bureaucracy during the New Order period. But first the two conceptual framework that are used to analyse the three programmes must be discussed.

Policy Functions

Roger Revelle observed that just like a living organism, public policy has a life cycle. 4 Harold D. Lasswell, a pioneer in policy sciences, lists within the life cycle seven policy functions which he referred to as policy outcomes. 5 Assuming the Revelle analogy and Lasswell's policy outcomes, Montgomery took policy as "data", developed the policy stages and applied it in a study of several developing countries. 6

2 3 4

5 6 7

The seven policy functions are as follows: Intelligence or gathering, processing and dissemination of information to participants in policy decisions and choices. Promotion or th\ use of persuasive or coercive means of influencing decisions and choices. Prescriptions or the formulation of authoritative and controlling norms and sanctions. Invocation or the initiation of action to relate prescriptions provisionally to specific circumstances. Application or subsequent operations involved in relating prescriptions to circumstances. Termination or the ending of a prescription and the adjustment of claims based on expectations developed when the prescription was in effect. Appraisal or the analysis and reporting of the degree to which policy goals have been achieved, and the allocation of imputed or effective responsibility for results. 6



Montgomery in one of his policy studies, divides the seven policy functions into four policy stages. They are: Recognition of the problem: intelligence function; 2 Building coalitions for action: promotion function; 3 The action phases: prescription, invocation, and application functions; 4 Transitional phases: termination and change and appraisal function. 7 This study will divide the cycle of policy functions into three stages: Formulation and declaration, which covers intelligence and promotion function. 2 Application, as in Montgomery's. 3 Appraisal, as in Montgomery's transitional phase except that it excludes the termination function since all programmes are still in operation. This simplified taxonomy of policy functions is adopted as in analysing public policy. This study will also use a decision order method and a matrix of possibilities that combines the policy function and decision order methods. The policy function methodology is applied to the three national programmes discussed in order to gain a better general picture of the bureaucratic mechanism, the political context within which the bureaucracy operates and the issue of participation.

Decision Order

The decision order concept was developed by Montgomery to explain three analytical "orders" or levels of decision involved in applying technology to social purposes. 8 The concept helps public policy and public administration practitioners to observe the decision-making process with regard to economic or technological choice, institutional or bureaucratic performance appraisal, and incentive systems which become important when one addresses the issue of participation. Montgomery defines each decision order as follows: The first order decisions are those which define and develop programmes for the purpose of benefiting identified elements of the society. The second order decisions are those that identify the administrative organizations or combinations of institutions that are to be assigned the role of modernizer and change agent. The third prescribes the incentive systems by which administrators are to elicit modernizing responses from citizens participating in the programmes. 9



In this study, while not neglecting the first order decisions, it is the second and third order decisions that are described at length. If the methodology applied gives this study a better insight on the bureaucratic mechanism and its problem, as well as addressing the issue of participation and discussing the socio-political context of the institutional or bureaucratic operation, then this will cover a great many public policy problems. In fact, the economic analysis from Chapter II in combination with the public policy perspective covered as described above will be sufficient for this study to reach important conclusions. To arrive at these conclusions, a matrix giving the possibilities of a combination of the two methods will be presented and subsequently applied to the three programmes discussed.

A Matrix Chart

The matrix chart combines the six policy functions (it excludes the termination function) with the three decision orders to create eighteen combinations of description and classification. Since this study concentrates on the general mechanism of the bureaucracy, its socio-political context, and the issue of participation, the eighteen possibilities described will not be exhausted when the matrix is applied. A MATRIX CHART OF PUBLIC POLICY METHODS

Decision Order

p 0 L


c y F

u c



I 0 N


First Order Decision

Second Order Decision

Third Order Decision

Stage One: Formulation and Declaration Intelligence Promotion

all az1

a12 a22

an a23

Stage Two: Action Prescription Invocation Application

a3I a41 asr

a32 a4z

a33 a43 as3

Stage Three: Conclusion Termination Appraisal




a, I






Before identifying which elements in the matrix will be used or stressed, let us pause to consider the obvious question, is this classification system useful? The answer is yes. The reason is that if one uses only the policy stage or policy function approach the description will be onedimensional. For example, the description and classification of the intelligence function is much enhanced with a decision order perspective as well. The gathering, processing and dissemination of information is more focused in the description if it includes the economic choice (first order), the bureaucratic linkages and interaction (second order) with regard to the decision-making process, and incentive system (third order) in appraising possibilities of wider participation in the decision-making process and the implementation of programmes. Similarly, the decision order classification helps describe the content of the appraisal function with regard to assessing the economic benefit of the programme (first order), the prospect of bureaucratic streamlining (second order), and the motivational problems of future participation (third order). Suffice it to say that all stages covered in the policy function description can be more sharply described and classified using decision order analysis. This two-dimensional methodology is probably more useful than the presently popular approach used in the study of public policy, called the study of implementation. The implementation studies have a disadvantage because by definition these studies tend not to describe at length the formulation stage in public policy, especially the intelligence function and first order decision. 10 Since this study is concerned only with a limited number of issues, only some of the matrix possibilities will be applied. From the policy function method the stress will be on the action and evaluation stage, and from the decision order method discussions will deal more with the second order decision, those that are important in dealing with the issue of participation. In the following section, the above methodology is applied to each of three programmes. The discussion of each programme begins with the introduction and presentation of background material. This will hopefully overcome the lack of attention paid to the intelligence and promotional functions. Then the matrix will be applied as follows: for BIMAS/ INMAS the stress will be more on the action stage and second and third order decision; for INPRES SD, since its development involved counter-elite pressure, the stress will be on the formulation stage and first order and second-order decision; for KB stress will be on the action and evaluation stage and second and third order decision. Throughout the application stage, the socio-political context within which policies or programmes were implemented will be discussed.




The basic needs results in Chapter II showed how the New Order government allotted considerable resources (gained to a large degree from the oil boom in 1973-74 and 1979-80), for public service delivery and extension services to increase rice production. Earlier in this chapter, I argued that compared to the INPRES SD and KB programmes, the BIMAS/INMAS programme was more complex. The complexity stems from both the nature of the programme and extraneous factors. For instance, since the BIMAS/INMAS programme consists of a package involving provision of goods (input supplies), concessional credit (for BIMAS only), and extension services, it is difficult to calculate its total value added, and to differentiate each element's contribution in evaluating the programme. Thus appraisal and policy outcome predictions are difficult to make. The difficulty in assessing the BIMAS/ INMAS programme through a comparison of benefits (increase in rice production because of intensification, taken as the difference between the area cultivated before and after intensification, or taken from the difference of production in area with intensification and its difference with area production without intensification at the same time), and costs (the total costs of the whole BIMAS/INMAS package) ratio is obvious. 11 Factors such as weather conditions (extremely good for 1980-81 and 1983-84, when rice production increased tremendously), the improvement of irrigation especially tertiary channels which came more into existence after 1978, all contribute to the increase in rice production. The difference in price ratio between rice and fertilizer, showed how price change and elasticity of demand for fertilizer need special treatment in itself, particularly since the supply of fertilizer at the cheap price outside the BIMAS/INMAS programme is also available. But since this chapter has a much more limited objective, these complexities are presented only to give a general picture of the difficulty of relating the BIMAS/ INMAS programme to the increase in rice production. 12 Nevertheless, knowing all the problems that have been stated above, a description and classification taken from the dual methodology application could probably give this study a better insight on the problems of each programme within the public policy perspective.

BIMAS and INMAS (Rice Intensification Programme)

The BIMAS/INMAS programme cannot be observed without relating them to the perspective of each Indonesian government's preoccupation with rice self-sufficiency. This was described in Chapter I. Although the pro-



gramme observed is the improved national BIMAS programme of the early 1970s, its origin can be traced back to the 1950s. 13 President Soekarno, though not much interested in the technicalities of the economy, announced a movement called Operation Prosperity with the aim of self-sufficiency in rice. 14 This movement which sowed the seeds for commitment for increased rice production, resulted in Padi Sentra (Centre for Paddy). Even though the Padi Sentra institution failed, together with the success of micro experimentation stemming from the work of Bogar Institute of Agriculture and its extension-service programme, it did produce conditions favourable to a national BIMAS project. The acronym BIMAS was formally used for the first time in 1965-66 which unfortunately coincided with the worst political upheaval in Indonesia. For the BIMAS programme the application of the dual methodology will involve the elements a32 , a33 , a52 , a 53 , a62• ~ 3 of the matrix. The first order decision will be overlooked since the history of BIMAS has shown that the goal of rice-sufficiency was more a preoccupation of all Indonesian national leaders than a result of rational economic choice. In other words, the decision to be self-sufficient in rice was initially political. But the nature of the programme changed radically in 1971, after the elimination of BIMAS Gotong-Royong (BGR). The invocation function will not be discussed because it is more useful for understanding specific regional differences or for policy comparison.

Prescription Function and Second Order Decision The highest body of the BIMAS programme is called the BIMAS coordinating body (Badan Koordinasi BIMAS). The Minister of Agriculture acts as its chairman. There are several ministers, the most important being the Minister of Interior as at the provincial level the Governor acts as the chairman of the BIMAS consultative body, the Minister of Finance as well as the Governor of the Bank of Indonesia (Indonesian Central Bank). Other members are the Ministers of General Works (or Pekerjaan Umum), Labour, Trade, BAPPENAS (the highest body for economic developing planning) and Co-operatives. The appointment of ministers to the BIMAS co-ordinating body does not reflect a tendency to give honorary membership to each of them, or merely an ex-officio status, but each of them has a direct responsibility to participate in the BIMAS programme. The programme is a large undertaking, the operation of which involves many bureaucratic complexities. For example, the BRI (Bank Rakjat Indonesia) gives concessional credit as a legitimate part of the BIMAS programme. To reduce the risk, the Bank of Indonesia must become a guarantor of the BRI operation and with this responsibility, the Governor of the Central Bank does not take his membership in this highest body



lightly. Immediately below the highest body is the daily operational control body (Satuan Pengendali BIMAS) which is headed by the DirectorGeneral of the Ministry of Agriculture. This pattern became the blueprint used even at the desa (village) level, with one important difference. The Governor heads the highest body of the BIMAS structure at the provincial level (whereas at the national level it has the Minister of Agriculture as its chairman). The bupati heads the highest body at the district level, and the camat (head of sub-district) at the sub-district level, and finally the lurah (village head) at the village level. At each level the day-to-day operational work is the responsibility of a chief officer from the Ministry of Agriculture (Kepala Dinas Pertanian). Within this organizational structure the most important possible conflict is between the Minister of Agriculture and the Governor because the latter heads the programme at the provincial level and his direct supervisor is not the Minister of Agriculture, but the Minister of the Interior. One important aspect of the BIMAS programme, the supply of fertilizers and pesticides to the farmers, comes from the the distributional channels as follows: FIGURE 3.1.


Stage of Distribution


Producer Line I (Port)

DIMAS Organization


Ministry of Trade Finance of Agriculture


BIMAS Controlling Body Line 2 (Province) Line 3 (District) Line 4 (Sub-district) BUDD/KUD Farmer


BIMAS Controlling Body at the Provincial Level


BIMAS Organization at the District level


BIMAS Organization at the Sub-district Level

The BUUD/KUD (Badan Unit Desa, at the lower level becomes Koperasi Unit Desa) are co-operative bodies that have received increasing responsibility from the government, including the important role of buying government rice stock. From 1978-83, the Junior Minister of Co-operative Affairs was also head ofBULOG, the organization that among other things



provides the national rice stock. In 1983, he became the Minister of Cooperative Affairs which reflects the higher status given to the co-operative organizations. The BIMAS programme concentrated on the intensification approach with a new institution (WILUD or Wilayah Kerja Penyuluhan Pertanian) with extension workers where the area was about 600 to 1,000 hectares. 15 In each village there are institutions and extension workers needed for the BIMAS/INMAS programme. In each WILUD there is one bank (BRI) that gives concessional credit to BIMAS farmers, one kiosk (organized by the private sector or a BUUD/KUD) to buy inputs for production (with BIMAS the farmer buys on credit, with INMAS the farmer pays immediately) and one extension worker (PPL or Petugas Penyuluh Lapangan) who is responsible for assisting the farmers in their production process. However, what appears as a clear inter-bureaucratic description of jobs is less clear if one tries to define the distribution of responsibility. For example, the delay of input supply affects production and credit payment. As a result there are differences in the availability of input supply under BIMAS (less successful since it is credit) and under INMAS (more successful since it is in cash). 16 As BIMAS is a co-ordinating body and a huge loosely tied organization, involving several ministries and institutions, there are still large grey areas in the co-ordinating process where the blame for possible failure is less clear than the job description might suggest. For example, the extension worker (PPL) functioning as an extension service is to a considerable extent dependent on the farmer's perception of other government facilities. The farmers whether they are helped by the extension worker (from the Ministry of Agriculture), bank officer from BRI which deals with their loan, KUD (which bought some of their rice), or kiosk personnel (which depends to a large degree on the effectiveness of State Fertilizer Corporation, PUSRI) may perceive these individuals as government assistance or interference (pressuring the farmer to pay his debt). The real issue then is to what extent at the prescription stage, does the government include incentives to farmers to participate in the programme.

Prescription Function and Third Order Decision. Each farmer who participates in the BIMAS programme can receive Package A (for new BIMAS participants), Package B (with less fertilizer as seeds are not of the high-yielding varieties) and Package C (more fertilizer). 17 Package A consists of 200 kg of urea, 50 kg of TSP, 50 kg of KCL/K20, 2 litres of insecticide, 100 grams of rat poison, seed, sprayer



fee, and Rp 10,000 cash. This kind of assistance (in the case of INMAS farmer, paid for every input supply in cash) is definitely an incentive since all debts are to be paid after the harvest season, usually seven months later, and the interest is one per cent per month. Besides the real assistance in the BIMAS package and the INMAS programme, the farmers also receive help from a PPL (field officer) with plot demonstration. What is also apparent here is that the whole incentive system is based on productivity, consequently for landless labourer, and the nearly landless, the advantage of the BIMAS programme is limited since the credit can only be given with some collateral which the labourers do not possess. The labourer's main objective is to increase income and this depends largely not only on productivity of the land but the arrangement between the landowner and the labourer. This part of the arrangement was not covered by the BIMAS programme. As mentioned earlier, the number of landless labourers increased by about 15 per cent and the improvement of their lot was more because of productivity increase, and less because of better owner and worker income arrangement. 18

Application Function and Second Order Decision In his insightful work on BIMAS, Gary Hansen described the power of the Governor to affect the national programme. 19 He described the fate of BIMAS Go tong Royong (BGR- before the improved national BIMAS in 1969-70) and its application in West Java and the improved BIMAS in East Java. His work revealed that an under-commitment in the West Java case and over-commitment in the East Java case, managed to "undo a major national programme" .20 What happened was that in the BGR programme where the private sector took part in supplying input and distribution, combined with government inefficiency it produced a failure of catastrophic proportions. Five of the twenty-two districts in West Java withdrew from the BIMAS programme and finally President Soeharto after an incognito field trip in West Java terminated the programme. In East Java the overzealousness of the Governor to achieve targets included actions like forced sale of rice and barriers on the trade of rice. These measures produced a situation where the central government simply abolished the target of rice procurement in each province. With the two examples as hard lessons, the BIMAS programme became more flexible and as a result co-ordination improved. But one possible problem came to the fore, the role of KUD. It was stated earlier that with the appointment of a State Minister in Co-operative Affairs it seemed a signal for the increased role of co-operatives in BIMAS. The problem is that the KUD was not a co-operative that was built from below. It was perceived



more as a "top-down" organization as well as a government organization. For example, in the procurement of rice for BULOG from KUD, incentives of "premium" money was given for KUD. 21 The result was often the establishment of a fictional KUD where the reality was actually BULOG payments to the private sector and then "stamped" as if they came from KUD. If there is increased responsibility to KUD without increased skills, organizational and managerial capability on the part of KUD, many problems will come to the fore. 22 Where floods and crop failure because of the wereng pest occur, the government with a special presidential instruction, INPRES No. 2 1976, provides credit rescheduling and relief. 23 The result is that 90 per cent of those areas eligible for relief were given debt relief. But it is clear that the programmes' prescription function did not anticipate the above possibility and that it took a presidential instruction to overcome the problems. Needless to say productivity suffered though part of this was a result of delay in supplying inputs. 24 Now, the overall picture seems to indicate better general bureaucratic interaction though productivity increase could not be explained to any considerable degree by bureaucratic streamlining.

Application Function and Third Order Decision The most logical incentive for increased production is perhaps the oldest motive - profit. The movement of rice/fertilizer price ratio to the advantage of the farmer, discussed in Chapter II, may explain more of the increase in production during the last three years than the complexity of the bureaucratic procedures. Improved distribution of fertilizer by PN PUSRI acted as a catalyst to favourable prices. There are conflicting reports on the usefulness of the extension officers' role in rice production. 25 But what seems less clear is the assessment of the extension officer's income in relation to their work. As a civil servant the PPL receives a fixed income. But as he or she is to a certain extent responsible for increased production, an evaluation of their work and criteria should be established. The only way to increase his or her work productivity would be to tie an evaluation of PPL workers to clear material incentives. 26

Appraisal Function and the Second Order Decision An appraisal could be more useful if we begin with a discussion on the Indonesian bureaucracy. As opposed to the Old Order, the New Order government has generated increased interest among political scientists to analyse the bureaucracy. During the pre-New Order era, many studies were orientated towards discussion of the political system27 but there are now analyses of the Indonesian polity showing the growing importance of the



bureaucracy such as the bureaucratic polity / 8 bureaucratic authoritarian regime, 29 or Beamtenstaat. 3° Karl D. Jackson for instance defined the Indonesian bureaucratic polity as follows: Essentially bureaucratic polity is a form of government in which there is no regular participation or mobilization of the people .... Some element of participation must, of course, exist in all polities, but in bureaucratic polities the only form of participation regularly involving large numbers of citizens relates to implementing rather than deciding national policies. 31

In an interesting article, Donald K. Emmerson has described the interaction between the bureaucracy and its public policy implementation, and the political context within which it operates. 32 His study, which evaluates bureaucracy with regard to size, loyalty and activity, shows that a bureaucracy is more concerned with official effectiveness than democratic participation.H This is hardly an aberration from the majority of the Third World polities. For Indonesia, what is crucial though is to what extent a huge programme such as BIMAS can succeed in its effectiveness, if it excludes mass participation. Although BIMAS has what is called kontak-tani (contact with farmers) which plays an increasingly important role in the implementation, the involvement of farmers in proportion to the totality of the BIMAS programme is minimal. Furthermore, there seems little prospect for an emergence of a genuine farmers' institution that could play an important role in future programmes. An institution with great potential is the co-operative. But the way the co-operative is performing its role now, existing problems will have to be dealt with as soon as possible, if serious mishandling is to be prevented. It is possible at this stage to consider cooperative leaders being given increased training in financial and administrative skills. The existence of the new State Minister for Co-operative Affairs will give greater impetus to pushing forward increased management training in many existing management institutes, especially in Java. Only after increased administrative and managerial skills are given can cooperatives be delegated more responsibility by the government.

Appraisal Function and Third Order Decision That the BIMAS/INMAS programme is not a failure despite decreasing participation in BIMAS is clear when one looks at Table 3.1 which shows how increase in yield per hectare better explains the production increase than the extension of rice growing areas. However, the increased productivity per hectare was not exclusively a direct result of BIMAS/INMAS programme. The weather and tertiary irrigation channels did have a






Percentage Increase

4.28 3.77 8.05

4.76 4.28 9.04


Java Off-Java Indonesia Yield (tons/ha)

7.49 4.86 12.35

12.26 7.67 19.93

64 58 61

Java Off-Java Indonesia

1.75 1.29

2.57 1.79 2.20

47 39 44

Area Harvested (million ha) Java Off-Java Indonesia Rice Production (million tons)


14 12

SOURCE: Mears (1981).

positive effect towards increased productivity. But probably the most important factor towards rice productivity is the ratio change of rice to fertilizer which resulted in increased fertilizer use by farmers. The BIMAS programme itself deteriorated in the number of farmers' participation as well as area targeted, especially since 1974 (see Table 3.2). Yet despite the rather bleak figures in Table 3.2, Indonesian rice production increased tremendously for the last three years. Thus, it seems that the increase in rice production was a result of better supply of inputs, the TABLE 3.2.


1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982


Area (Thousand ha) Target Realized

1677 1834 1980 3206 3522 3569 3786 3618 3160 2933 2905 3165

1305 1199 1867 2936 3032 3018 2474 2207 1777 1554 1591 1392


Farmers (Thousand)

Credit Extended (Rp billion)

1683 1538 2263 3546 3720 3391 2725 2442 1896 1614 1643 1531

11.0 9.9 17.7 44.1 57.8 77.5 66.4 62.3 55.2 50.5 54.8 55.3



price ratio of fertilizer to rice in favour of the farmer and the new highyielding variety IR-38, 34 under the BIMAS/INMAS programme. What is left from this appraisal of the third order decision is the role of credit. Here it is wise to consider that BRI as a traditional institution with experience in giving credit to farmers should play a more important role. In this regard the creation of a new credit scheme is not needed. What is needed is increased professionalism from BRI and increased responsibility on their part for a possibly new credit scheme that could probably give more incentive to farmers. Here a "feedback mechanism" from the farmers could lead to a new credit policy which is more effective than the present BIMAS policy. The problem of credit repaymene 6 is a reflection that farmers are not motivated to participate (which includes participation in repaying debts). It is important that bank officials at the sub-district level have more manpower and skills. Rather than continue the BIMAS programme or create a new credit scheme, it would be more useful if one looks at the possibility of increasing the BRI role through a normal banker-client relationship. This is probably the best incentive system that could be established under the present conditions.

INPRES SD: Primary School Programme 37

One similarity between the INPRES SD and BIMAS programmes is their political origin. Whereas the BIMAS programme was in some way a reflection of the political leaders' preoccupation with rice self-sufficiency, the INPRES SD came from a long history of Indonesian leaders' preoccupation with compulsory education. But the impetus for the emergence of the INPRES SD programme came from strong political pressure, mainly from youths, students, and the intelligentsia throughout 1973. For this consideration, the uses of the policy function and decision order methodology to analyse INPRES SD will be quite different from the BIMAS programme. The items of the matrix that will be used for this programme's public policy analysis will be the intelligence function and first order decision, the prescription and the second order decision, the application and second order decision, and finally, the appraisal and third order decision. Each stage of the public policy function will thus be partially described, although with regard to decision order analysis mostly the second order decision will be discussed. The reason is that with the third order decision, incentive systems, the programme judging by the high enrolment rate and increased literacy rate (calculated and reported in Chapter II) seems clear enough to have a strong response. Suffice it therefore to discuss the third order decision with the appraisal function. On the first order decision,



the combination with intelligence function will probably give this study a deeper insight into the rationale behind INPRES SD.

Intelligence Function and First Order Decision Chapter XII, Article 31 of the 1945 Constitution of the Indonesian State, states that: 38 1 Every citizen has the right to receive education; 2 The government makes the effort and organizes a national educational system, in accordance with the law. As a translation of the above statement Law No. 12, 1954 was enacted and Article 17 of the Law on the Objectives of Education and Teaching states that "each Indonesian citizen has the same right to be admitted as a pupil in a school if he fulfils the requirements fixed for education and teaching at the school" .39 Chapter VII, Article 10 of the same law states that a child has the right to enter primary school when he or she reaches the age of six. 4° Children of eight years of age are required to attend school for a minimum of six years, that is, long enough to complete primary schooling if they do not repeat any grades. Making the law and realization of its goals are, as in many cases, two different issues. Although every Indonesian Government treated education seriously, it sometimes became too political an issue. In the 1960s President Soekarno proclaimed that Indonesia had become a country free from illiteracy. The reality was that in 1980, the literacy rate was 72 per cent for the population ten years of age and older and 68 per cent for those fifteen years and older, at the international standard for calculating literacy rates. 41 The point here is that the education problem is always political. Consequently the political events of 1973 should be seen in this perspective and with this background in mind. Towards the end of the first five-year plan in 1973 students demonstrated against what they perceived as inequity and foreign domination. 42 Demonstrations that began at the time of the arrival of Minister Fronk of Netherlands43 and ended with the visit of Prime Minister Tanaka of Japan in January 1974,44 put strong pressure for equity on the development programme. With strong political pressure and the history of education as a political issue, officials at the National Planning Agency (BAPPENAS) came to the conclusion that something more than ''business as usual" had to be done with education. 45 When the BAPPENAS officials found that the Ministry of Education projected a 55 per cent primary school enrolment ratio in 1979 for the seven to twelve age group, they came to the conclusion that a critical bottleneck for this low ratio was school construction. 46 Before the existence of



INPRES SO, the regional (or provincial) government was responsible for education and the Ministry of Education gave technical guidance and Parents-Teacher Organizations had to raise funds for other expenses. This scheme had to be changed and BAPPENAS chose to overcome the problem of primary education by constructing primary schools as the most strategic act. BAPPENAS then arrived at the idea of a special instruction by the President (INPRES), that is, a first order decision. Fortunately, the oil boom in 1973 increased tremendously Indonesia's foreign exchange earnings. The financing for the school construction of the INPRES programme was based on the following assumptions:

2 3

4 5


If the central government provided funds, the regional government would be capable and honest enough to use them to construct school buildings. The buildings would be of acceptable quality; they would be usable and would last. Along with the buildings, necessary complementary inputs for running the school would be provided; these include furniture, books and other pedagogical tools, as well as staff, especially teachers. Pupils would attend the schools established, that is, they would enrol and subsequently attend in adequate numbers. Learning of the desired kinds of knowledge, skills and attitudes would actually take place; the characteristics of the facilities, staff, and pupils would be such that the kind of education desired would be there. The education received would create the sought-after economic and social benefits.47

Perhaps, more important, the construction of thousands of primary school buildings was a visible development result and it had the potential to weaken much of the criticism directed against the government.

Prescription Function and Second Order Decision The financing of INPRES SD came from the central government budget (APBN or Anggaran Pendapatan dan Belanja Negara) and given to the second level regional government (kabupaten or kotamadya) or to the district. INPRES SD, as in the BIMAS programme has a co-ordinating committee. After the presidential instruction {INPRES SD) which comes with an implementation manual, giving the direction of the programme and targets, further guidance is given by a joint ministerial committee called Keputusan Bersama.48 The ministers associated with the committee are the Minister for Internal Affairs (since the operation would be under the responsibility of each bupati who is under the Ministry of Internal Affairs), the Minister of Education and Culture (since the technical direc-



tion of the operation of schools is under this ministry), the Minister for Finance (who funded the programme) and the Minister Co-ordinator for Economics, Finance and Industry and the chairman of BAPPENAS who co-ordinates the work. 49 At the lower or operational level, there are the daily implementing bodies consisting of separate working groups: for construction, building and rehabilitation (chaired by Internal Affairs), for teacher hiring (chaired by the State Administrative body or BAKN, Badan Administrasi Kepagawaian Negeri), and for book supply (chaired by Ministry of Education). At the local level, the role of the bupati is decisive. In fact, it is so powerful that in the application some changes must be made.

Application Function and Second Order Decision How the bupati is to carry out the new school construction is to a large extent decided by the bupati himself with only general guidance from the central government. In the BIMAS programme it was discussed how the Governor could play a very important role in a national programme. In the INPRES SD programme where government funding and direction is fairly straight forward the bupati have the freedom to have the schools built either by a private constructor or the community village social organization, called swakelola. 50 The problem here is the availability of a site for the school. This crucial item is not financed by the central government and as a result it is quite a burden to the village people. The large role of the bupati gives a strong possibility for corruption. This was probably one of the reasons why in 1979-80, the project manager in each kabupaten was shifted from the bupati to the head of the Ministry of Education at the district level (Kepala Dinas Pendidikan dan Kebudayaan Kabupaten). 51 But even this formal transfer of power could not prevent a bupati from intervening.

Appraisal Function and Third Order Decision The difficulty in appraising the quality of the building and education is that there exists no quantitative data or quality evaluation available on the INPRES SO programme. This made appraising the incentive system much more difficult and we do not have reliable data except the very crude number of increase in school buildings as a result of INPRES SD programme since 1973-74, the increased literacy rate and the increased enrolment from 60 per cent to 85 per cent in 1980 and I 00 per cent in 1984 as a result of increased availability of buildingsY What is clear is the belief that the lack of school buildings was the crucial bottleneck in the development of primary education (first order



decision) was correct. With the positive enrolment result, it should be kept in mind that the problem of quality assessment, especially in mathematics and language, must become the priority for future planning. 53 The reason is that since the construction phase on a large scale is over, it is urgent at this stage to evaluate the education results if the government is to do something about the secondary school problem that comes from the very success of the INPRES SO programme. 54 Although there are still problems with teacher shortages, textbook supply, building quality, and fewer resources available in the future as a result of oil price drop, it seems clear that overall the primary school programme attracts participating response, mostly because it is free.

Keluarga Berencana (KB) or Planned Parenthood Programme

Compared to the primary education programme (INPRES SO) and the BIMAS programme, the family planning programme has produced an abundant number of scholarly works55 and the level of discussion, is more sophisticated. 56 As opposed to the other two programmes, the family planning programme became a national programme through an evolutionary path described in the next section. From the conceptual framework, I will use four elements of the matrix: the intelligence function and the second order decision, the prescription function and the second order decision, the application function and the second order decision, and the appraisal function and the third order decision. The reason for choosing these four descriptions and classifications is that, with respect to the life cycle of policy, emphasis will be placed on the institutional or bureaucratic agency role (three of the second order decision). The appraisal function and third order decision will try to describe some of the elements lacking in the classification. Most important is the attempt to look at the relationship between participation in family planning and consequent fertility decline as a result of the programme versus other contributing factors.

Intelligence Function and Second Order Decision At the end of the 1920s, a Chinese from Central Java using the pseudonym, Subrosa, wrote and distributed a pamphlet called "Neo-Malthusianism or British Control: Theory and Practice". 57 Although his pamphlet had some support, it received strong criticism. The Netherland Indies' Colonial Government, although quite aware of the population problem, especially the unequal population distribution between Java and the other islands, developed a transmigration programme as the sole means to overcome



the problem. After independence, Indonesian political leaders debated many issues but population pressure was not one of them. In fact, when President Soekarno stated in 1964 that population control was not necessary in Indonesia, there was not much opposition to the idea, partly because the climate was such that the dissenting voice was non-existent. With regard to institutions, the establishment of the Indonesian Planned Parenthood Association (PKBI or Perkumpulan Keluarga Berencana Indonesia) in 1957 is an important landmark. Throughout most of President Soekarno's effective tenure, from 1957 to 1965, the PKBI was active in mobilizing funds and selling and distributing contraceptive devices. Strangely enough the PKBI did not face strong pressure from the government to stop its activities. By 1963 the PKBI was organizing seminars in Java and Bali to introduce their activities to the medical profession. The change in the political climate that followed the replacement of the charismatic President Soekarno with the more pragmatic President Soeharto did not bring about any immediate difference in the political commitment of the government to the issue. At first, Soeharto passively supported the PKBI activities. Very carefully he changed his stand from passive support to cautious open support, and finally to a strong commitment of the family planning programme. President Soeharto's commitment, which became internationally known as he was among the thirty leaders who signed the World Population Dedaration, 58 moved from supporting PKBI, to establishing a semigovernment organization, Lembaga Berencana Nasional, in 1968 to establishing in 1970 a full co-ordinating organization called BKKBN (Badan Koordinasi Keluarga Berencana Nasional). This evolutionary change reflects the nature of the family planning movement in Indonesia which began with discussions of an article, to the establishment of a private organization and finally to a full fledged government co-ordinating organization. The family planning movement could not be seen as mobilization from "top down".

Prescription Function and Second Order Decision As stated by Snodgrass, the strength, and probably the weakness, of BKKBN is that it is a "co-ordinating body, not implementing agency". 59 But BKKBN, compared to other co-ordinating bodies like Badan Pengendali BIMAS and Keputusan Bersama Mengenai SO INPRES, is far more effective because it is an organization that is directly responsible to President Soeharto. The presidential decisions of 1970, 1972 and 1978 streamlined the BKKBN bureaucracy. The decisions resulted in a clear delegation of authority among deputies and established a deputy of population affairs (adding to other deputies of general works, family planning,



and control and supervision), reflecting the integration of the family planning programme into a wider population and development programme. In fact in the Fourth Development Cabinet (1983) there was a Minister for Population and Environment Affairs, Professor Emil Salim. At the regional level, the BKKBN has heads at the provincial and district levels. They are responsible to their direct BKKBN supervisor. This does not mean that they do not work with the regional government. In fact, the governor and bupati are directly responsible for family planning programmes in their respective areas. 60 But this creates strength rather than conflict since the BKKBN is not an implementing agency. The task of the BKKBN and its operation has changed from a clinic-based service for contraceptives to a village-based service. The village-based service has progressed from a medical worker visiting the village (the field personnel are called PLKBs or Petugas Lapangan Keluarga Berencana) to a more sophisticated incorporation of information, education and communication activities into several village-based institutions.

Application Function and Second Order Decision The success of the Indonesian family planning story has been well documented. 61 McNicoll and Masri state: The specific accomplishments of the government's direct involvement in family planning activities in Indonesia having significance for the fertility decline are: 1 Development of an effective contraceptive distribution system. 2 Mounting of extensive information, education and communication

activities publicizing fertility and family size issues and promoting the image of small family; and 3 Mobilization of local government and local community groups to bring informal pressure on eligible couples to practise contraception.62

The first two activities are not unique compared to family planning programmes in other developing countries. But the third accomplishment is significant. Although there are reported cases of coercion, 63 especially in the uses of IUDs (intra-uterine device), the implementation of the programme is less coercive than in the People's Republic of China or in India during the emergency regime of Indira Gandhi. In Indonesia, village organizations such as PKMD (Pengembangan Kesejahtraan Masyarakat Desa), PKK (Pendidikan Kesejahtraan Keluarga), and UPGK (Upaya Peningkatan Gizi Keluarga) which work for village welfare and nutritional enhancement have been willing to co-operate with and to incorporate the BKKBN work at the village level.



Appraisal Function and Third Order Decision The number of acceptors in PEL ITA I (3 .2 million) and PELIT A II ( 10.3 million) both surpassed the targets of 3 million and 8 million acceptors. 64 Table 3.3 shows user rates by province as of June 1982. 65 The DPIS December 1982 report states that 38 per cent of eligible couples use family TABLE 3.3.







Java and Bali 1 Jakarta 2 West Java 3 Central Java 4 Yogyakarta 5 East Java 6 Bali Outer Islands I 1 Aceh 2 North Sumatra 3 West Sumatra 4 South Sumatra 5 Lampung 6 West Nusa Tenggara 7 West Kalimantan 8 South Kalimantan 9 North Sulawesi I 0 South Sulawesi Outer Islands II 1 Riau 2 Jambi 3 Bengkulu 4 East Nusa Tenggara 5 Central Kalimantan 6 East Kalimantan 7 Central Sulawesi 8 Southeast Sulawesi 9 Maluku IO Irian Jaya I I East Timor All Indonesia

Current Users as a Percentage of Eligible Couples 47.4 26.3 33.1 47.1 62.5 63.5 62.6 26.6 16.4 27.2 25.6 18.2 25.4 35.5 21.4 28.5 30.2 34.5 10.0 9.9 12.4 28.9 7.6 8.5 14.3 11.0 6.I 5.7 3.6 1.4 38.1

NoTE: Estimate of the percentage of eligible couples using any programme method. For pill acceptors, data are based on the number of pill cycles distributed from family planning clinics. The number of IUD acceptors is estimated from sample survey data on the use of that method. SouRCE: Monthly report, National Family Planning Coordinating Board (BKKBN), Jakarta (23 August 1982).



planning devices. The World Bank estimates that on average 23 per cent of eligible couples use contraceptives in middle income countries. 66 McNicol! and Masri state the percentage of currently married women using contraceptives was 27 per cent in 1980. 67 The figure only includes married women which explains some of the considerable differences of the two data. But by both measures the use of contraceptive methods by Indonesians is quite high in comparison to many developing countries. McNicoll and Masri's calculations, despite the weakness of classification of data, tend to support the position that the total fertility rate dropped by nearly one child per woman between the late 1960s and the end of the 1970s and the decline could be largely explained by the use of modern contraceptive methods. 68 Late marriages, a trend of the 1970s, however, could also be a factor in the fertility decline. To put Indonesia's success in perspective it is useful to quote McNicoll and Masri's conclusion. It is curious reflection on the capriciousness (or short attention span) of the international population community that, although Indonesia's demographic transition has roughly parallelled India's over the last two decades, with East Java's present fertility on a par with Kerala's or Tamilnadu's, Indonesia should be hailed as a population policy success story while, India is typically portrayed as a failure. 69

But one difference still exists with regard to economic growth. Indonesia's growth is a divergence from the South Asian Model and closer to East Asian Model. 70 The latter is considered to have higher growth compared to the former. This partly explains more hopeful signs that could reduce fertility rate such as increased education and work for women among others.


Emmerson in his penetrating analysis showed how the strength of the state came to the fore in the New Order era as a result of increases in size, "departization" that produced a state apparatus that is more loyal to the central government, and activity that resulted in increased official effectiveness. 71 Technocratic skill at the highest level, political stability guaranteed by the military, resources mostly as a result of the oil boom in 1973 and 1980, which gave a higher possibility for increased resource allocation to public works and services, 72 all pointed to a better overall performance compared to any regime before the New Order era, as well as to many other regimes in developing countries. The success of the primary school building and family planning showed how in quantitative



terms Indonesia is above the average middle income countries. Enrolment ratio is 78 per cent average for low and middle income countries and 100 per cent for Indonesia in 1984, and using family planning devices by eligible couples is between 27 per cent to 38 per cent compared to only 23 per cent average in middle income countries. 73 But even its ardent admirer must admit that the record is not as spectacular as the fact that Indonesian income per capita growth is only more than 5 per cent for fifteen years of the New Order history (1967-82). The relationship between growth and equity is shown in the fact that the tremendous increase in rice production in the last five years was clouded by the problems of reduced participation and debt repayment in the BIMAS programme. Here it seems that the state's "strength" as Emmerson has stated could also become its "weakness". A BIMAS programme that faces termination (if not formally) might be more useful if it is replaced by possibly over-bureaucratization. Whereas in the INPRES SD programme and family planning the incentive system is comparatively riskless for the potential participant, this is not the case for BIMAS. Replacing BIMAS with other schemes or giving the co-operatives themselves an opportunity to develop independently will not be the answer to the complex task of rural development. An incentive system towards a more normal working relationship (such as a banker-client relationship which will give more priority to increasing skill and manpower in the banks in the provinces and district areas) and not a "targeted oriented" collection type (by KUD from BULOG for rice procurement) could be a better answer for future policy. 74 Emmerson concludes his analysis of Indonesian bureaucracy as follows: It is in these senses that the bureaucracy's newfound strength is weakness. Conversely, by increasing its vulnerability to the needs of powerless people it could acquire strength. "Tiptoe government" did not act, but hobnail boots are not the answer. 75

The family planning programme showed that participation is indeed possible. Whether participation is also possible in other development aspects depends much on political institutionalization which in turn cannot be answered as long as the problem of succession is not solved.




2 3

4 5 6 7 8 9 10



13 14

One possible exception is the work by C. E. Beeby, Assessment of Indonesian Education: A Guideline in Planning (Wellington, New Zealand: Oxford University Press, 1979). But the data are somewhat outdated. The translation of Keluarga Berencana is Planned Parenthood. Family Planning is a more popular term and is therefore used throughout this study. In Chapter II it was shown that the increase in primary school enrolment started in 1973 after the initiation of the INPRES SD programme. Although not "proof" of INPRES SD's effectiveness, it is clear though that since other factors were able to explain the enrolment increase, there must be a relationship between the two phenomena. But a public policy analysis could probably give more insight into the relationship. Although there are problems in explaining the internationally acclaimed success of the family planning programme, and the Population Census Report in 1980 of 2.34 per cent growth rate, some clear message of the programme will come across any evaluation. Increase in the percentage of users of contraceptive services among eligible couples and the rate of fertility decline all point to the direction of a real relation between family planning and fertility decline. The point is that relative to the BIMAS/INMAS programme, outside factors and its effects towards outcome and the programme itself, is less complex in the KB case. See Roger Revelle's introduction in Policy Studies of Population, ed. Warren F. Illchman et al. (Lexington, D.C.: Heath, 1975). Ibid., p. 122. Montgomery (1979), pp. 17-52. Ibid., p. 191. Ibid. Ibid. On the study of implementation, see J. Pressman and Aaron Wildavsky, Implementation (Berkeley: University of California Press, 1973); also see E. Bardach, The Implementation Game (Cambridge, Mass.: MIT Press, 1977) and Donald Warwick, "Integrating Planning and Implementation: A Transactional Approach", Harvard Institute for International Development Discussion Paper No. 63, June 1979. Nevertheless it has been done by A. T. Birowo eta!., "Survai Evaluasi Pelaksanaan Intensifikasi Padi dan Palawija Tahun 1971-78", Buku 2A (Jakarta: Department of Agriculture, 1978), pp. 53-61. For instance in its calculation of foreign exchange saving as a result of the increase in production (which means less imports in relation to production increase) the survey failed to calculate the foreign exchange spent for BlMAS/ INMAS programme for the import of the inputs supplied under the programme. With their method, the survey calculated the cost-benefit ratio of the BIMAS and INMAS programme at or above 2.0 and the foreign exchange saving (all for 1971-77) at about US$625.3 million. Dapice, in a private conversation with me stated that the high-yielding variety IR36 (available through BIMAS/INMAS as well as outside the programmes) is extremely effective against pests and diseases. It is also an important factor in explaining the increase in rice production. This is an especially solid explanation since before the inception of IR-36 in 1979-80, rice production suffered great losses because of wereng, an extremely destructive pest in mid and late 1970s. See DPIS (l982a), pp. 2-5 and 2-6. Ibid., p. 2-5. Interestingly enough the micro experimentation which started as a pilot project for an area of 105 hectares originated from a study activity as one of the Indonesian universities' functions to serve the society. Called the three functions of the


15 16 17 18 19

20 21 22 23 24 25


27 28 29

30 31

32 33 34 35


university, the first is education and the second, research. The third function although expressed in a different way, that is, demonstration and petition, has also an effect on the second programme observed, namely, INPRES SD. There are 15,309 WILUD (extension districts) which are served by only 10,799 PPLs (or officers-in-charge). There is still a shortage of extension workers. DPIS (1982a), pp. 2-92. Ibid., pp. 2-33, 2-33A and DPIS (1982b), pp. 39, 40. For instance the changes from bawon to tebasan and borongan shown by Collier are towards greater owner share in the production. Gary E. Hansen, "Bureaucratic Linkages and Policy-Making in Indonesia: BIMAS Revisited", in Political Power and Communications in Indonesia, ed. Karl D, Jackson and Lucian W. Pye (Berkeley: University of California Press, 1978). Ibid., p. 340. DPIS (1982a), p. 2-138. KUD received a premium of Rp 5/kg of rice sold to BULOG. DPIS (1982a), reported the increasing possibility of KUD's role in giving credit to the farmer. Ibid., p. 2-14. Ibid., p. 2-92. The DPIS (l982a) quotes an interview with Professor Gunawan Satari (head of the Department of Agriculture Study on BIMAS Evaluation) who found that the extension was the weakest part of the intensification programme. The Agro-Economic Survey 1976, on a study "Aspek-Aspek Kelembagaan dalam Pembangunaan Pertanian Studi Kasus di DAS Cimanuk, Jawa Barat", was critical in evaluating the extension service. See DPIS (l982a), p. 2-84. The DPIS field report showed that the field workers were not as weak as the above study might suggest. In all the works that I have read, the absence of the PPL evaluation criteria seem to be the case. The Hansen work, the DPIS (1982a) and the BIMAS evaluation study all fail to discuss this important factor. Although as has been stated before it is indeed difficult to calculate the PPL's value added, this does not mean that their role could not to a limited extent be quantified. A discussion on the incentive to the extension service will eventually increase their motivation to serve the farmers. See especially Herbert Feith, "The Dynamics of Guided Democracy", in Indonesia, ed. Ruth McVey (1962). Karl D. Jackson, "Bureaucratic Polity: A Theoretical Framework for the Analysis of Power and Communications in Indonesia", in Jackson and Pye, eds. (1978). Dwight Y. King, "Indonesia's New Order as a Bureaucratic Polity, a Nee-Patrimonial Regime or a Bureaucratic Authoritarian Regime: What difference does it make?" in Interpreting Indonesian Politics: Thirteen Contributions to the Debate, Benedict Anderson and Audrey Kahin, eds. Modern Indonesian Project Publication No. 62 (Ithaca: Cornell University Press, 1982). Ruth McVey, "The Beamtenstaat in Indonesia", in Anderson and Kahin, eds. (1982). Ibid., p. 4. He definitely describes this in Fred Riggs' term of "bureaucratic polity". See Riggs, Thailand: The Modernization of a Bureaucratic Polity (Honolulu: East-West Center Press, 1966). Donald K. Emerson, "The Bureaucracy in Political Context: Weakness in Strength", in Jackson and Pye, eds. (1978). Ibid., p. 136. From DPIS (1982a), pp. 2-12. Years refer to year of harvest figures, for example, 1971 includes the 1970-71 wet season and 1971 dry season. The difficulty arises from the fact that all areas not covered by BIMAS are taken as being covered by INMAS with the result that a farmer is either in BIMAS or INMAS.


36 37

38 39 40 41



44 45 46 47 48 49 50

51 52




The logic is that every farmer who buys fertilizer in cash from the kiosk is considered an INMAS participant. But then the question that comes to mind is: Is it not true that input supply availability and favourable price ratio of rice to fertilizer are all that the farmer needs? See DPIS (1982a), pp. 2-115. See Donald R. Snodgrass et al. (1980) and DPIS (1982a). In the first two years of the programme (1973-74 and 1974-75) it consisted mainly of construction of new primary schools and supporting services such as teacher hiring and provision of text books and library books. It was later broadened to include the rehabilitation of old primary school buildings and madrasah (primary religious schools). Schools are built on a standard design. DPIS (1982a). Ibid., p. 129. DPIS (1982a). For literacy rate of persons 10 years and above data were from Central Bureau of Statistics, ''Results of the Sub-sample of 1980 Population Census, Preliminary Tables'', Series S, no. I, Jakarta, May 1982, p. 48. The strongest and clearest statement of their ideological stand is "Petisi 24 October" (24 October Petition). The Student Council of the University of Indonesia produced the petition to commemorate the date of the Indonesian National Awakening - 28 October 1928. For more on the petition see the following newspapers: Pedoman, Kami, Abadi, Indonesia Raya, Kompas and Sinar Harapan on 25 October 1973. The first four newspapers have been banned since January 1974. Minister Pronk, from the Netherlands was the ex-officio chairman of the InterGovernmental Group for Indonesia (IGGI) - a group of countries that co-ordinates loans to the Indonesian Government. The reason for this demonstration was the high visibility of Japanese investments and what was perceived as the arrogance of the Japanese in Indonesia. On the role of BAPPENAS see Snodgrass et al. (1980), pp. vii and viii. DPIS (1982a), pp. 5-11. Ibid., pp. 5-10 and 5-11. Ibid., pp. 5-17. Ibid., pp. 5-17. Since 1976 the Minister of Religion has also participated because Islamic primary schools (madrasah) have been included in the programme. The DPIS found the differences quite significant. In Bali, 95 per cent of INPRES SD were reportedly built by swakelola; and the enthusiasm as well as the building quality were said to be high. In a South Sulawesi kabupaten all construction was contracted to firms chosen by the bupati. This made the carnal (head of the sub-district) and lurah (head of the village) unhappy since they felt left out, and they complained about the low quality of construction. Ibid., pp. 5-27, 5-28. Ibid., pp. 5-64. This is not the enrolment ratio which compares enrolment of children of aged 7 to 12 for primary school to the total population of that age group (definition taken from p. 5 of the report). The statistics were far from unanimous: the Ministry of Education gives an enrolment figure of 22,487,053 for 1980 and the Central Bureau of Statistics, 20,929,210. For 1984 the figure came from World Bank Atlas 1985 (World Bank, 1985). The considerable number of dropouts, 5.1 per cent in 1980-81, and repeaters, 8.8 per cent in 1979-80 is a clear indication that the problem of quality is quite serious. The figures are from DPIS (1982a), Chapter Ill, Table 3.15. DPIS (1982a), seems to conclude that it appears to be the case at this present time. In




57 58



61 62 63 64 65 66 67 68 69 70 71 72 73


fact, in the school year 1979-80, 97.2 per cent of the target of INPRES SD building was realized. Ibid., pp. 5-55. On the result of the 1971 programme see, especially Lee-Jay Cho et al., Population Growth of Indonesia: An Analysis of Fertility and Mortality Based on the 1974 Population Census (Honolulu: University Press of Hawaii, 1980). For a solid historical insight and problems of Indonesian population see Terence H. Hull and Ida Bagoes Mantra, Perubahan Penduduk Di Indonesia (Yogyakarta: Pusat Penelitian and Studi Kependudukan Universitas Gajah Mada, 1981). See Geoffrey McNicoll and Masri Singarimbun "Fertility Decline in Indonesia: I. Background and Proximate Determinants" and "Fertility Decline in Indonesia: II. Analysis and Interpretation'', Center for Policy Studies, Working Papers Nos. 92 and 93 (New York: Population Council, 1982). The existence of three population censuses in 1961, 1971 and 1980 gave the potential for more uses of quantitative methods in the issue of population and birth control. From Amen Budiman, "40 Tahun Lahirinya Buku K. B. Pertama Di Indonesia", Kompas, 12 October 1975. Daedumi and Soeroso, "Sejarah Analitik Keluarga Berencana" (Cambridge, Mass.: HIID and Pajajaran University Joint Working Paper, 1979), p. i. lt is also called the "World Leaders' Statement" because it was signed by thirty heads of states. The declaration gave broad support to population programmes. For further background on this statement see Phyllis T. Piattrow, World Population Crisis: The United States Response (New York: Praeger, 1973), p. 201. See Snodgrass, "The Integration of Population Policy into Development Planning: A Progress Report". Development Discussion Paper No. 49 (Cambridge, Mass.: HIID, 1978), p. 60. The bupati chairs the operational duty unit that monitors the programme down to the village level. The unit includes officers from other ministries such as health, information, education and religion, and officers from the PKBI (to include the possible religious sentiment which was largely contained through the incorporation of the religious leaders in this programme). Note that the original family planning institution, PKBI, is included in the team. Terence H. Hull eta!., "Indonesian's Family Planning Program: Success and Challenges", Population Bulletin 32, No. 6 (Washington D.C.: Population Reference Bureau, 1977). McNicol! and Masri (1982b), p. 25. Emmerson (1978) and DPIS (1982a), pp. 3-127. From DPIS (1982c), p. 46. DPIS (1982a), p. 3-33. DPIS (1982a), p. 3. The World Bank estimate is World Tables, 2nd ed. (Baltimore: John Hopkins University Press, 1980), p. 443. McNicoll and Masri (l982a), p. 69. Ibid., p. 82. They state that modern contraceptive usage could account for nearly all the estimated 0.9 per cent fall in total fertility drop of 1 per cent. McNicoll and Masri (1982b), Chapter 3. For an inter-country comparison see Chapter 3, Figure 3.1. Ibid., p. 41. Emmerson (1978). The funds allocated to family planning increased from US$1.6 million in 1969 to over US$100 million in 1980-81. See DPIS (l982a), pp. 3-16, 3-17. The average for low and middle income countries uses gross enrolment figures for 1978 and came from Stephen P. Heynaman, Improving the Quality of Education, Finance and Development (Washington D.C.: IMF Publication, March 1983), p. 18, Table I.



Net enrolment by definition includes pupils above twelve years of age. Indonesian data are for 1980. 74 The Rp 5 premium showed that it has nothing to do with KUD development but more for village officials, and BULOG DA Officials (BULOG officials at the provincial level). 75 Emmerson (1978), p. 136.


Summary and Conclusion: A Prospective Appraisal of Basic Needs

Summary and Conclusion

The basic needs approach to development is a complex, difficult and challenging subject for most development theorists and specialists. The problems of methodology in economic analyses, methodology in observation of programmes within public policy science, and the challenge for a more universal criteria for comparative basic needs outcome are all far from settled. No less important, the observation of possible trade-offs between growth and basic needs results and the building of a macro policy to guarantee sustainable future basic needs call for an urgent priority in future research agenda. Finally, the effect of international relations with respect to basic needs results at the national level, encompassing aid policy, trade policy, investment relationship, research and transfer of technology, among others, all need rigorous research and establishment of international information systems such as that begun on a small scale at the United Nations University. This study on basic needs condition is but a small step in the direction of deeper knowledge of the basic needs conditions in Indonesia. The overview of Indonesian economic and political development showed many important issues that could have an effect on the future basic needs achievement. But it should always be kept in mind that the New Order government started its economic programme with low levels of per capita income, rampant inflation, instability in the political sphere and an atmosphere that was far from being conducive to rapid economic growth. What the New Order has achieved are, increases in per capita income of 5 per cent per annum for the last sixteen years and the political stability that is necessary for development programmes. Indonesia's progress is reflected in its promotion by the World Bank, in its yearly report, from the low income countries group to the middle income countries group, 1 a prospect that was unimaginable when the first five-year plan was drafted in 1968. The achievement could be partially explained by large foreign aid, billions of dollars of foreign investment, an economic climate which encouraged domestic investments, a national indicative plan (REPELITA), and a balanced budget. Inspite of all the positive aspects



mentioned above, a radical critique might argue that because of these very factors, there are many problems that could have a negative effect on Indonesian basic needs achievements. These include the structural imbalances between economic sectors, the considerable degree of poverty still prevalent (which as this study observed, still involves about 20 per cent of the population) and political problems such as the difficulty in motivating participation in some of the national programmes. With regard to political stability the issue of "how much" and "at what level" stability could be maintained in an authoritarian regime became the big question in Indonesia. The format of political democracy, reflected in the legislative assembly produced only a formality of democracy. The level of repression which in the last four years was directed towards Muslim political activists, undoubtedly reduced the content of political participation and dissenting voices. In the economic field, the imbalances between the "modern" industrial sector and the "traditional" agricultural sector, increased the number of landless people and the level of activities in the informal sector. Here the government modified many programmes to rectify the imbalances. They include credit for small scale entrepreneurs and small farmers, construction of primary school buildings on a large scale, and a series of presidential instructions implemented in late 1973 and in 1974. The above points are the substance of the overview of Indonesian economic and political development in Chapter I. Chapter II was an attempt to observe and calculate to what level the correcting policies of the New Order government have produced improvements in the standard of living of the population. Three approaches have been taken, namely, a synthesizing effort of macro and micro studies related to food, sectoral results of three basic needs sectors - food, education, and health and family planning, and three attempts on single indicators- the PQLI and methods developed by Sayogyo and Pos M. Hutabarat. In all these approaches, more than impressive results could be reported signifying success in basic needs outcome. This does not mean that problems of basic needs have been solved for most of the Indonesian population. Macro studies revealed that the Indonesian economy has the potential to react to economic stimuli in a favourable direction. But the micro studies also showed that institutional arrangement of bawon to tebasan, increased government promotion of co-operatives which became a "top-down" institution and not a "bottom-up" movement among farmers, and structural problems such as increased landles~-uess to 15 per cent of rural households will have negative effects on the efforts for the provision of basic needs. The sectoral results showed that increased consumption of staple foods, especially rice, was significant. The rice equivalent consumption



per capita increased from 160 kg in 1970 to 188 kg in 1980, despite a 2.34 per cent annual population increase. In 1985 a conservative estimate of rice equivalent consumption per capita was at least 195 kg. Still, poverty remains prevalent in rural Java, and its extent was summarized in the discussion on single indicator attempts to measure basic needs achievements. Improvement in educational service has resulted in increases in number of pupils from an index of 100 in 1970 to 168 in 1980, and literacy rate from 59.6 per cent in 1971 to 62.0 per cent in 1977 and 68.4 per cent in 1980. Life expectancy increased from 45 years for males and 48 years for females in 1961-71, to 53 overall in 1980. By every standard these results indicate a sharp increase in basic needs conditions of the people of Indonesia. The PQLI which includes life expectancy at aged one, infant mortality rate per 1,000, and literacy rate -showed an increase from 49 in 1971 to 59 in 1980. In an international perspective, this puts the yearly increase from 1971 to 1980 of Indonesian PQLI at 2.4 per cent per annum, which is a respectable increase as an average annual disparity reduction rate. But the result is not as impressive as when compared with the increase in Indonesian annual per capita GNP. The important finding of the single indicator approach is the drastic reduction in the size of the destitute population in Indonesia. Using a modified form of Sayogyo's rice equivalent of 200 kg and putting the price of rice at Rp 250 per kg, this study concluded that the number of destitutes in the population has been reduced from 19.8 per cent of total population to around 6.1 per cent or slightly higher. This might be the most significant achievement of the New Order on basic human needs. Chapter Ill was a public policy approach to analysing development programmes that are highly related to basic needs. It showed that the most difficult programme, BIMAS, has been the least successful. The BIMAS programme, compared to INPRES SO and KB is the most complex. There are many elements in the BIMAS package: the BRI for credit, the Agriculture Department for extension services, PN PUSRI for fertilizer distribution, and BULOG for procurement. BIMAS is the most expensive programme and one that is most susceptible to external factors influencing its outcome (weather, irrigation works and price policy). Chapters II and III also indicated that public participation does not necessarily lead to or follow effective outcomes. The increase in rice production for the last five years came at a time when the number of BIMAS participants decreased. However, Chapter III also showed that some of the important programmes such as INPRES SD or KB owe their origin to political pressures and initiatives outside of government which were adopted and made priority items in the government's programme. After the MALAR! Affair, a series of government programmes were



aimed at more equitable impact: for example, Kredit Investasi Kecil, Kredit Modal Kerja Permanen and Kredit Candak Kulak (all credits for small entrepreneurs, and in fact extremely small individual activities). Since the political and economic development overview showed that the government addressed the issue of equity and basic needs more forcefully after 1973, it is necessary for this section to provide a conceptual explanation of this phenomenon.

A Conceptual Explanation: Hirschman's Entrepreneurial and Reform Function

Albert Hirschman, in his study on the nature of development in Latin America, proposed a general framework which he hoped could help people understand more deeply the interaction between economic developmcn; and politics. 2 Hirschman first stressed that growth creates imbalances and inequality, arid the imbalances could be sectoral or geographical. Increasing inequalities is an important part of the picture. 3 In time, he stated, pressure will arise to correct some of these imbalances. This happens because the continuation of growth requires such correction at some point and because the imbalances bring with them social and political tensions, protests and action. This formulation, according to Hirschman, leads immediately to the definition of the two principal tasks or functions that must be accomplished in the course of the growth process. 4 He proceeds to state: the first of the two tasks is the unbalancing function, or the entrepreneurial function. It can be performed by private domestic enterprise, foreign capital, the state or by any combination thereof ... at some point after this function has had its run there will be efforts at catching up on the part of lagging sector and regions, at social reforms to improve the welfare and position of groups that have been neglected or squeezed and at redistribution of wealth and income in general. This is the "equilibrating, distributive or reform function".~ Thus from Hirschman's point of view, the reform function has an essential role to play in making it possible for growth to be sustained after a powerful, yet disequilibrating push by the entrepreneurs. Finally, according to Hirschman The term reform function is not meant to imply that the people who act in the function are "reformists" in the sense of having forsworn any idea of revolution, to my mind they include anyone determined to correct imbalances and inequities that have arisen in the course of



growth, no matter what the consequences; in other words, they can be entrepreneurs, state agencies, reformists, reform mongers or revolutionaries. 6

From this rather general framework, Hirschman observes the case of Latin America countries such as Brazil, Chile, Argentina, Colombia and, in fact, he draws on European history as well. He states that "the strength of the entrepreneurial function depends both on the pull of opportunities for profitable investment and on the push of ideological forces" .7 This general framework is also quite relevant for understanding Indonesian economic development and politics with regard to basic needs. The "entrepreneurial" function in Indonesia stems particularly from the military who assured political stability (sometimes perceived by the intellectuals as stability at all costs) for foreign investments, domestic investment, in particular from Chinese Indonesian (non-pribumt) entrepreneurs and for the state with its five-year plans. These entrepreneurial actors were increasingly active from 1968 onwards. The question is when and where did the reform function come from in Indonesia and why at that time? The reform function came from the students, intelligentsia, Muslim entrepreneurs who resented increased foreign and Chinese Indonesian businessmen. It surfaced forcefully in the 1974 MALARI Affair. According to Hirschman, the reform function arises at widely different dates and with very different lags behind the emergence of the entrepreneurial function ... an obvious way of beginning to account for these differences is to look at the ownership of the economic activities and resources that are shouldering the bulk of the entrepreneurial function. If the ownership is foreign, ideological support for the entrepreneurial function can be expected to be particularly weak, and demands for reforms and redistribution ought to be heard sooner and more forcefully than if ownership of the dynamic economic sector were in domestic hands. 8

This quotation is given at length since it reflects correctly why the reform function came relatively early in Indonesia, that is, from mid-1973, when the first five-year development had not ended. The students, throughout perceived that development only profited the foreign, especially the Japanese investors. The Muslim activists were also bitter because they felt that the Chinese Indonesian economic success was a success for which they had to pay. In other words they felt that the increased accumulation of wealth by the minority was at the cost of the majority of the Muslim population. Whether this perception is true or otherwise, is probably difficult to assess. But what happened was that reformist policy came more forcefully after 1973-74, with the implementation of programmes such



as the INPRES SD, several credit schemes, and other INPRES Programmes such as INPRES Kecamatan and INPRES Penghijauan. From the Indonesian New Order experience, Hirschman's general framework helps "understand the interaction between economic development and politics" .9 In the Indonesian case it helps at least to understand the relationship between enrolment rate of primary school (that has been increasing only since 1973-74) and political events in 1973 and 1974. One could also perhaps speculate what could have happened to political stability if the oil boom which increased government revenue tremendously in 1973-74 did not happen? But fortunately the oil boom did happen and there was significant improvement in basic needs condition. But what about the future?

A Prospective Appraisal

The increase in PQLI, consumption of food per capita, enrolment rate, as well as decrease in fertility and the number of destitutes do not mean that basic needs efforts in the future should be scaled down in the list of development priorities. Together with the increase in landlessness and the urban informal sector, there are 27,504,730 illiterate adults (or 31.54 per cent) in 1980. If one assumes even 5 per cent destitutes, this means 7, 700,000 destitute people, and an infant mortality of 100 in 1980 is not a result that could give officials comfort. The problem for the Indonesian Government in the period of recession and drastic reduction in their foreign exchange as a result of oil price cut, is that with fewer resources it has to produce more results. Increased income for the last sixteen years increased expectations among the people which can only be met if public participation in the economic field increases. This does not necessarily mean more government-sponsored village organization with special treatment which may only benefit the village officials and government apparatus at the local level. In fact, the study of BIMAS is a lesson that what is needed is not complex organizational bodies such as KUD, BUUD, Koordinasi BIMAS, and the BIMAS "package". What is needed is infrastructure for marketing, better input prices that enhance activities for a more rational economic relationship between producer (farmer), consumer (people), distributor (BULOG, private sector), and other government agencies for a better production climate (such as public works for irrigation, BRI for credit). At the same time we have to ensure sufficient food consumption for the poor. The above problems are definitely a large agenda beyond the scope of this study. But what this study suggests is that the future policy agenda



could be more fruitful if it is based on increased participation through economic incentives. This in turn could not be produced with bureaucratization such as the "top-down" effort to produce village co-operatives, and numerous inter-agency relationships such as in the BIMAS case. In the future food policy, what is needed, using Timmer et al. 's term, may not be some of the "ideal" answers, like asset redistribution, rapid income growth for the poor, lump sum income transfer and definitely not "non-answers", such as eliminating the middlemen, crash programmes, direct deliveries to the poor, but the practical answer. 10 Here greater public investment in agricultural productivity is definitely one of the practical answers needed. The tertiary irrigation channel building in 1977-78 is one of the important positive factors that produced the rice production explosion in the early 1980s. Other public investments that might become future policy prospects are reforestation (which is covered on a very small scale in the INPRES Penghijauan project), as well as the provision of better roads, and public transportation needed for market traffic. The destitutes form 5 to 6.1 per cent of the population. A safety net policy should be established. This can be done by subsidizing dried cassava (gaplek) which provides vegetable protein or oil supplement to meet nutrient requirements other than calories. To ensure gaplek will go to the poorest population it will have to be laced with chillies to deter its use as animal feed. Such a subsidy is surely much cheaper than a rice subsidy and will more greatly benefit the targeted group. In the sector of education, health and family planning it is important to put more stress on several sectoral targets. In particular the reduction of infant mortality, and the campaign against illiteracy, should have a better place in development efforts. Or using Montgomery's term, the third order decision, the "incentive system" for increased results in food, education and health, could be given by putting targeted figures for infant mortality rate (from 100 to 50 before the end of the decade) or literacy rate (90 per cent by the end of 1990) as national development goals. To come to the precise figure for the target, as well as its costs another study is needed. But if this study could help increase the awareness among the researchers and concerned officials on the importance of those targets as development goals alongside the growth of national income, that in itself is a modest achievement.





3 4 5 6 7 8 9 10

World Bank, World Development Report 1982 (New York: Oxford University Press, 1982). See Albert Hirschman, "The Turn to Authoritarianism in Latin America and the Search for its Ec,momic Determinants", in The New Authoritarianism in Latin America, ed. David Collier (Princeton: Princeton University Press, 1979); also in Hirschman, Essays in Tresspassing Economics to Politics and Beyond (Cambridge: Cambridge University Press, 1981). Ibid., p. 124. Ibid. Ibid. Ibid. Ibid., p. 126. Ibid., p. 128. Ibid., p. 133. Timmer et al. Food Policy Analysis (Baltimore: John Hopkins University Press, World Bank Publication, 1983).

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SJAHRIR is Chief Economist for the Jakarta-based Center for Policy Studies (CPS- IndoConsult and RedeCon) and Managing Editor of the Indonesian Economy. He also writes for the bulletin Business News. He received his Ph. D. in Political Economy and Government from the Faculty of Arts and Sciences, Harvard University (1983). His main interest is in public policy, and particularly, in macro economic policy and its implementation problems.