Analysing Indonesia’s infrastructure deficits from a developmentalist perspective

Abstract

This paper analyses the performance and appropriateness of the Indonesian government’s ‘good governance’ institutional reform aimed at stimulating infrastructure construction. During the 15 years after the 1997 Asian financial crisis, the government attempted to strengthen formal institutions with the goal of improving public investment efficiency and attracting private investors. By analysing policies in the construction industry in terms of company registration, procurement and state enterprises, the paper finds that the outcome was far from what was expected by technocratic-bureaucratic reform promoters as interest groups frequently succeeded in capturing the new institutional system. This paper then challenges the dominant narrative that overwhelmingly blames incomplete institutional reform for Indonesia’s slow infrastructure construction. Given the inherent market failure and political challenges in institutional reform, the paper argues that passive developmentalist policies, which resulted in conflictual state–business relations and insufficient public investment, were a prime cause that then set the stage for the emergence of state-led infrastructure development strategy from the mid-2010s.

State‐owned Enterprises and the Politics of Financializing Infrastructure Development in Indonesia: De‐risking at the Limit?

“…While politico‐business coalitions reorganized their power and interests (Hadiz and Robison, 2005) economic nationalism has also become a check on neoliberal globalization (Aspinall, 2015; Patunru, 2018), particularly as it pertains to reforms aimed at privatizing SOEs and enhancing private sector participation in key industries (Davidson, 2010; Jarvis, 2012; Wickasono, 2008). As Kim (2023) shows in the case of the construction industry, state–business relations became increasingly conflictual in the context of good governance reforms, which challenged the entrenched position of domestic contractors while weakening government's ability to channel private resources for infrastructure development. Under the presidency of Joko Widodo (popularly known as Jokowi), the government has sought to reassert state control over the economy through SOEs, a developmental project of catch‐up growth characterized by heavy mediation and investment by the state — what Warburton (2016) calls ‘new developmentalism’.…”

Indonesia's Economic Advancement through Leveraging the Geopolitical Rivalry and Geostrategic between the USA and China in the Indo-Pacific Region

“…Indonesia needs to be cautious about the influence of great powers in its infrastructure development. Indonesia's infrastructure deficits need to be analyzed from a developmental perspective to ensure that the infrastructure development is appropriate for Indonesia's needs (Kim, 2023). Helping an Indonesian non-bank financial institution mobilize private capital for sustainable infrastructure could be a way to develop infrastructure that generates fewer negative environmental and social impacts (The World Bank, n.d.).…”