Competition Policy in Indonesia

The Indonesian economy was dominated by the government in the decades of the 1970s and 1980s through its control of major mining, manufacturing and agricultural activities. Hill (2000) estimates that as much as 40% of non-agricultural GDP was accounted for by government entities in the late 1980s There were still a lot of government corporations up until the late 1980s and early 1990s and governmental control over the banking system was still substantial. Non-financial state owned enterprises (SOEs) contributed 14.5% of GDP in the late 1980s. They also accounted for another 9% of gross domestic investment which rose to 15.7% over the period 1990 1997 (World Bank, 2000). Three SOEs are of particular note that dominate the sector in terms of revenue and assets are Pertamina (monopoly in oil and gas with diversified holdings in hotels, an airline and office buildings); PLN and PTTelkolm (monopoly in power and telecommunications industry respectively). The SOEs also employ a significant percentage of the labor force (25% according to data from the Indonesia Statistics Office). This strong role of the state was derived from the historical break with its colonial past under President Suharto and the distrust of capitalists. There was also a need for the Suharto regime in the three decades when he ruled to maintain control of enough industries to maintain its base for extortion and corruption. There was only a gradual and delayed shift toward export promotion and away from import substitution. This was partly the result of lobbying by entrenched interests that were making monopoly profits from new protected industries and corrupt officials that were operating the customs and port facilities. It also had to do with the control of key allocation and production agencies like Bulog and Pertamina. The decline in oil prices in the mid-1980s put pressure on the government to develop a more competitive economic environment which was reinforced by the growing integration of economies in Southeast Asia in conjunction with commitments to the ASEAN Free Trade Agreement. Policy measures focused on trade barriers. Tariffs were lowered and some import monopolies and import licenses were converted to tariff equivalents. There were also reforms in banking and the regulation of foreign direct investment. However, these reforms were partial in nature. Several banks remain under government control and policy required domestic partnerships for foreign direct investment (FDI) approval (see Dowling and Yap (2005) for further details. Nevertheless, despite these shortcomings in the policy environment, there was a measurable improvement in competition and economic efficiency, particularly in the manufacturing sector. Pangestu et al (2002) show that there was a decline in the level of industrial concentration and that the size distribution of firms has become more equal over time. There was also a decline in the prevalence of dominant firms therefore enhancing competition and reducing monopoly power. Finally, there was less stability in market shares after 1990, a development which reflects greater competition1. The evidence of enhanced competition over the decades of the 80s and90s is much less compelling in other sectors of the economy, including agriculture, services, infrastructure and some parts for manufacturing and mining sectors. There are a number of examples that can be cited to support this conclusion including the cement industry (where there were high tariffs on imports, restrictions on number of distributors and allocation of markets) as well as gas distribution, telecommunications and electricity (where an opaque regulatory framework prohibited a level playing field from developing as new entrants came into the market). Furthermore, in the telecoms sector the government remained the majority shareholder in PT. Telkom and Indosat.FTA, Indonesia, competition, telecom

Competition Policy in Indonesia

The Indonesian economy was dominated by the government in the decades of the 1970s and 1980s through its control of major mining, manufacturing and agricultural activities. Hill (2000) estimates that as much as 40% of non-agricultural GDP was accounted for by government entities in the late 1980s There were still a lot of government corporations up until the late 1980s and early 1990s and governmental control over the banking system was still substantial. Non-financial state owned enterprises (SOEs) contributed 14.5% of GDP in the late 1980s. They also accounted for another 9% of gross domestic investment which rose to 15.7% over the period 1990 –1997 (World Bank, 2000). Three SOEs are of particular note that dominate the sector in terms of revenue and assets are Pertamina (monopoly in oil and gas with diversified holdings in hotels, an airline and office buildings); PLN and PTTelkolm (monopoly in power and telecommunications industry respectively). The SOEs also employ a significant percentage of the labor force (25% according to data from the Indonesia’ Statistics Office). This strong role of the state was derived from the historical break with its colonial past under President Suharto and the distrust of “capitalists”. There was also a need for the Suharto regime in the three decades when he ruled to maintain control of enough industries to maintain its base for extortion and corruption. There was only a gradual and delayed shift toward export promotion and away from import substitution. This was partly the result of lobbying by entrenched interests that were making monopoly profits from new protected industries and corrupt officials that were operating the customs and port facilities. It also had to do with the control of key allocation and production agencies like Bulog and Pertamina. The decline in oil prices in the mid-1980s put pressure on the government to develop a more competitive economic environment which was reinforced by the growing integration of economies in Southeast Asia in conjunction with commitments to the ASEAN Free Trade Agreement. Policy measures focused on trade barriers. Tariffs were lowered and some import monopolies and import licenses were converted to tariff equivalents. There were also reforms in banking and the regulation of foreign direct investment. However, these reforms were partial in nature. Several banks remain under government control and policy required domestic partnerships for foreign direct investment (FDI) approval (see Dowling and Yap (2005) for further details. Nevertheless, despite these shortcomings in the policy environment, there was a measurable improvement in competition and economic efficiency, particularly in the manufacturing sector. Pangestu et al (2002) show that there was a decline in the level of industrial concentration and that the size distribution of firms has become more equal over time. There was also a decline in the prevalence of dominant firms therefore enhancing competition and reducing monopoly power. Finally, there was less stability in market shares after 1990, a development which reflects greater competition1. The evidence of enhanced competition over the decades of the ‘80s and’90s is much less compelling in other sectors of the economy, including agriculture, services, infrastructure and some parts for manufacturing and mining sectors. There are a number of examples that can be cited to support this conclusion including the cement industry (where there were high tariffs on imports, restrictions on number of distributors and allocation of markets) as well as gas distribution, telecommunications and electricity (where an opaque regulatory framework prohibited a level playing field from developing as new entrants came into the market). Furthermore, in the telecoms sector the government remained the majority shareholder in PT. Telkom and Indosat.

Central Asia’s Transition After Fifteen Years : Growth and Policy Choices

This paper presents a coherent and systematic analysis of the collapse and subsequent revival of the Central Asian Republics (CARs) since 1990. The focus is on the pattern of growth and structural change during the cycle of decline and subsequent revival in the CARs which have been inadequately analyzed in the literature on transition. The paper relates economic performance to initial conditions, country characteristics and policies. Within this framework, it proposes a simple typology of policies (including a new Type III set of policies on regional cooperation and industrial competitiveness) and relates them to the cycle of decline and revival in the CARs. It goes on to examine medium-term prospects and policy needs for the CARs.Growth, economic reform, regional cooperation, industrial competitiveness, central Asia, transitional economies

Central Asia : Mapping Future Prospects

Central Asia has emerged as one of the worlds fastest growing regions since the late 1990s and has shown notable development potential. This is significant for a region comprising largely of small landlocked economies with no access to the sea for trade. Among the advantages, of the region are its high- priced commodities (oil, gas, cotton and gold), reasonable infrastructure and human capital as legacies of Soviet rule; and a strategic location between Asia and Europe. Furthermore, many Central Asian Republics (CARs) have embarked on market-oriented economic reforms to boost economic performance and private sector competitiveness. Central Asia : Mapping Future Prospects considers the regions economic prospects to 2015. It charts recent economic performance, highlighting the economic revival. It also synthesizes recent forecasts and constructs scenarios for future economic variables against a constant global background. Projections include, among others, gross domestic product (GDP), manufactured exports per head, GDP per capita and poverty. A special theme chapter develops a manufacturing competitiveness index to compare the CARs with other transition economies and explores the impact of economic reform and supply-side factors (e.g. foreign investment and human capital) on industrial performancecentral Asia, future economic variables, gross domestic product, manufactured exports per head, GDP per capita, poverty, manufacturing competitiveness index

Central Asia after Fifteen Years of Transition: Growth, Regional Cooperation, and Policy Choices

This paper presents a coherent and systematic analysis of the collapse and subsequent revival of the Central Asian Republics (CARs) since 1990. The focus is on the pattern of growth and structural change during the cycle of decline and subsequent revival in the CARs, which have yet to be adequately analyzed in the literature on transition. The paper relates economic performance to initial conditions, country characteristics, and policies. Within this framework, it proposes a simple typology of policies (including a new 'Type III' set of policies on regional cooperation and industrial competitiveness) and relates them to the cycle of decline and revival. It goes on to examine medium-term prospects and policy needs for the CARs.growth; economic reform; regional cooperation; industrial competitiveness; Central Asia; transitional economies

Central Asia’s Transition After Fifteen Years: Growth and Policy Choices

This paper presents a coherent and systematic analysis of the collapse and subsequent revival of the Central Asian Republics (CARs) since 1990. The focus is on the pattern of growth and structural change during the cycle of decline and subsequent revival in the CARs which have been inadequately analyzed in the literature on transition. The paper relates economic performance to initial conditions, country characteristics and policies. Within this framework, it proposes a simple typology of policies (including a new Type III set of policies on regional cooperation and industrial competitiveness) and relates them to the cycle of decline and revival in the CARs. It goes on to examine medium-term prospects and policy needs for the CARs.growth, economic reform, regional cooperation, industrial competitiveness, Central Asia, transitional economies

Homeostasis and Well Being

The paper suggests that maintenance of a homeostatic equilibrium provides a rationale for many actions of economic agents. Homeostatic equilibrium has physical, economic, emotional, psychological and environmental dimensions. The characteristics of this equilibrium include feelings of safety, trust, connectedness with friends, family and community, and a predictable and welcoming social and work environment. Individuals generally make decisions that help them move toward and achieve this state of equilibrium. Departure from homeostasis reduces well being and stimulates agents to take actions that will return them to a state of homeostasis. This hypothesis is tested with probit analysis using sample responses from the four waves of the World Values Surveys conducted between 1980 and 2002. Results generally support the homeostasis hypothesis. Variables that reflect departure from homeostasis such as divorce and poor health are highly significant, pointing to a reduction in well being. Variables that reflect the importance of friends, family, a trusting social and work environment have significant impacts to raise well being.Homeostatic equilibrium, development

Homeostasis and Well Being

The paper suggests that maintenance of a homeostatic equilibrium provides a rationale for many actions of economic agents. Homeostatic equilibrium has physical, economic, emotional, psychological and environmental dimensions. The characteristics of this equilibrium include feelings of safety, trust, connectedness with friends, family and community, and a predictable and welcoming social and work environment. Individuals generally make decisions that help them move toward and achieve this state of equilibrium. Departure from homeostasis reduces well being and stimulates agents to take actions that will return them to a state of homeostasis. This hypothesis is tested with probit analysis using sample responses from the four waves of the World Values Surveys conducted between 1980 and 2002. Results generally support the homeostasis hypothesis. Variables that reflect departure from homeostasis such as divorce and poor health are highly significant, pointing to a reduction in well being. Variables that reflect the importance of friends, family, a trusting social and work environment have significant impacts to raise well being.

GLOBAL RECESSION AND ASIAN GROWTH: EXPERIENCE AND PROSPECTS

The paper outlines current macroeconomic developments in industrial countries and explains how slower growth in these economies is being transmitted to developing economies in Asia. The macroeconomic outlook for industrial countries in 2009 is discussed along with the transmission mechanism that has brought the global downturn tothe Asian economies. Monetary and fiscal policy adjustments in Asian economies have been implemented to address the downturn in economic activity and these policies are discussed in some depth. All the major countries in East Asia, Southeast Asia and South Asia are analysed. The paper concludes with a brief review of the outlook for 2010.Keywords: global recession, monetary and fiscal policy, Asian economies, economic outlook

Altruism and voluntary provision of public goods

We study how people's predisposition towards altruism affects their behavior in a voluntary contributions public good experiment. We investigate whether a high level of contributions can be sustained in groups of subjects who have been pre-selected on the basis of their altruistic inclinations. In the first stage of the experiment, each subject responds to a psychology questionnaire that measures various dimensions of one''s personality. The subjects are then matched in groups according to their altruism scores, and engage in a voluntary contributions game. We consider whether the levels and dynamics of group contributions differ significantly between the groups with altruists and non-altruists. We find that subjects'' altruism has only a weak positive effect on group behavior in the public good game.Altruism