Indonesian 'new order' shipping

Karl Popper wrote that “the transition from the closed to the open society [is] one of the deepest revolutions through which mankind has passed”. It’s a transition still underway all over the world. When outsiders peek in at authoritarian polities that have no elections or only a facade democracy (behind closed doors) they may be unaware of the intensity and extensiveness of intra-elite politics. Divisions over policy within the Authoritarian State of a transiting society, and between and among its dominant economic groups, can quite surprisingly resemble the divisions in the pluralistic polity of an open society.

Even in a closed society where personal relationships determine power to formulate and implement decisions, decisions themselves may be similar in nature (i.e. as contested and divisive) as the decisions taken in more modern depersonalized and pluralistic societies.

Think of a stylized (reductive) left-right ideological continuum of the kind seen in Indonesia during the New Order 1966-1998 rule of President Suharto. At one end were Nationalists who inter alia favoured price subsidies and inward-looking industrial policy and using the country’s oil wealth to intervene in support of new industries and major corporate groups. At the other end were Technocrats who advocated deficit- and debt-reduction, deregulation, foreign investment, incentives for export-oriented industrialization, and market economy in general.

Suharto skillfully managed these two competing groups within the polity. One could say the technocrats held greater sway, and there was something of an arena for expression of political interests within the Authoritarian polity. A devotee of jargon might wish to describe the late-Suharto state as post-neo-patrimonial.

William Liddle famously called it “restricted pluralism”, and Liddle likes ship and sea metaphors (pdf).

Having examined the ship’s bridge and superstructure (theory), let’s go on deck.

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In a 1987 book called The Indonesian Interisland Shipping Industry the Australian economist H. W. Dick wrote that “economic policy under the New Order has been very enlightened at the macroeconomic level, but the technocratic approach has yet to penetrate very far at the industry [micro] level”.

This superb book, which brings to life the history and micro-dynamics of crucial interisland shipping in Indonesia (you can imagine the natural complexity of feeder and higher-tonnage routes throughout an archipelago of 17,508 islands no less) provides many useful lessons about development.

A few passages will give a flavour:

Competition has been frustrated because inefficient firms have continued to receive subsidized access to public facilities (primarily port terminals) and investment credit on the grounds that they are disadvantaged pribumi (indigenous) firms. Regulation has been frustrated by the number of firms remaining too large for central control and by the incentives to evade government measures through personal connections and outright corruption...

The “bureaucrat’s nightmare” was that in spite of attempts at central control small shipping companies seemed to spring up all over the country “like mushrooms in the monsoon”. New entrants broke into the industry despite the (nationalist) sea communications directorate’s refusal to issue new licenses.

I particularly like the form of words in this quote:

Widespread evasion and circumvention of regulations had been achieved partly through outright buying of bureaucratic favours and partly through personal connections. Corruption is the intrusion of market forces into the domain of regulation. Personal connections are the intrusion of administration into competition...

Technocrats did eventually win the intra-elite policy argument.

[The] 4 April 1985 Presidential Instruction… in one stroke transformed the regulation of foreign and interisland shipping and trade by the most radical deregulation since the abandonment of multiple exchange rates and foreign exchange controls at the beginning of New Order...

Unfortunately the gains of deregulation reform appear not to have been fully realized. The dirigiste impulse remained strong within the state:

Regulation provided the raison d'être for a still very large civilian bureaucracy...

The problem was not only the administrative instincts of key military personnel in government, or Indonesia’s “bureaucratic tradition of kebijaksanaan”, a term that tends to conflate ‘policy’ with ‘wisdom’ and ‘discretion’. Even foreign development advisers were “highly critical of the large number of interisland firms and urged their consolidation into a small number of firms licensed to serve a network of routes throughout the Archipelago and organized in liner cartels with freight rates regulated by the Ministry of Communications”.

Boat enthusiasts will want to look at the nice photographs (google books).;

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