Making Trade Policy in a

New Democracy after a

Deep Crisis: Indonesia
 Overview
 Introduction
 Objective
 Research Methodology
 Key Findings
 Conclusion
 Overview

 An alternative view was observed from countries in crisis

over the past 2 decades.
 Economies do not turn inwards which are expected under
the conventional historical view.

 The paper discusses scenario of Indonesia which reflects

the above and also the relationship between political
environment and trade policies.
 Introduction
 HOW do deep economic crises affect trade policy in developing
countries?
 It is argued that governments find it easier to reform during ‘good times’,
of strong economic growth and low unemployment.

However, based on the observed behaviour of countries in crisis.

 In 1993, emergence of the term the ‘new liberalisation’.

 In 1996, this argument was developed more generally with ‘crisis
hypothesis’.

Indonesia

 Late 1960s and mid-1980s: Rapid economic growth & Liberalisation.

 1997 – 1998: Economic and Political crisis
 Economic: Contracted by over 13 per cent & Government sign on to
IMF programme.
 Political: Rule of President Soeharto came to an abrupt end.
 Objective

 to prove and explain the little e al. (1993) view "new

liberalization" and the Lal and Myint (1996) "crisis
hypothesis", using Indonesia's economic and political
situation from the late 1960s until now as an example.
 Research Methodology

Topics of the Journal (Researched Topics)

 Background on The Indonesian Context

 Reviews on Evolution of Trade Policy of Indonesia
 Reviews on Economic Crisis 1997-1998
 Reviews on New Post-Crisis Policy-making Framework
 Examinations on International Trade Policy since Crisis
 Examinations on Changing Domestic Trade Policy Regime
 Analysis of Bureaucracy’s Attempt to develop a New Trade
Policy Law
 Research Methodology

Basis of Contents

 This journal was compiled by 3 persons from different

institutions – Asian Development Bank, Australian National
University and Centre for International Economics.

 All findings and analytical results were backed by data

derived from the comparisons of past and present trade
policies, economical standing and political stability.

 References for the data gathered to conclude on the topics

were mainly from Economic Journals, Government
Databases, Researched Writings.
 Key Findings

Before the Economic Crisis

 Disengaged from global trade and investment.

 Withdrawn from the United Nations, IMF and the World Bank.
 Nationalist Resurgence, Tariffs were increased (close to 20 percent).
 Low Protection on many sector.

During the Economic Crisis

 Contraction over 13 Percent, Sharp Depreciation of the rupiah.

 Rp 2500 to Rp 17,500
 Inflation
 Key Findings

After the Economic Crisis

 Tariff harmonization (Uniform Tariff Rate)

 Lowering average tariff rate, reducing the number of tariff
bands.
 By 2010, most tariff should be between 5 to 10 percent.
 Agriculture goods remains high in tariff.
 Non-Agriculture goods to have lower tariff.
 Conclusion

 Indonesia remained a largely open economy despite the

economic crisis and highly unpopular IMF program.

 Effectiveness of the government does not strongly enforce

the above.

 No clear policy making structure (on Tariffs).

 To maintain reform momentum, Indonesia established

independent central bank, legislated rules governing fiscal
deficits and public debt and establishment of export zones.
Thank you

Aloysius, Tan
Josephine, Tan
Lewis, Tan
Sheow Wei, Tan
Wan Teng, Tan