Making Trade Policy in a New Democracy after a Deep Crisis: Indonesia

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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
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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.
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In 1993, emergence of the term the ‘new liberalisation’. In 1996, this argument was developed more generally with ‘crisis hypothesis’.

Indonesia
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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)
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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
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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
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Contraction over 13 Percent, Sharp Depreciation of the rupiah. Rp 2500 to Rp 17,500 Inflation

Key Findings
After the Economic Crisis
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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