Singapore: ISEAS-Yusof Ishak Institute, 2016. xix, 217 pp. (Illustrations.) US$29.90, paper. ISBN 978-981-4620-37-6.
The author identifies and brings together in a creative way two key concepts: state restructuring and economic convergence. The main task he undertakes in the book is to show that there are linkages between Indonesia’s state restructuring and its national economic convergence, as well as with the broader economic convergence taking place among some Southeast Asia economies. Aritenang undertakes his task by analyzing the country’s restructuring activities at both the local and national levels. This is no easy feat because the factors responsible for restructuring are neither simple nor apparent. Despite the difficulty, Aritenang does identify the variables: the key one is Indonesia’s decision to move away from a centralized government regime towards one that exhibits more decentralization. He concludes that the result of such restructuring is a more logical set of institutions that permits both local and state actors to operate more efficiently and effectively, particularly when they design and implement policies and programs intended to enhance national and local economic growth and development.
The author clarifies the meaning of regional convergence by initially referencing neoclassical theory, where convergence among national economies takes place naturally when, over time, a gap in economic growth between advanced and less advanced economies declines due to slower growth in advanced economies coupled with more rapid growth in less advanced economies. In effect, while both sets of economies grow, growth rates for the developing economies exceed those that are taking place in more advanced states. In the less advanced states one reason for this is restructuring. The author recognizes this point and expands upon it by moving beyond simple neoclassical orthodoxy in order to examine an array of studies that “provide evidence that regions are uneven and that the determinants of economic growth range from land, interregional economy and other institutional factors” (7).
Aritenang’s expansion in emphasis sets the stage for a three-part analysis of the impact that state restructuring has on economic convergence. First, he explains the importance of state restructuring in terms of efficiency in resources allocation, income distribution, and macroeconomic stability. Second, he examines the differences between national and local governance restructuring efforts and their varying impact on policy making. Third, he discusses the nature of decentralized policy making and governance. He concludes that there are greater effects at local levels and this yields greater convergence.
Much of Aritenang’s research was conducted in two Indonesian locales familiar to him. One is the manufacturing and industrial city of Batam and the other is the largely intelligence-based economy of Bandung, a locale featuring creativity and innovation. He knows them well because of his experience at the Bandung Institute of Technology and Indonesia’s Agency of Assessment and Application of Technology. Shaped by his experience, the author’s work stresses the idea that localized specialization in production is able take advantage of local resources, knowledge, and familiarity with socio-economic settings.
The book’s core is a set of eight chapters supported by seven rich statistical appendices. The volume’s pages are loaded with institutional information, quantitative data, ideas and analyses, theoretical concepts, and a wide-ranging set of topics that are not always connected to the author’s main task—but they’re usually interesting. Collectively the volume’s contents defy summarization. In brief, the chapters deal with state restructuring generally; the dynamics of its linkages to economic convergence; the impact of ASEAN’s FTA on regional convergence; the institutions that are the bases for restructuring and convergence; and Indonesian restructuring at the local and state levels.
His final chapter lists five important research findings when it comes to promoting economic development: (a) local place-based initiatives take advantage of abundant local resource endowments and infrastructures that attract investment, thereby enhancing growth; (b) partly because they are removed from the above place-based settings, broader institutional changes at the national level often worsen internal economic disparities and slow growth; (c) both cyclical macroeconomic effects and matters of location influence how well restructuring efforts turn out; (d) poor technologies in national manufacturing industries, as well as a shortage of knowledge, often slow national-based growth; and (e) local-place-based initiatives take better advantage of useful institutions and knowledge, and consequently they tend to perform better than more broad-based efforts, particularly in nationwide manufacturing industries.
The author’s writing is compact: it requires a disciplined reading but the effort is worthwhile. The book is well researched and thoughtful. It will interest policy analysts, academics, and advanced students. Not only is the book creative and scholarly, it is also practical and timely. On the practical side, Aritenang’s findings about restructuring are in line with the ideas that form the basis for Thailand’s creative OTOP (One Tambon One Product), a restructuring of production to reflect local resources. Tambon refers to the village or township where the production of one or a few products takes place by combining human and physical resources within the context of local customs and knowledge. This practical restructuring of production affects a range of light manufacturing and agricultural products that are exchanged either nationwide or occasionally via cross-border trade, while some are consumed locally.
In a timely manner, the book’s publication coincides with the early days of the ASEAN Economic Community (AEC), an integrated economic territory of ten Southeast Asian nations where 625 million people live, work, and produce an aggregate economic output that is the third-largest in Asia and the eighth-largest in the world. The thinking underlying the AEC includes the idea that a set of locally based production centres can generate added output that can be exchanged through national and regional markets, financed by commercial centres, supported by infrastructure facilities, and driven by local resources.
Aritenang’s research conclusions offer a set of ideas that could aid policy makers. The ideas conform to the visions underlying both OTOP and the AEC: that is, it’s wise to take advantage of local human and physical resources, knowledge, and institutions, because doing so leads to long-run comparative advantages, lower market prices, a movement towards economic convergence, and, most of all, enhanced economic wellbeing.
Robert L. Curry Jr.
California State University, Sacramento, USA
University of Hawai‘i-Manoa, Honolulu, USA (retired)
pp. 865-868