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1. Indonesia's Economy: Between Growth and Stability

Author:
Roland Rajah
Publication Date:
08-2020
Content Type:
Commentary and Analysis
Institution:
Lowy Institute for International Policy
Abstract:
Indonesia has much economic potential but the trade-off between growth and stability continues to bind its growth ambitions. Indonesian economic policy continues to prioritise stability over growth but the adequacy of economic growth has become the bigger issue. President Joko Widodo’s commendable pro-growth efforts have so far only stabilised Indonesia’s trajectory rather than boost it. Doing better will require reforms to be calibrated to make the trade-off between growth and stability less binding while enhancing productivity.
Topic:
Government, International Trade and Finance, Economy, and Economic growth
Political Geography:
Indonesia and Asia-Pacific

2. Counter Terrorist Trends and Analyses (CTTA) – Volume 12 Issue 03: COVID-19 and Terrorism

Author:
Raffaello Pantucci, Abdul Basit, Kyler Ong, Nur Aziemah Azman, V. Arianti, and Muh Taufiqurrohman
Publication Date:
04-2020
Content Type:
Journal Article
Journal:
Counter Terrorist Trends and Analysis
Institution:
Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
Abstract:
The Coronavirus Disease 2019 (COVID-19) pandemic has redefined almost all spheres of modern life. While states around the world are redeploying their financial resources, energies and military capabilities to cope with the challenge of the coronavirus, terrorist groups across the ideological spectrum have positioned themselves to exploit the gaps created by these policy re-adjustments. Terrorist groups are milking people’s fears amid confusion and uncertainty to promote their extremist propagandas. The rearrangement of global imperatives will push counter-terrorism and extremism down the priority list of the international community. Anticipating these policy changes, existing counter-terrorism frameworks and alliances should be revisited to devise cost-effective and innovative strategies to ensure continuity of the fight against terrorist groups. With these considerations in mind, this special issue of the Counter Terrorist Trends and Analyses (CTTA) features four articles that identify and assess important security risks around COVID-19, given its far-reaching social, economic and geopolitical impact. In the first article, Raffaello Pantucci reasons that COVID-19 will have a deep-seated and prolonged impact across government activity, both in terms of the categorisation of risks, as well as the resources available to tackle other issues. Perceptions of risk around terrorist threats may shift, with states grappling with stark economic, social and political challenges. At the same time, security threats continue to evolve, and may even worsen. According to the author, some of the tools developed to deal with the pandemic can potentially be useful in tracking terrorist threats. However, resource constraints will require states, on a global scale, to think far more dynamically about how to adequately buffer much-needed security blankets both within and beyond their borders. In the second article, Abdul Basit outlines the opportunities and potential implications that COVID-19 has created for terrorist groups across the ideological divide. According to the author, terrorist groups have exploited the virus outbreak to spread racial hatred, doomsday and end-of-times narratives. Among jihadist groups, IS has taken a more totalitarian view of the coronavirus pandemic, while Al-Qaeda (AQ) and the Taliban have used it as a PR exercise to gain political legitimacy. Far-right groups in the West have spun it to promote native nationalism, border restoration and anti-immigration policies. Terrorist groups have increased their social media propaganda to radicalise and recruit vulnerable individuals. At the same time, these groups have urged their supporters to carry out lone-wolf attacks and use the coronavirus as a bioweapon. In the post-COVID-19 world, revisiting existing counter-terrorism frameworks to devise more adaptable and cost-effective strategies would be needed to continue the fight against terrorism. In the next article, V. Arianti and Muh Taufiqurrohman observe that the COVID-19 outbreak has had a varied impact on Indonesia’s security landscape. On the one hand, it has emboldened IS-affiliated Indonesian militant groups to step up calls for attacks, with the government seen as weakened amidst a worsening domestic health crisis. On the other, ongoing indoctrination and recruitment activities of militant groups have also faced disruptions. According to the authors, counter-terrorism strategies will need to be reoriented as circumstances evolve, particularly in dealing with the arrest of militants and the subsequent processes of their prosecution and incarceration. Finally, Kyler Ong and Nur Aziemah Azman examine the calls to action by far-right extremists and the Islamic State (IS), which reveals varying degrees of organisational coherence in the respective movements. According to the authors, such variations influence these two groups’ preferred techniques, tactics and procedures adopted in seeking to exploit the health crisis. For its part, IS has a more organised hierarchical structure, even if it has increasingly granted autonomy to its affiliates to plan and execute attacks. In comparison, the absence of a central authority, or command structure in the far-right, can lead to a fragmentation of interests. These factors invariably create uncertainties in how, when and where extremists of both ilk may seek to operationalise an attack.
Topic:
Security, Government, Health, Terrorism, Counter-terrorism, Al Qaeda, Islamic State, and COVID-19
Political Geography:
South Asia, Indonesia, Southeast Asia, and Global Focus

3. Developing Countries Can Help Restore the WTO's Dispute Settlement System

Author:
Ana González and Euijin Jung
Publication Date:
01-2020
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
By refusing to fill vacancies in the World Trade Organization’s (WTO) Appellate Body—the top body that hears appeals and rules on trade disputes—the Trump administration has paralyzed the key component of the dispute settlement system. No nation or group of nations has more at stake in salvaging this system than the world’s big emerging-market economies: Brazil, China, India, Indonesia, Korea, Mexico, and Thailand, among others. These countries have actively and successfully used the dispute settlement system to defend their commercial interests abroad and resolve inevitable trade conflicts. The authors suggest that even though the developing countries did not create the Appellate Body crisis, they may hold a key to unlock it. The Trump administration has also focused its ire on a longstanding WTO practice of giving these economies latitude to seek “special and differential treatment” in trade negotiations because of their developing-country status. The largest developing economies, which have a significant stake in preserving a two-step, rules-based mechanism for resolving trade disputes, could play a role in driving a potential bargain to save the appeals mechanism. They could unite to give up that special status in return for a US commitment to end its boycott of the nomination of Appellate Body members.
Topic:
Development, Government, World Trade Organization, Developing World, and Donald Trump
Political Geography:
China, Indonesia, India, South Korea, Brazil, North America, Mexico, Thailand, and United States of America

4. Tangled Web: The Role of Oil, Gas and Mining in Funding Regional Governments in Indonesia

Author:
David Manley, Rani Febrianti, and Hari Subhash
Publication Date:
03-2020
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Indonesia’s system of funding provincial, district and city governments is one of the most complex in the world, and has undergone substantial expansion over the last two decades. While the system allows thousands of authorities to function, it is failing in three respects: inequality of funding between regions persists, funding for some governments is unpredictable and volatile and some oil- and gas-rich regions have not sufficiently prepared for a possible future with much lower revenues. Indonesia’s planning ministry, Bappenas, should investigate these issues further focusing particularly on clarifying policy objectives, ensuring more reliable funding, supporting oil- and gas-rich regions in becoming more resilient to a long-term decline in prices and clarifying the published rules around the funding system.
Topic:
Civil Society, Government, Oil, Gas, Media, Mining, and Political Parties
Political Geography:
Indonesia and Southeast Asia

5. Iran’s Revolutionary Influence in South Asia

Author:
Husain Haqqani
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Hudson Institute
Abstract:
Soon after Iran’s Islamic revolution in 1979, its leader, Ayatollah Ruhollah Khomeini declared that Iran would challenge “the world’s arrogant powers” across the globe. 1 “We shall export our revolution to the whole world,” he announced, adding that “Until the cry ‘There is no God but God’ resounds over the whole world, there will be struggle.’” 2 The idea of exporting Iran’s ideology was also incorporated in the Islamic Republic’s constitution. Article 154 of the current Iranian constitution affirms that Iran “supports the just struggles of the mustad’afun [oppressed] against the mustakbirun [tyrants] in every corner of the globe.” As is often the case with revolutionary regimes, the early fervor of the Iranian revolution seems to have subsided and the broader goal of replicating the Islamic revolution has been modified to expanding Tehran’s influence and ensuring external support for the survival of its clerical regime. But Iran still pursues a robust policy of cultivating and deploying proxies in other, mainly Muslim countries. The role of Iran’s proxies and allies in the Middle East is well known, partly because it is more overt. Hezbollah’s targeting of Israel and its efforts to dominate Lebanon, Iran’s role in propping up the Bashar Assad regime in Syria, or its political and militant meddling in Iraq and Yemen often make headlines. But the Ayatollahs have also expanded their influence across South, Central, and East Asia without attracting the same level of attention as their activities in the Middle East.
Topic:
History, Ideology, Islamism, and Revolution
Political Geography:
Iran, South Asia, Indonesia, and Middle East

6. The Battle for the Soul of Islam

Author:
James M Dorsey
Publication Date:
10-2020
Content Type:
Commentary and Analysis
Institution:
Hudson Institute
Abstract:
It is not the caliphate that the world’s Muslim powerhouses are fighting about. Instead, they are engaged in a deepening religious soft power struggle for geopolitical influence and dominance. This battle for the soul of Islam pits rival Middle Eastern and Asian powers against one another: Turkey, seat of the Islamic world’s last true caliphate; Saudi Arabia, home to the faith’s holy cities; the United Arab Emirates, propagator of a militantly statist interpretation of Islam; Qatar with its less strict version of Wahhabism and penchant for political Islam; Indonesia, promoting a humanitarian, pluralistic notion of Islam that reaches out to other faiths as well as non-Muslim centre-right forces across the globe; Morocco which uses religion as a way to position itself as the face of moderate Islam; and Shia Iran with its derailed revolution. In the ultimate analysis, no clear winner may emerge. Yet, the course of the battle could determine the degree to which Islam will be defined by either one or more competing stripes of ultra-conservativism—statist forms of the faith that preach absolute obedience to political rulers and/or reduce religious establishments to pawns of the state.
Topic:
International Relations, Foreign Policy, Islam, Politics, and Ideology
Political Geography:
Russia, Iran, Indonesia, Turkey, Middle East, Asia, Saudi Arabia, Morocco, Qatar, and United Arab Emirates

7. Input Allocation Behaviour on Tariff Changes: The Case of Indonesia’s Manufacturing Industries

Author:
Samuel Nursamsu, Dionisius Narjoko, and Titik Anas
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Can firms reallocate their imported inputs to domestic sources when faced with import tariffs? To answer this question, we analyse the input allocation behaviour of Indonesian medium and large-sized manufacturing firms in responding to the movement of import tariffs from 2000 to 2013 by utilising plant-level input data of Indonesian manufacturing. We find that an increase in tariffs only creates a weak substitution effect. Our findings indicate that firms reallocate their inputs towards domestic sources, although this is accompanied by a decrease in the firms’ value added. This implies that domestic inputs are worse substitutes for imported inputs and that firms’ capacity to switch over to domestic products is limited, suggesting that firms will immediately switch back to importing when the tariff is removed. We find no evidence that firms make any adjustment towards more domestic-oriented input composition over time; and heterogeneity exists within the result, as industries with a strong basis in the domestic market are more capable of adjusting.
Topic:
Industrial Policy, International Trade and Finance, Tariffs, and Manufacturing
Political Geography:
Indonesia and Asia

8. Foreign Direct Investment and Labour Market Dynamics in a Developing Country: Evidence from Indonesian Plant-Level Data

Author:
Toshiyuki Matsuura and Hisamitsu Saito
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study examines the impact of inward foreign direct investment on the wages and employment of skilled and unskilled workers in Indonesian manufacturing plants. Entry of multinational enterprises affects local labour markets through spillovers as well as labour and product market competition. Our results show that spillovers increase the labour demand of local plants for unskilled workers, but increased wages due to severe labour market competition reduce the demand for skilled workers. We also find that product market competition causes resource reallocation from low- to high-productivity plants. Thus, attracting inward foreign direct investment effectively enhances aggregate productivity growth, but may retard the transition to skill-intensive production in Indonesian manufacturing.
Topic:
Development, Foreign Direct Investment, Manufacturing, and Labor Market
Political Geography:
Indonesia and Asia

9. A Quantitative Analysis of Disaster Risk Reduction Investment Effects for Sustainable Development: Indonesia Case Study

Author:
Hiroaki Ishiwata, Hiroyuki Wada, Koji Suzuki, and Naoto Tada
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper analyses the long-term impacts of large-scale disasters on the economic growth of developing countries in the Association of Southeast Asian Nations (ASEAN) Community, by the scale of disaster risk reduction (DRR) investments. As a means of quantitatively analysing the optimal level and economic efficiency of DRR investments, a case study was conducted on Indonesia by using a dynamic stochastic macroeconomic model. The results showed that in Indonesia, although greater economic growth is expected when additional DRR investments are made, an excessive DRR investment may contrarily lead to a slowdown in economic growth: an optimal level of DRR investment exists and maintaining its level is essential for sustainable economic growth. Furthermore, it was confirmed that there is a break-even point when the amount of accumulated disaster damage mitigation benefits exceeds the amount of accumulated DRR investment. This demonstrated that the funds invested in DRR could be recovered. Additionally, the results also showed that even if no disaster damage is caused over a long period of time, DRR investments are by no means redundant as the ‘ex-ante risk reduction effect’ will be generated when the optimal level of DRR investment is made. Lastly, it was determined that providing a continuous DRR investment is important in achieving the global target set forth in the Sendai Framework for Disaster Risk Reduction. In addition, it is considered desirable to maintain a higher level of DRR investment than that which is currently being implemented.
Topic:
Economic growth, Investment, Risk, and Disaster Management
Political Geography:
Indonesia, Asia, and Indo-Pacific

10. The Economic Impact of Globalisation in Indonesia

Author:
Kiki Verico and Mari Pangestu
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper analyses the economic impact of globalisation in Indonesia from the end of the 1960s to date. The analysis found that globalisation generated a positive impact on Indonesia’s economic growth through the trade and investment channel; reduced wage inequality and child labour participation; and increased labour absorption, including women's participation in the labour market. Through the trade channel, globalisation also contributed to Indonesia’s productivity and structural economic transformation, benefited small and medium-sized enterprises (SMEs), contributed to poverty alleviation and reduced inequality, and increased trade in services such as tourism. Through the investment channel, there is evidence of the spillover effect of technology transfer, technology progress, improvement of the role of SMEs, and contribution to poverty alleviation. The waves of open and more restrictive trade and investment policies, which Indonesia has gone through in the last few decades, reflect the political economy reality – that is, the impact of globalisation is dynamic and only felt in the medium term, whereas the cost and potential negative impact is often felt more immediately throughout trade creation. The trade creation increases imports from countries with which free trade agreements have been negotiated, decreasing the domestic producer surplus. Since globalisation will create net benefits in the long run, Indonesia should continue its process of globalisation and integration with the world economy to ensure the net benefits and to move forward in its structural transformation, while managing the costs of globalisation and its transition process.
Topic:
Globalization, International Cooperation, International Trade and Finance, and Economic growth
Political Geography:
Indonesia, Asia, and Indo-Pacific