Jamie S. Davidson. Indonesia’s Changing Political Economy

Governing the Roads starts by raising an intriguing question: "How does a weakened democratic government with a checkered past of economic property rights and contracts establish a regulatory framework to promote private sector investment in infrastructure?"(p.8).Let us review the discussion along the path laid out in the book.According to the introductory chapter, while conventional discussions underscore that a regulatory regime would induce private investment, the author asserts that a balance between institutionalizing rules and government discretion, in other words sectoral governance, is essential for private investment.This is, he insists, a political question (p.15).Setting out the book's conceptual framework in Chapter 1, the author treats toll roads not as a technical matter but as a product of conflicts and compromises.To do this, he attempts to apply the New Institutional Economics (NIE) discussions that underlie formal institutions as constraints in transaction costs.However, Davidson finds that formal institutions in developing countries are weaker and more susceptible to powerful interests (p.29), and that the NIE-based approach fails to take into account the informal aspects of governance.Broadening the NIE's scope of analyzing formal institutions, the author takes the wider approach of "political sociology of infrastructure development" (p.29).He focuses also on the NIE's blind spots, such as variations in rent-seeking outcomes with prevailing firms' incentives, extra-parliamentary politics of redistribution in the post-enactment phase, and the land rights of citizens, not of investors, by way of shining a light on the contested nature of the eminent domain.Chapter 2 illustrates how the New Order's governance of toll roads changed twice.The first occasion was the emergence of former President Soeharto's children in the late 1980s.As Jagorawi Toll Road was financed by the government and international agencies, the private sector was still "poorly endowed" in order that "the state should be at the forefront of infrastructure investment" (p.60) from the 1970s until the mid-1980s.However, once Soeharto's children emerged in the toll

Corporate governance · Politics · Asian Studies and History · Socioeconomic Development in Asia · Southeast Asian Sociopolitical Studies