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Global Expansion of Emerging Market Multinational Corporations: International Political Economy Perspective—Case Study: PT Semen Indonesia

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Global Expansion of Emerging Market Multinational Corporations: International Political Economy Perspective—Case Study: PT Semen Indonesia Global Expansion of Emerging Market Multinational Corporations: International Political Economy Perspective—Case Study: PT Semen Indonesia A thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy Farahdiba Rahma Bachtiar SIP (Hasanuddin University) MA (Gadjah Mada University) School of Global Urban and Social Studies College of Design and Social Context RMIT University August 2019 Declaration I certify that except where due acknowledgement has been made, the work is that of the author alone; the work has not been submitted previously, in whole or in part, to qualify for any other academic award; the content of the thesis is the result of work which has been carried out since the official commencement date of the approved research program; any editorial work, paid or unpaid, carried out by a third party is acknowledged; and, ethics procedures and guidelines have been followed. I acknowledge the support I have received for my research through the provision of an Indonesia Endowment Fund for Education. Farahdiba Rahma Bachtiar 7 August 2019 2 Acknowledgements First and foremost, alhamdulillahirabbil alaamin for the blessing that Allah SWT- the Almighty has given me during this time. To both my supervisors, A/Prof Paul Battersby who has been so helpful and kind throughout my PhD candidature, for his invaluable mentorship, feedbacks and time. To A/Prof Julian Lee with his support and motivation. Therefore, I am able to finish my thesis. I want to acknowledge my sponsor- Indonesia Endowment Fund for Education (LPDP) as well for the full financial support, making it possible for a girl from a small village in Indonesia to pursue doctoral in her late 20s. I also wish to thank the RMIT academics and colleagues more specifically in School of Global, Urban and Social Studies for their supports and advice. PhD is a long and winding journey and I am not sure I was able to walk alone without them. To you all particularly in building 37 level 4 who were very considerate and supportive. I am also grateful to my Indonesian friends who turned to be my Melbourne family- Mbak Dian, Mbak Lia, Mbak Dewi, my Davies Street housemates, PhD Ladies, PhD Srikandi, RMIT Group, Indomelb, Brunswick and LPDP friends you all be missed. The teams and friends I relied during my last couple months of submission especially those in UIN. However, I can not mention you all- you know who you are. I would also like to thank my informants and research assistants for their information and time. For my editor, thank you for the assistance and feedbacks during the critical stage of my PhD. And finally I dedicate this thesis to my family – mom, dad and my siblings for their unconditional love and emotional support during my four years of PhD. Thank you all for believing me. Farahdiba Bachtiar Melbourne, August 2019 3 4 Abstract Until relatively recently, multinational corporations from emerging markets (EMMNCs) were minor contributors to the global stock of foreign direct investment (FDI). This research seeks to understand the significant expansion of EMMNCs in the past two decades, using PT Semen Indonesia as a case study. This research is particularly important in highlighting the developmental state model’s persistence in Southeast Asia. The state continues to play a directive role in the design of structure, strategies and targets by adjusting to new global and regional economic challenges and opportunities for Indonesia’s state-owned enterprises (SOEs). The political economy of Indonesia’s industrial policy reflects the efforts of successive presidents and their advisors to encourage national economic development by finding a workable formula to balance often-competing economic pressures—from global institutions and economic powers to domestic business and political constituencies. A qualitative case study was the methodology used to examine the trends and tensions of PT Semen Indonesia’s growth and its internationalisation. As a case study, PT Semen Indonesia was analysed from an international, political and economic perspective. Research findings indicate that the expansion of PT Semen Indonesia reflects key aspects of the developmental state model. The expansion was influenced by national priorities, and the institutional arrangements between the Indonesian state and PT Semen reveal the strategic importance of the cement industry for the state, which retains a decisive shareholding in the company. This thesis contends that the intricate relationship between the Indonesian state and PT Semen exemplifies the persistence of various elements of the developmental state, despite the adoption of a privatisation agenda in the wake of the 1998 Asian Financial Crisis. However, this thesis concludes that the internationalisation of PT Semen, as the first Indonesian multinational corporation (MNC) SOE, was primarily driven by commercial pragmatism that reached the government target on infrastructure and good economic factors, such as rapid economic growth and the ASEAN Economic Community. The company’s growth and maturation correspond to the dominant model of EMMNCs in terms of ownership, weak institutionalisation, business capacity, market seeking motivation and preference for horizontal FDI. The latter preference is exemplified by PT Semen’s acquisition of Thang Long Cement in Vietnam. Keywords: Global expansion, MNC, EMMNCs, IPE, developmental state 5 Contents Acknowledgements .................................................................................................................. 3 Abstract ..................................................................................................................................... 5 Contents .................................................................................................................................... 6 List of Tables ............................................................................................................................ 8 List of Figures ........................................................................................................................... 9 List of Abbreviations ............................................................................................................. 10 Chapter 1: Introduction ........................................................................................................ 13 1.1 The Shifting Trend of Multinational Corporations ........................................................ 15 1.2 EMMNC SOEs Global Expansion in the Asian Context ............................................... 17 1.3 PT Semen Indonesia Overview ...................................................................................... 19 1.4 Research Questions and Scope of the Study .................................................................. 21 1.5 Research Statement ........................................................................................................ 22 1.6 Research Strategies ........................................................................................................ 25 1.6.1 Design and Method .................................................................................................. 25 1.6.2 Data Collection Technique and Ethical Issues ........................................................ 27 1.6.2.1 Secondary Documents ....................................................................................... 27 1.6.2.2 Semi-Structured Interviews ............................................................................... 27 1.7 Thesis Structure .............................................................................................................. 28 Chapter 2: Analytical Framework and Literature Review................................................ 31 2.1 International, Political Economy Logic of Thinking ..................................................... 31 2.2 The Developmental State Model .................................................................................... 34 2.2.1 The Developmental State in Southeast Asia: Historical Background ..................... 40 2.2.2 The Developmental State and East Asian SOEs ..................................................... 45 2.3 The Conceptualisation of EMMNCs .............................................................................. 48 2.3.1.1 Modelling EMMNC Advantages ....................................................................... 54 Chapter 3: The Significance of Indonesia’s Case................................................................ 59 3.1 Indonesia Political Economy Changes and Evolution ................................................... 59 3.2 Indonesia as a Source of FDI ......................................................................................... 71 EMMNC FDI Global Trends ........................................................................................... 72 3.2.172 3.3 Indonesian SOEs Governance Evolution from Directorate to Ministry ........................ 76 Chapter 4: PT Semen Indonesia as an Agent of Development—Continuity and Adaptation .............................................................................................................................. 88 4.1 Positioning PT Semen Indonesia as an Indonesian SOE.......................................... 88 4.1.1 SOEs Governance Reform from Overlapping to Effective Bureaucracy? .............. 88 4.1.2 Managing the Developmental Mindset in a Complex Political Connectedness ...... 93 4.1.3 National
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