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Governance and Infrastructure Development As Indonesia Decentralises: Case Study of Industrial Estate and Port Development in Bantaeng and Banyuwangi Districts By

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Governance and Infrastructure Development As Indonesia Decentralises: Case Study of Industrial Estate and Port Development in Bantaeng and Banyuwangi Districts By Governance and Infrastructure Development as Indonesia Decentralises: Case Study of Industrial Estate and Port Development in Bantaeng and Banyuwangi Districts by Mohammad Yoga Pratama Thesis Submitted to Flinders University for fulfilment of the degree of Doctor of Philosophy College of Business, Government and Law January 2021 i ABSTRACT This research investigates the relationship between governance practices (voice and accountability, regulatory quality, and control of corruption) at local government level in Indonesia and investor interest to invest in infrastructure development in the region. It examines governance practices during the development process of industrial estates and ports in two districts, Bantaeng District in South Sulawesi Province and Banyuwangi District in East Java Province. Existing research and literature on governance in Indonesia found that governance processes are problematic, complex, inefficient, complicated and unstable, and need to be improved, yet the research has not always focussed on the importance of good governance. This thesis investigates such matters and explores the impact on investor interest in the construction of four infrastructure projects. The research demonstrates that how voice and accountability, regulatory quality, and control of corruption are implemented affects the infrastructure development process. It highlights differences between projects in Bantaeng District and Banyuwangi District. It shows that leadership and political will strongly affects outside investment, and finds that investor confidence is higher in Bantaeng District than in Banyuwangi District. The primary conclusion of this thesis is that when local governments have good implementation of voice and accountability, regulatory quality and control of corruption, this strengthens investor’s willingness to invest in the region, and attracts investors to engage and assist local governments in carrying out their mandated infrastructure development. ii TABLE OF CONTENTS ABSTRACT ......................................................................................................................................... ii LIST OF TABLES ............................................................................................................................. vii TABLE OF FIGURES ...................................................................................................................... viii GLOSSARY OF TERMS ................................................................................................................... ix DECLARATION ............................................................................................................................... xii ACKNOWLEDGEMENTS .............................................................................................................. xiii CHAPTER 1 INTRODUCTION ..................................................................................................... 1 1.1 Introduction .................................................................................................................................... 1 1.2 Aim .................................................................................................................................................. 7 1.3 Research Methodology ................................................................................................................. 8 1.4 Significance of the Study.............................................................................................................. 9 1.5 Structure of the Thesis ................................................................................................................ 10 CHAPTER 2 LITERATURE REVIEW ........................................................................................ 12 2.1 Introduction .................................................................................................................................. 12 2.2 Key Terms .................................................................................................................................... 12 2.2.1 Decentralisation ............................................................................................................. 12 2.2.2 Governance .................................................................................................................... 20 2.2.3 Infrastructure development ............................................................................................ 41 2.3 Relationship between Decentralisation, Governance and Infrastructure Development ..... 45 2.3.1 Decentralisation and governance ................................................................................... 46 2.3.2 Governance and infrastructure development ................................................................. 47 2.3.3 Decentralisation and infrastructure development .......................................................... 49 2.4 Conclusion .................................................................................................................................... 50 CHAPTER 3 OVERVIEW OF INFRASTRUCTURE DEVELOPMENT IN INDONESIA ....... 52 3.1 Introduction .................................................................................................................................. 52 3.2 The Importance of Infrastructure Development ...................................................................... 53 3.3 Infrastructure Development in Indonesia ................................................................................. 56 3.3.1 Infrastructure Development during the New Order Era ................................................. 56 3.3.2 Infrastructure Development in the Era Reformasi (Reform Era) ................................... 62 3.3.3 The Current Status of Infrastructure Development in Indonesia ................................... 72 3.4 Measures and Strategic Actions Undertaken by the Government to Accelerate Infrastructure Development in Indonesia .............................................................................................. 74 3.5 Problems, Obstacles, and Challenges in Developing Infrastructure in Indonesia .............. 76 3.6 The Development of Industrial Estates and Ports in Indonesia ............................................. 77 3.6.1 Industrial estates ............................................................................................................. 77 3.6.2 Ports ............................................................................................................................... 79 3.7 The Status of Bantaeng Industrial Park (BIP) and Banyuwangi Industrial Estate Wongsorejo (BIEW) ................................................................................................................................ 81 iii 3.8 Status of Port Bonthain and Port Tanjung Wangi ................................................................... 82 3.9 Conclusion .................................................................................................................................... 84 CHAPTER 4 RESEARCH METHODS ........................................................................................ 85 4.1 Introduction .................................................................................................................................. 85 4.2 Case Study Approach .................................................................................................................. 85 4.2.1 Case Selection ................................................................................................................ 88 4.2.2 Case Study Sites ............................................................................................................. 89 4.2.3 Locations of Case Study Sites ........................................................................................ 90 4.3 Types of Data and Data Collection Methods ........................................................................... 94 4.4 Selection of Research Participants ............................................................................................ 97 4.5 Thematic Analysis in Qualitative Research ........................................................................... 102 4.6 Research Framework................................................................................................................. 103 4.7 Research Ethics .......................................................................................................................... 105 4.8 Conclusion .................................................................................................................................. 106 CHAPTER 5 BANTAENG DISTRICT OF SOUTH SULAWESI PROVINCE AND BANYUWANGI DISTRICT OF EAST JAVA PROVINCE ......................................................... 108 5.1 Introduction ................................................................................................................................ 108 5.2 Bantaeng District: An Overview ............................................................................................. 108 5.2.1 Geographical, historical, socio-cultural and political context...................................... 108 5.2.2 Local governance ......................................................................................................... 114 5.2.3 Local politics ...............................................................................................................
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