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The World Bank and the Post-Washington Consensus in Vietnam and Indonesia

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The World Bank and the Post-Washington Consensus in Vietnam and Indonesia University of Wollongong Research Online University of Wollongong Thesis Collection University of Wollongong Thesis Collections 2007 The orW ld Bank and the post-Washington Consensus in Vietnam and Indonesia Susan N. Engel University of Wollongong, [email protected] Recommended Citation Engel, Susan, The orldW Bank and the post-Washington Consensus in Vietnam and Indonesia, PhD thesis, School of History and Politics, University of Wollongong, 2007. http://ro.uow.edu.au/theses/707 Research Online is the open access institutional repository for the University of Wollongong. For further information contact Manager Repository Services: [email protected]. The World Bank and the Post-Washington Consensus in Vietnam and Indonesia A thesis submitted in fulfilment of the requirements for the award of the degree Doctor of Philosophy from University of Wollongong by Susan Engel (BA Hons, MA) School of History and Politics, Faculty of Arts 2007 Certification I, Susan Nicolle Engel, declare that this thesis, submitted in fulfilment of the requirements for the award of Doctor of Philosophy, in the School of History and Politics, Faculty of Arts, University of Wollongong, is wholly my own work unless otherwise referenced or acknowledged. The document has not been submitted for qualifications at any other academic institution. Susan Nicolle Engel 3 August 2007 Table of Contents List of Tables and Charts____________________________________________________ i List of Abbreviations _______________________________________________________ ii Acknowledgements ________________________________________________________ iv Abstract _________________________________________________________________ vi Part I: The World Bank, its History, Structure and Operations _________________ 1 Chapter One Introduction ___________________________________________________ 1 Thesis Approach and Description___________________________________________________ 1 Why the World Bank? ___________________________________________________________ 3 What is the World Bank? _________________________________________________________ 6 Understanding Hegemony ________________________________________________________ 8 Hegemony and World Order _____________________________________________________ 14 Chapter Outline________________________________________________________________ 19 Chapter Two Creating a World Bank ________________________________________ 23 The Changing International Order from the First World War ____________________________ 24 Changing Economic Theory: Neoclassical Economics and Keynesianism __________________ 30 Early Post-war Economic Planning ________________________________________________ 37 Key Features of the IBRD’s Articles of Agreement____________________________________ 40 Purposes___________________________________________________________________ 40 Bank Membership and Capitalisation ____________________________________________ 43 Lending Capacity and Conditions _______________________________________________ 44 Operations _________________________________________________________________ 45 Organisation and Management _________________________________________________ 46 Selling the Bretton Woods Agreements to Congress ___________________________________ 49 Conclusion ___________________________________________________________________ 51 Chapter Three From Savannah to Structural Adjustment _______________________ 53 The Inaugural Meeting of Bank and Fund at Savannah _________________________________ 54 Early Bank Operations: 1946 -1949 ________________________________________________ 55 The 1950s ____________________________________________________________________ 62 The IDA and the 1960s__________________________________________________________ 69 The McNamara Years: 1968 — 1981_______________________________________________ 73 Neoliberal Economic Theory _____________________________________________________ 83 Conclusion ___________________________________________________________________ 87 Chapter Four From Washington to Post-Washington Consensus _________________ 88 The Washington Consensus in Full Swing ___________________________________________ 88 Washington Consensus Policies Phase One: Economic Stabilisation ____________________ 90 Washington Consensus Phase Two Policies: Structural Reform ________________________ 91 Implementing the Washington Consensus_________________________________________ 92 The Post-Washington Consensus __________________________________________________ 99 Key Features of the Post-Washington Consensus_____________________________________ 115 Part II: The World Bank in Vietnam and Indonesia ________________________ 119 Introduction: Case Study Selection________________________________________________ 119 Structure of the Case Studies ____________________________________________________ 124 Chapter Five Vietnam: An Overview ________________________________________ 126 The Political and Administrative Structure in Vietnam ________________________________ 126 Socio-economic Changes and Policy in Vietnam since 1986____________________________ 129 Development Assistance to Vietnam since 1993 _____________________________________ 137 The World Bank in Vietnam_____________________________________________________ 139 The World Bank’s Key Planning Documents: the Country Assistance Strategy and Poverty Reduction Strategy Paper ______________________________________________ 141 Conclusion __________________________________________________________________ 148 Chapter Six World Bank Lending in Vietnam ________________________________ 149 A Sectoral Analysis of World Bank Lending to Vietnam_______________________________ 149 Structural Adjustment Lending in Vietnam _________________________________________ 151 Investment Lending in Vietnam __________________________________________________ 159 Energy and Mining, and Water, Sanitation and Flood Control ________________________ 159 The Energy and Mining Sector ______________________________________________ 162 Water, Sanitation and Flood Control__________________________________________ 168 Transportation _____________________________________________________________ 171 Finance and Law, Justice and Public Administration _______________________________ 177 Agriculture, Fishing and Forestry ______________________________________________ 184 Education and Health________________________________________________________ 188 Conclusion: A Weak Post-Washington Consensus ___________________________________ 192 Chapter Seven Indonesia: An Overview _____________________________________ 195 The Political and Administrative Structure in Indonesia from 1966 ______________________ 195 The Political Structure Under Suharto: 1966 - 1998 ________________________________ 196 Constitutional and Political Reform: 1999-2004 ___________________________________ 200 Socio-economic Developments in Indonesia since 1966 _______________________________ 205 Socio-economic Developments under Suharto ____________________________________ 205 The Asian Financial Crisis and Beyond: Economic and Social Impacts _________________ 210 Official Development Assistance to Indonesia After 1966______________________________ 213 The World Bank in Indonesia____________________________________________________ 217 The World Bank’s Key Planning Documents: the Country Assistance Strategy and Poverty Reduction Strategy Paper ______________________________________________ 221 Conclusion __________________________________________________________________ 227 Chapter Eight World Bank Lending in Indonesia _____________________________ 228 A Sectoral Analysis of World Bank Lending in Indonesia______________________________ 228 Structural Adjustment Lending in Indonesia ________________________________________ 230 Investment Lending in Indonesia _________________________________________________ 234 Law, Justice and Public Administration__________________________________________ 235 General Law, Justice and Public Administration Projects _________________________ 235 Rural Area Development Projects____________________________________________ 243 Urban Area Development Projects ___________________________________________ 250 Water, Sanitation and Flood Protection __________________________________________ 255 Transport _________________________________________________________________ 256 Energy and Mining _________________________________________________________ 260 Health____________________________________________________________________ 266 Agriculture, Fishing and Forestry ______________________________________________ 268 Education _________________________________________________________________ 271 Conclusion: World Bank Lending in Indonesia: More Change But… _____________________ 274 Chapter Nine Conclusion__________________________________________________ 278 Approach to Monetary and Fiscal Policy ___________________________________________ 281 Country Specificity____________________________________________________________ 283 Recipient Government Ownership ________________________________________________ 285 The Role of the State __________________________________________________________ 289 Market Failure and the Pace and Sequencing of Reforms ______________________________ 290 A Focus on Poverty Reduction and the Social Costs of Adjustment ______________________ 292 Social Capital and Civil Society Participation _______________________________________ 293 Decentralisation ______________________________________________________________
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