Political Economy of Conflict During Indonesia's Democratic Transition
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POLITICAL ECONOMY OF CONFLICT DURING INDONESIA’S DEMOCRATIC TRANSITION Zulfan Tadjoeddin A thesis submitted in fulfilment for the degree of Doctor of Philosophy School of Economics and Finance March 2010 DEDICATION for Meilanie, Raissa and Zetta ACKNOWLEDGMENTS In the name of God, the most gracious, the dispenser of grace. Alhamdulillahi rabbi- ‘l ‘aalamiin. All praise to God alone, the Sustainer of all the worlds. I am deeply grateful to my supervisor, Professor Anis Chowdhury, whom I met for the first time in Jakarta in early 2000 when we were part of a team preparing the first National Human Development Report (NHDR) for Indonesia. Since then, I have benefited greatly from his advice, guidance, support, encouragement and friendship. It is he, who encouraged me to pursue research on internal social conflict in Indonesia. My heartfelt gratitude also goes to my co-supervisor, Professor Syed Mansoob Murshed, whom I met for the first time in Tokyo in early 2003, when we presented papers to the same panel at a United Nations University conference. In 2005, he supervised my Masters thesis at the Institute of Social Studies (ISS) in The Hague. I am indebted to him for his advice, collaboration and friendship. Both my supervisors are not only my wise gurus; they are also my colleagues and best friends. The idea for this thesis dates back in my time as a researcher at the UN Support Facility for Indonesian Recovery (UNSFIR) during 1999–2004. I was privileged to experience a very stimulating intellectual environment at UNSFIR that has served as the foundation of my academic life: I owe a great deal to my colleagues at UNSFIR; in particular to Widjajanti Suharyo and Bonaria Siahaan. But I cannot thank enough Dr. Satish Mishra who was the UNSFIR’s head and chief economist. He was a constant source of inspiration to all of us working at UNSFIR under a very difficult situation at a critical juncture in Indonesia’s history. Dr. Mishra assigned me the task of producing the first ever database on social conflict in Indonesia. He also facilitated the extension of that work in collaboration with Professor Ashutosh Varshney of the Brown University, USA. I have learnt a lot from Professor Varshney. I would like to express my gratitude to the University of Western Sydney for awarding me the UWS International Postgraduate Research Scholarship that enabled me to pursue this PhD. I am deeply indebted to Professor John Lodewijks and Professor Raja Junankar of the School of Economics and Finance, UWS for their constant support and encouragement. My thanks are also to other staff members of the School for their support. A big thank-you to Nikki Gallaway and Craig Berry – they were always there when I needed any help. My thanks also go to Ibu Anis, and i my fellow research students Asghar Ali, Gazi Hassan and Dr. Mohamed Elafif, who have made my stay in Campbelltown more enjoyable. I have been benefited from comments made by conference participants in Bogor, Canberra, Hamburg, Istanbul, Melbourne, Paris, Singapore and Sydney, where research findings of this thesis were presented during my PhD candidature. I thank them all. I am thankful to Dr. Robert Sparrow, Dr. Gerry van Klinken and Teguh Yudo for their comments on my draft chapters. In Indonesia, I wish to thank Professor Hermanto Siregar, Dr. Joyo Winoto and Dr. D.S. Priyarsono, who have been supportive in many ways. I am grateful to my mother and my late father for the prayers, love and values they have blessed me with, and to my parents in law for their prayer and support. To my two lovely daughters, Raissa and Zetta: this is my excuse for being intermittently away from home while I was working on this thesis. One day, I hope you will be proud of what your dad had done. Last but certainly not least, my sincere gratitude goes to my wife, Meilanie, for her constant support and love. She is about to start her PhD just as I complete this thesis; now I will take my turn. I dedicate this thesis to them all. ii STATEMENT OF AUTHENTICATION The work presented in this thesis is, to the best of my knowledge and belief, original except as acknowledged in the text. I hereby declare that I have not submitted this material, either in full or in part, for a degree at this or any other institution. ………………… Zulfan Tadjoeddin University of Western Sydney March 2010 iii TABLE OF CONTENT Acknowledgement i Statement of Authentication iii Table of content iv List of Tables ix List of Figures x Appendixes xi Abbreviations xii Abstract xiii Chapter One INTRODUCTION 1 1.1. SETTING THE CONTEXT: A STUDY OF INDONESIA 1 1.2. RESEARCH OBJECTIVE 5 1.3. APPROACH AND METHODOLOGY 5 1.4. GRIEVANCE, GREED AND SOCIAL CONTRACT: A RUNNING THEME 6 1.5. KEY CONTRIBUTIONS OF THE THESIS 11 1.6. A BRIEF TOUR OF THE THESIS 11 Chapter Two THE ECONOMICS OF CONFLICT: A SURVEY OF LITERATURE 14 2.1. WHAT CONFLICT? 14 2.1.1. Inter vs. Intra-state Conflicts 14 2.1.2. Classifying Internal Conflict and Violence 17 2.2. THE ECONOMICS OF CONFLICT 19 2.2.1. Modelling Conflict 19 2.2.2. The Economic Causes of Conflict 22 2.2.2.1. Greed and Grievance Approach 22 2.2.2.2. Social Contract as a Synthesis 31 2.2.2.3. Socio-economic Indicators Approach 32 2.3. DEMOCRACY, INSTITUTIONS AND CONFLICT 41 2.4. CONFLICT IMPACT, POST-CONFLICT RISKS AND POLICIES 42 2.5. SUMMARY: ECONOMICS OF CONFLICT AND DEVELOPMENT 44 iv Chapter Three CONFLICT AND VIOLENCE IN INDONESIA: A BACKGROUND 46 3.1. INTERNAL CONFLICT SINCE INDEPENDENCE 46 3.1.1. Early Independence 47 3.1.1.1. The 1948 Communist Uprising in Madiun 47 3.1.1.2. The Revolt of South Maluku Republic (RMS) 48 3.1.1.3. The Islamic State of Indonesian (Darul Islam-DI) Revolt 49 3.1.1.4. PRRI-Permesta Revolt 50 3.1.2. The Fall of Sukarno 51 3.1.3. State Violence in Suharto’s Indonesia 52 3.2. CRISIS, TRANSITION AND CONFLICT 53 3.2.1. Crisis and Transition 54 3.2.2. The Outbreak of Violence 55 3.2.3. Explaining the Conflict 59 3.3. THE CASE FOR THE ECONOMICS OF CONFLICT IN INDONESIA 60 Chapter Four A COHERENT THEORY OF CONFLICT AND COOPERATION FOR POST INDEPENDENT INDONESIA 64 4.1. INTRODUCTION 64 4.2. TWO CONVERGENCES 66 4.2.1. First Convergence: Across Regions 66 4.2.2. Second Convergence: Across Ethnic Groups 72 4.3. GRIEVANCES OF RELATIVE DEPRIVATION 76 4.3.1. Centre-Regional (Secessionist) Conflicts 78 4.3.2. Ethnic Conflict 83 4.3.3. Possible Elements of Greed 85 4.4. REPEATED GAMES, COOPERATION AND SOCIAL CONTRACT 87 4.4.1. Centre-Regional Cooperation 88 4.4.2. Inter-ethnic Coalitions 89 4.5. ROUTINE-EVERYDAY VIOLENCE 91 4.6. SHARED GROWTH AND DEMOCRATIC MATURITY 92 4.7. CONCLUSION 95 v Chapter Five CENTRE-REGIONAL CONFLICT, LOCAL DEMOCRACY AND THE RISK OF RESOURCE CURSE 97 5.1. INTRODUCTION 97 5.2. ASPIRATION TO INEQUALITY AND DECENTRALIZATION 98 5.2.1. Aspiration to Inequality and Grievance 98 5.2.2. Grievance vs. Greed 104 5.2.3. The Decentralization Response 106 5.3. POTENTIAL GREED AND A FUTURE RESOURCE CURSE 112 5.3.1. Democracy in Resource Rich Society 112 5.3.2. Post Transition Socio-economic Performance, 1999-2008 115 5.3.3. A Future Resource Curse? 116 5.3.3.1. Bad Governance 117 5.3.3.2. Internal Conflict 120 5.3.3.3. Dutch Disease 121 5.4. CONCLUSION 122 Chapter Six GRIEVANCE, GREED AND COOPERATION: LOCALIZED ETHNIC VIOLENCE DURING THE TRANSITION 123 6.1. INTRODUCTION 123 6.2. THE FRAMEWORK 126 6.2.1. Relative Deprivation and Conflict 126 6.2.2. A Possible Element of Greed 127 6.2.3. Interethnic Cooperation after Violence 128 6.2.4. Grievance, Greed and Cooperation 130 6.3. METHODOLOGY 132 6.3.1. Operationalizing Relative Deprivation 132 6.3.2. Measuring Relative Deprivation 134 6.3.2.1. Richer Regions with Lower Human Development 134 6.3.2.2. Unfulfilled Expectations 136 6.3.1. The Model 141 6.3.2. Estimation Technique 143 6.3.3. Coverage of the Study 144 6.3.4. The Dependent Variable: The Severity of Ethnic Violence 145 6.3.5. Data Issue 146 6. 4. RESULTS 148 6.4.1. Grievance and Greed in Ethnic Violence 148 6.4.2. The Cooperation Model 151 6.4.3. Robustness Tests 152 6.5. DISCUSSIONS AND CONCLUSION 154 vi Chapter Seven ROUTINE VIOLENCE IN THE JAVANESE DISTRICTS: NEO-MALTHUSIAN AND SOCIAL JUSTICE PERSPECTIVES 158 7.1. INTRODUCTION 158 7.2. THE RELEVANCE OF JAVA 161 7.3. HYPOTHESES 163 7.3.1. Population and Demographic Factors 163 7.3.2. Inequality 165 7.3.3. Joint Effect of Population Pressure and Inequality 165 7.4. DATA AND METHODOLOGY 166 7.4.1. Data on Routine Violence 166 7.4.2. Other Data 167 7.4.3. Estimation Strategy 167 7.5. RESULTS AND DISCUSSION 168 7.5.1. The Role of Population Pressure 168 7.5.2. The Role of Vertical Inequality 171 7.5.3. Interaction Effects: Inequality and Population Pressure 174 7.6. CONCLUSION 175 Chapter Eight ELECTORAL CONFLICT AND THE MATURITY OF LOCAL DEMOCRACY: TESTING THE MODERNIZATION HYPOTHESIS 179 8.1. INTRODUCTION 179 8.2. DEVELOPMENT, DEMOCRACY AND ELECTORAL CONFLICT 182 8.2.1. The Modernization Hypothesis 182 8.2.2.