This electronic thesis or dissertation has been downloaded from Explore Bristol Research, http://research-information.bristol.ac.uk Author: Julastuti, Munthea Title: A Critical Evaluation of Indonesia's Special Economic Zones using New Institutional Economics Approach General rights Access to the thesis is subject to the Creative Commons Attribution - NonCommercial-No Derivatives 4.0 International Public License. A copy of this may be found at https://creativecommons.org/licenses/by-nc-nd/4.0/legalcode This license sets out your rights and the restrictions that apply to your access to the thesis so it is important you read this before proceeding. Take down policy Some pages of this thesis may have been removed for copyright restrictions prior to having it been deposited in Explore Bristol Research. 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A Critical Evaluation of Indonesia’s Special Economic Zones using New Institutional Economics approach By Munthea Julastuti School of Sociology, Politics and International Studies University of Bristol A dissertation submitted to the University of Bristol in accordance with the requirements for award of the degree of Doctor of Philosophy in the Faculty of Social Science and Law. June 2018 Word count: 110,779 Abstract This thesis investigates how institutions influence political institutions and economic agents’ in making SEZ policy decision and why do these institutions affect the decision. Most existing literature tended to study SEZs economic outcomes, the advantages and disadvantages, and some have emphasised on the political nature of the SEZ development process. While the study on the institutions that influence the policymaking process by key policy actors and why is rare especially in Indonesia. By developing an analytical framework that combines NIE institutional concepts and Williamson’s institutional constraints model, this study examines what have up until now been separately used to study their influence in SEZ policy reform. The combination enabled an analysis on the interplay between Indonesia’s political institutions, policymaking process under economic reform strategies, and policy outcome with regards to SEZ. The empirical case studies presented here show traces of policy interventions and is well-suited to highlight the role that institutions play in determining behaviour. They put more stress on revealing actors’ decision in SEZ policymaking. This study found a causal logic whereby some institutional determinants constrain the state (political actors and economic agents) into making the market well-functioning thereby increasing the risk of SEZ policy change. The actors’ boundedness to their own rationalities has complicated the process of SEZ policy formulation which resulted in SEZ mixed performance. It promotes further questions on the policy appropriateness and the actors’ logic in their policy choice. The study argues that institutions matter in SEZ policy process and its relevant policies. It further argues that SEZ policymaking relevant constraints involve behavioural assumptions, formal and informal rules, human actors, and modes of interaction between various economic agents and political institutions. Findings indicate that policy and institutions have been mutually influencing each other, entailing change or continuity of the status quo and contributing to the institutional arrangement where the government’s current policy decisions affect what options become available in the future. Furthermore, the choice of policies and institutions and their implementation depend on the relevant political landscape and its importance is, in general, undisputed. This study also shows that despite the success of implementing economic development policies and programmes that have managed to restore macroeconomic stability for economic revival, institutional problems in the economic reform process remain. The thesis reveals that the SEZ policymaking process in the following regimes has been potentially affected by the bureaucratic legacy of previous authoritarian rulers. SEZ policy debates and controversies by different regime periods lead to the continual intra-elite rivalry and interjurisdictional competition which still seemed to colour the access to state power while inter-factional tension emerged with higher intensity in the RDO era, often reflected in elite polarisation and thus lead to higher uncertainty, higher transaction costs, and stagnant growth. Therefore, this study suggests that future SEZ policy formulation process should take institutional study into consideration. i Dedication and Acknowledgements I would like to acknowledge my indebtedness and express my sincere gratitude to the scores of people for the opportunities, the trust, the encouragement, the cooperation, the understanding, the intellectual stimulation, and the friendship that made this work possible and an enjoyable experience. Though it is an inspiring, often exciting, sometimes challenging, but always interesting experience, the work on this thesis has been a big challenge within the lack of time and made possible by many other people, who have supported me. First and foremost, I would like to convey my special gratitude to my supervisors, Dr Vernon Hewitt and Dr Winnie King who guided this work and helped whenever I was in need, for being outstanding and excellent advisors. Their intellectual guidance, constant encouragement, moral support, and invaluable suggestions made this work possible. I acknowledge the support and opportunity awarded to me to complete my PhD study and the financial support by the Scholarship Program for Strengthening the Reforming Institution (SPIRIT) World Bank. I would like to thank in particular the scholarship team at the Centre for Education, Training, and Development of Human Resources, Finance and Education Training Agency, Ministry of Finance of the Republic of Indonesia, for their administrative assistance and guidance. Further appreciation goes to the Indonesian Customs officers for providing me with valuable information related to my research, my colleagues in the International Affairs and Enforcement Directorate for their time and effort for being my gatekeepers to where I have to start my fieldwork and in providing me with lots of documents and publications. A special thanks to distinguish Bapak Heru Pambudi for giving me the chance to pursue my PhD degree. I am deeply grateful to all my informants for sharing valuable materials, thoughts and experiences. I would also like to extend my gratitude to Ibu Hendri Saparini (CORE) for her expertise in political economy, her thoughts as well as being a good friend have made my research meaningful. I am also indebted to Bapak Hajriyanto (MPR), despite demanding responsibilities, his insights and fatherly nature has motivated me to be more self- confident. I am also thankful to Ibu Sari Wahyuni (UI) for her thoughtful comments on my research and inspiring me to do better. I would also like to acknowledge my colleagues, Thuy Mai, Krist Weerakun, Mo Chen, and Lau Ze Wei; those times we spent together in Bristol, all the support we gave to each other and all the courses we had taken together will not be forgotten. I would like to thank all my fellow postgraduate research students and friends in SPAIS for helping me adapt with the academic life and the daily life in Bristol. I ii am also indebted to the fellow PGR graduate students before me. In addition, I must thank the PGR administrative staff at SPAIS office for their tireless efforts. Gratitude and appreciation will also be forwarded to my second big family of Indonesian society in Bristol and which those I cannot mention one by one. Above all, I am deeply and forever indebted to my family for the constant support. I wish to thank my husband and to my children for their forbearance, understanding, and unfailing support that I received all my life. I should also express my full gratitude to my stepmother, my in-laws, brothers and sisters who patiently pray and give their loving, encouragement and concern. I would like to dedicate this thesis to my parents, may they rest in peace. iii Author’s Declaration I declare that the work in this dissertation was carried out in accordance with the requirements of the University's Regulations and Code of Practice for Research Degree Programmes and that it has not been submitted for any other academic award. Except where indicated by specific reference in the text, the work is the candidate's own work. Work done in collaboration with, or with the assistance of, others, is indicated as such. Any views expressed in the dissertation are those of the author. Signed: ……………………………………………………………. Date: ……………….. June 11, 2018 ……………………… iv Table of Contents Page List of Figures and Tables ……………………………………………………………………………………………… viii List of Abbreviations and Acronyms ……………………………………………………………………………… x Chapter 1 Introduction 1 1.1. Background