Withering of Patrimonial State-Business Relations in Indonesia following the 1997-8 Economic Crisis? Case Studies of the Electronics and Palm Oil Industries Riaty Raffiudin, Dra. (University of Indonesia), M.A. (Ohio University, USA) Submitted in fulfilment of the requirements of the degree of Doctor of Philosophy College of Arts Victoria University February 2015 Abstract This study investigates the changes in patrimonial state–business relationships following the 1997–8 economic crisis and President Soeharto’s resignation. The main focus is to examine whether patrimonial state-business relations in Indonesia have withered away, persisted or developed into different patterns. Using a qualitative approach with a case study methodology, this study compares state-business relations in the electronics industry, considered to be among the most affected sector, and the palm oil industry, considered to be the least affected sector by the crisis. Applying this methodology has allowed the utilisation of multiple sources for an intensive and holistic study of state-business relations in the electronics and palm oil sectors of the Indonesian economy. This study addresses two questions: first, to what extent and in what ways have state and business relations become more transparent, accountable and legal since the 1997–8 economic crisis?; and second, how have the economic crisis of 1997–8 and the Reformasi political changes modified and moderated patrimonial relationships between the state and business, particularly the electronics and palm oil industries. I argue that the patrimonial character of many of these relationships has persisted, but in more diverse forms and networks as a result of the dispersal of power at national and local levels, even though in general state-business relations have been more transparent and accountable. Comparing state-business relations in the palm oil and electronics industries, the former has been a more supportive environment for patrimonial relationships than the latter. The contribution of this thesis is that in general it has demonstrated that patrimonial state- business relations in Indonesia, following the crisis and Soeharto’s resignation has remained but developed with different patterns, characteristics, and actors, which generated more complex relations and dependencies. This new understanding has confirmed Harold Crouch’s proposition (1979) regarding the persistence of these patrimonial relations. However, this research has also differed from Crouch by adding a new dimension to the complexity of such relations. i The findings of this study demonstrate that regulatory frameworks, global stakeholders and business associations have influenced patrimonial state-business relations in the palm oil industry, making them more complex, as this industry has become a more significant part of the domestic and global economy. In contrast, the same influences in relation to the electronics industry have suggested that the industry, relatively speaking, is not a supportive environment for patrimonial relationships to develop. The major differences in the palm oil industry that depart from Harold Crouch’s proposition are the increase in the number of government patrons; the involvement of local governments and conglomerates in exchange for concessions of land for plantations with material incentives; and the government, at both the national and regional level, are more dependent on conglomerates. The structure and dependency of technology on the international principal companies have made them more detached from the government. Patrimonial relationships between the government and these companies, therefore, can be considered as an impediment. ii Student Declaration "I, Riaty Raffiudin, declare that the PhD thesis entitled "Withering of Patrimonial State- Business Relations in hrdonesia following the 1997-8 Economic Crisis? Case Studies of the Electronics and Palm Oil Industries" is no more than 100,000 words in length including quotes and exclusive oftables, figures, appendices, bibliography, references and footnotes. This thesis contains no material that has been submitted previously, in whole or in part, for the award of any other academic degree or diploma. Except where otherwise indicated, this thesis is my own work". Sign Date: 10 February 2015 Acknowledgements Writing this dissertation has been a long process that has taught me how to understand myself as a true scholar. I learnt more about my strengths and weaknesses as well as overcoming barriers in achieving my goals. For this process, I must acknowledge many who have taught me to be this type of scholar. I would like to express my deepest gratitude to my supervisor, Dr Richard Chauvel, for his excellent guidance, patience, and for offering productive academic discussion that has enabled me to complete the whole process of writing this dissertation. His broad knowledge in Indonesian history and politics has enriched my perspective of the Indonesian political economy. More importantly, his critical point of view has sharpened and focused my analysis. I also would like to thank Prof. Bhajan Grewal for his valuable input with my early writing. I also acknowledge Dr Janis Webb from the Writing Circle and Angela Rojter from the Graduate Research Centre and Learning Support System at Victoria University for their inspiration and scholarly assistance. I also thank Dr Diane Brown for editing this dissertation according to the Australian Standards for Editing Practice (2nd edn., 2013). My study at Victoria University would not have happened without the scholarship from the Directorate of Higher Education of the Indonesian Government and support with tuition fees from Victoria University. I would like to thank the Department of Political Science, Faculty of Social and Political Sciences, University of Indonesia for allowing me to take leave from my teaching duties. Special thanks to my colleagues in the Center for Political Studies, FISIP UI, for their moral support. I am grateful to all my informants in the electronics and palm oil industries for their openness and willingness to discuss a wide range of issues. Thank you for providing the important data and information. Special thanks to Faisal Basri who connected me to key persons in the palm oil industry. iv To my colleagues and friends at Victoria University, with whom I have shared social and intellectual experiences and for providing me with a supportive environment in reaching academic excellence, I thank you all. I really appreciated the regular discussions that we had to sharpen each other ideas and unblock the writing barriers. Special thanks to Nanang Kurniawan, who assisted me in formatting all the chapters. Also to Annie Feith and Kerry Barnes, thank you for your friendship and motivation. Finally, I dedicate this dissertation to my family – my parents, my late parents-in laws, my husband, Asep Sutresna, and my son, Adhitya Sutresna – who supported me in this long journey, so that I could reach one of my goals in life. Thank you. v Table of Contents Abstract .................................................................................................................................... i Student Declaration ............................................................................................................... iii Acknowledgements ............................................................................................................... iv Table of Contents…………………………………………………………………………...vi List of Figures ........................................................................................................................ xi List of Tables ........................................................................................................................ xii Glossary and Abbreviations ................................................................................................ xiv Chapter 1 Introduction ............................................................................................................ 1 A. Background to the study .............................................................................................. 1 B. Research questions ...................................................................................................... 8 C. Hypothesis ................................................................................................................... 8 D. Research Aims............................................................................................................... 9 E. Contribution to knowledge .......................................................................................... 9 F. Statement of Significance ......................................................................................... 10 G. Organisation of the thesis .......................................................................................... 10 H. Methodology .............................................................................................................. 12 1. Rationale for adopting qualitative case study methodology .................................. 12 2. Unit Analysis ...................................................................................................... 13 3. Data collection ....................................................................................................... 14 4. Data analysis .........................................................................................................