PUBLIC-PRIVATE PARTNERSHIPS AND THE TRANSFORMATION OF THE THIRD WORLD STATE: THE CASE OF INDONESIA Dudi Rulliadi ORCID Identifier: 0000-0003-0771-4121 Submitted in total fulfilment of the requirements of the degree of Doctor of Philosophy January 2017 MELBOURNE LAW SCHOOL ABSTRACT This thesis aims to answer the question of how we should understand the transformation of infrastructure finance, and with it the Third World state, through the adoption of public-private partnerships (PPPs), with a focus on the case of Indonesia. It also seeks to understand the role of international law and institutions in that transformation. In this thesis, ‘PPPs’ refer to a range of contractual mechanisms used in the infrastructure sector. This thesis mainly focuses on PPPs as long-term contracts between Third World states and foreign private investors for the provision of ‘economic’ infrastructure that is vital for daily economic activity. PPPs have been widely promoted by international financial institutions (IFIs) as offering an innovative, technical and apolitical means to deliver better infrastructure and development for Third World states. This thesis offers a different way of understanding the role of PPPs in the Third World, presenting them as instruments of development and state transformation that must be studied within broader historical and geopolitical perspectives. It situates the promotion of PPPs within the project of Third World development championed by international institutions and law. The thesis argues that the translation of concessions into an instrument of development, and their incorporation into global development policy in the form of PPPs, has revived an older colonial project of remaking the Third World through concessions. Through promoting PPPs, IFIs have transformed domestic economic governance, the state and market relationship and the way the state understands infrastructure provision. In conjunction with their establishment, PPPs provided ‘efficiency’ as the new single reference for the state. Further, PPPs have transformed the economic role of the state beyond merely supporting the market, to a level where the state is also accountable to the market, thus putting democracy at risk. The thesis takes Indonesia as its focus, and uses a historical method to understand the ideological and legal- technical basis of PPPs, the role played by international law and actors in their promotion, their relation to earlier colonial concessions, and their role in the displacement of a collectivist post-independence economic model and interventionist establishment of market-friendly institutions. It reveals that Third World PPPs are a distinct project, shaped by the interventions of the international actors involved, and aimed at the transformation of the state. By these interventions and conceptualizations, the promotion of PPPs by IFIs has transformed Third World concessions and expanded the role of international law from a regulatory system governing concessions to one that creates market-friendly institutions in the domestic sphere. i DECLARATION This is to certify that: (i) the thesis comprises only my original work towards the PhD; (ii) due acknowledgement has been made in the text to all other material used; (iii) the thesis is less than 100,000 words in length, exclusive of tables, maps, bibliographies and appendices. Signature: Date: January 2017 Dudi Rulliadi ii ACKNOWLEDGMENTS A long journey that started as a childhood dream has finally reached the finishing line. After more than four years, my roller coaster ride has come to an end but the memory of it will stay forever. I thank Allah SWT, God the Almighty, for showing me, through this journey, the power and limits of human strength and reason. During my stay in Melbourne, I have met many respected scholars who have inspired me and helped me develop my intellectual horizons. My biggest thanks go to my supervisors, Professors Anne Orford and Tim Lindsey. They have been great mentors and their confidence that I would one day complete this journey enabled me to do so. Thanks go also to Sundhya Pahuja, Luis Eslava, Jennifer Beard, and Shaun McVeigh who have been both inspirational and generous. Sarah Biddulph was the academic assessor at my Confirmation and deserves my gratitude for that, as does Laura Griffin, who was very generous and helpful in anything beyond my thesis during my time in Melbourne. To my fellow travellers - Dewi Apsari, Rheny Pulungan, Josie Khatarina, Rifky Assegaf, Windy Triana, Anna Dziedzic, Tsegaye Ararssa, Cait Storr, Lily O Neill, Sara Dehm, Oishik Sircar and Debolina Dutta - thanks for sharing your thoughts, stories and experiences during my PhD years. I also thank past and current Research Officers, Domi Cordoba, Meghan Bergamin, Madeleine Grey, Rebecca Crozer and Andrew Dalziel, who have helped me with so many administrative matters. During my candidature, I was privileged to meet highly respected international lawyers, Professors Martti Koskenniemi, Antony Anghie and M. Sornarajah, to whom I presented my thesis in the Law School’s PhD masterclass. Thanks are due also to Professors Phillip Dann and Benedict Kingsbury for inviting me to the New York University School of Law and having enough confidence in me to allow me to present the very first, humble, paper I wrote in the first year of my PhD candidature. I am very grateful to my close friends who have supported me in so many ways, for so many years: Seno, Yanwar, Sulthon and Rahmad, my colleagues in the Fiscal Risk iii Management and Treasury of the Ministry of Finance. They have contributed so much to my thesis as well as my personal and professional development. Thanks are due as well to M. Ali Hanafiah with whom I had many spiritual conversations during our PhD journey and for helping me format this thesis, and to Darwin and Faaris at PT (Persero) Sarana Multi Infrastruktur, and Dody Mihardjana. Both gave me access to their valuable resources on the history of PPPs in Indonesia. Nietzsche once said, "Our writing equipment takes part in the forming of our thoughts". So I also thank Steve Jobs for creating such a beautiful and reliable typing machine that has accompanied my days and nights of inspirations and frustrations and helped me to transform my thoughts into paper. Finally, deep thanks go to my beloved wife Anisah and my lovely children, Amartya, Navya and Arka, who have made this journey possible - and unforgettable; and to my parents, my heroes, who have showed me the power of perseverance and patience. To them, I dedicate this thesis. iv TABLE OF CONTENTS ABSTRACT ................................................................................................................... i DECLARATION ........................................................................................................... ii ACKNOWLEDGMENTS ............................................................................................ iii GLOSSARY ................................................................................................................. ix CHAPTER I ................................................................................................................... 1 I. RESEARCH QUESTIONS AND SIGNIFICANCE OF THE THESIS ............ 1 II. THE INSPIRING EVENTS: PPPs AND THE TRANSFORMATION OF THE PARADIGM AND INSTITUTIONS ........................................................................ 4 III. CONCEPTUAL FOUNDATION OF PPPs: CONCESSION AND DEVELOPMENT NEXUS ........................................................................................ 6 IV. PPPs, THIRD WORLD DEVELOPMENT AND INTERNATIONAL LAW . ........................................................................................................................ 9 V. PPPs AND STATE TRANSFORMATION IN INDONESIA ......................... 12 VI. LOOKING THROUGH THE LENS OF NEOLIBERALISM: DEVELOPMENT, PPPs AND THE MARKETIZATION OF THE STATE ......... 16 VII. SCOPE OF THE THESIS ............................................................................. 27 VIII. STRUCTURE OF THE THESIS .................................................................. 29 CHAPTER II OLD NARRATIVE, INNOVATIVE TECHNOLOGY: THE CONSTRUCTION OF THIRD WORLD PUBLIC-PRIVATE PARTNERSHIPS .... 33 I. INTRODUCTION ............................................................................................ 33 II. THE FOUNDATIONS AND NARRATIVE OF TODAY’S PPPs: CONCESSIONS AND THEIR RELATIONSHIPS WITH DEVELOPMENT, INTERNATIONAL LAW AND GOVERNANCE ................................................. 35 III. THE EXPANSION OF INTERNATIONAL LAW AND DIVERGENT MEANINGS OF DEVELOPMENT IN THIRD WORLD CONCESSIONS ......... 38 A. Development as Self Empowerment: The Suez Canal Concession .............. 39 B. The Expansion of International Law into Third World Concessions ........... 42 v IV. THE PRIVATE FINANCE INITIATIVE AND GLOBAL NORMS ON INFRASTRUCTURE PROVISION ........................................................................ 48 A. Brief History of the Private Finance Initiative .............................................. 48 B. The Ryrie Rules and The Institutionalization of Efficiency ......................... 51 C. Technical Innovations of the PFI .................................................................. 53 D. The PFI and the Formation of Global Norms in Infrastructure Provision .... 56 V. CONCLUSION ................................................................................................ 58 CHAPTER III FROM DUTCH COLONIALISM TO