Challenges of Governance: Development and Regional Integration in Southeast Asia and ASEAN (Development and Governance) 3030590534, 9783030590536

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Development and Governance

Ronald L. Holzhacker Wendy Guan Zhen Tan  Editors

Challenges of Governance Development and Regional Integration in Southeast Asia and ASEAN

Development and Governance Series Editor Yilin Hou, Syracuse, NY, USA

This series will be devoted to the treatment of “development” and “governance” as two universally urgent issues that underlie many related problems in all countries. Though many other books, even series, already exist to tackle directly or otherwise these issues, this series stands out as a unique set with features not seen as proposed in the following. More information about this series at http://www.springer.com/series/13392

Ronald L. Holzhacker  •  Wendy Guan Zhen Tan Editors

Challenges of Governance Development and Regional Integration in Southeast Asia and ASEAN

Editors Ronald L. Holzhacker University of Groningen Groningen, The Netherlands

Wendy Guan Zhen Tan Western Norway University of Applied Sciences Bergen, Norway

ISSN 2567-5133     ISSN 2567-5354 (electronic) Development and Governance ISBN 978-3-030-59053-6    ISBN 978-3-030-59054-3 (eBook) https://doi.org/10.1007/978-3-030-59054-3 © Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Contents

  1 Introduction����������������������������������������������������������������������������������������������    1 Wendy Guan Zhen Tan and Ronald L. Holzhacker Part I Rights and Democracy: Political and Institutional Dynamics   2 The Regional Institutional Development of Human Rights in Southeast Asia��������������������������������������������������������������������������   23 Stanati Netipatalachoochote, Aurelia Colombi Ciacchi, and Ronald L. Holzhacker   3 The Institutionalisation of Human Rights in ASEAN��������������������������   45 Yuyun Wahyuningrum   4 The Noken System and the Challenge of Democratic Governance at the Periphery: An Analysis of Free and Fair Elections in Papua, Indonesia ������������������������������������������������   65 Tri Efriandi, Oscar Couwenberg, and Ronald L. Holzhacker Part II Sovereignty and Trade Alliances: Economic and Legal Discourse   5 Framing Trade Policy Preferences and Dialogues in ASEAN Economic Integration������������������������������������������������������������   89 M. Prayoga Permana, Herman Hoen, and Ronald L. Holzhacker   6 Protecting Intellectual Property Rights in Vietnam: Opportunities and Challenges����������������������������������������������������������������  115 Khoi Nguyen Phan   7 Indonesia–China Strategic Partnership: Role of Vision, Bureaucratic Actors and Domestic Political Change����������������������������  135 Petrus K. Farneubun

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Contents

Part III Sustainability and Equity: Socio-Spatial Differences   8 Financial Inclusion and Inclusive Development in Indonesia��������������  161 Titissari Rumbogo, Philip McCann, Niels Hermes, and Viktor Venhorst   9 Understanding Mobility Inequality in Jakarta with Space Syntax����  183 Isti Hidayati, Claudia Yamu, Wendy Guan Zhen Tan, and Ronald L. Holzhacker Part IV Inclusivity and Justice: Community and Growth Dilemmas 10 The Governance of Social License to Operate in the Forest Industry in Indonesia��������������������������������������������������������  209 Stephany Iriana Pasaribu, Frank Vanclay, and Ronald L. Holzhacker 11 Foreign Direct Investment (FDI), Inclusive Growth, and Institutions: A Case Study of Tourism Sector in Badung District������������������������������������������������������������������������������������  227 Pande Nyoman Laksmi Kusumawati, Joost Herman, and Ronald L. Holzhacker 12 Fish for Transparency: Challenges of Environmental Governance from the Perspective of Food-Driven Protests ����������������  247 Thai Nguyen Van Quoc, Elen-Maarja Trell-Zuidema, and Ronald L. Holzhacker Index������������������������������������������������������������������������������������������������������������������  269

About the Authors

Aurelia  L.  B.  Colombi  Ciacchi  is a full professor at the Law Faculty of the University of Groningen, the Netherlands, in the endowed chair of “Law and Governance.” Oscar Couwenberg  is Dean and Professor of Governance and Geography at the Faculty of Spatial Sciences, University of Groningen, The Netherlands. Tri  Efriandi  is a PhD candidate in the Department of Spatial Planning and Environment of the Faculty of Spatial Sciences at the University of Groningen. He is currently working on his PhD dissertation on Decentralization and Regional Development in Papua and West Papua Indonesia, under the supervision of Prof. Ronald L. Holzhacker and Prof. Oscar Couwenberg. Formerly, he served as a Policy Analyst in the Ministry of Home Affairs, Republic of Indonesia. He holds a bachelor’s degree in public administration from the National Institute of Public Governance (IPDN), Indonesia, and a master’s degree in public administration from the University of Indonesia. Petrus Kanisius Farneubun  is a PhD candidate in the Department of International Relations and Organization at the University of Groningen. He does research on Indonesia-China relations in the post-authoritarian period by examining the foreign policy of Indonesian President Susilo Bambang Yudhoyono. His doctoral research is funded by the Indonesia Endowment Fund for Education (LPDP). He holds a master’s degree in Peace and Conflict Studies from the Australian National University (ANU) in 2010 and another master’s degree in Teaching English to Speakers of Other Languages (TESOL) from the Indiana University of Pennsylvania (IUP), earned in 2006. He is a permanent lecturer at the Department of International Relations, Cenderawasih University, West Papua, Indonesia. His research interests focus on Indonesian foreign policy, peace and conflict, IR theory, and human security.

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About the Authors

Joost Herman  is a former professor of Globalisation Studies and Humanitarian Action at the Faculty of Arts, University of Groningen. He served as Head of Department of International Relations and International Organization (IRIO), Director of the Institute for Globalisation Studies Groningen (GSG), Director of Humanitarian Action Program (NOHA) Groningen, and President of International NOHA Association. Niels Hermes  is the Professor of International Finance, Faculty of Economics and Business University of Groningen, the Netherlands, and Solvay Business School, Université Libre de Bruxelles, Belgium. Isti Hidayati, MSc  is a PhD candidate in the Faculty of Spatial Science, University of Groningen, the Netherlands. Her doctoral research is sponsored by the LPDP scholarship from the Indonesian government. Her research focuses on addressing mobility inequality in Southeast Asia metropolitan cities from a spatial analytical perspective. She holds a master’s degree in Infrastructure Planning from the University of Stuttgart, Germany. Currently, she is a lecturer in the Faculty of Architecture and Planning, Universitas Gadjah Mada, Indonesia. Isti Hidayati has practice experience as an urban and regional planner in Southeast Asia. Herman  W.  Hoen  is full professor of International Political Economy at the Department of International Relations/International Organization (IR/IO) of the University of Groningen, the Netherlands. Ronald  L.  Holzhacker  is Professor of Comparative Multilevel Governance and Regional Structure in the Faculty of Spatial Sciences and the Faculty of Arts, Department of International Relations and International Organization at the University of Groningen. He holds a PhD from the University of Michigan in political science and a JD from the University of Minnesota Law School. He is broadly interested in questions of governance, human rights, and the interaction between civil society organizations and institutions in political systems. He is founding Director of the Groningen Research Centre for Southeast Asia and ASEAN (SEA ASEAN) located in Groningen and Gadjah Mada University, Indonesia. He leads an interdisciplinary team of scholars and 18 PhD researchers engaged in theoretically driven comparative research focused on governance, societal impact, and sustainable society in Southeast Asia. He has published in journals such as Law & Policy, Comparative European Politics, Journal of European Integration, European Union Politics, Nations and Nationalism, Party Politics, Journal of Legislative Studies, European Journal of Comparative Law and Governance, Journal of Asian Economic Integration, Contemporary Southeast Asia, and the Asia Pacific Journal of Public Administration. He is co-editor of numerous books over the past decade, most recently Decentralization and Governance in Indonesia (New York: Springer 2016) and Sustainable Development Goals in Southeast Asia and ASEAN: National and Regional Approaches (Leiden, Boston: Brill 2019).

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Pande Nyoman Laksmi Kusumawati  is a PhD candidate in the Department of International Relations and Organization at the Faculty of Arts, University of Groningen. Her research focuses on Foreign Direct Investment, Inclusive Growth, and Institutions in Indonesia. Her doctoral research is funded by a SPIRIT-­ BAPPENAS scholarship from the Indonesian government. She obtained a bachelor’s degree in Economics from the Faculty of Economics and Business University of Indonesia and a master’s degree in Economics from the Faculty of Economics and Business University of Groningen. She works as a government official at the Ministry of National Development Planning (BAPPENAS), Indonesia. Philip  McCann  is the Professor of Urban and Regional Economics at the University of Sheffield Management School, United Kingdom. Stanati  Netipatalachoochote  defended his thesis at the Faculty of Law and Faculty of Spatial Sciences at the University of Groningen, the Netherlands. He is currently the legal advisor to the Ministry of Natural Resources and Environment. He has a Master of Laws (LL.M) in International and Comparative Criminal Justice from the University of London and a Master of Laws (LL.M) in Criminal Law and Bachelor of Laws (Second Class Honors) from the Thammasat University, in Bangkok, Thailand. As a Barrister-at-Law, he worked for the Thai Ministry of Justice and was a Lecturer in Law at Siam University, Bangkok. His research topic focuses on human rights law and the role of civil society organizations to mobilize human rights in ASEAN. Stephany Iriana Pasaribu  is a PhD candidate at the Faculty of Spatial Sciences, University of Groningen, the Netherlands. Her doctoral study is funded by Nuffic through NFP Scholarship. She holds a bachelor’s degree and Professional Program to be a psychologist at the Faculty of Psychology, University of Indonesia. She holds a master’s degree in Visual Anthropology from Tromsø University, Norway, with the NORAD Scholarship. She also holds another research master’s degree in Cultural Geography from the University of Groningen, the Netherlands, with the Research Master Scholarship from the University of Groningen. She has extensive working experiences in nongovernment organizations (NGOs) and is skilled in Sustainable Development, Social Impacts Assessment, Social License to Operate, and Conflict Resolution. Currently, she is doing her doctoral research on Sustainable Communities Development and Natural Resources in Indonesia. Her research interests are evolved around the issues of indigenous communities, social impacts management, social license to operate, human rights impact assessment, and corporate social responsibilities. Prayoga  Permana  is a PhD candidate in International Political Economy, Department of International Relations and International Organization (IRIO), University of Groningen. Prayoga holds a bachelor’s degree in Political Sciences from Universitas Gadjah Mada (2011) and a Master of Public Policy in Economic Policy and Political Economy from Korea Development Institute (KDI) School of

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Public Policy and Management (2013). He serves as a lecturer in the Faculty of Social and Political Sciences, Universitas Gadjah Mada, and previously in charge as a director of a university-based think tank, ASEAN Studies Center. Khoi Nguyen Phan  is a PhD student in the Department of Private International Law, University of Groningen. His doctoral research in the Netherlands is sponsored by the 911 Project of the Ministry of Education and Training of Vietnam. Since 2005, he has been lecturer in the Faculty of Law, Can Tho University, Vietnam, teaching civil law, laws of contract, and intellectual property law. In 2011, he achieved an LLM from the University of the West of England, the UK. This chapter is a part of his PhD research, which he started in April 2017, focusing on substantive and private international law aspects of copyright law in Vietnam. Thai Nguyen Van Quoc  is a doctoral candidate at the Faculty of Spatial Science, University of Groningen. His doctoral study is sponsored by the PhD Scholarship Program from the University of Groningen. He holds a master’s degree in Urban and Regional Planning from the University of Amsterdam. Under the tutelage of Professor Ronald Holzhacker and Assistant Professor Elen-Maarja Trell-Zuidema, his dissertation investigates environmental planning from the perspective of food as a socio-political embedded component of environment, using theoretical insights of political ecology and methodological strengths of urban anthropology, with cases from Central and Southern Vietnam. In addition to academia, he works as the executive manager’s assistant at Vietnam Journal of Science and editorial contributor to Failed Architecture. Titissari Rumbogo  is a PhD candidate in the Department of Economic Geography, Faculty of Spatial Sciences, University of Groningen. Her doctoral study is sponsored by Indonesia Ministry of Finance Scholarship—LPDP. She works as permanent lecturer and researcher at the Faculty of Economics and Business University of Indonesia. She holds a bachelor’s degree from the Faculty of Economics and Business University of Indonesia (FEB-UI) and continues a master’s degree at Universite de Paris VIII—France with scholarship of Boursier du Gouvernement Français. Currently, she is doing research focusing on financial inclusion and inclusive development in emerging economies. Her research interests are economic geography, financial inclusion, and inclusive development. Wendy Guan Zhen Tan  is Associate Professor at the Faculty of Engineering and Business, Department of Civil Engineering, at the Western Norway University of Applied Sciences, Norway, and senior researcher at the Land Use Planning Group at Wageningen University and Research, the Netherlands. She is Associate Director of SEA ASEAN, the Groningen Research Centre for Southeast Asia and ASEAN at the University of Groningen. Her research expertise and interest focus on the implementation of land use and transportation integration, mobility issues, and institutional perspective in planning processes in Europe, America, and Southeast Asia. From 2010 to 2014, she was a board member of the Megacities Foundation. She received the Georges Allaert Prize in 2014 for her research contributions to mobility

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and spatial planning in our society. She is a member of the AESOP Transportation theme group and part of the international advisory board for the journal Urban Policy and Research. Elen-Maarja  Trell-Zuidema  is Assistant Professor of Spatial Planning and Environment at the Faculty of Spatial Sciences, University of Groningen, the Netherlands. In 2014, she was the lead organizer of the international workshop “Resilience: Just do it?! Governing for Resilience in Vulnerable Places” (with Britta Restemeyer, Melanie M. Bakema, and Gwenda van der Vaart). She is interested in the role of local-level initiatives and public participation in creating more resilient and sustainable places. The themes she explores within this context include community resilience in declining (rural) areas, flood resilience, urban food systems and gardening, and governance of renewable energy initiatives. In her previous projects, she has explored young people’s place attachment and influential aspects for the well-being of rural youths in their everyday context. Frank Vanclay  is Professor of Cultural Geography, the Head of the Department of Cultural Geography, and the Director of the Urban & Regional Studies Institute, Faculty of Spatial Sciences, University of Groningen, the Netherlands. Viktor  Venhorst  is the Assistant Professor in Economic Geography, Faculty of Spatial Sciences, University of Groningen, the Netherlands. Yuyun Wahyuningrum  is a PhD Researcher at the Governance, Law and Social Justice (GSLJ), a research group based at the International Institute of Social Studies (ISS) located in The Hague, part of Erasmus University Rotterdam, The Netherlands. She holds a Master of Arts in Human Rights and Development from Mahidol University, Thailand. Her research deals with various state engagements with international human rights norms in the context of ASEAN regionalism from the perspective of the Third World Approaches to International Law (TWAIL). Prior to this, she was the Team Leader for the Regional EU-ASEAN Dialogue Instruments of Human Rights Facility (READI HRF) and has been working more than 25 years in the civil society sector, advocating for human rights and democracy in Southeast Asia. In 2019, she was selected as the Representative of Indonesia to the ASEAN Intergovernmental Commission on Human Rights (AICHR) for the period of 2019–2021. Claudia Yamu  is professor at the Faculty of Spatial Sciences (FRW-RUG) at the University of Groningen. She holds the chair of “Spatial Analytics and Modeling” and is Director of CASUS, Centre for Advanced Studies in Urban Science and Design, and a Rosalind Franklin Fellow. As an experienced architect and urban planner, her expertise includes spatial analytics and modeling, people-centered design, computation, emerging technologies, digital tools, urban methods and theory, civic engagement, collaborative planning, and decision support. She researches future sustainable cities and regions, healthy cities, smart cities and citizens (residents), democratic cities, cities as complex adaptive systems, and the future well-­being of people.

Chapter 1

Introduction Wendy Guan Zhen Tan and Ronald L. Holzhacker

Abstract  This introduction presents a varied and multidimensional view of challenges of governance in Southeast Asia and ASEAN through the variety of disciplines and nationalities involved in the book. In light of 50  years of regional collaboration and integration as the member states of ASEAN seek to chart out a future path for the region, this book is dedicated to showcasing the different facets and challenges to governance that occur due to internal and external pressures for the various member states. The editors are particularly interested in the multilevel governance challenges on issues of democracy, equity and sustainability, the adaptation of policies and norms to fit an ASEAN way, and the changing roles of civil society and citizens in this process of seeking a common identity and voice. The book is divided into four sections. The first section introduces the fundamental political and institutional dynamics that are in play within the region and the interplay between regional forces and national norms. The second section tackles the economic and legal discourses that various member states face in relation to external and internal pressures related to international and regional trade and industry. The third section focuses on issues of sustainability and equity resulting from the vast socio-spatial differences in the varied cities and regions of the member states. In the final section, the dilemmas resulting from economic growth in exploitative industries and the impact that has on the local and regional community through the lenses of inclusivity and justice  are discussed. Written by a diverse collection of policy makers, researchers, educators and activists, this book provides an authoritative firsthand analysis of key challenges to governance in Southeast Asia and ASEAN. Keywords  Governance · Southeast Asia · Sustainability · Spatial science · ASEAN · Multilevel governance · Democracy · Equity · Sustainable development · Public policy · Norms · Discourse · Inclusive development · Institutions · Institutionalization W. G. Z. Tan (*) Western Norway University of Applied Sciences, Bergen, Norway Wageningen University and Research, Wageningen, The Netherlands e-mail: [email protected]; [email protected] R. L. Holzhacker (*) University of Groningen, Groningen, The Netherlands e-mail: [email protected] © Springer Nature Switzerland AG 2021 R. L. Holzhacker, W. G. Z. Tan (eds.), Challenges of Governance, Development and Governance, https://doi.org/10.1007/978-3-030-59054-3_1

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Southeast Asia is a rapidly developing region witnessing transformative changes to its society, economy, political systems, and its way of life. This impacts upon the millions within the region and generates challenges of governance. The Association of Southeast Asian Nations (ASEAN) marked its fifth decade in 2017 and bears witness to a period of prosperity and growth tempered by rising inequality and geopolitical challenges. The region consists of a very diverse set of countries: middle-income countries—MICs (Indonesia, Malaysia, Philippines, Thailand, and Vietnam), least developed countries—LDCs (Cambodia, Laos and Myanmar) and high-income countries (Singapore and Brunei). Their economic systems vary from capitalist market systems to socialist systems in various degrees of transition. The political systems vary greatly from democratic to socialist, with various degrees of political and administrative decentralization across the countries, and various degrees of input from stakeholders and citizens in the system of governance. Together they represent a great diversity of peoples, language, culture and beliefs across this vast region. The dream of a common regional identity and regional integration idealized in the ASEAN charter as ‘One Vision One Identity One Community’ (ASEAN, 2008) seems daunting. Thus, a key challenge of governance in the region is the great societal and governance variation across the region, and the extent to which ASEAN can play a significant role in promoting learning across the region, encouraging regional integration, and playing an emerging role in international relations on the world stage.

1.1  Challenges of Governance in SEA This book aims to showcase the multitude of challenges of governance from a variety of perspectives (political, institutional, and  societal) which arise within the region and how they may be managed with a multilevel and multi-scalar approach to governance, while respecting the delicate nuances of interregional and intra-­ regional differences. We argue that a fundamental step in resolving challenges of governance lies not in the blind adoption of predominantly Western ideals of democracy and equity but rather the adaptation of these ideals to Southeast Asian institutions, historical trajectory, and norms and values. This approach requires the evolutionary development, and fitting of institutions and mechanisms over time while being open to new actors from civil society as bringers of change. The complex condition of changing needs and interests of the communities in this region have seen a growing demand for policies and solutions beyond the traditional and hierarchical bounds of government (Thynne, 2000). The challenge here is to ‘ensure that the state, the rule of law, and governance systems actually protect and fulfil the civil, political and social rights of individuals and communities alike’ (Ibid, p. 228). Good governance is defined as a ‘public administration process that maximizes public interest’ (Yu, 2018, p. 4) and is indicated via legitimacy, transparency, accountability, rule of law, responsiveness and effectiveness. Good governance is only achieved when citizens are participating in political administration and goes hand in hand with democracy (Yu, 2018).

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Many states have various layers of government involved in decision-making processes at the national, state or provincial level and local levels. Certain regions have come together to cooperate regionally  on a supranational or intergovernmental basis, for example the European Union (EU) or ASEAN. In addition, certain local governments may cooperate in formal or informal ways to create metropolitan governmental structures. In the US, these multilayered perspectives have formally been studied as part of intergovernmental federal relations. In Europe, scholars began to move beyond a conception that focused only on interaction between layers of government, but on the broad concept of multilevel governance, which includes the interaction between governments at different levels but also stakeholders, civil society organizations and citizens. European centric concepts of regional integration are widely utilized in international relations or on matters of European integration (Piattoni, 2009). Could the same concept be understood in a vastly different context, i.e. Southeast Asia and specifically ASEAN? Underlying this embrace of multilevel governance is the belief that it lends both effectiveness of implementation in dealing with complex matters and legitimacy to the decision process and outcomes. While the original theorization of multilevel governance (MLG) emerged within the EU (Marks & Hooghe, 2003, 2004), a decade ago scholars began to consider a migration of the concept to better understand decision-making and governance within ASEAN and its member states. As scholars look back at the development of MLG over time in Europe, they have also reflected on how the concept may be useful to understand other regional perspectives (Stephenson, 2013). For example, De Prado (2007) began to conceive of MLG more broadly and drew comparisons with developments in Asia, but Sbragia (2010) considered research rather preliminary to make any deep comparisons to the European example possible. Scholars have asserted that ASEAN should be seen more in terms of its role in norm diffusion and developing consensus in a broader process of the promotion of integration (Schreurs, 2010; Stephenson, 2013). Others have viewed ASEAN integration as institutionally cautious, despite many meetings and pronouncements. While ASEAN remains the institutional core of cooperation, it is noted that in ‘many issues of trade, finance and security’ the actors involved are not just ASEAN members, but the various ‘ASEAN Plus’ groupings such as ‘ASEAN + 3’ with China, Japan and South Korea (Hamilton-Hart, 2012). Additional scholars have used the concept of MLG originally developed to understand the EU, to understand governance in particular countries, for example the recent focus on governance in Indonesia which appears in a special issue of the journal Policy Studies (Purwanto & Pramusinto, 2018). Here the focus is on waves of decentralization beginning in 1999 in Indonesia, strengthening the role of district, municipal governments, following the 1997 Asian Financial Crisis. ASEAN, and its various groupings such as ASEAN +3, also mobilize institutional structures to share knowledge in rapidly developing extraordinary circumstances. For example, the ASEAN health ministers met with various dialogue partners, including the plus three countries to ‘further enhance the regional collective response including sharing of lessons learnt based on their respective experiences in slowing down or halting the outbreak of COVID-19’ (ASEAN, 2020).

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ASEAN notes that this builds on earlier cooperation in the area of public health emergency preparedness and response, such as the SARS (Severe Acute Respiratory Syndrome) outbreak in 2003 and the H1N1 influenza pandemic in 2009 (Ibid.). While regionalism and development have been intertwined for decades, recently the focus by scholars has been on a broadened conceptualization of regional governance. By focusing on the promotion and fostering of transnational relationships amongst a wide variety of actors, one can better anticipate the challenges between regional market-making and sustainable development. Various scholars are stressing the importance of regional development governance (RDG), and how state and non-state actors from a region may produce improved policies to accommodate development (Bruszt & Palestini, 2016). These authors note that a key goal for RDG is to use regional public power to create and upgrade institutions to increase the competitiveness of various economic actors who can benefit from the opening of regional markets. They emphasize that the ‘distribution of opportunities in more open markets depends on the provision of regional public goods such as infrastructure connectivity, energy integration, and capacity building through development policies that could broaden the range of beneficiaries of more open markets’ (Ibid, p. 378, citing Rodrik, Subramanian, & Trebbi, 2004; Bruszt & McDermott, 2009; Jordana & Levi-Faur, 2005; Estevadeordal, Frantz, & Nguyen, 2004). This approach stresses the importance of moving from simply dyadic state-to-state relationships within a region, or business to business, to multiplex interactions involving not only states and stakeholders, but NGOs, civil society organizations (CSOs) and subnational governments. While Bruszt and Palestini clearly emphasize economic aspects of these developing regional models of development, the chapters in this book incorporate these economic perspectives also into broader challenges of governance in other policy domains with an emphasis on the multiplex interactions of a variety of actors in development. The authors in this volume position their chapters as a post-colonial, critical reflection of the challenges of governance resulting from the pursuit of a common regional identity and voice; with regards to key themes of human rights, democracy, sovereignty, accountability, equity and sustainability resulting from economic growth and development, and regional integration. Key contributions include the process tracing of human rights charters and institutions (particularly for women and children) in the region (Thailand, Indonesia), and insights into democracy in action in Papua in light of decentralization (Indonesia), trade policies and negotiations in the automotive industry (Malaysia, Indonesia, Thailand), legal institutional change due to global economic forces (Vietnam), and how foreign powers are viewed and constructed by individual nations (Indonesia). In addition, the chapters delve into the locality and geographical differences in saving behaviour in relation to financial institutions (Indonesia), how mobility inequality affects access to education (Indonesia), examine the role of community in high impact industries such as

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forestry and mining and tourism (Indonesia), and repositions the role of food and food security in reshaping the ongoing polity narrative (Vietnam). Within these contributions, challenges to governance are raised such as: 1. the mismatch between political hierarchy, and environmental and social impact. For example, how transportation network usage does not always correspond to the governance structures and how the location of financial institutions differs from where they are needed the most, 2. the delicate dance between financial interests vs. the needs of the community, for example in balancing food security and industry, negotiations between exploitative industries and the indigenous population and, 3. the formation of a sovereign nation’s ideals and policies in lieu of foreign and regional pressures. Evident in the adoption of IP law for global trade, negotiations with regional neighbours in automobile parts production and trade barriers. Together, these questions provide a choreographed cacophony of the different identities and voices within Southeast Asia and ASEAN. The authors and editors argue that the common voice is indeed a multiplicity of voices and the differences are lessons and best practices to inspire, translate and adapt by relevant stakeholders for each individual region and member state. We have consciously sought to feature the voice of local academics, activists, researchers and policy makers in dialogue with international academics and researchers with expertise in this region. There is a fair distribution of cases and analysis over the key member states in ASEAN to provide validity to the views presented. The chapters are a result of an ongoing discussion and debate within the Groningen Research Centre for Southeast Asia and ASEAN (SEA ASEAN) between our experienced and visiting researchers. SEA ASEAN is a multi-faculty, interdisciplinary research group aiming to bridge high-quality scholarly research, with policy relevance and a concern for societal outcomes, in the study of the nations and societies of Southeast Asia and ASEAN as a regional actor. The doctoral candidates are supervised by an interdisciplinary team and are policy makers or academics from Southeast Asia pursuing their doctoral studies in the Netherlands with scholarships and grants primarily from their own government.

1.2  Book Structure The book is organized into four sections. The first section introduces the fundamental political institutional dynamics that are in play within the region and the interplay between regional forces and national norms. Here, the chapters discuss the move forward in regional institutions for human rights and democracy, particularly for women and children, and how conventional approaches to these institutions have

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to consider Southeast Asian norms and local culture. The second section tackles the economic and legal discourses that various member states face in relation to external and internal pressures related to international and regional trade and industry. The authors focus on trade relations between member states within the automotive industry, how political discourse forms foreign trade policies and strategies, and how international regulations require sensitive and careful translation in the form of IP law. The third section focuses on issues of sustainability and equity resulting from the vast socio-spatial differences in the varied cities and regions of member states. Here, examples where governance is required to rectify differences in terms of food security, transportation governance and effects of location of financial institutes are discussed. In the final section, the authors discuss dilemmas resulting from economic growth in exploitative industries (forestry and tourism) and the impact that has on the local and regional community through the lenses of inclusivity and justice. The book presents a varied and multidimensional view of challenges of governance in Southeast Asia and ASEAN through the variety of disciplines and nationalities involved. The discussions are broached by economic and financial, international relations, legal, political science, and urban studies and planning scholars. We will next introduce each section of the book.

1.2.1  R  ights and Democracy: Political and Institutional Dynamics This section of the book focuses on the political and institutional dynamics of citizen participation in the political system, the protection of the rights of citizens, the role of the citizen in democratic decision-making, and the role of civil society organizations. Many of the authors contributing to this section begin by taking account of historical developments in the relation between citizens and the state, and trace long and fraught dynamic processes sprinkled with bouts of accelerations of change. The issue of regional coordination emerges and is placed in the Southeast Asia historical and institutional context (see Netipatalachoochote, Ciacchi and Holzhacker, Wahyuningrum). The chapters also highlight a lack of good governance culture (see Efriandi, Couwenberg and Holzhacker, Pasaribu, Vanclay and Holzhacker, Netipatalachoochote et  al., Nguyen van Quoc, Trell-Zuidema and Holzhacker, Wahyuningrum). It is noted that often consensus is key for regional decision-­ making, but agreement usually excludes enforcement mechanisms and sanctioning for noncompliance. There remain active debates about the sense of the community vs. the rights of individuals, and the role of norms and values in what is good for the community vs. individuals (Wahyuningrum). A key challenge of governance in this section relates to the challenge of the accommodation of local practices, norms and culture (see Nguyen van Quoc et al.) vs. evolving free and fair democratic decisionmaking (see Efriandi et al.) with respect for human rights.

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1.2.2  S  overeignty and Trade Alliances: Economic and Legal Discourse This section turns to a consideration of economic matters and trade, and the debate and tension which may emerge between state sovereignty vs. regional integration and trade alliances. We begin here with a discussion of the symbiotic relationship between commercial and state interests (see Permana, Hoen and Holzhacker), and the complications which emerge within countries through the conflict of interests which emerge within state bureaucracies and with these various competing bureaucracies and stakeholders. This can result in inefficiencies and incoherency in state positions, which makes regional integration negotiations and decision-making difficult in this area. The level of economic integration differs greatly across various sectors within ASEAN and there may be a fine balance to be struck between existing domestic supply chain demands vs. that of competition on the international market. In this section, we next turn to weighing local cultural practices vs. international economic integration (see Nguyen Phan). There are great political and economic pressures from external sources to conform to international agreements and treaties, but developing countries may consider whether these costs outweigh the benefits? (see Nguyen Phan). Finally, this section focuses on how foreign policy is constructed and made. We consider here the influence of leaders and political elites in establishing foreign policy (see Farnebeun).

1.2.3  Sustainability and Equity: Socio-Spatial Differences This section explores the effect socio-spatial differences have on the achievement of sustainable development and social equality. Here the authors showcase how geographical differences have a greater impact on social divides than what is considered within current policy frameworks and that intra-regional differences persist in Indonesia. We start with a chapter that examines vast differences in financial inclusion as seen through an empirical examination of which firms and individuals can access and make use of formal financial services in Indonesia (see Rumbogo, McCann, Hermes and Venhorst). The fundamental issues of the challenges here are rarely discussed in literature from more developed regions of the world. The fact that simple access to physical banks and information on how to participate in formal banking is lacking demonstrates the potential that still exists to increase financial inclusion with a few salient investments. This also demonstrates how the impact of certain challenges of governance is amplified for the poorer segment of society who are not usually considered in the broader purview of national policies. This inequality is widespread in the ASEAN region and is presented as income (see Rumbogo et al.) and as mobility inequality (see Hidayati, Yamu, Tan and Holzhacker). The latter  chapter demonstrates how current structures (i.e. physical infrastructures)

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exacerbate these inequalities by tracing the restriction or encouragement of access to educational facilities in informal settlements in central Jakarta (see Hidayati et al.). Both chapters contribute to a discussion based on empirical data to diagnose and determine the scope of inequalities and how there are knock-on effects to said inequalities such as intergenerational poverty and lack of social mobility (see Rumbogo et al.) to diminished access to educational facilities which again impedes social mobility (see Hidayati et al.). A key challenge to governance is to not overlook the geographical distribution and difference across this vast region.

1.2.4  I nclusivity and Justice: Community and Growth Dilemmas In this last section, we discuss the delicate balance between local and communal needs and that of the need to increase economic development. The topics discussed range from the need for social license to operate in the forestry industry (see Pasaribu et  al.) to approaches to include local community in the tourism industry in Bali, Indonesia (see Kusumawati, Herman and Holzhacker) to how the fish death environmental and food incident in Vietnam unleashed civil society discourse (see Nguyen Van Quoc et al.). There seems to be an implicit scale trading off economic gains for local and communal wellbeing. This is an overly simplistic approach that has led to numerous challenges in which actors at times exploit dominant economic rationale to suppress or exploit community interests. This contributes to multiple challenges of governance as the current policy structure does not always consider the values and beliefs of local communities. Together with irregular coordination and the loopholes in the system, such oversight can lead to potential manipulation or exploitation of the local community and/or indigenous peoples (see Pasaribu, et al.; Nguyen Van Quoc, et al.). This results in a range of responses to policy for inclusivity where the local community is positively consulted, engaged and involved (see Kusumawati et al.) and where the community is negatively ignored in the face of economic gains or losses (see Nguyen Van Quoc et al.). Here, the authors showcase how important local values, beliefs and sentiments are in engaging inclusive and just policies to overcome challenges of governance. We will now discuss each chapter individually by section, providing a brief introduction, the methodology used, the theoretical perspective, and the challenge of governance presented in the chapter. In this way, we wish to demonstrate the range of methodologies and theoretical perspectives from various disciplines, which are employed in this volume to address the overarching theme of challenges of governance.

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1.3  R  ights and Democracy: Political and Institutional Dynamics 1.3.1  N  etipatalachoochote, Ciacchi and Holzhacker: ‘Regional Institutional Development of Human Rights’ This chapter provides a critical analysis of the development of a human rights institution in Southeast Asia focusing on the ASEAN Intergovernmental Commission on Human Rights (AICHR). The authors present the progressive development of this institution over time as a critical contributor to further strengthening and building a regional human rights institution. This chapter contributes to a growing view that AICHR’s achievements over time may significantly contribute to how human rights are viewed and protected regionally in the future, including discussions on the possible creation of a regional court of human rights. The chapter first focuses on how ASEAN responded to demands to create a regional human rights institution as an agent to deal with human rights issues. The chapter traces the historical development of AICHR, provides empirical evidence from Joint Communiqués, and analyses statements by a Working Group and ASEAN elites’ speeches. Second, it asks how AICHR has expanded their role over time to significantly contribute to the improvement of human rights in Southeast Asia. Here, the chapter focuses on various ways AICHR has been active in improving human rights, including mobilizing on human rights issues, organizing campaigns, dialogues and events—and it has tried cautiously and incrementally to expand its mandates and engagement across the region. An example of this is provided by analysing how AICHR expanded beyond its human rights promotion power to include protection, through its role in the enactment of a legal instrument; the ASEAN Convention against Trafficking in Persons, Especially Women and Children (ACTIP). The chapter uses principal-agent theory to map the relationship between a state or region and the institution which it has built to help it overcome their regional concerns. It presents Member states as principals and the regional human rights institutions as agents. A central tension in the creation of this relationship between the Member states and the institutions of ASEAN, is the historical development of the ‘ASEAN way’ placing priority on state sovereignty and non-interference in the affairs of other ASEAN states. In terms of methods, the chapter combines legal perspectives with insights from institutional theory in political science and international relations. It traces the development of AICHR over time, and analyses the role and achievements of AICHR within the overall institutional structure providing for the promotion and protection of human rights in the region, including international and national mechanisms, and the engagement of civil society. In terms of the challenge of governance offered in the chapter, the focus of the discussion and argument is that while Southeast Asia has systematically built and developed AICHR to promote human rights in the region, the institution needs to develop further to have legal powers of protection. The challenge is to create greater

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cross-national regional coordination and complementarity to protect human rights. The authors note that at times ASEAN member states themselves have not been able to manage human rights situations which occurred in each respective state. Creating a stronger human rights institution as an agent of ASEAN is critical because some state members lack technical expertise, credibility, legitimacy or other resources to deal with human rights issues on their own.

1.3.2  W  ahyuningrum: The Institutionalisation of Human Rights in ASEAN This chapter focuses on the institutionalization of human rights in ASEAN, and notes the ‘human rights duality’ in the region, reconciling international norms with regional particularities (norms/values). For some commentators, the ASEAN Way is seen as incompatible with the enforcement of human rights law because regional monitoring entails interference in domestic affairs of the member states (Aguirre & Pietropaoli, 2012). But here the focus is on the gradual but systematic process of developing the AICHR and AHRD in achieving the institutionalization of human rights. Wahyuningrum traces how human rights have been institutionalized in ASEAN in the period of 2007–2013, and inquires to what extent such processes have challenged governance in Southeast Asia? She concludes that the ASEAN member states have attempted to localize the international human rights norms by considering their own experience, political calculation, perception and engagement with the international norms of human rights as well as the national interests. The experience of being dominated by foreign powers also contributes to the shape of ASEAN norms on human rights. To understand the process of institutionalization of human rights and to identify the underlying challenges of governance, Wahyuningrum assesses three major events in ASEAN in the period 2007–2012—the drafting of Article 14 of the ASEAN Charter, the TOR of the AICHR and the AHRD. She is able to carefully follow the process over multiple working drafts of these critical agreements, because the author is observer and participant during many of the key events. Her theoretical approach is based on the localization framework (Acharya, 2004) to highlight the importance and different roles of regional actors in fusing international norms to become regional ones, such as ‘norm entrepreneurs’ (the ones who promote the new norms), ‘norm antipreneurs’ (those who defend the status quo), and ‘creative resisters’ (those who are against a new norm but are willing to change with persuasion) (Bloomfield, 2015, pp. 21–22). In this framework, regional actors are not passive in the process of localizing international norms, but rather actively participate by applying a number of strategies such as ‘framing, ‘grafting’, or ‘stigmatizing’ the norms. Framing usually aims to make the global norms appear local by using language that names, interprets and dramatizes them (Finnemore & Sikkink, 1998, p. 268).

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In terms of the challenges to governance, Wahyuningrum remarks that unlike in the West, Asian society often considers a community’s interest as having a greater importance than the individual one. Institutionally, AICHR cannot respond well to grievances put forward by individuals and human rights groups. The AICHR’s effectiveness depends to a large degree on the consensus of all member states, which delay possible strategic decision-making in addressing human rights issues in the region in a timely manner.

1.3.3  E  friandi, Couwenberg and Holzhacker: The Noken System and The Challenge of Democratic Governance at the Periphery: An Analysis of Free and Fair Elections in Papua, Indonesia This chapter examines the problems of political decentralization in Indonesia by analysing the practice of the Noken system during the local direct election in selected regions in Papua. Previous studies have made little attempt to address the question of how decentralization is implemented in various regions across Indonesia. This chapter offers a different perspective by analysing problems of local direct elections as part of political decentralization and their implications for the democratization process in Papua. Despite greater authority due to the decentralization scheme, the development and democratization progress is lagging compared to other regions. The issues are highly relevant to Indonesia as a country with high cultural and ethnic diversity. Issues of concern to indigenous people and ethnic minorities have often been seen as ‘problematic’ to the idea of a unitary country with 1127 ethnic groups and 328 local languages. Efriandi et al. ask are free and fair elections possible under the Noken system in Papua? The chapter applies indicators from the literature of free and fair elections, and concludes that the absence of law to regulate the practice of Noken during the election becomes the main factor why the free and fair ideal dimensions are not achieved in the Noken system. The incompatibility between the principle of democracy and the customary practice creates the potential for fraud and is vulnerable to misuse by certain candidates to influence the voting results. In terms of methodology, the chapter derives eight indicators of free and fair elections to analyse the problems in every stage of election: before the election, during the election and after the election. These indicators emerge from theories of political decentralization, to the principal–agent relationship between local officers and citizens, to local government accountability with proper checks and balances. In terms of challenges to governance, the chapter broadly focuses on the tension that may exist at times between local cultural traditions and democratic ideals. The absence of law and regulation to standardize voting practice may hinder national conceptions of democratic governance, in the era of decentralization.

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1.4  S  overeignty and Trade Alliances: Economic and Legal Discourse 1.4.1  P  ermana, Hoen and Holzhacker: Framing Trade Policy Preferences and Dialogues in ASEAN Economic Integration This chapter focuses on trade policy from the perspective of both state and non-state actors for ASEAN Economic integration. It highlights the policy preferences and policy dialogues amongst stakeholders that shaped ASEAN economic integration within the automotive industry in Indonesia. The chapters contribute to the discussion on the extent to which EU-based theories on regional integration may be suitable to ASEAN, as a regional body based on principles of intergovernmentalism instead of supranational institutions. In Indonesia, major economic initiatives may face resistance during implementation by various stakeholders. It is the responsibility of the government to ensure that during the policy process, actors from various sides, perspectives and interests are involved to have an effective representation to channel interests. This research may be seen as a baseline to assist in the development of a more inclusive model of decision-making in Indonesia for ASEAN economic initiatives. Here the focus is on the automobile parts industry. Why did the state (Indonesia) propose the automotive industry as one of the priority sectors of integration in ASEAN? What are the interests that construct the policy preference? Indonesia’s automotive industry has involved itself in a global production network, but Indonesia’s involvement goes only as far as assembly activities to serve domestic markets, which is a relatively low value position in the cross-border production network. Despite the automotive industry not being a major export for Indonesia, it serves as one of the more important driving forces for Indonesia’s preference to integrate regionally. A driving force of an individual country’s decision for integration is to secure national economic growth. For the state, a commitment to securing wealth is a crucial track to acquiring legitimacy from its constituents. The relations between commercial and state interests can be seen as symbiotic in the case of the automotive industry. The chapter employs the methodology of process tracing, to follow the economic integration process and critically reflects on the often-neglected competing interests, and policy agenda setting, through interviews with key informants (state: ministries, private sector: executives/top management of sector). The theoretical frame is based on liberal intergovernmentalism and Strategic Preference Theory, focused on two key variables, the degree of economic interdependence in the overall regional economic structure and sectoral-trade interdependence. In terms of the challenges to governance, the chapter concludes that the level of integration in sectors differ greatly, and when issues arise between countries, there are an increasing number of non-tariff barriers (NTB) used to hinder competition and manage the domestic consensus towards integration. For ASEAN itself, Permana et al. notes that the integration of the automotive industry is one of the 12 priority integration sectors in

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ASEAN, as it continues to push for more efforts to ensure the benefits of regional integration are fairly distributed across the member states and broader segments of society.

1.4.2  N  guyen Phan: Protecting Intellectual Property Rights in Vietnam: Opportunities and Challenges This chapter focuses on how the intellectual property (IP) law system creates both benefits and burdens to a developing country like Vietnam, which creates challenges to governance in Vietnam domestically and within the international system. The creation of IP law to conform to international demands is part of long-term strategy of international economic integration, focused on the motivation to join the World Trade Organization (WTO). The chapter first focuses on how a strong IP law may both benefit and create burdens for a developing country such as Vietnam. IP is believed to promote fair competition, encourage creativeness, enhance technology transfer, absorb foreign investments and contribute to the procedure of harmonizing with the international system of IP law, but in a decade of practice in Vietnam there are restraints due to unclear regulations and practices, and cultural resistance within the society. For the challenges to governance, the chapter notes the high cost of capacity building for the IP offices in Vietnam and other developing countries, with budgetary and capacity issues for effective monitoring, enforcement, litigation and capacity building to maintain a strong system of IP protection. The chapter also notes the ineffective implementation of the IP related regulations. In terms of societal acceptance, the chapter asserts that in Asian culture, the idea of ‘private property’ in IP is considered as a new and foreign concept that is hard to accept. Hence, to explain the massive rate of IP right infringement in Asia, some researchers suggested a link to the ideas of so-called ‘Asian-values’. The wide-spreading influence of Confucianism in East-Asia, including Vietnam, encourages people to reproduce existing works to meet the needs of users, rather than call for verbatim duplications. This concept may restrain the effort of IP reform by facilitating copyright infringements.

1.4.3  F  arneubun: Indonesia–China Strategic Partnership: Role of Vision, Bureaucratic Actors, and Domestic Political Change This chapter focuses on the impact of domestic political change on Indonesian foreign policymaking at the time of President Susilo Bambang Yudhoyono (2004–2014). It includes an analysis of the roles which bureaucratic actors play in addition to presidential leadership in the context of domestic political change. The chapter fills a knowledge gap, by taking a bureaucratic politics approach for analysing foreign

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policies of non-Western states on issues that are not related to national security. The approach considers the neglected bureaucratic actors to understand Indonesian foreign policy, in addition to the President and the minister of foreign affairs. This contributes to a broader debate amongst Indonesian academics, and in the society at large, on how the country’s foreign policy is made and for what purposes. Which principal factors influenced President Yudhoyono to sign the strategic partnership with China and later upgrade it to a comprehensive strategic partnership? The underlying driver of Indonesia’s relation with China was Yudhoyono’s vision of making Indonesia prosperous that compelled him to promote a strategic partnership with China, the concrete shape of this relation is largely determined by the support from key bureaucratic actors whose policy preferences derive from their bureaucratic positions. The important role of the government actors is the result of domestic political change which has also generated a shift in the perception of China’s role in international affairs. In terms of method, the chapters analyse data from primary sources, notably government speeches, reports, policy statements, and secondary sources like journals, books, and newspaper articles from the period. Theoretically, the chapter combines a bureaucratic politics model with foreign policy analysis to apply in the Indonesia case. The contribution to the challenges to governance is a greater understanding of the various factors which influence important foreign policy decision-­ making within a country, specifically towards China, a country with a growing engagement across Southeast Asia.

1.5  Sustainability and Equity: Socio-Spatial Differences 1.5.1  R  umbogo, McCann, Hermes and Venhorst: Financial Inclusion and Inclusive Development in Indonesia This chapter examines if financial inclusion affects regional economic development in Indonesia through a quantitative analysis of empirical evidence on the relationship between financial inclusion and economic development at the regional level. It starts with a cross-country comparison across the SEA region for patterns of financial inclusion as a marker of inclusive development and focuses on Indonesia with a panel regression model to examine the extent to which financial inclusion is associated with economic development at the regional level of 33 provinces in a five year period. The authors counter existing literature that financial inclusion is critical for achieving positive macroeconomic outcomes such as higher economic growth. With their analysis, they suggest that a growing financial sector is beneficial for the economy. However, it is not strongly and consistently related to an increase of per capita welfare nor does it demonstrate a significant association between financial inclusion and economic level of development at the regional level.

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This presents several challenges to governance. There is the general goal that needs to shift the current development approach of economics first as a priority towards a more inclusive growth that could be achieved through financial inclusion. As such, developing successful financial inclusion policies across different regions within countries is a major challenge due to the severe regional differences in educational and information levels. Concretely, policies that aim at further increasing the bank branch density in Indonesia, especially in areas outside Java and Sumatra, would be a welcome addition to address these challenges. The authors also point to the potential of technology as an avenue of information access for the neglected poorer segments of society given the widespread use of mobile phones in the country. This chapter shows why Indonesia is such an interesting case in explaining how intra-regional differences present and challenge the national priority agenda of financial inclusion. Its contribution is also in delving into aspects previously neglected in literature on the role of informal financial providers, such as moneylenders, family members, shopkeepers and group savings organizations such as so-­ called rotating savings and credit associations (ROSCAs). The authors assert that formal banking institutions have much to learn as to how they could offer more flexibility regarding access to and use of their services, to serve the broader needs of the community.

1.5.2  H  idayati, Yamu, Tan and Holzhacker: Understanding Mobility Inequality in Jakarta with Space Syntax This chapter examines and describes mobility inequalities in terms of access to educational facilities and uses Space Syntax as a diagnostic method. This innovative approach offers an understanding of the city through its socio-spatial structures by analysing the urban neighbourhood kampung of Menteng in Jakarta through utilization of the diagnostic method of Space Syntax. This spatial analytical approach helps the reader to understand how current socio-spatial structures correlate to access to education and what the relationship is between the physical elements of a city and its social activity pattern of utilization with the concept of accessibility via a mathematical street network model. Looking specifically at individual access to transport hubs and educational facilities at four levels (pre-school, primary, secondary and tertiary), the chapter asks how mobility inequality can be understood through socio-spatial structures (street network configurations and distribution of key urban functions) and how that affects sustainable development. The findings show that in Menteng, the wealthy neighbourhoods are more accessible by vehicular traffic (and via major transport hubs) while medium to low income neighbourhoods are characterized by higher pedestrian activities. The kampung with its informal paths and strong local spatial structure is more conducive to pedestrian movements at times despite physical

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infrastructural barriers (rail tracks and major thoroughfares). These are however, not without significant safety and crime risks. Given that higher quality of education is mostly accessible by vehicular movement, those with a disadvantaged background tend to opt for educational facilities of a lesser quality or more easily accessible by other non-vehicular modes. As such, this chapter contributes to existing research debates on mobility and transport justice with a microlevel spatial analysis of a Southeast Asian metropolitan city and provides a new analytical framework to understand how socioeconomic opportunities relate to socio-spatial structures. Unfortunately, the situation here applies to many other metropolitan cities in Southeast Asia such as Manila, Bangkok and Kuala Lumpur, where socio-spatial structures of unplanned settlements induce and increase both mobility and educational inequalities. The authors conclude by discussing how an overhaul of planning policies is needed and the need for sectoral (i.e. coordination between education and transport policy arenas) and multilevel (national to regional to local) policy coordination is required to attain the sustainable developments goals in the face of overwhelming attention for economic development.

1.6  I nclusivity and Justice: Community and Growth Dilemmas 1.6.1  P  asaribu, Vanclay and Holzhacker: The Pathway to Social License to Operate of the Forest Industry in Indonesia: Multi-Stakeholders Perspectives This chapter uses a case study research approach to study the social license to operate (SLO) practices of two major forest management companies operating in Central Kalimantan, Indonesia. The chapter examines whether the concepts that underpin SLO (legitimacy, credibility, and trust) can be applied to the practices of the forest industry in Indonesia, the general applicability of the SLO concept, and what can be done to improve it. The authors state that SLO is an outcome of complex interactions between many factors and actors rather than being the direct result of company actions alone. Despite international regulations, actors often confuse legitimacy with economic legitimacy in terms of compensation and that it is difficult to untangle genuine legitimacy without monetary transfers to the community. The authors illustrate the tenacious balance needed between efficacy and that of local cultural norms and wisdoms. There is also an important difference between the easily confused SLO and any applicable legal licenses—one does not guarantee the other. The first is given by the community after a possibly long and careful process while the other follows finite regulations and governs the permission to carry out specific activities over a specific period of time in a given area. This confusion appears to affect the companies and

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local government, and the authors advise the need for early dialogue to clear up further confusing land entitlement/land tenure discussions and to ensure adequate community engagement. The chapter contributes by exploring the applicability of SLO, an underexplored concept to balance governance of industries with communal needs, to the forest industry in Indonesia. This is an avenue for host communities and local governments to achieve sustainable community development. However, the challenges to governance exposed here include the lack of oversight or control by government at any level to prevent unscrupulous operators, how companies and communities mistakenly perceive economic legitimacy as key to earning SLO. The underlying issue is a lack of a culture of good governance or an awareness of conflicts of interest that can lead to certain individuals to have unrestricted influence and risking corruptions across all levels and the inability of local people to seek redress. An important discussion raised in addition to the prioritization of economic benefits over environmental and social benefits and rights is that of how in current policy structures and narratives, the rights of the indigenous population remain unrecognized.

1.6.2  K  usumawati, Herman and Holzhacker: Foreign Direct Investment, Inclusive Growth, and Institutions: A Case Study of the Tourism Sector in Badung District This chapter asks what is the impact of foreign direct investment (FDI) on inclusive growth in the tourist sector in a particular district in Bali, Indonesia and how various institutions and stakeholders have assisted this process. As one of the positive examples in this book, the chapter focuses on the tourism sector of the Badung District in Bali, the authors analyse the four channels of employment creation: productivity improvement, establishment of Corporate Social Responsibility (CSR), linkages to Micro Small Medium Enterprises (MSMEs) as enacted by governments, and the role of foreign companies’ engagement with the community. The authors’ institutional analysis of hotels in the Nusa Dua area demonstrates how inclusivity is guaranteed through engagement, voice and accountability. Examples are given as to how employment creation is achieved with training and internship programs for local educational institutes, internal employment announcements and prioritizing hiring of disabled local persons. The chapter also demonstrates how CSR is achieved with the engagement of local community activities through local channels (via the head of the village) and implemented in actions such as the hiring of local artisans, allowing street hawkers into hotel areas, and the purchasing of local foods. Given the current focus on peak tourism, this chapter is an important contribution to understand how it is possible to reconcile economic growth with inclusive policies. It however also points out important challenges to governance such as how can actors facilitate inclusive growth without sacrificing economic growth while adapting to local culture and contexts. Although the chapter showcases a positive

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attempt of foreign companies to purposefully and successfully engage with local community/stakeholders, the question remains if this is also scalable across the country and eventually over the region. It is with great interest that the authors link how the local philosophy of Tri Hita Karana—a philosophy asserting that happiness and wealth can be attained by maintaining harmonious and balanced relationships between humans and God (parhyangan), humans and other humans (pawongan) and humans and the environment (palemahan)—are in line with the concept of sustainable and inclusive development and how the international hotels in Nusa Dua, Bali practice these interactions.

1.6.3  N  guyen Van Quoc, Trell-Zuidema and Holzhacker: Fish for Transparency—Food as a Trigger for Transboundary Activist Discourse Crisis is a great litmus test of systems and their resiliency to adapt and react. This chapter embodies that by recounting the cause and effects of a specific case of large-­ scale industrial pollution from the Formosa Ha Tinh Steel Corporation leading to massive fish death along the central coast of Vietnam, and how food as both a resource and a social construct, can play in showing challenges to governance. Using the theories of environmentalism and discursive resonance, the authors perform a discourse analysis of various data sources (i.e. various media, policy documents and interviews) to identify the narratives from the activists and the protestors, and the government in dealing with the fish death environmental incident. This incident is seen as a turning point in state-society relations where general food safety concerns are played up against larger commercial interests. The findings show the role of food in enabling both rural and urban activists to voice their (broader) concerns related to the governance of environmental resources and how those concerns of food safety and fear of losing their livelihood evolved to demanding governance accountability and transparency despite the differences in socio-­ political capital and geography from the various groups. It is also a lesson in the damaging effects of corporate and government arrogance that lean towards denial and oppression. The chapter throws up important challenges to governance such as what holds more value to society at the end of the day and what can civil society do in the face of such a crisis. Vietnam is a state adjusting to new participatory and economic challenges and there is a discrepancy in how the state can and should react to mass anger and outrage. This presents the opportunity for the rise of a civil society to play a role in such discussions which was previously limited due to the political system and culture. This lesson applies to various other governments in the region. Next, we discuss some major themes that have emerged across the various sections and chapters and conclude on the challenges to governance raised across the book.

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1.7  Conclusions The contributions in this book highlight a fundamental issue in understanding challenges to governance in the Southeast Asia region. The fact is that many of the existing theories, concepts and instruments were not developed specifically to consider local knowledge, cultures and contexts. This lack of fit returns again and again throughout various contributions. The basis of what is considered acceptable basis of good governance, i.e. democracy and individual representation (see Netipatalachoochote et al.; Wahyuningrum; Efriandi et al.), efficacy and transparency (see Permana et al.; Nguyen Phan et al.), legislative and executive balance (see Farneubun; Nguyen Van Quoc et al.) and equal and fair distribution of power and resources (see Rumbogo et al.; Kusumawati et al.; Hidayati et al.; Pasaribu et al.) is not a given in this region as a result of historical and cultural developments. This leads inevitably to challenges in the implementation and enactment of governance. First and foremost, there is a discrepancy of scale in governance structures and the actual physical scale at which policies are eventually enacted. We see this in the contributions of Hidayati et al. and Rumbogo et al. that such discrepancies have far reaching societal impacts of exacerbating poverty and educational gaps. As such, any policy has to be sensitive to the actual scale of implementation. It is difficult enough to standardize across one nation, much less across an alliance of nations such as ASEAN. In support of this, Efriandi et al., Kusumawati et al. are examples of how local implementation can vary in terms of negative or positive outcomes. Next, the region as a whole is still reeling from the unprecedented rates of economic growth and political change in the past decades and have adopted an ‘economy first, society and environmental second’ narrative in most of the policies across the region. Nguyen van Quoc et al., Pasaribu et al., contribute examples to how this is still an ongoing struggle. We recognize that it is as important to ensure livelihoods as to protect societal and environmental interests. However, walking into the new era of climate change and resource depletion, it is time for the region to perhaps rethink its priorities and how this can be translated across all nations and across all scales of governments. Last but not least, the above  narrative is parlayed into the tensions between sovereign ideals and policies in relation to a regional policy objective. Netipatalachoochote et  al., Wahyuningrum, Nguyen Phan et  al., Farneubun and Permana et  al. showcase this to great effect. This is a considerable challenge to overcome if ASEAN is to be a legitimate and effective representation of the region in the face of larger political and economic power blocs on a global stage. Southeast Asia is increasingly connected together as a region, as well as internationally across the globe. This has increasingly impacted the nation-states and the lives and wellbeing of citizens across Southeast Asia. We hope that our careful research and analyses found in this volume will shed some light on these dynamic processes.

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References Acharya, A. (2004). How ideas spread: Whose norms matter? Norm localization and institutional change in Asian regionalism. International Organization, 58(2), 239–275. Aguirre, K., & Pietropaoli, I. (2012). Human rights protection the ASEAN way: Non-intervention and the newest regional human rights system. Human Rights Law Review, 1(2), 276–311. ASEAN. (2008). The ASEAN charter. Jakarta: ASEAN Secretariat, January 2008. Retrieved May 1, 2018, from https://asean.org/storage/images/archive/publications/ASEAN-Charter.pdf. ASEAN. (2020). ASEAN senior health officials enhance regional collective actions against COVID-19 pandemic. Retrieved from https://asean.org/ asean-senior-health-officials-enhance-regional-collective-actions-covid-19-pandemic/. Bloomfield, A. (2015). Norm Antipreneurs and theorizing resistance to normative change. Review of International Studies, 42, 1–24. Bruszt, L., & McDermott, G. (2009). Transnational integration regimes as development Programmes. In L.  Bruszt & R.  Holzhacker (Eds.), The Transnationalization of economies, states and societies: New challenges for governance in Europe. Berlin: Springer. Bruszt, L., & Palestini, S. (2016). Regional development governance. In T. A. Börzel & T. Risse (Eds.), The Oxford Handbook of Comparative Regionalism (Oxford). Oxford: Oxford University Press. De Prado, C. (2007). Global multi-level governance: European and East Asian leadership. Tokyo: United Nations University Press. Estevadeordal, A., Frantz, B., & Nguyen, T.  R. (2004). Regional public goods: From theory to practice. Washington, DC: Asian Development Bank and Inter-American Development Bank. Finnemore, M., & Sikkink, K. (1998). International norm dynamics and political change. International Organization, 52(4), 887–917. Hamilton-Hart, N. (2012). Regional and multi-level governance: East Asian leadership after the global financial crisis. Asia Europe Journal, 9, 237–254. Jordana, J., & Levi-Faur, D. (2005). The diffusion of regulatory capitalism in Latin America: Sectoral and National Channels in the making of a new order. Annals of the American Academy for Political and Social Sciences, 598(1), 102–124. Marks, G., & Hooghe, L. (2003). Unravelling the central state, but how? Types of multi-level governance. American Political Science Review, 97(2), 233–243. Marks, G., & Hooghe, L. (2004). Contrasting visions of multi-level governance. In I. Bache & M. Flinders (Eds.), Multi-level governance (pp. 15–30). Oxford: Oxford University Press. Piattoni, S. (2009). Multi-level governance in the EU. Does it work? In Globalisation and politics. Cambridge, MA: MIT. Purwanto, E. S., & Pramusinto, A. (2018). Decentralization and functional assignment in Indonesia: The case of health and education services. Policy Studies, 39(6), 589–606. Rodrik, D., Subramanian, A., & Trebbi, F. (2004). Institutions rule: The primacy of institutions over geography and integration in economic development. Journal of Economic Growth, 9(2), 131–165. Sbragia, A. (2010). Multi-level governance and comparative regionalism. In H.  Enderlein, S. Walti, & M. Zurn (Eds.), Handbook on multi-level governance (pp. 267–278). Cheltanham: Edward Elgar. Schreurs, M. (2010). Multi-level governance the ASEAN way. In H. Enderlein, S. Walti, & M. Zurn (Eds.), Handbook on multi-level governance (pp. 308–320). Cheltanham: Edward Elgar. Stephenson, P. (2013). Twenty years of multi-level governance: Where does it come from? What is it? Where is it going? Journal of European Public Policy, 20(6), 817–837. Thynne, I. (2000). The state and governance: Issues and challenges in perspective. International Review of Administrative Sciences, 66(2), 227–240. Yu, K. (2018). Governance and good governance: A new framework for political analysis. Fudan Journal of Humanity and Social Sciences, 11, 1–8.

Part I

Rights and Democracy: Political and Institutional Dynamics

Chapter 2

The Regional Institutional Development of Human Rights in Southeast Asia Stanati Netipatalachoochote, Aurelia Colombi Ciacchi, and Ronald L. Holzhacker

Abstract  The deliberation on a Southeast Asian human rights regime dates back to the 1993 World Conference on Human Rights in Vienna. From then, the emergence of an idea on regional institutional human rights development arose to address the absence of human rights mechanisms in the region. This chapter offers a critical analysis on the human rights institutional development in ASEAN. The initial focus of the chapter is on illustrating the step by step progress toward the establishment of an ASEAN human rights institution. This progress will lead to the understanding of how the demand for a human rights institution has been made by ASEAN. The arguments here are supported by the analysis of the Joint Communiqués of the ASEAN Ministerial Meetings (AMM) from 1993 to 2010 and the Workshop statements of the Working Group for an ASEAN Human Rights Mechanism (Working Group) which documents ASEAN elite’s official speeches and opinions. The analysis on this point demonstrates ASEAN’s attempt to build regional agents in terms of human rights. The principal-agent theory is applied to offer understanding on the logical relationship between member states (principal) and regional human rights institutions (agent). Institutional theory is applied with respect to the second point of this analysis, which is to scrutinize the creation of a human rights institution known as the ASEAN Intergovernmental Commission on Human Rights (AICHR). The functions of the AICHR are illustrated through an investigation of its mandates, work plans and statements of meetings since the year of establishment to clarify why regional human rights institutions have been vital and particularly how the S. Netipatalachoochote (*) Faculty of Law and the Faculty of Spatial Sciences, University of Groningen, Groningen, The Netherlands Faculty of Law, Siam University, Bangkok, Thailand A. C. Ciacchi Faculty of Law, The Netherlands Institute for Law and Governance, University of Groningen, Groningen, The Netherlands e-mail: [email protected] R. L. Holzhacker University of Groningen, Groningen, The Netherlands e-mail: [email protected] © Springer Nature Switzerland AG 2021 R. L. Holzhacker, W. G. Z. Tan (eds.), Challenges of Governance, Development and Governance, https://doi.org/10.1007/978-3-030-59054-3_2

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AICHR has expanded its role and power over time to increasingly improve human rights in ASEAN. Keywords  Human rights · Regional institutional development · ASEAN Intergovernmental Commission on Human Rights (AICHR) · Principal-­ agent theory

2.1  Introduction The advent of the Association of Southeast Asian Nations (ASEAN) in 1967 signifies a great step forward in regional integration in Southeast Asia. Under this regional collaborative effort, ASEAN’s performance on human rights has been limited and gradual, and the emergence of a truly effective mechanism to protect human rights has been conspicuously absent. Triggered by the World Conference on Human Rights held in Vienna, Austria, ASEAN’s first consideration for a regional human rights regime was formally instituted that very same year at the 26th ASEAN Ministerial Meeting (hereafter, “AMM”) (ASEAN, 1993). In view of this, Southeast Asian elites organizationally pushed forward the idea of a human rights body in article 14 of the ASEAN Charter (ASEAN, 2007) which seemed to be a vast leap forward given the past ambivalence of ASEAN member states governments. In 2009, a first human rights institution was eventually established which is called the ASEAN Intergovernmental Commission on Human Rights, also known as the AICHR (ASEAN, n.d.). Many scholars have commented on AICHR’s weakness, its lack of a powerful judicial system and the general regressiveness of ASEAN human rights (Bui, 2016; Thio, 1999). Yet, the argument advanced in this chapter is that the AICHR represents an effort to help institutionalize human rights in the region. Since the AICHR has been established, this intergovernmental organization has realized some achievements in the human rights field. For instance, the AICHR is the key performer in enacting the ASEAN Human Rights Declaration (AHRD) which provided motivation for ASEAN member states to amend their domestic laws and regulations. The AICHR was also a vital component in driving the creation of the ASEAN Convention against Trafficking in Persons, Especially Women and Children (ACTIP) in 2015. This chapter provides a critical and comprehensive analysis of the human rights institutional developments in ASEAN. The challenge of governance here in the context of ASEAN is the lack of an effective human rights institution. In this light, the chapter supports goal 16 of the United Nations Sustainable Development Goals which aims to promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable, and inclusive institutions at all levels. The content is divided into two parts.

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First, the chapter outlines the gradual development of the AICHR over time. It shows how ASEAN has expressed demands for the creation of this institution, and delegated to it certain roles for the promotion of human rights in the region and within the ASEAN member states. The purpose of this demonstration is to argue that the development of a regional human rights institution was highly imperative. In this regard, the principal-agent theory will be illustrated to show the linkage of state members and regional human rights institutions. The empirical evidence analyzed here involves the statement of the Working Group for an ASEAN Human Rights Mechanism (Working Group), as well as AMM statements from 1993 to 2009, which is the period when AICHR was being established. Next, the chapter analyses the role and achievements of the AICHR as a regional human rights institution as to what it has conducted after having been established for a decade. In particular, it looks at why the AICHR is important and how has this institution as a delegate of human rights of ASEAN expanded its role and power over time beyond the strict principle-agent model in order to improve human rights issues. In this part, the AICHR’s mandate, work plans and statements of meetings will be investigated to answer the research questions below.

2.2  Research Question The research questions are divided into two points. The first one is “How did ASEAN demand the creation of a regional human rights institution as an agent to deal with human rights issues?” In continuation, the second question asks “How has the AICHR expanded their role over time to significantly contribute to the improvement of human rights in Southeast Asia?”

2.3  Scientific and Social Significance of the Research This research is socially significant, because the research will be of use to a wide range of groups, individuals, and institutions engaged in human rights. Members of the ASEAN public can benefit from the information provided in the chapter. For policy makers of ASEAN member states, the findings of the research may help them be aware of the competency of the existing mechanism and how it may be further developed. Moreover, it will be useful for them to realize the next step of building a regional human rights institution. ASEAN had put a lot of effort in its endeavor to create AICHR in the past decade. These developments are an important idea to draw upon as the region proceeds to further discuss creating regional human rights institutions in the future. Academically, throughout the period of this research into the evolution of human rights in ASEAN, much criticism has been found particularly about how AICHR is

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not a fully-fledged regional commission that promotes and protects human rights as maintained by a global standard (Clarke, 2012). Exemplifying a different position of the AICHR, this chapter focuses on its development and contributions, its role and importance. In doing so, this chapter makes suggestions as to how AICHR’s achievements can be channeled to overcome present challenges to how human rights can be developed in the future.

2.4  Methodology This research is primarily based on the theoretical context of “the principal-agent theory” which has been useful in matters of regional political and legal integration and should be the initial notion to consider when dealing with matters of institutional development. This research uses the principal-agent theory by mapping out the relationship between a state or region and the institution which it has built to help it overcome their regional concerns. Next, the theory of institutionalism is scrutinized to offer a clear understanding why institutional development is highly significant and pertinent particularly for human rights issues in ASEAN. Secondly, the study espouses a legal analysis approach by laying out the foremost institutionalist arguments regarding the important role of regional human rights institutions. It uses both primary and secondary sources of reference to describe the role of the AICHR to ascertain why it is significant. It analyzes the AICHR’s performances, work plans and mandates, statements of AMM which are known as joint communiqués and Workshop statements of the Working Group to ascertain whether and to what extent their objectives have been realized. Empirical evidence testifies to the progress of regional institutional human rights development in this region.

2.5  Theoretical and Literature Context 2.5.1  T  he Principal-Agent Theory; Member States: Intergovernmental Institutions It is inevitable to begin with an explanation on the theory as to why ASEAN member states came together to create a human rights institution. The relevant concept here is “the principal-agent” theory. This theory facilitates the understanding of the affiliation of the regional human rights institution, implied to be the “agent,” and the member states, implied to be the “principal.” While on this explanatory route, the chapter should firstly clarify the actual connotation of the principal-agent theory as follows.

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The principal-agent theory in political science and economic context can be best described as a relation between a person or entity (agent) who agrees to work in favor of another person or entity (principle) (Jensen, 2000). Laffont and Martimort (2002) state that one party (the “agent”) is able to make decisions on behalf of, or impacts, another party: the “principal.” In the context of law, scholars describe this interaction as “the foundational principle of agency law is that the principals, who have chosen to conduct their business through an agent, must bear the foreseeable consequences created by that choice. Conversely, as the bearer of the risks, the principal is entitled to receive the benefits created by the agency relationship” (Dalley, 2011, p. 497). Scholars apply the principal-agent theory in terms of the relations between member states and International Organizations (IOs) and/or International Institutions (IIs) by examining IOs/IIs in their role as agents with various responsibilities to member states (Hawkins, Lake, Nielson, & Tierney, 2006). Hawkins and Jacoby (2008) exemplify agents as actors, for example, the Security Council and European Court of Human Rights (ECtHR) act as an agent of states, which provide states valuable information and may influence state human rights policies and preferences. The IOs/IIs as actors are very important in implementing policy decisions and pursue member states’ interests strategically (ibid.). Mearsheimer (1994) states that IOs/IIs are “sets of rules that stipulate the ways in which states should cooperate and compete with each other” in collective decision-making. States may also delegate powers to IOs/IIs when they hold problems of collective decision-making or socially intransitive preferences (Pollack, 2003). Thus, if states as a group cannot reach a constant agreement on a policy, they can delegate their powers to an agenda-setting agent to induce an equilibrium when one might not otherwise exist (ibid.). This shows a typical solution to the collective choice problem in domestic politics (ibid.). The reason why member states create IOs/IIs and how they operate are examined by some scholars. Important new research has begun to advance a political approach in which strategic, modern states purposely adopt and design IOs/IIs as agents in pursuit of their goals (Goldstein, Kahler, Keohane, & Slaughter, 2000; Koremenos, Lipson, & Snidal, 2001). Member states have tasked some IOs/IIs to act independently, even empowering them to sanction member states in order to help dispute resolution or reinforce treaty commitments (ibid.). Additionally, the principal-agent theory is defined in the sense of delegation. Williamson (1985) states that delegation is a conditional grant of authority from a principal to an agent that empowers the latter to act on behalf of the former. Agents receive conditional grants of authority from a principal, but this defining characteristic does not imply that agents always do what principals want (ibid.). Because agents have autonomy, which is defined as “the range of potential independent action available to an agent,” it is possible that they act in a way which is undesired by the principal (Hawkins et al., 2006, p. 8). This undesirable action can occur in the form of shirking, where “an agent minimizes the effort it exerts on its principal’s behalf” (ibid.). On the other hand, there are scholars which suggest occurrences which are the opposite of shirking, that IOs/IIs have expanded their mandate over time. Betts (2012) demonstrates this phenomenon with the expanding role and mandate of the

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Office of the United Nations High Commissioner for Refugees (UNHCR) which is prescribed by its Statute, to one which has undergone formal and informal adaptations overtime. The mandate expansion relates to two areas, namely, the scope of population under UNHCR’s protection, and the scope of the required activities to protect those populations. Namely, the UNHCR originally protected refugees, gave legal advice, and conducted work in Europe, its protection has now expanded to include, inter alia, internally displaced people and victims of natural disasters (ibid.). In addition to legal advice to states, the UNCHR also now offers humanitarian emergency response and material assistance and operates on a global scale (ibid.). Betts posits that this expansion is largely a self-directed (in other words IO-led, as opposed to state-led) change (ibid.). Monnet’s research corroborates the phenomenon of mandate expansion. She argues that IO’s “mission creep”1 in unexpected issue domains is made possible through the strategic mobilization of internal and external expertise (Monnet, 2017). She demonstrates this argument in the context of bioethics where entrepreneurial bureaucrats within UNESCO, an organization which has no direct mandate on bioethics, mobilized external experts in bioethics for the purposes of creating mission creep in the field (ibid.).

2.5.2  I nstitutional Theory: Definition, Character, and Significance One important concept related to human rights development is institutional involvement. Hence, the institutional theory is presented here to pave the way in understanding why institutions are very important, and how their conduct fulfills the community’s demand. Moreover, this theory further examines what are the characters of an institution that will allow it to overcome the envisaged collective social request, help improve political and human rights issues and influence states’ actions. North (1991, p. 97) notes that “institutions are the humanly devised constraints that structure political, economic and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights).” The basics of the institutional theory is that something identified at a higher level is used to explain processes and outcomes at a lower level of analysis (Clemens & Cook, 1999). Institutions comprise, for example, protection of rights, contract enforcement, government bureaucracies, and the rule of law, and also include behaviors and beliefs, norms, and social units (Amenta, 2005). March and Olsen (2006) describe an institution as a relatively enduring collection of organized practices and rules, surrounded in 1  Monnet understands “mission creep” as a phenomenon that takes place when international secretariats engage in a significant amount of activities into new policy areas (such as standard-setting activities, support programs, and dissemination activities). Mission creep does not necessarily involve a formal change in mandate.

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structures of meaning and resources that are relatively invariant in terms of turnover of individuals and relatively resilient to the characteristic preferences and expectations of individuals and changing peripheral circumstances. The components of order and commonness are created by institutions, political actors are also fashioned and limited by them as institutions act within a logic of suitable action (Béland, 2005). Institutions are carriers of identities and roles and they are markers of a polity’s character, history and visions and also provide bonds that connect people together (Amenta & Ramsey, 2010). Argument about the causal role of institutions point out that institutions particularly in the political field were also posited to have key impacts on the political identities, interests, preferences, and strategies of groups (ibid.). Greif (2000) views institutions as a “system of social factors” that guide, enable, and constrain the actions of individuals. Mearsheimer (1994) defines institutions as a set of rules that stipulate the ways in which states should cooperate and compete with each other. Immergut (1998) adds that an institution is regarded as a well-­ ordered structure systematized by rule-based procedures. Dai (2007) explains institutions in the sense of international institutions. She argues that international institutions can resolve collective action problems among states by monitoring states’ compliance with treaties. Monitoring is done by providing compliance information, as a result facilitating reciprocity, inducing compliance (ibid.). While definitional dissimilarities remain, the arguments of institutionalists have been shared here: international institutions can have an independent effect on state behavior (Jepperson, 1991). International institutions not only constrain state behavior by applying sanctions to enforce international law, they also help internalize new norms into states—including human rights norms (Hafner-Burton, 2005). Around the world today, institutions play a vital role in several fields in terms of being people’s and governments’ or member states’ representatives (Greif, 2000, p. 284). With regard to human rights, virtually every state has ratified at least one of the United Nations (UN) core international human rights instruments, reflecting that the UN is an international institution that influences countries around the world to agree upon the same objective (Phan, 2012, pp.  28–30). Globally, the UN has a number of human rights sectoral bodies such as the Office of the UN High Commissioner for Human Rights (OHCHR) and the United Nations Human Rights Council (UNHRC). Regionally, the European Court of Human Rights (ECtHR), the Inter-American Commission and Court on Human Rights (IACHR & IACtHR), and the African Court on Human and Peoples’ Rights (the Court) demonstrate that human rights institutions are exceptionally important (Ibid, pp. 38–39). The impact of the above-mentioned institutions on governments and state involvement can be explained in many ways. One vital method by which international and regional human rights institutions can be beneficial in changing state behavior in terms of human rights is to ease international human rights law promotion and codification (Cortell & Davis, 1996). International and regional human rights institutions help to create and advance human rights norms (Phan, 2012, p. 36). They can lobby national governments and mobilize public support for the creation and adoption of certain human rights norms (ibid.). They can form special

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committees or assign their experts and organs to draft human rights agreements and submit these documents for state consideration, deliberation, and approval (ibid.). At the same time States can also negotiate international human rights agreements, debate and deliberate the pros and cons of distinctions in wordings, and reach a compromise on the final version of texts through those institutions’ communicative platform (Hawkins, 2004). International and regional human rights institutions can also help to address human rights violations (Petersen, 2011). The role of international institutions as monitoring mechanisms for human rights treaty commitments is very important (Hathaway, 2002). They have increasingly proven capable in providing tools for reporting and enabling the information exchange on human rights violations (ibid.). They globally and regionally disseminate information as a way to respond to human rights violations and put pressure on targeted states (Hafner-Burton, 2005). Additionally, international human rights institutions can support endogenous enforcement by putting norm violating states on the international agenda, and empowering and legitimating human rights norms (Risse, 1999).

2.6  Analysis 2.6.1  T  he Principal-Agent Theory and the Need for the AICHR: Evidences from ASEAN Official Statements and ASEAN Elites’ Speeches The idea advanced in this part pertains to human rights institutional developments viewed through the principal-agent theory, whereby a human rights institution is the agent and member states are the principals. It can simply be seen that the AICHR, the institution being exemplified here, is interpreted as the delegation of ASEAN in playing the role on promoting and protecting human rights because member states were not able to deal with human rights issues in their own territories. An example of such inability is when states are violators of human rights themselves. Thus, regional power is needed to deal with those challenges. This seems to be why the principal-agent theory can be assumed to be used in ASEAN’s (the principal) creation of an agent to work on regional human rights issues. This part offers collective empirical information from the AMM joint communiqué and the Working Group’s performance from 1993 until 2009. This range of years was selected because 1993 is the year human rights gained momentum in ASEAN due to the influences of the conference related to the Universal Declaration of Human Rights in Vienna and 2009 was the year the AICHR was established. This information shows how ASEAN designed and built their regional human rights institution and what form did they want the institution to take place. The idea of human rights institutional development firstly emerged in the 26th ASEAN Ministerial Meeting in Singapore in 1993, which broached the possibility

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of establishing an (intergovernmental) mechanism on human rights evidence from the following joint communiqué statement (ASEAN, 1993): “(The Foreign Ministers) in support of the Vienna Declaration and Programme of Action (of the World Conference on Human Rights) agreed that ASEAN should also consider the establishment of an appropriate regional mechanism on human rights.” This arrival confirms the beginning of ASEAN’s endeavor to start the demand of a human rights institution to work as an agent in human rights issues. It was reaffirmed by the creation and accreditation on the Working Group for an ASEAN Human Rights Mechanism (hereinafter: Working Group)2 which was first explicitly confirmed in the 31st Joint Communiqué 1998 (ASEAN, 1998). Consequently, ASEAN has continued reaffirming the official idea of establishing a regional human rights institution in AMM joint communiqués from the 32nd session in 1999 through to the 42nd session held in 2009. Over a period of ten years, ASEAN worked in cooperation with the Working Group which had regularly been invited to meet with the Foreign Ministers of ASEAN to engage with the governments on the possibility of establishing a human rights institution (Muntarbhorn, 2013, pp. 108–110). As for empirical evidence in the form of speeches, one of the Working Group’s chairperson, Vitit Muntarbhorn remarked that the reason why ASEAN needs an agent to deal with human rights issues is because there exists major human rights violations yet the remedies available at the national level may be inadequate or unavailable to render justice, thus necessitating a check and balance at the higher level to allow access to justice (Ibid, p. 105). There may also be regional considerations which require a regional response rather than a purely national response, such as cross-border issues (Ibid, p. 106). The Working Group annually organized workshops on the ASEAN Regional Mechanism on Human Rights, which were attended by participants from ASEAN governments, policy makers, and civil society organizations (Working Group a, n.d.). One of the Working Group’s progressive outsets is the Agreement on the Establishment of the ASEAN Human Rights Commission adopted by the First and Second Workshops which finally was confirmed and agreed in article 32 of the 35th Joint Communiqué by the AMM (Working Group b, n.d.). In the Draft Agreement, article 11 identified the power of the proposed commission as an agent to address human rights issues in particular to, on its own initiative, investigate (alleged) violations of human rights by a Contracting State or States which have ratified this Agreement in accordance with the established rules of procedure (ibid.). In 2003, the third Workshop affirmed the prominent demand of ASEAN for a regional human rights agent. In the keynote speech delivered by Dr. Sorajak Kasemsuwan, Vice Minister of Foreign Affairs of Thailand, he  declared that 2  The Working Group for an ASEAN Human Rights Mechanism (Working Group) is created by the Human Rights Committee of LAWASIA in 1995. Its primary goal is to establish an intergovernmental human rights commission for ASEAN. It is a coalition of national working groups from ASEAN states which are composed of representatives of government institutions, parliamentary human rights committees, the academe, and NGOs. Available at http://www.aseanhrmech.org/ aboutus.html

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member states all agree in principle that there should be a regional mechanism for human rights in the region (Working Group c, n.d.). Dr. Carolina Hernandez of the ASEAN-­Institute of Strategic and International Studies (ASEAN-ISIS) points out that the diversity within ASEAN has made it difficult to endorse the proposal for the ASEAN Human Rights Commission, but that ASEAN is willing to continue collaborative efforts with the Working Group (ibid.). Dr. Hafid Abbas of the Ministry of Justice and Human Rights of Indonesia stated that having regional human rights centers is very important (ibid.). Subsequently, the Working Group submitted the “Roadmap for an ASEAN Human Rights Mechanism” to the 36th AMM, and the Foreign ministers reaffirmed ASEAN’s commitment to establish regional human rights commission in article 36 of the Joint Communiqué 2003 (ASEAN, 2003). In the Fourth Workshop, Mr. Enny Soeprapto of the National Human Rights Commission of Indonesia noted with regret the absence of a human rights mechanism and stressed the need to build on existing institutions to protect human rights in the ASEAN region (Working Group d, n.d.). Hassan Wirajuda, Minister of Foreign Affairs (Indonesia) stressed that respect for human rights should be an important element of the ASEAN Security Community (ibid.). Tan Sri Abu Talib Othman, Chairperson of the Human Rights Commission of Malaysia (SUHAKAM) remarked: “A regional human rights institution would be an important milestone in the work of promoting and protecting human rights in the region. The four National Human Rights Institutions (NHRIs) in ASEAN have increased joint efforts on issues of common concern and will act as a catalyst for the establishment of the regional intergovernmental human rights mechanism” (Working Group e, n.d.). Mr. Duong Chi Dung of Ministry of Foreign Affairs of Vietnam stressed the need to create a human rights mechanism both in general and in a specific field such as women, and children’s rights in the regional level (ibid.). Ms. Pittara Damrithamanij of the Ministry of Foreign Affairs of Thailand addressed the need to establish an institution or mechanism in terms of specific rights such as to protect migrant workers required transnational solutions (Working Group f, n.d.). Dato’ S. Thanarajasingam, Acting Secretary-General of the Ministry of Foreign Affairs of Malaysia emphasized the importance of a partnership among governments, NHRIs, civil society groups and ASEAN peoples in shaping the regional mechanism (ibid.). The keynote address of the Philippine Secretary of Foreign Affairs, the Honorable Dr. Alberto G.  Romulo, was delivered by the Honorable Franklin M.  Ebdalin, Acting Secretary of Foreign Affairs and Undersecretary for Administration of the Department of Foreign Affairs. He stressed that “the establishment of a regional human rights mechanism is an important component in the course of building an ASEAN Community” (Working Group g, n.d.). He cited the report of the Eminent Persons Group (EPG) on the ASEAN Charter which recommended that ASEAN should, as a matter of principle, commit “to develop democracy, promote good governance and uphold human rights and the rule of law, and to establish appropriate mechanisms for these purposes” (ibid.). Regional human rights institutions also aid national governments to address cross-national borders human rights violations and abuses which might derive from organized crime such as human trafficking,

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terrorism, sexual exploitation of migrant workers, women and children better (Working Group h, n.d.). As a result, the demand for a regional human rights institution came into fruition. The signing of the ASEAN Charter in 2007 confirmed the possibility to establish a human rights institution, evident in article 14 (ASEAN, 2007). Later, at the 41st AMM in 2008, the decision was made to commission the High Level Panel (HLP) to establish an ASEAN Human Rights Body (HRB) (ASEAN, 2008). The final decision toward establishing a regional human rights institution was given at the 42nd AMM in 2009 whereby ASEAN officially signed HLP recommendations and created an HRB with ToR (ASEAN, 2009). With the ToR complete and present in the Joint Communiqué of the 43rd AMM, the ASEAN Intergovernmental Commission on Human Rights (AICHR) came into being and was commissioned as an overarching umbrella institution which would coordinate sectoral and thematic human rights issues and organizations within ASEAN (Jones, 2015). ASEAN statements and elites’ speeches cited above are clear manifestations of the demand of and attempt to create a regional human rights institution. ASEAN member states need an agent to mobilize human rights issues, a need which has been noted in AMM statements since 1993. The discussion on goals to establish a regional human rights institution, together with the progress made to realize that goal, is continuously mentioned almost annually during the AMM and in Working Group statements up until the time the AICHR was established. All of the endeavors on creating a human rights institution attest to ASEAN’s willingness to have an agent on human rights, otherwise they would not have tried to establish it. Nevertheless, the intergovernmental nature of institutions in ASEAN means they are designed to be dependent, as their representatives have to work under their government control. But, as will be demonstrated in more detail below, ASEAN human rights institutions have occasionally tried to expand their power to deal with the urgent human rights issues occurring in the region beyond a strict principal-agent model. It is thus our submission that ASEAN’s need of a human rights institution as an agent should be coupled with ASEAN’s grant of independence to the agent so that it will not be subject to power of the principal and can be free to expand its mandate to help solve human rights violations, so as to be a truly effective human rights institution like those that exist in other regions, such as the European Court of Human Rights.

2.6.2  I nstitutional Theory with the AICHR’s Functions: Significances and Expansion of Power to Improve Human Rights In order to illustrate why an institution is important in helping improve human rights issues in ASEAN, it is necessary to explain the functions and achievements of the existing human rights institution; the AICHR, in parallel with analyzing how they

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have expanded their power over time to deal with human rights issues. This part shows the features of the AICHR. Firstly, how the AICHR has contributed to the human rights arena regionally and domestically under its mandates and work plans. It will then analyze how, since its establishment, the AICHR has expanded its role and power to work beyond their scopes in order to respond to urgent human rights issues which occur in Southeast Asian countries. Pursuant to the Terms of Reference (ToR) for the AICHR which were negotiated and drafted by an intergovernmental panel known as the High Level Panel (HLP) and finally adopted at the 42nd AMM, Articles 1 and 3 of the ToR state that the AICHR acts as the consultative intergovernmental body; (1) to promote and protect human rights and fundamental freedoms of the peoples within the regional context, (2) to enhance regional cooperation with a view to complementing national and international efforts on the promotion and protection of human rights, and (3) to uphold international human rights standards (AICHR a, n.d.). Likewise, AICHR’s performance can be found in the Five-Year Work Plan, which is grounded on the 14 mandates outlined in the ToR. Year by year, the AICHR postulates its high priority functions and activities for the year under the work plan and in response to emerging exigencies on human rights in the region. Since its establishment, the AICHR has had two Five-Year Work Plans which are the 2010–2015 and 2016–2020 plans. The activities and functions of the AICHR can be summarized into the following tasks. The AICHR’s Functions and Mandate (AICHR, 2010–2015, 2016–2020) include: –– Complete a stocktaking of existing human rights instruments acceded and ratified by ASEAN Member States. –– Conduct workshops and studies on various thematic themes related to human rights. –– Identify current and potential human rights matters of interest to ASEAN. –– Conduct trainings on human rights for specific target groups, such as government officials, law enforcement officers, journalists, etc. –– Develop regional plan of actions, recommendations, or ASEAN policy framework on specific human rights issues. –– Disseminate information of the work of the AICHR and share best practices of effective implementation of international human rights treaty obligations including publications in both English and national languages of the ASEAN Member States. –– Coordinate and consult with relevant ASEAN Sectoral Bodies to ensure the effective implementation of ASEAN instruments related to human rights. –– Engage in dialogues with regional stakeholders on emerging human rights issues of interest to ASEAN pertaining to the promotion and protection of human rights in accordance with the AHRD. The first Work Plan for 2010–2015 is not so detailed and generally outlines conduct on main concerns based on the 14 mandates. A significantly prominent plan was the development of an ASEAN Human Rights Declaration (AHRD). It is an ASEAN landmark document, which sets the framework for further promotion and

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protection of human rights and fundamental freedoms in the region (Davies, 2014). The AHRD represents the aspirations and determination of ASEAN Member States and their populaces for a people-oriented ASEAN Community (Bui, 2016). The second Work Plan of 2016–2020 is more detailed in comparison with its predecessor because it designates clearly the years that AICHR should complete each work stipulated in the plan. An interesting and creative point in this work plan concerns the idea to ‘engage in dialogue and consultation with civil society and other stakeholders’ as provided for in mandate 4.8—an idea never formally realized by the AICHR before as previous AICHR-CSO engagements were obviously informal and noninclusive (Gomez & Ramcharan, 2013). The feature of this work plan signals the possibility for an increasingly formal relation between the AICHR and CSOs starting in 2015. The AICHR looked forward for more meaningful and constructive engagement and interaction with civil society organizations (CSOs) through the adoption of Guidelines on the AICHR’s Relations with Civil Society Organizations (AICHR b, n.d.). A few months later, the AICHR launched the application form for Civil Society Organizations (CSOs) to apply for Consultative Relationship with the AICHR. As of June 2019, there are 30 CSOs (and more are pending) that have been accredited by the AICHR to consultatively attend in all of the AICHR’s conferences and dialogues.3 This development shows that the AICHR seems to have embarked on a strategy to involve CSOs more closely in its work. This may also be viewed as a way to expand its powers. The institution can say it is simply responding to information and pressure from citizens and CSOs when it moves into new areas of engagement. In this sense, it is clear that the AICHR’s mandates were geared more toward a promoting, rather than a protecting approach. Its ToR does not include the powers of investigation, monitoring or enforcement, or protection of rights. Additionally, we found that both five-year work plans of the AICHR do not provide for the power to protect against human rights violations, nor is there an official discussion on this point at the AICHR’s workshops or meetings. These matters cause displeasure for the Working Group for an ASEAN Human Rights Mechanism which pushed for the ASEAN human rights mechanism (Petersen, 2011). Meanwhile, ASEAN member states seem to be acquiescing to this nonexistence. This is because member states are afraid that if the AICHR’s power can be expanded on these terms, in the future it might affect now states act constitute in violation of human rights. As a result, despite having the legal power to support AICHR’s expansion, member states have withheld their decision to do so, insisting instead that the AICHR only has a human right promotion role but not a protection role. As mentioned above, we argue that the AICHR as a regional institution should function similarly to human rights institutions in other regions, especially as regards judicial power and independence. For instance, the AICHR should have much more possibility to creatively construe its own mandate, and go beyond areas not explicitly listed, namely investigating, reporting and arbitrating individual complaints of

 See http://aichr.org/. Archives: February, May and November 2016; January and August 2017.

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human rights abuse. Although, some ASEAN elites, such as the Thai Prime Minister (2008–2011) Abhisit Vejjajiva, remarked that this human rights institution needs to first begin to increase its role in the issue of promotion. Once that is in place, there will be more teeth in terms of protection (The Straits Times, 2009). Dr. Surin Pitsuwan, the 12th Secretary-General of ASEAN highlighted the importance of AICHR’s achievement, in particular the ASEAN Human Rights Declaration, which is a roadmap for the regional human rights development (AICHR c, n.d.). Nevertheless, the argument here in this chapter is expected to move forward beyond only promotion-oriented role of the AICHR. That means the AICHR should seek opportunities to adapt its powers to reach the standard of other regional human rights institutions and be in line with international human rights norms especially in terms of protection. Even though the AICHR is not independent of the governments which have established it as an intergovernmental organization, we found that the AICHR itself and other groups and individuals, support the idea of AICHR’s expansion of power. On this point, the opinions of AICHR representatives who have consistently attended CSOs’ platform meetings seem to be interesting evidence to guarantee that they are trying to step out beyond their power. Mr. Edmund Bon, Malaysian representative to the AICHR, responding publicly to a question concerning the establishment of a judicial human rights mechanism, said that it is possible to create AICHR powers beyond its mandate to build a new arena of human rights protection such as establishing the ASEAN Human Rights Court in the future, but not soon. ASEAN should first actively adapt the already existing human rights institution, the AICHR, to have more competence to play a significant role in protecting human rights violations (SEAHRN, 2016). This position seems to be an argument for an institutional strengthening and expansion of the AICHR’s role and power. Thus, alongside the expansion of protection powers, it is not astonishing to find that the AICHR often tries to make a new way to overcome the lack of power. The AICHR itself has occasionally tried to expand its power beyond a strict principal-­ agent model to deal with the urgent human rights issues occurring in the region, without having regard to its mandate and work plan and to become somewhat freer and more interpretive of their own powers. More evidence of this assertion is the first-ever Judicial Colloquium on the Sharing of Good Practices regarding International Human Rights Law held on 13 to 15 March 2017 organized by AICHR (AICHR d, n.d.). The objectives of the Colloquium were to strengthen judicial cooperation and enhance the legal ability of the AICHR (ibid.). The Judicial Colloquium initially demonstrates a tendency toward increasing legal capacity to respond to human rights issues. Despite there being no mention of increasing investigative or adjudicatory powers in relation to human rights violations by states, the colloquium marks a legal initiative where participants, member of the high offices of the judiciary from their respective countries, are able to consult each other on legal matters. Participants like representatives of the Public Prosecution and Attorney General Offices, ASEAN Law Ministers Meeting (ALAWMM), ASEAN Senior Law Officials Meeting (ASLOM) are also among the

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most important instruments that can contribute toward legal powers to address human rights violations in the future. This evidence highlights the beginning of ideas about the judiciary functioning of regional human rights institutions, as regarded by the AICHR. This also ignites the need to establish an inter-sectoral expert or working group on human rights to provide technical knowledge and assistance to policy makers and AICHR representatives to strengthen judiciary functions. We support that this is of importance to the ASEAN human rights situation especially in terms of cases of violations. Creating and strengthening the judicial function can fulfill the absence of a protection role. Even though the idea is in its early stages, the knowledge and experiences of judges and lawyers can contribute and motivate the AICHR to actively consider this issue by perhaps enhancing the ASEAN Human Rights Declaration (AHRD) or enacting a new ASEAN human rights agreement or convention which will provide for and support judicial functions necessary to address regional human rights violations. Another significant expansion of the AICHR’s protection power is the attempt to combat issues of trafficking-in-persons (TIP). Both AICHR work plans; 2010–2015 and 2016–2020, in mandates 4.1 to 4.14 do not specifically mention that AICHR needs to adopt a human trafficking convention. In the second work plan, for example, mandate 4.2 only mentions about establishing “framework for human rights cooperation through various ASEAN conventions and other instruments dealing with human rights” (AICHR a, n.d.). TIP also appears merely as one of the issues the AICHR is mandated to initiate thematic studies upon in mandate 4.12 (ibid.). However, the AICHR went beyond that mandate by being a significant actor in drafting and enacting the ASEAN Convention against Trafficking in Persons, Especially Women and Children, known as “ACTIP,” which is an important step to encourage ASEAN states to amend their domestic law. Finally, the convention was signed by the member states’ leaders at the 27th ASEAN Summit, which marks a fruitful expansion of the role of the AICHR (ASEAN, 2015). There is a reason to this accelerated work. The US TIP Report which is the predominant universal barometer on anti-TIP initiatives in 2015 placed Singapore, Malaysia, Myanmar, Laos, and Cambodia on its Tier 2 watch list, and placed Thailand on its Tier 3 list (Kumar, 2016). About 200,000 women and children, or about one-third of the global trafficking trade, are trafficked annually from Southeast Asian countries (ibid.). Thailand is the primary source of women and children trafficked for commercial sex work in several urban cities (ibid.). As for Indonesia, thirty-four provinces in the country are source and destination points for TIP particularly in the Batam district of the Riau Islands and West Papua provinces where children are victims of sex trafficking (US Department of State, 2015). Vietnamese women who are internationally brokered for marriages and go live abroad, mostly to China and increasingly to Malaysia, are finally later forced into domestic labor or the sex trade (Kumar, 2016). Furthermore, the International Labour Office has reported of trafficking of migrant fishermen from Laos, Cambodia, and Myanmar into the Thai fishing industry (ibid.). This is strong evidence that TIP remains a vital problem in Southeast Asia which the AICHR is determined to combat and accordingly expanded their role to work with stakeholders to respond to this

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urgent regional issue. In this regard, the AICHR representatives try to explain that this work is a step forward in its development of a protection system. For example, the former Representative of Indonesia to the AICHR; 2013–2015, Mr. Rafendi Djamin, underscored that no ASEAN Member State (AMS) is free from the issue of trafficking, and the crosscutting nature of trafficking could be a start for better cooperation and/or coordination among relevant organs/bodies/sectoral bodies of ASEAN (AICHR e, n.d.). In the AICHR-SOMTC Consultation 2016, Dr. Dinna Wisnu, Indonesian representative to AICHR supports the attempt of stepping beyond the work plan as follows (AICHR f, n.d.): “In combating trafficking in persons, cross-border cooperation at the regional and international levels are necessary and inevitable, ASEAN has received the appreciation and acknowledgement of the international community. We have achieved much progress even before the ratification of ACTIP by all countries. There is even an agreement that the enforcement of laws and immigration rules needs to provide justice for victims and deliver more comprehensive preventive measures.” From this event, the AICHR launched the Summary of Activity Report on how countries in Europe and the United States develop their procedures to interview victims and to investigate crimes at their root, a procedure which should be applied for ASEAN situations (ibid.). AICHR Representatives also highlighted the importance of preventing these crimes to cut down criminal cases given that investigations take some time and a mechanism for human-rights-based approach in prosecution and victim rehabilitation is still undergoing (ibid.). Mr. Edmund Bon was a key speaker at the third SEA/ASEAN Research Network and Forum held at VU Amsterdam on 12th May 2017. He confirmed that the adoption of the ACTIP was an upright example guaranteeing that the AICHR has not only been working on human right promotion matters but also protection matters. It was suggested that the ACTIP really creates the opportunity for the AICHR to have a greater right of intervention (Personal Interview, n.d.). It is thus understandable that the AICHR has been trying to work outside of its work plans. Perceptions and opinions of the AICHR representatives can also guarantee that they have had progressive thoughts to work beyond their role and have tried to expand their power over time to deal with urgent human rights issues in the region, despite not being independent from member states’ control. Nevertheless, some human rights violations in this region still remain unaddressed by the AICHR.  An obvious example is the mass atrocities perpetrated against the Rohingyas in Myanmar. Such violations were allegedly caused by the state government. It is noted that the AICHR seems to be quiet when it comes to violations of this kind because intervention will likely affect the relation between them and state governments. The AICHR is not able to expand their power to deal with state-­ perpetrated human rights abuses. In relation to this sensitive political issue, it seems that the AICHR still relies on a consensus from all member states before any action can be taken. This discrepancy between self-led role expansion in some cases and reliance on consensus in others is a point which needs to be further discussed and resolved.

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2.7  Conclusion The purpose of this chapter is to argue that regional human rights institutions are very important and highly needed, especially in Southeast Asia, where human rights awareness just recently emerged to become a significant issue under its regional integration. To conclude and to answer the first question of whether ASEAN really demanded a regional human rights institution, the mentioned empirical evidence from AMM Joint Communiqués, Working Group’ statements and ASEAN elites’ speeches can confirm that this region needed an agent to deal with human rights issues. ASEAN member states themselves were not able to manage human rights situations which occurred in each respective state. All of the endeavors on creating a human rights institution attest to ASEAN’s willingness to have an agent on human rights, otherwise they would not have tried to establish it. Having a human rights institution as agents of ASEAN is beneficial because some state members lack technical expertise, credibility, legitimacy, or other resources to deal with human rights issues on their own. Agents like the AICHR can help to manage regional policies on human rights issues, facilitating collective decision-making, resolving human rights problems and enhance human rights credibility. A human rights institution as an agent is also important in helping ASEAN to have a stronger mechanism to determine which human rights problems shall be dealt with and how to equip ASEAN with the capacity to be a sustainable region in terms of good governance and human rights protection. As a final point, to answer the second question, the above analysis shows that after the AICHR was established, it has been active in improving human rights. AICHR performance show that it has been mobilizing human rights issues in several ways, such as organizing many campaigns, dialogues, and events, proving that this institution is not totally useless as it has been criticized by some. The regional institutional development on human rights has been increasingly changed in a positive way since its formation, and has contributed a number of successful works. The AICHR often tries to work outside its mandates and work plans to overcome urgent human rights issues which occur and become a major concern in the region. An achievement from expanding its human rights protection power and role has been with respect to the enactment of a legal instrument; the ASEAN Convention against Trafficking in Persons, Especially Women and Children (ACTIP). What does all this mean for the future of human rights in Southeast Asia? It means that with independence and an expanded scope of power, the AICHR would be able to make a meaningful contribution toward addressing human rights violations, especially those that are severe and urgent. Realizing such benefits of an expansion of power, ASEAN should support existing human rights institutions with independence and work together with them with a view that such expansion of scope of power would result in a future strong and effective human rights institution. Also, the AICHR can be one of the major actors to establish new regional human rights institutions which will be more powerful and independent to deal with human rights violations in the future such as a regional human rights court.

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Contemporary Realism and International Security (pp.  332–376). Cambridge, MA: The MIT Press. Monnet, A. L. (2017). Expert knowledge as a strategic resource: International bureaucrats and the shaping of bioethical standards. International Studies Quarterly, 61(3), 584–595. Muntarbhorn, V. (2013). Unity in connectivity? Evolving human rights mechanisms in the ASEAN region. Leiden: Martinus Nijhoff. North, D. C. (1991). Institutions. Journal of Economic Perspectives, 5(1), 97–112. Personal Interview. (n.d.). Personal interview at the SEA ASEAN Research Network Seminar on “ASEAN 50: What is it for the People?” Vrije University, Amsterdam, the Netherlands. Retrieved May 12, 2017. Petersen, C.  J. (2011). Bridging the gap? The role of regional and National Human Rights Institutions in the Asia Pacific. Asian-Pacific Law and Policy Journal, 13, 174–209. Phan, H. D. (2012). A selective approach to establishing a human rights mechanism in Southeast Asia. Leiden: Martinus Nijhoff. Pollack, M. A. (2003). The engines of European integration: Delegation, agency, and agenda setting in the EU. Oxford: Oxford University Press. Risse, T. (1999). International norms and domestic change: Arguing and communicative behavior in the human rights area. Politics and Society, 27, 529–560. SEAHRN. (2016). Speech on the stage during the period of the plenary panel 1 on 10 October evening session (16.00–17.40). The Southeast Asian Human Rights Studies Network (SEAHRN) 4th International Conference on human rights and peace in Southeast Asia. October 10, 2016 @ 8:00 am—October 12, 2016 @ 1:00 pm, Asia/Bangkok time zone, Sukosol Hotel, Si Ayutthaya Road, Bangkok, Thailand. The Straits Times. (2009).‘ASEAN Agrees on Role of Human Rights Commission’. The Straits Times, Singapore, 21 July, p.  8. Retrieved June 25, July, from http://eresources.nlb.gov.sg/ newspapers/digitised/issue/straitstimes20090721-1 Thio, L.-A. (1999). Implementing human rights in ASEAN countries: Promises to keep and miles to go before I sleep. Yale Human Rights & Development Law Journal, 2, 15–25. US Department of State. (2015). Trafficking in persons report, July 2015. Retrieved June 25, 2019, from https://www.state.gov/documents/organization/245365.pdf Williamson, O. E. (1985). The economic institutions of capitalism. Firms, markets, relational contracting. New York: The Free Press. Working Group a. (n.d.). Summary of Proceedings: First Workshop for an ASEAN Regional Mechanism on Human Rights, Jakarta, 5–6 July 2001. Retrieved June 25, 2019, from http:// www.aseanhrmech.org/downloads/1st_Workshop_Jakarta_Summary.pdf Working Group b. (n.d.). Draft Agreement on the Establishment of the ASEAN Human Rights Commission. Retrieved June 25, 2019, from http://www.aseanhrmech.org/downloads/draftagreement.pdf Working Group c. (n.d.) Summary of Proceedings: Third Workshop for an ASEAN Regional Mechanism on Human Rights, Bangkok, 28–29 May 2003. Retrieved June 25, 2019, from http://www.aseanhrmech.org/downloads/BKKWS-Summary-draft.pdf Working Group d. (n.d.). Summary of Proceedings: Fourth Workshop for an ASEAN Regional Mechanism on Human Rights, Jakarta, 17–18 June 2004. Retrieved June 25, 2019, from http:// www.aseanhrmech.org/conferences/fourth-workshop-on-human-rights.html Working Group e. (n.d.). Summary of Proceedings: Fifth Workshop for an ASEAN Regional Mechanism on Human Rights, Kuala Lumpur, 29–30 June 2006. Retrieved June 25, 2019, from http://www.aseanhrmech.org/downloads/5th%20WS%20Summary%20of%20 Proceedings.pdf Working Group f. (n.d.). Summary of Proceedings: Second Roundtable Discussion on Human Rights in ASEAN: Challenges and Opportunities for Human Rights in a Caring and Sharing Community, Jakarta, 18–19 December 2006. Retrieved June 25, 2019, from http://www.aseanhrmech.org/conferences/summary_of_proceedings_final.pdf

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Working Group g. (n.d.). Summary of Proceedings: Sixth Workshop on the ASEAN Regional Mechanism on Human Rights, Manila, 16–17 July 2007. Retrieved June 25, 2019, from http://www.aseanhrmech.org/downloads/6th%20WS%20Summary%20of%20Proceedings. Session.pdf Working Group h. (n.d.). Summary of Proceedings: Third Roundtable Discussion on Human Rights in ASEAN: Challenges and Opportunities for Human Rights in a Caring and Sharing Community, Manila, 17–18 December 2007. Retrieved June 25, 2019, from http://www.aseanhrmech.org/downloads/3rd%20RTD%20summary%20of%20proceedings.pdf

Chapter 3

The Institutionalisation of Human Rights in ASEAN Yuyun Wahyuningrum

Abstract  The main argument of this chapter is that norms matter to the institutionalisation of human rights in ASEAN. It provides a set of values to inform the principles of governance practices in Southeast Asia, and particularly in the development of the ASEAN cooperation framework on human rights. Applying the localisation framework, this chapter assesses three major events that situate the institutionalisation of human rights in ASEAN in the period 2007–2012. The examination reveals that the institutionalisation of human rights in ASEAN is characterised by ‘human rights duality’—the approach that reconciles the international norms on human rights with the regional particularities in ASEAN: The ASEAN Way and the Asian values. One of the implications of this approach is that AICHR lacks of normative, supervisory and implementation framework which pose challenges to governance in Southeast Asia. As human rights and governance are mutually reinforcing, giving a stronger mandate to AICHR to protect human rights in the region will strengthen the practice of governance in Southeast Asia. Keywords  AHRD · AICHR · ASEAN · Asian values · Human rights

3.1  Introduction The institutionalisation of human rights has gained universal acceptance and has become a fundamental element in governance. This chapter develops the notion of the ‘institutionalisation of human rights’ as a series of processes that embed norms, mechanisms, decision-making procedures, roles and particular modes of behaviour related to human rights within an organisation and a social system. Whereas, governance is a process that aims at achieving the consistency and transparency in an organisational system with a view to the effective and efficient realisation of human rights: civil, cultural, economic, political and social rights. The link between the Y. Wahyuningrum (*) International Institute of Social Studies (ISS), Erasmus University of Rotterdam, The Hague, The Netherlands ASEAN Intergovernmental Commission on Human Rights (AICHR) (2019–2021), Human Rights Working Group (HRWG), Jakarta, Indonesia © Springer Nature Switzerland AG 2021 R. L. Holzhacker, W. G. Z. Tan (eds.), Challenges of Governance, Development and Governance, https://doi.org/10.1007/978-3-030-59054-3_3

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institutionalisation of human rights and the concept of governance, therefore, lies in the political and institutional processes and outcomes to reach the targeted policy objectives. Nevertheless, this has not come without obstacles or resistance by the states, as the duty holders of human rights in countries and regions, particularly on the methods and processes of achieving the institutionalisation of human rights. In Southeast Asia, the institutionalisation of human rights and the development of governance practices have been part of regional integration project of the Association of Southeast Asian Nations (ASEAN). Both are now included in the roadmap to the building of the ASEAN Political Security Community (APSC), which guides member states to realise ASEAN as a rule-based Community. However, when ASEAN was formed in 1967 by the Bangkok Declaration, human rights and governance were absent in the foundational aspiration for regional cooperation. For too long, ASEAN’s policy on human rights has been rather restrained and non-engaged (Thio, 1992). Calls from the international community and civil society in Southeast Asia provided an impetus for social and political changes in some of the member states to start addressing human rights challenges in the region. Examples relate to reactions when the junta imprisoned Myanmar’s democratic icon at the time, Aung San Suu Kyi, and neglected the result of the 1990 national election; when Indonesian troops committed the killing of more than 200 Timorese in 1991 in Dili, that was known as the Santa Cruz massacre; and when Thai military cracked down the pro-democracy protesters in 1992, known as the ‘Black May’ tragedy. More than a decade after, ASEAN shifted its position on human rights by adopting the Vientiane Action Programme (VAP) on 29 November 2004. The VAP presented the region’s gradual approach towards the establishment of a regional human rights mechanism. Scholars and practitioners were divided in interpreting the situation. Katsumata (2009) and Ong (2009, p.  108) for instance, argued that this change occurred because ASEAN aimed to secure its identity as a legitimate institution in the global community of modern states and used it to claim an international status. Acharya (2004) articulated that this change should be perceived as a positive signal that ASEAN was moving forward on its institutional reform plan. Others reasoned that it was an attempt to address criticism over ASEAN’s inaction towards human rights abuses in the region (Bui, 2016; Termsak, 2009). It might be misleading to assume that the integration of human rights in ASEAN was led by the aim of transforming its political direction. After the Asian financial crisis in 1997, ASEAN took up human rights to restore the trust from foreign investors to bring back business to the region. Upholding human rights was perceived as one of the ‘new faces’ of ASEAN that is part of more modern regional governance.1 It complemented efforts to the domestic processes of democratisation in Indonesia, Thailand and Malaysia in 1998 and the restless activism of civil society group, such as by the Working Group for an ASEAN Human Rights Mechanism (WGAHRM). 1  This insight was shared by Indonesian retired diplomat during a workshop on ‘National Dialogue on Responsibility to Protect (R2P) and Mass Atrocities Prevention’ in Jakarta, 16 August 2016, which was organised by NGO Human Rights Working Group (HRWG).

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There has been a growing body of literature discussing the contribution of mechanisms in the institutionalisation of human rights, and less on assessing the role of norms in institutionalising human rights in ASEAN (Ryu & Ortuose, 2014). This chapter, therefore, aims to fill a gap in the literature by examining the diffusion of global human rights norms into the ASEAN normative framework. I argue that human rights norms matter to the institutionalisation of human rights. It provides a set of values to guide the work of member states in ASEAN on the protection and promotion of human rights. Such norms inform the principles of governance practices in the development of the regional cooperation framework, policies, programmes, budgeting and other measures in a sustainable manner. Human rights norms in the practice of governance enable a conducive environment that allows the human rights mechanisms to achieve the full enjoyment of human rights. With these in mind, I assessed three major events that situate the institutionalisation of human rights between 2007 to 2012: the process of drafting Article 14 of the 2007 ASEAN Charter on the establishment of ASEAN human rights body; the 2009 Terms of Reference (TOR) of the ASEAN Intergovernmental Commission on Human Rights (AICHR); and the 2012 ASEAN Human Rights Declaration (AHRD). The ‘localisation’ framework (Acharya, 2004, 2009) is used to help analyse the role of local actors in fusing the external norms with existing local ideas, norms and policies, with the objective of maintaining at least the core of a ‘cognitive prior’— that is the extant set of ideas, belief systems, and norms determining and conditioning ASEAN’s policies on human rights. The argument presented in this article is structured into seven sections. After the introduction and research question, is the methodology section. It follows with Theoretical Consideration as Sect. 3.4 and Analysis is in Sect. 3.7. The final section discusses a conclusion.

3.2  Research Question This chapter asks the questions, ‘how have human rights been institutionalised in ASEAN in the period of 2007–2013, and to what extent have such processes challenged the governance in Southeast Asia?’. It is hoped that answering these questions will help us to understand the way new norms are constructed in ASEAN. The elaboration of the institutionalisation on human rights in ASEAN will be useful for policy makers, government officials, researchers, civil society and scholars, especially on the interaction between global and regional norms on human rights.

3.3  Methodology This chapter employs a qualitative approach in interpreting primary and secondary sources of information related to the three major events in the institutionalisation of human rights in ASEAN: the drafting of Article 14 of the ASEAN Charter, the TOR

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of the AICHR, and the AHRD. These events are interrelated, connected and mutually constitutive in terms of content and historical processes. Analysing these three events will help to understand the process of the institutionalisation of human rights and to identify the underlying challenges to governance. This chapter utilises the working drafts of the (a) ‘First draft’ (no date), (b) ‘Draft TOR post-HLP 6 (13 December 2008)’, (c) ‘Draft TOR-HLP 7 (15 January 2009)’, (d) ‘Draft TOR-HLP 8 (13 February 2009)’, and (e) ‘Draft AHRb (11 July 2009)’ that were obtained during my earlier engagement with the drafters in the period 2008–2009. This chapter analyses the interview notes, literature, relevant news articles and personal observation during the engagement with the process of institutionalising human rights in ASEAN.

3.4  Theoretical Considerations 3.4.1  The Framework on Norm Localisation This chapter applies the localisation framework that was introduced by Amitav Acharya in 2004, for a number of reasons. First, the localisation framework is useful to highlight the importance and different roles of regional actors in fusing foreign norms to become regional ones, such as ‘norm entrepreneurs’ (the ones who promote the new norms)—‘norm antipreneurs’—(those who defend the status quo), and ‘creative resisters’ (those who are against a new norm but are willing to change with persuasion) (Bloomfield, 2015, pp. 21–22). In this framework, regional actors were not passive in the process of localising the foreign norms, but rather actively participated by applying a number of strategies such as ‘framing’, ‘grafting’, or ‘stigmatising’ the norms. Framing is a necessary strategy when the linkages between the existing norms and the new ones are not obvious. Framing usually aims to make the global norms appear local by using language that names, interprets and dramatises them (Finnemore & Sikkink, 1998, p. 268). Grafting is a strategy to institutionalise a new norm by associating it with a pre-existing norm in the same issue area in a gradual manner (Acharya, 2004). Stigmatising is a discursive process of stereotyping and ‘othering’ the norms with the purpose of making the new norm totally different from the existing one (Adler-Nissen, 2014). Second, the framework recognises the interaction between foreign norms and the existing core of ‘cognitive prior’ that is, the extant set of ideas, belief systems and norms determining and conditioning ASEAN’s policies on human rights (Acharya, 2009, pp. 69–111). Accordingly, the results of institutionalisation of human rights in ASEAN were shaped by the degree of acceptance by the actors and the proximity of the foreign norms with the cognitive prior norms applicable in the region. Very often, however, the prospect of norms to be localised successfully in ASEAN depended on three factors: the stronger an established cognitive norm or tradition,

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the more likely it is that the new foreign norms are localised, rather than simply adopted without change. The level of ability, credibility, power and social standing of the regional actors to perform discursive negotiation and present themselves to their own targets as upholders of local values and identities, and the benefits gained for the prestige and reputation if adoption is made to the new norm (Acharya, 2004).

3.5  A  SEAN’s Pre-Existing Norms: The ASEAN Way and Asian Values Of all the consequences that have followed from ASEAN’s establishment, when it comes to human rights none has been more distinctive than the so-called ‘ASEAN Way’ and the ‘Asian Values’. These ASEAN’s cognitive prior norms have informed the existing ‘local’ norms, ideas and belief system that define the identity of the grouping and sometimes became the basis of decisions made by the member states of the grouping. The Asian values were first introduced by the Prime Minister of Singapore, Lee Kwan Yew and the Prime Minister of Malaysia, Mahathir Mohamad, as a rejection of the universality of human rights. They argued that human rights were a ‘Western’ concept which could not be applied to non-western countries, particularly those with lower economic capabilities. They also confronted civil and political rights as not universal and characterised them as hindering the country’s economic growth and development (Zakaria, 1994; Wu, 2016, p. 280). Unlike in the West, Asian society considered a community’s interest as having a greater importance than the individual one. The norms of cognitive prior in ASEAN were built on the premises of human rights being domestic affairs of the member states and being different from the West. These arguments, known as cultural relativism or regional particularities, were also reflected in the 1993 Vienna Declaration and Programme of Action. Its Paragraph 5 reads: ‘… The international community must treat human rights globally in a fair and equal manner, on the same footing, and with the same emphasis. While the significance of national and regional particularities and various historical, cultural and religious backgrounds must be borne in mind’ (United Nations, 1993). The ‘ASEAN Way’ is a set of norms and practices that shape regional cooperation in ASEAN which is rooted in the 1976 Treaty of Amity and Cooperation (TAC) Articles 2, 9 and 10, which emphasise, among others, the state’s sovereignty and independence, noninterference in internal affairs, procedural norms of consultation and consensus in the decision-making process. The ASEAN Way is now protected under the Charter Article 2.2, as a set of guidelines for the interaction among member states in ASEAN. There has been criticism on the utilisation of the ASEAN Way as hindering the protection of human rights in the region. The ASEAN Way is seen as incompatible with the enforcement of human rights law because regional monitoring entails interference in domestic affairs of the member states (Aguirrea & Pietropaoli, 2012).

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Actually, ASEAN’s regional integration plan provided the avenue to relax the application of the ASEAN Way and particularly the norm of noninterference (Ryu & Ortuose, 2014). In fact, the ASEAN Way came under pressure right after the outbreak of the Asian financial crisis in 1997. Nevertheless, member states of ASEAN were still convinced that the ASEAN Way of nonintervention was a necessary and persuasive tool in eliciting agreement between democratic and non-­ democratic members of ASEAN, especially on human rights (Tan, 2010). Intervention is commonly understood as military intervention or the physical crossing of borders or making comments on the human rights situation in neighbouring countries. In fact, according to Kuhonta (Kuhonta, 2008, p. 309), the concept represents a set of modalities ranging from unsolicited to solicited intervention. The use of military force is considered as a high degree of intervention and noninterference as the lowest degree of intervention. The space in between is filled with diplomacy, cooperation, sanction and humanitarian intervention. This intervention spectrum is important for ASEAN in the sense that it can choose the ‘intervention’ that is proper or needed in a particular situation. The current global challenges such as climate change, transnational terrorism, trafficking in persons, natural disasters and human rights issues require states to cooperate and work together to minimise their bad impact on their population. Accordingly, a narrow understanding of the practice or a blanket application of nonintervention not only hinders the achievement and development of peace, security and economic growth, but also compromises the protection of human rights in the region. Another tension between the ASEAN Way and human rights lies in the strict interpretation of the state’s territorial sovereignty. Essentially, the noninterference principle and sovereignty are not unique to ASEAN’s norms. It can be found in the UN Charter, Article 2.7 which stipulates: ‘Nothing contained in the present Charter shall authorise the United Nations to intervene in matters which are essentially within the domestic jurisdiction of any state…’. In addition, the 1965 UN Declaration on the Inadmissibility of Intervention in the Domestic Affairs of States and the Protection of Their Independence and Sovereignty stated: ‘no state has the right to intervene, directly or indirectly, for any reason whatever, in the internal or external affairs of any other State’ (United Nations, 1965). To understand sovereignty, Jackson (1990, pp. 27–29) divided the concept into two kinds: negative and positive sovereignty. The former refers to freedom from outside interference. The latter denotes the ability of a state to provide public services for the citizens. It seems that ASEAN has weighted more on the former in relation to the protection of human rights.

3.6  ASEAN’s Human Rights System The adoption of human rights as part of regional integration projects is practiced differently in different parts of world. Regional organisations like ASEAN can serve as a platform for regulation and governance for members. They can also offer a

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mechanism to develop and extend that governance where necessary. Currently, there are regional human rights mechanisms with the function to monitor and/or seek to enforce human rights in Europe, the Americas and Africa in the form of the European Court on Human Rights (ECtHR), Inter-American Commission on Human Rights (IACHR), Inter-American Court on Human Rights (IACtHR), African Commission on Human and Peoples Rights (ACHPR), African Court on Human Rights and Peoples Rights (ACtHPR). The roles of these regional mechanisms on human rights are commonly perceived to complement, assist and act as an intermediary with the function of the UN human rights system. Hashimoto (2004, p.  1) argued that the complementary role of the regional organisations to the international norms and system, allows issues of regional particularity, such as regional needs, priorities and conditions, to be better addressed. In its intermediary role, a regional system can support the protection of human rights by mediating the relationship and cooperation between the international and national system (Shelton, 1999, p. 353). In terms of its assisting role, the regional mechanism can help states meet their commitments as well as make important contributions to secure member states’ compliance to their human rights obligations (Doyle, 2014, p. 69). Thus, the regional human rights system can function as the key actor in, as well as a site for, human rights diffusion among the states participating in the regional system (Davies 2014, p. 3). In Southeast Asia, the regional human rights system consists of the AICHR, AHRD and the ASEAN Commission on the Promotion and Protection of the Rights of Women and Children (ACWC). Due to limited space available, this chapter will focus on the process of developing the AICHR and AHRD in achieving the institutionalisation of human rights. The AICHR was established without the power to monitor human rights in the ASEAN countries. It works based on consensus and respect for the noninterference principle and ‘bearing in mind national and regional particularities and mutual respect for different historical, cultural and religious backgrounds, and taking into account the balance between rights and responsibilities’ (TOR para. 1.4, ASEAN, 2009, p. 4). This restricts the body in dealing with human rights abuses in the region. The country’s representatives to AICHR are appointed by, and answerable to, the ASEAN member states. The arrival of the AICHR was qualified as ‘sanctioning the development of some form of control machinery’ (Naldi & Magliveras, 2014, p. 204). On the other hand, some perceived it as an important step to further trigger the development of a human rights regime in the region (Kelsall, 2009). In a minimalist approach, having an imperfect body is better than not having one at all, since this will open an avenue for actions and innovations in addressing human rights. In addition, the AICHR came along with the promise of evolution, and thus was expected to move towards a stronger body of human rights as it matured as stated in the Cha-Am Hua Hin Declaration on the Intergovernmental Commission on Human Rights (ASEAN, 2009, para. 8). As for the AHRD, it covers civil and political rights, economic, social and cultural rights, and the right to development. It also contains references to the right to peace, the protection of the rights of persons with HIV/AIDS, and the rights of vulnerable and marginalised groups. It is worthwhile to note that the AHRD does

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not recognise the freedom of association, the rights of indigenous peoples and the rights of ethnic minority. The AHRD provides so-called ‘clawback’ clauses along with certain rights, which condition the implementation of such rights at the discretion of national authorities (Naldi & Magliveras, 2014). These clawback articles suggest that if there is a dispute in policies and practices between international and regional or national standards, the latter should prevail. The AHRD subscribes to the notion that the realisation of the mentioned rights is subject to the balance between duties and responsibilities of a person (Article 6), to regional particularities (Article 7) and to limitations based on national security, public order, public health, public safety, public morality and general welfare of the people (Article 8). Interestingly, Article 9 seemed to appear under the assumption that the AHRD can be a source of disputes among member states, as it reads: ‘In the realisation of the human rights and freedoms contained in this Declaration, the principles of impartiality, objectivity, non-electivity, non-discrimination, non-­ confrontation and avoidance of double standards and politicisation, should always be upheld’ (ASEAN, 2012a, p. 5). This raises the impression that AHRD has the potential to jeopardise state relations in ASEAN. This follows from implying possible diplomatic processes, such as ‘non-confrontation’, but also anticipates ‘politicisation’. This reflects an awkward negotiation of the competing interests of describing human rights standards while limiting the sovereignty costs of doing so (Doyle, 2014).

3.7  Analysis 3.7.1  The Dynamics of Regional Actors and Their Roles The dynamics of localising international norms cannot be separated from the fact that ASEAN is comprised of a mixture of regimes in Southeast Asia which reflect different stances on human rights. Historically, only the Philippines supported human rights in ASEAN in the 1990s. Indonesia and Thailand joined the Philippines after domestic political changes in the end of 1990s, while the rest was on the side of reluctantly agreeing to promote human rights in ASEAN (Ryu & Ortuose, 2014). Domestic change, in terms of political institutions and structure, often contributes to the emergence and role of regional institutions. Across the three major events in the institutionalisation of human rights (2007–2012), strikingly, the states’ human rights stances have remained the same. Singapore’s Ambassador-At-Large, Tommy Koh (2009, p.  59) described that Indonesia and Thailand were the primary promotors of the establishment of a human rights commission in ASEAN.  While Brunei, Malaysia, the Philippines and Singapore were in the middle, Cambodia, Laos, Myanmar and Viet Nam (or later known as CLMV) were in the opposition group in the process of drafting Article 14 of the ASEAN Charter related to the establishment of human rights body in

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2006–2007. The CLMV group insisted that the function of regional human rights in ASEAN should serve the purpose of two interests of the member states: to defend ASEAN’s views at international forums and to define human rights according to the interest and context of ASEAN (Koh, 2009, p. 57). Accordingly, the body cannot be independent (Dosch, 2008, p. 84) or be empowered to engage in finger-pointing on the human rights situation at the domestic level (Koh, 2009, p. 57). A similar grouping of states, in terms of human rights stances, also appeared in the process of drafting the TOR of the AICHR (2008–2009) and the AHRD (2011–2012). In summary, the three major events of the institutionalisation of human rights in ASEAN revealed that CLMV countries can be categorised as ‘norm-antipreneur’ that strongly resisted the institutionalisation of human rights in ASEAN, while Indonesia and Thailand were the key agents for human rights promotion, and Brunei Darussalam, Singapore and Malaysia are ‘creative resister’. Kavi Chongkittavorn, the Senior Columnist of The Nation in Bangkok explained the positions of ASEAN member states during the discussion on TOR in his article ‘Enforcing the charter against rogue members’:2 Some members like Indonesia, Philippines and Thailand commonly wish the human rights body to provide maximum protection for ASEAN citizens. They have been trying to push for country visits, cross-border investigation of human rights abuses and periodic reviews to be included in the TOR-AHRB.  Obviously, the opponents want to protect governments in power and pay lip service to human rights protection. To them, human rights promotion is more palatable (Chongkittavorn, The Nation, 15 June 2009).

3.7.2  I nteraction Between ASEAN Cognitive Prior Norms and Global Human Rights The process of localising human rights in ASEAN involved complex negotiations and transnational consensus building, which called for reconciling competing national interests, cultures, ideologies, the ability of all actors to participate effectively, and the capacity to own both the process and its end-product. Regional mechanisms can take an intermediary role between global systems and national institutions in order to improve the cooperation on human rights promotion and protection (Shelton, 1999, p.  353). They can also be the avenue where member states reject international norms and consolidate a more conservative regional normative framework (Doyle, 2014). The processes in ASEAN uncovered the state of a conservative regional normative framework on human rights as a result of global and regional interaction among 2  Kavi Chongkittavorn, Enforcing the charter against rogue members, The Nation, June 15, 2009, http://www.nationmultimedia.com/2009/06/15/opinion/opinion_30105154.php also accessible at http://khmernz.blogspot.nl/2009/06/enforcing-charter-against-rogue-members.html (accessed 26 October 2017).

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different political positions of the states. In the phase of drafting Article 14 of the ASEAN Charter, for instance, member states could only reach consensus on the text subject to three conditions: the body was to be established with a TOR (and not another form of legally binding document), under the control of the foreign ministers and in conformity with the ASEAN principles which include respect for state sovereignty and noninterference (or the ASEAN Way). Preferring a ‘TOR’ meant that member states wished to make the body function as a nonjudicial human rights body with decision-making based on consultation and consensus (Ginbar, 2010). Article 14 of the ASEAN Charter provides that: 1. In conformity with the purposes and principles of the ASEAN Charter relating to the promotion and protection of human rights and fundamental freedoms, ASEAN shall establish an ASEAN human rights body. 2. This ASEAN human rights body shall operate in accordance with the terms of reference to be determined by the ASEAN Foreign Ministers Meeting (ASEAN, 2009, p. 19). ASEAN left the decision to name the body to a later decision to be made by the High-Level Panel (HLP)—the eminent persons that represented ASEAN’s member states in the drafting of the TOR of the ASEAN human rights body. Singapore’s Foreign Minister George Yeo explained that some of the member states were driven by fears that Western countries and non-governmental organisations (NGOs) would use the human rights body to interfere in domestic politics. Therefore, the term ‘human rights body’ was selected rather than ‘human rights commission’, and ‘terms of reference’ (TOR) rather than a stronger legal instrument was agreed for ASEAN to placate such concerns.3 The debate over the name of the body continued until the drafting process of the TOR of the AICHR. The Special Assistant to the Secretary-General of ASEAN and Resource Person to the High-Level Panel,4 Termsak Chalermpalanuppap, explained that the name of the body was subject to a clash among member states grappling over terms that would convey greater or lesser independent decision-making power of the body (Termsak, 2009). There was a discussion on using the term ‘council’ or ‘commission’ which would sound more authoritative than a ‘mechanism’ or ‘forum’ (ibid). Denying that some member states rejected human rights, in 2009 Bounkeut Sangsomsak, Deputy Minister and ASEAN Senior Official Meeting (SOM) Leader of the Ministry of Foreign Affairs of Lao PDR, reasoned that almost all ASEAN member states were still at the stage of nation-building after having gained independence only three to four decades ago (Boungkeut, 2009, p. 165). Hence, ASEAN 3  Remarks by Minister of Foreign Affairs George Yeo and his reply to supplementary questions in Parliament during the Committee of Supply (CoS) debate (MFA) on 28 February 2008), para 11, https://www.mfa.gov.sg/content/mfa/media_centre/press_room/if/2008/200802/infocus_20080229_02.html (accessed on 26 October 2017). The ‘Committee of Supply’ is the term used in the Parliament Debate in Singapore to discuss national budget allocation and spending. 4  High-Level Panel (HLP) is a team that was assigned to draft the Term of Reference of the ASEAN human rights body, consisted of ten representatives from ten ASEAN member countries.

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needed to have its own standards for human rights protection so these would not be used as an excuse by outsiders to intervene into ASEAN’s affairs, as argued by Viet Nam’s Assistant Minister of Foreign Affairs and ASEAN SOM (Senior Official Meeting) Leader, Nguyen Trung Thanh (Nguyen, 2009, p. 103). As the accepted mode of diplomacy, the ASEAN Way provided both assurance that no member state would intervene over geographical territory, the political agenda and it ‘controlled’ acceptance of international norms to the member states’ level of convenience in relation to their domestic situation. On the side of the 42nd ASEAN Ministers Meeting (AMM) in Phuket, Thailand on 20 July 2009, the Minister of Foreign Affairs of Thailand, Kasit Piromya, announced that the name of the body was the ‘ASEAN Intergovernmental Commission on Human Rights’. As stated in the press release of the Thai Foreign Ministry at the time, the adoption of the TOR reflected a ‘maximum consensus’.5 I was physically present during the particular press conference in Phuket and had the opportunity to seek insights and clarification from the officials there regarding the name of the body and the reasons behind the ‘maximum consensus’. I was informed that, while the term ‘commission’ was agreed among member states, the phrase ‘intergovernmental’ was inserted with the purpose of diminishing the CLMV’s group’s concerns about the possible implication that the human rights body would act independently without consultation of the governments and would then be used for interfering in domestic politics by Western countries and NGOs. The idea that human rights would be used by Western countries and NGOs to interfere in ASEAN’s domestic politics continued to shape the discussion among member states on the TOR of the AICHR. For instance, the text of the First Draft of the Terms of Reference of [an ASEAN Human Rights Body] (no date) stated the concern related to funding for the human rights body: ‘[ASEAN human rights body] should not let the external parties drive the agenda on human rights’ (n.d., p. 6, section: Budget and Funding). This particular text was erased and the final text regarding funding from external parties reads as follows: ‘Funding and other resources from non-ASEAN Member States shall be solely for human rights promotion, capacity building and education’ (TOR AICHR para. 8.6, ASEAN, 2009, p.  13). The earlier text conveyed the message that member states considered funding as one of the channels for the West and NGOs to dictate the human rights agenda of the ASEAN. Recognising that ASEAN has limited resources, member states then suggested to ‘control’ the acceptance of the funds and limit it only to finance promotional activities of the AICHR. Furthermore, the earlier drafts (First Draft of the Terms of Reference of [an ASEAN Human Rights Body] (no date) and Draft TOR post-HLP 6, 13 December 2008), also suggested that one of the responsibilities of the ASEAN human rights body was to ‘Defend ASEAN in the case of external interference in the domestic affairs of ASEAN Member States relating to human rights’. While this text was

 https://www.thaiembassy.sg/press_media/press-releases/outcome-of-the-asean-foreign-ministers-meeting-with-the-high-level-panel- (updated 9 October 2020).

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erased in the Draft TOR-HLP 7 (15 January 2009)—without an explanation provided for this—it revealed the repetitive stance of some of the Member States in viewing ASEAN as their platform to shield international criticism. The formulation of the text was also founded as the condition to the establishment of the ASEAN human rights body by the CLMV group during the drafting of Article 14 of the ASEAN Charter (see Koh, 2009, p. 57). Reading these texts together conveys the message that the establishment of the human rights body in ASEAN was not driven by the motivation to shift ASEAN towards adopting liberal values, but rather using its tools to protect the member states from the criticism of the liberals. The risk of Western interventions was not the only reason for caution among the member states of ASEAN, but also among their peers in Southeast Asia. The adoption of the text ‘to provide advisory services and technical assistance on human rights matters to ASEAN sectoral bodies upon request’ (ASEAN, 2009, p. 7) was thus not possible in the beginning. This changed when some member states suggested to include the words ‘upon request’ at the end of the sentence. The phrase ‘upon request’ gave an understanding that the member states would be in control when deciding whether advisory assistance is needed and requested. Without the request, there would be no efforts from the body to comment and provide advisory or technical assistance to the country. I was informed that the formulation ‘providing advisory or technical assistance’ possibly is an intrusive statement that could open avenues for inter-state intervention in the domestic affairs of ASEAN members.6 Speaking of ‘intrusive’, the earlier drafts of the TORs suggested that the purpose of the ASEAN human rights body extended to ‘Recogniz[ing] that the promotion and protection of human rights in each Member State should be compatible with the rule of law’ (First draft n.d, p7. 2; Draft TOR post-HLP 6 13 December 2008: 3; Draft TOR-HLP 7 15 January 2009: 3; Draft TOR-HLP 8 13 February 2009: 3). This sentence disappeared in Draft AHRb (11 July 2009) because some of the member states objected to the ‘rule of law’ being listed as one of the competencies of the human rights body. Moreover, the suggested text was considered intrusive to the domestic affairs of ASEAN members’ domestic affairs.7 It is worth to mention that Southeast Asian civil society groups had actively participated in submitting inputs to the HLP, particularly on the mandate of the human rights body. The suggestion to equip the body with the power to monitor, investigate and pay country visits were said to be clamped down in the text by the formulation ‘to prepare studies on thematic issues on human rights in ASEAN’ (see para. 4.12 of the TOR). However, some member states insisted that the term ‘conducting studies’ is inclusive of activities related to investigation, fact-finding exercises and country visits. As detailed in the above explanation, the ASEAN member states’ cognitive prior related to their experience of being under the colonisation of the Western countries 6  This text is based on the responses that I received from Indonesian officials when I asked them about the background of the various mandates of the AICHR during my engagement with the highlevel panel to draft the ASEAN Human Rights Body in 2008–2009. 7  Idem.

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shaped the way they perceive and treat human rights. The Western countries were seen as the promotors of liberal values on human rights which were characterised as intrusive, dominating and manipulative. Human rights brought a dilemma for some ASEAN member states: on the one hand they were reluctant to open the door for liberal norms, but at the same time they needed to do so in order to recover from the pain of the financial crisis. The institutionalisation of human rights in ASEAN showed that the way in which the Association engaged in human rights values was by resisting their full meaning and controlling their anticipated applicability during the process of regional norm construction, among others by underlining pre-existing norms such as the ASEAN Way. Localising human rights in ASEAN, in other words, provided the avenue for member states to resist the dominant international norms.

3.7.3  N  ational Interests and the Return of the Universalism Vs. Regional Particularism Debate The institutionalisation of human rights in ASEAN showed various concerns among ASEAN’s member states. A first set of concerns relates to the extent to which international norms dominate national interest and laws. Pradap Pibulsomggram, Deputy Permanent Secretary of the Ministry of Foreign Affairs of the Kingdom of Thailand (Pradap, 2009, p. 99) also shared that during the drafting of Article 14 of the Charter on the establishment of ASEAN human rights body, the major concern among some member states that international norms would override their national interests. Therefore, as argued by Viet Nam’s Nguyen Trung Thanh (2009, p. 102), the responsibility for human rights should remain in the hand of each member state, not with the regional organisation. This concern is apparent in the final adopted text of the TOR of the AICHR (para. 2.3) stating that the Commission will be guided by the principle: ‘… that the primary responsibility to promote and protect human rights and fundamental freedoms rests with each member state’ (ASEAN, 2009, p. 5). Despite the fact that ASEAN member states are parties to some of the international human rights conventions—such as the UN Convention on Rights of the Child (CRC), Convention on the Elimination of the Discrimination Against Women (CEDAW) and Convention on the Rights of Persons with Disabilities (CRPD) —Brunei Darussalam, Laos, Viet Nam, Malaysia and Myanmar reportedly wanted to refrain from making any reference to international human rights law (including treaties) in the AHRD.8 During the drafting of the AHRD, Malaysia argued that ASEAN should determine its own common values in the spirit of ‘unity in diversity’, and not be based on other internationally accepted definitions.9 In addition,

8  Mizzima News (17 February 2012) ‘ASEAN waters down human rights draft: leaked documents’, at http://e-archive.bnionline.net/index.php/news/mizzima/12650-asean-waters-down-humanrights-draft-leaked-document-.html (accessed on 27 October 2017). 9  Ibid.

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Laos reportedly argued that the implementation of human rights should be ‘… in compliance with national law of each ASEAN Member State’.10 Following this line, on the debate on right to life provision, Malaysia called for a ‘margin of appreciation’ in interpreting this right due to the different laws that existed at the national level (Villanueva & Manalo, 2017, pp.  102–103). Accordingly, the final text of Article 11 of AHRD on the right to life reads: ‘Every person has an inherent right to life which shall be protected by law. No person shall be deprived of life save in accordance with the law’ (ASEAN, 2012b, p. 5). On issues related to the rights of minority groups and indigenous peoples, Myanmar and Laos were reluctant to include their protection in the AHRD. They argued that not all ASEAN member states have indigenous people (Summary Record, ASEAN Secretariat 2013, para. 18).11 Another example that showed how a national concern was used to limit the inclusion of international human rights norms in the AHRD was the rejection by Brunei Darussalam and Malaysia of the term ‘sexual identity’. They were concerned about the definitions of ‘sex’ and ‘other status’ in the AHRD. As Malaysia commented: ‘LBGT is one of those things which Malaysia, Brunei and Singapore cannot accept in the declaration. Article 3 of the AHRD has already addressed all persons, and that includes LBGT’.12 Malaysia’s AICHR Representative explained that any reference to the rights of LGBT will pose a problem in the context of Malaysia, as there are two parallel laws in Malaysia: Federal and Sharia Law, and the latter will never permit the inclusion of LGBT rights (ASEAN, 2013, para. 11).13 In an interview with The Jakarta Post on 20 September 2012, Indonesia’s AICHR Representative acknowledged that the discussion regarding the rights of LGBT persons and indigenous peoples often became ‘intense’ within AICHR with different level of sensitivity of each member state.14 The self-determination dimension in the right of indigenous people, is often used as an argument to reject the inclusion of this right.15 It is the cognitive prior of some of the member states in ASEAN that the argument of ‘self-determination’ will allow further discussion to separate from the country’s territorial integrity, which is dangerous to the process of national-building

 Ibid.  Summary Record of the second Consultation with Civil Society on the Drafting of the ASEAN Human Rights Declaration in Manila, 12 September 2012 I participated in this Consultation on behalf of the Human Rights Working Group (HRWG), a national coalition of NGOs working on human rights in Indonesia, based in Jakarta. 12  Ibid. The different order of the acronym in ‘LGBT’ and ‘LBGT’ is from the original. LGBT stands for Lesbian, Gay, Bisexual and Transgender. 13  The Summary Record was officially circulated to those who participated in the Regional Consultation by the ASEAN Secretariat on 13 February 2013. It is on file with the author. 14  Saragih, Bagus BT (2012) ‘AHRD won’t be perfect, says Marty’, The Jakarta Post, 20 September, available online at http://www.thejakartapost.com/news/2012/09/20/ahrd-won-t-be-perfect-saysmarty.html (accessed on 29 January 2018). 15  Interview with Rafendi Djamin, Representative of Indonesia to AICHR (2009–2015) via skype on 20 October 2017. 10 11

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project.16 Indonesia’s AICHR Representative also admitted that other AICHR members defended their national interests by bringing up matters of domestic relevance during the negotiations of the AHRD (Saragih, 2012). The adopted AHRD excluded the specific protection of LGBT, ethnic minority and indigenous peoples’ rights. This can be translated that member state acknowledged the potential of the international law to shape or change the national law once such rights were recognised as the regional normative framework. Therefore certain rights that have been considered as posing challenges to the local norms, beliefs or regime, such as the right of LGBT or the rights of indigenous peoples were removed from the regional normative text. National interest, cognitive prior and perception on human rights shaped the process of localisation of the international human rights norms in ASEAN. When international norms contest the control of states at domestic level, it is likely that such norms will not be localised. To the contrary, when international norms are not seen as challenges to national political stability, the higher the chance for those norms to be localised in the form of a regional normative framework. This process of being selective to certain human rights showed that member states in ASEAN take the route of developing their own regional normative framework based on selected national preference of human rights, this end resonates with Acharya’s premise that not all international standards were adopted by ASEAN indiscriminately. In the process of drafting Article 14 of the ASEAN Charter, the TOR of the AICHR, and the AHRD, ASEAN member states repetitively invoked the notion that human rights in the West are different from what fits Asian political, social, cultural and economic situations (Bua, 2009, p. 33). Utilising the notion of ‘Asian values’ to retain state control by stirring the meaning and possible application of human rights was confirmed in the drafting of the AHRD. Although the Asian values debate originated from an ingenuous cultural approach and self-serving political interest of the member states, it also been seen as symbolising the states’ resistance against global normative uniformity. In the drafting of the AHRD for instance, Laos reportedly took the most hard-line stance17 by putting conditions on the realisation of universal human rights to take place ‘in the context of regional and national particularities such as political, economic, social, cultural, historical and religious backgrounds’ (see Mizzima News, 2012). Not only did Laos mark the universality of human rights as the ‘othering’ signifier to Southeast Asia, but the country also ‘stigmatised’ it as ‘dangerous’ to national stability. For this purpose, Laos proposed to add a reference each to ‘national security’ and ‘public morality’ along with references related to universal human rights and freedoms, arguing that ‘the exclusive insistence on rights can result in conflict, division, and endless dispute and can lead to lawlessness and chaos.’18  Ibid.  Ibid. 18  Mizzima News (17 February 2012) ‘ASEAN waters down human rights draft: leaked documents’, at http://e-archive.bnionline.net/index.php/news/mizzima/12650-asean-waters-downhuman-rights-draft-leaked-document-.html (accessed on 27 October 2017). 16 17

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Together with Viet Nam, Laos also stigmatised the right to freedom of expression to cause violence and division among society, as their comments explained: ‘Freedom of expression carries with it special duty not to defame the reputation of others and incite hatred, discrimination, war, social division and violence’.19 For Laos, universal human rights would restrain a country from progressing on economic, political and social development, expressed as follows in one of its official statements: ‘Each ASEAN member state has the right to pursue its own economic and social development and freely choose its own political system which suits the historical culture and social realities and national values of each nation, based on the aspirations of its people without external interference or pressure in whatsoever forms’.20 The initial comments on the draft of AHRD showed the evolution of the way the universality of human rights that has been depicted over time, at least in Southeast Asia. In the 1990s, universalism was presented by the regimes in Southeast Asia as incompatible values to the region. Two decades after, universalism has been attached to new terms: ‘dangerous to political stability’, ‘problem to development’, ‘a form of interference’’ and ‘a nightmare’.21 The institutionalisation of human rights in ASEAN was also characterised by the importance of ‘noninterference in the internal affairs of States’. Accordingly, localised human rights norms in ASEAN showed the following four characteristics. The first deals with the formulation of a regional normative framework by locking it by the grouping’s pre-existing norms: the ‘ASEAN Way’ and ‘Asian Values’, which serve as the ASEAN’s identity markers. These markers will immediately distinct ASEAN human rights norms with other norms on human rights. In addition, ASEAN solidify its pre-existing norms as well as the regimes responsible for their enforcement (see Ciorciari, 2012). Second, localising human rights in ASEAN constructed the formulation of ‘human rights duality’—the approach that reconciles the regime of international human rights standards with the particularity claims of Southeast Asia. Third, in achieving human rights institutionalisation, ASEAN selected international human rights laws that fit best with the context in Southeast Asia. In other words, ASEAN has been in control of what kind of rights can be institutionalised, and how and when, according to the pace that has been decided collectively by the members of the Association. Fourth, in analysing the localisation processes, ASEAN exhibited a different sense of human rights institutionalisation that applied in most other regions. Rather than embedding human rights norms, mechanisms, roles and modes of behaviour within the system, ASEAN confined human rights into a controlled bureaucratic environment, which has enabled member states to address the issues in a safe political space in which government officials control the regularity

 Ibid.  Ibid. 21  Ibid. 19 20

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and content of the discourse. Not only victims of human rights have no access to this kind of environment, but also civil society organisation and the media. Applying localisation in analysing the institutionalisation of human rights in ASEAN allows this chapter to point out two changes. Firstly, there is the creation of new institutions, the AICHR and the ACWC, that carry the task of promoting and protecting human rights in ASEAN. Secondly, a new function of the Association has been established, that is as a ‘norm guardian’ (see Stubbs, 2008) in the sense that ASEAN took on board goals and norms that had been widely discussed in Asia for some time such as ‘Asian values’ as well as the ‘ASEAN Way’. ASEAN was also situated as a ‘norm brewery’ (see Katsumata, 2006) as it became the avenue where a series of cooperation frameworks were created for the development and practice of a set of norms associated with human rights within the members and beyond. Moreover, with the new mechanism on human rights, the grouping can now delegate the dissemination the ASEAN human rights duality through the AICHR and ACWC.  These two human rights mechanisms then will carry the role of ‘norm campaigner’ with the task of disseminating and defending the specific characteristics of a human rights duality approach, considering that AICHR and ACWC are the reference point for human rights in ASEAN. As localisation concentrated within the interaction of regional actors in diffusing foreign norms, it overlooked the potential outcome of the localisation influence at the level of global world politics. In fact, institutionalisation of human rights would mean that ASEAN provides a means of cooperation on human rights in which such cooperation require interaction with all possible participants, including the global communities.

3.7.4  Challenges to Governance in Southeast Asia One of the purposes of this article is to understand the extent of human rights institutionalisation in ASEAN inform the challenges to governance in Southeast Asia. The implementation of human rights relies on a conducive and enabling environment, which include adequate legal frameworks and institutions as well as political and administrative processes responsible for responding to the rights of the people in ASEAN. The lacking of power of the AICHR to address human rights issues in the region, the nonexistence of mechanisms where individual or civil society organisations can submit their grievance before the AICHR and the inability of the AICHR Representative to act independently from the member states will hinder governance practices in Southeast Asia. Furthermore, the introduction of a human rights duality approach, the limitation of recognised human rights in AHRD, as well as the inclusion of the clawback condition to human rights realisation have less influence in creating a sustainable respect to human rights in the region.

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3.8  Conclusion The preceding sections in this chapter have shown that human rights norms are a very important means for achieving the institutionalisation of human rights. In answering the research question, I examined norm localisation in three events that have been important in the process of the institutionalisation of human rights in the period of 2007–2013. The examination revealed that the ASEAN member states localised the international human rights norms by considering their cognitive prior related to the experience, political calculation, perception and engagement with the international norms of human rights as well as the national interests. The experience of being dominated by foreign power also contributes to the shape of ASEAN norms on human rights. As the result, ASEAN came up with a human rights duality, an approach that reconciles the international regime and regional particularities: the ASEAN Way and the Asian values. On the other hand, the human rights duality approach poses challenges to governance in Southeast Asia. One of the implications of this approach is that AICHR has an inadequate normative, supervisory and implementation framework. AICHR cannot respond to the grievance that put forward by individuals and human rights groups. The AICHR’s effectiveness depends to a large degree on the consensus of all member states, which delay possible strategic decision in addressing human rights issues in the region in timely manner. The institutionalisation of human rights was firstly seen as an ASEAN’s progressive measure to strengthen international human rights norms in order to protect the human rights of the people in the region. However, its process showed a different meaning of the institutionalisation of human rights as ASEAN confined human rights issue into a controlled bureaucratic environment and closed the possible opportunity for civil society to monitor the process. Under the premise that human rights and governance are mutually reinforcing, giving a stronger mandate to AICHR to protect human rights in the region will strengthen the practice of governance in Southeast Asia.

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Chapter 4

The Noken System and the Challenge of Democratic Governance at the Periphery: An Analysis of Free and Fair Elections in Papua, Indonesia Tri Efriandi, Oscar Couwenberg, and Ronald L. Holzhacker

Abstract  Since the post-Suharto era in 1998, decentralization has been established as the major institutional reform in Indonesia. It has been implemented as the policy framework which aims not only to generate development but also to promote democratization through the establishment of direct elections for local executive leaders. In fact, promoting democracy by establishing local executive elections in Indonesia is challenging. The inability of national policy to adapt to the local customary practice creates a barrier in implementing the ideal concept of democracy, namely free and fair elections. This chapter addresses the problems of free and fair elections by examining the practice of the “noken” system in Papua, the name of a traditional bag which evolved as an election mechanism in several districts in Papua’s central highland area. This research utilizes eight indicators of free and fair elections to analyze the problems in every stage of election: before the election, on the election, and after the election. Based on the literature, policy-study, and data from newspaper articles, this research argues that the practice of noken system contravenes with the principles of democracy. The absence of law and regulation to standardize this customary practice becomes a major drawback in promoting democratic governance at the periphery region. Keywords  Political decentralization · Local direct election · Papua · Noken system · Democracy · Free and fair election T. Efriandi (*) Faculty of Spatial Sciences, University of Groningen, Groningen, The Netherlands Ministry of Home Affairs, Jakarta, Indonesia e-mail: [email protected] O. Couwenberg Faculty of Spatial Sciences, University of Groningen, Groningen, The Netherlands e-mail: [email protected] R. L. Holzhacker University of Groningen, Groningen, The Netherlands e-mail: [email protected] © Springer Nature Switzerland AG 2021 R. L. Holzhacker, W. G. Z. Tan (eds.), Challenges of Governance, Development and Governance, https://doi.org/10.1007/978-3-030-59054-3_4

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4.1  Introduction The relationships between decentralization and democratization have emerged as one of the major debates both in academic literature and government practice in many developing countries. Decentralization not only becomes as a means in achieving democratization (Agrawal & Ribot, 1999; Hutchcroft, 2001) but, in reverse, decentralization also needs democracy in order to reach its potential (Faguet, 2014). However, how this symbiotic relationship could be achieved is still unclear. Proponents of decentralization argue that by constituting government closer to the people would increase government accountability and responsiveness to the citizens (Blair, 2000; Grindle, 2007; Manor, 1999). Nevertheless, critics over decentralization claim that this system might be accompanied by more corruption at the local than at the national level (Prud’Homme, 1995). Next, the creation of a smaller and homogenous society through decentralization creates a greater potential for local elites to use their powers, resources, and social influences in affecting policy for their own favor (Bardhan, 2002; Bardhan & Mookherjee, 2000; Verbrugge, 2015). These pros and cons indicate that the success and failure of decentralization are various and contextual. Indonesia, in this case, experienced an important reform in 1998 after the fall of highly centralistic and authoritarian system during the Suharto’s regime, known as the New Order, for more than 32 years. The establishment of decentralization in 1999 becomes a major institutional reform in devolving a greater political, administrative, and fiscal authority to the local government. Furthermore, the arrangement of local direct elections in 2004 is also marked as a major political leap of Indonesia’s transition process to democracy. In fact, however, the transition process from an authoritarian regime to democracy through decentralization is challenging. Local direct elections as one of the implementations of political decentralization are still hindered by the several malpractices such as money politics, patronage, and clientelism that hampered the democratization process in this country (Aspinall & Sukmajati, 2016). This chapter aims to examine the problems of political decentralization in Indonesia by analyzing the practice of the noken system during the local direct election in several regions in Papua. The Constitutional Court acknowledges this system for elections as a way to preserve the local customary practice. Nonetheless, this traditional system intersects with the national electoral system which allows only one man, one vote, and one value, while the noken system accommodates the community consensus where a tribe leader can vote on behalf of the community (Nolan, 2016; Nolan, Jones, & Solahudin, 2014). In this chapter, the problem of the democratic election on the noken system is analyzed by using the dimensions of free and fair elections. This chapter argues that the noken system contravenes with the principles of democracy due to the gap between the national election policy and the customary practice. This policy barrier then creates confusions and potentially triggers conflicts on the election. It thus suggests that adopting the values of democracy

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in a democratic transition country with a high cultural diversity is hard to comprehend. The overall structure of the chapter takes the form of four sections. The first section of this chapter gives a brief overview of the research background. The next section discusses the theoretical framework and methodology for this research. The third section is concerned with the analysis of free and fair election principle to explain the hindrance of the noken system. Finally, the last section concludes the research.

4.1.1  N  oken System and the Challenge of Democratic Governance As a country with a high cultural and ethnic diversity, the issue of indigenous people and ethnic minorities has always been problematic to be accommodated in the policy-­making in Indonesia (Duncan, 2007). Although 1945 Constitution articulates that the state acknowledges and respects the indigenous peoples along with their traditional rights and cultural identities,1 giving certain ethnic groups special legal privileges in the political process is complicated (Duncan, 2007). For example, acknowledging the practice of the noken system on the elections. Originally, noken is the name of a traditional bag that has been made from the tree bark (Nolan, 2016). This bag has been used by several tribes in Papua, particularly in the central highland area, to carry a variety of goods, e.g., agricultural products, animals, or firewood.2 During the election, this traditional bag turns into a customary practice. The bag for each of the candidates is hung on a stake or on the neck to replace the ballot box at the polling station.3 On the other hand, the noken system has also been practiced through the ikat system. In this system, the decision-making process on to whom the votes from a clan will be given is implemented in two different mechanisms. The first is the Big Man mechanism. In this method, the tribal leader will determine by himself to whom the votes will be given, without the deliberation process with his clan members. The clan members have given a mandate to a tribal leader to become their representative in electing a candidate. The second mechanism is the consensus-based arrangement. In this mechanism, consensus among clan members has been made through deliberation process in determining how many votes will be given to certain candidates. The government has established the national policy to create a uniformity for the election system all across the country.4 However, the noken system which is ­different

1  The 1945 Constitution of the Republic of Indonesia article 18B section (2) & article 28I section (3). 2  Papua Election Commission, Decision No. 01/Kpts/KPU Prov.030/2013, 12 January 2013. 3  Ibid. 4  Constitutional Court, Decision in case No. 31/PUU-XII/2014, 11 March 2015, p. 15.

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with the national election policy has still been practiced during the election in several regions in Papua. This local customary practice is not only incompatible with the national election policy but also potentially triggers conflicts over the election process. In many cases, elections in Papua often lead to conflicts. The diverse clans in this region, particularly in the central highland area, create a traditional political structure in the form of trapezium which means that there is no figure that can unite different tribal groups. This fluid political condition creates frictions among political elites on the election time could easily turn into a communal conflict between societies (UP4B, 2014). Moreover, high illiteracy in several regions in Papua causes difficulties for society in understanding the democratic elections. This condition makes the community more vulnerable to be provoked by political elites or candidates which then often lead to violent conflicts between supporters. In 2017, the Election Supervisory Agency of Indonesia (Badan Pengawas Pemilu, Bawaslu) releases the Elections Vulnerability Index for local executive elections (Pemilihan Kepala Daerah, Pilkada) in 2018. This annual publication measures the potential problems of democratic election in regions that will hold local leader elections in a given year by using three dimensions: implementation, contestation, and participation. The index places the Papua as the province with the highest vulnerability index from in total 17 provinces that will hold election in 2018. Furthermore, at the district level, three districts in Papua are also ranked as the regions with the highest vulnerability index from in total 154 districts and cities that will hold local leader elections in 2018.5 The practice of the noken system becomes one of the factors of the high vulnerability index in this region.6 In short, the customary practices during the election become a dilemma for democratization process in Indonesia, particularly in this case is in Papua. The transition process to democracy in this region is still undermined by the gap between the national election policy and local customary practice, namely the noken system. The legal vacuum of this system is vulnerable to be exploited by political elites in affecting the election results (Nolan, 2016). Consequently, it could violate the principles of democratic election and trigger conflicts among society. On the other hand, in a unitary country with 1127 ethnic groups and 328 local languages, accommodating local customary practices to the election system is burdensome, as it might pose a potential threat to political stability if each ethnic group practices their local custom on the election.7

5  Election Oversight Committee (Badan Pengawas Pemilu, Bawaslu), Indeks Kerawanan Pemilu Pemilihan Kepala Daerah 2018. 6  “Gunakan sistem Noken, Pilkada 2018 di Papua dan Papua Barat Rawan,” Tempo.co, 23 October 2017. 7  Constitutional Court, Decision in case No. 31/PUU-XII/2014, 11 March 2015, p. 14.

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4.1.2  Research Question To examine the challenge of political decentralization and democratic governance in Papua this chapter offers the following research question: Is a free and fair election possible under the Noken system in Papua?

4.1.3  Social and Scientific Significance Scientifically, this research aims to fill in the gap in the existing literature on decentralization and governance particularly in the developing countries. Faguet (2014) explained that many studies on decentralization are focused on the output of decentralization by using the socioeconomic indicators such as economic growth, poverty rate, health, and education, while only a limited number of studies explore the effect of decentralization on the quality of governance. Furthermore, the problems in Papua have inspired scholars to analyze the obstacles from different perspectives. Several studies discuss nationalism and conflicts (Chauvel & Bhakti, 2004; McGibbon, 2004), while another study examines the output of development in this region (Resosudarmo, Mollet, Raya, & Kaiwai, 2014). However, these previous studies make no attempt to address the question of how decentralization is implemented and what is the challenge of governance in Papua. Therefore, to offer a different perspective, this chapter highlights the problems of local direct election as the institutional framework of political decentralization and considers the implications of this framework for the democratization process in Papua. Scholars have debated the impact of decentralization on democracy and development. It has commonly been assumed that decentralization and democratization are the preconditions for successful development (Sutiyo & Maharjan, 2017, p.  2). Nevertheless, the successes and failures of decentralization in Indonesia are various and very contextual. In Papua, despite greater authority due to the decentralization scheme, the development and democratization progress is lagging compared to other regions. Hence, one purpose of this chapter is to offer an explanation that is important for policymakers in designing policies for distinctive communities, especially in an underdeveloped area.

4.2  Literature Review 4.2.1  Political Decentralization Political decentralization refers to the establishment of an institutional framework to devolve political authority or electoral capacities to subnational actors (Falleti, 2005, p. 329). It is established as “a strategy of governance to facilitate the transfer

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of power closer to those who are most affected by the exercise of power” (Agrawal & Ribot, 1999, p. 475). Devolving the political power is implemented in various forms, for instance, the establishment of local direct election or the creation of local representative institutions (Cheema & Rondinelli, 2007; Schneider, 2003). The direct election provides an instrument for local citizens to oversee the performance of local officials. This, in turn, produces the relationship between the local officials and citizens that can be conceived as a principal-agent one. The local leaders act as the agent while the community stands as the principal. The principal can sanction the agent if the agent does not accommodate the principal’s interests. For this relationship, election then emerges as the most visible sanctioning mechanism from the principal to their agents (Fischer, 2016). However, the effectiveness of this aim can be attained when two conditions are met: when local governments are downwardly accountable to their constituents and when constituents can utilize accountability as a countervailing power for local governments (Agrawal & Ribot, 1999, p. 478).

4.2.2  Electoral Accountability In decentralization, the local election has two different but related functions: firstly, election as one of the implementations of political decentralization (Agrawal & Ribot, 1999; Shah & Thompson, 2004) and secondly, election as a mechanism of accountability (Bovens, Goodin, & Schillemans, 2014). Election as the mechanism of accountability is known as the electoral accountability (Ashworth, 2012; Przeworski, Stokes, & Manin, 1999). It is also known as downward accountability (Agrawal & Ribot, 1999; Devas & Grant, 2003; Francis & James, 2003). As marking the ballot paper gives an opportunity for citizens to give rewards and punishments of the officials, the election becomes a mechanism of control in selecting and sanctioning the local elected officials (Fearon, 1999). In ideal conditions, this mechanism might lead to good governance (Ashworth, 2012) and to improve the quality of the local democratic process (Cheema, 2007).

4.2.3  Free and Fair Election As indicated previously, the local direct election is established as the mechanism of accountability in political decentralization. Nonetheless, the elections in a local region cannot guarantee that the election process will be implemented democratically. In a study which sets out to determine the indicators of democracy, Dahl (1973) identifies free and fair elections as one of the elements of democracy. It indicates that by just establishing the election policy and arranging the election at the local level are deficient for democracy. In reaching its potential, elections should be managed in free and fair process.

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Elklit & Svensson (1997, p. 35) define freedom as “the right and the opportunity to choose one thing over another.” They explain that “the freedom is related to the voter’s opportunity to participate in the election without coercion and restrictions.” These definitions indicate that in a competitive election, voters have a freedom to exercise their political rights in selecting a candidate. Furthermore, Elklit & Svensson (1997, pp. 35–36) defined fairness as impartiality. It is classified into two elements: regularity and reasonableness. Regularity means “impartial application of the election law, constitutional provisions, and other regulations,” while reasonableness means that relevant political resources are distributed equally among political competitors. In conceptualizing the free and fair dimensions, Elklit and Svensson (1997) assessed the free and fair dimensions in each period of election: before polling day, on polling day, and after polling day. In contrast, Bishop and Hoeffler (2016) distinguished the free and fair dimensions based on the time period of election. They describe freeness as “the rules of the election and the process leading up to the election” and fairness as “the events on the election day” (Bishop & Hoeffler, 2016, p. 608). Hence, they did not analyze the free and fair process in every and each period of election as Elkit & Svensson did, but they frame “free” as the process before the election time and “fair” as the process on the election time. Moreover, based on the Bishop and Hoeffler (2016) the dimensions to assess the freeness are legal framework, electoral management bodies, electoral rights, voter register, ballot access, campaigns process and media access. In terms of fairness, the indicators to assess the fair process on the election days are voting process, role of officials, and counting of votes. This system of classification is useful to examine the process before and on the election days. However, it has a limitation to analyze the process after the election days. Therefore, to examine the process after the election, the following dimensions of free and fair by Elklit and Svensson (1997) will be analyzed: legal possibilities of complaint, official and expeditious announcement of election results, impartial treatment of any election complaints, impartial reports on the election results by the media, acceptance of the election results by everyone involved.

4.3  Methodology In this chapter, we analyze the barriers of democracy in the noken system by using the dimensions of free and fair elections. This research combines the free and fair dimensions by Bishop and Hoeffler (2016) to analyze the pre-election and on the election time. Whereas, for the process after the election, the dimensions by Elklit and Svensson (1997) will be utilized. Nevertheless, due to data limitations, not all of the dimensions can be examined. In this research, the dimensions that are analyzed to measure the freeness before the election process are: legal framework, electoral management bodies, electoral rights, and voter register; The dimensions to measure the fairness on the election time are: voting process and counting of votes; and lastly, the dimensions that will be used for to analyze the process after the

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Democratic Process Free and Fair Elections

Political Decentralization

Local Direct Election

Before the Election: 1. Legal framework 2. Electoral management bodies 3. Electoral rights On the Election: 1. Voting process 2. Counting of votes

Democratic Election

After the Election: 1. Legal possibilities of complaint 2. Acceptance of election results

Fig. 4.1  Conceptual framework on political decentralization and democratic election. (Source: Based on Bishop and Hoeffler (2016) and Elklit and Svensson (1997))

election are: legal possibilities of complaint and the acceptance of the election results by everyone involved. Overall, the conceptual framework of this research is presented in Fig. 4.1 below:

4.4  Analysis 4.4.1  Before the Election 4.4.1.1  Legal Framework Election in Indonesia can be divided into three different forms: presidential election, legislative election, and election for the local government heads. Presidential and legislative elections are regulated in Law 7/2017 while local leader elections (e.g., provincial governors, district heads, and city mayors) are regulated by Law 10/2016, the latest law after several amendments from 2014 to 2016. However, these election laws do not regulate the practice of the noken system. Hitherto, the

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technical guidance for this practice was only regulated by the decision of Papua provincial election commission in 2013. The consideration of this decree is based on the Constitutional Court decision in 2009.8 The constitutional court acknowledges the implementation of the noken system as an effort to preserve the local customary practice (Nolan, 2016; Nolan et al., 2014). Their argument on preserving the local customary practice is based on the article 18b paragraph 2 of constitutional law that states the local customary rights in the community were acknowledged and respected by the state and protected by the constitutions. The dispute in 2009 legislative election becomes the starting point of the problem over the noken system. The disputes over the noken system continue in 2011 on the election for district head of Yahukimo, the election for district head of Dogiyai in 2012, the 2013 Papua governor’s election in 2013, and the 2014 Presidential election. Although this system had never been regulated by any election laws, it is continuously practiced in the election. There is a concern if this system is formally regulated, it would trigger other regions to demand the similar circumstances (Nolan, 2016, p. 404). This legal vacuum also creates a polemic on which parties who are responsible for drafting a regulation for this practice. National general elections commission argued that the responsibility for regulating the noken system belongs to the district general elections commission.9 Moreover, in 2016 the provincial general elections commission stated that they would abolish the noken system on the elections in 2017,10 whereas, in contrast, national general elections commission stated that they would facilitate the implementation of this system on the elections in 2017.11 This legal vacuum problem not only created ambiguities but also generated opportunities for potential fraud during the elections. For instance, the lack of details in indicating the tribal chief who will act as the community representative during the election elicits the opportunity for everyone to claim to be the tribal chief.12 Another problem is in defining the territory of a customary region (wilayah adat) where a tribal chief will represent on behalf of his community. Nolan (2016) explained that there is no clear definition to determine the areas and boundaries of customary regions which then caused difficulties in constructing a compatibility between administrative regions (e.g., districts, sub-districts, and villages) and customary regions (e.g., clan and sub-clan). During election time, this incompatibility creates ambiguity whether a tribal chief represents the electorates in an administrative region or electorates in a customary region because there is a possibility of more than one tribe living in an administrative region.

 Constitutional Court, Decision in case No. 47–81/PHPU.A-VIII/2009, 9 June 2009.  “Sistem noken dipermasalahkan, KPU serahkan pengaturan ke daerah”, Kompas.com, 19 November 2015. 10  “KPU Papua akan hapus sistem noken dalam Pilkada 2017”, Kompas.com, 12 March 2016. 11  “KPU akan fasilitasi penggunaan sistem noken di Papua saat Pilkada 2017”Kompas.com, 28 November 2016. 12  “Noken dan Ikat, Praktik Adat dan Kerawanan Pemilu”, Kompas.com, 11 February 2014. 8 9

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4.4.1.2  Electoral Management Bodies The electoral management bodies which are responsible to conduct elections in Indonesia are divided into three different commissions that is based on the tier of government: national general elections commission (Komisi Pemilihan Umum, KPU), provincial general elections commission (Komisi Pemilihan Umum Provinsi, KPU Provinsi), and district general elections commission (Komisi Pemilihan Umum, KPU Kabupaten/Kota). According to the Law 7/2017 on General Election, national and local election commissions are responsible to organize presidential, legislative, and local executive elections. The national election commission has a predominant role in presidential and legislative elections, and for local executive elections, national elections commission is more functioned as regulators (Hillman, 2011). Besides the election commissions, there is also elections supervisory committee at national, provincial, and local level to supervise the election process. At the local level, the major problems of the local electoral bodies are independency and the overlapping responsibilities between the electoral bodies (Hillman, 2011, p. 303). The problem of neutrality is caused by the dependency of local election commissions on the local executive government’s resources (Hillman, 2011). This dependency then creates an opportunity for fraud as the incumbent candidates might use their influence on the budgetary system to ensure that local electoral bodies would secure the votes for them (Nolan, 2016). Whereas, the problem of overlapping responsibilities is caused by the weakness of authority of the supervisory committee, as this supervisory body only files a report to the local elections commission or to the police if there is a criminal or administrative violation during the election, but they cannot enforce to ensure the local elections commission or the police will follow up their report (Hillman, 2011, pp. 318–319). In Papua, the independency of local electoral commissions is even more problematic. In 2017, 11 districts in Papua region held an election for local executive leaders and nine out of these 11 districts filed a case against disputes over election results to the constitutional court. It becomes the highest case of disputes among other regions that at the same time also held an election for local executive leaders. One of the main factors of this dispute is the allegation of vote inflation.13 From these nine districts, only the case in three districts, i.e., Tolikara, Puncak Jaya, and Intan Jaya, were accepted and followed up by the constitutional court because the rest six districts did not meet the requirements of voter threshold as regulated in the Law. In the district of Tolikara, for example, the dispute arises because the local election disregarded the recommendation from the election supervisory committee to do a re-voting in 18 sub-districts from in total 46 sub-districts in Tolikara. The local elections commission kept counting the votes in these 18 sub-districts and set the incumbent as the elected candidate. The constitutional court through the decision 14/PHP.BUP-XV/2017 then instructed the Papua election commission to do a

13

 “Pertarungan calon abdi daerah di MK”, Majalah Konstitusi, No. 122, April 2017, p. 12.

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re-voting in these 18 subdistricts.14 Another example is the case in Puncak Jaya district. During the vote counting process, the local elections commission only counted the voting results in 20 subdistricts from in total 26 subdistricts. The election commission argued that they did not count the results in six districts because the document of recapitulation results is insufficient, as many of these documents are missing, damaged, or incomplete. The candidate number 1 then filed a case to constitutional court and during a hearing, the attorney from the candidate number 1 argued that election committee in six sub-districts relocated the votes from candidate number 1 and number 3 to candidate number 2. The local election commission Puncak Jaya also admitted that voting documents from these six districts were damaged as the voting numbers were deleted and replaced with other numbers or letters.15 On their decision, the constitutional court then instructed the Papua provincial elections commission to hold a re-voting in these six subdistricts.16 Those two examples above show the institutional problems on the local election bodies. In the case of Tolikara, due to the weakness of authority from the supervisory committee, the local elections commission did not follow a recommendation from the supervisory committee to re-vote the election in 18 districts. The provincial elections commission then took over the responsibility to conduct the reelection process based on the instruction from the constitutional court. In the case of Puncak Jaya, the administrative violations by changing the electoral votes in official tally documents in favor of one of the candidates show how the issue of independency is still the fundamental problem for election bodies at the local level. 4.4.1.3  Electoral Rights Bishop and Hoeffler (2016) explained that establishing a legal framework which ensures the electorates’ rights to vote does not guarantee the voters can exercise their rights on the election. The voters, de facto, should get an “equal and effective access to polling stations” and they “have been informed effectively about how and where to vote” (Bishop & Hoeffler, 2016, p. 611). Law 7/2017 on General Election regulates that the voters are Indonesian citizens who have aged 17  years old or more, there is also a possibility for citizens less than 17 years old to vote but only if they are married or had been married. The law guarantees the electoral rights for each voter, thus voters have a freedom to vote their favor candidate directly without coercions from any party, without being represented, and secretly which means that only the voters know their vote preference. In the noken system, the democratic principle of “one man, one vote, one value” is violated, as this system is based on the consensus where a clan chief will represent his community in electing a candidate. The Indonesian Human Rights

 Constitutional Court, Decision in case No. 14/PHP.BUP-XV/2017, 3 April 2017, pp. 165–166.  “Puncak Jaya PSU di 6 distrik,” Majalah Konstitusi, No. 122, April 2017, p. 28. 16  Constitutional Court, Decision in case No. 42/PHP.BUP-XV/2017, 4 April 2017. 14 15

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Commission argued that this practice not only contravenes the principles of democracy but also violates the human rights principles because each voter in the community lost their opportunity to participate and to vote directly.17 This electoral rights issue is closely related to the legal vacuum of the noken system. There is no clear technical guidance on how the consensus will be reached among the clan members, or how if some clan members have a different preference over the candidate and want to use their own votes directly to the polling station without being represented. However, the electoral rights issue should also be examined by looking at the obstacles in its community itself. The difficult geographical conditions compounded by the limited infrastructures particularly in the central highland regions causes limited access for communities in receiving information about the election mechanisms and in recognizing the candidate’s background. The other shortcoming is low literacy; for instance, in the district of Tolikara and Intan Jaya. In 2013, the percentage of literacy in these two districts were only 33.56% and 28.08%, respectively. This low literacy causes difficulties for people to actively participate in the election process. These difficulties not only tend to cause poor understanding of the election mechanism but also how to use and defend their electoral rights in the election process. 4.4.1.4  Voter Register The voter registration process is one of the major drawbacks for elections in Indonesia. The inaccuracy and invalidity on the numbers of voters in the final voter’s list (Daftar Pemilih Tetap, DPT) have always been the source of disputes. Unregistered voters, multiple voter data, or the migration data of the voters that not recorded correctly are several problems on the voter registration. In compiling the voter data, several parties are involved and several stages also need to be followed. As the first stage, Ministry of Home Affairs provides the data of potential voters to the KPU 6 months before the election. On the next stage, KPU analyses the data from the Ministry of Home Affairs and then distributes the analysis results to the KPUD Provinsi and KPUD Kabupaten/Kota. KPUD Kabupaten/Kota follows up the data by arranging the updating process which is undertaken up to the neighborhood level. This stage is arranged to get the latest data about the voter existence, for example, if the voter has passed away or has moved to another address. As the next stage, the updated results are then compiled into the temporary voters list (Daftar Pemilih Sementara, DPS). This temporary list is then rechecked and coordinated again with the local civil registration agency and as the last stage, the list will be fixed into the final voters list (Daftar Pemilih Tetap, DPT) through an open plenary meeting.

 “Komnas HAM minta KPU dan Bawaslu tolak sistem pemilu noken”, Kompas.com, 3 February 2014.

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Nevertheless, as explained earlier, those series of registration process still leave various problems and trigger dispute over the election results; for instance, the dispute over the local executive election in the district of Tolikara in 2017. During the hearing at the constitutional courts on 21 March 2017, the local supervisory committee of Tolikara gave a statement that the local election commission never gave a notice of the schedule for updating the voter list to the local supervisory committee. Therefore, the supervisory committee has difficulties in doing surveillance on the voter registration process. Furthermore, the local supervisory committee also stated that the elections commission of Tolikara did not deliver the documents of temporary voters list to them, while the regulation obliges the local election commission to submit the voter’s list to the local supervisory committee. Thus, the election supervisory committee can submit a feedback if there are mistakes on the recapitulation list.18 In addition to those coordination problems, problems occur during the plenary meeting to finalize the voter list. The local supervisory committee disagrees with the local election committee over the total number of voters on the list, because compared to the 2014 presidential election data, the number of voters in several subdistricts increased significantly from 20 to 100%. On the other hand, in several districts, the number of voters were reduced from 500 to 2000 voters.19 Furthermore, if we compare the DPT for 2014 presidential election and DPT for 2017 local executive election, for less than 3 months from June 2014 and December 2016 the number of voters fluctuate significantly. In sub-district of Yuneri, the number of voters is increased more than 200% from 2203 voters in June 2014 to 6638 voters in December 2016. Another example is in sub-district of Nunggawi, the number of voters is raised more than 100 percent from 5371 voters in 2014 to 11,190 voters in 2017. In contrast, in the sub-district of Timori, the number of voters decreased significantly from 6079 in 2014 to 3407 in 2016.20 There are five factors which determine the increasing or decreasing the number of voters: mortality, immigration, emigration, marriage, or the addition of the young voters. As have been explained earlier that voters are citizens who have minimum aged 17  years old or less than 17  years old but married or had been married. Therefore, there is also a possibility if the number of voters is changed not only by mortality or migration but also due to the marriage rate or the addition of 17-year-­ old population. Nevertheless, the significantly increasing number of voters up to 200 percent in the sub-district of Yuneri, or by contrast declined by 2672 voters in the sub-district of Timori is questionable. The data from Central Bureau of Statistics indicate that the percentage of population growth in Tolikara is only 2.98% between  National Election Commission (Komisi Pemilihan Umum, KPU), Decision No. 2/2017, 8 June 2017. 19  Mahkamah Konstitusi, Decision in case No. 14/PHP.BUP-XV/2017, p. 135. 20  National Election Commission, Daftar Pemilih Tetap Pemilihan Presiden 2017 (https://data.kpu. go.id/ss8.php); Tolikara Election Commission, No. 33/Kpts/KPU-Kab. Tlk/XII/Tahun 2016, Penetapan Daftar Pemilih Tetap (DPT) Kabupaten Tolikara pada Pemilihan Bupati dan Wakil Bupati Tolikara Tahun 2017. 18

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2014 and 2015 and 1.87% between 2015 and 2016. Hence, how the number of voters could increase or decrease significantly in the last 3 years is doubtful. The problems on the accuracy and validity of the voter number can be explained into two factors: administration factors and institutional factors. Administration factors are due to the demography data that has not been recorded completely and accurately. The implementation of the national single identification number still experiencing some difficulties, such as some citizens could have two different identification numbers whereas there are also some citizens that have not been recorded on the population data system. Another factor is the institutional problem. The data of voters is provided by the Ministry of Home Affairs, while the obligation to update the data becomes the responsibility of the Elections Commission.21 The problem which then emerged is who will be accountable if there is a problem with the voter registration process (Hillman, 2011, p. 323). Such as if the voters are not recorded on the single identity number data or if there is a miscalculation on the voter’s list.

4.4.2  On the Election 4.4.2.1  Voting Process In the noken system, the voting process is the stage when the implementation of the system can be clearly seen. The noken bag will replace the ballot box at the polling station. This traditional bag is hung on a stack or around the neck of an official. However, due to the absenteeism of legal basis which regulates this system, it is not really clear how the system works during the voting process, either the system only means that the noken bag will only replace the ballot box at the polling station or at the same time the system also establishes a mechanism where a tribal leader could represent their clan members in selecting a candidate at the polling station. Furthermore, as no law that regulates on which region that use this system, it is difficult to determine which districts or sub-districts that can use this system. The Constitutional Court only regulates that only regions that have ever used this system are allowed to use this system in the next election, while the regions that never system this system are not allowed.22 Nevertheless, this verdict did not determine which regions can establish the noken system. Constitutional Court argues that they do not have an authority to determine which region can use the noken system during the election.23 According to the principals of the democratic election, there are some weaknesses in the noken system during the voting process. Confidentiality, for instance, is one of the principals that has been violated. In general practice, voters come to the polling station, get the ballot paper, go to the polling booth to punch the ballot  Law 7/2017 on General Election Article 12, Section d.  Constitutional Court, Decision in case No. 31/PUU-XII/2014, 11 March 2015, p. 34. 23  Ibid. 21 22

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paper, and then put the ballot paper into the ballot box. Whereas in the noken system, the secrecy has been contravened because the ballot box is replaced by the noken bag for each candidate. Therefore, the voter’s preference for a candidate can be seen publicly as the voter will place the ballot paper in one of the bags that is featured with the candidate number. Another democratic principal violation of the noken system is the direct principal. The principals of one man, one vote, and one value are not applicable in the noken system as voters cannot use their votes directly and be represented by the tribal leaders at the polling station. Although there is a deliberation process in the clan community before determining to which candidate the votes will be given, the procedure on how the deliberation process will be arranged in the clan community and how the voting authority will be given from the clan members to their leader is unclear. In many cases, this obscurity becomes the source of conflict over the election results. In the district of Tolikara for example, during a hearing at the constitutional courts the candidate number 3 argued that in the sub-district of Bokoneri, the clan leader represented their members on the election process without the consent of voters in his community.24 Furthermore, Nolan (2016, p. 405) explained that the noken system opens a possibility for a brokerage system. This is happened because the bloc-voting system through noken will open an opportunity for the tribal chief to do a political transaction by negotiating with candidates on to which candidate the votes from his clan will be given (Nolan, 2016, p. 399). The reciprocal benefits that the tribal chief leader will get are not only in direct rewards such as cash money, but also will be rewarded in the future benefits such as “future investment in road or buildings in return for votes” (Nolan, 2016, p. 409). As has been explained earlier, the absence of regulation particularly the indicators in figuring out a clan leader who has authority to represents his community on the election becomes a potential for everyone to claim as the representative from a clan on the voting process. The absence of regulation also cause difficulties to ensure from which clan a tribal leader comes from, or how many clan members that will be represented by a tribal leader. In some cases, this vagueness produces a discrepancy on the number of voters between the total number of clan members that have been represented and the total number of voters that have been recorded in the official final voter list.25 This is often leads to conflicts between supporters of candidates in claiming the votes, especially when a candidate that should get a certain number of votes, but instead recorded as the acquisition of another candidate.26

 Constitutional Court, Decision No. 14/PHP.BUP-XV/2017, 3 April 2017, p. 17.  “Bawaslu: Pemilu dengan noken di Papua tidak demokratis”, Kompas.com, 20 Agustus 2013. 26  “13 daerah di Papua diniliai rawan konflik saat pilkada”, Kompas.com, 19 November 2015. 24 25

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4.4.2.2  Counting of Votes The counting of votes is arranged in several stages. When the time limit to vote is reached, the counting of votes will be started in each polling station and the tabulation process will be finalized at the district level. Election officials in each level are responsible to calculate the voting results and as a way to legitimate the counting process, the witnesses from each candidate should attend in every counting stage. In the noken system, however, this counting process has a drawback because the number of votes will be calculated in the voting bloc as the tribal chief will deliver the votes as many as their clan members. It is then not surprising if in several districts the turnout rates reached 100 percent on the final tally results (Nolan, 2016). On the election for district head of Tolikara, for example, in the sub-district of Wunim, from total 5985 voters on the list, all of the 5985 votes has been recapitulated on the election result and all of these votes are obtained only by one of the candidates, while other candidates did not get any single votes.27

4.4.3  After the Election 4.4.3.1  Legal Possibilities of Complaint The mechanisms of complaint about the election implementation process are arranged in several ways and involve several parties. Election oversight committee is responsible to resolve disputes before the election and on the election time, whereas the constitutional court has an authority to adjudicate disputes over the election results (Hillman, 2011, p. 316). Furthermore, there is also an honor council which is responsible to investigate and to impose sanctions over the violation of ethics by the election organizers. On local executive elections, the complaints about the administrative and criminal violations on all election stages will be resolved hierarchically. As the election oversight committees are established in each administrative region, the alleged violation reports at certain administrative region will be received by the oversight committee on that certain region. For example, the violation reports at the sub-district level will be received by election oversight committee at sub-district level. These reports then will be forwarded to the election oversight committee at the district level which will determine whether the report is valid or not (Hillman, 2011, p. 318). If the report is valid, the election oversight committee will forward the report to several bodies according to the type of violation, administrative violations will be forwarded to the local election committee, whereas criminal violations will be forwarded to the police. Nevertheless, the mechanism for election disputes that has been explained above still has an institutional problem on the implementation. The district election 27

 Constitutional Court, Decision No. 14/PHP.BUP-XV/2017, 3 April, 2017, p. 33.

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oversight committee only has an authority to receive, analyze, and forward the violation reports, while the authority to respond the complaints belongs to the police or the district election commission. For administrative violations, the authority to resolve this misconduct becomes the responsibility of district election commission. However, “where complaints or administrative violations involve improper conduct on the part of local election commission staff, the local election commission is usually declined to follow up” (Hillman, 2011, p.  319). This weakness of authority hinders the role of election oversight committee in enforcing the law for any misconduct in each election stages. Compared to the administrative violations, the procedure to resolve the election criminal violations is clearer. The law 1/2015 on local executive elections has established procedures and time limits for the police, the public prosecutor, and the district court in handling the criminal violation during the local executive elections. The criminal violations will be handled by the police before it is submitted to the prosecutor. After the maximum 5 days since the case has been received, the public prosecutor should submit the case to the district court, and in 7  days the district court will investigate, adjudicate, and deliver the decision over the election criminal case. Furthermore, if there is an appeal against the district court’s decision, the further investigation then will be conducted by the high court. The high court will adjudicate and decide the final verdict on the criminal violation case. This final verdict is the last and binding decision which no other appeals can be made. Disputes over the election results will be adjudicated by the Constitutional Court. The court has been managed the disputes over election results since 2008. However, in 2014 the constitutional court abolished its authority to adjudicate disputes over local executive election results. They argued that the 1945 Constitution only allows the Constitutional Court to adjudicate disputes for presidential or legislative elections, not local executive elections. In 2016, the law on local executive elections gave the mandate again to constitutional court to resolve the disputes over local executive election results until the special judicial bodies which function to adjudicate disputes over local executive election results is established. Taken together, the explanations above identify that the legal system has already established a mechanism to resolve disputes or complaints about the local executive elections process. However, this mechanism of complaint, particularly for administrative violation cases, is still hampered by the institutional arrangement problems. This is due to the limited authority of district election oversight committee in enforcing the rules against violators. Therefore, an institutional reform by giving a larger authority to the district election oversight committee is essentially required (Hillman, 2011, p. 323). Another institutional problem is the role of Constitutional Court in managing large numbers of dispute over the election results. From 2008 until 2017, the Constitutional Court has handled 903 cases.28 These cases are only for local executive election not included the dispute on the parliamentary election (national,

28

 “Pertarungan calon abdi daerah di MK,” Majalah Konstitusi, No. 122, April 2017, p. 12.

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p­ rovincial, district) and the presidential election. As in 2027, Indonesia will hold simultaneous local executive elections for 34 provinces, 416 districts, and 98 municipalities, the establishment of special judicial bodies to administer the dispute of local executive elections is urgently needed. 4.4.3.2  Acceptance of the Election Results The acceptance of election results by everyone involved is crucial because it potentially affects the political stability in a region (Elklit & Svensson, 1997). The acceptance of election results is marked not only by disputes over the election results at the court but also by violent conflicts between the candidate supporters or by the intimidation and physical violence against the election officials. According to the local election vulnerability index 2017 that is compiled by the national election oversight committee, four districts in Papua, Tolikara, Intan Jaya, Nduga, and Lanny Jaya sequentially become regions with the highest vulnerability index among 94 districts that held district head or city major election in 2017. And based on local executive election vulnerability index 2018, Papua is the province with the highest vulnerability index among 17 provinces in Indonesia that will hold governor election in 2018. For district election, four districts in Papua, Mimika, Paniai, Jayawijaya also become regions with the highest vulnerability index among 54 districts that will hold district head or city major election in 2018. One of the indicators to examine the acceptance of election results is the number of disputes at the Constitutional Court. In 2017, from 11 districts in Papua that held an election for local executive leaders, nine districts filed a case of dispute over election results to the constitutional court. The disputes over the election result in this region are not only for 2017 local election, almost in every election such as presidential or legislative election, the used of noken system in several regions becomes a major cause of disagreement between the election contestants at the Constitutional Court. Nevertheless, in each decision from 2009 to 2014, the Constitutional Court always argue that in the name of acknowledging customary practice, the use of noken system for election is justified and acceptable (Nolan, 2016, p. 402). The other indicator is the violent conflicts due to the dispute over election results. Various violent conflicts often occur during elections particularly in the central highland area that use the noken system. In Puncak Jaya, for example, clashes over supporters that arose during the re-voting time led to casualties. This conflict was caused by competing between the candidate’s supporters over the votes in the noken bag.29 Another instance is in Intan Jaya, riots that emerged during the local election committee plenary meeting also resulting in the death of a resident.30 These violent conflicts show that how political contestation during local direct elections is

 “Ricuh PSU di Puncak Jaya, 3 polisi kena panah,” Detik.com, 15 June 2017.   “Rusuh saat pleno KPU Intan Jaya Papua, Seorang Warga Tewas,” Kompas.com, 24 February 2017.

29 30

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s­ usceptible to trigger horizontal conflicts in society. Provocation by the candidate over their supporters and the minimum number of officials to secure the election make the violent conflicts are prone to occur in Papua’s central highland area.

4.5  Conclusion Decentralization in 1999 became a starting point for a new phase of development of democracy in Indonesia. Political decentralization through the establishment of direct election for local leaders stands as a means to develop democratization at the local level after more than 32 years under the shadow of an authoritarian regime. Direct elections also give legitimacy for elected candidates in governing the community, as they are elected by the majority of voters who use their voice directly. In fact, however, the establishment of local direct election does not necessarily mean that the election will be implemented democratically. Local direct elections are still constrained by several problems in every election stage such as (1) institutional problems, i.e., the low capacity and overlapping responsibilities between electoral management bodies (Hillman, 2011) and (2) fraudulence practices such as money politics and vote inflation. The other challenge is the cultural constraint. This happens when the Western concept of democracy are unadaptable with the customary practice in a certain local entity. This chapter identified the challenge of democracy at the periphery region by addressing the practice of noken system in Papua during the local election. This chapter has argued that free and fair elections as one of the principals of democracy are difficult to be achieved under the noken system. Based on the eight indicators of free and fair elections, we found that the absence of law to regulate the practice of noken during the election becomes the main factor why each free and fair dimension is violated. The incompatibility between the principle of democracy and the customary practice creates a potential fraud and is vulnerable to be misused by certain candidates to influence the voting results. Furthermore, this unregulated system also affects the political and social stability in Papua regions. The high number of violent conflicts during the election in this region also shows that how political contestations are susceptible to trigger conflicts in a heterogeneous community. Communities at the grassroots level with the low level of education and high illiteracy rates are vulnerable to be influenced by various interest groups during the election time. The problems become a great challenge for government in synchronizing and integrating the uniformity of national policy with the cultural diversity at the local level. Designing a policy by only looking from above without recognizing the local context will have an impact on the policy failure when it is implemented. On the other hand, institutionalizing the customary law in a unitary state with high cultural diversities is also not an easy task. Therefore, the government should find a right formula to synchronize and integrate the intersection between the national law and local customary practices.

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References Agrawal, A., & Ribot, J. (1999). Accountability in decentralization: A framework with south Asian and west African cases. The Journal of Developing Areas, 33(4), 473–502. Ashworth, S. (2012). Electoral accountability: Recent theoretical and empirical work. Annual Review of Political Science, 15, 183–201. Aspinall, E., & Sukmajati, M. (2016). Electoral dynamics in Indonesia: Money politics, patronage, and clientelism at the grassroots. Singapore: NUS Press. Bardhan, P. (2002). Decentralization of governance and development. The Journal of Economic Perspectives, 16(4), 185–205. Bardhan, P., & Mookherjee, D. (2000). Capture and governance at local and national levels. The American Economic Review, 90(2), 135–139. Bishop, S., & Hoeffler, A. (2016). Free and fair elections: A new database. Journal of Peace Research, 53(4), 608–616. Blair, H. (2000). Participation and accountability at the periphery: Democratic local governance in six countries. World Development, 28(1), 21–39. Bovens, M., Goodin, R. E., & Schillemans, T. (2014). The Oxford handbook public accountability. Oxford: Oxford University Press. Chauvel, R., & Bhakti, I. N. (2004). The Papua conflict: Jakarta’s perceptions and policies. In Policy studies (Vol. 5). Washington, DC: East-West Center. Cheema, G. S. (2007). Devolution with accountability: Learning from good practices. In G. S. Cheema & D. A. Rondinelli (Eds.), Decentralizing Governance: Emerging Concepts and Practices (pp. 170–188). Washington D.C: Brookings Institution Press. Cheema, G.  S., & Rondinelli, D.  A. (2007). Decentralizing governance: Emerging concepts and practices. Washington, DC: Brookings Institution Press. Dahl, R. A. (1973). Polyarchy: Participation and opposition. London: Yale University Press. Devas, N., & Grant, U. (2003). Local government decision-making—Citizen participation and local accountability: Some evidence from Kenya and Uganda. Public Administration and Development, 23(4), 307–316. Duncan, C. R. (2007). Mixed outcomes: The impact of regional autonomy and decentralization on indigenous ethnic minorities in Indonesia. Development and Change, 38(4), 711–733. Elklit, J., & Svensson, P. (1997). What makes elections free and fair? Journal of Democracy, 8(3), 32–46. Faguet, J. (2014). Decentralization and governance. World Development, 53, 2–13. Falleti, T. G. (2005). A sequential theory of decentralization: Latin American cases in comparative perspective. American Political Science Review, 99(03), 327–346. Fearon, J.  D. (1999). Electoral accountability and the control of politicians: Selecting good types versus sanctioning poor performance. Democracy, Accountability, and Representation, 55, 61. Fischer, H. W. (2016). Beyond participation and accountability: Theorizing representation in local democracy. World Development, 86, 111–122. Francis, P., & James, R. (2003). Balancing rural poverty reduction and citizen participation: The contradictions of Uganda’s decentralization program. World Development, 31(2), 325–337. Grindle, M. S. (2007). Going local: Decentralization, democratization, and the promise of good governance. Princeton, NJ: Princeton University Press. Hillman, B. (2011). Electoral governance and democratic consolidation in Indonesia. The Indonesian Quarterly, 3, 301–323. Hutchcroft, P. D. (2001). Centralization and decentralization in administration and politics: Assessing territorial dimensions of authority and power. Governance, 14(1), 23–53. Manor, J. (1999). The political economy of democratic decentralization. Directions in development. Washington, DC: The World Bank. McGibbon, R. (2004). Plural Society in Peril: Migration, economic change, and the Papua conflict. Washington, DC: East-West Center.

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Nolan, C. (2016). Papua’s central highlands: The Noken system, brokers and fraud. In E. Aspinall & M. Sukmajati (Eds.), Electoral dynamics in Indonesia: Money politics, patronage, and clientelism at the grassroots (pp. 398–430). Singapore: NUS Press. Nolan, C., Jones, S., & Solahudin. (2014). The political impact of carving up Papua. In H. Hill (Ed.), Regional dynamics in a decentralized Indonesia (pp. 409–432). Singapore: Institute of Southeast Asian Studies. Prud’Homme, R. (1995). The dangers of decentralization. The World Bank Research Observer, 10(2), 201–220. Przeworski, A., Stokes, S. C., & Manin, B. (1999). Democracy, accountability, and representation. Cambridge: Cambridge University Press. Resosudarmo, B.  P., Mollet, J.  A., Raya, U.  R., & Kaiwai, H. (2014). Development in Papua after special autonomy. In H.  Hill (Ed.), Regional dynamics in a decentralized Indonesia (pp. 433–459). Singapore: Institute of Southeast Asian Studies. Schneider, A. (2003). Decentralization: Conceptualization and measurement. Studies in Comparative International Development, 38(3), 32. Shah, A., & Thompson, T. (2004). Implementing decentralized local government: A treacherous road with potholes, detours and road closures. In A. James, J. M. Vazquez & S. M. Indrawati (Eds.), Reforming intergovernmental fiscal relations and the rebuilding of Indonesia: The big bang program and its economic consequences (pp. 301–331). Edward Elgar Publishing, UK. Sutiyo, & Maharjan, K. L. (2017). Decentralization and rural development in Indonesia. Berlin: Springer. Unit Percepatan Pembangunan Provinsi dan Provinsi Papua Barat (UP4B). (2014). Percepatan Pembangunan Provinsi dan Provinsi Papua Barat. Laporan Akhir UP4B. Verbrugge, B. (2015). Decentralization, institutional ambiguity, and mineral resource conflict in Mindanao, Philippines. World Development, 67, 449–460.

Part II

Sovereignty and Trade Alliances: Economic and Legal Discourse

Chapter 5

Framing Trade Policy Preferences and Dialogues in ASEAN Economic Integration M. Prayoga Permana, Herman Hoen, and Ronald L. Holzhacker

Abstract  An exposure to international trade through an economic integration initiative potentially creates winners and losers at the domestic level. This chapter highlights the policy preferences and policy dialogues amongst stakeholders that shaped ASEAN economic integration within the automotive industry in Indonesia by tracing the economic integration process and critically reflects on the often-­ neglected competing interests and policy agenda settings. Policy preferences are defined as state motivation to pursue economic integration on the regional level, while policy dialogue is a domestic political process that involves various groups namely internationalist and backlash coalitions. Focusing on the automotive industry as an illustrative case, this chapter utilizes the qualitative approach of process tracing as a strategy to collect the data from key interviewees (government and private sector). Given the low intra-trade interaction in ASEAN, the analysis suggests that economic interdependence in sector-specific trade as the main driving force constructing policy preference. By eliminating trade barriers in the automotive industry, political elites aim to transfer domestic policy preferences to the regional level in order to secure domestic support through wealth-creation. Integrated ASEAN economies could contribute significantly to the development of the automotive industry with crucial improvements for a member country’s income per capita. The policy dialogue process traced shows that Indonesian domestic political-­ economic interaction was in diverged opinions between the internationalists that M. P. Permana (*) Faculty of Arts, University of Groningen, Groningen, The Netherlands Faculty of Social and Political Sciences, Universitas Gadjah Mada, Yogyakarta, Indonesia e-mail: [email protected] H. Hoen International Political Economy, Faculty of Arts, University of Groningen, Groningen, The Netherlands e-mail: [email protected] R. L. Holzhacker University of Groningen, Groningen, The Netherlands e-mail: [email protected] © Springer Nature Switzerland AG 2021 R. L. Holzhacker, W. G. Z. Tan (eds.), Challenges of Governance, Development and Governance, https://doi.org/10.1007/978-3-030-59054-3_5

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fully support integration and the backlash that approach economic integration cautiously. The latter perceived nontariff barriers as an acceptable strategy to protect the domestic economic interest. However, both actors’ strategies are constrained by their power, authority, as well as bargaining over the needs to address certain internal and external issues. Keywords  ASEAN economic integration · Trade policy preferences · Automotive industry · Backlash and internationalist coalitions

Abbreviations ABAC AEC AFTA AICO ASEAN ATIGA BBC BKPM BPM CKD EMU EU GAIKINDO IIT IKD LI NTB RCA RCEP RTA SME SNI SPT UNECE WEF WTO

ASEAN Business Advisory Council ASEAN Economic Community ASEAN Free Trade Area ASEAN Industrial Cooperation Scheme The Association of Southeast Asian Nations ASEAN Trade in Goods Agreement Brand to Brand Complementarity Investment Coordinating Board, Republic of Indonesia Bureaucratic Politics Model Completely Knock Down European Monetary Union European Union The Association of Indonesian Automotive Industries Intra Industry Index Incompletely Knock Down Liberal Intergovernmentalism Non-Tariff Barriers Revealed Comparative Advantage Regional Comprehensive Economic Partnerships Regional Trade Agreement Small and Medium Enterprises Indonesian National Standard Strategic Preference Theory United Nations Economic Commission for Europe World Economic Forum The World Trade Organization

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5.1  Introduction Contemporary Southeast Asia embarked upon their new economic landscape by the end of 2015. This is realized by opting to fully operationalize an agreement on the regional free trade, by eliminating trade barriers to facilitate the goods and services exchange and to grant market access privilege for investment. Discriminatory measures will be removed, and economic policy harmonization has been scheduled for acceleration to reassure the timely realization of regionalization process. In contrast with AFTA (ASEAN Free Trade Area) as an economic initiative in the late 1990s, Kosandi (2012) regards the current development of ASEAN (Association of Southeast Asian Nations) economic integration as an acceleration phase. This chapter aims to draw a comprehensive picture of the trade policy process and domestic political forces behind the backdrops of regional economic integration in Southeast Asia. A study to trace the policy process in the formation of an ASEAN economic initiative is crucial because ASEAN has long been perceived as an elitist association where the decisions were made by a handful of foreign ministers of the member states rather than the majority of the population (Ananta, 2009). Moreover, Ruland (2017) posits that greater public involvement had no chance in practice, except endorsing a statement to commit in a ‘people-oriented ASEAN’. This is not, the case of Indonesia at the domestic level as Ruland (2017) argues. He further suggests that after the democratic transition, foreign policymaking in Indonesia has developed a hallmark of allowing more stakeholders to participate. At this juncture, this chapter was designed to cover two approaches namely the statist and the non-statist approach to respond the challenge of democratizing ASEAN from the domestic level. The former focuses on state behaviour while the latter highlights the role of non-state stakeholders such as private industries in the automotive industry. In this context, the state interest in economic integration is to reap benefit from cross-border trading for public interests. Simultaneously, private stakeholders are concerned about eliminating tariffs, reducing economic uncertainties and enhancing economies of scale in a highly fragmented region such as ASEAN. Two competing interests (internationalist and backlash coalitions) are often seen as unitary, or symbiotic, or even non-existent in the previous ASEAN economic integration literature (Nesadurai, 2003; Chandra, 2008). Besides, little did we know that economic integration is a policy program that resulted from a series of policy dialogues across the ministries, industries, or even some local government entities. Even though economic integration has often been associated with a policy program (Yi, 2007), there is a little theoretical and empirical evidence on the policy process behind the backdrops. In fact, studies have revealed that the economic effects of integration depend on the preference of policy makers, interest groups, as well as domestic institutions (Mansfield & Milner, 1999). This chapter chooses the automotive industry in Indonesia as an illustrative case. The industry represents prominent actors that determine policy preferences of economic integration in Southeast Asia. An extensive study conducted by Doner (1991) as described by Chalmers (1994), revealed that the organized and successful

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s­ tate-­business interactions had accounted for the rise of large capitalist groups in the region. Specifically, in Indonesia, the automotive industry developed an alliance with nationalist elements in the bureaucracy, as well as adapted their industrial aspirations. ABAC (ASEAN Business Advisory Council), an organized body that mobilizes private sector’s consent from the domestic level, has been closely affiliated with the automotive industry. Apart from Suzuki Indomobil Indonesia, the CEO of Astra International (Indonesia’s largest conglomerate company based on the automobile industry) has become a prominent member (Ruland, 2016). The integration of the automotive industry was also listed as one of the 12 priority integration sectors in ASEAN. The key feature of the industry in ASEAN region, for instance, is fuelled by strong economic growth favourable government policy, as well as high level of cooperation and economic integration (Oxford Economics, 2015). Similarly, at domestic level, the automotive industry is a leading sector for economic integration.1 Aswicahyono (2000) has indicated that the industry has attracted government intervention than any other manufacturing sectors ranging from import protection to intense government regulation.

5.1.1  A  SEAN Economic Integration and Challenges of Governance in Southeast Asia and ASEAN Realizing ASEAN economic integration’s full potential is a huge undertaking. Up until 2017, ASEAN economic integration has achieved a few tangible results because the level of integration in many sectors varies greatly (Tangkitvanich & Rattanakhamfu, 2017). Issues arise, such as increasing number of nontariff barriers (NTB), the fear of competition, and managing domestic consensus towards integration. The Economist briefly notes that tariffs may vanish, but NTB are rising because ASEAN member states set to formulate intellectual properties, immigration, and land-use regulations (Anonymous, 2016). Ruland (2016) further argued that many of the SMEs (Small and Medium Enterprises) in Indonesia are concerned about tough competition with bigger enterprises. Similarly, Basu Das and Tham (2015) indicated that conflicting interests within the domestic economies ranging from bureaucratic complexities to incoherent policies are prevalent. All in all, the World Economic Forum (WEF) on ASEAN in 2017 highlights a very important issue to address the challenges of economic integration. It pushes more efforts to ensure the benefits of regional integration are fairly distributed across the member states and all segments of society.

1  Anonymous. (2014). Inilah Sektor Unggulan Indonesia Hadapi MEA.  Accessed from http:// industri.kontan.co.id/news/inilah-sektor-unggulan-indonesia-menghadapi-mea

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5.1.2  Research Questions In order to frame trade policy from state and non-state actors and its relations to ASEAN economic integration, this chapter proposes two research questions: • Why did the state (Indonesia) propose the Automotive Industry as one of the priority sectors of integration in ASEAN? What are the interests that construct the policy preference? • How have the policy dialogues among various actors (government and nongovernment stakeholders) shaped Indonesia’s direction towards ASEAN Economic Integration, particularly in the Automotive Industry?

5.1.3  Social and Scientific Relevance This chapter attempts to fill the gaps left by previous studies on regional economic integration in ASEAN in two ways. First, theories on integration possess some limitations in providing a compelling basis to explain phenomena within the ASEAN integration process. This is because theories on integration rely on the EU (European Union) experiences (Kim, 2014) whereas the study of the integration process requires a deeper analysis on exogenous (as an articulation of major global shifts) and endogenous (how the regionalism is shaped by different actors within the region such as ASEAN) perspectives (Hettne et  al., 1999  in Lombaerde, Soderbaum, Langenhove, & Baert, 2010). Indeed, EU has provided a model of integration for ASEAN. Severino (2003) for instance, has mentioned that the EU is the mother of all other integrations while ASEAN is at the early stages of the integration progress in the EU. However, given its distinct characteristics as a loose regional body, the European approach is not fully applicable to ASEAN. Commitments towards integration in ASEAN are left to individual member states with non-interference approaches. Second, the major ASEAN integration theory such as regional developmentalism (Severino, 2003) aggregates political process at the domestic level. The theory tends to see domestic actors to have the single frame of opinion within the government, while in fact; they potentially have different rationalities to address the issues. It is equally critical to note that an exposure to international trade creates winners and losers. Alt and Gilligan (1994) has mentioned that the fundamental issue of international trade is that the international economic initiative might create greater economic outputs to society, but can be also disruptive to the individual’s lives. Through mapping such potential obstacles, the study of economic integration process is necessary to formulate a more comprehensive understanding of how the integration should work in the ASEAN settings in the future. For instance, the study of Ruland (2016) has revealed that in Indonesia, major economic initiatives are suffering from lack of legitimacy and has met with a lot of resistance during the implementation. The government has to ensure that during the policy process, actors from

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both sides are involved and have effective representations to channel their interests. This chapter, furthermore, can be a baseline to develop a more inclusive model of decision-making in ASEAN economic initiatives.

5.1.4  Research Methods To achieve the research objectives, this chapter relies mainly on the qualitative method. ‘Process tracing’ was conducted as a method for empirical data collection. Process tracing was one of the most frequently used methods to collect data on group influences in the European Union (Dur, 2008) which can also be applied to the other regional groupings such as ASEAN. In this research, process tracing was conducted by a series of interviews with key informants. For state actors, relevant ministries for ASEAN economic initiatives were involved: The Coordinating Ministry of Economic Affairs, The Ministry of Trade, The Ministry of Industry and The Ministry of Foreign Affairs of The Republic of Indonesia. The ministries were interviewed separately to confirm how policy dialogues took place among them. This method was aimed at clarifying whether each ministry has a different perspective towards integration as suggested by Bureaucratic Politics Model (BPM) in the literature review section (Sect. 5.2). The ministries were not treated as a unitary actor that represents a single state preference towards the ASEAN economic integration. In addition, the researcher approached the ministry staff members from the lower to the higher level. The lower ministry staff members grasp the technicalities of economic policy while the top management tends to deal with political bargaining with other top officials. With regard to the non-state actors, the researcher investigated the automotive industry in conveying their demands, their economic preferences, how well their access to policy decision-­ makers was and how policy makers addressed their aspirations. For this purpose, interviews were conducted with the Chair of ABAC (ASEAN Business Advisory Council) and the President of Suzuki Indomobil Indonesia. Rounding off the methodology section, this chapter also employs secondary economic data to provide a picture of economic interdependence. The Revealed Comparative Advantage (RCA) and Intra Industry Trade (IIT) Index were cited from a statistical report of a published book edited by Denis Hew, Brick by Brick: The Building of an ASEAN Economic Community. Secondary data were also gathered from multiple sources of Indonesian online newspapers and economic magazines.

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5.2  Literature Review 5.2.1  C  onstructing State’s Preference in Regional Economic Integration: Economic Interdependence and Domestic Politics 5.2.1.1  Liberal Intergovernmentalism (LI) What constructs state’s policy preference in regional economic integration? two-­ stage approaches in Liberal Intergovernmentalism (LI) by Moravcsik provide the baseline for the inquiry using the formation of the EMU (European Monetary Union) as a case study. LI has a central claim that the most fundamental factor which constructs European integration is the commercial interest. Policy preference towards regional economic integration resulted from a rational choice from national leaders who pursued an economic interest of powerful producers as well as the macroeconomic preference of the ruling elites. This preference emerges from domestic political contestations where sectoral interests, adjustment costs, and geopolitical concerns play a critical role. In the regional sphere, states negotiate with a relative power which is determined by asymmetrical interdependence and commitment for regional credibility (Moravcsik & Schimmelfenig, 2009). Andrew Moravcsik (1998) has further suggested that regional economic integration was not shaped by a mere domestic political convergence. Interstate bargaining that was determined by asymmetrical interdependence, economic costs, and gains for the imposed condition within the integrated economy, accounts for policy outcome that leads to economic integration commitment. Nonetheless, Moravcsik’s approach possesses some limitations in explaining the logic of ASEAN economic integration. Moravcsik embarked on the case of the Maastricht Treaty and European Union’s monetary integration which was developed with better democratic credentials than ASEAN Member States. Therefore, the aggregation process of national preference in the ASEAN Member States would be different from those in the European Union. Another limitation is that Moravcsik asserted the importance of interdependence among the states as one of the main push factors. Again, different from those in the European Union, the intra-ASEAN trade did not contribute significantly to the share of international trade in most ASEAN countries. It can be implied that economic interdependence in ASEAN is not significant enough to push for regional economic integration (Kim, 2014). 5.2.1.2  Strategic Preference Theory (SPT) Kim (2014) offered Strategic Preference Theory that fits the ASEAN context better. SPT according to Kim (2011) shared a common ground with Liberal Intergovernmentalism in terms of constructing states preferences. Both theories asserted member states’ preference as a key variable for integration outcomes.

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Integration is perceived as a process whereby the states select their own preferences first and move forward to bargain a substantive agreement on the regional level. SPT (Kim, 2011) has a central argument that the regional economic integration is determined by two primary variables namely economic interdependence and domestic politics. The first variable, economic interdependence is measured by intraregional trade and investment. It is said that ‘the higher the degree of intra-regional trade and investment, the stronger political will for deeper integration among ASEAN members’. The second variable is the domestic factor. In this variable, it is claimed that the more regional integration is perceived as enhancing sovereignty and domestic regime security, the stronger the political will for deeper integration among ASEAN members. This variable suggests the preference and political support towards ASEAN economic integration by ASEAN leaders can only be realized when the economic integration initiative enhances their sovereignty and regime security. Thus, the state is carefully choosing regional integration scheme. The member states would likely favour a scheme that best suits their goals of securing support (Kim, 2014). Similarly, as mentioned by Nesadurai in the Regional Developmentalism theory (2003), the pursuit of wealth-creation behind regional economic integration initiative brings the domestic politics back. Wealth-creation through regional economic initiatives can be a source of domestic political support. 5.2.1.3  A Conceptual Framework on Policy Preference Having reviewed LI and SPT, this chapter would suggest two important variables constructing economic integration preferences. The first variable is the degree of economic interdependence in regional economic structure (ASEAN) and how the economic interdependence determines domestic support for the ruling elites. LI has suggested that economic integration is a result of an aggregation of domestic political contestation, while economic interdependence among the member states remains a crucial push factor. SPT, in addition, has asserted the political support for integration can be a source to enhance sovereignty and domestic regime security. However, in this chapter, the degree of economic interdependence mentioned earlier is not measured by indicating overall intra-ASEAN trade. This is because the intra-ASEAN trade has accounted for only 24% whereas extra-ASEAN trade has a larger share of 76% in 20152. This evidence suggests that economic interdependence amongst the ASEAN member states is not significant enough to push for integration, particularly in a specific sector such as the automotive industry. Therefore, this chapter would further suggest a sectoral-trade interdependence indicator as a more viable indicator to construct the variable for analysis. A sectoral intra-trade indicator reflects a specific preference of ASEAN member states in

2   ASEAN Secretariat. (2015). External Trade Statistics, 2015. Accessed from http://asean. org/?static_post=external-trade-statistics-3

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s­ pecific areas of trade in goods or services. Consequently, this chapter will utilize sector specific-trade indicators for the automotive industry in the region, and investigate how the integration in the sector contributes to wealth-creation in Indonesia.

5.2.2  Conceptualizing Policy Dialogue 5.2.2.1  Bureaucratic Politics Model (BPM) The second part of the literature review departs from the neo-functional approach in regional economic integration theory. It indicates that the policy direction on trade arrangements is determined by a domestic political process that involves various groups (Gunter, 1989). The neo-functionalists perceived regional integration as a process of transferring public affairs, involving citizens from domestic level to regional context. In such dialogues, interest groups such as social elites, lobbyists, and politicians act as the carriers of values. Mansfield and Milner (1999) highlighted the role of the pressure group influence when shaping trade policy. Mansfield and Milner (1999) added a new contribution by asserting policy maker’s preference and institutional variables as inevitable factors. Nevertheless, this contribution was lacking the perspective on the inquiry of what constructs the actors’ actions, and how the actions could shape economic integration. In order to frame the policy dialogue, this chapter utilizes Allison’s and Halperin (1972) Bureaucratic Politics Model (BPM) as a primary source to construct the conceptual framework. This model offers a highly comprehensive understanding of the foreign policy formulation process at the domestic level in democratic governance environments. It is mainly argued that the determinants of foreign policy outcomes are derived from a role play of conflicting world views amongst the actors within a government. The BPM approach criticizes traditional views that foreign policy decisions are straightforward and merely based on the ideas of national interest (Cezar, 2017). BPM further suggests that the conceptions of national interest within domestic agencies may vary. Each agency perceived national interest as a reflection of its own interests, and as a result, had tendencies to struggle for what they perceived was right. In this situation, BPM regards no one as an absolute power in regards to the decision-making process (Cezar, 2017). The central concept of the BPM aims to answer three important questions in policymaking: (1) Who plays? (2) What determines each actor’s stance, and (3) How the actors’ stance determines and aggregates a government’s strategic decisions (Allison & Halperin, 1972)? The first question focuses on the determinant of whose interests and behaviour possess an influential effect on the government’s decisions. The determinants are the circle of senior players, or a circle that includes major political figures or an influential organization that manages budgetary allocations. The second question highlights the importance of each actor’s primordial role that reflects the proposition of ‘where you stand depends on where you sit’ (Cezar, 2017). The primordial roles are defined by the interpretation of the state’s actions in

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certain policy areas. Their standings are dependent on the interpretation of national interests, organizational interests, as well as domestic interests to the extent of personal interests. Lastly, an actor’s stance when determining strategic decisions is dependent on two determinants: policy and decision games, and action games. Policy and decision games are the issues that the government wants to respond to or change, such as external changes, events, or internal pressures. Action games are determined by bargaining advantages that are sourced from formal power, control over resources and information, and persuasiveness over other players (Allison & Halperin, 1972). 5.2.2.2  Internationalist Vs. Backlash Coalitions The basic tenet of politics in trade policy suggests that trade liberalization is a test of the state’s capacity to sustain sectoral loyalty (Corrales & Cisneros, 1999). Corrales and Cisneros (1999) argued that trade policy to a certain degree is politically inefficient. The policy always creates winners and losers because trade liberalization has direct effects on import-competing sectors. This situation provides an incentive for the losers to take actions against liberalization. The discussion of winners and losers shapes two competing actors in policy dialogue. Solingen (1999) mentioned at least two competing actors, namely internationalist coalitions and backlash coalitions. Internationalist coalitions are traditionally defined as large-scale industries in goods or service, including highly skilled labour, imported product consumers, and those with foreign trade and investment exposure. One should acknowledge Solingen’s greatest contributions on illustrating the first coalition by describing the complicity of ‘reform-minded’ government officials. They are those who shaped international economic policy and direction as a tool for domestic economic reform. In contrast to the internationalists, Solingen (1999) labelled the backlash coalitions for import-competing firms, small businesses, and bureaucracies that are concerned with the erosion of state centrality. Bilal (1998a, 1998b), at the same token, argued that the Regional Trade Agreement (RTA) resulted from the debate of two major forces namely the protectionist and anti-protectionist forces. The proponents of free trade are the consumers, industries that rely on imported products as their inputs, and the industries that benefit from export. Policy dialogue between internationalist and backlash coalitions is developed through the interaction between policy makers and private sectors at the domestic level before proceeding to the regional and global policy arena. The grand strategy of internationalist coalitions is the formulation of policies that are compatible with global market access. The strategy includes securing access to foreign markets, capital, investments, and technologies. The internationalists transfer their domestic interests to the regional arena. On the other hand, the strategy of backlash coalitions is for sustaining resource allocations to industries and attempting to weaken internationalist beneficiaries. They endure pressures for internationalization at home,

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and challenge the existence of the international regime for their national objectives (Solingen, 1999). 5.2.2.3  Framing the Policy Dialogue: A Conceptual Framework In order to frame the policy dialogue on trade policy that shapes economic integration, this chapter combines both the BPM, and Internationalist approach vs. the Backlash Coalition approach. The BPM is considered as the most suitable theory because the current development shows that foreign policymaking in Indonesia is heading towards democratic settings where more stakeholders are becoming involved in crafting the policy (Ruland, 2017). There, policies were meant to be formulated not only through public consultations but also through a series of dialogue among the ministries. In this setting, ministries might have different standings and objectives. However, under one circumstance, the BPM does not fit Indonesian settings perfectly, say, in terms of how the theory defines the actors involved. The BPM also does not assert the influence of non-state actors such as private enterprises. Therefore, the first important question of who plays in the policy dialogue conceptual framework will be answered by the Internationalist and Backlash Coalitions category developed by Solingen (1999). In brief, the conceptual framework for the second research question is depicted as follows (Fig. 5.1):

Who plays? The internationalists

Primordial Roles What determines an actor's stance? Interpretation of Interests

POLICY AND DECISION GAMES INTERACTION FOR STRATEGIC DECISIONS ACTION GAMES

Who plays? The Backlash Fig. 5.1  Framing the Policy Dialogue. (Adapted from Solingen (1999) and Allison and Halperin (1972))

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The internationalists are those who support regional economic integration. They are reform-minded officials with outward-looking economic policies, and they are the proponents of free trade deals. This category will also include export-oriented firms with some government links. Conflictingly, Backlash coalitions are those who endure the internationalization process at home. They are not necessarily against free trade, but they accommodate international economic initiatives cautiously. Both the internationalists and the backlash are attached to certain primordial roles such as their interpretation of national interests, organizational interests, and to some extent, personal interests. However, what was missing from the BPM is that the determinants of the primordial roles for both parties did not consider the links to non-state actors as an important factor. Therefore, this chapter would suggest that the links to private industries as a determinant that shapes the primordial role. The policy towards economic integration developed through the interactions between two parties. The outcome of the policy dialogue is dependent on two important factors: policy and decision games, and action games. The policy and decision games are both internal and external issues related to economic integration that the government aims to respond to, while actions games are bargaining advantages such as their formal power and control over information and resources.

5.3  Discussion The discussion is organized as follows. The first sub-section provides an analysis of state preference in pursuing economic integration in the automotive industry. This chapter then traces the complexity of state actors that involved in policy dialogue. It is aimed to provide a brief overview of which actors are classified in the internationalist and backlash coalitions. Regarding the inquiry of how these actors have shaped policy dialogue, the third sub-section describes the interaction within the frame of policy and decision games, as well as the action games. The final sub-section discusses the role of the automotive industry in shaping the policy direction towards economic integration.

5.3.1  State Preferences in ASEAN Economic Integration To identify state preferences in regional economic integration, this chapter focuses on the automotive industry in Indonesia as an illustrative case. Economic interdependence in sectoral trade, mainly the automotive industry, and the interplay between economic interest and domestic political forces are the primary variables that construct regional economic integration at the domestic level. Economic interdependence will not be treated independently from the domestic politics variable. Instead, this chapter argues that economic interdependence in sectoral trade could

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be a driving force that constructs the domestic support that propelled regional economic integration forward. Indonesia’s preference to integrate the automotive industry is not merely a transfer of its economic specialization to regional level as suggested by RCA for instance. The revealed comparative advantage (RCA) illustrates the ratio of the total shares of exports of a commodity compared to the total world exports. The higher the ratio a country possesses, the greater RCA it may possess (Oktaviani, Rifin and Reinhardt, 2007). RCA also reflects trade specializations of a country (Balassa, 1965). The following data depicts Indonesia having a high RCA in agro-based industries, fisheries, wood-based products, rubber, and electronics while it has no significant RCA in the automotive industry as opposed to Thailand. Other literature referred Indonesia as an assembly industry for Japanese companies (Nag, Banerjee, & Chatterjee, 2007). Consistently, the study of Aswicahyono and Kartika (2010) found that Indonesia’s automotive industry has involved itself in a global production network, but Indonesia’s involvement goes only as far as assembly activities to serve domestic markets, which was in the lowest position in the cross-border production network. This Table 5.1 depicts RCA index of ASEAN Countries in 2005. The highlighted column depicts a comparison of RCA Index in the Automotive sector between ASEAN countries. Intra Industry Trade Index provides a picture of integration in selected sectors. The numbers illustrate the degree sectoral integration in ASEAN. The higher IIT index means the more integrated specified sectoral industry in regional trade. Table 5.2 represents the Intra Industry Trade Index (IIT). The IIT serves as a sectoral indicator of economic integration degrees between countries. The higher the IIT number the higher possibility that mobility factors and trade affect a shift in income per capita. This occurrence, furthermore, may alter domestic demand as well as production patterns (Oktaviani et  al., 2007). As seen in Table  5.2, high-income ASEAN countries such as Singapore were affected the most, followed by Malaysia, Thailand, and then Indonesia. Specifically, for Indonesia’s automotive industry, the IIT shows the highest number of two points ahead of the rubber-based product in second. The significant IIT in the automotive industry illustrates that, despite the fact that the automotive industry is not a major export for Indonesia, it serves as one of the more important driving forces for Indonesia’s preference to integrate regionally. The more integrated ASEAN makes significant contributions to the automotive industry which is crucial for the country’s income per-capita. Moreover, Indonesia has a large number of assembly plants, part suppliers, and employment than any other country in ASEAN except Thailand. GAIKINDO (The Association of Indonesian Automotive Industries), has estimated a total of 715.000 jobs were generated in 2012 (Natsuda, Otsuka, & Thoburn, 2015). This finding supports Nesadurai’s (2003) thesis that the driving force of an individual country’s decision for integration is to secure national economic growth. For the state, a commitment to securing wealth is a crucial track to acquiring legitimacy from its constituents. The relations between commercial and state interests can be seen as symbiotic in the case of the automotive industry.

Brunei 0.001 0.001 0.004 0.019 0.015 0.003 0.002 1.665 0.004

Source: Hew (2007)

Sectors Agro-based Automotive Electronics Fisheries Healthcare ICT Rubber-based Textile Wood-based

Cambodia 0.321 0.024 0.007 0.635 0.019 0.003 0.168 15.609 0.430

Indonesia 7.398 0.383 1.092 3.563 0.324 0.729 1.804 0.277 5.026

Lao PDR 1.117 0.059 0.030 0.012 0.073 0.093 1.219 0.406 18.092

Malaysia 4.628 0.114 2.809 0.618 0.240 1.976 0.852 0.486 2.665

Myanmar 9.118 0.000 0.015 9.801 0.010 0.011 0.649 0.687 3.642

Philippines 1.905 0.286 0.926 1.505 0.097 1.197 1.000 0.128 0.060

Table 5.1  Revealed Comparative Advantage Index (RCA) by Priority Sector and ASEAN Countries, 2005 Singapore 0.126 0.217 2.331 0.267 0.422 1.647 0.270 0.309 0.087

Thailand 0.970 0.880 2.096 5.689 0.350 1.218 1.684 1.563 1.292

Vietnam 0.221 0.132 0.350 11.047 0.188 0.207 8.033 0.830 3.754

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Brunei 1.43 26.06 24.51 3.83 6.84 21.86 11.37 9.61 10.31 12.87

Cambodia 5.33 11.19 6.03 12.21 0.30 5.99 3.39 5.11 11.79 6.82

Indonesia 16.61 39.86 28.87 24.19 23.98 29.77 37.98 17.40 26.79 27.27

Lao PDR 5.29 2.28 0.34 0.00 1.02 0.06 0.04 1.16 10.49 2.30

Malaysia 26.33 39.30 48.09 44.16 53.34 51.37 45.80 31.91 33.50 41.53

Myanmar 0.04 0.61 1.94 0.02 2.74 2.27 0.01 0.06 1.01 0.97

Philippines 3.52 19.60 22.40 21.04 19.68 27.23 24.98 11.46 16.23 18.46

Singapore 28.90 40.05 44.34 33.97 39.70 47.81 46.76 33.73 24.58 37.76

Thailand 14.66 34.68 40.78 35.36 29.06 45.18 47.14 20.45 34.31 33.51

Vietnam 9.42 15.91 16.37 22.66 19.30 15.40 23.12 16.57 32.26 19.00

Sector average 11.15 22.96 23.37 19.74 19.59 24.70 24.06 14.75 20.13

a

Source: Hew (2007) Intra Industry Trade Index provides a picture of integration in selected sectors. The numbers illustrate the degree sectoral integration in ASEAN. The higher IIT index means the more integrated specified sectoral industry in regional trade

Sectors Agro-based Automotive Electronics Fisheries Healthcare ICT Rubber-based Textile Wood-based Country average

Table 5.2  Average Intra Industry Trade Index (IIT)a

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Besides, the other factor that shapes preferences of integrating the automotive industry is an external factor such as the Asian economic crisis. For instance, the Indonesian government was once thinking twice to fully implementing AICO (ASEAN Industrial Cooperation Scheme) to adhere to their national interest. Indonesia kept imposing certain rules that assemblers are eligible for tariff reductions if they achieved a designated number of local content requirements. Until 1998, the Asian economic crisis pushed ASEAN states into realizing that they should take AICO into account seriously as they had no option but to strengthen exports and reduce imports. The ‘Hanoi Plan of Action’ in December 1998 marks a new chapter for integrated ASEAN in terms of the automotive industry under the AICO scheme. The members of ASEAN had finally reached their decisions to waive 30% of local equity requirements. Apart from the state’s reaction to the economic crisis, AICO deregulation was facilitated by continued pressures from the business community and foreign companies (Yoshimatsu, 2002).

5.3.2  P  olicy Dialogue: The Internationalist and Backlash Coalitions 5.3.2.1  Mapping the State Actors In framing the policy dialogue among actors, this chapter begins by mapping which actors could be characterized as the internationalists, and discusses the backlash at the domestic level to provide an analysis for the inquiry of who plays mentioned in the conceptual framework. In Indonesia, policy dialogue shaping economic integration involves various ministries and private sectors. Given the divided opinions towards economic integration, it can be argued that state actors are no longer in a single category to frame a policy dialogue among them. One of the main research findings is that, contrary to the unitary approach, the ministries were divided in opinions as mentioned in the Bureaucratic Politics Model (BPM). In recent years, Indonesia’s foreign policy orientation towards ASEAN has shifted to a distinct approach. Poole (2015) saw the country has moved from multilateralism to strategic bilateral relations with an emphasis on national interests and benefits for the people, making it uncertain to claim that ASEAN is Indonesia’s foreign policy cornerstone.3 In the meantime, some ministries under Joko Widodo’s administration have geared up to add local content requirements for trade in goods while others tighten control for foreign professionals in service sectors. The ministries have demanded a review of the benefit of the ASEAN Economic Community (Patunru & Rahardja, 2015). Mahbubani and Sng (2017) have noted that Indonesia could be strained by economic nationalism that leads to resistances to open up its economy to regional competitors. 3  Poole, A. (2015). Is Jokowi Turning His Back on ASEAN? Accessed from http://indonesiaatmelbourne.unimelb.edu.au/is-jokowi-turning-his-back-on-asean/

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The domestic policy arena that shapes regional economic integration in Indonesia involves 14 ministries and a government body (BKPM/Investment board) under the Coordinating Ministry of Economic Affairs. The ministry serves as a representative for the AEC (ASEAN Economic Community) Council in Indonesia. The ministry’s tasks include representing Indonesia in AEC Council meetings, conducting regular meetings with related ministries concerning AEC and ensuring effective coordination among them. The Coordinating Ministry of Economic Affairs is able to consult directly with the President on strategic decision-making for international economic initiatives. They convey the aspirations of top officials to ministerial meetings to ensure that national objectives can be achieved in lieu of the debates over competing interests. The Coordinating Ministry also act as a mediator when the ministries are in conflict or have different opinions.4 Nevertheless, the Coordinating Ministry of Economic Affairs is not adequately equipped in terms of human resources.5 The ministry must handle the complexities of various economic initiatives in ASEAN at the domestic level, ranging from trade in goods to services, and investment and energy. The ministry is challenged by a limited number of personnel, as well as unsuitable staffs’ qualifications. As a result, the ministry’s staffs must consult respective ministries on every detail of economic agreements before heading to the ASEAN council meetings.6 The primordial roles of the Coordinating Ministry of Economic Affairs are leaning towards the internationalists. They cite that the Indonesian economy should look outward and that domestic economic actors would benefit from greater access to the international market, and thus could achieve national interest in regional economic integration. The ministry also expresses concern for the low participation among private industries in benefiting the AEC due to a huge potential within Indonesian domestic markets. Additionally, the ministry has advocated for greater economic access overseas through RCEP (Regional Comprehensive Economic Partnerships), which was debatable across the 15 economic ministries.7 The second prominent actor in regional economic integration at the domestic level is the Ministry of Trade. The Ministry of Trade acts as a negotiator in international trade negotiations, both on a bilateral and a multilateral basis. They are tasked with ensuring greater market access for Indonesian products through trade negotiations. Citing where you stand, depends on where you sit from the BPM model, the primordial role of the ministry can be categorized under the internationalists. During interviews, ministry officials state that Indonesia would benefit more from regional economic integration by shifting the inward-looking mindset of businesses. They

4  First author’s interview with a mid-career staff, the Coordinating Ministry of Economic Affairs, Republic of Indonesia. Jakarta, 10 May 2017. 5  First author’s interview with the staffs of ASEAN Cooperation Directorate at Ministry of Trade, Republic of Indonesia, 17 May 2017. 6  As expressed in an interview a mid-career staff at Coordinating Ministry of Economic Affairs, Republic of Indonesia. Jakarta, 10 May 2017. 7  Ibid, 10 May 2017.

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have criticized various domestic constraints as a speed bump that hinders the country from economically benefiting the integration.8 In my opinion, our industries are domestic oriented. We don't really see ASEAN as our priority. We simply trade the same goods to our traditional market destinations. When we pushed for more export, local economic players would complain about their capacities to fulfill the domestic needs. For them, domestic demand comes first, while in fact, everyone has to compete internationally. We don't really know where we are heading to, we can't really see the sense of urgency to compete (a high official at the Ministry of Trade, Republic of Indonesia).

In contrast to the Ministry of Trade, a Ministry of Industry senior staff stated that Indonesian businesses are not ready to face competition with international players domestically as they could not match the pace of international agreements while the agreements often neglect the interest of local industries. Local businesses also tend to focus on the domestic market, citing that the country has a huge domestic demand that is not fully supplied by its own economic players. Moreover, the Indonesian business community often criticizes market internationalization with the infant industry argument. They raise issues on lack of infrastructure, incoherent industrial policy, and market uncertainties, while failing to build awareness efforts towards international economic initiatives.9 As a result, the Ministry of Industry responds the demand by aiming to buffer local businesses with certain domestic regulations, or slowing the pace of new free trade agreement creation through inter-ministerial consultations. They perceived the strategy as an acceptable approach to locally minimizing international agreement consequences.10 The Ministry of Foreign Affairs has also been fully involved in shaping ASEAN economic initiative. The ministry positions itself as the defender of the current regime’s political objectives11: Our task is to (politically) ensure that economic integration would not go beyond our national mandate. It must be economic-wise and national interests should be fully adhered. The Joko Widodo administration has emphasized the importance of tangible economic benefit. The question of what do we get has always be arisen compared to the previous administration (a high official at the Ministry of Foreign Affairs, 2017).

It is likely that the ministry is on the backlash side. The previous statement implies that the primordial role of the ministry is depending on the vision of the current government with regard to the economic integration. This finding, however, needs to be interpreted with caution because regime's attitude to ASEAN could be adapted over time depending on the domestic and global situation. 8  As expressed in an interview with a high official at Ministry of Trade, Republic of Indonesia, 17 May 2017. 9  First author’s Interview with the staffs of the Ministry of Industry of Republic of Indonesia, 1 June 2017. 10  Interview with a senior staff, the Ministry of Industry of Republic of Indonesia, 1 June 2017. 11  Interview with a high official at Ministry of Foreign Affairs, Republic of Indonesia, 13 May 2017.

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5.3.2.2  P  olicy and Decision Games, and the Action Games in Policy Dialogue It is encouraging to take a closer look at the aspect of policy and decision games, and the action games to frame the policy dialogue. As mentioned previously in conceptual framework, this chapter addresses policy and decision games as a government response to internal and external issues with regard to economic integration, while the action games are defined as bargaining advantages for certain actors, such as their formal power, control over information, and resources acquired to determine the direction of policymaking. This chapter would argue that both actors’ strategies in shaping the policy are constrained by their power, authority, as well as bargaining over the needs to address certain internal and external issues. In this chapter, there are two main areas of conflicts in the policy dialogue. First, regarding Indonesia’s policy commitment for liberalization and second, on the effort towards harmonizing standards to eliminate NTB. Conflict arises when the commitments to internationalize the automotive sector could potentially create losers at the domestic level. The difference worked through a series of consultation across the ministries. When conflicting policies continue within various ministries, the President can ultimately decide the policy direction. The strategy of the backlash to endure the internationalization at home is by formulating a policy innovation to promote the local contents use without to the extent of not violating the WTO rules. In the trade policy dialogue process, interactions among the ministries were deliberative. This perfectly fits a major change after democratization in Indonesia that allowed more actors to participate in foreign policymaking. Competing interests among the ministries were consulted through a series of meetings. Policy and Decision Games, in general, arise when the government as a whole has to comply with the deadline of liberalization scorecards, such as eliminating trade barriers to the lowest amount possible. Specifically, in the post-2015 integration of the automotive sector, Indonesia has to harmonize its national standards according to 19 UNECE (United Nations Economic Commission for Europe) regulations.12 This move is critical because compliance with the scorecard determines Indonesia’s commitment and credibility towards ASEAN economic integration. Furthermore, there have been international pressures to reform Indonesian industrial policy in the automotive sector towards an open trade policy (Aswicahyono, 2000). It is also worth noting that some efforts towards harmonizing standards to fully reduce NTB can be a hurdle to ensure the commitment. The Indonesian domestic political economy is divided in opinion between the internationalists that fully support the integration and backlash coalitions that approach economic integration cautiously. The former Minister of Industry, MS Hidayat has stated that economic integration in the automotive industry provides a window of opportunity for the local industry. But with insufficient anticipation, the integration could harm local

 ASEAN Secretariat. (2015). Accessed from http://www.asean.org/storage/images/2015/October/ outreach-document/Edited%20Automotive.pdf

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industry.13 Thus, to stay competitive, the Minister suggested the industries to use local components despite the fact that Indonesia is not yet supported by a sufficient number of local component producers.14 The Indonesian government has introduced IKD (Incompletely knocked-down) system in 2006 to encourage sub-component imports rather than CKD (Completely Knock Down) as a whole. This strategy was set by imposing tax-duty rates with the primary goal of ensuring the know-how investment from foreign assemblers. And this policy innovation is not prohibited under the WTO rules (Natsuda et al., 2015). In addition, an interview with a staff from Ministry of Industry revealed that sometimes NTB can be used as an acceptable strategy to protect the domestic economic interest as long as the policy does not violate WTO regulations.15 For instance, the application of NTB such as local content requirements is necessary to benefit domestic producers with an established supply chains (Oxford Economics, 2015). To ensure Indonesia’s commitment towards liberalization, Coordinating Ministry of Economic Affairs has conducted regular meetings. First, at staff’s level, and it moved forward to director’s level up until the minister’s level. If deadlock of opinions occurred, the ministry would turn over the case to the president: All the ministries are treated equally under the coordination of coordinating ministry of economic affairs. However, the economic initiatives are subject to approval from the coordinating ministry of economic affairs. We have conducted several meetings to hear their opinions. However, when more and more disagreements are involved, we strongly suggest them to talk with the president directly (a mid-career official at Coordinating Ministry of Economic Affairs, 2017).

Thus, ensuring Indonesian commitment is not an easy task. According to the coordinating ministry of economic affairs staff, several ministries are reluctant to liberalize the sectors under their authorities. They refused to speed up the pace of liberalization due to the demand of local business entities. This situation was also expressed by a Ministry of Trade staff: Contrary to popular belief, Indonesian automotive sectors have approached ministries to protect some items in the supply chain. They have also complained about PSR (Product Specific Rules of Origin) (a Ministry of Trade Staff, 2017).

Formal power, power over information, and the action games also played a significant role during the policy dialogue. The Ministry of Industry is equipped with a strong bargaining of formal authority to consult the 75% of commodity list that determines whether or not the specific export/import commodities are included in

 Hardum. S. E. (2014). Hadapi MEA, Kemenperin Pacu Daya Saing Industri Nasional. Accessed from http://www.beritasatu.com/ekonomi/192192-hadapi-mea-2015-kemperin-pacu-daya-saingindustri-otomotif-nasional.html 14  Anonymous. (2014). Bea Masuk Jegal Sektor Otomotif. Accessed from http://www.republika. co.id/berita/koran/news-update/14/12/01/nfwbog36-bea-masuk-jegal-sektor-otomotif 15  From an interview with a senior staff at Ministry of Industry of Republic of Indonesia, 1 June 2017. 13

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the liberalization lists.16 Therefore, moving towards trade negotiations without involving the Ministry of Industry is deemed impossible. Similarly, the Coordinating Ministry of Economic Affairs is privileged to have a direct consultation with the President as mentioned in the previous discussion. The President’s mandate is perceived as the most important consideration during the policy dialogue. Competing interests were often neglected to accommodate the mandate of the President.17 The internal and external issues related to the automotive industry and AEC that the ministry of industry aimed to respond is that to realize a vision to transform Indonesia from the assembly hub to be a producer of automotive machinery, primary components, as well as transmissions. The minister also set a higher standard, to produce more automobiles than Indonesian competitor in ASEAN, Thailand.18

5.3.3  T  he Automotive Industry Roles as Non-State Actor in Policy Dialogue The second question of this research was the role of non-state actors in shaping Indonesia’s policy direction towards economic integration in the automotive industry. In this chapter, non-state actors are automotive corporations, both the principals and their subsidiaries.19 The current study found that domestic automotive players are in favour of economic integration because they demand an efficient mode of production through the regional supply chain of components. However, at the same time, they also aim to safeguard their domestic market in Indonesia. The most striking result from this chapter shows that positioning the automotive industry in Indonesia as the internationalists can be problematic. In addition, despite the fact that ABAC (ASEAN Business Advisory Council) officials are the prominent names in the automotive industry, they are not mainly representing the interest of the industry in policy dialogue. The automotive industry has been privileged within ASEAN Economic initiatives since its early stages. ASEAN states have introduced BBC (Brand to brand complementarity) scheme, AICO (ASEAN Industrial Cooperation), CEPT (Common Effective Preferential Tariff Scheme) (Hassler, 2012) and later, ATIGA (ASEAN Trade in Goods Agreement) to facilitate further integration in the automo As expressed in an interview with the Head of ASEAN Economic Cooperation Subdivision at Coordinating Ministry of Economic Affairs, Republic of Indonesia. Jakarta, 10 May 2017. 17  Remarks from an interview with the staffs of International Cooperation Directorate, Ministry of Industry of Republic of Indonesia, 1 June 2017. 18  Anonymous. (2016). Target Ekspor Sienta ke ASEAN 500 Unit Per Bulan. Accessed from http:// industri.kontan.co.id/news/target-ekspor-sienta-ke-asean-500-unit-sebulan 19  Company’s leader and representative, they are mainly large corporations in Japan such as Toyota, Suzuki, and Mitsubishi. Indonesian automotive Industries are the subsidiaries of the Japanese Companies. The Japanese brands are managed under a holding group locally. For instance, Astra International manages Toyota and Daihatsu; and Indomobil holds Suzuki and Nissan. 16

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tive sectors. The only opposition that the industry has encountered in policy dialogue were the member states with strong national interests (Yoshimatsu, 2002). In the early stages of ASEAN cooperation, the Japanese automotive industry in Southeast Asia was struggled to develop its operations due to protectionist policies (Yoshimatsu, 1999). At the domestic level, the interests of the automotive industry are represented by GAIKINDO (Indonesian Automobile Industry Association). The former Chair of GAIKINDO is currently the head of ABAC of Indonesia. ABAC conducts regular meetings with relevant ministries to discuss Indonesia’s trade policy in ASEAN and to represent Indonesia in those regional meetings. Nonetheless, Indonesian ABAC is not a part of Indonesian Chamber of Commerce, and does not maintain institutional communication with the Chamber. ABAC does not mainly representing the automotive industry, but this organization was designed to convey the demands of local businesses at large to the higher levels in ASEAN. The representation problem arises when ABAC was perceived as the agent of the automotive industry interests at the domestic and regional level (see introduction). In fact, ABAC has no direct institutional relations with GAIKINDO even though at its inception, two of the three ABAC representatives in Indonesia were from Suzuki Indomobil and ASTRA International.20 In this case, both Indonesian government and ASEAN Secretariat are not equipping ABAC with adequate resources, making it impossible for small industrial players to lead the ABAC. ABAC officials often spend their own budget to attend the meetings or to conduct an exhibition on the regional level. We do have some constraints to empower ABAC. The organization is not well-functioned compared to ABAC Malaysia. Our government does not fund ABAC, that is why our ABAC remains powerless (a high official at the Ministry of Trade, 2017).

This representation system, however, does not make ABAC a toothless organization. Although ABAC’s recognition as an official representative of the businesses remains doubtful, ABAC’s people maintain some individual connections to top officials in the cabinet. For instance, the Chair of ABAC was once consulted by former President Yudhoyono and his Minister of Trade, on an issue related to the outcome of ASEAN economic negotiations that they attended. The Chair of ABAC has also assisted the Minister in conducting ASEAN economic initiatives-related consultation with the house of representative.21 One might argue that the primordial role of the automotive industry is on the side of the internationalists because automotive industries in Indonesia are in favour of ASEAN economic integration. One possible explanation is that despite the local

 Remarks from an interview with The Chair of ABAC Indonesia and The President of Suzuki Indonesia. Jakarta, 6 June 2017. 21  Remarks from an interview with The Chair of ABAC Indonesia and The President of Suzuki Indonesia. Jakarta, 6 June 2017. 20

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content requirements and domestic competition issues, the industry remains dependent on imported components: Can we really produce everything (components) locally? No, it is not easy. When we aim for export, we need the approval of UNECE in terms of safety standards. Take it simple for the locally made car seat, is it safer (compared to the imported ones)? (The President of Indomobil Indonesia, 2017).

In addition, Jongkie Sugiarto, the Chief of GAIKINDO mentioned a similar situation, stating that using more local component is possible, as long as the government encourages increased local component production capacity. Sugiarto further mentioned that, while the automotive industry does not demand more protection, but he suggests a more comprehensive policy on tariffs because the government continues to impose a tariff on component materials. This situation has increased the price of locally made components.22 However, regarding the full implementation of AEC, some local automotive industry players have raised their concerns about tough competition at the domestic level. For instance, Noegardjito the secretary general of GAIKINDO, has expressed his fear that AEC would likely bring more imported sedan to the Indonesian domestic market.23 Similarly, the chief of GAIKINDO, Jongkie Soegiarto mentioned that local automotive industries must harder to enhance the quality of their products, production capacity and their human resources.24 The president of Indomobil Indonesia argued that the automotive sector integration has enabled a zero tariff, yet NTB for the components are prevalent, particularly when it comes to national standard regulation (SNI). Therefore, it is plausible to note that in some circumstances, the automotive industry demands protection to counter competition domestically. But at the same time, it also implies that the industry is desired to lubricate the trade barriers for its interest to import some components. Together, these situations provide an important insight that classifying the automotive industry into the internationalist category can be problematic in the Indonesian context. Given the divided opinion across the Ministries, policy dialogue between the government and the automotive industry is in a complex interaction. This illustrates that the action games of asserting their bargaining and power to the state can be ambitious. For instance, what the Ministry of Trade and Industry may approve does not necessarily work for the Ministry of Finance given the Ministry of Finance interest in generating import taxes.25 However, to the extent of lubricating international market, the complexity might not be the case. The industry has approached the government as expressed by a high official in the Ministry of Trade to convey its  Anonymous. (2014). Bea Masuk Jegal Sektor Otomotif. Accessed from http://www.republika. co.id/berita/koran/news-update/14/12/01/nfwbog36-bea-masuk-jegal-sektor-otomotif 23  Anonymous. (2014). Ini Dia Gambaran Pasar Otomotif RI ketika MEA Dibuka. Accessed from http://kabarbisnis.com/read/2850595/ini-dia-gambaran-pasar-otomotif-ri-ketika-mea-dibuka 24  Anonymous. (2014). Bea Masuk Jegal Sektor Otomotif. Accessed from http://www.republika. co.id/berita/koran/news-update/14/12/01/nfwbog36-bea-masuk-jegal-sektor-otomotif 25  Remarks from an interview with The Chair of ABAC and The President of Suzuki Indonesia. Jakarta, 6 June 2017. 22

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interest. In this case, the Ministry of Trade can clearly assert its position with the automotive industry. The automotive industry has complained to us on Thailand’s domestic regulations to import automobiles from Indonesia. We then, expressed our objections to Thailand’s government about this. We strongly advise that they should obey the rules of zero tariffs in ASEAN (a high official at the Ministry of Trade, 2017). Furthermore, lobbying activities have not only been conducted by the local players but also the principals from Japan. Yoshimatsu (2002) has mentioned that some Japanese corporations have approached the government, asking for national equity participation rules to be waived. Nippon Denso has lobbied ASEAN Secretariat and ASEAN governments to BBC preferential tariff measures.

References Allison, G.  T., & Halperin, H.  M. (1972). Bureaucratic politics: A paradigm and some policy implications. In World politics: Vol. 24. Supplement: Theory and policy in international relations (pp. 40–79). Cambridge: Cambridge University Press. Alt, J. E., & Gilligan, M. (1994). Political economy of trading states: Factor specificity, collective action problems and domestic political institutions. The Journal of Political Philosophy, 2(2), 165–192. Ananta, A. (2009). Reviewed: Review work(s): Indonesia and free trade agreement: Nationalist and regional integration strategy by Alexander C. Chandra. ASEAN Economic Bulletin, 26(August 2009), 232–235. Aswicahyono, H. (2000). How not to industrialise? Indonesia's automotive industry. Bulletin of Indonesian Economic Studies, 36(1), 209–241. Aswicahyono, H., & Kartika, P. (2010). Production linkages and industrial upgrading: Case study of Indonesia’s Automotive Industry. In P. Intarakumnerd (Ed.), Fostering production and science and technology linkages to stimulate innovation in ASEAN. ERIA Research Project Report 2009-7-4 (pp. 57–86). Jakarta: ERIA. Balassa, B. (1965). Trade liberalization and revealed comparative advantage. Manchester School of Economic and Social Studies, 33, 99–123. Basu Das, S., & Tham, S. Y. (2015). Moving the AEC beyond 2015: Managing domestic consensus for community building. Singapore: ISEAS Yusof Ishak Institute. Bilal, S. (1998a, March). Why regionalism may increase the demand of trade protection. Journal of Economic Integration, 13(1), 30–61. Bilal, S. (1998b, February). Political economy considerations on the supply of trade protection in regional integration agreements. Journal of Common Market Studies, 36, 1–31. Cezar, R. F. (2017). Why and how do bureaucratic conflicts matter in trade policy? Evidence from the US trade policymaking process during the Clinton administration (1993–2001). Contexto Internacional 39(1). Chalmers, I. (1994). Domestic capital in the evolution of nationalist auto developmental policy in Indonesia: From instrumental to structural power. Working paper no. 30, August 1994. Murdoch, WA: Asia Research Center, Murdoch University. Chandra, A. C. (2008). Indonesia and the ASEAN free trade agreement: Nationalists and regional integration strategy. Lanham, MD: Lexington Books. Corrales, J., & Cisneros, I. (1999). Corporatism, trade liberalization and sectoral responses: The case of Venezuela, 1989–99. World Development, 27(12), 2099–2122. Dur, A. (2008). Measuring interest group influence in the EU: A note on methodology. European Union Politics, 9(4), 559–576.

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Gunter, F. (1989). Customs union theory: Retrospect and prospect in greenaway. In Hyclak & Thornton (Eds.), Economic aspects of regional trading arrangements. New York: New York University Press. Hassler, M. (2012). Macroregional economic integration in Southeast Asia: AFTA and the automobile industry from a Thai perspective. Singapore Journal of Tropical Geography, 33, 124–136. Hew, D. (2007). Brick by brick: The building of and ASEAN economic community. ISEAS and Australian National University Asia Pacific Press. Kim, M.-H. (2011). Theorizing ASEAN integration. Asian Perspective, 35(2011), 407–435. Kim, M.-H. (2014). Integration theory and ASEAN integration. Pacific Focus, 29(3), 374–394. Kosandi, M. (2012). Parallel evolution of practice and research on ASEAN economic integration: From paradigm contestation to eclectic theorization. Ritsumeikan Annual Review of International Studies, 11, 101–133. Lombaerde, P. D., Soderbaum, F., Langenhove, L. V., & Baert, F. (2010). The problem of comparison in comparative regionalism. Review of International Studies, 36(3), 731–753. Mahbubani, K., & Sng, J. (2017). The ASEAN miracle: A catalyst of peace. Singapore: NUS Press. Mansfield, E., & Milner, H. (1999). The new wave of regionalism. International Organization, 53(Summer), 589–627. Moravcsik, A. (1998). The choice for Europe: Social purpose and state power from Messina to Maastricht. Ithaca, NY: Cornell University Press. Moravcsik, A., & Schimmelfenig, F. (2009). Liberal intergovernmentalism. In European integration theory. Oxford: Oxford University Press. Nag, B.  Banerjee, S & Chatterjee, R. (2007). Changing features of the automobile industry in Asia: Comparison of production, trade and market structures in selected Asian countries. Asia Pacific Research and Training Network on Trade Working Paper Series, No. 3, July 2007. Natsuda, K., Otsuka, K., & Thoburn, J. (2015). Dawn of industrialisation? The Indonesian automotive industry. Bulletin of Indonesian Economic Studies, 51(1), 47–68. Nesadurai, H. (2003). Attempting regional Developmentalism through AFTA: The domestic sources of regional governance. Third World Quarterly, 24(2), 235–253. Oktaviani, R., Rifin, A., & Reinhardt, H. (2007). A review of regional tariffs and trade in the ASEAN priority goods sector. In D. Hew (Ed.), Brick by brick: The building of an ASEAN economic community. Singapore: ISEAS. Patunru, A., & Rahardja, S. (2015). Trade protectionism in Indonesia: Bad times and bad policy. Lowy institute analysis. Accessed from https://thinkasia.org/bitstream/handle/11540/6410/ patunru_and_rahardja_trade_protectionism_in_indonesia_0.pdf?sequence=1. Poole, A. (2015). Is Jokowi turning his back on ASEAN? Accessed from http://indonesiaatmelbourne.unimelb.edu.au/is-jokowi-turning-his-back-onasean/. Ruland, J. (2016). Why (most) Indonesian businesses fear the ASEAN economic community: Struggling with Southeast Asia's regional corporatism. Third World Quarterly, 37(6), 1130–1145. Ruland, J. (2017). Democratizing foreign policy making in Indonesia and the democratization of ASEAN: a role theory analysis. Trans Regional and National Studies of Southeast Asia, 5(1), 49–73. Severino, R. C. (2003). Regional integration in Europe and Asia: The future of ASEAN economic integration. Asia Europe Journal, 1, 475–479. Solingen, E. (1999). ASEAN, Quo Vadis? Domestic coalitions and regional co-operation. Contemporary Southeast Asia, 21(1), 30–53. Yi, C. (2007). Emergence of regionalism: About state preference formation. Polis working paper no. 23. Leeds: School of Politics and International Studies, University of Leeds. Yoshimatsu, H. (1999). The State, MNCs and the Car Industry in ASEAN. Journal of Contemporary Asia, 29(4), 495–515. Yoshimatsu, H. (2002). Preferences, interests and regional integration: The development of the ASEAN Industrial Cooperation Arrangement. Review of International Political Economy, 9(1), 123–149.

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Other Sources Oxford Economics. (2015). Non tariff measures on the automobile industry: Quantifying the impact on the ASEAN economy. A report for General Motors International. Anonymous. (2016, January 2). South-East Asian integration, more hat than cattle. The Economist. Tangkitvanich, S., & Rattanakhamfu, S. (2017, March 21). Assessing ASEAN economic community. East Asia Forum.

Chapter 6

Protecting Intellectual Property Rights in Vietnam: Opportunities and Challenges Khoi Nguyen Phan

Abstract  With economic growth of ASEAN member countries, and their entrance into international trade agreements (World Trade Organization), there are pressures to develop institutions to adapt to external pressures. This chapter focuses on how the intellectual property (IP) law system both creates benefits and burdens to a developing country like Vietnam, and to the extent which it creates challenges to governance. Relying on secondary data such as articles, reports and statistics, the chapter shows the extent to which the IP system generates advantages, as well as the adverse outcomes to developing countries, and how such countries are pressured by international factors to adopt IP law. Analysis shows that a strong IP system may help the country attract more foreign direct investment, encourage innovation and transfer of technology and contribute to the process of integrating to the global economy. Yet, to maintain the high level of IP protection, there are challenges to governance including (1) the high cost of capacity building for the IP offices, (2) ineffective implementation of the IP-related regulations, and (3) the impression that the IP laws run counter to cultural practice. The chapter concludes that although there are some disadvantages, the IP law plays an important role in Vietnam’s strategy of international economic integration. Keywords  IP law · Foreign direct investment · Vietnam

6.1  Introduction Vietnam is a developing country in the Southeast Asia which has made numbers of effort to reform its IP system since 2005, while having a limited choice for a suitable level of IP protection because of international pressures (e.g., from the World Trade Organization—WTO). This chapter will begin with a glance at the global debate relating to IP and how it contributes to the developing countries, together with some K. Nguyen Phan Faculty of Law, University of Groningen, Groningen, The Netherlands Faculty of Law, Can Tho University, Can Tho, Vietnam © Springer Nature Switzerland AG 2021 R. L. Holzhacker, W. G. Z. Tan (eds.), Challenges of Governance, Development and Governance, https://doi.org/10.1007/978-3-030-59054-3_6

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examines to economic motivation that encouraged Vietnam in adopting a brand-new IP law system in 2005. Although there have been some optimistic signals to the IP stakeholders, the economy, and the Government, the results after 10 years of adoption seem below expectations. The Government had many difficulties in implementing and enforcing the IP law because of ineffective enforcement, insufficiency of infrastructure and human resources, and lack of social consensus. The chapter then introduces some recent activities of the Vietnamese Government to re-evaluate the current IP system and preparing for another reform in the future, including looking at the regional regime of IP law within the Association of Southeast Asian Nations (ASEAN) as a possible solution for better dealing with IP-related issues.

6.2  Research Questions and Methodology This chapter attempts to answer the question of how a strong IP law could both benefit and create burdens to a developing country such as Vietnam. Besides, an additional question which should be answered is how a developing country like Vietnam is pressured by international factors in adopting its regimes of IP protection. This chapter analyses primary resources such as statistics and legal documents and information from the Government and international organizations (e.g., World Bank), and other information from news or magazines.

6.3  S  ocial and Scientific Significance of the Research Questions Answering the research questions is important for two reasons. First, analyzing the outcomes of Vietnam’s IP system after 10 years would illustrate to what extent the country is being affected by internal and external pressures in choosing its own regime of IP that challenges the governance. This would be helpful for IP right holders and users, investors and firms to choose their own strategy relating to IP. To other developing countries in the ASEAN group, the experience in Vietnam could be a helpful lesson to have better approaches and solutions for dealing with IP, both in international and national stages. Second, the research attempts to consolidate the endeavor of the ASEAN to have a regional regime of IP, which is believed to give more benefits to its member states to be treated more equitable in the global playground of IP.

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6.4  Theoretical Framework First of all, the terms of intellectual property/intellectual property rights (IP/IPR) and intellectual property system (IP system) used in this chapter should be explained. According to the World Intellectual Property Organization (WIPO), IP refers to “creations of the mind: inventions; literary and artistic works; and symbols, names and images used in commerce,” and it is categorized as Industrial property1 and Copyright (including Related rights).2 In Vietnam, since the country has the membership of the International Union for the Protection of New Varieties of Plants (UPOV), IP includes industrial property, copyright/related rights and right to new plant varieties.3 Like any other property right, IPR are rights that “allow creators, or owners, of patents, trademarks or copyrighted works to benefit from their own work or investment in a creation.”4 In this chapter, the term of IP system refers to all legal regimes that recognize and protect the IPR, such as: legal documents concerning IP issues, IP offices, courts, polices, and customs. Relating to the effects of IP to developing countries, there are basically two streams of viewpoints in a global debate. In a transitional state like Vietnam, the system of IP law was built to comply with the standards of the Agreement on Trade-­ related Aspects of Intellectual Property rights (TRIPs) within the WTO. Therefore, the debates on how strong IP affects developing countries have a strong relation with the debate between developing countries and developed countries within WTO about TRIPs.

6.4.1  A Glance to the Debate Within WTO About TRIPs Generally, IP right issues can be found in many trade Agreements administrated by the WTO. Among them, there is an agreement that directly focuses on IP rights— the TRIPS.  Historically, this Agreement was adopted on April 15th, 1994  in Marrakesh, Morocco during the Uruguay Round of negotiations, aiming to build a high-level IP rights system within WTO by setting up a minimum standard for the members. To achieve this, the Agreement combines several international treaties on IP issues such as: The Paris Convention for the Protection of Industrial Property (the Paris Convention), The Berne Convention for the Protection of Literary and Artistic Works (the Berne Convention), The Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (the Rome Convention), The Washington Treaty on Intellectual Property in Respect of  Such as: patents, trademarks, industrial designs and geographical indications (WIPO).  See WIPO, What is Intellectual Property, available at http://www.wipo.int/edocs/pubdocs/en/ intproperty/450/wipo_pub_450.pdf (last visit 30/8/2017). 3  See Art. 1 of the Law No. 50/2005/QH11 (The Vietnam IP Law 2005). 4  See WIPO, What is Intellectual Property, (Supra n2). 1 2

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Integrated Circuits (the Washington Treaty). In other words, even if a country is not a member of such Treaties/Conventions, since being a member of the WTO, it has to comply with the treaties because this is mandated by the TRIPs. During the Uruguay Round, there was an argument between developed and developing countries relating to the benefits and burdens of the TRIPS. It is reported that “…the main argument between developed and developing countries arises over whether the TRIPs is focused more to benefit the industries of developed countries rather than the developing countries” (Braga, 1989, as cited in Su, 2000) and whether the TRIPs “damages the economic growth of developing countries” (Abbott, 1996, as cited in Su, 2000). Supporting the TRIPs, optimistic scholars noted that a high level of IP right protection would both increase foreign direct investment (FDI) and the transfer of technology from developed countries to developing countries, since foreign firms believe that their IP rights are well protected rather than to be stolen and sold to third parties (Williamson, 1989, as cited in Su, 2000). Some argued that a strong IP right system may help developing countries to keep their scientists and inventors remain in their countries since their ideas and innovations are sufficiently protected. Chen and Puttitanun (2005) even linked IP protection to innovations. Consequently, in long term, it is believed that developing countries will increase their international reputation and be more independent on technology (Helleiner, 1980, as cited in Su, 2000). In contrast, some researchers warned that TRIPs may generate adverse outcomes to developing countries Smith (1999) believed that an international agreement to protect intangible property, i.e., IP, is originated from developed economies, which use several tactics to encourage/force less developed countries to have a strong IP system, e.g., “implement certain basic intellectual property laws in order to enjoy membership in the WTO” (Smith, 1999). Thus, developing countries accused developed countries to be hypocritical because IPR primarily belong to developed countries, and a strong system of IP protection seems to give more benefits to the developed countries than the developing countries (Braga, 1989 as cited in Su, 2000). In fact, some developed countries, in the past, such as the US (Long, 1996 as cited in Smith, 1999), or Japan (Mackley, 1987 as cited in Smith, 1999) were benefited from having low standards of IP protection. Furthermore, some also argued that a low level of protecting IP rights just causes bad effects to investors in high-­ depending to IP sectors (Javorcik, 2002) and strong level of IP right systems would create obstruction to the transfer of technology and to the economic development of developing countries since their chances to access the IP properties are less (Romano, 1998, as cited in Su, 2000). Smith also found that developing countries are troubled by budgetary issues on monitoring, enforcement, litigation, and capacity building to maintain such a strong system of IP protection (Smith, 1999). To Vietnam, a country that was colonized over centuries, undercapitalized, undeveloped of educational and technological system, with poor governance, this would create “resentment, lax enforcement,

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dependent technology system and other unforeseen problems that will under-cut the promises of the WTO and TRIPs,” as well as economic disadvantages to the country within the WTO (Smith, 1999). Some cultural/traditional aspects are believed to create a resistance to enforce such a high IP protection in TRIPS. In the Asian culture, the idea of “private property” in IP is considered as a new and foreign concept that is hard to accept (Ng, 2013). Hence, to explain for the massive rate of IP right infringement in Asia, some researchers suggested a link to the ideas of called “Asian-values.” Yu (2012) noted that wide-spreading Confucianism in East-Asia including Vietnam, encourages people to reproduce the existing works to meet the need of users rather than call for verbatim duplications, and this may restrain the effort of IP reform by facilitating copyright infringements. However, despite initial resistance to the TRIPs, developing countries in WTO finally accepted the TRIPs because of either preventing unilateral trade sanction from the US or having the right to extend the period of time to comply with the agreement according to Art.65 and Art.66 (Abbott, 1996, as cited in Su, 2000).

6.4.2  A  Review on the Controversial Debate on IP and Developing Countries Many scholars, optimistically, agreed that having an effective IP protection system would benefit the countries, including the developing countries. Relating to the role of IP to developing countries, Goans (2003) reported that IP would advance the development of the economy by attracting foreign investment and motivating creativeness within the country, and an IP system is a factor facilitating developing countries to join the developed international economic activities. On the contrary, having a weak IP protection is believed to create consequences, for example, from counterfeit goods to trademark owners and consumers (Goans, 2003). Supporters of the common standards of IP regulations in the TRIPs also argued that some industries, which heavily depend on R&D (e.g., pharmaceutical, computer industry), would even collapse without a global IP system. However, from the opposite side, many researchers doubt whether there is a visible link between IP protection and economic development, and forcing developing countries to adopt a high level of IP protection may create adverse outcomes. While Smith (1999) stress that a strong IP system “is only one factor that contributes to economic development and technological innovation,” Chon (2005) even suggested that a global consideration such as IP law should be interpreted to such provisions that have more focus on food security, education and healthcare, and the international IP system should have a principle for every country to build its own IP regimes. Response to how IP protection affects innovation and FDI, Glass and Saggi (2002) found that higher cost of imitation in strong IPR protection system even

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generates wasting resources and reducing both FDI and innovation. Besides this, Hassan, Yaqub, and Diepeveen (2010) recognized that IP rights protection may result in difficulties to medicine access and pharmaceutical innovation in developing countries. As a member of ASEAN, Vietnam has to consider the regional actions concerning IP rights protection. Relating to this organization, for better coping with the issue of IP rights, Endeshaw (1999) suggested pursuing an internal IP regime in the region to reduce the international pressures for member states in choosing the suitable level of IP system according to their own conditions. Although admitting that internal different levels of the economic and political backgrounds generating difficulties to the regional efforts, Ng (2013) stated that a good balanced regime would be a solution to uniform IP law for the ASEAN in the future. With respect to all of the above research, this chapter aims to provide more focus to a specific case of Vietnam after its choice to be a member of the WTO and how the reform of IP law has affected the socioeconomic life. This experience could be learned from other developing countries including ASEAN member states to have a more appropriate approach with IP right protection to either increase the expected benefits or reduce the adverse outcomes.

6.5  Analysis The first Vietnam IP law, which was adopted in 2005 and came into effect in 2006, is considered a landmark of the law system of Vietnam relating to IP rights. It covers all of the relevant issues of IP: copyright and related rights, industrial property rights, and rights of plant variety. After a decade, the law has created a significant change in the socioeconomic life of Vietnam. In fact, the system of IP law in Vietnam includes a legal framework for IP right owners to declare their rights legitimately, to receive protection from the government against infringements, and to commercialize their rights more effectively. Socioeconomically, the system is believed to promote fair competition, encourage creativeness, enhance technology transfer, absorb foreign investments, and contribute to the procedure of harmonizing with the international system of IP law (The Vietnamese Government, 2006). However, after 10 years of practice, there are some restraints on the system because of inappropriate or unclear regulations, inappropriate practices of IP-related offices and resistance from cultural/social attitudes.

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6.5.1  I ntroduction to the Origin of the Vietnam IP Law and the System of IP Regulations Undeniably, the IP system reform in Vietnam is part of the long-term strategy of international economic integration since DOI-MOI,5 and the shifting point of reform is the adoption of the Vietnam Intellectual Property Law in 2005 (hereinafter referred to as the IP law 2005) as one of the legislative commitments of the WTO. As explained previously within the WTO, there is an agreement relating to IP rights named TRIPS which is applied to all of its member countries. Thus, before examining some internal pressures to reform the system of IP law in Vietnam, some reviews on the process of Vietnam to gain the membership of the WTO will be briefly introduced.

6.5.2  E  xternal Compulsion: A Member of the WTO, To Be or Not To Be? Until 2006, after the DOI-MOI, Vietnam has pursued a strategy to be more integrated to the international market with a high pace of economic development. It has normalized relations with the World Bank, the International Monetary Fund, and the Asian Development Bank; joined ASEAN, the ASEAN Free Trade Area (AFTA) and ASEAN Plus with partners such as China and Korea FTA, the Asia-Pacific Economic Cooperation (APEC); and joined as a founding member of the Asia-­ Europe Meeting (ASEM). It has also signed the EU-Vietnam Framework Cooperation Agreement (EEAS) and the Vietnam-US Free Trade Agreement. As reported by the Government (2006), these conditions have strongly contributed to the development of the country, increasing the rate of import and export and the economic growth, promoting the competitive position of goods and enterprises. Thus, Vietnam had more motivation to join the WTO, since it considered this as part of a continuing step of the DOI-MOI and an integrated strategy, which corresponds with WTO principles (The Vietnamese Government, 2006). However, taking part in the WTO, Vietnam has also faced many restraints from the opposite sides that either doubted the role of the WTO and the role of IP to the developing countries. To Vietnam, as an applicant country to the WTO, although it had the single option to agree with the TRIPS in order to become a member of the WTO or not, the argument between developed and developing countries within the WTO regarding to the TRIPs provided the country some clues about positive and negative sides of this Agreement. Notably, Vietnam recognized that economic globalization would increase economic dependence on developed countries, especially in unstable fields 5  A political socioeconomic strategy of the Vietnamese Government since the 1980s, including restructuring and opening the economy to be more diverse, modern and integrated with international trade and encouraging international investment.

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(e.g., financial markets), and expand the gap between countries, social classes and regions within the country (The Vietnamese Government, 2006). First, it has been criticized that the negotiations acceding the WTO were unfair. Due to the rule of negotiation, Vietnam had parallel bilateral talks with individual countries that offered numbers of demands, sometimes, covering also political or noncommercial purposes. The Vietnamese Government (2006) also noticed that this one-way negotiation rule is likely to put prospective members into unfavorable positions, since it has no right to give any counter requests, and the latter country applying for the membership, the more disadvantaged it is because the list of requirements might be extended. In this progress, there is no exception for any applicants regardless developing or least developed countries. Up to 2005, there were 147 members within the WTO and with a wide range of topics to be negotiated, the bilateral negotiations for Vietnam which started in 1995, consequently, took 10 years to be finished. Although WTO aims to level the international market, some even accused that a double-standard system has been created within the organization since new members have to agree with “WTO-Plus” conditions6 (The Vietnamese Government, 2006). Second, Vietnam also has some difficulties according to the country’s specific conditions. For example, in 2001, Vietnam signed the Bilateral Trade Agreement (BTA) with the US, an important trading member of the WTO, ruling to open the market, especially the market in services. Thus, it had to apply the same conditions to other members of the WTO under the Most Favored Nation7 principle under TRIPs. Besides, according to the Government (2006), the WTO’s negotiations were more difficult for Vietnam because new opinions for the opened market discussions under the Doha Round had been used by many member countries as offering conditions for applying countries. Furthermore, some members, which had struggled with WTO-Plus conditions, preferred to see practical commitments from Vietnam in advance rather than just having pure commitments. Third, the high rate of GDP growth of Vietnam from the last decade of the twentieth century to 2005 (from 1990 to 2005, the GDP average growth was approximately 7.46% per year)8 has consolidated the belief that Vietnam could successfully achieve its economic goals without enjoying the membership of the WTO. In brief, with all of the reasons above, WTO has not been seen as a level playing field for all players. In other words, WTO is a game in which the later participants

6  The conditions that beyond the requirements of the WTO, which are offered by member countries to the country applying for the membership. 7  This was explained by the WTO as “Treating other people equally Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members.” For more details, visit: https://www.wto.org/english/thewto_e/ whatis_e/tif_e/fact2_e.htm (last visited 25/8/2017). 8  See GDP Growth (Annual %) at http://data.worldbank.org/indicator/NY.GDP.MKTP.KD. ZG?locations=vn (last visited 14/7/2017).

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must accept all rules, which are set up by the former participants and applied equally to players at all level. However, with the awareness of opportunities and challenges, and high-trade incentives, Vietnam decided to join the WTO. The Government agreed that being a member of the WTO is a strong evidence for the decisive goal of opening the socioeconomic conditions in the country. This also contributes to domestic and foreign investments, generates more production and exporting capacities, creates more transparency, equality, and democracy which are necessary for anti-corruption policy (2006). According to Le Dang Doanh9 also stressed that WTO accession would be a great opportunity for Vietnam, because a global organization as WTO would encourage international free trade, motivate the country to improve the economic environment and facilitate the attraction of more foreign investors, and accelerate the administrative reform.10 Before acceding to the WTO, the Government reported that, as member of the WTO, Vietnam could attract international investment, improve production and exporting capacity, enhance economic restructuring, facilitate, increase the transparency of the government and reduce corruption. Moreover, goods and services of Vietnam will be treated internationally equally within the organization and trade disputes will be settled under the WTO Dispute Settlement System, one of the most effective international dispute resolution system in the world (The Vietnamese Government, 2006). In other words, acceding to the WTO is the process of taking part in economic globalization, which is beneficial to the country by its competitive advantages, maintaining the stability and sustainability of economic development, enhancing the competitive ability of goods and services, and promoting the national welfare because the resources are distributed more effectively (The Vietnamese Government, 2006). This was, optimistically, agreed by the business sector, which also showed positive reactions with WTO and their readiness for the new international playing ground. According to a survey by the Institute of Economics of the National Center for Social Sciences and Humanities, although most of Vietnamese firms still had limited knowledge about the WTO, especially private enterprises and small businesses, they generally were optimistic about their willingness to join the WTO as 90% believed this would generate economic growth, 86% said that people’s income would increase while 98.7% believed that the quality of goods and services would be improved.11

9  Dr. Le Dang Doanh, Formerly Director of the Central Institute for Economic Management (CIEM), Ministry of Planning and Investment. For further information, visit: http://www.ciem.org. vn/en/home.aspx 10  See Dr. Le Dang Doanh: 95 miles away, 5 more miles to go…(in Vietnamese) at http://tuoitre.vn/ tin/kinh-te/20060515/ts-le-dang-doanh-da-di-duoc-95-dam-con-5-dam-nua/137927.html (last visited 22/8/2017). 11  See Vietnamese firms are ready for the WTO accession (in Vietnamese) at http://kinhdoanh.vnexpress.net/tin-tuc/vi-mo/doanh-nghiep-vn-san-sang-cho-viec-gia-nhap-wto-2678148.html (last visited 22/8/2017).

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6.5.3  Some Internal Pressures The domestic pressures partly emerged from the international situation. After becoming a member of the WTO, the need to protect IP of Vietnamese products in foreign markets, predictably, would be higher. In the past, some Vietnamese IP rights have been violated/pirated in the international market. For example, the brands Phan Thiet (fish sauce), Trung Nguyen (coffee), or Vinataba (tobacco) have been registered overseas without giving notice to the Vietnamese trademark owners.12 Besides, since Vietnam has been an agricultural based country, and exporting the agricultural products has been very important to the economy,13 the need for international recognition and protection of IP rights in the relevant products (e.g., brands, geographical indications) is critical, not only to fight against the infringements, but also to provide them the intangible values that could increase the exporting prices. In short, if having a low level of IP protection, Vietnam cannot provide the protection for domestic IP rights from infringements in the international market. Yet, Vietnam finished its negotiations with the US and finalized the long-term process of application to the WTO in 2006. The following paragraphs will focus on its exertion in enhancing the power of the IP law system as part of the law reform requirements within the WTO’s commitments.

6.5.4  The Reform of IP System in Vietnam in 2005 In fact, legislators decided to draft a particular law covering all issues of IP: copyright, patent, trade mark, trade secret, geography indication, patent and rights of new plants. It was also designed to be compatible with the international treaties that Vietnam has the membership and, unquestionably, with the TRIPs. This experience can be found in the other ASEAN countries. For instance, in 2002, Indonesia adopted a new version of the Copyright Act, to be more harmonized with The WIPO Copyright Treaty and The WIPO Performances and Phonograms Treaty, in which the country is a member (Antons, 2008). To that end, on November 29th 2005, the National Assembly passed the Vietnam IP Law (Law No.50/2005/QH11), which came into force from July first 2006, covering all issues of IP rights. Customarily, implementing documents then was adopted by authorized bodies to explain the law and facilitate its application. The current system of IP law in Vietnam, significantly, has the characteristic of a civil-law system which is based on codification. In this system, the IP Law is the

 See What trademarks has Vietnam lost? (in Vietnamese) at http://vietnamnet.vn/vn/kinh-doanh/ viet-nam-da-danh-mat-nhung-thuong-hieu-nao-43766.html (last visit 30/8/2017). 13  See Report on import and export in the month of December and 2005 (in Vietnamese) at https:// www.customs.gov.vn/Lists/TinHoatDong/ViewDetails.aspx?ID=16427&Category=S%E1%BB% B1%20ki%E1%BB%87n (last visited 30/8/2017). 12

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principle document, with some relevant laws that have regulations concerning IP issues: The Civil Code, The Criminal Code, Law on Technology Transfer, Law on Competition, Law on Publication, etc. After 4 years of its adoption, the IP Law 2005 was amended in 2009. The system is, basically, administrated under a system of IP offices: the National IP Office (NOIP, belonging to the Ministry of Science and Technology, which administrates the issue of industrial property rights), the Copyright Office of Vietnam (COV, a division of Ministry of Culture—Sport and Tourism—administrates the issues of copyright and related rights), the New Plant Variety Protection Office (an ancillary office of the Ministry of Agriculture and Rural Development— in charge of plant variety rights issues).

6.6  Some Optimistic Signals from the IP Law System After 10 years of its existence, in response to the expectations of the government, the new IP law system has played a crucial role in the protection the exclusive rights of the IP right owners and brought benefits to different levels. The benefits can be seen from three aspects of: the IP right holders, the socioeconomic factors, and the Government. Firstly, to the IP rights owners, the system provides them a more effective way to declare, register, exercise and be protected. The number of IP application and granting protection certificate are increasing annually, e.g., 2166 patent applications in 2006, increased to 5228  in 2016 Ministry of Science and Technology (MOST), 2017. Regionally, there are some regimes that facilitate the IP applicants within the ASEAN. For example, Vietnamese IP applicants can access the ASEAN’s database, which are shared by the IP offices of several member countries, of trademarks14 and industrial designs15 to search for helpful information and help them save time and effort in registering. Since the rights are protected, the right holders can exploit their rights in many ways, via assignment contracts and licensing contracts. Over the 10 years period, IP transactions increase considerably. The MOST (2017) reported that in 2006, the number of contracts that have been registered with the NOIP was only 213, but it rose by a factor of six to 1219 in 2016. In the field of copyright, authors now can commercialize their works more effectively and easily thanks to the one-stop-shop system of copyright collection societies, which are authorized by the copyright owners to license the use of works or conduct litigations against violations. A strong IP system must have an effective regime to deal with right infringements. In fact, the current IP law system in Vietnam had provided many mechanisms to resolve conflicts and disputes than the previous system. According to the

14 15

 Via http://www.asean-tmview.org/tmview/welcome  Via http://www.asean-designview.org/designview/welcome

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MOST (2017), while the NOIP resolved 6475 claims and provided 1858 advisories (i.e., to the Courts) for issues of industrial property rights in the period of 2006–2016, the COV shared the duty of resolving 250 letters of claim in the period of 2006–2015. Statistics shows that the number of claims have also expanded. For example, the number of claims relating to industrial property rights rose by nearly 100% (from 622 to 1123) in the period 2005–2016 (MOST, 2017). Although this may stress the IP offices, the increasing number of claims shows that copyright owners have more awareness of and know how to protect their IP rights; either they believe that submitting claims to the IP offices is the effective resolution. Secondly, there are some signals showing that the Vietnam’s economy was being benefited from the existence of the IP system. Yet, there has been no research on how the Vietnam’s economy directly responses to the system of IP law, the economic statistics have shown some positive outcomes. For instance, total export and import amount of Vietnam increased significantly from $69.4 billion in 2005 to $327.6 billion in 2015.16 Similarly, the FDI also increased rapidly from $1.9 billion to $11.8 billion in the same period.17 This may be explained by the fact that foreign investors were more confident to exploit their IP rights in Vietnam because their IP would be protected. From another aspect of technology, the Ministry of Plan and Investment reported that Hi-tech Industrial Zones/Parks (in Ho Chi Minh City, Da Nang City and Ha Noi) and seven Hi-tech Application Areas in other provinces have contributed the additional intellectual value to the productions (2017). Besides this, the IP system might have positive impacts on creativeness and innovation. The percentage of expenditure for R&D in the GDP developed from 0.178 (~$67.5 million) in 2002 to 0.19 (~$257.5 million) in 2011, and according to the MOST (2014), it continued to show a rapid increase to 0.35 (~$550 billion)18 in 2013. Thirdly, the new IP system proved that Vietnam is serious in its strategy to pursue an opened and integrated economy. Internationally, the nation is believed to improve its prestige and would be treated equally within the WTO because the WTO’s rules are applied to member countries regardless of being rich or poor (The Vietnamese Government, 2006). To give an illustration, in its first dispute within the WTO, Vietnam won the anti-dumping lawsuit against the US in 2011.19 Thus, with a high level of IP protection, it would be easier for Vietnam to negotiate international economic-­related agreements. After WTO, it continued to join several FTAs with

 See Statistics on the value of Vietnam’s Export and Import of goods for the period 1996 – 06/2016 (in Vietnamese) at https://www.customs.gov.vn/Lists/ThongKeHaiQuan/ViewDetails.aspx?ID=37 6&Category=S%E1%BB%91%20 li%E1%BB%87u%20chuy%C3%AAn%20 %C4%91%E1%BB%81&Group=S%E1%BB%91%20li%E1%BB%87u %20th%E1%BB% 91ng%20k%C3%AA (last visited 13/7/2017). 17  See FDI, net inflows (BoP, current US$) at http://data.worldbank.org/indicator/BX.KLT.DINV. CD.WD?locations=VN (last visited 13/7/2017). 18  At the rate exchange of USD/VND = 22.600 19  For more details, see WTO case DS404: United States — Anti-dumping Measures on Certain Shrimp from Viet Nam, available at https://www.wto.org/english/tratop_e/dispu_e/cases_e/ ds404_e.htm (last visited 01/8/2017). 16

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Chile (2008), Japan (2008), Lao (2015), Korea (2015), and the Eurasian Economic Union (EAEU) (2015). As a member of ASEAN, Vietnam has also taken part in the FTAs of ASEAN-China, ASEAN-India, ASEAN-Australia/New Zealand, ASEAN-­ Korea, and ASEAN-Japan. Besides that, Vietnam has been supported by some international regimes in IP-related issues. Since it became member of the ASEAN in 1995, the country has participated in a long-term strategy of the organization to uniform and enhance IP protection within the region. The strategy began with The ASEAN Framework Agreement on Intellectual Property Cooperation in the ASEAN Summit in Bangkok, Thailand in 1995. After that, the ASEAN Working Group on Intellectual Property Corporation (AWGIPC) was established in 1996, which presented the ASEAN IPR Action Plan 2004–2010 and the ASEAN IPR Action Plan 2011–2015 in 2004 and 2015. In 2013, the AWGIPC opened two online portals, the ASEAN IPR SME Helpdesk, which aims to give European small and medium enterprises information about IPR related issues in advanced of entering the ASEAN market20 and the ASEAN Intellectual Property Portal,21 which provides basic information about IP systems in ASEAN member countries. In 2009, it launched the program facilitating IP Offices in ASEAN member countries for faster and more accurate in granting the patent certificate, named The ASEAN Patent Examination Co-operation.22 However, the road to have a uniform system of IP protection within the ASEAN has many obstructions since the member countries are in different “level of cultural, political, economic and technological development” (Ng, 2013). There is a large gap in the economic development among ASEAN’s countries. In 2015, the GDP per capita was highest in Singapore at ~$52,744, the lowest amount of that in Cambodia was only $1198 (ASEAN Secretariat, 2016).23 In field of IP law, when 8/10 countries have accessed both of the two important treaties on copyright and industrial rights—the Berne Convention and the Paris Convention—Cambodia has only the membership of the Paris Convention and Myanmar, up to date, have not accessed to either of them. In ASEAN, only 7/10 countries recognized the right to plant variety as IP right in their laws,24 and geographical indication (GI) are protected in different ways (e.g., in Vietnam and Thailand, GI is a separated object of IP, but in Brunei, GI is protected as trademark). In other words, the diversity among ASEAN countries

 For further information, visit http://www.southeastasia-iprhelpdesk.eu/ (last visited 23/8/2017).  For further information, visit https://www.aseanip.org/ (last visited 23/8/2017). 22  For further information, visit https://www.aseanip.org/Services/ASEAN-Patent-ExaminationCo-operation-ASPEC/What-is-ASPEC (last visited 23/8/2017). This program will come to a higher step, since the search engine and database of ASEAN (ASEAN PatentScope) has just been declared to be launched in the 53th meeting of the AWGIPC in Hanoi. See Launched database search engine for ASEAN countries (in Vietnamese) at http://dantri.com.vn/khoa-hoc-cong-nghe/ khoi-dong-cong-cu-tra-cuu-co-so-du-lieu-ve-sang-che-cac-nuoc-asean-20170717194746825.htm 23  See ASEAN Statistics Leaflet – Selected key indicators 2016, available at http://www.aseanstats. org/publication/asean-statistics-leaflet-selected-key-indicators-2016/ (last visited 07/9/2017). 24  Up to date, right to new plant varieties is not recognized as IP right in Lao, Cambodia and Myanmar. 20 21

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turns to different goals and benefits in the regional regime of IP, and an effort to build the regional IP system should take all of the differences among countries into account.

6.7  The IP System and Its Challenges to the Governance In May 2017, the MOST chaired a conference to review 10 years of the enforcement of the IP law in Vietnam, and to hear contributing comments from several IP-related stakeholders for law revision. The conference concluded that, after a decade of application, the practices of the IP law were ineffective in some aspects. To be more specific, the IP system is evaluated to be complicated, insufficient of human resources and infrastructure, and lacks social consensus and therefore, needs to have a new reform in the future.

6.7.1  IP System in Vietnam, A Complicated One From the very beginning, the drafters of the Vietnamese IP law have tried to include all of the IP right issues into one law, as an effort to simplify the system. However, the outcome was not as expected. In fact, each of the IP issues is administrated by a specific IP office, which has authority to issue some kinds of by-law document to explain the regulations relating to their sectors in the IP law. This is necessary because in Vietnam, the laws are concise documents that need other by-law documents to explain the provisions and to make the regulations able to be applied. Unfortunately, the processes created sub-systems of IP regulations with hundreds of legal documents and confused all parties involved: IP right owners, IPR users, and IP administrators. Furthermore, acceding to inter-territorial IP treaties also embarrassed the Vietnamese lawmakers to harmonize and localize all of the relevant rules. Some international agreements and regional on-going process of IP harmonization also create more puzzles. For the moment, Vietnam has joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CP-TPP), as one of its founding members. This Agreement is the effort of the remaining 11 members, after the withdrawal of the US in 2017. Because of the Agreement, Vietnam has to decide whether or not to reform the IP law in such a way that fitting with the CP-TPP. Regionally, the ASEAN also has its own framework to harmonize the IP law among members to comply with international standards.25 Therefore, any future reforms in the IP system of member states must take the current stages of the ASEAN’s framework into account. Regrettably, at the current stage, a prospect to

25

 For instance, as provided by the Strategy Goal 2 of the ASEAN IPR Action Plan 2011–2015.

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establish a regional regime of IP is still unclear. Again, this creates more difficulties to the law makers in the ASEAN’s member states to localize the international IP regulations. Noticeably, the stress also comes from certain economic partners, such as the US. In 2017, Vietnam is still in the Watch-list of the US because of a high rate of IP right infringement, and the situation was unchanged since the List first appeared in 2009. This may be link to other issues, as “The United States will continue to address these [e.g., IP right infringements] and other IP issues with Vietnam through the United States-Vietnam Trade and Investment Framework and other bilateral engagement” (The United Stated Representative—USTR, 2017). Some other countries in the ASEAN, such as Indonesia and Thailand which appear on the Priority Watch-list, have had trouble in the relationship with the US relating to IP rights.26 The effectiveness of IP law execution, considerably, is partly impaired because of the inconsistency of relevant regulations. For instance, the implementing documents are not always coherent with the provisions in the law. According to the Ministry of Justice (2016), 2350 implementing documents were found to have unlawful contents, in which 62 documents were adopted by high-rank offices, including the Ministries. Consequently, the system became both unmanageable and unreliable. In 2005, under the pressure to have an Intellectual Property Law to meet the requirements of existent Members of the WTO, the National Assembly of Vietnam hastened adopting the IP law after only 11 months of drafting, submitting, and ratification. The law then was examined again in 2006 by the Government, and some mistakes were found. To fix the faults, the National Assembly passed the amended version of the Copyright law in 2009 (Law No. 36/2009/QH12), which came into force the year after. Despite the revision of IP law, a lack of synchronicity and harmoniousness continue to cause inefficiency in the IP system. It can be admitted that, the system of law in Vietnam heavily depends on implementing documents which are not always reliable. As mentioned above, in 2009, the IP law was slightly redressed, meaning that the implementing documents of the old version of the law then should be changed or modified to comply with the new version one. However, this was not fully done until 2013. Hence, the new version of the IP law came out with the old version of implementing regulations in the interim. Additionally, measures dealing with IP right infringements were criticized since they had been applied improperly. To execute the IP law, many IP enforcement agencies believe that it is unbalanced and ineffective in certain key aspects.27 Similarly, the USTR (2017) noted that “Vietnam also continues to rely heavily on  See The 2017 “Special 301” Report of the Office of the United States Trade Representative (USTR), available on https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/ april/ustr-releases-2017-special-301-report (last visited 25/8/2017). 27  See Report on 10 years enforcement of IP law: some provisions in the IP law should be revised (in Vietnamese) at https://www.most.gov.Vietnam/Vietnam/tin-tuc/12009/tong-ket-10-nam-thihanh-luat-so-huu-tri-tue%2D%2Dcan-sua-doi%2D%2Dbo-sung-mot-so-dieu-cua-luat-so-huutri-tue.aspx (last visited 25/7/2017). 26

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administrative enforcement actions, which have failed to deter widespread counterfeiting and piracy.” From 2006 to 2016, while the Market Surveillance Agency28 has found 179,857 cases and fined VND 591,720,045 (~$26,000) for IP right violations, the number of cases relating to copyright and related rights infringement that had been judged by the Civil Court was only 142 cases, and by the Criminal Court was even lower at 24 cases (Ministry of Culture–Sport–Tourism, 2017). Thus, the Government was suggested to facilitate civil and criminal measures, and to have a specific system of IP Court for better dealing with IP right infringements.29 However, to cope with online infringements, the country seems to have no effective mechanism for an appropriate resolution. Since broadband internet access and smartphones are very popular in Vietnam, the USTR (2017) underlined that, although there were stronger enforcement actions from the Government, the rate of online piracy and sales of counterfeit goods was likely to have increased. As a response to the above problems, the Government is considering some solutions such as re-examining and simplifying the IP law, not only to enhance its efficiency but also to make it comply with international and regional IP system including: Adopting new Laws for each IP issues (e.g., Copyright law, Patent law, Trademark law…).30 Furthermore, since IP rights are not national issues anymore, any successful effort to make an effective system should have an awareness of the cross-border factors, international and regional IP-related circumstances, and the inter-relationship among them. Regionally, the ASEAN Framework Agreement on Intellectual Property Cooperation which was signed by the Economic Ministers at the fifth ASEAN Summit in Bangkok, Thailand aiming to foster a closer cooperation in the field of IP rights as part of the ASEAN FTA to achieve a prosperity region, following with numbers of Plans: Hanoi Plan of Action (1994–2004), ASEAN IP rights Action Plan 2004–2010, ASEAN IP rights Action Plan 2011–2015, in which every member country had its own responsibility.31 Because of this, any effort to promote the level of IP protection in ASEAN member countries need to correspond to the regional actions.

6.7.2  T  he Need for More Funding on IP Offices and IP Enhancing Activities In fact, Vietnam has suffered from considerable pressure, from businesses and IP administrative bodies, to invest more in capacity building for IP offices in order to better deal with IP-related issues (e.g., reducing the time of granting IP certificates and judging IP claims). Yet, the IP Law facilitates a regime that creators of IP can  One of the affiliated agencies of the Ministry of Industry and Trade.  Supra n27. 30  Ibid. 31  To-date, the long awaited ASEAN IP rights Action Plan 2016–2025 still not be published. 28 29

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register their rights officially, and thousands of IP certificates have been granted over the last 10 years; however, some Vietnamese firms claimed of suffering losses because the procedures of IP right registration takes more time and effort than being expected. Similarly, the IP offices reported that the backlog was high without effective resolutions.32 In addition, the procedure to apply for IP certificates was also criticized because it lacks transparency and tracking ability. Therefore, the investment might partly focus on upgrading the infrastructure for IP offices based on computing technology and a sharing information platform.33 In addition, promoting public awareness toward IP rights to all of the related stakeholders (e.g., inventors, creators, IPR users, small and medium enterprises), could enhance self-protection, reduce inappropriate uses, and encourage creativeness. Besides, the need to have a strategy to increase the value of product using IP is very urgent. Undeniably, although the total amount of export was high, the value of that was under expectations. For instance, foreign importers buy coffee at a price of only $2/kilo, then sell it at $200/kilo,34 buy tea at $1698/ton and sell at $9800/ton.35 This is partly because of poor branding promotion. It is reported that 80% of Vietnamese agricultural products were sold internationally with foreign brands,36and 80% of them were domestically traded without brands (NOIP).37 Therefore, trade promotion strategy should be conducted in a manner that links with IP value promotion. Although this should be primarily operated by the exporting companies, the Government might have a policy to facilitate such activities (e.g., fund for international trade fairs to marketing Vietnamese brands).

6.7.3  The Need to Improve Social Awareness on IP Yet, cultural tradition and low awareness of IP issues are believed to create a restraint to the effort of the Government to reform and enact the IP protection system. The IP law in its appearance in 2005 might be a long step of the country, since the public had not been prepared well for such a change in social life. Although IP rights are evaluated as significance for the success of enterprises, especially small and medium

 Supra n27.  Ibid. 34  See Vietnam urgent to boost export value at http://vietnamnews.vn/economy/375119/vn-urgedto-boost-export-value.html#tBbqcAfyfqFbhs4v.97 (last visited 30/8/2017). 35  See Inattention in building brands for agricultural products (in Vietnamese)at http://www.favri. org.vn/vi/tin-tuc/tin-tuc-cap-nhat/960-van-lo-la-xay-dung-thuong-hieu-nong-san.htm (last visit 30/8/2017). 36  Ibid. 37  See Urgent to build brand-named for Vietnamese agricultural products at http://www.ipsi.org. vn/TinTucChiTiet.aspx?nId=745&nCate=3 (last visited 30/8/2017). 32 33

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ones, their knowledge and understanding of IP-related issues are very low.38 According to the MOST (The Ministry of Science and Technology (MOST), 2017), despite the fact that there are about 600,000 enterprises and two million individual business households, only 300,000 trademarks has been registered (NOIP, 2017).39 This partly contributes to either the high rate of IP infringement or the ineffectiveness in the operation of the IP offices. For example, according to Huu Can,40 the increase of trademark violation resulted from the low awareness of the marks’ owners, since they did not register their mark, had no strategy and human resource to handle the IP issues (2014).41 The social consensus also plays an important role in IP law enforcement in Vietnam. In May 2017, the Vietnam Centre for Protection of Music Copyright (VCPMC) that tried to collect the remunerations from the users of copyrighted works in the lodging sector (e.g., guest houses, hotels), has received angry response from society. The VCPMC then, with a suggestion from the COV, declared to stop the plan to search for a more appropriate manner to operate such action.42 To the Government, again, any practices to raise the public awareness to IP-related issue should be in harmony with relevant regional actions, e.g., the Strategy Goal 3 of the ASEAN IPR Action Plan 2011–2015.

6.8  Conclusion Summarizing what has been discussed in the previous parts of this chapter, having a strong IP law is very important to Vietnam for the strategy of international economic integration. However, Vietnam faces various problems in fostering the IP system as a developing country. In the field of IP right protection, the game has been settled by the developed countries and there is no level playing ground to all participants. Although some benefits may be recognized from the view of economists, IP  See Small and medium enterprises are unconcerned with IP (in Vietnamese) at http://sromost. gov.vn/vi/tin-tuc-su-kien/664-doanh-nghiep-vua-va-nho-con-tho-o-ve-so-huu-tri-tue (last visited 21/8/2017). 39  See Startup enterprises are unconcerned with IP, (in Vietnamese) at http://www.baohaiquan.vn/ Pages/Doanh-nghiep-khoi-nghiep-tho-o-voi-so-huu-tri-tue.aspx (last visit 21/8/2017). 40  Mr. Nguyen Huu Can, Deputy Director of the Vietnam Intellectual Property Research Institute, Ministry of Science and Technology. For further information, visit: http://english.vipri.gov.vn/ 41  See Many difficulties in preventing intellectual property infringements (in Vietnamese) at http:// www.baomoi.com/nhieu-kho-khan-trong-viec-ngan-chan-vi-pham-so-huu-tri-tue/c/13574768.epi (last visited 23/8/2017). 42  See Halt the plan to collect copyright fees for musical works on TV programs broadcasted at hotels (in Viet namese) at http://tuoitre.vn/tin/van-hoa-giai-tri/20170526/tam-dung-thu-phi-amnhac-tai-cac-phong-nghi-khach-san/1321122.html (last visited 03/8/2017). Again, this created an extra-stress to the Government, as they have to draft for a Decree, which balancing all of the stake holders’ benefit, in collecting the remuneration in such cases. In other words, the copyright owners have to wait until there is such a regulation adopted by the Government. 38

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right holders and the Government; certain challenges are also apparent. Despite concerted efforts from the Vietnamese Government over the last 10 years, the implementation of this complicated system also reveals certain inefficiencies: inconsistent regulations, inappropriate application of administrative and criminal measurements, and delays in granting IP certificates. Besides this, some difficulties come from traditional characteristics and extra-territory also put the legislators into a complicated situation to balance all of the relevant factors. The results of this chapter could not reveal the whole picture of IP system in Vietnam. Therefore, further research on how the IP law affects the social-economic life in Vietnam should be conducted. In the short term, to reduce the high rate of IP violations and accelerate the process of certificate granting, enhance the effectiveness and transparency of examination of applications for IP property registration, Vietnam may consider to have re-evaluations for reforming the current IP system respecting to both domestic and international/regional elements, invest more funds to raise the social awareness of IP right related issues to all stakeholders, and upgrade the capacity building and substructure of IP offices such as shared-digital databases. Taking a slightly wider scope, the lesson learned by Vietnam should be deeply examined by ASEAN and its member states. In the region of Southeast Asia, since Vietnam similar conditions and characteristics with many other member states of the ASEAN, such as level of economic development and cultural perceptions, the challenges from pursuing a high level of IP rights protection may also occur in other countries. Although the prospect of harmonizing IP law within ASEAN has been challenged, a regional system of IP system could be a good solution to provide the ASEAN members more power to negotiate in international IP-related treaties, and to choose at what level of IP protection is suitable according to their own conditions and goals of the economy.

References Abbott, F. M. (1996). The WTO TRIPS agreement and global economic development. Chi.-Kent L. Rev., 72, 385. Antons, C. (2008). Copyright law reform and the information society in Indonesia. In B. Fitzgerald, F. Gao, D. O’Brien, & S. X. Shi (Eds.), Copyright law, digital content and the internet in the Asia-Pacific (pp. 235–255). Sydney University Press: Australia. ASEAN Secretariat. (2016). ASEAN Intellectual Property Rights Action Plan 2011–2015. Braga, C. A. P. (1989). The economics of intellectual property rights and the GATT: A view from the South. Vand. J. transnat’l L., 22, 243. Chen, Y., & Puttitanun, T. (2005). Intellectual property rights and innovation in developing countries. Journal of development economics, 78(2), 474–493. Chon, M. (2005). Intellectual property and the development divide. Cardozo L. Rev., 27, 2821.  Endeshaw, A. (1999). Harmonization of intellectual property Laws in ASEAN. The Journal of World Intellectual Property, 2(1), 3–23. Glass, A.  J., & Saggi, K. (2002). Intellectual property rights and FDI. Journal of International Economics, 56, 387–410.

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Goans, J.  W. (2003). Intellectual property and developing countries: An overview. In Briefing Paper. Washington, DC: Nathan Associates. Hassan, E., Yaqub, O., & Diepeveen, S. (2010). Intellectual property and developing countries. Santa Monica, CA: RAND Corporation. Helleiner, G. K. (1980). International technology issues: southern needs and northern responses. In International Economic Disorder (pp. 166–193). Palgrave Macmillan, London. Javorcik, B.  S. (2002). The composition of FDI and protection of intellectual property rights: Evidence from transition economies. European Economic Review, 48, 39–62. Long, D. E. (1996). The protection of information technology in a culturally diverse marketplace. J. Marshall J. Computer & Info. L., 15, 129. Mackley, C. (1987). The Role of the Patent System in Techology Transfer: The Japanese Expericence. Colum. J. Transnat’l L., 26, 131. Ministry of Culture–Sport–Tourism. (2017). The Ministry of Culture—Sport and Tourism, Report No. 184/BC-BVHTTDL on 10 years enforcement of IP law on copyright and related rights, 2017. Ng, E. S. K. (2013). ASEAN IP harmonization: Striking the delicate balance. Pace International Law Review, 25, 129–160. NOIP. (2017). The Copyright Office of Vietnam, 20 years of foundation and development of copyrights (in Vietnamese). Retrieved August 4, 2017, from http://www.cov.gov.vn/cbq/index. php?option=com_content&view=article&id=562&catid=49&Itemid=102 Romano, F. (1998). Global trademark and copyright 1998: protecting intellectual property rights in the international marketplace. International Conventions and Treaties. Smith, M. W. (1999). Bringing developing countries’ intellectual property laws to TRIPs standards: Hurdles and pitfalls facing Vietnam’s efforts to normalize an intellectual property regime. Case Western Reserve Journal International Law, 31, 211–251. Su, E. (2000). The winners and the losers: The agreement on trade-related aspects of intellectual property rights and its effects on developing countries. Houston Journal of Intellectual Property Law, 23(1), 169–218. The Ministry of Justice. (2016). Judicial summary data in 2016 (in Vietnamese). Retrieved July 13, 2017, from http://moj.gov.vn/cttk/sltk/Lists/SoLieuThongKe/Attachments/38/Bieutonghopsoli eutongket2016(2016-12-16)-Tong%20so-gui%20Van%20Phong.xls The Ministry of Planning and Investment. (2017). Report on summary of operating models of the industrial zones and economic zones. Retrieved July 25, 2017, from http://www.mpi.gov.Vn/ Pages/tinbai.aspx?idTin=35899&idcm=207 The Ministry of Science and Technology (MOST). (2014). Investigation of Scientific research and technological investment (in Vietnamese). Retrieved July 27, 2017, from https://www. google.nl/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKE wjx5b6H3qTVAhXNmLQKHcJ6DKQQFggpMAA&url=http%3A%2F%2Fwww.vista.gov. Vn%2FLinkClick.aspx%3Ffileticket%3D7KN7k5gmVa0%253D%26tabid%3D83%26langua ge%3Dvi-VN&usg=AFQjCNF8mtOa_UNeedBTwrANossrLKU7uQ The Ministry of Science and Technology (MOST). (2017). Report on summary of 10 years enforcement of IP law (draft). Retrieved July 25, 2017, from https://www.most.gov.Vn/cchc/ tin-tuc/593/11919/du-thao-bao-cao-tong-ket-10-nam-thi-hanh-luat-so-huu-tri-tue.aspx The United Stated Representative—USTR. (2017). Special 301 report on intellectual property rights. Retrieved July 28, 2017, from https://ustr.gov/about-us/policy-offices/press-office/ press-releases/2017/april/ustr-releases-2017-special-301-report The Vietnamese Government. (2006). Vietnamese Government, Report No. 150/TTr-CP on 15/11/2006 to the President of Vietnam on the WTO accession negotiations and ratification of the Protocol of Accession to the WTO Agreement, 2006. Williamson, D. (1989). Addressing inadequate intellectual property protection in the Uruguay round. Business America, 4. Yu, P. K. (2012). Intellectual and Asian values. The Marquette Intellectual Property Law Review, 16, 329–299.

Chapter 7

Indonesia–China Strategic Partnership: Role of Vision, Bureaucratic Actors and Domestic Political Change Petrus K. Farneubun

Abstract  Several studies by Indonesian and foreign scholars have addressed the impact of domestic political change on Indonesian foreign policymaking at the time of President Susilo Bambang Yudhoyono (2004–2014). Their analyses, however, tend to be rather general and emphasise the personal characteristics of the president and the role of the minister of foreign affairs. Although they are important, this chapter proposes a more encompassing analysis in which, next to presidential leadership, bureaucratic actors also play a key role in Indonesian foreign policymaking, along with the broader context of domestic political change. To demonstrate the relevance of these factors, this chapter looks at Indonesian foreign policy towards China with specific reference to the “Strategic Partnership Agreement” signed in 2005, later upgraded to a “Comprehensive Strategic Partnership Agreement” in 2013. With the combined framework of Allison’s bureaucratic politics model and Hermann’s scheme of foreign policy analysis, and on the basis of the data gained from primary sources, notably government speeches, reports, policy statements, and secondary sources like journals, books, and newspaper articles, findings indicate that (1) the underlying driver of Indonesia’s relation with China is Yudhoyono’s vision of making Indonesia prosperous that compels him to promote a strategic partnership with China, (2) the concrete shape of this relation is largely determined by the support from key bureaucratic actors whose policy preferences derive from their bureaucratic positions, and (3) this important role of the government actors is the result of domestic political change which has also generated a shift in the perception of China’s role in international affairs. Keywords  Strategic partnership · Domestic politics · Bureaucratic actors · Foreign policy

P. K. Farneubun (*) Faculty of Arts, University of Groningen, Groningen, The Netherlands University of Cendrawasih, Jayapura, Papua, Indonesia © Springer Nature Switzerland AG 2021 R. L. Holzhacker, W. G. Z. Tan (eds.), Challenges of Governance, Development and Governance, https://doi.org/10.1007/978-3-030-59054-3_7

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7.1  Introduction The collapse of authoritarian rule in 1998 has been a moment of remarkable change in Indonesian domestic politics. It has significant impacts on the conduct of Indonesian foreign policymaking, altering Indonesian perceptions about China and making the process of policymaking more consultative, and yet highly political. Deeper engagement and integration with global and regional major players, notably China, have now become a policy priority. Although all the Indonesian post-authoritarian administrations have initiated stronger cooperation with China, it is under Yudhoyono’s leadership that Indonesia– China cooperation reached its highest form. This achievement was marked by the signing of two historic agreements, the Strategic Partnership Agreement in 2005, which was later upgraded to a Comprehensive Strategic Agreement in 2013. Despite many challenges such as Indonesia’s concerns about China’s growing military power, regional stability in the South China Sea, and massive influx of Chinese workers and products to Indonesia, these agreements mark a new era of Indonesia– China bilateral relations and serve as a basis for multi-sector cooperation. This chapter focuses on this particular change. It asks why and how President Yudhoyono made his decision to intensify relations with China. This question requires an investigation to understand Yudhoyono’s foreign policymaking by examining his vision of making Indonesia a prosperous country, the influence of key government officials, and the impact of domestic political change.

7.1.1  Research Question The chapter asks one central question: “Which principal factors influenced President Yudhoyono to sign the strategic partnership with China and later upgrade it to a comprehensive strategic partnership?” This chapter makes three overarching claims. First, that Yudhoyono’s decisions are primarily driven by his vision to improve Indonesia’s economic growth through establishing a strategic partnership with China. Second, that this decision is shaped and supported by his inner circle of individuals in bureaucracies. Third, that the involvement of government actors is the result of the domestic political change which has also increased political pressure and generated a shift in the perception of China’s role in Indonesian economic development.

7.1.2  Significance of the Research The research is significant in three ways. First, it fills a knowledge gap by (1) showing the usefulness of the bureaucratic politics approach for analysing foreign policies of non-Western states on issues that are not related to national security; (2)

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taking into account the neglected bureaucratic actors to understand Indonesian foreign policy, in addition to the president and the minister of foreign affairs; (3) contributing to a broader debate amongst Indonesian academics, and in the society at large, on how the country’s foreign policy is made and for what purposes.

7.1.3  Research Design This qualitative case study research employs content analysis by drawing on available documents and materials, including both primary and secondary sources, to explain Yudhoyono’s foreign policy decisions. Primary data used in this chapter include policy documents, writings, speeches and other remarks made by President Yudhoyono and key individuals in bureaucracies as well as regulations related to foreign relations. This chapter also relies on the work of others who have written about Indonesia–China relations. Information from news media is also collected, especially the Jakarta Post, a prominent daily English language newspaper in Indonesia, considered to be one of the most reliable media sources. It publishes in-­ depth analyses from scholars, statements, and speeches of President Yudhoyono and other bureaucratic actors on Indonesia–China relations which are not available in government sources. The analysis of the data sources focuses on Indonesian economic growth and its relation to Yudhoyono’s vision, the influence of key bureaucratic actors, the impact of domestic politics, and how these factors affect the president’s decision to sign two strategic partnership agreements with China.

7.2  Establishing a Theoretical Framework This chapter draws its analysis from two classical models: Graham T.  Allison’s bureaucratic politic model (Allison, 1969) and Charles F. Hermann’s foreign policy Scheme (Hermann, 1990). Allison developed the model to analyse the U.S. decision to confront the Soviet Union in the Cuban missile crisis in 1960. He first posits that actors in the inner circle have direct influence in the decision-making. Second, the policy outcome is seen mainly as a result of “pulling and hauling” among actors with different preferences and interests. According to Allison, their positions and roles in the government determine their policy preferences. This proposition corresponds to what is famously termed “Where you stand depends on where you sit”. Third, bureaucratic actors exert influence on the policymaking by providing alternatives, input and recommendations to the president who is under multiple constraints, having to pursue national interests and satisfy his constituency and the general public (Allison, 1969; Allison & Zelikow, 1999). While most case studies that utilize Allison’s model have demonstrated the influence of key government actors on foreign policymaking, the works are primarily written by western scholars and mainly focus on issues related to U.S. national

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security (e.g. Blomdahl, 2016; Holland, 1999; Jones, 2008; Marsh, 2014; Rhodes, 1994; Rosati, 1981; Smith, 1985). These scholars specify various roles key individuals have played to influence foreign policy, including, among others, the provision of input, advice, information, and policy alternatives. Few non-western scholars have employed Allison’s model to test its explanatory power and its applicability to other countries than U.S. and non-security issues. Lai and Kang (2014) and Zhang (2016), for example, used Allison’s model to examine Chinese foreign policymaking, while Sebata (2010) utilized the model to analyse Japan’s defence policy. Interestingly, the studies by Western and non-western scholars largely confirm the assumptions of Allison’s bureaucratic politics model. Although Allison’s model has been adopted widely and has received considerable recognition for its contribution to foreign policy analysis, scholars have also pointed to its shortcomings because of its exclusiveness on U.S. security policy analysis, its potential inapplicability to analyse foreign policy practice in other countries (Brenner, 1976; Hermann, Preston, Korany, & Shaw, 2001; Wagner, 1974), and the little attention it pays to the primacy of the president (Art, 1973; Krasner, 1972) and actors outside the executive branch (Art, 1973; Rosati, 1981). In addition, although Allison’s model provides a clear empirical focus for explaining foreign policymaking, he exclusively focuses on actors. To bridge some of the weaknesses of Allison’s model, Hermann’s foreign policy model is also utilized to address both actor and structure. In addition to the influence of bureaucracy, Hermann locates the sources of policy change within the primacy of the president and in the broader context of domestic politics. According to Hermann (1990, p. 11), changes in foreign policy are determined to a certain extent by the leader or the head of government who imposes his vision which is considered necessary for redirection of foreign policy. Hermann calls this “leader driven”. In addition to this, for Hermann foreign policy also depends on certain aspects of the internal political system, most importantly the relationship between the ruling regime and domestic constituents. This implies that if the link between the rulers and those ruled changes profoundly, this has also an impact on foreign policy. Combining the key features of both Allison’s and Hermann’s models provides a framework for analysing non-security foreign policy of Southeast Asian countries, in particular, Indonesia, because actors and the structure in which they are embedded are inextricably linked. The structure is related to a new democratic system which has been introduced recently in most Southeast Asian countries including Indonesia. An examination of the Indonesian foreign policy process demonstrates that elements from both frameworks are relevant and necessary to account for the changes under Yudhoyono. Therefore, this chapter proposes an analytical framework based on three core aspects to be assessed: First, the extent to which foreign policy is leader-driven, with a focus on Yudhoyono’s vision. Yudhoyono introduced his vision built on four

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pillars: prosperity, peace, justice and democracy. This chapter decides to focus on the prosperity aspect by analysing Yudhoyono’s policies, initiatives and political statements that reflect this dimension of his vision and assesses whether there is a close connection to his foreign policy towards China. If there is, it suggests that Yudhoyono’s decision to sign the strategic partnership with China is likely to be driven by his vision. Here, prosperity is understood as economic prosperity realized through sustainable economic growth. Thus, economic growth is perceived as the key to prosperity. Second, the influence of key bureaucratic actors, concentrating on who belongs to the inner circle, their positions and roles in the government, their policy preferences and what they do to influence policymaking. Bureaucracy has been defined as “any large-scale organization of appointed officials whose primary function is to implement the policies of the decision makers” (Naidu, 2005, p. 80). Halperin et  al. (2006, p.  4) refer to bureaucracy as “civilian career officials and political appointees, as well as military officers”. Similarly, according to Checkel (2008, p. 74) bureaucracies including foreign ministries, state departments, departments of international trade and ministries of defence play decisive roles in foreign policymaking. In Indonesia, government officials, and most notably ministers, are appointed by the president, and they can, of course, be career civil servants or technocrats, but also politicians or business people. Furthermore, they may or may not be affiliated to a political party. This chapter considers government ministers and the president’s political advisors as bureaucratic actors because of the nature of their roles and functions in the government bureaucracy. For the purpose of this research, this chapter treats them as the representatives of government bureaucracies whose functions are supporting and implementing president program/policy and international agreements, and involving in discussions and consultations with other external parties for a particular foreign affair/matter. Therefore, assessing their influence will be focused on their policies and policy statements which promote Indonesia–China economic cooperation. Central to this assessment is also the timing when their statements and policy were made. If these policies and behavioural indicators exist and the statements and policy preferences were made prior to the signing of both or one of the agreements, it seems reasonable to assume that there are individuals in the bureaucracies are likely to play substantive roles in the policymaking. An absence of these indicators, therefore, suggests a lack of bureaucratic influence. Thirdly, the impact of domestic political change focuses on analysing domestic reforms which include constitutional amendments, regulatory reforms, and the changing attitudes towards the role of China. The analysis will be focused on whether the political reform facilitates greater involvement of the key bureaucracies, affects the relationship between executive and legislative, and increases political pressures on decision-makers. If these indicators exist, it is reasonable to argue that domestic political change has had an impact on Yudhoyono’s decision-making.

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7.3  Vision-Driven Policymaking 7.3.1  Yudhoyono’s Vision of Sustainable Economic Growth Most scholars have accepted that vision influences foreign policymaking. In his scheme of foreign policy analysis, Hermann (1990) pointed out that the source of foreign policy change was driven by the leader who brought his vision, energy, and power into the government. Tsygankov (2005) demonstrated that contemporary Russia’s perception of potential adversaries, its foreign policy goal, and the way to achieve the goal was shaped by Putin’s vision of preserving Russia’s great power status. Former U.S. president Woodrow Wilson’s vision of making Americans safe and creating a stable new world order led him to promote liberal democracy (Ambrosius, 2007, 2017). Although these examples provide evidence that vision matters, studies to examine the connection between Yudhoyono’s vision and his foreign policymaking are rare. Vision occupies a unique place in Yudhoyono’s pursuit of political power and in maintaining his power legitimacy. It is a defining characteristic of Yudhoyono’s leadership. According to Yudhoyono, a presidential candidate needed to have vision and a concept of planning to solve problems in the country. Without vision and solutions, the candidates were not worthy and eligible to lead Indonesia (Yudhoyono, 2014, p. 339). He further contended that with vision, a president can determine strategy, policies and programs and compel his ministers to follow the president’s vision (ibid, p.  532). He also claims that he usually briefed cabinet members and governors about his vision, mission and intention, agenda and priorities that he needed to work on (ibid, pp. 520–521). As mentioned earlier, Yudhoyono built his vision on four pillars: prosperity, peace, justice and democracy (KPU Media Center, 2009; Yudhoyono, 2004a; Yudhoyono & Kalla, 2004). This chapter focuses on his vision regarding prosperity aspect because this vision was his core policy towards China and was closely related to his ambition to achieve a strong economic growth. The Law No. 25/2007 on Investment signed by Yudhoyono, for example, specifically pointed to sustainable economic development as the key to achieve a just and prosperous society. For Yudhoyono, Indonesia needed higher economic growth of at least 7% because only with this growth Indonesia can improve people’s welfare, get better education and healthcare (Yudhoyono, 2004a, pp. 7–8). In one of his speeches made shortly after taking office and before signing a strategic partnership agreement with China, he set up a target for his administration to reach an average annual growth of 6.6%, reduce poverty from 16.6% to 8.2% and unemployment from 9.5% to 5.1% by 2009 (Yudhoyono, 2005a). Following the signing of the agreement, he made a statement in October 2005 that his main target in building the partnership with China was to gain economic advantages (Sukma, 2009, p. 603). He outlined his policy goal as follows:

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National growth is something that defines and summarizes Indonesia’s key challenges, and encapsulates exactly what I intend to achieve with my presidency…My aim as President is to see Indonesia grow to be economically prosperous, resilient, cohesive, competitive, peaceful and confident about its identity, its values and its future (Yudhoyono, 2005b).

Yudhoyono’s numerous speeches, remarks and political statements on many occasions about economic growth reveal a link between his vision and national policy and foreign policymaking. For example, Yudhoyono introduced more major economic reforms, sound trade and investment policies than his predecessors in order to increase trust among investors to do business in Indonesia and to achieve an impressive economic growth. In his first official remark delivered on 20 October 2004, Yudhoyono raised the concern that Indonesia’s economy was still under 7%, which had not yet promoted employment (Yudhoyono, 2004b). His vision drove him to take different stands from his predecessors, by being more proactive, outward looking and intensively engaged with other countries, including China. Yudhoyono was not only impressed with China’s economic development but also interested in the factors driving China’s success particularly the transformation of China’s policymaking. In an interview with Asia Inc., Yudhoyono said, “I have always been impressed that China since reforms undertaken by Deng Xiaoping in the late 1970s, was able to double its income per capita within one decade and then double it again in the following decade” (Yudhoyono, 2006, p. 325). He frequently called for closer ties with China (Handayani, 2005a), and encouraged Indonesia to “learn from China, not only in terms of trade and investment but also in the use of technology” (Handayani, 2005b). The following section presents how Yudhoyono’s vision was implemented in policies and how these enacted policies were relevant to economic prosperity.

7.3.2  National Policy to Support Yudhoyono’s Vision The “Triple Strategy” was introduced by Yudhoyono in the early days of his administration to achieve sustainable economic growth. This strategy was an overarching development policy consisting of promoting growth (pro-growth) through exports and investment; promoting employment by stimulating the productive sectors (pro-­ jobs); and reducing poverty by promoting agriculture and rural development (pro-poor). This strategy was introduced because his predecessors’ policies, while able to deliver macroeconomic stability, failed to create more employment and undertake economic reforms (Yudhoyono, 2005a). Yudhoyono himself admitted that to promote prosperity in Indonesia, his government implemented the “Triple Track Strategy”. He also claimed that his economic vision was reflected in this strategy (Yudhoyono, 2005c). Yudhoyono issued a number of policy initiatives to implement this strategy and to accelerate economic development, attract investments and increase exports and imports. Examples include Presidential Decisions No. 24/2005, No. 3/2006, No.

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16/2006; Presidential Instructions No. 3/2006, No. 5/2008; Law No. 2/2009, and Presidential Regulations No. 7/2005 and No. 5/2010 on the National Medium-Term Development Plan for the period from 2004 to 2009 and from 2010 to 2014, respectively. However, achieving sustainable economic growth requires adequate infrastructure. Indonesia still faces infrastructure problems leading to its unattractiveness to foreign investors. The Global Competitive Report 2006–2007 published by the Economic Forum (WEF, 2007) showed that inadequate supply of infrastructure was the most problematic factor for doing business in Indonesia. Yudhoyono’s predecessors have made infrastructure their priority, but Yudhoyono was not satisfied with its development and called for a public–private partnership (Yudhoyono, 2014, p. 82). For Yudhoyono, basic infrastructure and economic infrastructure were very important for the country’s development. It was a key to an impressive rate of economic development (Yudhoyono, 2004a), and a driver for prosperity (Yudhoyono, 2005d). His strategy was enforced through various presidential regulations such as regulations No. 67/2005 on Public-Private Partnership/ PPP in the Provision of Infrastructure, No. 42/2005 on establishing a Committee for Policy of the Acceleration of Infrastructure Provision, No. 75/2014 on Acceleration of Prioritized Infrastructure Provision. He also made infrastructure one of the five priorities in Indonesia’s Medium-Term Development Plan 2004–2009, launched the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) 2011–2025 through increasing infrastructure development and improving the investment climate, and hosted two consecutive infrastructure summits on 17 January 2005 and in November 2006 which attracted hundreds of participants and foreign investors. The following subsection is to show that Yudhoyono’s vision was also translated into foreign policy, in addition to national policy.

7.3.3  Foreign Policy to Support Yudhoyono’s Vision Yudhoyono’s desire for economic prosperity requires policy that encourages economic cooperation, builds partnerships and increases access for foreign trade and investments. The reason for pointing to the need of the policy is that making Indonesia prosperous and promoting economic growth is highly dependent on long-­ term amicable relations and mutual economic exchanges. Yudhoyono’s predecessors were more concerned on domestic politics, making their policies were more inward looking. The result of the policy was that Indonesia was not able to promote its global profile and active engagement in international fora. Yudhoyono’s reoriented Indonesian foreign policy from inward looking to outward looking. In his best-selling book “Selalu Ada Pilihan (There is Always a Choice)” he emphasized that Indonesia needed to avoid being too inward looking (Yudhoyono, 2014, p.  699) and called Asian-African nations to do the same (Yudhoyono, 2005h). According to Yudhoyono, “Indonesia being inward-looking

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no longer applies. Indonesia is now an outward-looking country very much eager to shape regional and international order, and intent on having our voice heard” (Yudhoyono, 2005e). Yudhoyono’s active involvement in international affairs made him Indonesian “first foreign policy president”, according to Dino Patty Djalal, his spokesman and advisor (McBeth, 2016, p. 111). Likewise, the failure of previous administrations to boost Indonesia’s economic performance and attract foreign investments also drove Yudhoyono to pursue high diplomacy and constructive engagement. In his first foreign policy speech before the Indonesian Council of World Affairs (ICWA) on 20 May 2005, he outlined basic properties of Indonesian foreign policy: embracing a peaceful relationship with all countries, seeking no enemies but friends and partners, and promoting national identity and nationalism (Yudhoyono, 2005f). His presidential remark was then translated into a new foreign policy direction of ‘a million friends, zero enemies’ which placed great emphasis on seeking partnerships and maintaining constructive relationships with other countries to promote economic development. Yudhoyono embraced the idea of “dynamic equilibrium” to bring all powerful partner countries into a joint commitment to accelerate development (Anwar, 2014). The inclusion of Indonesia within an economic cooperation framework with strategic players was crucial to generate Indonesia’s economic growth and enhance its global profile. The concrete shape of the policy was that Yudhoyono initiated strategic partnership with numerous countries not only with China but also with several other countries like the U.S. and elevated their relations to comprehensive partnerships. For Yudhoyono, “I do not speak of ‘partnership’ as a slogan or buzzword. I speak of ‘new partnership’ as a concept that underscores my personal commitment and my government's determination  to promote a strong environment for business and entrepreneurship in Indonesia” (Yudhoyono, 2005g). According to Yudhoyono, “we need to be an active actor in building international cooperation and partnership, both bilaterally, regionally and multilaterally” (Yudhoyono, 2008). Another initiative was that he introduced an open-door policy as China did in the 1970s. According to Yudhoyono, China is a leading player today because, in the 1970s, it changed course, adopted the Four Modernizations, opened up to the outside world, and embraced market principles (Yudhoyono, 2005a). Although the open-door policy was not a new policy given the fact that his predecessors had also taken this approach, Yudhoyono was more proactive, and his engagement with other countries was more intensive. Deeper relations with China were made by signing two historic agreements, Strategic Partnership and Comprehensive Strategic Partnership Agreements. Strategic partnership was an important instrument in Yudhoyono’s foreign policy to boost Indonesian economic growth. Specified under the agreements was that China and its private enterprises were encouraged to invest and contribute to the infrastructure connectivity in Indonesia, such as railways, bridges, highways, seaports and airports. Adding to that, following the signing of the strategic partnership, China agreed to add $200 m in loans to finance Indonesian mega infrastructure projects (The Jakarta Post, 2005), the involvement of China in Indonesian infrastructure was

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related to Yudhoyono’s vision to achieve sustainable economic growth through modernizing infrastructure. Yudhoyono signed the Strategic Partnership Agreement a few months after taking office. This agreement was shorter, less detailed and less specific compared to the later Comprehensive Strategic Partnership.1 Nonetheless, it was echoed as, “the most significant achievement in Indonesia’s foreign policy in 2005” and “signified a major turn-around in Sino-Indonesia relations” (Lanti, 2006, p. 103). President Yudhoyono has referred to the agreement as a historic milestone while China’s President Hu Jintao described it as the beginning of a new era in bilateral relations (Pangestu, 2006). Following the signing of the agreements, there was an increase of engagement with business groups and state officials. Yudhoyono admitted that in his overseas trips, he almost always met business groups (Yudhoyono, 2014, pp. 718–719). Also, according to Mari Elka Pangestu, the Indonesian Minister of Trade, since the signing of the strategic partnership, both sides have had frequent meetings of high levels (Pangestu, 2006). Tjhin (2012, p. 306) has also observed that following the signing of the Strategic Partnership Agreement with China, there was an increase in the exchange of visits of government officials and political party members, and the relations between Indonesian political party members and the Communist Party of China grew stronger despite the communist ideology being outlawed in Indonesia.

7.4  Key Individuals in the “Inner Circle” As the strategic partnership agreements were the key and historical bilateral agreements between Indonesia and China, we expect the highest involvement of bureaucratic actors in shaping the agreements. The involvement of these individuals was considered substantial for the success of the partnership agreements. Moreover, both agreements require bilateral consultations between coordinating ministers/vice premiers. Yudhoyono engaged extensively with his ministers and assistants to decide and support its implementation. Cabinet meetings were held regularly to discuss policy issues and to gain insights from his ministers before a decision was made (Fealy, 2015). Central to this policy discussion was the importance of controlling his bureaucracies to improve their performance, and ensure that they act according to their function, namely implementing and translating president’s policy agenda to their respective ministerial policy or regulations. As Pramusinto (2016) points out that the role of ministries is “to formulate presidential policies” and “translate the vision and missions of the President for 5 years, which are drawn from the pledges made during election campaigns into policies” (pp. 123–124). 1  Each agreement can be viewed at http://en.people.cn/200504/26/eng20050426_182767.html; https://www.kemlu.go.id/Documents/RI-RRT/Joint%20Statement%20Comprehensive%20 Strategic%20Partnership.pdf

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With this regard, Yudhoyono issued several rules of the game and a code of conduct in his first cabinet meeting on 22 October 2004 consisting of 12 rules of the game. The rules explicitly set the tone of warnings and instructions to his cabinet members. Among the rules are “loyalty to my party ends, when loyalty to my country begins; the line of minister is ‘cabinet line’, not ‘party line’; the decision of president has to be executed” (Yudhoyono, 2014, p.  725). Moreover, during the swearing of Cabinet office, Yudhoyono reminded his ministers to maintain their loyalty and report to him, not to their party leaders (The Jakarta Post 2009). Confrontation and conflicts with his ministers, and bureaucracies were avoided to create a stable administration, increase bureaucratic and economic performance. Yudhoyono’s preference for creating stability rather than chaos was expressed in his book, “… our economy will not grow if our country is not stable. Without social, political, and security stability, investments and business will be paralyzed and inoperative” (Yudhoyono, 2014, p. 39). Therefore, he strongly emphasized, “In crucial things, unity” (Yudhoyono, 2014, p. 38). Similarly, in an interview with Aspinall and Mietzner on 2 December 2014, Yudhoyono openly admitted, “I love stability, I love order” (Aspinall, Mietzner, & Tomsa, 2015, p. 7). Two working units, the Presidential Work Unit for the Organization of Reform Program (UKP3R) created in 2006, and the Presidential Working Unit for Development Monitoring and Oversight in 2009, were added to the bureaucratic structure to monitor and conduct an assessment on the performance of his cabinet members. Yudhoyono’s ministers came from a mix of different backgrounds. Some were businessmen and affiliated with political parties; others were career bureaucrats and technocrats. An assessment of the statements, policy preferences, and policy advocacy of the bureaucratic actors made prior to the signing of the strategic partnership agreements demonstrates that those with expertise and high experience in economic and foreign policy affairs play influential role in Yudhoyono’s approach of building a strategic partnership with China. Not only were they responsible for the implementation of Yudhoyono’s foreign policy, but they were also responsible for its formulation and were expected to provide input and advice to the president. Hassan Wirajuda, a career diplomat and non-partisan minister, was the dominant actor in reforming the ministry of foreign affairs and defining Indonesian foreign policy both in terms of the substance and process. From the outset, Wirajuda was amongst the most active supporters of economic integration. For example, during Megawati’s administration, as the foreign minister, Wirajuda advocated ASEAN Community which included economic community embracing trade liberalization (Luhulima, 2014). In addition, Wirajuda highly supported long-term and stable Indonesia–China relations. He had active involvement in advancing Indonesia– China cooperation. For example, in November 2004, after his appointment as Yudhoyono’s foreign minister and prior to the signing of strategic partnership agreement on 25 April 2005, in a joint press conference with the Chinese president’s Envoy and State Councillor Tang Jiaxuan, both parties announced that Indonesia and China agreed to build a bilateral strategic partnership and would prepare the concepts of the partnership and discuss them at their Asia Pacific Economic

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Cooperation (APEC) meeting in Chile by the end of November 2004 (People’s Daily Online, 2004). Wirajuda supported close Indonesia–China relations because stable relations were important to realize regional stability and economic integration, as mandated by the foreign ministry institutional agenda. This preference could be understood because cooperation with China was framed within the context of economic opportunity and conflict prevention guided by a strong conviction that bilateral cooperation would generate mutual benefit to both sides and would contribute to peace and security in the region. According to Wirajuda, China’s rapid economic development would contribute to the economic progress of the countries in the region and the cooperation with China was regarded as the key to strengthen regional relations and mitigate conflicts (China Daily, 2006). He further maintained that Indonesia would benefit from the rise of China and the strategic partnership agreement because China offered a vast market for Indonesian domestic products (Budianto, 2010) and China has emerged as a major arms supplier, a potential alternative for Indonesia’s military equipment modernization (Unidjaja, 2004). Similarly, Marty Natalegawa, a career diplomat and the successor of Wirajuda, was a strong supporter of the Indonesia–China partnership. Substantially, Natalegawa continued his predecessor’s policy by subscribing to institutional preferences and his bureaucratic position. He acknowledged the central role of China as Indonesia’s strategic partner and advocated close relations with China to be one of the priorities for Indonesia (Mishra & Sari, 2010). Later, in his annual press statement delivered on 7 January 2011, he stressed that Indonesia would continue to develop strategic and comprehensive partnerships with Russia, China, India, Japan and the Republic of Korea (Natalegawa, 2011). When meeting with Chinese Foreign Minister, Yang Jiechi on 11 July 2012, Natalegawa highlighted the value of Indonesia–China Strategic Partnership and ensured the realization of the cooperation at an early date (Ministry of Foreign Affairs, PRC, 2012b). He further advocated that the nation’s foreign policy should shift focus in 2013 to promote economic development, improve bilateral cooperation with strategic partners, expand non-traditional markets, and promote sustainable and balanced economic growth (Aritonang, 2013). Natalegawa believed that Indonesia–China relations were vital for peace, development, and stability in the region (Ministry of Foreign Affairs, PRC, 2013). His statements were closely related to the aims of the strategic partnership agreement to promote peace, stability, and prosperity of Indonesia and China and its peoples. All his statements were made before Indonesia– China relations upgraded to comprehensive strategic partnership in October 2013, giving a strong indication of his influence on the signing of the agreement. Likewise, Indonesian ministers responsible for the economic sector have been leading actors in promoting cooperation between Indonesia and China. Although Liddle and Mujani (2005) divided Yudhoyono’s first ministerial appointments between protectionists and market-oriented economists, it appeared that all these ministers highly favoured Indonesia’s cooperation with China. Ministers of trade were considered the key actors in advocating strategic partnership between Indonesia and China. They played substantial roles in drafting economic policies, set the

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details and direction of the policies, making Yudhoyono’s role rather minimal (Sherlock, 2015, p. 108). Although undergoing three cabinet reshuffles from Mari Elka Pangestu to Gita Wirjawan to Muhammad Lutfi, these ministers continued to make the strategic partnership a top item on the policy agenda. Pangestu, a highly respected economist with expertise in international trade, and a pro-market economist according to Liddle and Mujani’s division, was a decisive actor. From the beginning, shortly after being sworn as the Minister of Trade, Pangestu had made her position clear that she would support Yudhoyono’s vision by promoting export to help accelerate economic growth, promote the realization of ASEAN economic community and ASEAN-China Free Trade Area (ACFTA) (Hakim, 2004). She had recognized the importance of China’s roles and made concrete efforts even before Indonesia and China signed the strategic partnership in April 2005. In one of her media statements made in early January 2005, Pangestu stated, “The commitment from China has been very generous, and China is helping in many ways, not just in funding, but in more specific areas” (China Daily, 2005). Pangestu played a dominating role in many free trade agreements and other economic-related policies because she believed free trade would contribute to economic development. For example, she was one of the signatories of the ASEAN-China Free Trade Agreement on Trade in Goods (TIG) of the Framework Agreement on Comprehensive Economic Cooperation on 29 November 2004, a month after Yudhoyono was sworn into office. The agreement was important because it was a major step to the full realization of ACFTA which finally came to full force in 2010 with a commitment to eliminate all tariffs. In addition, she encouraged Indonesia to shift policy from protectionism to open-­ door policy (Pangestu, Rahardja, & Ing, 2015), and advocated multilateral trade agreements as the “best and fairest system for developing countries” (Haswidi, 2006). Nonetheless, her trade policy under ACFTA did not please parliament because it opened greater access for cheap Chinese good products flooded into Indonesian market. She was often described by members of parliament as more loyal to her Chinese ancestors than to Indonesia. Her trade policy was seen as a threat to local industries. She was finally removed by Yudhoyono from her cabinet post in 2011 due to high pressure from members of parliament (Fukuoka & Verico, 2016) and issues related to ACFTA (Parameswaran, 2012). Prior to her removal as the trade minister, Pangestu consistently promoted the Indonesia–China partnership viewing it as an opportunity for Indonesia to reap benefits from trade and investments with China. According to Pangestu, China’s large markets and its dependence on Indonesia’s resources to support its economic development would contribute to mutual beneficial relationships (Pangestu, 2006, 2010). Likewise, she, along with the Chinese Minister of Trade, established a forum, namely the Joint Commission on Economic, Trade, and Technical Cooperation with the aim to enhance the bilateral relations in these areas and to implement the strategic partnership commitment. Through this commission, the Government of China agreed to finance some Indonesian infrastructure projects (Pangestu, 2006). Pangestu and the Chinese Minister of Trade also established the Joint Expert Group

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to monitor the progress and impact following implementation of the strategic partnership agreement and the ACFTA. She also actively promoted the strategic partnership by highlighting the successful completion of the first phase of the strategic partnership in her speech in 2010 during a business luncheon on the sidelines of tenth JCM (Joint Commission Meeting) Indonesia-PRC attended by distinguished delegations from China, and the business community of Indonesia. She further urged to increase trade volume and to ensure that bilateral trade was fast, sustainable and mutually beneficial (Pangestu, 2010). Gita Wirjawan, a businessman and investment banker, who succeeded Pangestu in October 2011, also made Indonesia–China cooperation a priority during his term of office. Prior to his appointment as the Minister of Trade, Gita was appointed by Yudhoyono as the chairman of the Indonesian Investment Coordinating Board (BKPM) in October 2009. According to Castle and Manuwoto (2011, pp. 264–265), as the chairman of BKPM, Gita played a decisive role in revising the negative investment list that opened up new sectors to foreign investors, despite opposition from some cabinet members. He also secured approval from the chief economic minister and finance minister, and other cabinet members to oversee government-­ sponsored infrastructure projects. After becoming Minister of Trade, Wirjawan continued to promote trade and investment by close engagement with China. Apparently, he made the infrastructure development a main priority to boost sustainable economic growth, a sector which was also highly emphasized under the two strategic agreements. For example, Wirjawan states, “Infrastructure development is an important element to achieve economic growth, and this investment cooperation is in line with MP3EI program which is now being promoted by the government” (Indonesian Minister of Trade, 2012). Wirjawan further advocated his policy preferences by urging the strategic ties between Indonesia and China to be upgraded from its current strategic partnership status (ibid) in which it was finally realized in 2013 with the signing of comprehensive strategic partnership. Strong support for a closer partnership with China also came from the Coordinating Ministers for Economic Affairs. They were actively involved in promoting the cooperation. While these ministers also underwent five reshuffles: Aburizal Bakrie (2004–2005), Boediono (2005–2008), Sri Mulyani (2008–2009), Hatta Rajasa (2009–14) and Chairul Tanjung (2014), they all played important roles in shaping Indonesia’s policy towards China. For example, Bakrie, a politician and protectionist of economic policy, according to Liddle and Mujani, called upon Chinese businesses to invest in Indonesia’s various development sectors including infrastructure development projects which were offered by Indonesia after the signing of the strategic partnership (The Jakarta Post, 2005). He also expected an increase in Indonesia–China bilateral traded, pushed Indonesia to have close cooperation with China because he viewed the cooperation as an economic opportunity for Indonesia (Hakim, 2005; Hakim & Hudiono, 2005). According to Bakrie, “The more China expands its trade, the more opportunities for countries like Indonesia” (Hakim & Hudiono, 2005).

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The appointment of Bakrie was a political compromise. Bakrie was a senior Golkar (Functional Group) party politician and one of the country’s wealthiest businessmen, a profile similar to the Vice President Yusuf Kalla. According to Liddle and Mujani (2005), Yudhoyono named Bakrie as the coordinating minister of economic affairs on the advice of Kalla. Interestingly, with the support and influence of Kalla and Aburizal Bakrie as the chief economic minister, Chinese companies succeeded to gain most projects of the Indonesian big power plants (McBeth, 2016, pp. 92–95). Sri Mulyani, a pro-market economist and a highly regarded technocrat, who was first appointed by Yudhoyono as the head of the National Development Planning Agency and later as the Minister of Finance and then the acting Coordinating Minister for Economic Affairs, sought to strengthen the strategic partnership and promoted the acceleration of strategic partnership to comprehensive strategic partnership (Xinhua News Agency, 2009); Rajasa, a senior politician, and businessman, also advocated Indonesia–China relations to a new level, advanced the implementation of relevant agreements, and raised the level of cooperation (Ministry of Foreign Affairs, PRC, 2012a). Another influential actor in Yudhoyono’s foreign policymaking was his foreign policy adviser, Dino Patti Djalal who led a newly-formed unit known as the Presidential Staff for Foreign Affairs. Under Djalal’s leadership, this office turned into “an engine of diplomatic engagement with extraordinary influence under the president’s imprimatur” (Connelly, 2014). Yudhoyono and Djalal had built a very close and personal connection when Yudhoyono became the Coordinating Minister for Security and Political Affairs, and their relationship continued when Yudhoyono ran as a presidential candidate in 2004. Djalal joined Yudhoyono’s campaign team as a foreign affairs advisor and became a speechwriter for the president in which he played a big role in influencing Yudhoyono’s foreign policy (Wirajuda, 2014). Djalal’s intervention by inserting ideas into Indonesia’s foreign policy did not please the Minister of Foreign Affairs. He was described by the minister as an “unguided missile” because he went beyond his role thereby undermining the authoritative role of the minister (ibid). Also, Yudhoyono’s policy of a “million friends, zero enemies” was not a genuine Yudhoyono idea. Instead, it was a concept borrowed by Djalal from a statement made by Indonesia’s first vice president, Mohammad Hatta (McBeth, 2016, p. 112; Wirajuda, 2014). This discussion shows that some key bureaucratic actors are the central players who influenced Yudhoyono’s decision to establish strategic partnership with China and support its implementation. Their influence relates to their positions in the respective bureaucracies and act according to their ministerial functions. However, their involvement is also dependent on domestic political change. Therefore, the following section focuses on this change in order to provide a broader context of policymaking and the roles of bureaucratic actors.

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7.5  Impact of Domestic Political Change Indonesian domestic political change from an authoritarian regime to democracy has had a substantial impact on the foreign policymaking process, the relationship between the executive and legislative branches, and Indonesia–China relations. First, domestic political change leads to an inclusive foreign policy. This inclusivity denotes the involvement of both bureaucratic and non-bureaucratic actors in the process of policymaking. Yudhoyono’s two foreign ministers, Hasan Wirajuda and Marty Nategawa, have called this process “democratization of foreign policy” to indicate an intensive consultation and participation of various actors, both government and nongovernment actors, in the policymaking process (Anwar, 2010). Scholars have also agreed that democratization has led to greater involvement of state officials and parliament in Indonesia’s foreign policymaking (Anwar, 2010; Dosch, 2006; Gindarsah, 2012; Nabbs-Keller, 2011, 2013a, 2013b; Rüland, 2009); Wirajuda, 2014). Specifically, democratization facilitates legal and institutional reforms which allow bureaucratic actors to bargain and engage not only in foreign policymaking but also in discussions with external parties regarding foreign policy matters. The law No. 37 of 1999 on Foreign Relations, for example, specify foreign policy actors to include state actors-executives and legislative and non-state actors such as NGOs, regulates the relationship and interaction among the actors, the power bestowed upon them, and inter-agency coordination. Similarly, Law No. 24/2000 on International Agreements specifies that the minister in charge of foreign affairs shall give political considerations and take the necessary steps in the making and concluding of international agreements, upon consultation with the House of Representatives in matters relating to public interest. In the explanatory notes of the Bill, an international agreement is defined to include, among others, treaties, convention, agreement, arrangement, memorandum of understanding and declaration. Both these laws generate three policy implications regarding the role of bureaucratic actors and parliament: (1) the need for interagency coordination and consultation when an agreement is going to be made by state institutions and government institutions. The coordination is required for national interest prioritization and compliance to the practices of free and active Indonesian foreign policy; (2) the extension to other foreign policy actors, in addition to the president and minister of foreign affairs. It means that other state officials and bureaucracies also play a role in the conduct of foreign relations and international agreements. Second, in addition to the regulatory reforms, four constitutional amendments created a clear separation of powers between executive, legislature and judiciary, a dramatic shift from the previous executive-heavy dominance by the President and the military, thus leading to the emergence of strong bureaucratic powers. Ministries are vested with authority to be in charge of particular affairs of government and independently making public policy, an extension to the previous role as simply

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leading a state department or make decisions which were dictated by the president or high military officials. Nevertheless, the constitutional change also increases political pressure on decision-­making and results in variance in policy preferences and increases conflict of interests among ministers. The pressure and variance are closely related to the emergence of new political parties in which bureaucratic actors, notably ministers, are also affiliated to the parties. Baswedan (2007), for example, noted that ministers from political parties were trapped in a situation where they served two principles: the president and their party leaders (Baswedan, 2007) and Boediono (2013), Yudhoyono’s vice president, admitted that there was never an ideal policy and there was no guarantee that a policy would be implemented according to its original intent because there was always political interest, compromise and lobby. Hermann (1990) has argued foreign policy change may occur because the ruling regime needs to adjust its policies to meet the preferences of its constituents in which regime survival depends on their continual support. Yudhoyono was no exception. The appointments of his ministers nicely illustrated this relation. He was under intense pressure from several constituencies to accommodate both economic protectionist and market-oriented ministers (Liddle & Mujani, 2005, p. 125). As mentioned previously, while Mari Elka Pangestu was elected as one of the market-oriented ministers, she was later removed from the minister of trade because of high pressure from members of parliament. She was described as more loyal to her Chinese ancestry (Fukuoka & Verico, 2016, p. 70). Another example was the departure of Yudhoyono’s finance minister, Sri Mulyani, who decided to join the World Bank’s as a Managing Director. In her interview with the Wall Street Journal (WSJ) in December 2009, she admitted that she was under constant pressure from Aburizal Bakrie and other politicians over her economic and bureaucratic reforms and her decisions that, among others, disadvantaged Bakrie’s companies. According to Mulyani, Bakrie was not happy with her (The WSJ, 2009). Likewise, Yudhoyono’s decision to appoint ministers from political parties was a good example to demonstrate a connection between policy decisions and political pressure. Yudhoyono elected them because of high pressure from political parties or as a gift for their support. Tanuwidjaja from Centre for Strategic and International Studies (CSIS) nicely describes Yudhoyono’s cabinet as “‘return the favour’ cabinet (kabinet balas budi), a cabinet of political mates (kabinet perkoncoan), a rainbow cabinet (kabinet pelangi) and a power/cake sharing cabinet (kabinet bagi-bagi kekuasaan atau kue)” (Tanuwidjaja, 2009). Scharff (2013, p. 2) has also pointed out that coalition parties received cabinet seats in exchange for their support, and more often these ministers favoured the interests of their political parties more than their roles as ministers. Although there exist political pressure, competing interests and Yudhoyono’s ministers come from different backgrounds and profile, as it shows earlier, that they all act according to their ministerial functions by advocating and supporting the implementation of Indonesia–China strategic partnerships, thus suggesting that there was no pulling and hauling among them.

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Third, domestic political change plays a significant part to a positive perception towards China. Under Sukarno and Suharto’s leaderships, Indonesian foreign policy was pragmatic. The focus was on internal and external threats to the ruling regime, including threats to sovereignty and national interests. Under the authoritarian regime, China was viewed as a threat to Indonesian security and stability, although economically important. In contrast, under the reform era, the principal determinant of Indonesia’s relation with China has been the government’s perception about China’s role in Indonesian foreign policy and economic development. According to Tjhin (2012, p. 307) following the collapse of Suharto’s regime, Indonesian foreign policy towards China was more concentrated on economic cooperation with strong emphasis on the energy sector. Survey by the Pew Center from 2002 to 2015, consistently demonstrates a favourable view on China’s rise; and according to its 2007 survey, 66% Indonesians perceived China’s growing economy as good for Indonesia (Pew Research Center, 2007). The positive view was related to public pressure over the economic crisis which began to hit Indonesia in 1998 and caused high inflation, poverty and unemployment. As a result, the post-authoritarian administrations began to concentrate on economic cooperation with China to solve the crisis and to maintain their legitimacy. They saw China as an important and viable alternative to the crisis recovery because of its impressive economic growth. According to Sukma, Indonesia–China cooperation intensified since the reform era where China was seen as creating economic opportunities. However, it was under Yudhoyono that China became a strategic partner, partly because Yudhoyono saw China not only as a potential alternative for economic recovery but also for his regime survival (Sukma, 2009, p. 603). In addition, domestically, the post-authoritarian regime removed discriminatory laws against Chinese Indonesians in order to gain a mutual trust not only from China but also from the Chinese Indonesians who dominated the Indonesian economy.

7.6  Conclusion This chapter concludes that Yudhoyono’s decision to promote a stronger relationship with China under the strategic partnership agreements can be explained through three levels. On the personal level, Yudhoyono’s vision of making Indonesia a prosperous country through sustainable economic growth has become a significant force in shaping his decision. His vision influences his national and foreign policy, confirming Hermann’s assumption of leader-driven policymaking. However, relying on vision alone is not sufficient to explain the complexity of decision-making. Bureaucratic actors, particularly those whose responsibilities lie in economic, trade and foreign policy affairs, have also come to play leading roles in his policymaking. Yudhoyono relied on their support and they acted according to their functions to implement president vision and agenda. Nonetheless, the involvement of the bureaucratic actors is a part of a larger context of domestic political change. Indonesian democratization allows them to

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involve themselves in foreign policymaking and participate in the making and discussion of international agreements. An increase in Indonesia–China relations were also a product of democratization which contributes to positive perception towards China and cooperation with China, as suggested by Hermann that policy change is also driven by a change in domestic politics. Also, although democratization increases political pressures on decision-makers and result in competing interests and preferences, all the bureaucratic actors continued to advocate and promote Indonesia–China strategic relations, suggesting that affiliation to political parties does not contribute to policy behaviour of the politician ministers and the agreement can be considered an ideal policy. With this regard, this research demonstrates a partial utility of Allison’s bureaucratic politics model. The finding confirms the model assumption that actors’ bureaucratic positions inform their policy preferences and in turn, influence policy behaviour. Therefore, the assumption that “where you stand depends on where you sit” can be said to have been confirmed. However, the analysis also identifies the shortcoming of the model. The policy outcome is not a result of pulling and hauling, as suggested by the model, but it is based on a common acceptance that the Indonesia–China relations and strategic partnerships are vitally important for the Indonesian economy. Note: This present chapter is an extended and revised version of the paper, presented at the third International Conference on Social and Political Science, Syarif Hidyatullah State Islamic University, Jakarta, Indonesia, November 14–15, 2017.

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Part III

Sustainability and Equity: Socio-Spatial Differences

Chapter 8

Financial Inclusion and Inclusive Development in Indonesia Titissari Rumbogo, Philip McCann, Niels Hermes, and Viktor Venhorst

Abstract  Financial inclusion, defined as the proportion of individuals and firms making use of formal financial services, has become a central theme in discussions about how to achieve so-called inclusive development. Inclusive development refers to striving for equal development of all individuals, particularly including marginalized (that is the very poor) groups. According to many, financial inclusion plays an important role in achieving inclusive development. Unequal access to financial services can exclude people from the process of economic growth. This chapter studies the role of financial inclusion in the development process, taking a cross-country perspective in South East Asia as well as an interregional perspective using data from Indonesia. We first develop a conceptual model, linking financial inclusion operationalized as bank branch access, to economic growth. Based on this conceptual model, the empirical part of our analysis consists of three sections. First, we use an Asian cross-country comparison to enrich our understanding of the main patterns of financial inclusion and inclusive growth. Second, turning to the case of Indonesia, we first discuss the processes of restructuring and regionalization of the banking sector. These processes have led to substantial changes in access to banking services, particularly in nonurban areas. Third, we provide econometric evidence on the relationship between regional access to bank branches and regional economic development, demonstrating that financial inclusion is associated with per capita economic output at the provincial level. The Indonesian regional analysis relies on T. Rumbogo (*) Faculty of Spatial Sciences, URSI, University of Groningen, Groningen, The Netherlands Faculty of Economics and Business, University of Indonesia, Depok, West Java, Indonesia e-mail: [email protected] P. McCann University of Sheffield Management School, Sheffield, UK e-mail: [email protected] N. Hermes Faculty of Economics and Business, University of Groningen, Groningen, The Netherlands e-mail: [email protected] V. Venhorst Faculty of Spatial Sciences, URSI, University of Groningen, Groningen, The Netherlands e-mail: [email protected] © Springer Nature Switzerland AG 2021 R. L. Holzhacker, W. G. Z. Tan (eds.), Challenges of Governance, Development and Governance, https://doi.org/10.1007/978-3-030-59054-3_8

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a panel regression of 33 provinces over 5 years (2011–2015). We find that financial access is significantly and positively associated with the regional economic level of development in Indonesia, controlling for the general economic circumstances and development level of the region. These results suggest there is a definite challenge for the government to shift the development approach toward inclusive growth through financial inclusion. This finding may help developing targeted interventions aimed at increasing the regional bank branch coverage in Indonesia. Keywords  Financial inclusion · Inclusive growth · Panel analysis · Indonesia · South East Asia

8.1  Introduction In the past decades, emerging economies have shown robust economic growth and an emergence of a middle-class population, but at the same also an increasing income distribution gap and sluggish poverty reduction. While many of these countries have successfully kept their growth pace during a period of economic and financial crisis experienced by Western economies, several nations with a vast population (i.e., China, India, and Indonesia) are still coping with severe problems of income inequality, leaving many of its inhabitants living below the poverty line. Financial intermediation provided by institutions such as banks, savings institutions, insurance companies, etc., plays a central role in allocating scarce resources efficiently in the economy. A substantial body of literature has discussed the relationship between the formal financial system and aggregate economic growth (i.e., Ductor & Grechyna, 2015; Levine, 1997, 2005; Liu & Hsu, 2006; Rajan & Zingales, 1998; Rajan & Zingales, 2003; Ruiz, 2017; Shahbaz et al., 2015). Financial inclusion, defined as the proportion of individuals and firms making use of formal financial services, has become a central theme in discussions about how to achieve so-called inclusive economic development. Inclusive development refers to striving for equal development of all individuals, particularly including marginalized (that is the very poor) groups. According to many, financial inclusion plays an important role in achieving inclusive development. An inclusive financial system is often associated with an inclusive growth process. In particular, the poor may benefit from access to formal finance as it helps them with smoothing household consumption, investing more in education or running a start-up business. Unequal access to financial services can exclude people from the process of economic growth. This chapter investigates the role of financial inclusion in the development process, taking a cross-country perspective in South East Asia as well as an interregional perspective, using data from Indonesia. We find that financial access is

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significantly and positively associated with the regional economic level of development in Indonesia. These results suggest there is a definite challenge for the government to shift the development approach toward inclusive growth through financial inclusion. We have organized the analysis in this chapter as follows. Section 8.2 provides an overview of the general set-up of our study. In Sect. 8.2.1, we discuss the research aims and central research question. Section 8.2.2 addresses the challenges for governments of emerging economies with respect to achieving inclusive development. Section 8.2.3 shortly discusses the methodology used in our empirical work. Section 8.3 provides an overview of the relevant literature as a general background for why financial inclusion is important for obtaining inclusive growth. In Sect. 8.4, we present our empirical results. First, we discuss the Southeast Asian comparative perspective of financial inclusion, providing context to our findings for Indonesia. In particular, in this section we provide an overview of the relationship between financial inclusion and a number of key development indicators. Second, we introduce the case of Indonesia by discussing trends in the provision of banking services since the banking crisis in 1997. More specifically, we ask which effects financial reforms since the late 1990s have had on regional differences in financial inclusion. Third, we analyze the relationship between regional financial inclusion and regional economic development. Section 8.5 concludes.

8.2  General Set-Up of the Study 8.2.1  Research Question Most studies on financial inclusion have been carried out in a cross-country setting and have shown the beneficial effects of an inclusive financial system for the economy. This chapter studies the relationship between financial inclusion and economic development both from a cross-country perspective in South East Asia as well as an interregional setting in Indonesia. Our approach provides a more accurate statistical inference regarding regional differences of the relationship between financial inclusion and economic development. Specifically, we state the following research question: Does financial inclusion affect regional economic development in Indonesia?

In order to answer this research question, we first ask ourselves what we know about this relationship by reviewing the literature. Building on this review and using a cross-country perspective, we investigate the patterns of financial inclusion and various outcome variables for a sample of South East Asian economies. We then turn to the case of Indonesia, studying trends in financial inclusion at the regional level and their impact on regional economic development.

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8.2.2  Scientific and Social Significance of Research This chapter aims at exploring further the relationship between financial inclusion and economic development. Offering financial services to a wide range of income groups, and in particular to the poorest and economically most vulnerable segments of the population, has been a real struggle for governments of many emerging economies. In particular, developing successful financial inclusion policies across different regions within countries has been a major challenge. Our investigation enhances our understanding of the pivotal role of financial inclusion for achieving inclusive economic growth in emerging economies. The literature argues that financial inclusion is critical for achieving positive macroeconomic outcomes such as higher economic growth. To the best of our knowledge, our study is one of the first providing empirical evidence on the relationship between financial inclusion and economic development at the regional level. Such a regional perspective is important, because it helps us understanding better why financial inclusion at the national level may fail and whether and to what extent regional contextual characteristics determine the relationship between financial inclusion and economic development. In order to investigate the role of such regional-level variables, sufficient variation in these variables between regions is required. Indonesia is a very interesting case study to analyze the importance of regional differences. First, it is a large country in terms of population. Second, there is quite some diversity in terms of the level of development between regions. Finally, and perhaps most importantly, regions within the country differ on a number of potentially important dimensions, in particular when it comes to formal and informal institutions. Financial inclusion policy has been set as national priority agenda. Still, expanding financial inclusion presents a formidable challenge in Indonesia.

8.2.3  Methodology Throughout this chapter, the term financial inclusion will refer to the proportion of individuals and firms using formal financial services (Allen  et  al., 2016; Demirgüç-­Kunt & Klapper, 2013; World Bank, 2014a, 2014b). We apply a quantitative approach to study the relationship between financial inclusion and economic development. We divide our quantitative analysis into two parts: a cross-country comparison of this relationship for a number of emerging economies in the South East Asian region and an interregional setting using data from different regions across Indonesia. In the analysis, we make use of descriptive as well as inferential statistics. The cross-country analysis is based on the World Bank Global Financial Inclusion dataset (2014b). This dataset provides a wealth of information on the level of financial inclusion at the country level. Our analysis of the relationship between financial inclusion and economic development at the regional level is based on data from 33

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Indonesian provinces for the period 2011–2015 provided by Indonesia Central Bureau Statistic, Financial Service Authority Republic of Indonesia, and Ministry of Home Affairs Republic of Indonesia. We estimate a panel regression model to examine the extent to which financial inclusion is associated with economic development at the regional level. Our data includes information on regional gross domestic product per capita, bank branch density per km2 (calculated as the number of bank offices in a region divided by the region’s total land area), the human development index, and the unemployment rate. The latter two variables allow us to control for the general economic and developmental situation of different Indonesian provinces. One important aspect we consider when doing our regional-level analysis is the process of Indonesian banking sector reforms. These reforms have been going on since the late 1990s. Our analysis helps understanding the dynamics of and differences in financial inclusion between regions over time.

8.3  Literature Review 8.3.1  Inclusive Growth Inclusive development refers to striving for equal development of all individuals, particularly including marginalized (that is the very poor) groups. According to the OECD, inclusive growth is “…economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society.”1 This organization approaches inclusive growth as a multidimensional concept, that is, it entails more than just the growth of income. The OECD also stresses that inclusive growth means that the proceeds of economic growth are shared among the total population of a country. A growing body of literature has investigated inclusive growth as part of sustainable growth that includes equality of opportunities (Ali & Son, 2007; Ali & Zhuang, 2007; Ianchovichina and Gable, 2011; Khan, 2012). Empirical evidence suggests that inclusive growth is necessary to curb inequality and reduce poverty (Berg & Ostry, 2011; Kraay, 2004). The experience of several emerging economies in Asia reflects the case in which countries’ rapid economic growth has not been equally shared among different parts of the population and has resulted in income differences between regions in a country (Ali & Zhuang, 2007). These countries thus did not achieve inclusive growth. What we know about inclusive growth is largely based on empirical studies investigating inclusive growth and its link to poverty and inequality.

 See the following web link: http://www.oecd.org/inclusive-growth/

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8.3.2  Financial Inclusion Many studies define financial inclusion as the access and use of financial services provided by formal financial institutions (Allen et  al., 2016; Beck  et  al., 2007b). Often the focus is on financial services such as savings, credit, insurance, and payment services. Most research investigating financial inclusion utilizes bank account ownership and frequency of account use (i.e., transaction, payment) as their measure of financial inclusion (see, e.g., Allen et al., 2016). These studies mostly rely on the Global Financial Inclusion Index dataset developed by the World Bank (2014a, 2014b). They find that households’ holding a bank account differs across countries due to individual- and/or household-specific factors, as well as regulatory constraints related to the formal financial system at the macro-level. At the same time, some studies find that being connected to and served by a bank does not necessarily lead to bank account usage (Beck & De La Torre, 2007; Kempson et al., 2004). This occurs because of the presence of informal financial services providers that may provide more affordable, flexible, and attractive services than formal financial institutions do. From an institutional perspective, the formal financial system includes bank and nonbank financial institutions, such as savings associations. These institutions are formally regulated by the Central Bank. One consequence may be that access to their services is restricted, at least for some groups of the population who cannot fulfill specific requirements set by regulators. Examples of these requirements are the need for (financial) collateral when entering into a loan contract, having access to official documents such as a personal ID or registration number, etc. On the other hand, informal financial providers, such as moneylenders, family members, shopkeepers, and group savings organizations such as so-called rotating savings and credit associations (also called ROSCAs), offer flexibility regarding access to and use of their services. Both formal and informal financial providers serve the market and therefore, to some extent, facilitate financial inclusion within the country, as illustrated in Fig. 8.1 (Kumar et al., 2005). In spite of this, in many countries a large share of the population is still excluded from accessing and using financial services. The degree of financial inclusion and the type(s) of institutions available and accessible to various parts of the population may vary across countries and may depend on a list of variables, such as the macroeconomic environment, the development and specific features of the financial system, geographical characteristics and socio-demographic characteristics. For example, in the context of financial inclusion, Beck et al., (2007a) found that financial sector outreach and depth indicators are positively correlated with the level of economic development, the quality of institutions and regulatory environment, the existence and development of the credit information system, the availability of physical infrastructure, and the level of country’s initial endowment. Demirgüç-Kunt  et  al., (2008) suggest that geographical characteristics, physical access to banks and the lack of proper documentation are the main barrier to access. Sarma and Pais (2011) show that physical infrastructure,

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Financially served

Financially excluded

Financially included

Bank

Formal other (only)

Informally served (only)

Fig. 8.1  Degree of financial access. (Source: Kumar et al. (2005b) in Barr et al. (2007), modified)

information and communication technologies are essential for financial services access. Hermes et al., (2009) argue that new banking technologies, such as ATMs, phone, and internet banking enhance financial services supply. Similarly, Porteous (2007) investigates the importance of financial communication for the financial services usage, e.g., receiving payments in combination with saving in Southern and East Africa. Focusing on the supply side of financial services, studies found that several factors are essential for understanding financial infrastructure development (Porteous, 2007; World Bank, 2009). These studies show that the price of risk related to the offering of a specific financial product and the cost of location when offering financial services are important for understanding to what extent the financial system is inclusive. For example, the price of risk of lending to the poor may be too high for them to take a loan. Moreover, high costs of extending the bank branch network, for example because part of the population lives in relatively remote areas, may restrict the poor from having access to financial services. Figure 8.1 shows how financial access is related to the availability of financial services i.e., banks, other formal financial institutions, and informal financial services providers. Thus, people may be classified as financially included via formal and/or informal financial institutions, or as financially excluded. During recent years, financial inclusion has seen a new development, known as the digitalization of financial services. This involves, among other things, the use of mobile phones to process banking transactions and the use of information and communication technology (ICT) for personal registration purposes. This has helped obtaining a wider distribution and use of financial services by the poor. Still, the digitalization process and its impact on financial inclusion has worked out differently across countries. According to the World Bank Global Findex Database 2014, mobile money penetration has been more promising in Sub-Saharan as compared to

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Asian countries (Demirgüç-Kunt  et  al., 2015). Offering digital financial services seems to be a promising innovation. Yet, a deeper discussion of its consequences for financial inclusion is outside the scope of our study.

8.3.3  E  mpirical Evidence: Financial Inclusion and Inclusive Growth Several studies analyze the link between financial sector development, financial inclusion, and inclusive growth. These studies investigate the extent to which formal financial sector development affects the poor through inclusiveness of economic opportunities. Several of these studies report that financial development affects the poor through aggregate growth and changes in the distribution of income (Beck et al., 2007a; Dabla-Norris et al., 2015b; Karpowicz, 2014). According to Beck and De La Torre (2007), financial development corresponds to poverty reduction through three channels: a decrease of income inequality, a rise of the income share of the poorest in the economy, and a reduction of the proportion of people living under the $1 per day poverty line. In a follow-up study, Gopalan and Kikuchi (2016) found that financial inclusion is crucial for inclusive macroeconomic growth. In contrast, however, Levine (2005) finds that financial development contributes to persistent income inequality and poverty incidence by disproportionately satisfying the affluent people and excluding the poor. A limited number of studies focus on financial inclusion and its effects on the economy, Honohan (2008) report a robust and significant positive correlation between financial inclusion, lower poverty incidence, and measures of income inequality. Mercado (2016) also reports evidence of a positive association between financial inclusion and poverty in a sample of Asian countries. Taking a policy perspective, Baar (2004) discusses the implementation of financial inclusion strategies in the United States. The study shows that these policies enhance better access to financial services for the poor and unbankable people. Most studies focus on the association between financial inclusion and inclusive economic growth only. The study by Dabla-Norris et al., (2015a) is one of the few that takes into account whether and to what extent country-specific characteristics, such as the nature of the financial system, have an impact on the association between financial inclusion and inclusive growth. Sehrawat and Giri (2015) take a similar approach using data from a sample of South Asian countries. Our concise review of the literature suggests that equal opportunities of having access to financial services are important for inclusive growth. In addition, much of the available literature on this topic finds a positive association between financial inclusion and inclusive growth. Yet, few studies investigate factors that may suppress this positive association. Lack of access and under-use of financial services remains a challenge in many countries. Several authors point out that factors such as the inefficiency of capital allocation and the persistence of credit constraints for

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specific segments of the population may interfere with successful financial inclusion (see, e.g., Aghion & Bolton, 1997; Galor & Moav, 2004; Galor & Zeira, 1993). These factors are particularly important in developing economies, leading to complications in delivering greater access, usage, depth, and efficiency of intermediation of financial services. The World Bank (2016) suggests that removing restrictions for an inclusive, efficient and stable financial system is necessary for economic growth and poverty reduction. Barriers to financial inclusion vary however, both between as well as within countries. In the next section, we start with a cross-country analysis of the association between financial inclusion and growth, using data from a sample of South Asian countries. Next, we carry out a within-country analysis of this relationship by focusing on the case of Indonesia. In particular, we study the impact of Indonesian government policies aiming at reforming the banking system. One important aspect of these reforms is the regionalization of bank branches. Our approach allows for an analysis of the relationship between regional financial access and regional GDP.

8.4  Analysis 8.4.1  International Comparison of Financial Inclusion Our first set of results provides a descriptive analysis of the potential relationship between financial sector development, financial inclusion, and the distribution of economic output. We measure financial inclusion as the formal financial account penetration at the country level. Traditional economic growth theory shows that the determinants of economic growth may vary depending on the country-specific context. In our analysis, we are mainly interested in the relationship between financial sector development, financial inclusion, and economic growth. The analysis provides preliminary evidence showing that although a growing financial sector may increase a country’s economic output, this may not necessarily reflect an increase of per capita welfare due to the absence of financial inclusion. Thus, financial development may contribute to persistent income inequality and poverty incidence by disproportionately satisfying the affluent people and excluding the poor. Table 8.1 compares the economic level of development using GDP per capita as a measure, financial sector development measured as the private credit to GDP ratio, and financial inclusion measured as the formal account penetration rate, for a selected set of Asian countries. Looking further into how an inclusive financial sector is serving people, Table 8.1 also provides a deeper cross-country comparison of key measures of financial inclusion from the World Bank Global Financial Inclusion Index 2014 survey dataset. This dataset is based on information from surveys among 150,000 individuals in more than 140 states. The dataset represents 97% of the world’s population aged 15 and above.

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Table 8.1  Financial inclusion, economic and financial sector development, and formal account penetration Gross domestic product per capita (constant 2010 in US$) Country China 6108 India 1646 Indonesia 3692 Singapore 51,865 Malaysia 10,398 Thailand 5589 Philippines 2505 Vietnam 1596

Financial sector development (domestic credit from financial sector as % of GDP) 167.2 76.0 43.4 126.1 140.5 167.8 55.8 113.7

Financial inclusion (formal account penetration, % ages 15+) 78.9 52.7 35.9 96.3 80.6 78.1 28.0 30.8

Account at a financial institution Income Income richest poorest 40% (% 60% (% ages 15+) ages 15+) 72.0 83.6 43.7 58.5 21.9 45.3 96.2 96.4 75.5 84.0 71.9 82.3 14.9 37.1 18.7 39.4

Rural (% ages 15+) 74.3 49.7 28.4 n.a. 73.7 78.2 24.5 26.9

Source: World Bank (2014b)

Table 8.1 shows that financial sector development in 2014 is positively related with GDP per capita, but that the relationship is rather weak. The data suggest that a lack of financial inclusion might be at the root of this. A high level of a country’s financial sector development does not necessarily go hand in hand with an inclusive financial system. Higher levels of domestic credit provided by the financial sector as a percentage of GDP do not always play out in higher levels of financial inclusion. Take Vietnam as an example: despite this country’s considerable level of financial sector development (113.7% in 2014), the level of financial inclusion is still relatively low. Only 30.8% of adults have an account with a formal financial institution in 2014. At the same time, the table shows that Indonesia has modest levels of financial development (43.4% in 2014), combined with a level of financial inclusion comparable to that of Vietnam. In Indonesia, 35.9% of adults have an account at a formal financial institution in 2014. What stands out in Table 8.1 is that low level of financial inclusion corresponds to a low level of GDP per capita. For countries such as Indonesia, the Philippines and Vietnam, low levels of formal financial account penetration are associated with lower levels of GDP per capita. The table illustrates the financial account usage stratified by income group and geography in selected Asian countries. From Table 8.1 we infer that formal financial account penetration in the sample of Asian countries has not been inclusive. Penetration ratios differ substantially across income groups and geographical areas. Whereas in some countries financial inclusion is high across income groups and in rural areas (Singapore, China, Malaysia, Thailand), in other countries it is still (very) low, both in general terms, as well as in terms of income groups and geographical location (Indonesia, the Philippines, and Vietnam). The table also

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indicates that on average the 40% poorest group of the population is the most vulnerable group in terms of being excluded from the formal financial system. In the Philippines, less than 15% of adults in this income group own a formal financial account. In Vietnam and Indonesia, this is 18.7% and 21.9%, respectively. In addition, geographical location turns out to be a substantial factor in hampering financial inclusion. This may explain the financial inclusion divide between urban and rural areas in many countries. As can be seen from Table  8.1 formal financial account penetration is low in rural areas. In rural areas in the Philippines, only 25% of the adults have an account. In Indonesia, this is 28%, while in Vietnam it is only 27%. This can be explained by the fact that people living in urban areas enjoy greater proximity to formal financial access points such as bank branches, providing them with a higher level of financial service supply as compared to people living in rural area. Next to formal financial institutions, informal finance plays an important role in providing financial services such as payment services, loans and savings, especially for the poorer sections of the population. Table 8.2 shows the usage of formal and informal financial services. This also holds for most Asian countries in our sample. According to the World Bank (2014a, 2014b), the practice of informal savings clubs as a form of peer-to-peer banking, is very pronounced in Indonesia. Some 25% of adults in Indonesia participate in these informal saving clubs. Similar patterns are shown for other Asian countries. Another form of informal finance is informal borrowing and lending between family members, neighbors and friends. In countries such as for instance in the Philippines and Indonesia, some 40–50% of adults use this type of informal financial services. Finally, individuals may borrow from informal financial institutions such as moneylenders and loan sharks. Depending on the country, the percentage of adults making used of these services lies between 9% (Thailand) and 13% (the Philippines).

Table 8.2  Use of formal and informal financial services—cross-country comparison Saved at financial institution (% age 15+) Country China 41.15 India 14.36 Indonesia 26.56 Philippines 14.79 Thailand 40.60 Singapore 46.21 Malaysia 33.77

Saved using saving club or person outside the family (% age 15+) 2.54 8.78 25.23 9.30 8.43 4.53 9.90

Source: World Bank (2014a, 2014b)

Borrowed from family or friends (% age 15+) 25.06 32.30 41.49 48.65 31.12 4.45 38.96

Borrowed from a private lender (% age 15+) 1.06 12.57 2.94 13.49 9.15 1.05 0.81

Borrowed from a financial institution (% age 15+) 9.55 6.37 13.14 11.79 15.40 14.20 19.52

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8.4.2  D  epth and Breadth of Indonesia Financial Inclusion Policy This section discusses the policies of the Indonesian government that may have influenced the country’s financial inclusion. First, we discuss the financial system reforms that have been implemented since the late 1990s in response to the Asian financial crisis. Second, we shortly review the government’s financial inclusion policy agenda since the 2000s. Finally, we provide a brief description of Bank Rakyat Indonesia, a large formal financial institution specializing in delivering financial services to the poorer segments of the Indonesian population. Indonesia started reforming the financial system during the early 1990s. The reforms aimed at reducing the influence the government had on the financial system. In the decades before 1990, the government used the financial system to support its industrial policy goals. Banks were required to lend to firms in specific industries the government viewed as being critical for the long-term development of the country. Moreover, it determined the interest rates at which these loans were made, as well as the interest rates on saving accounts. Finally, the government owned some of the banks and restricted entry of new (foreign) banks to control competition in the market. Financial sector liberalization coincided with the expansion and diffusion of the banking activity in the country’s financial centers (i.e., Java and Sumatra). According to Nasution (1998), during the 1990s, there was a rapid expansion of banks’ branch offices, new establishments of both national and foreign banks and the emergence of nonbank financial institutions. Unfortunately, these developments were not accompanied by prudent governance of the financial sector. At the same time, monetary and fiscal policy failed to prevent the Asian financial crisis in the 1990s. The crisis eventually led the Indonesian banking sector into widespread bankruptcy in 1997. The financial sector reforms began in 1999 (Nasution, 1998) following two main strategies: mergers and consolidation of banks. Due to these mergers and consolidations, the sector was characterized by a lower number of banks and the establishment of several sizeable financial holding companies in the 2000s. Moreover, the government established a new set of bank regulation policies aimed at reducing the risk of financial distress and increasing financial prudence of banks. Due to these reforms the Indonesian financial sector again became highly regulated. This time, however, regulation was not used as part of the government’s industrial development policy, but as a means to increase the stability of the system. The Indonesian financial system reforms also influenced the level of financial inclusion of the country. Financial inclusion has been part of a national strategy involving institutions of all different sorts, such as banks, post offices, and retail networks. The primary concern is to support Government-to-Person (G2P) transfers and to provide financial services for the poor and low-income customers (Ekberg, Chowduri, & Soejachmoen, 2015). The National Strategy for Financial Inclusion achieves this by stimulating access to saving, credit, remittances and insurance, providing easy access to obtaining a personal financial identification numbers,

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offering financial literacy programs and using financial regulation and customer protection policies. Under the National Strategy, financial inclusion is also stimulated by promoting microfinance. The scope of microfinance in Indonesia is unique compared to other countries, since the microfinance institutions in Indonesia also include agencies from both the formal and informal financial sector. According to Mosley (1996), at least before the 1990s 70% of rural households in Indonesia relied on informal moneylenders for their everyday cash needs. Access to formal financial services has improved considerably, however, since People’s Credit Banks—also known as rural banks, were taking steps to serve poor households in rural Indonesia from the early 2000s. These rural banks were created by Indonesia’s New Banking Act that was established after the financial crisis of 1997. This Act provided selected semi-formal microfinance institutions the status of a rural bank. Lastly, Indonesia’s state-owned bank, Bank Rakyat Indonesia (BRI) is an institution specializing in providing microfinance services (Robinson & World Bank, 2002). The bank is designed to meet the demand of low-income customers, who mostly live in rural and remote areas. During the Indonesian financial system collapse in the late 1990s, BRI was an example of a commercial microfinance bank that remained stable and profitable. Its endurance was because the BRI business model relies on a domestic and local economy with a large number of micro banking clients who were not affected by the financial crisis. Nowadays, BRI has successfully transformed into one of the big four corporate banks in Indonesia, serving commercial finance to micro-, small-, and medium-sized retail customers. At the same time, it also serves a wide range of corporate clients. The growing financial, banking, nonbank financial industries in Indonesia need a trustworthy monitoring institution that oversees financial services sector in a broader institutional and geographical scope. Thus, Indonesia Financial Service Authority was established in 2014 to perform regulatory and supervisory duties over the financial sector. Several provisions have been released by OJK to enhance financial inclusion practices, through broader distribution channels, in a prudential financial system. For instance, Regulation No.19/POJK.03/2014 rules the implementation of branchless banking toward financial inclusion. Another regulation is Regulation No.10/POJK.05/2014 that rules the functioning of nonbank financial institutions. This agency also produces several regulations regarding microfinance licensing, business implementation, supervision.

8.4.3  I ndonesia’s Financial Inclusion and Inclusive Development: A Regional Perspective We start this section by discussing the past Indonesian centralized development policy that resulted in spatially dividing regions, including its financial sector. Prior to the 1997 Indonesian economic reforms, Indonesia implemented a centralized development model. The model resulted in a large income gap between different regions in the country. The benefits of economic development were mainly enjoyed

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by the population of the two main islands of Indonesia: Java and Sumatra. These two islands have always been the primary driver of the Indonesian economy. Java and Sumatra contributed 58% and 22% to the country’s total economic output (Indonesia Central Bureau Statistic, 2016). Indonesia has demonstrated a high level of income inequality compared to other Asian countries. Indonesia’s Gini coefficient, a widely used measure for income inequality, ranges from 0.34 in 2002 to 0.39 in 2017. It worsened at level 0.41 in 2014 (Indonesia Central Bureau Statistic, 2017). Recently, income inequality has gone down a bit, however, because of the catching up of the middle class to the top 20% of the population. Yet, the bottom 40% of the poorest households are still left behind. In fact, several regions report higher inequality compared to the national average; this holds for, e.g., DKI Jakarta, Banten, DI Yogyakarta, Papua Barat, Papua, and North Sulawesi. Turning to data regarding access to financial services, Table 8.3 provides information regarding the regional presence of bank branches (Indonesia Central Bank, 2015). As can be seen from Table 8.3, the banks are predominantly located in urban areas on either Java or Sumatra. The regulated micro finance providers tend to reach the upper levels of the microfinance market in districts and sub-district towns in the urban areas. In contrast, the lower end of the market is served by NGOs, cooperatives, rural banks and village-based institutions. Therefore, commercial and rural bank branches are predominantly located in Java and Sumatra. Furthermore, as can be seen from Table 8.3, the branch expansion between regions in Indonesia is not equal. This is caused by the fact that these areas provide a more attractive market for the supply of financial services. Consequently, there is lack of access to financial services outside the two main islands of the country.

8.4.4  F  inancial Inclusion and Inclusive Development: An Econometric Analysis Model Interpretation To start our analysis, we examine the correlation between our proxy of financial access, measured as the number of bank branches per km2, and gross domestic regional product per capita (GDRP per capita). We use a pooled data partial correlation test. For both variables, we have data for 33 provinces in Indonesia for the period 2011–2015. The result of the partial correlation test, controlling for year of observation, shows a strongly significant positive correlation (0.61) between the two variables. This suggests that high levels of financial access are associated with high levels of economic level of development at regional level. Next, we investigate the association between financial inclusion and regional economic level of development using panel data regression analysis. Again, our data cover 33 provinces over the period 2011–2015. In panel data analysis we observe the same cross-sectional unit, in this case provinces, over different time periods

8  Financial Inclusion and Inclusive Development in Indonesia Table 8.3  Regional total bank branch offices per land area km2 2011–2015 Total bank branch offices per land area (km2) in region Region 2011 2012 2013 2014 Java Island West Java 0.01043 0.01074 0.01111 0.01122 Banten 0.00818 0.00962 0.00973 0.00983 DKI Jakarta 0.80571 0.84938 0.86444 0.85691 D.I. Yogyakarta 0.01724 0.01787 0.01883 0.01915 Central Java 0.00915 0.00948 0.01000 0.01009 East Java 0.00831 0.00860 0.00889 0.00891 Sumatra Island Bengkulu 0.00136 0.00141 0.00151 0.00161 Jambi 0.00096 0.00106 0.00118 0.00120 Aceh 0.00126 0.00132 0.00136 0.00136 North Sumatra 0.00244 0.00263 0.00273 0.00275 West Sumatra 0.00183 0.00193 0.00200 0.00200 Riau 0.00101 0.00101 0.00105 0.00108 South Sumatra 0.00088 0.00102 0.00111 0.00109 Bangka Belitung 0.00140 0.00134 0.00146 0.00164 Kepulauan Riau 0.00622 0.00683 0.00719 0.00719 Lampung 0.00144 0.00162 0.00168 0.00173 Kalimantan Island South Kalimantan 0.00181 0.00191 0.00201 0.00188 West Kalimantan 0.00047 0.00047 0.00050 0.00050 East Kalimantan 0.00051 0.00053 0.00089 0.00092 Central Kalimantan 0.00028 0.00030 0.00031 0.00029 Sulawesi Island Central Sulawesi 0.00058 0.00061 0.00063 0.00065 South Sulawesi 0.00259 0.00265 0.00280 0.00287 North Sulawesi 0.00260 0.00274 0.00282 0.00289 Gorontalo 0.00142 0.00142 0.00151 0.00151 West Sulawesi 0.00077 0.00083 0.00089 0.00089 South East Sulawesi 0.00079 0.00081 0.00092 0.00110 Other Island West Nusa Tenggara 0.00226 0.00237 0.00264 0.00280 Bali 0.01384 0.01471 0.01592 0.01609 East Nusa Tenggara 0.00101 0.00105 0.00109 0.00111 Maluku 0.00070 0.00064 0.00064 0.00068 Papua 0.00017 0.00018 0.00018 0.00018 North Maluku 0.00044 0.00056 0.00059 0.00066 West Papua 0.00024 0.00026 0.00028 0.00025 Source: Author (2017)

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2015 0.01122 0.00962 0.81475 0.01915 0.01000 0.00868 0.00176 0.00122 0.00134 0.00281 0.00202 0.00108 0.00111 0.00164 0.00719 0.00176 0.00186 0.00050 0.00088 0.00028 0.00066 0.00280 0.00296 0.00160 0.00089 0.00113 0.00280 0.01644 0.00115 0.00068 0.00019 0.00069 0.00023

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(Wooldridge, 2009). The advantage of panel data analysis is that combines a cross-­ sectional and time series dimension (Hsiao, 2007). First, it usually provides increased sample variance and degrees of freedom, resulting in a more accurate statistical inference. Second, it enables us to better control for unobserved time-­ constant and time-varying characteristics that may dilute our view on the relationship under study. Our data were gathered from multiple sources covering the years 2011–2015. The dependent variable in our model is the regional per capita GDP level (constant prices) (Source: Indonesia Central Bureau Statistics, 2016). The main independent variable is the number of bank branches per km2—that is calculated by the divided provincial number of bank offices by total land area). The data on the number of bank branches was extracted from Indonesia Banking Statistic (Financial Service Authority Republic Indonesia, 2016); while the total land area per province information were taken from the Statistical Yearbook of Indonesia (Directorate General of Regional Authority, Ministry of Home Affairs Republic of Indonesia, 2016). Moreover, we include control variables such as the human development index and the open unemployment rate. These two variables were drawn from Indonesia Central Bureau Statistics (2016). Human Development Index is a composite index of life expectancy, education, and living standard that was initially proposed by United Nation Development Program in 1990. In addition, open unemployment rate data was selected from Indonesia Labour Force Survey. It is calculated as a percentage of unemployed individuals divided by all individuals in the labor force. These variables allow us to control for the general regional economic situation and development level. This prevents spurious correlations resulting from omitted variable bias. We applied the Hausman specification test to investigate whether we should use the fixed-effects or the random-effects method in our panel model estimations. The results of the Hausman test revealed that we should utilize random-effects instead of a fixed-effects specification. Finally, all variables have been standardized. This allows to directly compare the effect sizes between the variables in our model. The results, as shown in Table 8.4, indicate that bank per land km2 area and per capita regional Gross Domestic Product (GDP) are positively and significantly associated at the 1% significance level. In particular, per capita regional GDP increases with 0.36 standard deviation when the number of banks per km2 increases by one standard deviation across time and between regions. The effect of bank per km2 is larger than that of the human development index, which also affects regional GDP per capita positively. The unemployment rate is negatively associated with regional GDP per capita. The outcomes suggest that financial access may help improve the level of regional economic development. One interpretation of the outcome may be that a dense bank distributional channel within a region facilitates households and businesses to better engage in the economy by having better access to financial services such as payment systems, loans, and savings. Household and businesses having better access to finance will engage more in economic activities, increasing their output and income. Our analysis thus provides preliminary evidence of a strong and statistically significant positive association between access to financial services and the level of

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Table 8.4  Generalized least squares (GLS) panel regression result Dependent variable: GDP regional/capita (constant price), random effect GLS regression Explanatory variables Est (β) P > |z| Intercepts −9.23E − 16 1.000 Bank per km2 area 0.36028 0.001*** Human development index 0.29098 0.000**** Open unemployment rate −0.05377 0.000**** Sigma_u 0.78721 Sigma_e 0.06388 Rho 0.99345 R2 within 0.5694 Between 0.4136 Overall 0.4145 Number of observations 165 Number of groups 33 Observation per group 5 Prob > chi2 0.000 Source: Authors This table shows a representative sample of Generalized Least Squares Regressions relating the Gross Domestic Product (GDP) Regional per capita to financial access at the provincial level. *** and **** indicates significance at the 1% and 0.1% levels, respectively. Dependent variable is the Regional GDP per capita. The main explanatory variable is financial access (bank per km2). The total number of observations is 165. Prob > chi2 informs us weather the model as a whole is significant. Sigma_u is the standard deviation of residuals within groups ui and sigma_e shows the standard deviation of residuals (overall error term). In addition, Rho shows the intraclass correlation. STATA reports three R2 measures: within R2 (0.5694), R2 between (0.4136), R2 overall (0.4145). Values for the three R2 may be compared, but it is unnecessary in a panel model.

regional GDP per capita. We demonstrate this relationship over and above controls for the general economic and development state in the Indonesian regions.

8.5  Conclusion The literature argues that financial inclusion is critical for inclusive growth. In this chapter, the aim was to assess the relationship between financial inclusion and economic level of development at the regional level, using the geographical context of Indonesia as an example. This empirical evidence is beneficial to enhance our understanding of the pivotal role of financial inclusion for achieving inclusive growth at the regional level. First, from the international comparison, the descriptive statistics suggest that a growing financial sector is beneficial for the economy. However, it is not strongly and consistently related to an increase of per capita welfare, arguably due to the absence of financial inclusion. Second, our panel data analysis suggests preliminary

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evidence of a significant association between financial inclusion and economic level of development at the regional level. In particular, our analysis shows that financial access, that is the number of bank branches per km2, is associated with regional per capita economic output in Indonesia, controlling for the general development state and the economic situation. As described in Sect. 8.4, the government of Indonesia has started to implement financial inclusion policies. It introduced various financial reforms that aimed at stimulating the growth and performance of the financial system. One particular aim was to increase the stability of the banking system. Next to these policies directed at the formal banking system, the government also actively aimed at supporting the development of microfinance. One example is the BRI, a state-owned bank specializing in providing financial services to the lower end of the market. Although the government made several efforts to enhance the development of the financial system, financial inclusion in Indonesia still lags behind that of most of the other Asian countries. Expanding financial inclusion thus remains a formidable challenge in Indonesia. Policies that aim at further increasing the bank branch density in the country, especially in areas outside Java and Sumatra, would be welcome. Moreover, better informing low-income households about the advantages and opportunities to make use of financial services could help to enhance financial inclusion. In addition, policy makers could begin to think about how to implement less restrictive regulations for the poor to demand financial services, without endangering the stability of the banking system. Finally, financial service providers could be stimulated to reduce the costs of their services and develop services that cater to the special needs of the poor. The use of technological innovations, such as mobile banking and other types of ICT-based service provision could play an important role in this respect. What kind of barriers is most important for the poor in remaining unbanked? What kind of financial services do they need? How can financial regulations be adjusted so that the poor can be better served without risking instability of the financial system? These are all important questions that need to be answered for the government to develop credible policy initiatives. Further empirical research on the relationship between financial inclusion and inclusive growth, and the exact nature of this relationship, is needed to support such policy initiatives.

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Statistical Yearbook of Indonesia. (2016). Directorate General of Regional Authority, Ministry of Home Affairs Republic of Indonesia Wooldridge, J. M. (2009). Introductory econometrics. A modern approach (4th ed.). Mason, OH: South-Western Cengage Learning. World Bank. (2009). Financial infrastructure: Building access through transparent and stable financial systems. World Bank. (2014a). Financial inclusion. Global Financial Development Report. World Bank. (2014b). Global financial inclusion index database 2014 World Bank. (2015). World Bank DataBank. https://databank.worldbank.org/home.aspx World Bank. (2016). World Bank Annual Report 2016. Zhuang, J., & Asian Development Bank. (2010). Poverty, inequality, and inclusive growth in Asia: Measurement, policy issues, and country studies. London: Anthem Press. Zins, A., & Weill, L. (2016). The determinants of financial inclusion in Africa. Review of Development Finance, 6(1), 46–57.

Chapter 9

Understanding Mobility Inequality in Jakarta with Space Syntax Isti Hidayati, Claudia Yamu, Wendy Guan Zhen Tan, and Ronald L. Holzhacker

Abstract  In Southeast Asia, cities are often plagued by mobility issues. Their socio-spatial structures—defined as the configuration of the street networks and locations of key functions—often lead to mobility inequalities whereby spatial fragmentation affects the individual’s ability to move through the built environment and access key functions to participate in socioeconomic activities. This chapter describes these mobility inequalities in terms of access to educational facilities and uses Space Syntax as a diagnostic method to analyse kampung Menteng (a typical form of informal settlement) in Jakarta with the “Choice” indicator to show potential through-movement for vehicular and pedestrian access. Our findings show that (1) wealthier neighbourhood favour car access, (2) quality educational facilities are usually only accessible by private car and (3) although kampungs are highly connected locally and favour pedestrian movement, there are safety risks involved for pedestrians. This has consequences for whom may or may not access quality education, especially at the secondary and tertiary levels. This approach provides an evidence-­based understanding to urban planners and policymakers on how current socio-spatial structures induce mobility inequalities and horizontal and vertical coordination is needed to resolve this key challenge of governance.

I. Hidayati (*) Faculty of Spatial Sciences, University of Groningen, Groningen, The Netherlands Faculty of Architecture and Planning, Universitas Gadjah Mada, Yogyakarta, Indonesia e-mail: [email protected] C. Yamu Faculty of Spatial Sciences, University of Groningen, Groningen, The Netherlands e-mail: [email protected] W. G. Z. Tan Western Norway University of Applied Sciences, Bergen, Norway e-mail: [email protected]; [email protected] R. L. Holzhacker University of Groningen, Groningen, The Netherlands e-mail: [email protected] © Springer Nature Switzerland AG 2021 R. L. Holzhacker, W. G. Z. Tan (eds.), Challenges of Governance, Development and Governance, https://doi.org/10.1007/978-3-030-59054-3_9

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Keywords  Mobility inequality · Socio-spatial structures · Space syntax · Governance

9.1  Introduction In rapidly urbanizing regions, mobility—defined as the individual’s ability to travel and access opportunities to jobs, education, healthcare and other services—will affect the quality of life, well-being and even exacerbate existing socioeconomic inequalities. For example, children from less well-off families located in inaccessible locations have less access to transportation options which then limit their ability to attend better educational facilities. This can have a lifelong impact on their social capital and employment opportunities (Andersson et al., 2012; Miranti, Vidyattama, Hansnata, Cassells, & Duncan, 2013). Mobility therefore plays an important role in sustainable development and contributing directly to a sustainable and liveable city. Transportation form the backbone of modern societies and limited mobility resulting from limited transportation options (infrequent or unreliable bus services, etc.) or socioeconomic capacities (lack of income or ability to use transit system, etc.) affect participation in employment, education and general wellbeing resulting in socioeconomic inequalities. The challenges of governance for sustainable development through mobility inequality present itself on three fronts. First, to address these inequalities effectively it requires a cross-sectoral cooperation between the traditionally separate sectors of land use planning, transportation, economic development and education. In addition, there is a scalar mismatch as land use and transport decisions are usually enacted at the local and regional level, while economic development and education are decided at the national level. Last but not least, most urbanized regions in Southeast Asia equate transportation expansion (mainly car-­ based) to economic growth. There is little concern for possible environmental or societal impacts, such as pollution and traffic congestion. There is a direct link between limited mobility and socioeconomic opportunities as shown by the higher numbers of jobs accessible by cars in contrast to significantly few jobs accessible by public transport or walking (Grengs, 2010; Kawabata & Shen, 2006) in the same time frame. More acute and direct consequences include the high numbers of patients dying from illness and accidents due to not reaching health care services on time (Foreign Policy, 2016) due to reliance on private cars as ambulances for the urban poor are limited or are deployed too late (Tempo, 2017a). These limitations are not just the result of lacking resources but are at times a result of lacking of institutional coordination. For example, the amount of free school bus services from the Jakarta provincial government are insufficient to cater to all students. With school starting at 7:00  a.m., students in further residential locations (which might be more affordable) will not be on time with public buses (starting at 6:00 am at the terminals) and those who live closer are not able to walk to school due to the fragmented pedestrian networks. This leaves most students with the

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choice of either private car or motorcycles, effectively limiting educational access to those without private vehicles or not able to afford the higher living costs in urban areas with more school facilities of a higher quality (The Jakarta Post, 2016a). Underlying this linkage are the socio-spatial structures of cities, as defined through transit and street networks, spatial structures, the location and distribution of functions and facilities as social structures. The interplay of land use and transportation systems is enacted through potential and realized accessibility and types of possible activities (Wegener and Fürst, 1999). Policies can directly influence transportation infrastructure or land use location choices and the accumulation of those policy decisions in time indicate path dependency. For example, Jakarta’s urban development policy embraces motorization (Hook & Replogle, 1996) resulting in a less walkable city (Althoff et al., 2017). The macro level (city-wide) decisions on which networks are privileged (cars above walking) and where key functions (schools, hospitals and offices) are located also present at the micro level as street morphology. A car-oriented environment will incentivize car travel while posing barriers to others who have no access to that modality. This leads to a vicious cycle where the user is forced to adopt an unsustainable modality (car/motorcycle), which is contrasting with the policy ambitions for a more sustainable environment (more walking or cycling). As unfortunate as this is, this cyclical relationship is prevalent in land use and transport planning in most Southeast Asian metropolitan cities (ADB, 2012; OECD, 2010). Socio-spatial structures are products of previous policies of how to organize our built environment and planning decisions taken decades ago can have direct consequences on how our cities are structured and used today. These structures can unknowingly disadvantage certain groups using certain transport modes, affecting their ability to move and create mobility inequality. For example, in car-oriented environments with minimum public transport, those with lower income or without driving license are also less able to access employment and educational opportunities, especially if those opportunities are located far away or in locations accessible only by car. This inequality has occurred frequently in modern planning history, with the alienation of certain racial and income groups in ‘blighted’ neighbourhoods in the race to build freeways in the US (Thompson, 2007). This chapter therefore proposes understanding the above limitations as mobility inequalities and identifying them through socio-spatial structures (i.e. land use location choice and street network configuration) and how those structures create or affect socioeconomic inequalities. This builds upon current debates on the mobility turn in social sciences (Kenyon, Lyons, & Rafferty, 2002; Sheller & Urry, 2000; Uteng, 2009) and the established relationship of land use and transportation structures affecting human activities and accessibility (Wegener and Fürst, 1999). Using the example of an urban informal settlement in Jakarta (the neighbourhood of Kampung Menteng and surroundings) with a distinct street network configuration, the authors utilize Space Syntax1 to identify the underlying socio-spatial structures 1  Space Syntax provides a robust spatial analysis that can be used to infer potential accessibility from the street network configuration based on how people use and perceive the space. For indepth explanation see Sect. 9.4.2 or refer to van Nes and Yamu (2018).

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(vehicular vs. pedestrian networks) and how they contribute or limit socioeconomic opportunities (access to educational facilities) as mobility inequalities. In the next section, the research question is presented. This is followed by the social and scientific significance of this approach and perspective on mobility inequalities. Then, the methodology and case selection are explained and the theoretical framework discussed. After establishing the context of the case, the socio-­ spatial structures of Menteng is analysed. The findings are then used to conclude on the issue of mobility inequality and further reflections are made on the challenges to governance it presents and possible solutions.

9.2  Research Question Focusing the discussion on sustainable development in Southeast Asian metropolitan cities and understanding the possible challenges of governance to it, this chapter asks the following question; How is mobility inequality understood through socio-spatial structures (street network configurations and distribution of key urban functions) affects sustainable development?

Here, two key concepts are of importance. 1. Mobility inequality, defined as the ability for individuals to move through the built environment differentiated by their socioeconomic attributes. Factors such as wealth or education level can lead to differences in ability, opportunities and resources. In this chapter, we focus on economic value of residences (wealthy or poor neighbourhoods) and potential transport modes (car, motorcycle, transit or walking). 2. Socio-spatial structures, as defined through street network configurations and location of key urban functions (focusing on educational facilities in this chapter). Certain street configurations impact the ease of access of certain functions and the eventual choice of route to a particular location. Factors that could affect travel route choice includes distance, time, motivation and other environmental conditions. In this chapter, we focus on the ‘shortest path’ with the least angular deviation for analysis.

9.3  Scientific and Social Significance of the Research Sustainable development requires a focus beyond infrastructural investments or economic growth, prevalent in traditional transport planning (Banister, 2008; Litman & Burwell, 2006; United Nations, 2016). The much-neglected societal aspects is brought into emphasis with the introduction of the concepts of mobility inequality understood through socioeconomic attributes (e.g. income) related to socio-spatial structures using spatial analysis with Space Syntax. This approach (i.e.

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determining route choice based on network configuration in relation to location of function) provides empirical evidence of existing dysfunctions of the socio-spatial structures and provides a diagnostic framework to aid in problem identification, and visual communication for policy makers. In Jakarta, as in most Southeast Asian metropolitan cities, urban transport planning practices still follow a technical-rational approach (Allmendinger, 2002; Litman, 2013). Transport planners consider capacities and flows and how to combat congestion but rarely refer to a target user group (Turner, 2013). This worsens existing inequalities and in Jakarta this has led to a non-walkable city, where transport carries a high cost. On average, Jakarta residents spent around 20–35% of their income on transport (Kompas, 2017; Tempo, 2017b), mostly for fuel or public transport fare. Only few people walk since only 7% of Jakarta streets have sidewalks and most of them are blocked by street vendors or are used by motorcycles as road extensions (The Jakarta Post, 2016b; The New  York Times, 2017). Althoff et al. (2017) ranked Jakarta as the last amongst 46 countries in terms of walkability. Nonetheless, the Jakarta Transport Masterplan 2015–2030 puts little emphasis on improving the walking environment, how the transport plan will affect urban poor is addressed neither (Department of Transportation, 2015). By spatially analysing socio-spatial structure to understand mobility inequality, this chapter (1) contributes to existing research debates on mobility and transport justice (Martens, 2012; Pereira, Schwanen, & Banister, 2017) with a micro-level spatial analysis of a Southeast Asian city, (2) provides a new analytical framework to understand how socioeconomic opportunities relate to socio-spatial structures and (3) discusses the feasibility of such an analysis in aiding planning processes. The focus on educational facilities ties into how access to education is a key pillar of the UN 2030 Sustainable Development Goals (SDG 42) (United Nations, 2017). Inability to reach schools can lead to lower rates of school participation and learning continuation. This can have an effect on educational level of a certain population groups and widens the inequality gap in wage and social networks (Duflo, 2001; Miranti et al., 2013). Therefore, we focus this chapter on understanding where schools are located and if the street network might impede or facilitate different socioeconomic groups (those with a car and those who rely on public transport or walking). In Southeast Asia, most developing countries are invested in road network expansions (ADB, 2012; OECD, 2010; Pojani & Stead, 2015) and have fallen into the trap of building more car-oriented structures as proxies for progress and prosperity following the North-American model (Kenworthy & Laube, 1996; McIntosh, Trubka, Kenworthy, & Newman, 2014). In this rapidly urbanizing region where socioeconomic class differences are growing and more families are able to afford a car, there exists a large rural-urban migration. This is creating a new class of urban poor who do not have access to resources such as private motorized vehicles. This will inadvertently lead to a lack of educational opportunities for the next generation and

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sharpens the have-and-have-nots divide. There is therefore a need to expand mobility inequality discussions in Southeast Asia, where research has been meagre (Levy, 2013). Highlighting the above consequences, this chapter criticizes the current spatial planning processes and contributes (1) in raising awareness in policymakers of individual socioeconomic differences of their target user groups and by (2) empowering the mobility disadvantaged participation in the decision-making processes through clear and legible visual analysis of their socio-spatial structures.

9.4  Theoretical Overview In a world of limited resources and opportunities, people mostly move through and to highly accessible streets and depending on their ability to move (or mobility), affecting and determining the ease of which one reaches a particular location or engage in certain socioeconomic activities. The limitations to mobility resulting from geographical, social, economic, demographic or even physical factors result in mobility inequality. Mobility is also intrinsically linked to understanding accessibility. Certain street network configurations and patterns allow higher accessibility in reaching desired facilities, while others might decrease accessibility. For instance, on a city-wide scale, major roads provide better accessibility for those travelling by car to reach a certain school, while to reach the same destination with public transport might take three or more transfers and walking for quite a distance. On a local scale, pedestrian networks provide important linkages to reach certain functions within shorter distances and hence walking is the dominant mode. This chapter argues that to understand mobility inequalities, socio-spatial structures affecting accessibility should be analysed with Space Syntax.

9.4.1  Constructing Mobility Inequality Mobility, defined as the ability to move (Cresswell, 2010; Preston & Rajé, 2007;), is often expressed as number of trips, distance travelled, transport options and car ownership in transport literatures (Clifton & Lucas, 2004; Lucas, 2012; Olvera, Mignot, & Paulo, 2004; Olvera, Plat, & Pochet, 2015). Differences in mobility can lead to socioeconomic inequalities, referred to as mobility inequality (Lucas, 2012; Wachs & Kumagai, 1973). Studies on mobility inequality have emerged as a critical response to the technical-rational approach of transport planning, revealing the correlation of socioeconomic factors of age, gender, race, income, and housing location with mobility (Blumenberg, 2004; Currie, 2010; Uteng, 2009). For example, age affects mobility through a license to drive, physical ability (e.g. different walking speed between teenager and elderly), and sensitivity to an increase in transport cost (e.g. student with no income versus business traveller). Women usually have shorter

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but more complex travel chains (Blumenberg, 2004) and less access to cars (Sheller & Urry, 2000). The urban poor have limited transport options, resorting to walking and public transport, excluding them from accessing car-oriented locations (Ureta, 2008). In cities with strong spatial segregation—either based on ethnicity, income, or both—mobility inequality is more prevalent, disadvantaging ethnic minorities and poorer neighbourhood as they have less transport options (Power, 2012; Preston & Rajé, 2007). Although the bulk of these studies were conducted in the US and the UK, the symptoms of mobility inequality related to socioeconomic factors holds true for most Southeast Asia metropolitan cities, as economic inequalities (e.g. indicated by GINI ratio) are even more striking. Mobility inequality relates to current discussions on mobility-related exclusion (Kenyon et al., 2002), wherein the group with limited mobility is excluded from the participation in socioeconomic activities. Transport justice debates argue that transport benefit (i.e. accessibility) should be granted to all member of society, including those with limited mobility in line with social equity principles (Martens, 2012). Limited mobility leads to limited opportunities as being mobility disadvantaged could reduce or lessen access to employment (Grengs, 2010; Kawabata & Shen, 2006), education (Kenyon, 2011), health service (Bostock, 2001; Hine, 2011) and other socioeconomic activities. Mobility and accessibility—defined as the ease to reach and is expressed as the number of opportunities within reach (Geurs & van Wee, 2004; Handy & Niemeier, 1997)—are intertwined concepts. Socio-spatial structures such as street network configurations (Hillier, 2009), transport services and land uses or functions (Geurs & van Wee, 2004) are the main determinants for accessibility. The city centre is often regarded as highly accessible as it usually consists of streets with short distances (in terms of either angular deviations, directional turns, or metric distances) from and to any other streets in the network, offers more transport services (e.g. more traversing routes, more frequent timetable), and forms a concentration of functions (e.g. jobs, schools, health care services and other socioeconomic facilities).

9.4.2  U  nderstanding of Socio-Spatial Structures with Space Syntax To understand the above socio-spatial structures, a spatial analytical approach is proposed. Specifically, with Space Syntax (SSX) which is used in urban analysis, describes and quantifies how easy it is to access and navigate in any spatial surrounding, using a mathematical street network model. The underlying theoretical assumption is that street network configurations affect the way people perceive and use space and therefore shapes movement patterns (Hillier, 2012; Hillier & Iida, 2005; Penn, 2003). SSX consists of calculating configurational spatial relationships within the built environment, addressing the relationship between the physical elements of a city and its social activity pattern of utilization with the concept of accessibility.

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As a method and theory, SSX offers a toolset to diagnose existing situations and give prognosis on spatial changes in the built environment independent of inherently interwoven cultural aspects. Within these constraints, this tool can assist in finding some spatial evidence in relation to certain presumptions and observations (van Nes & Yamu, 2018). Since its development by Hillier and colleagues at the University College London in the 1980s, SSX has been used in numerous international decision-making processes in urban planning and design. According to Rose and Stonor (2009), as a spatial decision support system (SDSS), SSX has the main functions of (1) a diagnostic tool for the identification of existing challenges and opportunities, (2) a prognostic tool for providing potential urban planning and design interventions and (3) as a communication tool in order to communicate results of a complex analysis with easy to understand visual aid. In this chapter, SSX is applied as a diagnostic tool as an urban anamnesis for the socio-spatial structures of Menteng. The analysis methodology works on two key concepts of centrality as the representation of a hierarchical accessibility that is (1) Integration, also known as potential to-movement and, (2) Choice, known as potential through-movement. For analysing socio-spatial structures, we propose the application of “Choice” analysis to depict the potential of people’s choice for routes based on least angular deviation as people tend to choose the straightest path that is less confusing (Dalton, 2003; Hillier & Iida, 2005). The street network analysis highlights the hierarchy of urban accessibility with regard to potential usage of certain routes (for an in-depth explanation please see van Nes & Yamu, 2018; Dalton, 2003). There are however limitations to SSX as a robust and quick analytical tool. The method does not incorporate street or road width, directions (one-way road), local conditions such as weather, quality of the road surface, or the traffic light circuit. The SSX analysis works two-dimensional, and therefore reduces some of the three-­ dimensional information of the real world. It is therefore important to correlate the SSX model with additional data to gain an in-depth understanding of complex spatial challenges. However, Space Syntax has proven to be a successful method and theoretical approach to identify spatial challenges and opportunities of cities and regions. Finally, we have to remember, that Space Syntax results must always be connected to our understanding of societal processes and human behaviour (van Nes & Yamu, 2018).

9.5  Methodology To explore how mobility inequality can be identified through socio-spatial structures, this chapter is in the form of an exploratory single case study (Yin, 2009). Kampung Menteng and its surroundings (henceforth, Menteng) is selected as an example of a typical urban neighbourhood in Jakarta with the following criteria: • Mix of income level and residences conditions.

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• Mix of planned and unplanned settlements within the area. • Mix of pedestrian and vehicular street networks. The kampung is an ideal unit of analysis as it is not only a spatial unit but also a socio-cultural centre identifiable by inhabitants and other citizens. The analysis area is defined with a 2 km buffer surrounding the unplanned settlement of the kampung3 to reduce bias (i.e. edge effect, detailed explanation refers to Gil, 2017) in the analysis of socio-spatial structures. Data on socio-spatial structures are gathered from OpenStreetMap (OSM) as; • Manually modelled axial map to represent street network configurations of the area. • Location and distribution of educational facilities for the various age groups. Open source data (i.e. OSM) are quite common and well regarded in terms of data reliability in recent urban and transport planning studies (Gil, 2015; Luxen & Vetter, 2011). To understand the socio-spatial structures of Menteng, we utilize a two-step analysis: 1. Spatial structures in the form of a strategic street network model are constructed from existing street networks (i.e. axial map, for further details see Turner, Penn, & Hillier, 2005) and are analysed with two different radii for normalised angular Choice analysis (NACH); • NACH low—a low metric radius to identify Menteng’s local, pedestrian-­ oriented accessibility pattern and; • NACH high—a high metric radius to highlight a car-oriented accessibility pattern. 2. Results from these spatial structures indicators are then juxtaposed to educational facilities (social structures) representing access to socioeconomic opportunities and discussed. The analysis output generates cartographic representation of categorized values of the axial maps. The values represented for Choice are categorized from high to low and discussed in relation to the location of educational facilities. For this chapter, the consideration of educational facilities as a social structure proxy is taken as an option out of the numerous alternatives such as religious, cultural, retail or commercial facilities. The choice was made due to the larger demographic that these types of facilities could affect. In the case of school children and young adolescents, their adult familial members are involved in the mobility choices and processes. In addition, lack of educational access can have devastating consequences in the short and long-term socioeconomic capacities of those involved.

3  In the urban context, a kampung refers to an unplanned and informal settlement (Nas, Bonn, Hladká, & Tampubolon, 2008).

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9.6  The Case of Kampung Menteng, Jakarta Kampong Menteng (Area: 0.116  km2) belongs administratively to the Menteng sub-­district (kelurahan), one of the five sub-districts of Menteng district (kecamatan) in Central Jakarta. The district is known for its elite residential areas of modern development in close proximity to an existing kampung—a form of informal settlement—where domestic staff servicing the elite residential areas reside. Nowadays the kampung is densely populated, the sub-district has 8939 households with four to five residents per dwelling (BPS, 2013). Most of the dwellings in kampung Menteng are categorized as slums (Ministry of Public Work, 2012) with street widths often less than two metres and fragmented street network (see Fig.  9.1). Spatially, the kampung is an enclave wedged in by railway tracks leading to the Manggarai Station and the Ciliwung River. The close proximity of this analysis area to the more prosperous Central Business District serves to highlight the gaps in mobility and socioeconomic opportunities.

9.6.1  Analysis of Socio-Spatial Structures Next, the analysis area of Menteng and in particular kampung Menteng will be explained based on the two “Choice” through-movement analysis indicators of high metric radius (vehicular) and low metric radius (pedestrian). The socio-spatial structures and its relations to mode choice and hence mobility opportunities and

Fig. 9.1  Examples of streets of kampung Menteng, Jakarta

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limitations are presented first for vehicular based movement (see Fig. 9.2a) and then for pedestrian-based movements (see Fig. 9.2b). 9.6.1.1  High Metric Radius Analysis (Vehicular Accessibility) The potential through-movement analysis using a high metric radius (NACH high, Fig. 9.2a) depicts all major through roads connections very well to important locations throughout the city of Jakarta (see high accessibility streets in red in Fig. 9.2a). These for example are Salemba Raya Street, where offices and higher education institutions are located, leading to one of Jakarta economic hubs (Senen) and the recreational area (Ancol); Sultan Agung Street, being a feeder, which connects to the city centre (Sudirman-MH Thamrin); and Pangeran Diponegoro street as a through road with office and residential buildings. Our analysis highlights a highly accessible road system dedicated to vehicular movement to city-wide functions. Most of these roads are well equipped with public transport stops or can link to those with ease (see Fig. 9.2a). Interestingly, Menteng’s wealthy neighbourhood (the top left quadrant of the map) embraces high vehicular-­ oriented accessibility. This is linked to car ownership as a prestige object and status symbol and related to mode preference due to socioeconomic status. According to Maimunah and Kaneko (2016), in Jakarta 65% of those with income less than IDR 1,000,000 (around USD 70) per month resort to walking since they can neither afford to own a car nor the public transport fare. In contrast, 60% of those earning income above IDR 8,000,000 (around USD 560) per month use the car daily. Hence for the analysis area, the preferred modes of movement can be inferred from the residential economic values as residents of wealthy neighbourhoods tend to travel more by private car while the residents of poorer neighbourhoods tend to walk. Focusing on the kampung (Fig.  9.2a inset), the analysis highlights the main streets (high accessibility, red or orange segments): Menteng Trengulun Street and Menteng Jaya Street as entrance points into the informal settlement area. These ‘entrance’ streets allow car movement up to certain street crossings. Other major thoroughfare roads encircling the kampung have comparatively lower accessibility (blue or green segments) as the rail tracks and the river act as mobility barriers (Fig. 9.2a, see inset). 9.6.1.2  Low Metric Radius Analysis (Pedestrian Accessibility) The potential through-movement analysis using a low metric radius (NACH low, Fig.  9.2b) highlights local accessibility for pedestrian-oriented movement (Fig. 9.2b). It is of interest that the high-income neighbourhood (the top left quadrant of the map) is not well equipped for pedestrian movement, evidenced in its larger block sizes. Whereas the middle class and lower-middle class neighbourhoods in the rest of the map embrace a strong local street network with more potential accessibility for pedestrian movement. The kampung’s ‘entrance’ streets are

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again highlighted (high accessibility, red or orange segments) indicating that these streets are also the main routes for pedestrian movement for entering deeper parts of the kampung (closer to Manggarai train station, located to the southeast of the kampung) or reaching functions located outside of the kampung. These ‘entrance’ streets are connected to city-wide thoroughfare roads, indirectly leading to the city centre of Sudirman-MH Thamrin Street. The kampung exhibits a stronger internal network (Fig. 9.2b, inset) for pedestrian movement with its section traversing streets than in the vehicular movement analysis (Fig.  9.2a, inset). This can be explained by the choice for walking or individual motorized movement (using motorcycle) in deeper parts of the kampung, due to the narrow street and alley widths and the socioeconomic makeup of the kampung’s residents. The kampung therefore emerges as a very local system and this finding is corroborated by previous studies of other kampungs in Jakarta (Budiarto, 2003). Walking and riding motorcycle as transport modes could help to overcome the kampung’s spatial segregation formed by railway tracks, through inventing/establishing informal crossings at several points. Many locals illegally and at times recklessly cross the busy commuter rail tracks with these modes for the sake of convenience. One of the main informal crossings connects Menteng Jaya Street with Anyer Street, traversing another neighbourhood and leading further to Surabaya Street with its antique market. This behaviour at informal crossings are not yet reflected in the current analysis model but will be incorporated in the next phase of this analysis as future research. 9.6.1.3  Mobility Correlated to Location of Educational Facilities Knowing the differences in mode choice and mobility opportunities and limitations as evidenced by our analysis of vehicular-based movement (see Fig. 9.2a) and then for pedestrian-based movements (see Fig.  9.2b), we superimpose the location of educational facilities: • Preschool, children under ages of six; • Primary, 6–12 years old; • Secondary, 13–18  years old including (junior high, senior high and vocational) and. • Tertiary, older than 18 years old. In total 341 educational facilities are mapped including all state-owned and private-­owned, regular-, international-, and religious-based curriculum within the analysis area. At the first glance, the location of preschool and primary educational facilities do not follow a clear spatial accessibility pattern for either the high or low metric analysis (see Fig. 9.3a, b). Hence, a 100-m buffer is generated (according to Leather, Fabian, Gota, & Mejia, 2011, majority of Asian people only willing to walk 50–100 m to access pedestrian crossings) to capture possible correlations between accessibility and education level. Within this 100-m buffer, we count 132 schools

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located next to city-wide highly accessible roads; while 150 schools enjoy high accessibility to local streets. Comparing this to the high and low metric analysis (see Fig. 9.3c, d) for secondary and tertiary facilities, preschools and primary schools seem to be more associated with local accessibility networks while tertiary schools tend to correlate to the highly accessible city-wide street network (red and orange segments in Fig. 9.3c, d). This correlation can be explained as the path-dependent manifestation of a national policy from the 1970s, in which the national government built a number of primary schools in close proximity to settlements with the objective of providing education to all. The state-owned primary schools are located within walking distance from the residential areas. In addition, students and employees of secondary and tertiary educational facilities are able to afford and licensed to use a mix of motorized transport modes (i.e. car, motorcycles and buses). To contextualize the correlation between the spatial analysis and educational facilities and provide insights beyond the pattern of accessibility and location in the previous figures, we review the context of economic reasoning and the perceived quality of education. For Jakarta in general, expensive schools are usually private institution, providing good educational quality with an international curriculum. State-owned schools at secondary education level are also known for good educational quality, but their numbers are limited and are therefore highly competitive (Ministry of Education & Culture, 2016). The system of expensive private facilities and competitive state-­ owned facilities providing better quality education excludes those with low academic achievement or lower financial capacity. When the locations of these facilities are charted based on their accessibility by vehicular or pedestrian through-movement (high or low metric, see Figs. 9.3a–9.3d), and compared to the level of tuition fee and ownership status (state or private), we begin to see a clearer picture regarding how socioeconomic opportunities are limited by mobility through socio-spatial structures, thereby creating mobility inequalities (see Table 9.1). Here, we present five facilities of each category within Menteng and tuition fee is taken as a proxy of educational quality. As we see from Table 9.1: • For preschools (all private institutions), the more affordable ones are located on streets highly accessible for pedestrian movement. • For primary schools, no patterns can be discerned. • For secondary facilities, the more expensive facilities are highly accessible for vehicular movement. • All facilities at the tertiary level are highly accessible for vehicular movement. There is a distinction between more expensive and therefore considered higher quality facilities at the preschool, secondary and tertiary level to be highly accessible to vehicular movement and not to pedestrian movement. Students who do not have access to private vehicles will encounter more difficulties to reach such facilities (e.g. longer travel time, higher safety risk). Disadvantaged groups (low-­income families) therefore have less chances to access quality education and are likely to

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Table 9.1 Accessibility values (vehicular or pedestrian) of educational facilities related to educational quality (proxy of tuition fee) and ownership (private or state) School name and Tuition fee per month (in ownership status USD using currency of 1 (private unless USD = 13,661 IDR) otherwise stated) Preschool: (refer to Fig. 9.3a and 9.3b) TK Montessori 161 TK Ar Rahman 29–80 TK PSKD Mandiri 417 TK Kartika 15–29 TK Larasati 7–22 Primary: (refer to Fig. 9.3a and 9.3b) SD Penabur 80 SD St Bellarminus 59 SD Perguruan Cikini 44 a SDN 4 Manggarai (state-owned) a SDN 3 Bukit Duri (state-owned) Secondary: (refer to Fig. 9.3c and 9.3d) SMK Farmasi 29 SMP Nurul Iman 37 SMA 1 PSKD 139 a SMPN 33 Jakarta (state-owned) a SMAN 8 Jakarta (state-owned) Tertiary: (refer to Fig. 9.3c and 9.3d) UI Medical Dept 110 (vocational degree) STIE YAI 66–110 Universitas 51 Gunadharma Universitas Brawijaya 293 (Post-Graduate) Universitas Mercu 88–132 Buana

Accessibility by pedestrian Accessibility by vehicular movement movement (low metric) (high metric) Average High High High High

Average Average Average High Very high

High Average Very high Average

High Average Average Below average

Average

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Below average Average Below average Average

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a

lag behind when entering secondary and tertiary educational phases. In Indonesia, the number of graduates with a low-income background for primary education is 91%, but sharply drops to 55% at the secondary education level and only 3.3% of the cohort enters tertiary education (Susanti, 2011). These barriers do not only come

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from financial conditions, but are also derived from the spatial configurations granting easy access for those with private vehicles. In light of our analysis and corroborating cohort data, we can deduce the effects of mobility inequalities that enact as barriers for the disadvantaged, urban poor in accessing secondary and tertiary education. This also proves how path-dependent socio-spatial structures create mobility inequalities.

9.7  M  obility Inequality in Southeast Asian Metropolitan Cities As our analysis of Menteng with Space Syntax shows, the two different potential through-movement—vehicular and pedestrian—correlate to the ease of reaching certain level and quality of educational facilities. The vehicular through-movement potentials traverse through wealthy neighbourhoods providing easy (private car) access to high quality, and expensive secondary and tertiary facilities. In contrast, pedestrian through-movement is more prevalent in the middle- and low-income neighbourhoods and allows access to mediocre and affordable educational facilities. Within the kampung, the strong local network helps in accessing local facilities with pedestrian movements but is less supportive of accessing city-wide facilities requiring vehicular access. For instance, those within kampung Menteng will need to detour through the ‘entrance’ streets or have access to private vehicles to reach secondary or tertiary education facilities. The average detour is around 500 m and given the regional willingness threshold to walk only 50–100  m (Leather et  al., 2011); this spatial structural inconvenience contributes to the rising popularity of motorcycle as a main modality for transport. The increasing preference for motorcycles, exposes pedestrians using the same streets to more traffic safety risks, especially at those key ‘entrance’ streets which inhabitants of the kampung have to access to get anywhere else in Menteng. The current socio-spatial structures and configurations benefit motorcycle users above pedestrians as few are connected with proper walkways.

9.7.1  Socio-Spatial Structures and Mobility Inequality Aside from access to key functions such as educational facilities, there are also other limitations such as safety risks associated with the socio-spatial structures of kampungs. A kampung’s local spatial structures can be attributed to the organic development of how the internal street networks of these unplanned settlements are being configured, constructed, and restructured by the inhabitants, often without considering the city-wide transport networks for cars and public transportation. The kampung’s configurations of narrow streets in proximity encourages social

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interactions among inhabitants, attracts local economic activities (e.g. small shops, temporary street vendors selling groceries in the morning), and provides natural surveillance (i.e. eyes on the street). Some of these internal  paths are accessible through walking and motorcycle, while other are only accessible through walking (e.g. involving stairs). The internal network might be confusing to strangers as some alleyways might lead to dead-ends but, the informal paths and crossings are known to the locals who expertly use them to overcome spatial barriers such as rail tracks and dead ends. Nonetheless, those living in the kampung might not be aware of the underlying mobility limitations imposed by these spatial configurations. Sihombing (2002) wrote about his experiences living in kampung Menteng Atas (located south of our analysis area) as having no difficulties in walking 150 m to take the bus to the university but stresses on the safety risks related to the local spatial structures and configurations (i.e. street crime performed by youth in dead ends). This highlights the additional safety costs of walking in the kampung. In Jakarta, safety in terms of street crime, is amongst the main concerns of why more than 50% students opt to use private vehicles, mostly motorcycles, which are rationalized by users as costing one-third of public transport costs (Kompas, 2015). Subsidized school bus services are less attractive to users due to its limited operational time (until 5 pm), frequent delays in the morning, and insufficient number of vehicles in comparison to the number of students. However, these forms of mobility (i.e. motorcycles or buses) are not without risks considering that 57% of traffic accidents involve high school students (Ministry of Transportation, 2015).

9.7.2  Socio-Spatial Structures in Southeast Asia Considering the above risks and the prevalence of similar settlements in Jakarta, those seeking education are exposed to safety risks and crime while walking or even taking transportation options such as motorcycles or buses. Those highly dependent upon public transport are penalized with time constraint and costs. This combination of transport resistance in terms of time, effort and comfort, keeps students from poor families opting for mediocre quality schools within easy reach and extending generational poverty and lack of social capital. Unfortunately, this situation applies to many other metropolitan cities in Southeast Asia such as Manila, Bangkok and Kuala Lumpur, where socio-spatial structures of unplanned settlements induce mobility and educational inequalities. In Manila, where 37% of the population is living in slums (Ballesteros, 2010), the completion rate for secondary education is only 42% (The National, 2010). In Bangkok, people living in informal settlements are associated with a higher dropout rate (Nicaise, Tonguthai, & Fripont, 2000). Socio-spatial structures can also create education inequality through a strong ethnic-spatial segregation as observed in Kuala Lumpur, where different ethnic groups congregate in different parts of the city (Raman & Sua, 2010).

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The inherent safety risks and penalizing location of key functions of socio-­spatial structures contribute to rising mobility inequalities. Beyond raising awareness of these relationships, urban planners and policymakers should be aware of how their decisions and policies can harm or benefit society. The starting point is to provide equal opportunities for citizens in these rapidly growing metropolitan cities. Resolving these mobilities will be crucial in attaining sustainable development and balancing societal inequalities. However, the challenges of governance present in resolving such multifaceted and complex issues. To ensure access to quality education will require increasing educational capacities as well as access to these locations for all socioeconomic backgrounds. The first might be the domain of educational (national level) policies while the latter is (in our case) the domain of regional (Jakarta Metropolitan Region) and local (unplanned settlements) policies and institutions. The horizontal coordination of these different sectors (education and transportation) will have to be combined with vertical coordination between the different levels of scales of governance (national, regional and local). Beyond the mismatch of national, regional and local policies regarding spatial plans, transportation networks and facilities locations; there is also the issue of sedimentation of decades of development policy which might not improve the situation when built upon one another. To make matters worse, Southeast Asian cities have generally opted to equate car transportation capacity expansion with economic growth and development.

9.8  Conclusion This chapter showed how mobility inequality can be identified by analysing socio-­ spatial structures in relation to accessibility of key functions. We analysed the example of a typical urban neighbourhood in Jakarta with an unplanned settlement (kampung Menteng) and its correlation to transport hubs and educational facilities at four levels (preschool, primary, secondary and tertiary) with Space Syntax. Analysing Menteng with two indicators (“Choice” at high and low metric) to approximate vehicular and pedestrian through-movement potentials, we see patterns of correlation, namely; 1. Wealthy neighbourhoods are being more accessible by vehicular traffic (and major transport hubs) while medium to low-income neighbourhoods are characterized by higher pedestrian activities. 2. The kampung with its informal paths and strong local spatial structure is more conducive to pedestrian movements at times despite physical infrastructural ­barriers (rail tracks and major thoroughfares). These are however, not without safety and crime risks. 3. Given the quality of education related to expensive private schools mostly accessible by vehicular movement, those with a disadvantaged background tend to opt for educational facilities of a lesser quality or more easily accessible by other modes.

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In combination, we see a pattern of how disadvantaged groups (lower income) are limited in their mobility and which areas they can access and what they can access within a given time, budget and effort threshold they can afford. This is an identification of mobility inequalities which is prevalent in many Southeast Asian metropolitan cities. The advantage of a spatial analysis correlated with key functions allows an empirical data-based discussion of at times abstract and complex concepts such as mobility inequality. The larger challenge however, lies in resolving mobility inequalities and that points to larger governance challenges requiring sectoral and multi-level coordination to achieve sustainable developments in the lieu of economic development. There are known limitations to this spatial analytical approach with Space Syntax such as data availability and interpretation dependency on in-depth knowledge of local conditions and contexts to create a cogent analysis. For future research, the authors intend to improve the current analytical model with a high-resolution pedestrian model, including informal paths and functions critical to the socioeconomic opportunities of a kampung.

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Part IV

Inclusivity and Justice: Community and Growth Dilemmas

Chapter 10

The Governance of Social License to Operate in the Forest Industry in Indonesia Stephany Iriana Pasaribu, Frank Vanclay, and Ronald L. Holzhacker

Abstract  The concept of Social License to Operate (SLO) has predominantly been applied in the extractives industry, and its understanding and application within forestry has been limited to date. Nevertheless, achieving a SLO is crucial for forest companies, especially given that forestry has long time horizons, high exposure to the global market, and many and varied stakeholders. We examine how forestry companies operating in Indonesia attempt to gain a SLO from their host communities. We analyse the roles of the three main stakeholder groups in forestry operations in Indonesia: companies, communities and governments. We specifically examine: (1) whether the concepts that underpin SLO (legitimacy, credibility, and trust) can be applied to the practices of the forest industry in Indonesia; (2) the general applicability of the SLO concept in the Indonesian context and (3) what can be done to improve SLO practices in the Indonesian forest industry. We argue that obtaining and maintaining a SLO is an outcome of complex interactions between many factors and actors, rather than being the direct result of company actions. In the Indonesian context, SLO is a relatively new and not fully understood or utilized concept. Its value has not been fully appreciated by all actors. By examining two forestry companies operating in Central Kalimantan, we scrutinize the roles of companies, communities, and the local and central government in the governance of SLO to create a better understanding of this emerging concept in the Indonesian context. Keywords  Social License to Operate · Social acceptability · Community engagement · Sustainable forest management · Social forestry

S. I. Pasaribu (*) · F. Vanclay Faculty of Spatial Sciences, University of Groningen, Groningen, The Netherlands e-mail: [email protected]; [email protected] R. L. Holzhacker University of Groningen, Groningen, The Netherlands e-mail: [email protected] © Springer Nature Switzerland AG 2021 R. L. Holzhacker, W. G. Z. Tan (eds.), Challenges of Governance, Development and Governance, https://doi.org/10.1007/978-3-030-59054-3_10

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10.1  Introduction While formal legal requirements are significant for governing production, informal social regulations are also important. An informal, unwritten social contract reflecting the opinions and expectations of the broader community about the impacts and benefits of industry or government activities is manifested in the concept of Social License to Operate (SLO) (Edwards & Lacey, 2014; Lacey, Edwards, & Lamont, 2016; Lacey & Lamont, 2014; Parsons, Lacey, & Moffat, 2014). Gunningham, Kagan, and Thornton (2004, p. 308) defined SLO as the “demands on and expectations for a business enterprise that emerge from neighbourhoods, environmental groups, community members, and other elements of the surrounding civil society”. Conversely, Thomson and Boutilier (2011) perceive SLO simply as the acceptability of a company and its activities to a specific community. SLO can also be viewed in terms of stakeholder engagement (Lynch-Wood & Williamson, 2007). Simply put, SLO is the tacit permission that communities and society may grant to industry or government to access land and utilize resources. The growing awareness of the applicability of the concept reflects the changing nature of the relationships between industries, their communities and other stakeholders, including government, and is an outcome of the neoliberalisation of government (De Jong & Humphreys, 2016; Owen & Kemp, 2013; Prno & Slocombe, 2012). Achieving a SLO is essential for long-term business success, especially in sectors with highly visible business activities, long time horizons, high exposure to global markets, and/or with diverse stakeholders keen to influence practices, such as the resource-based industries, including forestry and mining (Esteves, Franks, & Vanclay, 2012; Langbroek & Vanclay, 2012; Vanclay, 2012; Vidal, Bull, & Kozak, 2010). We focus on SLO in the context of forest management, an industry which has a long history of social conflict (Affolderbach, 2011; Vanclay, 2017). The main reason to choose forestry is because SLO has been extensively used in the mining literature, but with a few exceptions (Dare, Schirmer, & Vanclay, 2014; Edwards, Lacey, Wyatt, & Williams, 2016), its understanding and application within forestry has been limited. Forestry is a significant industry in Indonesia, where 60–90  million people depend on forests for their livelihoods (Marti, 2008). Another reason to research forestry in Indonesia is because of the extreme forest loss, approximately 50% since 1900, resulting in serious social impacts (Obidzinski, Andriani, Komarudin, & Andrianto, 2012). Most forests are on community land with only informal traditional tenure, often belonging to indigenous peoples (Colchester, Anderson, & Chao, 2014). Due to transmigration, illegal logging, plantation companies, the expansion of palm oil production and other agribusiness investments, lands continue to be taken without regard to the livelihoods, welfare, or knowledge of the local communities (Colchester, 2011; Colchester, Pang, Chuo, & Jalong, 2007; Vanclay, 2017). These circumstances have been generating much land conflict between communities and companies (Colchester et al., 2014). We consider it crucial to reflect on the relationship between forest companies and communities in terms of SLO.

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From a business perspective, the advantages of SLO for companies are: improved corporate reputation, ongoing access to resources, reduced regulation, improved market competitiveness, strengthened stakeholder relationships, and positive effects on employees (Esteves & Vanclay, 2009; Gunningham et  al., 2004; Joyce & Thompson, 2000). The need to be perceived as being sustainable has encouraged the extractive industries to work closely with their stakeholders (including communities) to develop and maintain a SLO, and it is considered that a failure to do so would affect their financial performance (Prno & Slocombe, 2012). In developing countries, such as Indonesia, natural resources are typically owned and managed by the government. However, private companies are often granted authority to exploit forests and manage plantations. This often leads to disputes between companies and communities, which play out locally and globally (Butler & Laurance, 2008; McCarthy, 2012; Yasmi, Anshari, Komarudin, & Alqadri, 2006). In a context where the nature of relationships between companies, communities, governments and nongovernment organizations (NGOs) is evolving and complex, SLO becomes an important concept to understand how these various stakeholders engage with each other and make decisions (Parsons et al., 2014). We argue that sustainable development can be achieved by incorporating different stakeholders and their diverse perspectives into forest management. This chapter focuses on Kalimantan, Indonesia, which was chosen because there has been massive deforestation as well as large-scale conversion of land into industrial plantations, primarily palm oil. Palm oil plantations have been the main driver of deforestation in Indonesia, destroying the habitat of endangered wildlife, including orangutan and Sumatran tiger (Marti, 2008). This has also led to the indigenous people experiencing severe environment and social impacts (Obidzinski et al., 2012).

10.1.1  Research Questions The primary purpose of this chapter is to scrutinize the applicability of SLO to the forest industry in Indonesia. This will be done by exploring the perspectives of the primary actors in the forestry industry: communities, companies, and the Local and Central Governments. Specifically, we examine: (1) whether the concepts that underpin SLO (legitimacy, credibility, and trust) can be applied to the practices of the forest industry in Indonesia; (2) the general applicability of the SLO concept in the Indonesian context and (3) what can be done to improve SLO practices in the Indonesian forest industry. We argue that obtaining and maintaining a SLO is the outcome of complex interactions between many factors and actors, rather than being the direct result of company actions. In the Indonesian context, SLO is a relatively new and therefore not fully understood or utilized concept, the value of which has not been fully appreciated by all actors. By examining two forestry companies operating in Central Kalimantan, we critically scrutinize the roles of companies, communities, and the

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local and central government in the governance of SLO to create a better understanding of the importance of this emerging concept.

10.1.2  Social and Scientific Relevance This chapter is one of the very first publications to discuss the concept of SLO in the context of the Indonesian forest industry. With the established international ecological significance of natural forests in Indonesia, it is essential that forestry companies have a SLO from their local and international stakeholders. It is thus very appropriate that companies, communities, governments and NGO stakeholders have a greater understanding of this concept. An objective of this chapter, therefore, is to increase awareness of SLO. We also seek to influence forestry companies operating in Indonesia so that they understand why they need a SLO from their host communities. Finally, we contribute to the international discussion around SLO, by considering the role of SLO in forest governance. Our research highlights the thoughts of company, community and government representatives about how SLO is operationalized. This will help policy and decision makers in Indonesia and potentially elsewhere to increase awareness of the importance of SLO.  It may help forestry companies consider different approaches to the issues affecting how they seek to gain a SLO in practice. The insights discussed in this chapter will assist in establishing a genuine SLO from communities and in building positive company–community relationships.

10.2  Social License to Operate 10.2.1  History of the Concept It is generally accepted that the term, Social License to Operate (SLO), first appeared in 1997 in the context of the extractive industries. Jim Cooney, Vice President of International Government Affairs at Placer Dome, a Canadian-based mining company, claims to have coined the term (Cooney, 2017) is widely accredited as having done so (Gehman, Lefsrud, & Fast, 2017). Use of the term has grown rapidly and it is now standard industry jargon in the mining, oil & gas, forestry, and renewable energy industries (Boutilier, 2014; Dare et al., 2014; Harvey & Bice, 2014). It is also widely discussed in the academic and management literature (Moffat & Zhang, 2014; Morrison, 2014; Owen & Kemp, 2013; Prno & Slocombe, 2012). Awareness of the need to obtain a SLO for each specific project is now generally accepted, and it is argued that this awareness has led to a change in the culture, policies, practices and image of industry (Thomson & Boutilier, 2011). Coney used the term as a metaphor for the community’s ability to stop a mining project’s activities.

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Nowadays, the concept has evolved to become part of the general outlook or management perspective of many companies, and has become the purpose of their corporate social responsibility (CSR) programs (Boutilier, 2014; Manteaw, 2008; Rodhouse & Vanclay, 2016). A company is perceived to have a high level of CSR when they have achieved successful SLO outcomes as demonstrated by, at the very least, a lack of conflict (Jijelava & Vanclay, 2017). From the company perspective, gaining a SLO is increasingly seen as a crucial aspect of managing environmental and social risks (Esteves, Factor, Vanclay, Götzmann, & Moreiro, 2017). Correspondingly, from the perspective of communities, SLO is increasingly recognized as a prerequisite for sustainable development (Jijelava & Vanclay, 2017). SLO is perhaps best understood as the set of demands and expectations of local stakeholders (especially communities and broader civil society) about how a business should operate. SLO has often been represented as a “social contract” between communities and a company (Demuijnck & Fasterling, 2016; Lacey et al., 2016; Lacey & Lamont, 2014). It is often mistakenly perceived as a single License granted by all (homogenous) members of a community at a given single point in time, however it should be conceived as an ongoing process of negotiation over time with multiple groups in a society (Dare et  al., 2014; Jijelava & Vanclay, 2014; Vanclay, 2012). SLO is both tangible and intangible. It is intangible in that it is informal and unwritten. However, it becomes tangible through the consequences of how the approval or opposition of a community is expressed and experienced, which can often have significant outcomes to a project and company (Hanna, Vanclay, Langdon, & Arts, 2016; Moffat, Lacey, Zhang, & Leipold, 2016). The process of attempting to a SLO can result in a company modifying its practices in order to fit in and adapt to prevailing social norms (Stapledon, 2012), even though problems still remain (van der Ploeg & Vanclay, 2018).

10.2.2  H  ow Do Social License and Legal License Relate to Each Other? Arguably, SLO is just as important as any legal license. To some extent, what comprises a SLO will be aligned with the cultural norms and legal frameworks applied in a particular country. However, the process to obtain and sustain a SLO is different and distinct from obtaining regulatory or legal licenses, although they are interrelated, especially when there is a legal obligation to achieve product certification. Legal licenses are rooted in specific legislative requirements and procedural conditions, and generally must be obtained before the project or related activities are started. Legal licenses are typically granted by government or its agencies, given only for a specified time period, and clearly nominate the area over which it applies. Conversely, SLO needs to be actively earned and sustained over time by a company through timely and effective communication, meaningful dialogue, and ethically

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responsible behaviour (Jijelava & Vanclay, 2017; Kelly, Pecl, & Fleming, 2017). A SLO can only be given by a community and stakeholders, and not by government, politicians, or legal authorities. SLO is rooted in the beliefs and perceptions of communities or citizens about how a company or business should operate (Edwards et al., 2016). It is dynamic in nature, meaning it is subject to continual evaluation and renewal by communities and other stakeholders based on the activities of the company and whether or not the company is able to meet their needs and expectations (Parsons et  al., 2014). Nevertheless, SLO and legal licenses are similar in some respects, in that SLO is now increasingly perceived as a requirement before a project or activity can proceed (Boutilier, 2014). Gaining a SLO does not guarantee that a legal License will also be achieved. Likewise, the legal act of licensing an activity or project does not necessarily indicate it has a SLO. Nonetheless, since legal licensing is increasingly perceived as being insufficient in fulfilling societal expectations, SLO has arguably become less voluntary and can be considered as de facto prerequisite for a project (Leith et al., 2014).

10.2.3  Operationalization of Social License to Operate Although the concept of SLO is considered difficult if not impossible to measure (Jijelava & Vanclay, 2017), there have been various efforts to develop models to explain what constitutes a SLO (Gunningham et  al., 2004; Joyce & Thompson, 2000; Moffat & Zhang, 2014; Prno & Slocombe, 2012; Thomson & Boutilier, 2011). We use the model proposed by Thomson and Boutilier (2011), since we believe this model to be most suitable for the context of the forest industry in Indonesia, where legitimacy, credibility, and trust are often obscured and/or questioned by environmental NGOs. Thomson and Boutilier’s model was used to analyze how forest companies try to gain a SLO from communities. In the model, SLO is represented as a continuum with four positions: (1) the withholding or withdrawal of SLO; (2) acceptance; (3) approval and (4) ownership or psychological identification (see Fig. 10.1) (Thomson & Boutilier, 2011). Which position a company is located at depends on the community’s (and other stakeholders’) perceptions about the levels of legitimacy, credibility and trust they assign to that company and its activities (Dare et al., 2014; Jijelava & Vanclay, 2017; Moffat & Zhang, 2014; Parsons et  al., 2014; Prno & Slocombe, 2012; Thomson & Boutilier, 2011). Jijelava and Vanclay (2017) have expounded the Thomson & Boutilier model. They consider that (social) legitimacy can be defined as the acceptance of the project by affected communities, especially in terms of fairness. Fairness is perceived in terms of whether there was a fair procedure to approve a project, and whether the benefits of a project are shared or distributed fairly with and within communities and other relevant stakeholders. Credibility is defined as the extent to which a project or a company is perceived to be trustworthy. In other words, whether a company

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Trust Boundary

Approval Credibility Boundary Acceptance Legitimacy Boundary Withheld/Withdrawn Fig. 10.1  The pyramid model of Social License to Operate (Thomson & Boutilier, 2011)

is perceived as being honest with what they say and do in relation to the project, with no intention to deceive or engage in deceptive activities, being realistic about their project and their ability to fulfil community and other stakeholders’ needs and expectations. Trust is a firm belief among the members of a community that they can rely on the company, that the company will make decisions that will likely bring reasonable benefits to the communities and the company. Trust is the confidence by a community or other relevant stakeholders that a company will always fully consider, acknowledge, and resolve all potential issues that the community might have regarding the project. According to Thomson and Boutilier (2011), legitimacy needs to be gained to acquire the lowest level of SLO, acceptance. There are several types of legitimacy: legal, economic and social. Legal legitimacy is a perception about whether the regulatory requirements and procedures have been followed properly, and whether the decision taken is fair for both the company and the affected communities. Economic legitimacy is defined as the perception of the affected communities about whether the benefits and/or compensation they will receive from the project are fair. Social legitimacy is an intricate concept involving: the wellbeing of the communities, the appreciation of the cultural values of the communities by the company, and the ways in which the company treats the communities and other stakeholders (Joao, Vanclay, & den Broeder, 2011; Vanclay, Esteves, Aucamp, & Franks, 2015). When a company reaches the acceptance level, it means the communities agree that the company’s project can proceed, but there may still be doubt whether the company will genuinely address their concerns in the future. At the acceptance level, communities usually have complaints about the project, although they approve the company to continue. Therefore, acceptance can be considered as the temporary willingness of a community for the project to proceed (Thomson & Boutilier, 2011). When a company has succeeded in creating legitimacy, the next stage is to establish credibility, which will advance them to the approval level of SLO. Credibility is achieved by consistently delivering true, consistent, and clear information to

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communities. Credibility can also be achieved when the company keeps its promises, listens attentively to the concerns and complaints of communities, and treats communities fairly. The approval level is considered as having been achieved when communities openly and strongly express their support for project (Thomson & Boutilier, 2011). Gaining trust from communities is a signal that a company has reached the highest level of SLO, “psychological identification”. When there is a demonstration of a high level of trust, communities will identify and align their future with the project. This means that they perceive their future highly depends on the success of the project, and they are willing to fight for its success and the interests of the company, and vice versa. In this case, both the company and the communities believe they share the same interests and goals. Full trust may be established by repeatedly proving to the communities that the company has a genuine interest in promoting their wellbeing, and by being evidently proactive advancing the communities’ objectives.

10.2.4  Critiques of the SLO Concept Although the SLO concept has attracted much support, there are also some detractors at a general conceptual level and at a practical level. The concept is considered to be ill-defined, hard to measure, and variously understood by different groups, including industry, academics, local communities and NGOs (Harvey & Bice, 2014; Moffat et al., 2016). Some consider it to be a neoliberal concept that emerged in response to community opposition to projects, with the intention of constraining debate about the underlying issues, rather than being proactive engagement (Manteaw, 2008; Meesters & Behagel, 2017; Owen & Kemp, 2013). Others believe that it is nothing new, and just another name for legitimacy (Gehman et al., 2017). Some believe that not all companies are convinced that gaining a SLO is necessary—that the business case for a SLO is not fully developed—and that projects can sometimes more profitably proceed without local community support (Boutilier, 2014; Owen, 2016; cf. Ehrnstrom-Fuentes & Kroger, 2017). Finally, the process of gaining a SLO requires community engagement and discussion about the project within the community, which may be a source of conflict within communities, and between communities and forest companies (Wiersum, Ingram, & Ros-Tonen, 2013). Despite these criticisms, we believe the concept has value, as we discuss below.

10.3  Methods Case study research was undertaken by looking at the SLO practices of two forest management companies, Taiyoung Engreen (PT.TYE) and Hutan Amanah Lestari (PT.HAL), which operate in Central Kalimantan, Indonesia. As with all case study

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research (Yin, 2014), mixed methods were used, including: document analysis; in-­ depth interviews with representatives of forest companies, communities and governmental agencies; focus group discussions with representatives of an environmental NGO and a research organization; and field-observation. In-depth interviews and document analysis were used to gain an understanding of: how PT.TYE and PT.HAL perceived the SLO concept; how they have attempted to achieve SLO from their communities; how the communities perceived those attempts; and the roles of local and central government in the governance of SLO. The interview discussion topics were developed by reviewing the literature on SLO. Document analysis included reviewing the annual Social Engagement reports from PT.TYE and PT.HAL, as well as other appropriate reports. Qualitative data analysis was undertaken using MaxQDA, with data coded to identify the key themes. Interviewees in the forest sector were identified by a snowball process using the professional networks of the lead author in Indonesian forest industry, the Ministry of Internal Affairs of Indonesia, and various NGOs networks in Central Kalimantan. In total, eight in-depth interviews were conducted in January 2018 (six in Kalimantan, two in Jakarta) and two focus groups in January 2018 were conducted in Palangkaraya, Central Kalimantan (one with the local NGOs, one with a research organization). Two company managers, two community members, two government officials, a senior forestry academic, and one international NGO staff were interviewed. For all interviews, the general principles of ethical research and informed consent were applied (Vanclay, Baines, & Taylor, 2013), although signed consent sheet were not used because it was not appropriate in this specific context. Interviews were conducted in Bahasa Indonesia and were recorded, with the permission of the interviewee. Detailed notes from the interviews were written in Bahasa Indonesia and reviewed to find themes.

10.4  The Social License of Two Forestry Companies 10.4.1  Background to the Case Studies Our research involved case studies with two forest management companies operating in Kalimantan in Indonesia. PT.TYE is a Korean company that has established plantations in Indonesia for rubber and sengon (Albizia chinensis), which is used for pulp. Its plantations are in the Gunung Mas district of Central Kalimantan. They acquired an operational permit (SK-IUPHHKA-HT) from the Indonesia government in 2009 for a concession area of 59,810 ha. PT.HAL is a private Indonesian company that invests in carbon sequestration using 25,800 ha in the South Barito and East Barito Districts of Central Kalimantan. PT.HAL sells carbon credits by protecting existing forests and by reforestation. PT.TYE and PT.HAL were selected as appropriate cases because they are relatively recent in starting their projects in Central Kalimantan (PT.TYE in 2009 and PT.HAL in 2013). They facilitate our

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exploration of what companies do to achieve and maintain a SLO from affected communities. With Indonesia being a signatory to the United Nations Declaration of the Rights of Indigenous Peoples, but not to the Convention 169 of the International Labour Organisation, Free, Prior and Informed Consent (FPIC) (see Hanna & Vanclay, 2013) is not a strict requirement and it is not formally required in Indonesia, however it is de facto expectation (Colchester, 2010; Colchester, Anderson, & Zazali, 2010), and is specifically expected because of the certification requirements of forestry companies in Indonesia. One reason to examine PT.TYE was because 70% of their concession area is customary forest of the indigenous people, the Dayaknese. This forest primarily comprises Ulin trees (ironwood, Eusideroxylon zwageri), which are believed by the Dayaknese to be sacred, thus needing protection. However, the local government has not officially recognized it as a customary forest (Mongabay, 2016). Without this recognition, the Ulin forest is at risk. It is a good case study because PT.HAL has attempted to preserve the protected forest. However, the communities still demand financial benefits from the reforestation project.

10.4.2  G  aining SLO from Local Communities: The Company Perspective In both companies, the understanding of the SLO concept was limited. Essentially, they equated SLO with social management, CSR and community development, which are required by the government-mandated code of forest practice and the forest certification schemes. SLO was also perceived as being somewhat similar to FPIC. However, the essence of the interviewees’ understanding of SLO was community acceptance of company activities. Legitimacy was perceived as being key to gaining SLO. However, both companies primarily relied on economic legitimacy to achieve SLO from local communities. Economic legitimacy was considered as when the benefits being provided by the project to the affected communities were fair. Economic legitimacy was seen as being compensation or financial entitlements for those who have been negatively affected by the project and in terms of benefits or contributions by the company to the communities beyond normal taxation or other legally-imposed costs of operation. In both cases, the benefits provided were considered to be shared infrastructure, job opportunities and transfer of skills, knowledge, and technology to local people. A critical issue identified by the interviewees was the need for the company to gain legitimacy from the communities. Achieving genuine legitimacy through direct involvement was considered difficult because the communities overestimate the value of money rather than prioritizing forest protection. PT.HAL had difficulties to gain genuine legitimacy from the communities without paying money. The

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communities measured fairness of the compensation and benefits based on a comparison with what they had acquired from another company, as revealed by one interviewee: Communities are not as naïve as people from outside think. They know the value of money. For instance, if we want to promote awareness of our programmes in a village, the community members would not come to the awareness events if they knew we would not give them money for transport—or, when we invited them to plant trees together, they would ask whether they would get paid for it. I think this is due to the influence of how the other company has treated them. For PT.HAL, it is because there is a mining company that has given the communities money and material things to attend their programs. Thus, the local communities expect us to do the same (PT.HAL representative)

To gain legitimacy, it is important that the company understands and respects the local context, including cultural norms, wisdom and habits (Jijelava & Vanclay, 2017; Prno, 2013). In the case of PT.HAL, the communities are mostly Muslim. For Muslims, it is very important to go on a pilgrimage to Mecca. This creates a pressure on the communities to collect money from various activities, including illegal logging, illegal mining, and by asking money from PT.HAL and other companies. Hence, the main strategy to secure legitimacy revolved around economic legitimacy. Once legitimacy had been achieved, the companies were challenged to achieve trust. PT.HAL attempted to achieve trust by contributing clear and fair economic benefits to the communities and by being responsive to the shifting community expectations over time. However, the process of gaining trust had been negatively influenced by the legacy of a local NGO, which had deceptively attempted to teach Islam to the local communities under the guise of food security. This reveals that gaining trust depends not only on how a company treats local communities, but also on the legacy of past activities and relationships with other stakeholders. When the legacy is negative, it will be a challenge for a subsequent company to gain trust from communities, with them questioning whether the company’s intentions are genuine or not. Both PT.TYE and PT.HAL had awareness that it will take years to achieve a high level of trust from the local communities. Both companies translated a high level of trust as a situation without significant conflict with communities for an extended period. They were also conscious about the key role of trust for the success of the company’s projects. However, they were concerned that a high level of trust might be accompanied by high level of dependency on them. The main challenge the companies perceived to achieve credibility and trust from the communities was associated with land entitlement. From the perspective of PT.TYE and PT.HAL, the concession areas belonged to the State and because they had acquired a business land use permit (Hak Guna Usaha), they considered that they had the right to use the land and that the State had endorsed their presence and operational activities. However, the communities believed that the concession areas were their customary forest lands (hutan adat), which they had held for generations. This highlights three things. First, the local government does not have clear information regarding land tenure, especially relating to unregistered land and customary land. Second, the land rights of the indigenous people are not adequately

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recognized or respected by the Government of Indonesia. Third, the customary institutions of indigenous peoples lack a legal basis. These issues raise questions for PT.TYE and PT.HAL in terms of gaining credibility and trust from the communities, including whether the communities have a right to approve or not the presence and operational activities of the companies. In our case, the forest is clean and clear, meaning that it is absolutely owned by the State. So, how is it that the communities have a right to give us a SLO or not? (PT.HAL representative)

Both the PT.TYE and PT.HAL representatives described the need to engage early in dialogue with the local government to achieve a SLO.  They considered that the involvement of local government will secure a SLO at the community and regional levels. However, it is often the case that local governments fail to monitor company activities despite there being funding for this. This is suggestive of corruption or at least of their lack of willingness to recognize indigenous people rights to land.

10.4.3  The Perspective and Role of Government at all Levels The representatives of the Local and Central Governments—specifically the Provincial Forestry Agency and the Forestry Ministry—had a clear preference for terms such as social management (kelola sosial), CSR, and community development over SLO. To a lesser extent, they also used the term, social forestry (kehutanan sosial), which aims to simultaneously conserve forest and create prosperous communities (Hyde & Köhlin, 2000). They considered SLO as a relative new term for an existing and well-known concept. As mentioned earlier, SLO and legal licenses are different although interrelated, as was clearly evident when looking at forestry practices in Indonesia. When a company has acquired forestry certification (Pengelolaan Hutan Produksi Lestari), it has the right to undertake forest management according to its own determination of what it considers is appropriate. Thus, the certification process is a form of self-­ regulation that minimizes the ongoing role of government. There is no monitoring and no compliance checking by government. This regulatory framework reveals a shift in forest governance regarding sustainable forest management, away from the state to corporate bodies and with an important role for NGOs in resisting (Hanna, Vanclay, Langdon, & Arts, 2014; Hanna et al., 2016). This transfer of authority from state actors to companies impacts on the role of the local government in relation to SLO: there is no monitoring or control by local government of company’s activities to achieve a SLO; there is no role for the government in relation to addressing community grievances; and there is uncertainty around who is responsible for mediation and problem solving in relation to contentious issues between a company and communities. The surveillance of company SLO practices is thus highly dependent on NGOs, indigenous people’s groups,

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and on the personal goodwill and individual initiatives of staff of the Provincial Forestry Agency, who do act in support of communities but without a clear mandate. Forest companies are assessed annually by Central Government for their community engagement and environmental management performance. However, this assessment is based only on company self-reporting, without any field inspection. This shows that both Local and Central government do not take it very seriously. However, the Local and Central government representatives recognized the need to monitor how forest companies attempt to earn a SLO from local communities. Their challenge is to be able to fulfil this role as an honest and brave watchdog, free from corruption or collusion, especially when a forest company is owned by a powerful individual. This was outlined by an interviewee: There is a case where the forest company is owned by the leader of the local government, a person who also is the President of the Indigenous people’s group. In this case, how can the communities express their concerns regarding the company? How can the true concept of SLO be applied when this is the case? (Central Government Representative).

10.4.4  SLO from the Perspective of Communities In the case of PT.TYE, the local community considered that forestry activities had negatively influenced their sources of livelihood. Over time, the price of some forest commodities sold by community members (e.g. rubber latex and rattan) has been declining. Furthermore, since 2008, swidden or shifting cultivation (ladang berpindah), their customary way of life, has been forbidden. These things together have prompted them to engage in illegal mining and logging to survive. For local communities, developing alternative livelihoods is a primary concern. Therefore, economic legitimacy is the first requirement for a company to obtain their acceptance. A form of economic legitimacy provided by PT.TYE was the provision of shared infrastructure, such as improved roads. This has enabled the communities to bring non-timber forest products to market. Legitimacy, credibility and trust are earned when a company undertakes community engagement that leads to economic benefits for local communities. Communities expect companies to provide real, ongoing benefits, such as helping them sell the non-timber forest products, providing social benefits, and addressing all social and environmental issues that arise. The communities frequently emphasized the importance of listening and participation. They would like to cooperate with the companies. Effective community engagement is very important to develop opportunities for positive interactions that create credibility and trust (Moffat & Zhang, 2014; Prno, 2013). Trust is only achieved when community engagement methods ensure that all groups in the communities are included (Dare et al., 2014), as was revealed by an interviewee: Conflict between company and communities occur when we do not engage with all groups in the local communities. They will protest and not trust us. Then they will start to claim that our areas are theirs. (PT.HAL representative)

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For PT.TYE, the communities expected Local Government to be involved at the village level, playing the roles of adviser to the community and go-between with the company. It was noted that village leaders sometimes have their own vested interests and often received financial benefits from the companies. Consequently, some community members felt alienated or ignored, with their concerns going unaddressed. Nevertheless, in general, conflict between company and communities will only be solved with the help of community leaders because communities usually respect and listen to them. In the Indonesian context, community leaders often play a pivotal role in shaping trust between communities and company. Establishing harmonious relationships and providing effective channels for delivering complaints can significantly improve trust.

10.5  U  nderstanding the Place of SLO in the Indonesian Forestry Industry Forestry companies operating in Indonesia are either owned by individuals with enormous power and influence, or by significant foreign companies. This inherently creates governance issues, including corruption risk, elite capture, conflicts of interest, and issues about access to remedy (Barr & Sayer, 2012). Sometimes, roles and positions of the various parties overlap. In the case discussed above, one person was both the leader of the local government and the leader of the indigenous community, as well as something of a local entrepreneur and power broker. His various roles meant he often had a conflict of interest. Potentially he could acquire a permit without having properly gained FPIC or without following the normal legal procedures. In general, companies perceive that they need to earn a SLO from communities only when communities express their concerns or demands explicitly (see also Hanna et al., 2014, 2016). Communities often demand financial benefits or compensation, and usually companies will grant these demands. Companies tend to equate SLO practices with CSR.  Therefore, to earn a SLO from local communities, companies sometimes undertake community engagement activities around alternative sources of livelihood, they provide capacity building for the skills required for those alternative livelihoods, and they carry out philanthropic activities to fulfil the needs of communities (Esteves & Vanclay, 2009; Vanclay, 2017). Communities usually expect that NGOs will help and guide them in their interactions with a company or play a role as trusted buddy in negotiating with the company. However, not all NGOs have a genuine intention or commitment to this role. Some NGOs or individuals manipulate the system and deceptively exploit the communities to gain information, lands or resources fraudulently. Even though the companies are themselves not responsible, their reputation and social licenses are at risk, especially when they take no action to establish who the legitimate voice of the

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community might be. There is no oversight or control by government at any level to prevent unscrupulous operators.

10.6  Conclusion Our analysis of the two forestry companies, PT.TYE and PT.HAL, revealed the value of thinking in terms of legitimacy, credibility, and trust, and the general utility of the Social License to Operate concept. Our research revealed the contested nature of SLO within the Indonesian forest industry, but also that SLO, as a concept, was considered important by the three main actors (company, community and government), even though it was not fully understood. However, our research participants tended to characterize SLO activities as being equivalent to corporate social responsibility, social management, or community development programs aimed at improving the company–community relationship. Both companies and communities perceived that economic legitimacy was key to earning a SLO.  Therefore, they tended to prioritize economic benefits over legal or social legitimacy issues, such as whether the company fully respects the local culture or community way of life, or whether a company carries out its activities legally and competently. Within the Indonesian context, SLO practices were complicated by three things. Firstly, Indigenous people’s rights have not been fully recognized by the Indonesian government or by companies. Secondly, overlapping roles and the lack of a culture of good governance or an awareness of conflicts of interest means that it is possible for some individuals to have unrestricted influence, leading to a risk of corruption and the inability of local people to seek redress. Thirdly, the Indonesian Government tends to issue business permits to forestry companies without any assessment that the affected communities accept the presence and operational activities of the company, even though the communities notionally do have a right to give or withhold their free, prior and informed consent. In this context therefore, we consider that constantly examining the risks associated with SLO practices and the complexities of the power relations among the actors are crucial to improving SLO practices in the Indonesian forest industry.  

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Chapter 11

Foreign Direct Investment (FDI), Inclusive Growth, and Institutions: A Case Study of Tourism Sector in Badung District Pande Nyoman Laksmi Kusumawati, Joost Herman, and Ronald L. Holzhacker

Abstract  Inclusive growth has increasing become a concern for international organizations and national governments, including that of Indonesia. This is caused by the idea that high economic growth is not often followed by lowered inequality and decreasing poverty. Regarding the contributions of Foreign Direct Investment (FDI) to its host countries, existing studies have focused only on its effect on economic growth. This is considered too narrow an approach and the alleviation of inequality and poverty should be considered when assessing the contributions of FDI to the domestic economy. This concept of the impact of FDI on inclusive growth has not been well-examined in existing literature. This chapter aims to observe the impact of FDI on inclusive growth in the Badung district in Bali, which is well known as an international tourism region and foreign investment destination. Using qualitative methods, we investigate the role of institutions in promoting FDI to inclusive growth by observing how an international hotel contributes significantly to inclusive growth through several channels. Our findings show that inclusive institutions play a pivotal role in FDI contributing to inclusive growth. Keywords  Inclusive growth · Inclusive institutions · Foreign direct investment

P. N. L. Kusumawati (*) Faculty of Arts, Groningen University, Groningen, The Netherlands The Ministry of National Development Planning (BAPPENAS), The Republic of Indonesia, Jakarta, Indonesia e-mail: [email protected] J. Herman Faculty of Arts, University of Groningen, Groningen, The Netherlands e-mail: [email protected] R. L. Holzhacker University of Groningen, Groningen, The Netherlands e-mail: [email protected] © Springer Nature Switzerland AG 2021 R. L. Holzhacker, W. G. Z. Tan (eds.), Challenges of Governance, Development and Governance, https://doi.org/10.1007/978-3-030-59054-3_11

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11.1  Introduction Foreign direct investment (FDI) is seen as a main driver for economic growth in developing countries, especially the countries with limited sources of domestic financing. However, the impact of FDI on the host country is under discussion and there are competing theories on whether it is positive or negative. Current research mainly focuses on the contribution of FDI to aggregate economic growth and is too narrow an approach. We therefore propose to consider FDI from a much broader perspective by incorporating the concept of inclusive growth. Inclusive growth is defined as economic growth that is beneficial for all members of society on an equal basis regardless of their individual circumstances (Felipe, 2012) and can be measured by the economic growth accompanied by lesser inequality and lower poverty (Kusumawati, Elhorst, & De Haan, 2015). This approach is in line with The World Bank, the United Nation Development Programme (UNDP), and the Asian Development Bank (ADB) focusing on a broader concept of economic growth in their programs (Rauniyar & Kanbur, 2010). The introduction of the inclusive growth concept is important for assessing the quality of FDI. For example, the World Tourism Organization (UNWTO) has promoted investment in the tourism sector to contribute not only to economic growth but also to its inclusiveness. In fact, Indonesia’s medium-term development plan for the period 2015–2019 has begun to make references to the concept that investment should be inclusive and lead to inclusive growth (Bappenas, 2015). For FDI to lead to inclusive growth, we must consider inclusive institutions and their absorptive capacities. Benefits of FDI to host countries cannot be gained without sufficient absorptive capacity (Borensztein, De Gregoreio, & Lee, 1998; Wang & Wong, 2011). Addressing the knowledge gap on inclusive growth and institutions our chapter examines the effect of FDI on inclusive growth and the role of institutions in this process. The Badung district in the Bali Province (henceforth Badung), is known as an international tourism region and foreign investment destination and will be used as our case study. Observations will be focused on the Nusa Dua area which was developed by Indonesian government as a world-class international tourism destination. This study employs qualitative methods in which stakeholders, such as foreign companies, local government, and local community were interviewed and their responses analyzed for the relation between FDI and inclusive growth, and the role of institutions herein.

11.1.1  Research Questions This chapter asks what is the impact of FDI on inclusive growth in the tourism sector in Badung District, Bali, and how have institutions assisted this process?

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11.1.2  Scientific and Social Significance of the Research Challenging the existing focus on the impact of FDI on economic growth, this chapter considers inclusive growth in assessing the contributions of FDI on the host country. The effect of FDI on inclusive growth includes its contributions in inequality and poverty reduction. Analyzing all channels through which FDI can promote inclusive growth, we consider its societal contributions and impacts. Investigating the role of institutions in promoting the impact of FDI on inclusive growth, we contribute to New Institutional Economics discussions by looking at the various institutions (governments, companies and the communities) involved. We include the value and culture of the society which influence the characteristic of institutions in the region. Our findings on the Badung case can be a reference for the further studies on inclusive growth and provide guidance for decision makers managing FDI in their regions.

11.1.3  Research Design and Methodology To understand the impact of FDI on inclusive growth and the role of institutions in this process, this chapter proposes a theoretical framework to analyze the detailed channels through which FDI promotes inclusive growth and the characteristics of institutions required for inclusive growth based on empirical evidences of the effect of FDI on inclusive growth in Badung focusing on stakeholders including government, foreign companies and the community. The empirical evidence is based on the results of in-depth interviews with stakeholders in the Badung district, especially the Nusa Dua area which was developed for international tourism in the south part of the district. Stakeholders interviewed include the international hotel in Nusa Dua Area, the management of the Nusa Dua area known as the Indonesia Tourism Development Corporation (ITDC), government officials of Bali Province and the Badung district, the head of traditional village, the academics of Udayana University, and the administrative staff of school for deaf students Sekolah Luar Biasa Bagian B (SLBB).

11.2  Theoretical Framework 11.2.1  FDI and Economic Growth The impact of FDI on domestic economy is debatable and there are two competing theories concerning this issue. The first, modernization theory, is rooted in economic liberalism and argues that FDI can contribute to the host country through employment creation, improvement in productivity, and increases economic

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linkages to domestic enterprises (Bengoa & Sanches-Robles, 2003; Borensztein et al., 1998; Durham, 2004; Li & Liu, 2005; Solomon, 2011). The second, dependency theory, suggests that economic liberalization through FDI may distort the economies of host countries destroying local entrepreneurship, stifle technological innovation, crowd out domestic firms, and increase unemployment (Alschuler, 1976; Amin, 1974; Bornschier, Chase-Dunn, & Rubinson, 1978; Frank, 1979; Mihalache-O’keef & Li, 2011). These studies merely focus on examining the impact of FDI on economic growth and it is indeed a too narrow approach. Kusumawati et al. (2015) has shown that economic growth is often not accompanied by lesser income inequality and lower poverty rates. For instance, the more recent increase of economic growth in India has not been accompanied by a decreasing mortality rate, or lesser income and gender inequality (UNDP, 2005). With Indonesia’s remarkable economic growth since the global financial crisis, it has unfortunately experienced the worst income inequality in over 50 years. The persistence of high inequality and poverty undermines economic growth in the long-run (Balakrishnan et al., 2013). The existence of poverty and inequality is an indication that economic growth has not been distributed evenly across social groups (OECD, 2012, p. 8).

11.2.2  FDI Links to Inclusive Growth According to Felipe (2012), inclusive growth is achieved when all members of society participate in and contribute to the growth process on an equal basis regardless of their individual circumstances. Inclusive growth measures the broader concept of economic growth which is indicated by lower inequality and poverty (Kusumawati et al., 2015). However, there is a lack of theory explaining the links between FDI and inclusive growth. The closest study which provides the detail links between investment and poverty is Mitchell and Ashley (2010). The study presents the channels through which international tourism business contributes to poverty reduction. Meanwhile, the other studies like Borensztein et  al. (1998), Bengoa and Sanchez-Robles (2003), Durham (2004), Li and Liu (2005), and Solomon (2011) provide the mechanisms of FDI affecting economic growth, rather than inclusive growth. By reviewing those studies, there are four channels through which FDI contributes to inclusive growth: employment creation, productivity improvement, then establishment of Corporate Social Responsibility (CSR), and linkages to Micro Small Medium Enterprises (MSMEs). Through those channels, FDI is expected to benefit locals, especially the marginalized groups such as the poor, the disabled and women. These groups experience constraints and limited access to gain the benefits of foreign investment and are not involved in FDI polices. Through employment creation, FDI can generate employment for the locals and they can then receive a sustainable income and improve their welfare. Specifically, FDI could employ the disabled and female workers who are

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mostly marginalized and excluded from the labor market. Therefore, by working at these foreign companies, the marginalized can receive incomes to finance their expenditures. Through employment creation, FDI contributes to inclusive growth and reduced poverty and inequality. Besides receiving income, locals working at foreign companies receive educational and healthcare benefits. Educational benefits like on-the-job training encourages general skills and competency improvement of the employees leading to productivity increase. Having incomes and social security assists in reducing poverty and inequality. Locals who work at foreign companies receive benefits such as full coverage health insurance and better access to healthcare facilities which supports their performance and productivity. The Corporate Social Responsibility (CSR) programs of foreign companies and their linkages to Micro Small Medium Enterprises (MSMEs) help channel FDI toward inclusive growth. The CSR programs consist of short-term such as cash and goods transfers for locals and long-term programs such as education and health programs to improve the quality of life of the locals. The linking of FDI to MSMEs can generate employment and income for those working in the MSME sectors. Since most of the locals who work in that sector are poor, a strong linkage helps to reduce poverty and income inequality.

11.2.3  The Role of Institutions for Inclusive FDI Studies show that the economic benefits of FDI for the host countries cannot be gained automatically without the existence of absorptive capacity in the host countries (Borensztein et al., 1998; Lamsiraroj, 2016; Lamsiraroj & Ulubasoglu, 2015; Wang & Wong, 2011). For instance, Borensztein et al. (1998) and Wang and Wong (2011) found that the positive impact of FDI depend on the quality of human resources to absorb technological transfer from FDI to host countries. Meanwhile, Lamsiraroj and Ulubasoglu (2015) found that other factors such as degree of trade openness and financial development are important factors for promoting FDI for economic growth. Enabling those absorptive capacities, New Institutional Economics (NIE) argues that institutions play a fundamental role in fostering economic development (North, 1981; Rodrik, 2000) and consequently the positive impacts of FDI on host countries (Dunning & Fortainer, 2006). Acemoglu and Robinson (2012) introduced the concept of inclusive institutions which allow all members of society to participate and gain benefits from development. Likewise, Balakhrishnan et al. (2013) suggested that institutions should be inclusive to achieve inclusive growth. North (1981) defines institutions as the humanly devised constraints that structure political, economic and social interaction. Institutions consist of formal (constitutions, laws, property rights) and informal institutions (sanctions, taboos, customs, traditions and social norms). Institutions have an important role of institutions in fostering the positive impact of FDI on host countries (Dunning & Fortainer, 2006).

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Balakhrishnan et al. (2013) suggested that institutions should be inclusive in order to achieve inclusive growth. Inclusive economic institutions should allow all members of society, especially the locals, to be involved and gain benefits from development (Acemoglu & Robinson, 2012). Inclusive political institutions should allow the members of society to engage (engagement), express their aspirations (voice), and be informed about development policies (accountability) (OECD, 2012). Acemoglu and Robinson (2012) caution that some institutions can also be rather extractive. These extractive institutions only provide benefits for a small portion of society. In doing so, these extractive institutions sacrifice the rest of the population by restraining their access to benefits from FDI activities and restrict their involvement in FDI programs or policies. As a result, the existence of extractive institutions can  cause FDI tends to increase poverty and inequality in the host country’s economies. Most of studies assume that institutions are an exogenous variable not influenced by the other factors. However, Hofstede (1980) suggests that the value of society influences the structure and functioning of institutions. In practice, the existence of inclusive institutions is influenced by the value of stakeholders including foreign companies, the government and society. Bobo (1991) found that people with a high individualism value are less likely to support redistributive policies than social responsibility value. Adopting the concept of inclusive institutions in the model of FDI-inclusive growth nexus requires the existence of inclusive institutions not only in the foreign companies involved but also within the government. Therefore, an analysis of all stakeholders involved is required to understand the role of institutions for inclusive growth. Next, we will use the case of Badung to illustrate the effect of FDI on inclusive growth and how institutions have assisted the process considering the value of society influencing the characteristics of institutions.

11.3  The Badung District and Inclusive Growth Performance Badung is one of the districts in the Bali Province covering 7.43% of the total area of Bali island and contribute a significant average of 23% to the overall in the province. The economy of Badung is dominated by tourism activities such as hotel, restaurant, transportation, and communication. From 2005 to 2014, its economy grew by 6.58% per annum which was considerably higher than national economic growth of 5.72%. The tourism sector plays a dominant role and contributes to around 50% of Badung’s economy and increases every year. Therefore, the tourism sector has high economic growth potential and is attractive for both foreign and domestic investments. In the same period, FDI contributed around 95% to the total investment in Badung and is perceived as a key driver of economic activities, especially for the tourism sector. FDI inflows has promoted high economic growth and created employment for the locals. Employment data shows that on average, the

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district had 333,000 workers1 in the period of 2013–2015 and most of them have been absorbed in the economy.2 Moreover, there is very little gender as both male and female workers had a 99% absorption rate demonstrating an equal opportunity to be involved in economic activities. In Badung, we see that the poverty rate decreased in the period of 2005–2014. The Gini coefficient3 here, indicative of lowered income inequality, was significantly lower than other regions in Indonesia. These social indicators are evidence of inclusive economic growth of the Badung district (see Fig. 11.1). Looking at the relation between economic growth, poverty rates and Gini coefficient in that period (see Fig. 11.1), Badung’s economic growth satisfy the criteria of inclusiveness. However, these indicators do not make explicit the role of FDI in promoting inclusive growth or the detailed channels though which FDI contributes to inclusive growth. Therefore, we propose a qualitative analysis of whether FDI contributes to inclusive growth based on the results of in-depth interview with related stakeholders in the district and what role institutions played in assisting FDI to contribute to inclusive growth.

Fig. 11.1  Economic growth, poverty rate, and Gini coefficient of the Badung District. (Source: Author calculation from Badung Statistic Bureau data)

1  Persons of 15 years old and over who, in the previous week, were working, temporarily absent from work but having jobs, and those who did not have work and were looking for work (www. bps.go.id). 2  Employment absorption, here, is represented by proportion of employment to work forces. 3  Gini ratio or Gini coefficient is one of inequality measurements. The value is ranges from 0 as a perfect equality and 1 as perfect inequality. Source: http://siteresources.worldbank.org/PGLP/ Resources/PMch6.pdf.

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11.4  FDI and Inclusive Growth in the Badung District Badung is a well-known tourist region. The tourism sector in Badung started to grow in the 1970s. The southern part of the district, Nusa Dua, was chosen to be a center of mass tourism. In 1980s, the intensification of tourism of Bali and the deregulation of the banking sectors in Indonesian saw a sharp increase in tourism investments that facilitated the development of tourism sector in the Badung District. There was a rapid rise in the number of hotels, both domestic and international, and restaurants and art shops. In a relatively short period, the tourism sector grew to become the dominant sector. Nusa Dua was designated as a world-class international tourism accommodation in 1973 by the Indonesian government. In order to manage the Nusa Dua area and create an environmentally sustainable and integrated model for a tourism destination, the Indonesia Tourism Development Corporation (ITDC), an Indonesian state-­ owned company was developed. Currently, there are several international hotels in Nusa Dua area offering a capacity of 5000 rooms, shopping center, museum, cultural venues, golf course, hospital and other tourism businesses. Next, the detailed effects of inclusive growth in the Nusa Dua area will be explored.

11.4.1  Employment Creation Based on the theoretical framework, FDI could contribute to inclusive growth through employment creation for those marginalized, such as the poor, the disabled, and women. They are usually not involved in FDI activities and do not have an access to benefits. According to our interviews, the international hotel in Nusa Dua has supported inclusive growth in Badung by providing employment opportunities for the locals, especially the disabled and females. The international hotel with 572 employees prioritize employing locals who live in the surrounding Nusa Dua area and the Badung district and limit the number of foreign employees working at the hotel to only six employees. The foreign employees are employed as general managers and executive managers. Locals are usually employed as general staffs and some are employed as a supervisors, managers, and executives. Employment opportunities for locals at an international hotel in the Nusa Dua area was discussed by an interviewee4 during our interviews, stating that many students from the local tourism vocational schools go on to work at the hotel after they finished their study. In addition, the international hotel provides internship programs benefitting those students in improving their skills and knowledge. The international hotel also provides job opportunities for the disabled. According to our interviewees, the international hotel employed around six disabled or deaf 4  An interviewee who is become the head of  Desa Adat and the head master of one of tourism vocational schools in Nusa Dua (Nusa Dua, 5 June 2016).

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persons as employees. Based on the Indonesian government law No. 13/2003, at least 1% of the total employees employed should be disabled as a minimum requirement. The disabled workers have been hired as staff in kitchen and room service sections. An interviewee5 mentioned that disabled students who have been employed by the hotel are happy and comfortable working there. Moreover, those disabled students also receive a satisfactory income higher than the salary received by their teachers. This source of income helps improve their living conditions.

11.4.2  Labor Productivity Improvement Besides creating employment opportunity for the locals, FDI can contribute to the inclusive growth by increasing the productivity of the locals. Providing educational programs and healthcare facilities for the employees are the part of the hotel policies that in turn increases the productivity of the employees. With higher productivity, the employees have a possibility to be promoted to a higher position and receive a higher salary. In addition, a higher productivity level increases the competitiveness of employees in the labor market. This is a channel through which locals, including the marginalized receive benefits from FDI through the educational programs and healthcare facilities provided. Based on our interviews, most of the current employees have been working at the hotel for 30 years. Through their employment, those with originally a low level of education level have improved their skills through educational programs provided and have reached higher positions moving from being a general staff to working as a supervisor or manager at the hotel. In addition, the hotel also offers opportunities for employees to take external job training abroad. The hotel regularly sends its chefs abroad to learn techniques of international standard cuisine. The training programs have improved the skills of the locals who work at the hotel and facilitated their promotion to higher positions and receive a higher income, increasing their competitive advantage in the labor market in the region and internationally. This channel of benefits was mentioned by an interviewee as; After having training program abroad, when the hotel opened a new branch in Shanghai, China, the employees who have international qualification were sent to work in Shanghai (Manager of the international hotel’s Human Resource Department, Nusa Dua, 31 May 2016).

Besides providing training programs to improve the productivity of local employees, the hotel provides healthcare facilities for local employees and their families. According to our interviewees,6 the international hotel provides double coverage for

5  An interviewee from senior high school for disabled students in Nusa Dua (Nusa Dua, 31 July 2017). 6  Managers of the international hotel’s Human Resources Department and Marketing department (Nusa Dua, 31 May 2016).

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health insurance through both the government’s social insurance and another private health insurance programs. The health insurance covers the costs of health services not only for the employees but also for their families. In addition, the international hotel provides a good quality of health clinic services for its employees improving their access to doctors, medical check-ups and treatments. In short, the provision of educational programs and healthcare facilities improve the capacities of the locals who work at the hotel. The improving skills and health condition increase the productivity of local employees including disable workers. It helps local employees out from poverty and reduces income inequality in the region.

11.4.3  Corporate Social Responsibility (CSR) Programs As mentioned, FDI can also contribute to inclusive growth through short-term and long-term CSR programs. The CSR programs can be effective in promoting inclusive growth if the programs are aimed to increase the capacity and productivity of the locals. According to our interviews, one of the CSR programs provided by the hotel is facilitating cash transfers for traditional villages, the so-called “desa pekraman.” According to the head of Desa Pekraman, the funds received from the international hotels in Nusa Dua are saved in the non-bank institution owned by community as Lembaga Perkreditan Desa (LPD). The funds then can be used for financing cultural activities, community empowering programs, and scholarships for poor students. Hence, the international hotel’s cash transfer program has a direct effect on the improvement of community welfare. In addition, the international hotel has a house refurbishment program for poorest families in the Badung District. The program helps to renovate the houses of the poor so that they have a proper and healthy house with good sanitation. In addition, the hotel also provides healthcare programs based on community’s requests. For instance, the head of Desa Pekraman recommended to the hotel to assists the locals in preventing the spread of dengue fever by introducing fogging. Another program which was also provided by the hotel is counseling about AIDS to increase the understanding and awareness of the locals about the disease. The hotel also regularly participates in community services to maintain a healthy environment so that the locals have a healthy and productive life. With respect to education, the hotel has a regular educational program for deaf students at the senior high school named as Sekolah Luar Biasa bagian B (SLBB) which is located near to the Nusa Dua area. The students of the SLBB are regularly trained by the hotel’s employees once a week to increase their skills in the English language, flower arrangement, aerobic and basic massage. In addition, the hotel also gives an opportunity for the students to work at the hotel after graduation from the school. The international hotel currently employs six deaf students from the SLBB for housekeeping and their restaurants. Because of these CSR programs, the hotel was recognized by the Indonesian government as a company that has actively supported the government’s program in alleviating poverty.

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11.4.4  Economic Linkages to MSME FDI can also contribute to the local community through its linkages with domestic enterprises, especially the Micro Small Medium Enterprises (MSMEs). According to our interviews, the international hotel in the Nusa Dua area has linkages to MSMEs in the service sector. For instance, according to managers of Human Resource Department (HRD), the international hotel employs local traditional musicians and dancers to perform at the hotel. In addition, the international hotel also established a cooperation with local taxi drivers to provide transportation services for the hotel’s guests. By having active and direct linkages to MSMEs, the hotel has created employments and income for other locals working at the MSMEs and not directly employed at the hotel. The locals working at MSMEs are usually poor. In order to strengthen the links between hotels in the Nusa Dua area and the MSMEs, all the hotels in Nusa Dua collects and provides revolving funds for MSMEs in all regions of the Bali Province. Besides providing these revolving funds, the Indonesia Tourism Development Corporation (ITDC) managing the Nusa Dua area has the responsibility to monitor and train these local MSMEs. In order to empower local MSMEs, ITDC together with hotels in the Nusa Dua area provide not only revolving funds, but also mentoring program. The mentoring program includes monitoring, trainings, and regular coaching. The revolving funds will be directly transferred to the local entrepreneurs which are located not only in surrounding the Nusa Dua area but also in the other regions in Bali (Management of ITDC, Nusa Dua, 6 June 2016).

Besides engaging local dancers and taxi drivers, the international hotel in Nusa Dua also provides access to street vendors to sell their products in the area of Nusa Dua. According to interviewees,7 Indonesia Tourism Development Corporation (ITDC) and international hotels develop special places in the Nusa Dua area for street vendors and the locals who want to open their businesses in the Nusa Dua area. The street vendors gain here an opportunity to receive income by selling souvenirs to the guests and indirectly benefit from the hotel. The international hotel also purchases local products such as vegetables, meats and furniture which are supplied by local farmers. However, the linkages of hotel business to agricultural sectors are still limited because local farmers face problems of ensuring product quality and sustainability. As the hotel is a world-class hotel, the hotel requires the farmers to supply the products that meet an international standard. Due to their limited scale of business, the local farmers can only supply products for the hotel in small quantities. The challenge of ensuring product quality and supply sustainability was also confirmed by the manager of the international hotel. Through the above channels of employment, productivity increase and engaging the local community, FDI from the international hotel in the Nusa Dua area has contributed to inclusive growth. The channels utilized by the hotel adhere to the theoretical frame for inclusive growth as proposed. Next, we will discuss the role of institutions required in promoting FDI for inclusive growth.

 Some street vendors in Nusa Dua (Nusa Dua, 31 July 2017).

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11.5  T  he Role of Institutions in Promoting FDI for Inclusive Growth New Institutional Economics (NIE) proposes that institutions are important in promoting economic growth and welfare and these inclusive institutions are part of the FDI-inclusive growth nexus (Balakhrishnan et al., 2013). These inclusive institutions consist of economic and political institutions (Acemoglu & Robinson, 2012). To analyze the role of institutions in Nusa Dua area, we trace the characteristics of institutions through the history of the Nusa Dua area’s development.

11.5.1  T  he Dynamics of Institutions in Nusa Dua Development History It is highly debatable if the initial process of the development of the Nusa Dua area has encouraged inclusive growth. Based on our interview with the head of Desa Pekraman, the community was not well-informed of the initial plan of the Nusa Dua designation as a world-class tourism area. As a representative of national government, the Indonesia Tourism Development Corporation (ITDC) just informed the locals that the Nusa Dua area would be developed as an international tourism area beneficial to the local community. The locals were suggested to hand over their lands to ITDC and that they will be compensated based on the type of land they owned. The amount of compensations was decided unilaterally by the ITDC without considering the local community’s aspirations. The locals accepted the compensations not because they supported the program but because they felt intimidated and threatened (Madiun, 2010). It was an example of a non-inclusive governmental policy and planning where the central government played a dominant role. The centralistic planning process (top-down approach) was a result of the authoritarian government regime at the national level. In addition, the head of Desa Pekraman mentioned that the locals were afraid that the ITDC would not only take their lands but also radically change their livelihood. At that time, most of the locals in the Nusa Dua area worked as fishermen and farmers, therefore land and their access to the beach were highly important. Since the Nusa Dua area development as an international tourism area, the locals have lost access to the sea and most have gone from being fishermen and farmers to becoming street vendors, taxi drivers and engaging in other types of work. During to the centralistic regime at the national, the Balinese people accepted the government’s policies and reaped the economic benefits from the fast growth of the tourism sectors on their island. However, without involving the locals in the process of the Nusa Dua development and limiting the access of the locals are indications of extractive institutions. The growing feelings of discontent of the Balinese people about the intrusion of investors have started a protest movement. For instance, in 1994 there was a protest against the realization of the Bali Nirwana Resort in the

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Tabanan district close to the holy sea-temple Tanah Lot. The demonstrations were soon brought to a halt by military intervention and a heavy hand of censure on the press. In 1997, the people also protested the building of a hotel at Padanggalak beach, an important religious site. These two public protests indicate how the Balinese people are becoming increasingly aware of the impact of tourism activities on the local culture, the environment and the economy. After entering the democratization era initiated by the fall of the authoritarian regime in 1998, the institutions in Badung have radically changed from being extractive to being more inclusive. Based on interviews with street vendors in the Nusa Dua area, before the democratization era, local government security (Ketertiban Umum/Tibum) and hotel security did not allow street vendors to enter the Nusa Dua area. The street vendors then illegally sold their souvenirs in the Nusa Dua area while risking arrest. However, after the democratization era, the local community had more voice in bargaining with the government and the international hotels. Local government officers and hotels’ management are more concerned about their role in the local community. The hotels went on to provide a space for the local community to be involved in the economic activities resulting from the development. For instance, the local government provided local regulations on legalizing street vendors in the Nusa Dua area. This was consolidated by the formation of the street vendor association in Nusa Dua as explained below; Head of village, local government, and polices had an initiative to form street vendor association, called as ‘paguyuban’. By having paguyuban, street vendors’ activities can be coordinated. In the same time, by having ‘paguyuban’, local government, society, and hotels can cooperate on monitoring terrorist and other activities at Nusa Dua area. Therefore, the member of paguyuban can also monitor the activities which potentially disturb tourism safety in Nusa Dua area (A male street vendor, Nusa Dua, 31 July 2017).

Analyzing the history and the development of the Nusa Dua area before and after democratization era, we see the shift of the institutions in the area from being extractive to being inclusive. In addition, there was a rise of awareness of the locals in protecting their culture and values from the fast growth of tourism sector. This awareness also played an important role in fostering the existence of inclusive institutions. Next, we look at the role of economic and political institutions in fostering inclusive growth in the Nusa Dua area.

11.5.2  Economic Institutions Economic institutions have been defined in this chapter as the rules of the game which provide opportunities for all members of society including those marginalized to gain benefits from FDI activities. In the previous section, we have observed that the international hotel supported the opportunities of the community and especially those marginalized, to be involved in FDI activities and gain benefits from FDI through employment creation, productivity improvement, CSR programs, and linkages to MSMEs.

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Based on our interviews, all stakeholders (the government, the international hotels, and the community) have shown that they are inclusive economic institutions. For the international hotel in Nusa Dua area, the existence of inclusive economic institutions is represented by the policies of international hotel to employ the locals, especially the marginalized such as the disabled and women. The agreement between the international hotel and the locals to hire at least 30% of the locals in the international hotel is an example of that. In addition, the international hotel also hires the disabled as its employees. It is supported by national government law No. 13/2003 which requires private sectors to hire at least 1% of their workforce from disabled workers. According to our interviews, the international hotel fulfilled this requirement. The district government also has a program to provide trainings and educations for job seekers in cooperation with international hotels to strengthen employment creation. In addition, the manager of the international hotel mentioned that the hotel gives an equal opportunity to employing both males and females. The society in Badung was apparently more open minded regarding the possibility of females working at a hotel reported the manager. The negative image of associated with women working at the hotel is gradually decreasing and the number of females working at the international hotel has increased. Regarding the channel of productivity improvement, inclusive economic institutions in the district is supported in this channel by regulations from both the government and the international hotel. Indonesian government law No.13/2003 states that every company has to provide trainings and facilities for their employees. The international hotel in Nusa Dua adheres to this law and has regular training programs and healthcare facilities for their employees. These programs improve the skill levels and health of employees thereby increasing their productivity. The district government also provides a free certification program for workers to ensure quality standardization that increases the competitiveness of local workers in the labor market. Foreign companies and the government in Badung have supported the implementation of CSR programs for society, especially the marginalized surrounding Nusa Dua area. Indonesian government requires the companies to give contributions to society through CSR program by issuing the regulation No. 47/2012. Moreover, the district government supports the implementation of CSR programs through regulation No.6/2013 to establish a CSR forum to synchronize foreign companies’ CSR programs with the government’s development programs. The forum aims to increase the contribution of private sectors toward society and consists of the representatives from the hotels, the government and the community. The increasing linkages between the tourism sector and MSMEs are also proof of the existence of inclusive economic institutions in Badung at the level of local government (provincial and district government). For example, the provincial government ratified Provincial Regulation No.3/2013 on local fruits protection. The regulation8 from the provincial government requires companies in the tourism

 Bali provincial regulation No.3/2013 on local fruit protection, article 56.

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sector to consume and purchase local fruits to increase the demand of local fruits. Likewise, the provincial government enacted regulation No.16/2009 on the Bali Provincial Spatial Plan requiring all buildings in Bali, including hotel buildings, to use Balinese architecture.9 The district government requires investors to adopt Balinese architecture for their buildings before the government issues any investment licenses. Based on our interview, these requirements increase the links between the tourism sector and with MSMEs, especially those in architecture, carving, and furniture production. Through programs of employment creation, productivity increase and linkages to local MSMEs, economic institutions play an important role in promoting FDI to generate inclusive growth. The international hotel in the Nusa Dua area and the local government are part of the inclusive economic institutions in this process. Economic inclusive institutions are produced by the existence of inclusive political institutions (Acemoglu & Robinson, 2012). Next, we will look into the role of inclusive political institutions in Badung and especially in the Nusa Dua area.

11.5.3  Political Institutions Inclusive political institutions are defined as the rule of the game which involves the community in FDI’s programs. The OECD (2015) suggests that there are three key aspects of inclusive political institutions—voice, engagement and accountability. The existence of inclusive political institutions can help to involve all members of society in FDI programs or policies while extractive political institutions benefit only a small group of the society. Based on our interviews, inclusive political institutions were found in all channels of FDI. For example, the employment creation channel where the international hotel agreed with the local community to employ locals for at least 30% of their employees was a result of a negotiation process between the hotel and the locals. According to our interviewees,10 the international hotel involved the locals in expressing their voices by engaging them in the negotiation process about the ­agreement. Therefore, the agreement accommodates the interests of the locals and also that of the hotel. To implement the agreement, the international hotel always informs the locals first about job opportunities before publishing the vacancies publicly. By communicating the job opportunities first to the locals, the international hotel has adopted accountability aspects within the agreement implementation. Inclusive political institutions are also implemented in productivity improvement channels. For instance, in deciding for the types of training programs, the international hotel has regulated that each employee has to participate in training programs

 Bali provincial regulation No.16/2009 on Bali provincial level spatial plan, article 122 (2g).  Interviewees are a manager of the international hotel’s Human Resource Department (Nusa Dua, 31 May 2016), and the head of the customary village (Nusa Dua, 5 June 2016).

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for at least 40 h a year. In addition, employees can propose internal or external training programs that they need to the hotel management. This indicates that employees have a voice and express their preferences on the training programs. Similarly, the decision by the international hotel to use both health insurances provided by government and by private companies is a result of discussion between international hotel and its employees. Since the health insurance provided by the government was not well developed, the employees recommended to their manager to use the insurance provided by private companies as well. Inclusive political institutions have also been adopted in how CSR programs are decided. For instance, the international hotel has a program to provide regular trainings for deaf students. According to our interviewees,11 the international hotel always accommodates the aspirations of the school regarding the training programs needed by deaf students. Moreover, the international hotel always informs the school about the potential vacancies for disabled students at the hotel. The other CSR programs conducted by the international hotel are always discussed firstly with the head of Desa Pekraman. As a result, the CSR programs provided by the hotel match with the demands of the community. The existence of political institutions is also found in linkages to MSMEs, such as the provision of traditional dancers and musicians. The international hotel informs the locals about the vacancies through the head of Desa Pekraman who then discusses the vacancies with the other members during in the regular village meeting. This shows the joint involvement of the international hotel and the village pekraman in FDI programs. The characteristics of institutions are affected by societal norms and value. The existence of inclusive institutions in Badung especially in the Nusa Dua area is significantly influenced by a Balinese philosophy known as Tri Hita Karana (THK). The philosophy states that happiness and wealth can be attained by maintaining harmonious and balanced relationships between humans and God (parhyangan), humans and other humans (pawongan) and humans and the environment (palemahan). These three aspects are holistic approaches in line with the concept of sustainable and inclusive development suggested by international organizations. Specifically, the pawongan aspect, is present in how the international hotels in Nusa Dua always maintain their relationships with the community and the other stakeholders. By involving the locals in formulating CSR programs, we see how the international hotels have adopted the THK principles. The provincial and district have formed the THK forum to encourage and regularly assesses whether the hotels in Bali adopt the THK principles in their businesses.

11  Interviewees are managers of the international hotel’s Human Resource Department and Marketing department (Nusa Dua, 31 May 2016), and teachers from senior high school for disabled (Nusa Dua, 31 July 2017).

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11.6  Conclusions The concept of inclusive growth is a current focus for international organizations and national governments such as in Indonesia. The rising concern for inclusive growth, especially in developing countries, is caused by evidence of high economic growth not accompanied by lesser income inequality and lower poverty rates which determine the quality of economic growth. In the tourism sector, the UNWTO has promoted FDI as a main driver of economic growth and inclusiveness. FDI in the tourism sector is therefore expected to benefit all members of society in the host countries, especially for the marginalized. However, the real impact of FDI on inclusive growth is still debated on in existing literature. Existing studies perceive that institutions, which are defined as the rules of the game regulating the behavior of stakeholders, significantly contribute to such inclusive growth depending on their level of quality. We have observed that the impact of FDI on inclusive growth in tourism sectors occurs through several channels such as employment creation, healthcare and education improvements, economic linkages, and CSR programs. We examined the Badung district in Bali, Indonesia a well-known international tourism region and foreign investment destination and focused on the Nusa Dua area located at the south part of the district. Through our interviews, we found that FDI in the tourism sector in Badung contributed significantly to inclusive growth through employment creation, productivity improvement, Corporate Social Responsibility (CSR) programs, and linkages to Micro Small Medium Enterprise (MSME). Examining the role of institutions in facilitating FDI to achieve inclusive growth, we found that in Badung the international hotel and the local government have programs which expand the opportunities of the locals, especially the marginalized, to gain benefits from FDI activities through inclusive economic institutions. In addition, the international hotel in the Nusa Dua area also involves the community in the formulation, planning and the implementation of the CSR programs. We found that inclusive political institutions exist in all channels of the FDI-inclusive growth relations. The role of inclusive institutions in fostering the contributions of FDI to inclusive growth is influenced by a Balinese philosophy, known as “Tri Hita Karana.” The value of this philosophy has been internalized not only in the Balinese people, but also by the international hotels in the region and the local government.

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Chapter 12

Fish for Transparency: Challenges of Environmental Governance from the Perspective of Food-Driven Protests Thai Nguyen Van Quoc, Elen-Maarja Trell-Zuidema, and Ronald L. Holzhacker

Abstract  In the aftermath of a mass fish death along the coastal area of Central Vietnam in April 2016, disdain and frustration of the public soon escalated into widespread protests. These protests arose in response to evasion and oppressive tactics from the government. Using discourse analysis, this chapter identifies the different narratives between the government and the activists. This mismatch reveals challenges to governance in Vietnam in the form of a lack of participatory platform. The chapter explores how the theme of fish contributed to the narrative of protestors in rural and urban areas in Vietnam and where they differ. Our analysis indicates that food, as a socio-political lens, has seemingly unified the voices of rural and urban protestors and might have potential to consolidate the existing discourses on civil society. The socio-political imagery of masses of dead fish depicted a life-­threatening reality that transcended mere everyday  discomfort or technical  failures. The fish death, as reconstructed through various media sources, highlighted the role of food as a medium for transboundary socio-political activism. In this sense, food and the related discourse has a bounding effect on some narratives but also functions as a frame to illustrate the challenged relationship between the government and its people. Keywords  Discourse analysis · Food security · Fish death · Narrative · Vietnam

T. Nguyen Van Quoc (*) · E.-M. Trell-Zuidema Faculty of Spatial Sciences, University of Groningen, Groningen, The Netherlands e-mail: [email protected]; [email protected] R. L. Holzhacker University of Groningen, Groningen, The Netherlands e-mail: [email protected] © Springer Nature Switzerland AG 2021 R. L. Holzhacker, W. G. Z. Tan (eds.), Challenges of Governance, Development and Governance, https://doi.org/10.1007/978-3-030-59054-3_12

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12.1  Introduction In April 2016, fishermen in Vietnam’s central coastal area woke up to a scene of mass fish deaths (Paddock, 2016a, 2016b). What was deemed an isolated incident soon saw its consequences manifest on a national scale. Villagers suffered food poisoning, local fishery and tourism deteriorated. Unemployment and insolvency threatened workers in the affected areas (Paddock, 2016a, 2016b). Seafood consumption came to a halt, implying a concern for food safety of not only the locals but also wholesale buyers and distributors from more populous areas further away, such as Ho Chi Minh City and Ha Noi (Thanh Nien, 2016). Despite the central government’s efforts, the protests persisted; people were concerned about their livelihood or food safety, and demanded greater accountability and regard for the environment from authorities (Davis, 2016). In the communist society cautious of active political engagement, the “environmental disaster”, has pushed people to “understand that they cannot avoid politics because politics and policy can affect their lives” (Le Quang Binh, as reported by Ives, 2016). This can be attributed to the chief concern around seafood supply as a basis for Vietnamese export and as a basis for common household meals, considering that the value of Vietnamese seafood exports reached USD 3.15  billion in early 2016, (Thong & Olsen, 2012; Tuu, Olsen, Thao, & Anh, 2008). This dependency on seafood, albeit in different ways, unified urban and rural protestors for a common cause. By focusing on this specific fish death disaster (henceforth, event), the chapter investigates the extension to which food has contributed to the “rise” of activist discourse in Vietnam. It focused on  how the activist discourse compared or contrasted to the official discourse of the Vietnamese government and by extension the potential implications of the differing discourses for (environmental) governance. Discourse analysis was  used  to  explore the (rural and urban) protests and the response and communication concerning the event by the Vietnamese government. The chapter reconstructed the event discursively and examined the argumentative structure in documents, political utterances, NGOs reports and international news reports through the social-constructivist role of language in shaping happenings.

12.2  Research Question The chapter is an exploratory study on the discursive role of food in the context of an environmental pollution event. Exploring the potential of food to bring together different social concerns and geographically distant groups for a collective message, we consider the implications of the collective message on environmental governance (see Fig. 12.1). The chapter aims to answer the following key questions: What is the role of food in enabling both rural and urban activists to voice their (broader) concerns related to the governance of environmental resources? In what ways did

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Fig. 12.1  Conceptual framework. (Source: Authors)

the rural and urban discourses resemble or differ from each other and the official discourse from governmental channels? What are the challenges to governance in Vietnam as revealed by the event? In this chapter, the aim is not to conduct a social movement study, but to showcase how food can be embedded socio-­politically and what this embeddedness could mean for governance. In this sense, it resonates with the call for attention to four major food concerns, amongst which the most relevant to this case is how food issues are integrated into economic development activities (Pothukuchi & Kaufman, 2000).

12.3  Scientific and Social Significance This chapter contributes to the growing body of literature on food’s socio-political embeddedness and enriches existing literature on environmental discourse analysis by illustrating the role of food. In addition, the empirical data from this specific case contributes to understanding the challenges of governance of common resources in Southeast Asian countries, specifically Vietnam. Our research showcases the relationship between the government and people, and the dynamism of people in confrontation with the government. The event was “a turning point in state-society relations in Vietnam” (Nguyen, 2017). It demonstrated the challenged interactions between the government and the concerned citizens in times of hardship and their demand for a communicative platform to work together on common resources issues. To this end, this chapter contributes to current discussions in Vietnam on the emergence of a well-grounded civil society to facilitate governance on national and local scales.

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12.4  Research Design and Methodology 12.4.1  Discourse Analysis Using the Foucauldian discourse model from Hajer (1995) to analyse the event, we reveal the implicated challenges of governance, in addition to the demand for more effective environmental protection regulations. This model focuses on the constitutive role of discourse in political processes and how it allocates a central role to subjects of discourse. The unit of analysis is the most fundamental unit of a discourse analysis, the event’s “story-line”, or “narrative”. The narrative analysis, as described by Hajer (1995), is one out of three level of analysis (narrative, discursive practices, and social practices) in discourse analysis. It enables this research to identify the socio-political embeddedness of food as manifested through the protests. The narrative level is useful for exploring the discursive space of the event. Using Sharp and Richardson’s (2001) methodology to complement Hajer’s (1995) concepts, the narrative analysis used in this chapter asks: • Identity: How different narratives can be identified? This is a necessary first step to decide which narrative will be the focus of the research. Here, we focus on the narratives from the government, the rural protestors, and urban protestors as main articulators. • Manifestations: Where do narratives manifest? Manifestation can be seen in policy rhetoric and actions, institutional practices and events. Here, we focus on textual data and its associated practices. • Interaction: How struggles or diffusion between narratives manifest? In environmental policy studies, it is often the struggle between different economic, social and environmental discourses that gives shape to policy rhetoric. Here, we look into how the identified narratives conversely or complementarily relate to each other. • Interaction outcomes: How the outcomes of these struggles or diffusion manifest? The outcomes of these interactions are the manifestation of narratives “that are influencing individual well-being at a particular moment” (Sharp & Richardson, 2001, p. 199). This helps us link the text-based findings to the process of the events in reality. This also situates the findings within the broader discussion on the dilemma between economic growth and environmental protection and the role of civil society. As such, these variables, namely (1) identity, (2) manifestations, (3) interaction and (4) interaction outcomes, would be useful to investigate the involvement of food in the narratives and the emblematic problems associated. In addition, to focus on the connecting role of food, we used the concept of resonance, relating to “the effectiveness or mobilising potency of proffered framings, thereby attending to the questions of why some framings seem to be effective or ‘resonate’ while others do not” (Benford & Snow, 2000, p. 169). Benford and Snow (ibid) argued strongly in favour of “resonance” as an analytical tool to understand how a particular narrative, more than others, appeal to social movement participants.

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12.4.2  Data Collection Data sources include newspaper articles, press releases, and NGOs reports and documentaries from the period between 1st of April and 1st of September, 2016 (see Table  12.1) were used to start the identification process. Press releases from the Office of the Government and statements made by local and central officials were collected by searching for the key names and acronyms of the ministries and persons involved. This included political leaders of the affected provinces as well. These sources represent the government’s narrative. Next, keywords such as “fish death” and “Formosa” were used to search and identify relevant articles published on the Tuoi Tre Newspaper1 (McKinley, 2011). A random sample of 16 articles out of 42 were selected and analysed in chronological order. The random sampling was to prevent overdominance of certain views and ensure presence of journalistic independence (Binh Duong & Nash, 2017). To compensate for the lack of “objective” national coverage on the activist activities, we collected international new articles with keywords including “protest” and “fish” using the Nexis Lexis database and sorting with the popularity ranking. Additional sources include an official report (Green Trees, 2016) focusing on the perspective of human rights of protestors from Green Trees—a civil society organisation focusing on environmental protection, and a documentary2 produced by the Taiwan Public Television Service Foundation or PTS.  The documentary (Taiwan Public Television Service (PTS), 2016) gave an ethnographic insight into the damages suffered by locals and their opinions. The Green Trees’ report (2016) focused on protests in urban areas and related NGOs activities and helped identified the urban narrative. This balanced the number of sources regarding government and activists narratives (16 each). To better illustrate the narratives, we supplemented the analysis with excerpts from printed interviews sourced during data collection.

Table 12.1  Summary of data sources Government (number of analysed documents of each type) Office of Government’s press releases (16) Statements from officials from desk research (various) Tuoi Tre Newspaper (16)

Activist Rural Urban International news via Nexis Lexis (30) Interviews’ excerpts from desk research (various) PTS Documentary (1) Green Trees Report (1)

1  Available both in print and online. This is an established newspaper with the highest daily circulation in Vietnam. 2  The documentary was broadcasted in Taiwan on 20th of June 2016 and posted on the foundation’s official YouTube channel 10 days later.

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12.5  Theoretical Framework Combining environmental activism studies and the discussion of food from a socio-­ political perspective, this chapter elaborates on the dynamics of environmentalism through social movements and show food as a medium for environmentalist activism.

12.5.1  Environmental Activism and Discursive “Resonance” In the Global North, “environmentalism is tired” and challenged by both empirical irrelevance and intellectual stasis (DeLuca, 2005, p. 67). However, in reality, environmentalism is an ongoing process where aspiring individuals and groups keep take great efforts improvise their tactics in the face of constant challenges. Following the ideological shift from 1970s to 1990s, environmentalism has embraced a more argumentative approach (Hajer, 1995). Hajer’s (ibid) investigation into the cases of Dutch and British reaction to acid rain in 1980–1990s show the influence of how an environmental concern is framed towards its potential audience. Environmental politics has proved to consist of argumentative struggles, in which actors try to impose their viewpoint on each other while positioning differentiated viewpoints in specific ways. Social movements’ power and chances of influence depend on their ability to translate movement-specific grievances, such as women’s rights or environmental pollution, into broader universal discourses of human rights, justice or risk (Alexander, 2006). Food in this specific case had both a sensationalising and interlinking effect on the narrative the protestors tried to construct and amplify. Local (and rural) protests have the ability to reach regional or national dimensions. Protests that are regionally focused can raise issues on a national or even international stage (Strijker et al., 2015). This is echoed in the Southeast Asian context, where agrarian protests in Thailand, Vietnam, Indonesia, Malaysia and the Philippines affirm that “scales of action are becoming more and more intertwined and complex” (Turner & Dominique, 2009, p. 3). For example, the protests of farmers in peri-urban Hue, Vietnam, over land acquisition can be linked to the national debate over land ownership which is a sensitive topic in Vietnam (Nguyen Quang Phuc et al., 2015). For the fish death, food demonstrated the potential to unify two groups of very different social and geographical settings (rural and urban activists). Examining food in this perspective resonates with discussions on the budding Vietnamese civil society, and the demand for it, originating from various collective environmental activities drawing social and academic attention (Wells-Dang & Wells-Dang, 2011). The interaction of language, power and networks is central to this research. The process of connotations assignment critical to the study of environmental politics (Sharp & Richardson, 2001) and the formulation and operation of related social movements (Benford & Snow, 2000) helped dissect these three components from an

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intricate set of constructed realities. In response to increasing demand to understand “new social movements” across Western countries in 1980s, scholars developed informed methodological approaches such as discourse and framing analysis. Both belong to the same family of analytical frameworks and share a common interest and interpretive perspective when it comes to activism and social movement communication (Lindekilde, 2014). The concept of “resonance” has been suggested as beneficial for investigating the mobilising potency of framings of social movements and revealing why some framings seem to be more effective than some others (Benford & Snow, 2000). The degree of “resonance” depends on two factors: the credibility and the relative salience of the proffered frame. They are each a function of the constituents and serve different analytical purposes. Although not the main focus for this research, they are nonetheless useful concepts to discuss the mobilising ability of food and justify our decision to explore the fish death event from a food narrative.

12.5.2  The Socio-Political Embeddedness of Food The increasing attention to the role of food in spatial planning can be observed in the Global North. In the 1990s, Pothukuchi and Kaufman exposed the under-­researched role of food system in an urban context (1999). Almost a decade later, Carolyn Steel wrote that “most of us [still] live in the ignorance of what it takes to feed us” (2009, p. 9). Her research demonstrates that despite the industrial reform in food production and distribution since the beginning of the twentieth century, there remains a romanticised idea of food as a product of conventional farming practices amid picturesque rural landscape. Such misconceptions can also be observed the Global South despite the irony that quite a few nations (such as Thailand, Malaysia, and Indonesia) enjoy strong crop export productions (FAO, 2013). Meanwhile, scholars have consistently demonstrated the socio-political characteristic of food, specifically in contested contexts. As part of basic necessities, food’s pricing has proved to be socio-politically provocative. Timmer (2013) stated that in East and Southeast Asia, food security faces constant pressure due to its dependency on rice productivity, which in turn is prone to environmental and political volatility. He emphasised food, or food price stability specifically, as a public good. Thus, when the food supply is threatened by pricing changes, “understandably then, citizens turn to the political market instead” (Timmer, 2013, p. 273). In other words, food becomes a political commodity and appears to have motivational capacity for the citizens either through its symbolic dimension or as a major daily necessity for the populace (Glasius & Pleyers, 2013). As suggested by Bohstedt (2010, p. 9), food issues are easily linked to perceived injustice due to the “law of necessity”, which holds that “in emergencies, when survival hangs in the balance, human subsistence must take preference over property rights.” In addition, a food crisis concerns not only the politics of accessibility for the impoverished population, but also the problems inherent in production, productivity

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and contested debates about the need to accommodate population growth (Bush, 2010). In this sense, food functions as a “catalyst” for raising demands beyond itself (ibid: 121). For example, food-driven protests in eighteenth century Britain were essentially a rejection of traditional rights and customs being violated (O’Brien, 2012). In the cases of modern Egypt, Mexico and Bangladesh, food protests exceeded mere pricing concern and acted as a medium through which rioters challenge the impacts of globalisation and international food regimes on local food systems (ibid: 121). In the Middle East, “urban and rural poor as well as the middle class” perceived food prices crisis as emblematic of local corruption and political oppression (ibid: 123). Interestingly, most of these struggles in the Middle East and Africa were urban based, and the rural poor were struggling to from coalition on a broader scale. On a global scale, food activism shares a common feature with the post-2010 activism demanding social justice from national governments (Glasius & Pleyers, 2013). In Vietnam, there have also been discussions over food safety at the national level, specifically on how the urban food market has been saturated with preservatives, dyes, antibiotics, spoiled animal-sourced food and other worrying treatments (Nguyen-Viet, Tuyet-Hanh, Unger, Dang-Xuan, & Grace, 2017; World Bank, 2017). The socio-political aspects of food are, however, less explicitly discussed either by scholars or politicians (Ortmann, 2017). Combining an understanding of both environmental activism discourse and food socio-political embeddedness, our effort to investigate the fish death event that was triggered by corporate environmental pollution aims to address the knowledge gap of discussion socio-political embeddedness and discursiveness of food beyond the national and urban arenas.

12.6  Analysis Different narratives used by different actors—the government, rural protestors, and urban protestors—involved are examined to reconstruct the event. Next, the confronting narrative of the activists in response to the evading narratives of the government is discussed. Then, the narratives of rural and urban activists are unpacked. Finally, the concept of “resonance” is used to tie these narratives together.

12.6.1  Approaching the 2016 Fish Death Event in Vietnam On 6th of April 2016, the first wave of fish death was reported at Vung Ang port in Ha Tinh Province. As shown in the event timeline in Fig. 12.2, increasing number and scale of fish related incidents and a lack of assurance from the government caused the coastal residents to protest, demanding that a culprit be identified. Suspicions were casted against the Formosa Ha Tinh Steel Corporation (hereafter Formosa), whose iron and steelmaking plant were located in close proximity to the

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Fig. 12.2  Timeline of the event. Notes: MNRE Ministry of Natural Resources and Environment. The events taking place on April 25 and June 30 can be considered the discursive turning points. After April 25, civil society activities made frequent use of the “fish” theme and demanded the culprit to be identified. After June 30, civil society turned to issues concerning sanction and compensation. It is impossible to identify the first use of the hashtag #ichoosefish; logically, it should follow the controversial “Fish or Steel” response from Formosa’s representative. Multiple activists were arrested for “inciting social unrest”, yet the exact date of protests could not be verified; hence these arrests are considered but not illustrated here

location of the fish death outbreak. When pressed for a formal response to public accusation, Formosa’s representative caused controversy with his counter-­ confrontational reply which was “You have to decide whether to catch fish and shrimp or to build a modern steel industry” (Paddock, 2016a, 2016b). This reply granted the “fish” theme a symbolism and a central place in the activist narrative. This theme then provided a perspective to understand the uniqueness of the events and the challenges of environmental governance in Vietnam. Focusing on the event as constructed by different groups of actors, we investigated food as an action stimulus and its representation of challenges to (environmental) governance in Vietnam. The fish death event exemplifies how food is perceived, and how the associated symbolism and experiences govern people’s reaction to socially constructed environmental issues (Beck, 1995; Hajer, 1995). For instance, dying forests themselves did not generate the public attention and concern with which they were associated until they were framed as a sign of systematic failures to maintain proper environmental quality (Hajer & Versteeg, 2005). Similarly, mass fish deaths only achieved political dynamism when the imagery of fish deaths were perceived as detrimental to personal and collective sense of security by the concerned Vietnamese fearing for their food safety and environmental pollution. Considering the vast scope of the event, the chapter chooses to focus on critical moments. These are moments that “construe the process of action and reaction because they mark when and how people engage in negotiation” and “involve a shift

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in the meaning of evens in a social process” (Verloo, 2015, pp. 67–68). An example of a critical moment explicitly drawing in food as an important notion, is that of the ambiguous response from Formosa’s public representative. That response unintentionally provided the material for the activist’s narratives, stimulating the role of food therein. Focusing on the critical moments facilitates reconstructing and validating the event from a range of sources feasible. Using the aforementioned variables of (1) identity, (2) manifestations, (3) interaction and (4) interaction outcomes, we first analysed the tension between the government and the protestors. Next, focusing on protestors’ and activists’ narratives, the discursive interaction between the urban and rural protestors was further explored. Admittedly, “protestors” and “activists” are not synonymous. However, in reality and as our data shows, this distinction is minute. For the convenience of further discussions, the overarching narrative of protestors and activists is simply termed “activist”. However, the specific actors in urban and rural areas are termed “protestors” when considered in light of their actions.

12.6.2  Narrative Dispute: Activist Versus Government Analysing various sources, we have generated a comparison of two dominant narratives as seen through their articulating variables (see Table 12.2). 12.6.2.1  Identity Unsurprisingly, there was a noticeable lack of national coverage on the reaction of the people in the areas directly affected by the event. International news outlets did however report an unofficial censure on social media when public protests took place. While this posed certain challenges to data collection for the activists’ narrative, it certainly made explicit the government’s narrative. Two opposing narratives on food—that of the confrontational activist and the evasive government—are identified. Further analysis of the next articulating variables shows how distinct these two dominant narratives are from each other. 12.6.2.2  Manifestations Activist: Fish over Steel When the first wave of dead fish was washed ashore, locals expressed not only their concerns but also their doubts about the potential culprit, as reported by Tuoi Tre Newspaper (Tuoi Tre Online, 2016): On the night of April 7th, before midnight, the fish were still healthy and ate normally; however, at 2 o’clock, April 8th, they all died. They die as the tide rises. The species we’ve

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Table 12.2  Discursive space comparison between activist and government narrative Articulators (identity) Manifestation

Activists Fish death as an urgent problem – Fish death was a disaster with obvious causes and requires immediate actions – Fish death had widespread consequences and broad implications, especially food as nutrition supply and livelihood

Sanction of Formosa and solution – Closing down of Formosa for fear of future repetition of the event – Keeping Formosa would harm the locals’ livelihood

Perception of environmental protection – Food was a representative of incompetent environmental protection that could harm daily life – Environment was a community concern

Interaction (struggle)

Outcomes

Government – Fish death was a technical incident that is serious and needs expertise and time – Fish death was an isolated incident whose consequences can be successfully controlled by the government – Formosa had apologised and pledged to compensate, which is sufficient – Shutting Formosa would harm the nation’s ability to attract foreign development – There was no real threat on food caused by the event, claims by EU or “enemies of the state” were political distortion – Environment protection was government’s responsibility

Important values – Scientific rigidity, and patience – Perpetuated hardship for the locals and violated right to be well-informed of both and compliance from the people local and non-local residents Narrative consistency – Consistent insistence on immediate – Inconsistent responses and responsibility and compensation actions – Escalation of protests – Added material for discussion on civil society and protests law – No connection between the event and environmental policies on food security

raised, including tench and bass, are quite strong, doing well in water with inconsistent tide. The mass death is unusual, especially in a few mere hours. (Owner of a fish farm) Villagers simultaneously ended up at local clinic with confirmed symptoms of food poisoning, The “inept” response by the government—a ban on fishing with no clear guidance and assistance—exacerbated the locals sense of confusion and frustration—article in the New York Times. (Paddock, 2016b) We are so angry, […] If we knew who put the poison in the ocean, we would like to kill them. We really need to have an answer from the government on whether the ocean is totally clean and the fish are safe to eat. (Local fisherman)

The locals, particularly those in the fishing industry, immediately dismissed the possibility of natural causes based on their professional experiences. They

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maintained their suspicions of industrial parks in the surrounding areas, notorious  for a spate of industry-related environmental scandals. Dead fish was not a threat to food alone, but also to the long-term livelihood of local fishing and tourism industries critically relying on the seafood supply. Local fishermen’s perception of the event heavily emphasised fish death as a serious threat to their family and occupation, as confirmed in both the Green Trees report (2016) and the PTS documentary: Initially we were uninformed in the first week, so we just keep on eating the fish we caught. Then the pain came [inaudible local dialect] all over the body. I thought it was just some random sickness, who’d have thought. Then the [dead] fish appeared and we stopped eating and the pain were gone, but I still feel numb on my lower half […]. I don’t know what to eat now,—(Mai Thi Khai, a Ha Tinh local, PTS documentary at 3′30″)

Staying close to their narrative of a threatened livelihood, the protestors used the fish corpses and nets as visual protesting mediums. Their narrative was constructed around and boosted by visible elements of the profession. These visuals from reality concretized the narrative. Amidst unclear and conflicting information from the government, this gave a simplified definition of the problem that varied body of audience could relate to. As local business suffered from declining profits, there was news coverage on suspicious transportation of fish and other seafood from contaminated water for illegal trading purposes. This media coverage helped the narrative reached a broader audience in the form of urban residents of Ho Chi Minh and Hanoi. These urban residents then organised their own protests, staying close to the activists’ narrative of “fish over steel” as inspired by the rural protestors. Green Trees used images featuring protestors holding banners with reference to “poisoned sea” and “dead fish” in their reports (Green Trees, 2016, pp. 134–138). The activist narrative shows the emblematic nature of fish death, “in terms of which a general understanding of what environmental problems were about was constructed” (Hajer, 2006). Likewise, the activist narrative indicates that there is more to fish death than just mere threats on daily livelihood. It touches on the connotation of “justice”; consequently, the activist narrative actively sought for confrontation as they deemed the event and the government reactions not only unsatisfactory but also unjust. Government: Neither Fish nor Steel In response, both state and local government provided an evasive narrative, with a trait of inconsistency. For instance, when addressing the possible cause, Pham Khanh Ly, Deputy Director of Department of Fisheries (MARD) commented that “It must be something extremely toxic that can cause fish death of such scale and affect that many provinces” (Sam, Thanh, & Luong, 2016). Yet, MNRE Vice Minister Vo Tuan Nhan assured that Formosa was legally permitted to discharge waste, only to be challenged by the Ministry’s answer to the Vice Prime Minister Trinh Dinh Dung the next day confirming Formosa’s violations in cleaning their

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discharging pipelines (BCC Vietnam, 2016). The inconsistency of the government’s narrative in their effort to co-opt the event with a scientific and legal focus unintentionally enhanced the activists’ narrative. The governmental narrative frequently referenced scientific and knowledge driven decision making, as shown in the PM’s first official response: The PM has demanded undivided attention as well as transparency, objectivity, cautiousness, and scientific attitude from all the ministries, local and provincial governments in order to identify the cause for proper communication to the people. The PM also delegates Ministry of Police to sanction any wrongdoings with no hesitancy. The PM’s spirit remains decisive and insistent. (Nghi, 2016)

After the first investigation produced no clear result, the stress of scientific rigour was iterated by MNRE (Long, 2016): Although the Ministry’s Heads have demanded rapidity, the results must be precise and science-based. […] At the moment, no sub-team has completed their test; everyone is still handling a large amount of tasks, data; independent scientists are working as well. Thus, we still have no official report and consequently no results to announce.—said a head of MNRE.

After Formosa’s guilt was confirmed, the narrative of the government switched instantly to condemnation, sanctioning and demanding compensation of Formosa while discrediting protest efforts. Assurances on seafood safety were issued, meanwhile, any protests on the fish death event was reported by state-backed media as “acts of incitement and disturbance” (BBC Vietnam, 2017; BCC Vietnam, 2016). This is consistent with official statements, in which the fish death was mentioned as a technical incident, and the solution provided by the government was to be unchallenged since it is an “expert” duty (see Announcement numbered 70/TB-VPCP). This move to pre-empt civil society discussions was facilitated by framing the narrative as being handled by the “experts” majoring in environmental science or law. Thus, any civil discussion and participation was thereby unnecessary. Interaction and Outcomes The activists’ narrative focused on economic hardship for the locals and violation of the right to be well-informed for both local and non-local residents, and demanded immediate responses. The government’s narrative insisted on scientific rigour, and the virtue of patience and compliance from the people. These two narratives struggled to coincide due to the vastly different nature of the discussions. The interaction also struggled with each other at the level of narrative consistency. The activists insisted  on immediate responsibility and compensation but the government gave conflicting responses ranging from denial to oppression. The oppression tactics radiated a sense of “He who excuses himself, accuses himself” towards the unsatisfied populace. The outcome of such narrative struggles inevitably escalated protests. Previously the Vedan’s pollution of Thi Vai River did trigger a food scare in Vietnamese society due to the scale of pollution and the lack of social media at the time when dead fish were first reported (1993–1994) and most importantly the

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institutional and legal support from both central and local government during that incident (Truc, 2017). However, for this event, a different context has pushed food security and safety to the forefront. The people were confronted by a tangible and highly visual threat on their food supply. This was amplified by the additional dimension of the ongoing debate on civil society and the protest law (Khánh, 2011) seen as a potential aid to improve governance (Wells-Dang, 2010).

12.6.3  Narrative Diffusion: Rural in Relation to Urban Despite differences in localities, social positions and capacities between the rural and urban protestors, their narratives were actually complimentary (Table 12.3). 12.6.3.1  Identity The definitions of “urban” and “rural” are deliberately constructed to support and differentiate the activists’ narratives. In reality, the consequences of the event were widespread, making it hard to geographically delineate rural and urban protestors. The event was considered to have direct effects on provinces of Ha Tinh, Quang Binh, Quang Tri, and Thua Thien-Hue, specifically along a coastline of approximately 25 km bordering these provinces. Yet, among these provinces, the scale of the impact varied based on proximity to the source of toxins and the coastal area, and the level of direct dependency on local fishing industries. Thus, rural protestors are defined as those who participate in protests taking place in one of the aforementioned coastal provinces while urban protestors are those expressing their concern in the vicinity of Ho Chi Minh City and Hanoi. 12.6.3.2  Manifestations Rural Manifestations Due to the lack of data available on the protests in rural areas, we have relied on the arguments put forwards by the locals in general, deducing that their grievances resonated with the activists. Green Trees reported that local divers had been aware of the discharging pipelines from Formosa prior to the event and had trouble breathing during and post diving in its vicinity. In the PTS documentary (2016), the locals clearly expressed their fear for both personal health and income perspective: All of these [seafood] are now unsalable. They look like not much but they actually cost tens of million [Vietnam Dong]. Trading these is my job but with the current situation now I don’t know what to live on. Now I can’t help tearing up. I can’t sell, I can’t earn any money to support my family; they all depend on me in this house, food, clothes, all me. […] The government gives us rice, but even so, what could we eat that with? Even the salt is now

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Table 12.3  Discursive space relationship between rural and urban narrative  Articulators (identity) Manifestation

Interaction

Outcome

Rural protestors Fish death as a serious concern – Fish death as a threat to (sea) food supply and livelihood – Fish death was caused by “industrial force”, as opposed to “natural causes” since it was different from local experiences

Urban protestors – Fish death was not immediate threat to food supply but rather unjust treatment of (sea) environment and non-transparent governmental practice – Formosa causing fish death was conditioned by incompetent government practice

The deserved response – The right to be informed by not only – Compensation but more importantly the ability to catch and the government but also civil-based groups sell seafood as soon as possible Congruence between narratives – The locals’ need to be protected; Formosa should be shut down – It is people’s right to speak out via protests in support of their environmental opinion – Concern over food supply and – Concern over food safety and employment environmental protection – Demand for government’s responsibility in response to the event – Rural and urban connection was visible for a limited period of time – However, the connection did not generate a momentum that can politically justify civil society

dangerous. We don’t know what to eat, and I also don’t know which job to take,—(Local seafood trader in Ha Tinh, PTS documentary at 5′23″)

Aiming for a higher societal impact, activists built on the narrative of livelihood endangerment where fish—the consumption of it and the industry around it—played a central role as a discursive space for this narrative. When their lawsuits against Formosa were rejected by the courts for a lack of evidence, the locals disagreed over the nature of such “evidence”, as reported by the Guardian (Cantera, 2016), quoting a local fisherman: “We are jobless, four people are dead because of fish poisoning and a whale was found dead on Cua Lo beach, only 50km from here. What other proof do they need?” As reported by Canberra Times (Paddock, 2016a), protestors in rural Nghe An Province were seen wearing T-shirts bearing a fish skeleton. Some carried signs reading, “Fish need clean water, citizens need transparency”. This slogan appeared to touch on the broader theme of “transparency” which featured prominently in the urban narrative. “We’re just ordinary people. We don’t know why the fish die but … it might be because of waste from nearby industrial parks”, said a fisherman in response to New  York Times (Paddock, 2016b). Previous environmental scandals in Vietnam have resulted in negative impressions of industrial parks and factories, for example, Vedan Company’s pollution of Thi Vai River or farmers’ skin disease working in

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rice fields near Hoa Khanh Industrial Park Hoang (Van Hai, Minh, Mai, & Lien, 2012). Therefore, the fishermen, who possessed certain professional expertise and social knowledge, allocated the responsibility to Formosa, the owner of the industrial parks nearby. While demanding sanctions on Formosa, their main concern remained with their livelihood out of fear of a future repetition of the event. The Green Tree’s report (2016) focused on direct impact in the rural areas and recommended a more radical vision for ‘transparency’ of the government. The government provided solutions to accommodate these direct impacts without elaborating on the structural dynamics of the administrative system. The main concern of rural protesters remained close to their daily life, as expressed by a fisherman claiming his income has fallen by 70% and that countermeasures would be taken “If Formosa remains in Vietnam and doesn’t give us our clean environment back, we will continue to protest” (Ives, 2016). Urban Manifestations: Transparency in Jeopardy Activism on various causes, including religious freedom, political space and environmental protection, has been a part of Ho Chi Minh City’s development dating way back to before the reign of the Communist party (Liên, 2013; Phuong & Mol, 2004; Thayer, 2010). In Hanoi, there is rising awareness of protesting as a method of expressing opinions such as witnessed in the cases of the Green Trees Movement (Vu, 2017), and Reunification Park (Wells-Dang, 2010). Despite alleged interference from the authoritarian regime, various forms of activism have materialised. In our case, the “fish or steel” response from Formosa’s representative proved that obstruction or obfuscation actually aided narrative construction for the urban protestors. The constant fear of unhygienic food was prevalent among the discussion of food quality control, especially in urban areas. “Levels of micro-organisms, parasites, pesticides and antibiotic residues in food in Vietnam appear to be much higher than those in developed countries” (World Bank, 2017). There have been cases of unhygienic food compounded by incompetent food management and communication policies. The trust in the food management system in Vietnam remains fragile and people feel the need to deal with the risks on their own (Nguyen-Viet et al., 2017). The concern over seafood safety was observed in the shift of preference for fish sauce from the Southern sea as opposed to the central coastal area where there were no reports of pollution after the event. “Recently in Phu Quoc, we’ve been experiencing good sale. People from everywhere come to Phu Quoc to buy, most of who come from Ho Chi Minh City. All bottling facilities buy [the fish sauce essence] from us, but we’re not sure if it is adulterated when it arrives in Ho Chi Minh City, but our fish sauce is purely made from anchovy”, said an fish sauce trader in Phu Quoc (Ai, 2016). The urban narrative framed the event as emblematic of a failure of the management system to protect the country’s environment and its people. In addition to asking for environmental protection, the urban narrative differentiates itself from the

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rural in that it treats fish as representative of problematic lack of “transparency”. Evidencing the scaling effect of the narrative to urban arenas, Green Trees (2016) discussed protestors rights in the report in addition to the local fishermen’s right. The same communicative strategy could be found in international news articles researched, suggesting the government as part of the problem and not the solver of it (Paddock, 2016a, 2016b). Fish as a food source symbolised socio-political unrest, drawing urban protestors to criticise governmental transparency beyond the impact of the local event. In a context of mistrust in the government’s ability to handle food security and environmental protection, fish symbolised a tangible threat to the urban residents despite no reported shortage of seafood and related products in both cities. This broadened narrative beyond local livelihoods resulted in the urban narrative being featured prominently in international news and by activists (Green Trees, 2016). The event was discussed as an indication of human rights, political identity, and development issues. The breadth of the discussion showed the weight of the urban narrative due to the advantageous social positions of the urban protestors in comparison to rural protestors (Business Monitor Online, 2016). The increase in frequency and scale of civil disobedience both online and on the ground was indicative of a gradual shifting of the country’s political landscape, with the ruling Communist Party of Vietnam (CPV) having given in to popular demand on several occasions. This is likely to be the result of rising affluence among the Vietnamese people, leading to growing rates of internet penetration and the growth of civil society. 12.6.3.3  Interaction and Outcomes The two narratives (rural and urban protestors’ manifestation) resonated at different points. Firstly, they both addressed the damaged access to food supply and the impacted livelihood of the locals. Secondly, they implicitly recognised the need for the people to speak their mind in times of need. The two narratives differed however in their focus. The rural narrative focused on food shortage and livelihood endangerment, whereas the urban focused on environmental protection and government transparency. Still, they converged in a call for greater responsibility of the government towards those who have suffered from the fish death. The continuity of the protests proved that a promise of scientific results was not exactly what the activists demanded. The triggering factor was a sense of insecurity over a very essential food supply source. The two narratives involved very different demographic groups with somewhat different concerns and positions within the food system. Yet, considering that the urban protests ceased after June 2016, the mobilising effect of food seemed limited in establishing a civil society on a national scale.

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12.7  Conclusion Through the perspective of food in the case of the fish death event in 2016, we were able to identify different narratives and show how they either struggled or converged with each other. There were marked differences between the activist and the government narrative. The former was a combination of converging narratives—risk to livelihood and food security from rural protestors with the urban protestors arguing for food security through transparency and accountability. The latter showed the dangers of inconsistencies and flip-flopped from emphasising scientific rigour for decision-making, to discouraging societal debate and assigning blame to Formosa. Food as an object of analysis proved to be helpful in exploring the event and its impact on governance. It tied together conflicting and harmonising processes within the event. Food as a product of environment provided valuable insights into the broader context of  environment  governance and  power hierarchy thereof. In this sense, food was a medium through which larger societal and political problems surrounding the event can be investigated.

12.7.1  Challenges to Governance Our analysis highlights two major challenges for environmental governance. Governance is “not the same as government… includes the actions of the state and, in addition, encompasses actors such as communities, businesses, and NGOs” (Lemos & Agrawal, 2006, p. 298). This event showcased the challenges which a central government faced dealing with divergent narratives and not engaging in societal discussions. This stemmed from a dilemma between economic growth and environmental protection—retaining the steel industry interests and weighing it against local fishing needs and food security. By focusing on deconstructing the narratives and subsequent reactions to it, we compared the narrative of the government with the activists, and the rural protestors with their urban counterparts. This event highlights challenges to governance beyond mere regulatory non-compliance. The relationship between the government and the activists was shown to be constrained, where communication between the two sides failed to discuss the same issue effectively. The government was not able to alleviate the situation by disincentivising activists’ responses as in previous cases of environmental pollutions. The issue of food—its consumption and economic value—occupied a unifying role, bringing together urban and rural protestors via concerns for food safety and environmental protection. However, our findings suggest that such a role did not provide a substantial momentum to transform this union into capacity for political confrontation and change. These challenges to governance are echoed in previous studies, addressing the need for the government to provide a participatory platform for the people to voice their concerns, specifically on environmental issues with far-­ reaching consequences on people’s daily life (Phuong & Mol, 2004).

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12.7.2  A Call for Civil Society Recently, scholars have proposed that civil society can provide such a platform (Ortmann, 2017; Wells-Dang, 2010). A civil society grounded in an embedded aspect of daily life such as food could be helpful in mobilising social forces for change. Unfortunately, in this case a civil society has not yet emerged out of the food-driven protests. This does not counteract previous claims on the embeddedness of food  but points to the need to consider specific context in which food-related activism materialises. The subject of food provided an observational unit through which the concept of “resonance” was applied to explore the potential of the aforementioned non-state actors. While civil society has been argued for favourably by advocacy scholars such as Wells-Dang and Le Quang Binh, its establishment could benefit from a stronger momentum than the one provided by food in this  case. Seemingly a chicken-or-egg dilemma, the process of civil society building relies not only on environmentalists or activists but also on the institutional support which was hindered in this case.

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Index

A African Commission on Human and Peoples Rights (ACHPR), 51 African Court on Human Rights and Peoples Rights (ACtHPR), 51 Agreement on Trade-related Aspects of Intellectual Property rights (TRIPs), 117–119 Albizia chinensis, 217 Allison’s model, 137, 138 ASEAN Business Advisory Council (ABAC), 94 ASEAN-China Free Trade Area (ACFTA), 147 ASEAN Free Trade Area (AFTA), 121 ASEAN Human Rights Declaration (AHRD), 34, 37, 51, 52 ASEAN-Institute of Strategic and International Studies (ASEAN-­ ISIS), 32 ASEAN Intergovernmental Commission on Human Rights (AICHR), 9, 51 institutional theory, 33–38 principal-agent theory, 30–33 ASEAN Member State (AMS), 38 ASEAN Ministers Meeting (AMM), 55 ASEAN Senior Law Officials Meeting (ASLOM), 36 ASEAN Working Group on Intellectual Property Corporation (AWGIPC), 127 Asia-Europe Meeting (ASEM), 121 Asian-values, 119 Association of Southeast Asian Nations (ASEAN) AHRD, 51, 52 AICHR, 51

AMM, 55 ASEAN Way, 49, 50 Asian values, 49, 50 challenges of governance, 2–5 cognitive prior, 56, 57 complex negotiations, 53 economic integration, 12, 13 (see also Trade policy preferences) international and national system, 51 NGOs, 55 principal-agent theory, 30–33 regional actors and roles, 52, 53 regulation and governance, 50, 51 SOM Leader, 54, 55 TOR, 54–56 transnational consensus building, 53 universalism vs. regional particularism debate, 57–61 Western interventions, 56 Automotive industry, see Trade policy preferences B Bali Province, 228, 232 Bank Rakyat Indonesia (BRI), 173 Bilateral Trade Agreement (BTA), 122 Bureaucratic Politics Model (BPM), 94, 97, 98 C Cambodia, Laos, Myanmar and Viet Nam (CLMV), 52, 53 Centre for Strategic and International Studies (CSIS), 151 Choice analysis, 190

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269

Index

270 Civil society organizations (CSOs), 4, 35 Clawback clauses, 52 Convention on the Elimination of the Discrimination Against Women (CEDAW), 57 Convention on the Rights of Persons with Disabilities (CRPD), 57 Copyright Office of Vietnam (COV), 125 Corporate Social Responsibility (CSR) programs, 17, 230, 231, 236 Crisis, 18 Cultural relativism, 49 D Desa Pekraman, 236, 238 Discursive resonance, 18 Domestic political change, 13, 14 Downward accountability, 70 E Economic disclosure, 7 Election Supervisory Agency of Indonesia, 68 Electoral accountability, 70 Environmental disaster, 248 Environmentalism, 18 Eurasian Economic Union (EAEU), 127 European Court of Human Rights (ECtHR), 27, 51 EU-Vietnam Framework Cooperation Agreement (EEAS), 121 F Financial inclusion definition, 162 in Indonesia banking sector reforms, 165 empirical evidence, 168, 169 financial access, 167 financial services digitalization, 167, 168 formal financial institutions, 166 formal financial services, 164 geographical characteristics, 166, 167 inclusion policy, 172, 173 inferential statistics, 164, 165 informal financial providers, 166 infrastructure development, 167 international comparison, 169–171 panel data regression analysis, 174, 176, 177 regional perspective, 173, 174 research question, 163 scientific and social significance, 164

Fish death disaster activist vs. government Fish over Steel, 256, 258 interaction and outcomes, 259, 260 Neither fish nor steel, 258, 259 challenges to governance, 264 civil society, 265 data collection, 251 discourse analysis, 250 environmental activism and discursive resonance, 252, 253 environmental governance, 248 2016 fish death event in Vietnam, 254, 255 narrative diffusion identity, 260 interaction and outcomes, 263 rural manifestations, 260–262 urban manifestations, 262, 263 socio-political embeddedness of food, 253, 254 Foreign direct investment (FDI), 17, 18, 118 CSR programs, 236 economic growth, 229, 230 economic institutions, 239, 241 economic linkages, 237 educational benefits, 231 employment creation, 234, 235 inclusive growth, 228 Badung district, 232–234 empirical evidences, 229 employment creation, 230 role of institutions, 229 labor productivity improvement, 235, 236 Nusa Dua Development History, 238, 239 political institutions, 241, 242 qualitative methods, 228 role of institutions, 231, 232 stakeholders, 229 Foucauldian discourse model, 250 G Generalized least squares (GLS), 177 Geographical indication (GI), 127 Government-to-Person (G2P) transfers, 172 Gross domestic product (GDP), 176, 177 H High-Level Panel (HLP), 33, 34, 54 Human rights ASEAN AHRD, 51, 52 AICHR, 51 AMM, 55

Index ASEAN Way, 49, 50 Asian values, 49, 50 cognitive prior, 56, 57 complex negotiations, 53 international and national system, 51 NGOs, 55 regional actors and roles, 52, 53 regulation and governance, 50, 51 SOM Leader, 54, 55 TOR, 54–56 transnational consensus building, 53 universalism vs. regional particularism debate, 57–61 Western interventions, 56 challenges to governance, 61 drafts, 47, 48 examples, 46 norm localisation framework, 48, 49 regional institutional development (see Regional institutional development) research question, 47 scholars and practitioners, 46 Human rights body (HRB), 33 Human rights institution, 10 I Impartiality, 52 Inclusive growth, 228 definition, 165 in Indonesia banking sector reforms, 165 curb inequality and poverty, 165 empirical evidence, 168, 169 formal financial services, 164 inferential statistics, 164, 165 panel data regression analysis, 174, 176, 177 regional perspective, 173, 174 research question, 163 scientific and social significance, 164 Indonesian Council of World Affairs (ICWA), 143 Indonesia Tourism Development Corporation (ITDC), 229, 238 Institutionalization of human rights, 10, 11 Integration, 190 Intellectual property (IP), 13 in Vietnam, 120 by-law document, 128 certificates, 130, 131 conflicts and disputes, 125 copyright and industrial rights, 127, 128 developing countries, 119, 120

271 documents implementation, 129 domestic pressures, 124 external compulsion, 121–123 government, 130 harmonization, 128 international regimes, 127 offices, 130, 131 opened and integrated economy, 126, 127 protection, 127 reform of, 124, 125 regulations, 121 research questions, 116 right holders, 125 right infringement, 129, 130 rights owners, 125 social and scientific significance, 116 social awareness, 131, 132 TRIPS, 117–119 UPOV, 117 WIPO, 117 WTO, 117–119 Inter-American Commission and Court on Human Rights (IACHR & IACtHR), 29 Inter-American Commission on Human Rights (IACHR), 51 Inter-American Court on Human Rights (IACtHR), 51 International Institutions (IIs), 26–28 Internationalist and backlash coalitions action games, 108, 109 policy and decision games, 107, 108 state actors mapping, 104–106 International Organizations (IOs), 26–28 International Union for the Protection of New Varieties of Plants (UPOV), 117 Intra Industry Trade Index (IIT), 94, 101, 103, 104 J Jakarta Transport Masterplan, 187 L Legal disclosure, 7 Liberal Intergovernmentalism (LI), 95 Local community, 8 M Menteng, 190 Micro Small Medium Enterprises (MSMEs), 17, 230

Index

272 Ministry of Technology and Science (MOST), 125, 126 Mobility inequality and accessibility, 189 car-oriented environment, 185 cross-sectoral cooperation, 184 definition, 184, 186, 188 educational facilities, 187, 195, 197 Jakarta provincial government, 184, 185 Jakarta Transport Masterplan, 187 land use and transportation systems, 185 low metric radius analysis, 193, 195 macro level (city-wide) decisions, 185 micro-level spatial analysis, 187 mobility-related exclusion, 189 path-dependent manifestation of national policy, 197 secondary and tertiary education, 200 social structure proxy, 191 socioeconomic attributes, 186 socioeconomic capacities, 184 socio-spatial structures, 185, 186, 189 kampung, 191–193 of Menteng, 191–193 SSX, 189, 190 in Southeast Asia, 188 in Southeast Asian metropolitan cities, 200–202 spatial planning processes and contributes, 188 street network configurations and patterns, 188 sustainable development, 184, 186 symptoms of, 189 technical-rational approach, 187, 188 vehicular-based movement, 195 Moravcsik’s approach, 95 Multi-level governance (MLG), 3 N National IP Office (NOIP), 125 National standard regulation (SNI), 111 Noken system, Papua after the election acceptance of election results, 82, 83 mechanisms of complaint, 80–82 decision-making process, 67 democracy, 68 Elections Vulnerability Index, 68 on the election time counting of votes, 80 voting process, 78, 79

electoral accountability, 70 free and fair election, 70, 71 policy-making, 67, 68 political decentralization, 69, 70, 72 pre-election analysis electoral management bodies, 74, 75 electoral rights, 75, 76 legal framework, 72, 73 voter registration process, 76–78 research question, 69 social and scientific significance, 69 Non-confrontation, 52 Non-discrimination, 52 Non-electivity, 52 Non-governmental organisations (NGOs), 54, 55 Non-tariff barriers (NTB), 92 O Office of the UN High Commissioner for Human Rights (OHCHR), 29 OpenStreetMap (OSM), 191 P Panel regression model, 165 Policy Studies, 3 Political and institutional dynamics, 6 Political decentralization, 11, 69, 70, 72 Politicisation, 52 Principal-agent theory, 9 member states, 26–28 regional political and legal integration, 26 R Regional development governance (RDG), 4 Regional institutional development institutional theory AICHR, 33–38 community’s demand, 28–30 principal-agent theory AICHR, 30–33 legal analysis approach, 26 member states, 26–28 regional political and legal integration, 26 research questions, 25 social significance, 25, 26 Regional particularities, 49 Regional Trade Agreement (RTA), 98

Index Revealed Comparative Advantage (RCA), 94, 101, 102 Rotating savings and credit associations (ROSCAs), 15, 166 Rule-based procedures, 29 S Sekolah Luar Biasa Bagian B (SLBB), 229, 236 Senior Official Meeting (SOM) Leader, 54, 55 Severe Acute Respiratory Syndrome (SARS), 4 Social License to Operate (SLO), 16, 17 advantages, 211 business case, 216 community engagement, 216 credibility, 214, 215 definition, 210 economic legitimacy, 215, 218 forest industry in Indonesia general applicability, 211 Local and Central Governments, 211 social and scientific relevance, 212 forest management, 210 genuine legitimacy, 218 government activities, 210 history, 212, 213 Hutan Amanah Lestari (PT.HAL), 216, 217, 219, 220 in Indonesian Forestry Industry, 222 legal legitimacy, 215 legal license, 213, 214, 220 for long-term business success, 210 natural resources, 211 NGOs, 220 operationalization of, 214 psychological identification, 216 pyramid model, 215 social legitimacy, 215 sustainable development, 211 Taiyoung Engreen (PT.TYE), 216–222 with social management, 218 Socio-spatial differences, 7, 8, 14, 15 Space Syntax (SSX), 15, 16, 186, 189, 190 Strategic partnership Allison’s model, 137, 138 domestic political change, 150–152 domestic reforms, 139 government bureaucracy, 139 key bureaucratic actors, 139 partnership agreements bureaucratic and economic performance, 145

273 cabinet reshuffles, 147 career bureaucrats and technocrats, 145 Chinese companies, 149 code of conduct, 145 cooperation with China, 146 game rules, 145 government-sponsored infrastructure projects, 148 implementation, 144 involvement of, 144 market-oriented economists, 146 open-door policy, 147 protectionists, 146 substance and process, 145, 146 sustainable and balanced economic growth, 146 TIG, 147 trade and investments, 147, 148 working units, 145 Yudhoyono’s foreign policymaking, 149 research design, 137 research question, 136 research significance, 136 Yudhoyono’s decision, 138 Yudhoyono’s vision foreign policy, 142–144 national policy, 141, 142 sustainable economic growth, 140, 141 Strategic Preference Theory (SPT), 95, 96 T Terms of Reference (TOR), 34, 54–56 Trade in Goods (TIG), 147 Trade policy preferences challenges of governance, 92 degree of economic interdependence, 96 LI, 95 non-state stakeholders, 91 policy dialogue BPM, 97, 98 framing, 99, 100 internationalist vs. backlash coalitions, 98, 99, 104–109 non-state actors, 109–112 process tracing, 94 research questions, 93 sectoral intra-trade indicator, 96 social and scientific relevance, 93, 94 SPT, 95, 96 state preferences, 100–104

Index

274 Trafficking-in-persons (TIP), 37 Tri Hita Karana (THK), 242 U UN Convention on Rights of the Child (CRC), 57 United Nations (UN), 29 United Nations High Commissioner for Refugees (UNHCR), 28 United Nations Human Rights Council (UNHRC), 29 UN 2030 Sustainable Development Goals (SDG 4), 187

V Vietnam Centre for Protection of Music Copyright (VCPMC), 132 Vietnamese export, 248 Vietnam-US Free Trade Agreement, 121 W Working Group for an ASEAN Human Rights Mechanism (WGAHRM), 46 World Economic Forum (WEF), 92 World Intellectual Property Organization (WIPO), 117 World Trade Organization (WTO), 13, 117–119