Analysing Indonesia’s infrastructure deficits from a developmentalist perspective

Abstract

This paper analyses the performance and appropriateness of the Indonesian government’s ‘good governance’ institutional reform aimed at stimulating infrastructure construction. During the 15 years after the 1997 Asian financial crisis, the government attempted to strengthen formal institutions with the goal of improving public investment efficiency and attracting private investors. By analysing policies in the construction industry in terms of company registration, procurement and state enterprises, the paper finds that the outcome was far from what was expected by technocratic-bureaucratic reform promoters as interest groups frequently succeeded in capturing the new institutional system. This paper then challenges the dominant narrative that overwhelmingly blames incomplete institutional reform for Indonesia’s slow infrastructure construction. Given the inherent market failure and political challenges in institutional reform, the paper argues that passive developmentalist policies, which resulted in conflictual state–business relations and insufficient public investment, were a prime cause that then set the stage for the emergence of state-led infrastructure development strategy from the mid-2010s.