As an archipelago, Indonesia is dependent upon shipping for much of its internal trade. Just how geographically fragmented the country is can readily be appreciated from the map. Population, however, is not evenly distributed. Two-thirds of the population is concentrated in the small but amazingly fertile islands of Java and Bali. Of the remaining third of the population which is located in the Outer Islands, the large proportion is accounted for by Sumatra. Eastern Indonesia, which encompasses about half the country's total area of land and sea, contains barely 10 per cent of the total population. This distribution of population is reflected in the pattern of interisland trade. Most of the food production and manufacturing is located on Java, and the largest proportion of interisland trade flows between Java and Sumatra.

Because Java is overpopulated relative to its resource base while the Outer Islands are under populated, substantial real income gains could be expected to accrue from interisland specialization and trade. An efficient interisland shipping industry is essential, however, if those gains are to be realized. Any margin of inefficiency in the cost of providing shipping services resembles an interisland tariff over and above the natural level of protection involved in providing transport services at some unavoidable minimum cost. Such inefficiency frustrates economic integration and the economy sacrifices both current and future real income from interisland trade forgone.

In the late colonial period a very efficient and extensive network of interisiand shipping services was provided by a private Dutch company known familiarly as the KPM (Koninklijke Paketvaart Maatschappij or Royal Packet Company). By establishing a firm monopoly of the whole interisland network, apart from a few lines to Singapore, the KPM was able to use profits from the main trunk lines to cross-subsidize regular scheduled services to even the most remote corners of the Archipelago. By through-shipment arrangements, these interisland services were linked with deepsea lines to all parts of the world.

INTRODUCTION

In order to arrive at a deeper understanding of the household economy and the process of differentiation evidently occurring at the village level, more intensive “case studies” were then made of sixteen village households. These sixteen were chosen according to three criteria: that of stratification, that is, according to the household types senang, sedang and susah, identified earlier; that of variability, that is, where possible, with different family structures, and thirdly, the limits of the possible were set by personal access and the availability of a family member willing and able to fill in the questionnaires and answer diverse other questions. These sample households were not chosen by me but by my adoptive father in the village, according to the parameters set above. As such, they may reflect his personal friendships in the village; on the whole, however, they seem to be fairly representative of the village households, and care was taken to include households from both the major political factions in the village.

Data collected on these sample households is of three kinds:

1. biographical

2. income and expenditure data

3. time utilization data

To begin this chapter, an introduction of the various households with the biographies of the household heads, followed by an examination of their budgetary and labour utilization patterns, is in order.

THE LIFE HISTORIES

Senang Households

We shall begin this series of household portraits with the well-to-do households and appropriately then, with Ahmad D, the largest landowner in the village. He owns a total of 12.75 re of padi land, operates altogether 17.5 re and estimates that every padi season nets him a profit of $5000, certainly a not inconsiderable sum. What does a well-to-do man do with his money?

In 1968, he made his first major investment with the construction of a house which would cost at current prices at least $15,000. In 1970 he bought a pedestrian tractor in partnership with his brother.

INTRODUCTION

Most studies of the Green Revolution conceive of it as the vehicle with which a pre-capitalist peasantry is brought into the fold of a market economy. The following comment is typical:

The nature of this traditional peasantry as evocated in statements like “padi planting is therefore never a business proposition. It is a way of life”, is widespread as conventional wisdom not merely in political discourse but also in the academic literature. A geographer's description of the North Kedah Plain in 1951 made repeated reference to the “self-contained subsistence farmers who plant a few coconuts around their huts to supplement their rice and set traps in the glam swamp for edible fish.” Further in the text, he adds: “Throughout this period (between 1911-47) a close approximation to self-contained subsistence farming based on padi has been the mode of life on the Plain…”

Furthermore,

The system is thus seen to comprise a large mass of small producers with an intact subsistence cycle, surplus for trade being extracted via rents in kind. Alternatively, the marketed surplus is seen to issue from larger farms which produce sufficient quantities to engage in “commercial production”. Thus, in the calculations of the CPR study:

Changes in Industrial Policy

Japanese industrial policy has undergone a major change since the energy crisis in 1973/74. The basic feature of the change is the shift of emphasis from “forward looking” industrial policies to strengthen the international competitiveness of basic industries to the “management-of-market-failure” industrial policies which became necessary with the increase in the number of depressed industries. The former policies tried to set the framework for new, upcoming industries so as to accelerate the introduction of new technologies, the increase in output, and the gain in international competitiveness. The forward-looking industrial policies were designed to contribute to the improvement of the living standard of the people as well as to the acceleration of economic growth.

However, partly because of the enhanced capacity of the private sector to implement their own future industrial development strategies through increased R & D expenditure and overseas investment and partly because of such external developments as the energy crises in the 1970s and the sharp appreciation of the yen in the mid-1980s, the government has been brought under pressure to shift the focus of its industrial policies to the management of declining industries and areas.

Nevertheless, it is important to note that “forward-looking” industrial policies have never been, and probably will never be, abandoned. In fact, forward-looking policies and industrial restructuring policies have always coexisted in post-war Japan. Even before the 1973/74 energy crisis, the restructuring of the coal and textile industries had been important issues for the government, and the promotion of future high-technology industries has also been an important part of the present day government policy. However, the extent of restructuring industries after the energy crisis has been most pervasive, affecting every aspect of social and economic life of the people involved as well as the industries themselves. The main thrust of industrial policies has therefore been directed at industrial restructuring. For analytical purposes, however, it is useful to look into the government policies in the pre- and post-energy crisis periods.

In contrast to Australia and New Zealand, Southeast Asia is a problematic region with regard to the Law of the Sea. The proclamation of sea zones has always resulted in a dispute with other countries and their demands. The archipelagic proclamation of Indonesia and the Philippines was rejected world-wide, especially by the great powers. Malaysia was also involved, because the archipelagic waters of Indonesia include the Natuna Islands and the Anambas Islands, thus separating West Malaysia from its East Malaysian provinces of Sarawak and Sabah. In the Gulf of Thailand the sea zones of Thailand and Vietnam overlap. In the South China Sea large areas are claimed by Vietnam, the Philippines, the PRC, the Republic of China (Taiwan), and Malaysia. The reason for the complex of regionalization conditions in this area lies in the geographical position of the states with regard to each other: the Pacific states of Southeast Asia are grouped around the South China Sea and its bays (Gulf of Thailand, Gulf of Tongking) in a more or less circular pattern. This is why all the areas claimed have a common centre. In addition, a number of historic claims date from a time when the political situation in this part of the world was completely different from the present one (for example, a number of states did not even exist and large areas were governed by European countries). The difficulties are multiplied by the large number of islands, particularly the numerous small islands (Spratly Islands, Paracel Islands) in the South China Sea, which actually never clearly belonged to any particular state because they were regarded as un- important. The process of establishing national maritime economic zones eventually led to open disputes. The quest for the largest possible sea zones can be explained by the fact that the Southeast Asian semi-enclosed seas (and the western part of the Pacific Ocean as a whole) are relatively shallow, and therefore provide favourable natural conditions for the exploration and exploitation of oil and for fishing (see Atlas for Marine Policy … 1983).

In the colonial period the size of the interisland fleet and the financing of new construction were commercial matters for the KPM to determine. Since Independence, however, the government has had a pervasive influence on the size, composition and ownership of the interisland fleet. Despite various shifts in policy, three main concerns have been apparent. First and perhaps foremost, the government has wished to assist in building up the fleet of pribumi (indigenous) firms (including PELNI). Initially this assistance was provided to strengthen pribumi firms in opposition to the KPM; more recently it has been directed against non-pribumi (that is, Chinese) firms. Secondly, the government has tried to stimulate or restrain the growth of capacity in order to maintain some rough balance between the supply and demand for shipping space and avoid either undercapacity and consequent distribution crises or overcapacity and the resultant bankruptcy of ‘weak’ (that is, pribumi) firms. Thirdly, die government has been concerned with the quality of the interisland fleet, especially the age of ships. It has therefore introduced a scrapping policy to eliminate older ships, while ensuring through import controls that only modern ships are added to the fleet.

The first section of this chapter reviews the evolution of investment policy with particular regard to assistance to pribumi firms. The subsequent three sections focus upon the rehabilitation programme, the role of P.T. PANN (the Fleet Development Corporation), and scrapping policy.

THE EVOLUTION OF INVESTMENT POLICY

The policy of fostering the development of pribumi shipping firms was introduced actually by the Netherlands Indies Government when it established the Stidning Gemeenschappelijk Schepenbezit or SGS (J°i nr Shipowning Authority) in March 1947.' The government and the KPM together contributed 22 ‘powered lighters' of less than 175 gross tons for bareboat charter to pribumi firms to operate local feeder services for the KPM. After Independence the new Indonesian Government initially continued this policy with the formation of Pemilikan Pusat Kapal-Kapal or PEPUSKA (Central Shipowning Authority) in September 1950 to take over the role of the SGS.