Technocracy in Indonesia: A Preliminary Analysis

Author Name SHIRAISHI Takashi  (Faculty Fellow, RIETI / National Graduate Institute for Policy Studies)
Creation Date/NO. March 2006 06-E-008
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This paper traces the evolution of technocracy in Indonesia, while asking how to explain the changing effectiveness of the economic team of ministers from the early Suharto era to the current era under President Susilo Bambang Yudhoyono in the economic policy decision making.

The paper argues that the technocracy nurtured by the New Order was cohesive and effective in part because of its shared academic background and technical expertise and in part because of its adherence to the three principles of balanced budget, open capital account, and pegged exchange rate system and its ability to serve as Soeharto's right arm in formulating and executing national development policies. In the late Soeharto era, however, these academic technocrats faced increasing challenges from engineers entrenched in the government agencies such as the Ministry of Industry, the Investment Coordination Agency and the BPPT (Agency for the Assessment and Application of Technology). Technocrats who, in alliance with the IMF, attempted to use the Asian crisis to force structural reforms on Indonesia found themselves shut out by Soeharto.

The transitional governments led by B.J. Habibie, Abdurrahman Wahid, and Megawati sought institutional and political alternatives to the discredited technocratic economic policy-making process. These alternatives ranged from putting technocrats in touch with other key players in Indonesia's economy and politics such as businessmen, the mass media, emerging politicians and future technocrats to the outright bypassing of technocracy to the empowerment of MOF for the sake of macroeconomic stability at the expense of BAPPENAS and long-term national planning. With the enactment of a series of laws governing the BI, government finance, and national development planning as well as constitutional revisions, however, a new institutional framework is now in place.

This new institutional framework will go a long way toward upholding the mid-term and long-term economic rationality of the policy-making process. But technocrats will now also become even more dependent on their ability to secure the backing of the president, whose decisions on economic policy will likely be influenced by non-technical and highly politicized issues. Moreover, the technical expertise that was once commanded only by the academic technocrats is now shared not just by technocratic bureaucrats, but also politicians and political (ex-)activists with backgrounds in economics. This means that a range of perspectives in economic thinking is now available for political appropriation. In this sense, it is clear that technocracy can no longer be shielded from "politics". In retrospect, it has never been. If it had once looked as if it was under the New Order, Soeharto made it appear so. But those days are over. Although the institutional foundation is now in place for the independence of Central Bank, the fiscal prudence of the Ministry of Finance and the planning function of the BAPPENAS, their performances ultimately depend on who runs these institutions and what political processes inform their operations.