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Indonesia's Trade and Price Interventions: Pro-Java and Pro-Urban

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  • Jorge Garcia Garcia

Abstract

In 1987 and 1995 Indonesia's price and trade policies (intervention regime) increased the income of Java's urban centres and reduced that of people living in rural Java and the other islands. This happened because the regime protected manufacturing activities, most of them located in Jakarta, Bandung and Surabaya, and taxed primary sector based activities, located outside urban Java. It protected some primary sector based activities directly, but the entire intervention regime, with manufacturing protection included, taxed them. As a result, regions deriving income from primary sector based activities lost. Indonesia's intervention regime is regressive: it transfers income from poorer to richer regions. This regime and its effects on regional incomes continue. Governments have designed programs to raise the income of Eastern Indonesia, but have omitted the most effective instrument: opening the economy to international competition. A serious attempt to reduce regional income disparities should begin by eliminating barriers to international trade.

Suggested Citation

  • Jorge Garcia Garcia, 2000. "Indonesia's Trade and Price Interventions: Pro-Java and Pro-Urban," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 36(3), pages 93-112.
    • Handle: RePEc:taf:bindes:v:36:y:2000:i:3:p:93-112
    DOI: 10.1080/00074910012331338993
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    References listed on IDEAS

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    1. Medhi Krongkaew, 1994. "Income Distribution in East Asian Developing Countries: an update," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 8(2), pages 58-73, November.
    2. Jorge Garcia Garcia & Lana Soelistianingsih, 1998. "Why Do Differences in Provincial Incomes Persist in Indonesia?," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 34(1), pages 95-120.
    3. Johnson, D Gale, 1997. "Agriculture and the Wealth of Nations," American Economic Review, American Economic Association, vol. 87(2), pages 1-12, May.
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    Cited by:

    1. Hal Hill, 2002. "Spatial Disparities in Developing East Asia: a survey," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 16(1), pages 10-35, May.

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