Stephen V. Marks

Economic interests and voting on the omnibus trade bill of 1987

This paper presents an econometric analysis of the votes on five pivotal amendments to the omnibus foreign trade bills of the U.S. House and Senate in 1987. Probit estimation is used to identify the relationships between geographic variations in employment in trade-sensitive industries and congressional voting on changes in foreign trade policy procedures. The implied pattern of expected net benefits for the industries from the five amendments is highly consistent with qualitative evidence on the costs and benefits at stake. Two general conclusions stand out: (1) Procedural foreign trade policy proposals can have very specific beneficiaries. (2) Diffuse export interests can be influential in opposition to procedural protectionism.

Effective rates of protection revisited for Indonesia

This paper calculates nominal and effective rates of protection for Indonesian tradables sectors in early 2008, and compares these figures with previous calculations for 1987 and 1995. Such a review is overdue. Many non-tariff barriers to imports and exports have been abolished, though new import restraints on rice and sugar are notable exceptions to this trend. Import tariffs have been lowered, particularly through regional preferential trade arrangements. We account for such arrangements in two different ways. Export taxes persist in certain natural resources sectors, but most rates have been reduced. We find that more than half of the effective support provided to tradable products sectors now comes from subsidies on fuels, fertiliser, electricity and liquefied petroleum gas, rather than from trade policies per se. Duty drawbacks and exemptions for exporters boost the effective rate of protection for tradables sectors overall by a small fraction of 1%, and for no input–output sector by more than 3%.

Fiscal sustainability and solvency: theory and recent experience in Indonesia

A major challenge for Indonesian economic policy makers is to avoid the recurrence of conditions that could trigger a new economic crisis. One of the important dimensions of this challenge will be to conduct fiscal policy in a way that is sustainable, given the level of interest rates and the rate of growth of the economy. This paper synthesises various approaches to the measurement of fiscal sustainability that have appeared in the economic literature, relates these measures to the fundamental concept of fiscal solvency, and applies the framework to Indonesia over the period 1991–2003. The domestic and foreign debt positions of the central government are treated separately, to capture the influence of exchange rate changes on the relative costs of domestic and foreign borrowing. The empirical analysis indicates that Indonesia has met the fiscal sustainability criterion in recent years, except when the rupiah has depreciated heavily.A major challenge for Indonesian economic policy makers is to avoid the recurrence of conditions that could trigger a new economic crisis. One of the important dimensions of this challenge will be to conduct fiscal policy in a way that is sustainable, given the level of interest rates and the rate of growth of the economy. This paper synthesises various approaches to the measurement of fiscal sustainability that have appeared in the economic literature, relates these measures to the fundamental concept of fiscal solvency, and applies the framework to Indonesia over the period 1991-2003. The domestic and foreign debt positions of the central government are treated separately, to capture the influence of exchange rate changes on the relative costs of domestic and foreign borrowing. The empirical analysis indicates that Indonesia has met the fiscal sustainability criterion in recent years, except when the rupiah has depreciated heavily.

Proposed changes to the value added tax: implications for tax revenue and price distortions

This paper examines changes to the value added tax (VAT) system proposed recently by the Indonesian Ministry of Finance-in particular that the exemptions for certain sectors be ended. Using the input-output relationships in the economy as a basis, it analyses the implications of these changes for tax revenue and for price distortions. It also considers other feasible changes to the VAT exemptions that could be advantageous. The paper concludes that the estimated revenue impacts of the proposed changes are small relative to the apparent scope for revenue increases from improved administration of the system as it stands.This paper examines changes to the value added tax (VAT) system proposed recently by the Indonesian Ministry of Finance-in particular that the exemptions for certain sectors be ended. Using the input-output relationships in the economy as a basis, it analyses the implications of these changes for tax revenue and for price distortions. It also considers other feasible changes to the VAT exemptions that could be advantageous. The paper concludes that the estimated revenue impacts of the proposed changes are small relative to the apparent scope for revenue increases from improved administration of the system as it stands.

NTT SANDALWOOD: ROOTS OF DISASTER

For decades the government of Nusa Tenggara Timur (NTT) province has exploited the sandalwood sector, to the detriment of the growers of the trees. Severe depletion of the stock of sandalwood in the province has been the result. This paper documents NTT policies toward the sector, which it argues have been both inefficient and inequitable, and offers a detailed approach for reform. It also examines the political economy of these policies, and argues that the case of sandalwood provides an example of the dangers of decentralisation of economic authority in the absence of local democracy.

Economic policies of the Habibie presidency: a retrospective

Abstract B.J. Habibie ascended to the presidency in the midst of a severe economic crisis, and with a reputation as an economic nationalist rather than reformer. Nevertheless, Habibie had the mantle of reformer thrust upon him, and important steps toward economic reform were taken during his 1998–99 presidency. Among these were reforms of domestic and foreign trade policies, the development of anti-monopoly and consumer protection laws, and the decentralisation of fiscal and regulatory authority. Through strict adherence to monetary discipline, moreover, Habibie accomplished a macroeconomic stabilisation that had eluded Soeharto in his last months as president. Other changes in economic policies and practices under Habibie, notably a populist program to distribute government largesse to cooperatives and small business and the extraction of election campaign funds from banks dependent on state authority, were steps in the wrong direction, if economic efficiency and good governance were among the goals.

Non-Tariff Trade Regulations in Indonesia: Nominal and Effective Rates of Protection

Non-tariff regulations on imports and exports have spread in Indonesia since 2011. I report findings of a study of many of these regulations, in which a variety of methods were used to estimate the associated nominal rates of protection. These findings were then used to estimate effective rates of protection (ERPs) across 140 tradable-goods sectors in the Indonesian economy in early 2015, taking into account also the effects of the most-favoured-nation and preferential-import tariff schedules, anti-dumping and safeguard duties, export levies, duty drawbacks and exemptions, domestic sub-sidies, and excise taxes. I find that the magnitude and dispersion of ERPs were higher in 2015 than in early 2008, for which a similar study was previously conducted, and that much of the variability was related to quantitative trade restrictions. In particular, the regulations examined boosted a measure of the cost of living by 7.6% in 2015, compared with 2.5% in 2008.

THE ASEAN-CHINA FREE TRADE AGREEMENT: POLITICAL ECONOMY IN INDONESIA

The ASEAN–China Free Trade Agreement has been the most consequential trade agreement for ASEAN in the past decade. In this article, I use partial equilibrium modelling to estimate the direct impacts of the agreement on Indonesia and China, and from these estimates draw political economy implications for Indonesia. Although the agreement has contributed to a modest trade surplus for Indonesia overall, it has led to a larger bilateral deficit with China. In addition, the shifts to surplus for Indonesia have mostly been in resource-based sectors, while the shifts to deficit have occurred in many manufacturing sectors that the government would like to see grow. I argue that pushback against the agreement has contributed to a resurgence of non-tariff trade barriers in the country, although other political economy forces also have been at work. The agreement ultimately provides a cautionary tale: cutting regional import tariffs can lead to pressures for more complex and less transparent trade policies.