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Indonesia has achieved moderately fast economic growth for most of the past 50 years. Has this growth translated into rising living standards? This is the question that is addressed in this paper. The conclusion is a qualified yes. The caveat is attached for two reasons: (i) philosophically, the definition of living standards remains a subject of considerable conjecture, and (ii) not all social indicators point in the same direction. I focus primarily on trends in measurable indicators of human welfare, particularly poverty and inequality. Combined with major improvements in the coverage and quality of the country's statistics, and a now extensive literature, it is possible to document, and in some cases explain, trends in living standards in some detail. I also investigate whether (and how) the sudden swing during 1999–2001 from an authoritarian and centralized regime to a democratic and decentralized era impacted significantly on these trends.

The development of female entrepreneurs in Indonesia is an integral part of Muslim women's economic contributions and empowerment. However, there is a lack of reliable research about female entrepreneurship and how gender may affect the experiences of business ownership in Indonesia. Therefore, the aim of this study is to explore the challenges encountered by these women entrepreneurs on a daily basis. Qualitative in-depth interviews were conducted with 30 female Indonesian entrepreneurs. Participants were recruited using theoretical and maximum variation sampling techniques. Content analysis was then used to analyze the data. Results revealed high levels of variations, both within and between women, suggesting that the quality of business entrepreneurship and success depended largely on the personal characteristics of these women, rather than on any system of formal education or training. This study also found that many women displayed resilient coping strategies when dealing with business failures. As a consequence, they were able to thrive despite restrictive social, cultural and political constraints. The paper highlights the importance of the experiences of female entrepreneurs in a developing country and the need to integrate the development of female entrepreneurship as a part of women empowerment effort.

Changes in the oil price directly affect production costs, and subsequently, the general price level of products. With Indonesia observing an inflation targeting policy, this study applies the nonlinear autoregressive distributed lag (NARDL) technique to investigate the effect of oil price fluctuations in Indonesia. The relationship is important for the central bank to gauge the effectiveness of the inflation targeting policy in immunizing the country from oil price fluctuations. Our findings have revealed that there was an asymmetric behavior between oil price and the inflation rate (producer price index), thus questioning the effectiveness of the inflation targeting policy. More specifically, in the long run, an increase in the oil price will tend to lead to an increase in the rate of inflation with a greater deviation, while an oil price reduction will lead to a decrease in the inflation rate with a lower deviation. This suggests that the benefits of an oil price reduction are not passed down to the consumer.

Indonesia has introduced a moratorium on the conversion of natural forests to land used for palm oil production. Using a dynamic, bottom-up, interregional computable general equilibrium model of the Indonesian economy, we assess several scenarios of the moratorium and discuss its impacts on the domestic economy as well as on regional economies within Indonesia. We find the moratorium reduces Indonesian economic growth and other macroeconomic indicators, but international transfers can more than compensate the welfare losses. The impacts also vary across regions. Sumatra, which is highly dependent on palm oil and is home to forests that no longer have a high carbon stock, receives fewer transfers and suffers the greatest economic loss. Kalimantan, which is relatively less dependent on palm oil and has forests with a relatively high carbon stock, receives more transfers and gets greater benefit. This implies that additional policy measures anticipating the unbalanced impacts of the moratorium are required if the trade-off between conservation and reducing interregional economic disparity is to be reconciled.

Indonesia is an agricultural country with the world’s largest Muslim population. Islamic microfinance institutions can play a significant role in poverty alleviation in the rural sector predominantly dominated by agricultural activities and poor farmers. The institutions offer unique financial products that cater to the needs of traditional farmers and rural households based on the risk-sharing concept in Indonesia. Islamic microfinance institutions operate cooperatively on equity financing and debt-based financing. Islamic finance provide products and services that parallel with Muslim clients’ religious beliefs. The chapter begins with a historical overview and landscape of Islamic microfinance in Indonesia followed by the principles of Islamic values in Islamic microfinance and the factors that influence Islamic Microfinance Institutions’ performance.

We use a monthly dataset to analyze whether Islamic banks have greater market power compared with their conventional counterparts. Using a sample of Indonesian banks, we find that Islamic banks possess greater market power than conventional banks. This condition does not hold, however, when we compare state-owned Islamic and conventional banks. We also find some specific determinants of Islamic banks’ market power: the Ramadan holy month (positive impact), the proportion of profit-and-loss sharing in their financing (negative impact), and the presence of a Sharia board (positive impact). Interestingly, Ramadan benefits not only Islamic banks but also conventional banks. Our findings support prior literature emphasizing the role of religiosity in Islamic banks’ behavior.

In recent years, China has been catching-up with other advanced economies and become one of the “leading geese” in the Asian economy. China not only plays a leading role in regional production network but also in various regional economic cooperation. Indonesia, being one of the following geese, needs to adjust its position to benefit from this change in global and regional order. While other more advanced economies have less to offer, Indonesia has gradually moved closer toward China in terms of economic cooperation. Using the flying geese model, this paper argues that China’s BRI might change trade and investment trends in Indonesia. China BRI might complement the role of Japan as a catalyst for economic development in the Asian region in general and in Indonesia in particular. There is no official BRI project agreed by Indonesia so far. However, there are a number completed and ongoing China–Indonesia projects, which arguably might pave the way for future BRI investment. Currently, apart from the Jakarta–Bandung High speed railways, most of the projects are concentrated in resource-exploitation needed by China and the fulfilment of Indonesian development needs, such as power generation, mineral smelters and industrial parks. From the Beijing’s perspective, these projects are perceived as part of BRI. Since these so-called BRI projects have not been completed, it is therefore impossible to assess their impacts on Indonesia’s industrialization at this point. However, we can still argue that BRI might have initiated a new type of investment that might in turn change the industrial trends, structure and performance in Indonesia. If this change leads to improvement in products quality or value added, industrial upgrading, technological transfer and export boost, then one may argue that BRI has brought promised benefits to the host economy (i.e., Indonesia). Otherwise, the benefits would be negligible.

Decentralization is in vogue. However, the relationship between decentralization and local-level development dynamics remains unclear. Does decentralization lead to a ‘reform dividend’ of more rapid development in better-governed regions, with attendant national benefits? What is the impact on spatial inequality? In particular, do poorer regions lag further behind as equalizing fiscal policies at the national level weaken? We address these issues with reference to Indonesia, the world’s largest archipelagic nation, which implemented a ‘big bang’ decentralization program in 2001. Our main conclusion, perhaps counterintuitive, is that decentralization had a minimal impact on regional development dynamics, although its political impacts have been far-reaching.

This paper investigates the effect of exchange rate volatility on bilateral trade between Taiwan and Indonesia via 19 export and import industries. Considering the existence of an asymmetric effect of exchange rate volatility on trade, we employ an asymmetric ARDL model and arrive at the following main results. First, the long-run asymmetric effect of exchange rate volatility shows far higher impacts on Taiwan’s exports to Indonesia than on Taiwan’s imports from Indonesia. Second, the short-run asymmetric effect of exchange rate volatility causes unstable changes on the trade amounts for most of Taiwan’s export and import industries with Indonesia.

An increase in world population and per capita income has generated unprecedented demands for fiber-based products. Consequently, wood production from timber-producing countries of the Pacific Rim has dramatically increased in recent years. Several countries in Southeast Asia have vast timber resources, primarily from the Dipterocarp forests which reach optimum condition in the evergreen rainforests of Peninsular Malaysia, Sumatra, Borneo, and the Philippines. At the same time, harvesting intensity has caused considerable degradation of the environment and depletion of forest resources, to such an extent that the problems are of great concern to many people. This paper discusses the forest resources of the Pacific Rim as they affect international trade. Indonesia is now the largest timber producer in the region; therefore, special emphasis is placed on the development of its forest products industries and the impact of environmental issues on forest conservation and management. Because the bulk of tropical timbers comes from Dipterocarp ecosystems, which also contain most of the presently underutilized species, their known wood properties and utilization potential are described. Alternative markets for wood use and new technologies to improve the effective utilization of wood are presented.

Trust was found to promote entrepreneurship in the US. We investigated whether this was true in a developing country, Indonesia. We failed to replicate this; this failure was true whether trust was estimated at the individual or community level or whether ordinary least squares (OLS) or two stage least squares (2SLS) was employed. We reconciled the difference between our results and those for the US by arguing that the weak enforcement of property rights in developing countries and the consequent hold-up problem make it more efficient for entrepreneurs to produce generic goods than relationship-specific goods—producing generic goods does not depend on trust.

To increase the use of healthcare services in Indonesia, the government of Indonesia introduced Askeskin, a subsidized social health insurance for the poor, in 2005. We examine the effects of this social health insurance on women’s healthcare use. Using propensity score matching, we find Askeskin induces women to use public healthcare facilities for birth delivery and antenatal checkup, discourages them from getting help from midwives for birth delivery, and makes them more likely to use contraceptives. The insurance seems to increase delivery care expenditure, however. We do not find evidence that it increases women’s preventive and curative healthcare use.

Poverty is the fruit of unequal distribution and has become a market for loan sharks. Financial inclusion for all is the key for creating a distributive justice. Islamic finance should be a solution to eradicate poverty. Inability of the Islamic financial institutions to complete the missions of the Islamic finance to bridge the financial and real sectors, to distribute the wealth and to manage the lack and excess of liquidity may also create distributive injustice. This chapter believes that Islamic nano-finance can be an answer to cope with the Islamic microfinance gap in financing the very poor. The existence of conventional microfinance institutions in some countries that focus on nano-finance should be a reflection for Islamic finance to engage in this society. Microfinance actually helps poor households by empowering women to contribute to the economic growth and sustainable livelihoods of their families and communities. Some studies also confirm that women in general are a better credit risk for microfinance institutions throughout the world. But, in the absence of banking facility, the very poor frequently borrow money from the loan sharks and microfinance institutions that come to help these people by charging an interest rate. So, this chapter is intended to: (1) Describe the profile of microfinance for women in some countries; (2) Compile a working model of nano-finance activities in the world; (3) Propose a model of Islamic nano-finance for women by integrating the Islamic finance and Islamic philanthropy to finance the poor in meeting their immediate needs, especially to avoid them from the trap of loan shark.

Indonesia, Southeast Asia's most populous state and its largest economy, was deeply affected by the economic crisis of 1997–1998. Its economic contraction in 1998, of over 13%, was the sharpest among all four crisis-affected East Asian economies. This followed three decades of virtually uninterrupted, rapid economic growth. The country's economic crisis was accompanied by regime collapse, resulting in the departure of then President Suharto after 32 years of authoritarian rule. This paper examines the country's socioeconomic development in the decade since the crisis, in the context of the earlier growth, and the very different institutions of economic governance operating under the new democratic regime of weakened central authority and many more economic policy actors. The main conclusions are that growth and macroeconomic stability have been restored surprisingly quickly, but that microeconomic policy and the investment climate are less predictable.

Using the Indonesian Family Life Survey, this paper elucidates the factors related to happiness in Indonesia. Some factors yield results consistent with those in the literature, but other factors such as unemployment and the female gender turn out not to be robust. Some attempts are made to purge endogeneity for past income mobility, social trust, and political environment. Also, measures with a more immediate impact on happiness are exploited for social trust and political environment. The sign of the coefficient on past income mobility is reversed once the variable has been purged of endogeneity. In addition, social trust and political environment are found to have little relationship with happiness.

Private and academic institutions are embracing E-learning as an attempt to improve the learning process, encourage knowledge transfer and compliment their existing learning environment. For many countries with a large population, limited resources and remote geographical areas like Indonesia, E-learning holds the key to better education and provide better access to knowledge resources. E-learning is still new in Indonesia and there are not many studies reported in the literature. This study aimed to provide some ideas about the state of E-learning in Indonesia, specifically in higher education institutions. A survey was carried out to reveal the state of E-learning in higher education institutions in Indonesia. Sample of the population consists of lecturers, developers and researchers who work for higher education institutions in Indonesia. While the study showed that most of the E-learning projects are new and the level of participation is slow, the quality of E-learning courses is perceived as fair. As E-learning development in Indonesia is still in its early stages, serious efforts are needed to facilitate E-learning in higher institutions. The study identified infrastructure problems and staffs' reluctance to adopt E-learning as the main problems for the slow implementation and adoption of E-learning. Despite these problems, E-learning is expected to gain momentum in Indonesia as it is perceived as an effective way to educate the population of Indonesia.

In implementing the Belt and Road Initiative (BRI), there remains a huge perception gap between China and Indonesia. Differences in ideology, politics, race, religion, and ethnicity are hindering the great potential of the BRI from being fully realized. To bridge the gap and enhance mutual understanding, people-to-people exchange between both countries should be accorded greater significance. In addition, strengthening bilateral cooperation in education, labor, tourism, and culture can bring positive spill-over effects beyond basic intercultural learning. Such non-infrastructure cooperation creates more room for people-to-people bonds to flourish, where economic interests are not blindly pursued. Deepened mutual understanding will, in turn, help achieve the major goals of the BRI and promote the building of a community of shared future along the route.

Indonesia and Thailand, two major open economies in Southeast Asia which operate under ‘managed-float’ exchange rate systems, have remained susceptible to both the external and domestic shocks since the East-Asian financial crisis of the late 1990s. Unlike the standard monetary-policy literature, these countries have introduced ‘flexible inflation targeting’ as the monetary policy strategy under managed- float exchange rate systems. Although these countries have managed to keep inflation low on average in a low-inflation environment, inflation has however remained highly volatile. This paper attempts to answer how significant are external shocks, relative to domestic shocks, as the drivers of inflation and inflation volatility for these countries? The paper uses a Structural Vector Autoregression (SVAR) modelling framework and monthly macroeconomic data over the period 2000M1-2015M12. The empirical results suggest that in both countries, (i) inflation is more sensitive to external shocks relative to domestic shocks, which is consistent with the inflation globalization hypothesis; (ii) Inflation volatility however remains sensitive to both the external and domestic shocks; (iii) As expected, inflation and inflation volatility exhibit a feedback relation between them, which is consistent with the Friedman-Ball and Cukierman-Meltzer propositions. The paper also highlights that inflation and inflation volatility affect the real interest and exchange rates, which affect real output and asset prices. The paper concludes that Indonesia and Thailand can make monetary policy more effective for maintaining price stability if they make the exchange rates more flexible to ameliorate the effects of external shocks on these economies.

Bank Rakyat Indonesia (BRI) provides an example of large-scale rural microfinance banking services that are financially sustainable due to its commercial banking and capital self-sufficiency principles. BRI is also exceptional in the outreach of its microfinance services, with its 8.539 microoutlets in almost all sub-districts throughout Indonesia providing simple and flexible microfinance banking products that in 2015 served 43 million microsavers and 7.85 million microborrowers nationwide. This chapter gives a historical overview of BRI and its successful transformation from government-reliant towards commercial and capital self-sufficiency microfinance banking without overlooking its main mission in catering the rural poor population. The chapter shows how a well-managed microfinance banking system can weather economic crises and help the rural poor cope with economic shocks. The chapter also highlights some implications for the microfinance institutions, BRI in particular, as well as the government as the policy maker.

Typic Paleudults and Typic Hapludults — strongly acid, infertile soils that are vulnerable to surface erosion — are the principal soils of lowland dipterocarp forests. Representative soils were characterized in this study by textual classes with regard to morphology, physicochemical properties, and clay mineralogy (in terms of texture). It proved possible to recognize soils with different textures by their morphology. Bulk density and porosity were correlated with clay content.

Total C, N, P, and Av-N, as well as exchangeable Mg and K, tended to be higher in the finer soils. The Av-P level did not vary markedly among the texture types. ECEC and exchangeable Al content were correlated with clay content. The Al saturation percentage was generally higher than 70%. Most of the studied elements occurred in greater amounts in the subsoils (30–150 cm) than had generally been believed.

In most of the soils, kaolinite dominated, followed by vermiculite and gibbsite, with smaller amounts of illite, partially interlayered vermiculite (PIV), and goethite. Lepidocrocite was found only in soils on middle to lower slopes, and cristobalite and hematite were detected in red soils, suggesting thermal influences as the result of combustion in nearby underground coal seams.