A Dirty Word?

The document examines the shift in Indonesia's foreign economic policy from nationalistic and protectionist roots toward a neo-liberal approach characterized by trade and investment liberalization. It identifies external pressures, such as IMF structural adjustments and regional integration (ASEAN), and internal influences, including intellectual elites and the private sector, as primary drivers. Despite this trend, the author notes persistent domestic protectionism and a fundamental contradiction between these policies and Article 33 of the Indonesian constitution, which emphasizes a family-based, state-controlled economy.

• There is a fundamental contradiction between Indonesia's constitutional economic ideology and its actual foreign economic policies. Article 33 of the constitution mandates that the economy be based on the 'family (kekeluargaan) or mutual assistance principle' and that critical production branches and natural resources be 'controlled by the state', whereas current policies increasingly embed neo-liberal principles.
• Indonesia's trade regime has undergone significant liberalization, with the simple average tariff dropping from approximately 27 per cent in 1985 to around 6.9 per cent by the time of the report.
• External forces, specifically the International Monetary Fund (IMF) and World Bank, drove economic liberalization following the 1997/98 crisis. The IMF's structural adjustment program required the reduction of import tariffs on sensitive products like iron, steel, and chemicals to 5–10 per cent and allowed free imports of wheat flour, soybean, and garlic.
• Indonesia has shifted toward a strategy of bilateral free trade agreements (FTAs) and economic partnership agreements (EPAs) due to the failure of the WTO to conclude multilateral negotiations and the fear of losing export competitiveness to neighbors like Singapore and Thailand.
• Foreign direct investment (FDI) regulations were liberalized through the 2007 Foreign Investment Law, which established equal treatment for national and foreign investors and opened most sectors to investment. However, OECD data from 2010 ranked Indonesia as the fifth most restrictive country for FDI among 46 surveyed nations.
• Internal promotion of neo-liberalism is driven by intellectual elites from think-tanks such as the Center for Strategic and International Studies (CSIS), the Smeru Research Institute, and the University of Indonesia, as well as large conglomerates like the Sinar Mas Group seeking international expansion.
• Despite the overall trend of liberalization, 'creeping protectionism' persists, evidenced by domestic opposition to the ASEAN–China Free Trade Agreement (ACFTA) and requests for a judicial review of the ASEAN Charter based on its conflict with the Indonesian constitution.

APA

Chandra, A. C. (2011). A Dirty Word? International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/dirty_word.pdf

Chicago

Chandra, Alexander C. A Dirty Word? International Institute for Sustainable Development, 2011. https://www.iisd.org/system/files/publications/dirty_word.pdf.

Wikipedia

{{cite report |last1=Chandra |first1=Alexander C. |title=A Dirty Word? |publisher=International Institute for Sustainable Development |date=2011 |url=https://www.iisd.org/system/files/publications/dirty_word.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{chandra2011dirty, author = {Chandra, Alexander C.}, title = {{A Dirty Word?}}, institution = {International Institute for Sustainable Development}, year = {2011}, url = {https://www.iisd.org/system/files/publications/dirty_word.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }