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Book Launch -- Growing Apart: Oil, Politics, and Economic Change in Indonesia and Nigeria

On September 17, the Africa and Asia programs held a book launch for Growing Apart: Oil, Politics, and Economic Change in Indonesia and Nigeria by Peter Lewis, an associate professor and director of the African Studies Program at Johns Hopkins University. Lewis compared Indonesia and Nigeria, two countries with similar demographics, political evolution, and natural resources and why they took two different paths to economic development. Nigeria's minimal economic development came from a lack of a confident investment climate due to ethnic patronage competition, maintenance of an oil monoculture, and money laundering. Indonesia was more successful economically, creating investor confidence through market policies, diversification of the economy to include oil, manufacturing and agriculture, and elites investing money in Indonesian business and infrastructure.

Date & Time

Monday
Sep. 17, 2007
2:00pm – 3:30pm ET

Overview

On September 17, 2007, the Africa and Asia Programs of the Woodrow Wilson International Center for Scholars hosted a Book Launch Event to introduce the new book by Peter Lewis, Growing Apart: Oil, Politics, and Economic Change in Indonesia and Nigeria. The book attempts to answer the question: How did two countries with similar demographics, political evolution and base natural resources take two very different directions on the path to economic development? Peter Lewis is Associate Professor and Director of the African Studies Program, Johns Hopkins University, School of Advanced International Studies. Robert Hathaway, Director of the Asia Program, provided introductory remarks and served as moderator.

Lewis began his presentation with his observations of the many similarities in the development of Indonesia and Nigeria. He sees parallels in terms of their very large and very diverse populations, abundant natural resources including oil and gas, and key historical moments since independence from their colonial legacies. More precisely on the historical note, he noted that both countries were left with fairly little infrastructure. Initially they experimented with democracy and then collapsed in violence in the 1960s. This was followed by a 30 year history of authoritarian rule under Suharto in Indonesia (1965-1998) and military rulers in Nigeria (1966-1999) and then democratic transition in the late 90s. Indonesia and Nigeria both also experienced high levels of corruption, polarization, a legacy of violence, and external economic shocks.

Differences between the two developing countries emerged on the economic side. Indonesia consistently maintained approximately 7% economic growth until 1997 (the time of the Asian economic crisis) while Nigeria had only 3.5% growth on average since independence. Since 1997, Indonesia's growth has returned to around 5%.

As possible explanations, he pointed to three main differences in economic policies and strategies for investment: the level of confidence created for investors, diversification of the economy, and the location of corruption money.

1. Confidence level for investors
Indonesia's economic policies created confidence for investments from the beginning. The government pursued generally market friendly policies. Suharto delegated economic technocrats who implemented course corrections at regular intervals and remained in their posts for several terms. They instituted a "lock-in" policy that provided institutional guarantees for certain policies. The technocrats also courted investors early on and encouraged long-term commitments through "producer-coalition."

Nigeria, on the other hand, could not inspire confidence for investors due to ethnic patronage competition. The country was not anti-market, per se, but there were numerous adverse political influences on the market. Investors could not gain a clear sense of safe investments in a decentralized ethnic patronage system. Money was kept as liquid or invested only for the short term in the import-export trade and real estate.

2. Diversification of the economy
Indonesia diversified its economy to promote manufacturing and agriculture in addition to exploitation of oil and natural resources, so much so that manufacturing surpassed oil in leading foreign exchange in 1990. Indonesia also increasingly globalized and privatized its market. In contrast, Nigeria continued to rely only on an oil monoculture, meaning crude oil and not even natural gas. With the huge cash inflows from oil, there also persisted an attitude that oil prices would always bounce back even after large drops in the 80s. This attitude led to stagnation and marginality of the highly centralized Nigerian economy.

3. Investment of corruption money
Even though both countries experienced high levels of corruption, Indonesia's elites put their money into domestic manufacturing and infrastructure investments. Nigerian elites put their corruption money in foreign banks. This difference in domestic investment by Indonesians was important in that Indonesia developed infrastructure and manufacturing, albeit through corrupt funding. Indonesia also paid contracts on the expectation of performance, meaning projects were completed, while Nigeria did not have clear procedures for implementing building projects and paid money before they even began. This money then went directly out of the country into foreign banks and left Nigeria with poor infrastructure and no new outlets for economic gain.

Mr. Lewis concluded that Indonesia's case is optimistic and may offer an example of one path away from the "resource curse" wherein resource rich countries remain economically poor. Nigeria has some hopeful elements but is stuck in an oil monoculture and difficult corruption that make its path much longer and more challenging.

During the Question and Answer period, guests in attendance brought up other important factors that could explain the economic divergence of Nigeria and Indonesia. One was the difference of having a Javanese majority controlling Indonesia versus three large critical ethnic groups with no majority in Nigeria. This lack of majority could have impeded implementation of economic policies. Mr. Lewis also mentioned the effect of the 3% ethnic Chinese in Indonesia that joined with the Javanese, contributing a high level of capital, access to overseas but no real socially competitive threat.

Secondly, the longevity of a center/periphery link in Indonesia from the historical Javanese empire was contrasted to the more recently drawn border in Nigeria. The question stemmed from the potential cultural influences on economic development. Mr. Lewis replied that this was important but hard to measure as there are so many different Asian cultural influences and both countries are in reality under highly centralized control.

Lastly, the "neighborhood effect" of the positive Asian economic examples was compared to the lack of successful economic models around Nigeria as a contribution to Indonesia's relative success on the economic front. Mr. Lewis acknowledged all of these points and noted that they were expanded upon in the book.

Prepared by Alicia Ranck, Intern and Roseline Fodouop Tekeu, Program Assistant, Africa Program.

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Africa Program

The Africa Program works to address the most critical issues facing Africa and US-Africa relations, build mutually beneficial US-Africa relations, and enhance knowledge and understanding about Africa in the United States. The Program achieves its mission through in-depth research and analyses, public discussion, working groups, and briefings that bring together policymakers, practitioners, and subject matter experts to analyze and offer practical options for tackling key challenges in Africa and in US-Africa relations.    Read more

Indo-Pacific Program

The Indo-Pacific Program promotes policy debate and intellectual discussions on US interests in the Asia-Pacific as well as political, economic, security, and social issues relating to the world’s most populous and economically dynamic region.   Read more

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