2 - Indonesia's First Affirmative Policy: The Benteng Programme in the 1950s

Summary

To a much greater degree than has been the case in the other newly-independent countries in Southeast Asia, economic nationalism in Indonesia has remained a potent force until the present. Although its contemporary manifestations has in general become less aggressive and less strident than they were in the 1950s, economic nationalism remains a driving force that to a large extent still influences economic policies today. Whereas economic nationalism during the early years of independence in the 1950s was mainly directed at the continuing economic dominance of the Dutch and ethnic Chinese business interests, in the years following the Asian economic crisis in the late 1990s economic nationalism was mainly aimed at the perceived interference of international organizations, particularly the IMF, in the formulation of Indonesia's economic policies.

Despite the strong economic nationalism, pragmatic considerations have more often than not over-ruled ill-considered economic nationalism. In this way, pragmatic policies have often been able to mitigate the adverse economic and political effects of emotional economic nationalism. This was, as will be argued in this paper, evident when the Indonesian government in the second half of the 1950s, terminated the unsuccessful Bentengprogramme, its first affirmative programme to promote indigenous Indonesian entrepreneurs.

ECONOMIC NATIONALISM DURING THE EARLY YEARS OF INDEPENDENCE

During the early years of independence in the 1950s a basic aspiration of Indonesia's economic nationalism was the need ‘to convert the colonial economy into a national economy’. This popular demand appealed to many Indonesians, as during the Dutch colonial period Indonesia had become an outstanding example of a colonial primary export economy. The growth dynamics of such an economy was primarily determined by the rapid expansion and diversification of primary exports at the expense of traditional economic activities (Pauuw, 1983: 9). While primary export expansion had brought some welfare to the Indonesian population, it had not laid the basis for sustained economic growth and successful transformation into a more diversified economy. Moreover, during the colonial period the production of primary commodities for export had been initiated and managed by Dutch and other Western enterprises, while the Indonesian population only played a subordinate and passive role as lessors of land and/or as unskilled, lowly-paid workers. Not surprisingly, rapid primary export expansion did not lead to a substantial increase in the skills, productivity and incomes of the Indonesian population (Paauw, 1983: 9–10).