INTRODUCTION

Vote-buying in Indonesian elections is certainly nothing new. Since the days of Suharto, serangan fajar (dawn attack) — which refers to the effort of bribing voters to vote for a particular party conducted in the early hours on polling day — has continued to play an important role to this day. Since the fall of Suharto's New Order in 1998 however, there are two important trends to note. On the one hand, the predictable effects of vote-buying may have been reduced by greater awareness amongst voters, as they now enjoy the freedom to vote and know they can benefit by taking the bribe and still vote according to their own preference. At the same time, parties have quickly realized that vote-buying is expensive and probably not very effective.

In the current electoral system, candidates are at the centre of the voting process. Put simply, candidates largely run and fund their own campaigns, and they face tough competition from those not only from other parties, but also from their own parties, to win seats. As such they have been forced to choose methods they deem most efficient in grabbing votes amongst the electorate to which they are largely unknown. One simple way to do this is to attract votes with material benefits, which has resulted in large-scale vote-buying. The 2014 elections have demonstrated that this phenomenon has evolved to be more extensive, sophisticated, and better organized than before. Indeed, various observations have strongly indicated that, compared to the 2009 elections, the scale and extent of money politics in this year's elections have been remarkable. An independent observer has used the words “massive, vulgar, and brutal” to describe the extent of transactional politics during the elections. The wide-ranging cases that have been reported featured most notably the door-to-door approach, where typically voters would be handed an envelope containing a specific candidate's name and a certain amount of money to persuade them to vote for that particular person. Less-direct and more innovative methods are plenty, including interest-free loans, free blood tests, plant seeds for farmers, insurance for motorbike taxis, and lucky draws offering freezers and even a Hajj trip.

Vote-buying also takes place at different stages of the campaign. Candidates provide gifts as a way to introduce themselves to voters. These could then be followed up by hand-outs at mass rallies, and donations to build or improve community facilities.

INTRODUCTION

With Indonesian elections about six months away, speculation is mounting about who will be running to become the next directly-elected president. Which sosok (figure) will be chosen to represent the respective parties will be a crucial matter and will strongly influence how the presidential campaign is managed. Parties need therefore to choose their potential candidate very strategically.

Be that as it may, many parties are unable to escape the grip of traditional party authority or dynastic politics. These are either forced to nominate “old faces” or run the risk of not fielding a credible internal candidate. The nomination of veterans such as Aburizal Bakrie (Partai Golkar/Golkar Party), Wiranto (Partai Hati Nurani Rakyat/People's Conscience Party), Prabowo Subianto (Partai Gerakan Indonesia Raya/Great Indonesia Movement Party), and the lack of suitable candidates in Partai Demokrat (PD, Democratic Party) are evidence of this succession problem. Partai Demokrasi Indonesia–Perjuangan (PDI-P, Indonesian Democratic Party Struggle), on the other hand, has developed an alternative system of candidate selection through nurturing local candidates for national leadership.

By all accounts, the battle among the parties to present the most credible presidential candidate will be uncompromising. This essay analyses the strategies of two major parties in their bid to win the popular vote.

PD'S NATIONAL CONVENTION:THE SEARCH FOR SUCCESSOR

PD is by most accounts a success story. It was built as a political vehicle as late as in 2001 to carry Susilo Bambang Yudhoyono in his bid for presidency in the 2004 elections. The party has since then been riding on his success. After a rushed set-up, Yudhoyono's meteoric rise in popularity propelled PD to become the fourth largest political party in 2004 with 7.04 per cent of the votes, behind Partai Golkar (Golkar Party), PDI-P, and Partai Persatuan Pembangunan (PPP, United Development Party). The party's strength grew further in the 2009 elections. It secured more than 20 per cent of the votes and tripled its number of seats in the legislature from 55 seats in 2004 to 148 seats.

Arguably, Yudhoyono's popularity single-handedly carried his party in the last two elections. However, relying too much on one sosok has its consequences.

INTRODUCTION

The recently concluded legislative election in Indonesia produced several unexpected results. The first one was the underperforming results of the opposition party the Indonesian Democratic Party–Struggle (Partai Demokrasi Indonesia–Perjuangan, PDI-P), which failed to capitalize on the popularity of its presidential candidate Joko Widodo (popularly known as Jokowi).

The party is estimated to have won only 19 per cent of the popular vote, far below the expected 25 to 30 per cent that had been predicted by a number of Indonesian public opinion surveys. Another unexpected result of the legislative election was the strong showing of Islamic political parties, which seem to have obtained a combined vote share of nearly 32 per cent. This reverses their poor results in the 2009 legislative elections and defies predictions made by pollsters and journalists that these parties were going to achieve even worse results in this election.

This article unpacks the results of the Indonesian legislative election (pemilihan legislative/pileg) by focusing on these two key findings. Based on a comparison of estimated results from the current election with the final results from previous post-Reformasi elections (1999, 2004, and 2009), it is argued that:

1. a. Although PDI-P managed to achieve a significant vote gain in this election, it failed to capitalize on the popularity of its presidential candidate, Jokowi, due to the lack of television advertising, local-level campaigning of candidates, possible vote-buying at the grassroots level, and internal rivalries between Jokowi supporters and those of PDI-P chairwoman Megawati Soekarnoputri, and;

2. b. The stronger-than-expected results of the Islamic parties should not be interpreted as evidence of political Islam gaining ground in Indonesia. Instead, this result can be attributed mostly to the parties’ strategy to re-focus their campaign within their own primary constituencies.

EVALUATING PDI-P's PERFORMANCE

Twelve national political parties competed in the 2014 legislative election, and PDI-P was favoured to win big, especially after it nominated the popular Jakarta Governor Joko Widodo as its presidential candidate on 14 March 2014. Opinion polls had expected the party to ride the wave of the “Jokowi effect” and comfortably pass the 25 per cent popular vote threshold, which would have enabled it to nominate its own presidential candidate without seeking coalition partners.

After an extensive pre-campaign lobbying period to form political coalitions, the presidential election campaigning has been ongoing for three weeks. There have been three nationally televised debates between the two candidates (with each debate focusing on a specific topic) and a nationally televised “dialogue” between the presidential candidates and the Indonesian Chamber of Commerce (KADIN). There has been a flurry of activities as the presidential candidates and their spokespersons immersed themselves in campaigning; billboards and advertising are everywhere.

It has become fairly clear what the division within the Indonesian elite is about. The two candidates, Joko Widodo (from PDI-P) and Prabowo Subianto (from GERINDRA), represent two quite different paths into the future (or back to the past) for Indonesia, but both emerge from within the Indonesian ruling elite. Widodo harks from the new regional elite that blossomed with Indonesia's experiment with decentralization. Prabowo is very much tied to the old elite of the New Order and, while very wealthy in his own right, is also the brother of an extremely wealthy businessman. He is a former son-in-law of Suharto and the son of a former Suharto minister, who is also a wealthy businessman. At the moment, most polls put Widodo between 5 per cent and 7 per cent ahead of Prabowo, with between 20–30 per cent still undecided. Widodo, although still ahead in the polls, appears to have lost the massive lead he had earlier in the year, when some polls had him at 70 per cent.

The “visions” offered by the two candidates reflect the main division within the Indonesian capitalist class. There are the large conglomerates aspiring to restore their crony status, represented by Prabowo and Aburizal Bakrie (Golkar chairman) and there is the ocean of kabupaten (regency) and provincial capitalists, represented by Widodo and Jusuf Kalla, who make up the bulk of the elites of local branches of political parties throughout the country. Since 2000, kabupaten and provincial capitalists have had more space for intervention in politics as a result of the direct election of regional leaders such as bupatis (regents), mayors and governors and more budgetary power for local parliaments.

INTRODUCTION

Now that he has won the election, Indonesian President-elect Joko “Jokowi” Widodo has only three months in which to prepare and consolidate his actionable economic platform before his inauguration day in October. There remain significant economic challenges awaiting him. Expectations are great that he will lead the country to become a great nation, in a style similar to his political coalition's name, Koalisi Indonesia Hebat (the great Indonesia coalition). He will however need to be realistic in identifying his priorities within his five-year term. Not only will he need to select well the cabinet ministers who will work with him in fulfiling his campaign promises but he will also have to find the money needed to implement many of his development programmes.

Against this backdrop, this essay discusses the fiscal challenges faced by the new government, and argues that improving future fiscal policy is crucial to the achievement of more equitable growth.

THE POLITICAL ECONOMY OF FISCAL SPACE

A key challenge facing Jokowi will be fiscal space. This refers to the availability of government revenues for developmental expenditures. Jokowi will inherit little fiscal space for his own development programmes due to President Susilo Bambang Yudhoyono's (SBY) populist policy on energy subsidies. Between 2009 and 2014, the share of energy subsidies to the total central government spending increased significantly from 7.6 per cent to about 27.4 per cent. In 2014, Indonesia spent about US$33 billion on fuel and electricity subsidies, and ironically, these primarily benefitted the midde class and have long been criticized for being poorly targeted and detrimental to Indonesia's goal to achieve energy security. Worse still, the amount allocated for energy subsidies is higher than central government spending on education, healthcare and social protection programmes. During SBY's second term, energy subsidies grew much higher than central government revenues did. As a result, Indonesia's budget deficit increased from 1.6 per cent of GDP in 2009 to 2.4 per cent of GDP in 2014.

Jokowi is fully aware that the fiscal situation will be critical to his own plans. In his campaign, he promised to develop the country's infrastructure, boost productivity in the agriculture and manufacturing sectors, improve human capital, and provide better healthcare, education and social protection for Indonesians.

Of all the direct elections for local leaders (known in Indonesian as Pilkada) held in 2012, the gubernatorial race for Jakarta DKI was definitely the one to watch. As a contest for the most important posts for Indonesia's sprawling capital city with almost 7 million registered voters, the Jakarta election serves as a barometer for local elections throughout the Indonesian archipelago.

During the first round of the local election on 11 July 2012, the popular challenger, Joko “Jokowi” Widodo, led with almost 43 per cent of the votes, while the incumbent, Fauzi “Foke” Bowo, trailed with 34 per cent. As none of the candidates garnered more than 50 per cent of the votes, the two leading candidates went on to a second round run-off.

And so, on 20 September 2012, Jakarta voters went to the polls a second time to elect their governor and deputy governor. Quick count estimates showed Jokowi winning with at least 53 per cent of the votes, and already that same day, Fauzi Bowo congratulated the new governor-elect. The Jakarta General Election Commission officially announced on 29 September that Jokowi had won 53.82 per cent of valid votes, winning the majority of the vote in all five municipalities of Jakarta. Fauzi Bowo had garnered 46.18 per cent of valid votes.

On 15 October, Joko Widodo and his running mate Basuki Tjahaja Purnama were installed as governor and deputy governor of Jakarta respectively, and became the second pair to be directly elected to two of the nation's most coveted offices.

DECENTRALIZATION AND DIRECT ELECTIONS FOR LOCAL LEADERS

In reaction to the over-centralization of state powers during the Suharto era, Indonesia embarked on a path of decentralization with legal reforms in 1999. Law No. 22/1999 and Law No. 25/1999 instituted the devolution of political authority and distribution of revenues respectively to districts and municipalities. This gave much greater power and autonomy to local leaders and local parliaments. With more at stake in terms of resources made available at the local level, political elites at that level lobbied for the proliferation of districts and municipalities. From a total of 341 in 1999, the number of districts and municipalities grew to 440 by 2004, and now stands at around 500.

INTRODUCTION

One of the main surprises from the recently held legislative elections in Indonesia (9 April 2014) was the better-than-expected performance of Islamic parties. Taken together, they managed to garner around 32 per cent of the vote share (as against close to 29 per cent in 2009). Multiple polling institutions had announced for some time that such parties were going to fare poorly. The Prosperous Justice Party (Partai Keadilan Sejahtera, PKS) had been embroiled in a beef graft import scandal in 2013, while the botched experiment of Islamism in the Middle East, following the 2011 Arab Spring uprisings, did not signal anything positive for the advancement of political Islam in Indonesia. However, PKS managed to limit the damage (winning around 6.9 per cent of the votes, down from 7.88 per cent in 2009) by interpreting the graft scandal as a conspiracy against the party and by relying on its long-term charity strategy on the local level, a common feature of Islamist movements. For sympathizers, whatever happened in Jakarta could not nullify the dedication of PKS cadres in helping communities in dire times, such as the 2013 Jakarta floods or the eruption of Sinabung volcano in 2014. The other important surprise was the National Awakening Party's (Partai Kebangkitan Bangsa, PKB) success in recovering its constituency within the traditionalist organization Nahdlatul Ulama (NU), garnering about 9 per cent of the vote. The United Development Party (Partai Persatuan Pembangunan, PPP — 6.7 per cent) and the National Mandate Party (Partai Amanat Nasional, PAN — 7.5 per cent) have similarly managed to establish themselves as mid-sized parties, whose support will be key to the “big three”: PDI-P, Golkar and Gerindra. The Crescent and Star Party (Partai Bulan Bintang, PBB — 1.6 per cent), the only true conservative Islamist party, did not manage to pass the electoral threshold of 3.5 per cent.

With July's presidential elections looming, have the results of the legislative elections shown that political Islam is still a force to be reckoned with? While the current volatility of political manoeuvring makes predictions on future coalitions rather risky, past events may give us hints of things to come.

AN ALLIANCE OF ISLAMIC PARTIES?

One could ask whether the 32 per cent vote share can translate into some form of unity for the coming presidential elections.

INTRODUCTION

On 9 April 2014, around 200,000 people stood for election to 20,257 seats in the Regional and Provincial Legislative Councils (DPRD), the House of Representatives (DPR) and the Regional Representatives Council (DPD). Of these, 6,607 candidates from twelve parties competed for the 560 seats in the DPR, while the remainder ran for the 132 seats in the DPD, the 2,137 provincial seats and the 17,560 regional seats. There are 1,344 new seats, mostly in the regional parliaments and 123 in provincial parliaments.

One week after the elections, more and more reports have surfaced of cheating during vote counting. Most of the reports are about switching counting of ballot papers for one candidate to another for money. This is possible with the bribery of election officials. Initially, complaints came from candidates who had been unable to mobilize enough supporters to be scrutinizers at the very large number of voting centres in each constituency. Their ballot papers were especially vulnerable. If those who lost votes due to cheating can document this, there may be a round of court cases disputing votes in different constituencies. It is difficult to know the extent of cheating at this time, but it is unlikely to change the overall picture presented by the election results.

WHAT HAVE THE ELECTIONS REVEALED?

Overall, the elections have confirmed the alienation between the mass of the population and the existing parties.

GOLPUT the Winner

Most election analysts are confirming a formal absentee voter rate (GOLPUT) at 34 per cent, up from 29 per cent in the 2009 elections. This only includes the percentage of registered voters who did not vote. It does not include people who are eligible to register to vote but did not. Nor does it include spoilt votes. It is probable that the real absentee vote is at least 40 per cent, i.e., at most only 60 per cent of the population voted.

There was a massive television advertising campaign, backed also by the party leaders, urging people not to “GOLPUT”. On Election Day, television hosts as well as politicians were still confident that there would be a drop in GOLPUT.

INTRODUCTION: THE VERY SHORT HONEYMOON

Burdened with high expectations on deliverables, Indonesian President Jokowi's first few months have been hectic. The most difficult challenges anticipated at the start of his administration were: whether the cabinet would be dominated by professionals as promised; resistance from the parliamentary opposition; and his plan for an unpopular fuel price hike. Doubts about his choice of cabinet ministers have been mitigated by the hard work that some have demonstrated. Still, his choices for the chiefs of legal and judicial institutions have been met with criticism, and have raised questions about his commitment to clean government and to the combatting of corruption. Meanwhile, fortune has been on his side as the drop in crude oil prices has made the elimination of costly oil subsidies much easier. However, all these seem to be negated by the glaring fact that he remains under a lot of influence from party politicians — particularly Megawati (chairwoman of the Indonesian Democratic Party Struggle) and Surya Paloh (chairman of National Democratic Party).

HOLDING A MINORITY GOVERNMENT AGAINST CRISIS-RIDDEN OPPOSITION

With only 37 per cent seats in the parliament, Jokowi's Great Indonesia coalition (comprised of PDI-P/Indonesian Democratic Party – Struggle, Partai Nasdem/National Democratic Party, PKB/National Awakening Party, and Hanura/People's Conscience Party) has an uphill task in passing their policies. After all, 2014 saw by far the most polarizing elections being held in Indonesia, and there is still a big divide between both candidates’ camps — which has extended into the parliament where Jokowi leads a minority government against a much bigger Red and White Coalition (consisting of Partai Gerindra/Great Indonesian Movement Party, Partai Golkar/Functional Group Party, PKS/Prosperous Justice Party, PAN/National Mandate Party, and PPP/United Development Party), led by Prabowo.

The divide between Prabowo's supporters and Jokowi's have created splits even within individual parties, notably the PPP and Golkar. These have manifested as leadership crises that have left the two major parties in tatters. The crisis in PPP had been obvious since the presidential campaign period when Suryadharma Ali's personal move to endorse Prabowo was rejected as the party's official position. The party currently has two chairmen. Suryadharma is chairman of the PPP camp that staunchly supports Prabowo, while Romahurmuziy controls the faction that favours Jokowi.

ISEAS Perspective was quietly started in the middle of 2013. This series of analytical briefs on Southeast Asian current affairs thus came into being around the same time that the Indonesia Studies Programme was revamped at the Institute.

Already then, the signs were already clear that the Indonesian elections scheduled for 2014 were going to be very significant ones, as a window not only into how the country had been developing since the fall of Suharto in 1998 but also into how the democratization process in the country begun in all earnestness in 2008 had been faring.

In the weeks before, during and after the elections, Indonesia experts based at or otherwise affiliated to ISEAS, were sent out on fieldwork trips to sharpen their sense of what the most profound changes and the most significant trends occurring in Indonesia were; and to write reports on the current state of this giant archipelagic country.

Their findings were made public through ISEAS Perspective. A series of well-attended seminars were also arranged at the Institute throughout the period. Events were moving quickly though, and the publishing schedule could not always keep up with changes on the ground, nor with the number of articles submitted. Of the eighteen articles written, only fifteen saw immediate light of day.

This compilation allows for the remaining three to be published for the first time. As a collection, the articles provide anyone interested in Indonesia — and given the prominence of this country, that should include anyone interested in Southeast Asia and East Asia — with an effective introduction to the country's present social, economic and political situation.

The election of Joko Widodo as President in itself robustly challenges the status quo of established political parties and traditional power holders, and how his term in office develops in the coming years will be closely watched by governments and international businesses — and by ISEAS.

INTRODUCTION

The upcoming 2014 parliamentary and presidential elections will be the most important yet for Indonesia. Voters will go to the polls to pick their parliamentarians on 9 April, and parties will be vying for support from an increasingly sceptical electorate.

Three elections after major political reforms were carried out, there are strong demands that the democratic transition should continue. The process seems to have stalled with corruption remaining rampant, the legal system still weak and corrupt, and the parliament approving bills that compromise reform objectives. These, along with overall dissatisfaction towards President Susilo Bambang Yudhoyono's (SBY) performance, have fuelled the demand and even urgency, for change in the political leadership.

The parties still remain the gateway to political office at the central and local levels, and party politicians elected into public office are often responsible for managing state or local budgets. Many of these officials are now either jailed, facing trials, or under investigation for corruption allegations. Meanwhile, they are broadly criticized for being inefficient and unproductive. Aside from all these, parties are generally poorly institutionalized — as clearly evidenced by the lack of clear platforms, and by the heavy reliance on particular figures and leaders for support and popularity.

As a result, the upcoming elections will be about which party has the most popular candidates. Parties have therefore been scrambling to identify those who can attract voters. This is made all the more necessary by the fact that specific platforms and party programmes are largely missing. The 2014 election is shaping up to be a race based on image and popularity. Increasingly, it is about those picked by parties to represent them.

THE PARTIES

Partai Nasional Demokrat (Partai Nasdem, National Democratic Party)

Born as a mass organization, it declared itself a party on 26 July 2011. It lists Pancasila as its ideology, and it is the newest party that will be competing. This election is also its first. It was founded and chaired by Surya Paloh, an ambitious former Golkar official who owns Metro TV, the number one Indonesian television news network.

INTRODUCTION

The recently concluded 2014 legislative and presidential elections highlight the continuing importance of Islamic political parties in Indonesian politics. The parties collectively managed to obtain nearly 32 per cent of the vote share in the national legislative election conducted last April. Out of the five Islamic parties contesting, four supported Prabowo Subianto's presidential candidacy, while only one backed Joko Widodo (Jokowi's). What are the roles these parties will play in the new Indonesian government, now that Jokowi is officially the winner of the presidential election and will be inaugurated as Indonesia's new president on 20 October 2014?

The first section of this article reviews the electoral achievements of Islamic political parties in April's legislative election and the ideological and interest-based differences between these parties. The next section analyses the four largest Islamic parties — the National Awakening Party (PKB), the National Mandate Party (PAN), the Prosperous Justice Party (PKS), and the United Development Party (PPP), discussing whether they will be represented in Jokowi's cabinet, and whether they will likely support or oppose his policy on religious affairs. The final section concludes with some observations on the intermediate prospect of Islamic parties in the new administration.

ELECTORAL RESULTS AND POLITICAL DIVISIONS

Table 1 shows how the five Islamic parties did who competed in the April 2014 legislative election. Collectively, they obtained 31.41 per cent of all the votes cast, surpassing the 25.90 per cent combined vote share they obtained in the 2009 legislative election, which no doubt was a record low for the Islamic parties in post-reformasi Indonesian elections.

The unexpectedly strong results achieved by the five Islamic parties made some observers wonder about the potentially influential role Islam might have in future Indonesian politics, more specifically, whether it would lead to a stronger push for Islamist agendas — most possibly further restrictions on morality-related matters.

However, this possibility is elusive since the Islamic parties are so divided based on their respective ideologies and political interests. Ideologically, the parties are divided over the interpretation of Islamic teachings and their application in Indonesian society. For instance, PKS is widely believed to support stricter interpretations of Islamic law within Indonesian society and some of its politicians have condoned actions by radical Islamic groups that persecute members of religious minorities.

Singapore is among the most affluent and urbanized countries in the world. It rapidly grew from a colonial island-entrepôt with a gross domestic product (GDP) per capita of US$428 in 1960 to a vibrant global city-state with a GDP per capita of US$55,183 in 2013 at market prices. Reclamation of land has resulted in the expansion of Singapore's land area to approximately 710.3 km2 in 2009 from 581.5 km² in the 1960s. With an estimated population of 5.08 million in 2009, Singapore's population density stands at 7,100/km2. This makes it one of the most densely populated countries in the world.

In international rankings of per capita carbon dioxide (CO2) emissions (as in Table 1.1 below), Singapore is comparable to such developed Asian industrial economies as South Korea and Japan, significantly lower than resource-rich Organisation for Economic Co-operation and Development (OECD) economies such as Australia and the United States, and much lower than the rich, small petroleum-based states such as Qatar and the United Arab Emirates (UAE). As an affluent city-state, Singapore's per capita emissions are significantly higher than the more populous, middle-income developing countries such as its neighbours Malaysia and Thailand, and much higher than China and India with their huge populations and lower per capita incomes.

The key attribute of Singapore's uniqueness in terms of energy and emissions is that it is a city-state, in a world of generally larger, lessurbanized countries. This fact of high population density and urbanization skews per capita indicators of wealth, energy use, and CO2 emissions. In any consistent ranking, Singapore would need to be appropriately compared to other global cities and their immediate suburban environs such as Hong Kong, Dubai, London, Houston, or Sydney. And even when such comparisons are made, allowances are required for the fact that for most of these cities, actual emissions caused by households and businesses in the cities are associated with electricity which is usually generated outside city limits.

Policymakers in Singapore, like their counterparts elsewhere, are faced with balancing priorities in meeting the simultaneous requirements of economic growth, energy security and environmental sustainability. To be sure, each of these broad societal objectives can mean radically different things to different constituencies of the population. Academics, businessmen, and career civil servants, along with the ordinary man on the street, would naturally have their own perspectives and questions on what each of these objectives entail. How are such objectives ranked? What do they mean in terms of concrete policy initiatives and regulatory action on the part of government and how would such governmental action affect the daily lives of consumers and businesses? How are trade-offs (if they do occur) between one policy objective (say energy security) and another (say economic competitiveness) weighed and debated in public?

Policy challenges related to energy sector issues facing Singapore can be grouped into four broad areas. The first policy challenge, on the domestic front, is the perceived need to promote energy efficiency and ‘renewable’ energy initiatives among local households and businesses sensitive to new cost burdens on existing financial budgets and bottom lines. The potential for improving energy efficiency and adopting new energy technologies in cost-efficient ways has attracted the keen attention of policymakers. Can we reduce energy use and emissions while at the same time reducing consumer or production costs? Are there barriers to households or businessmen from discovering cheaper ways of using energy or reducing pollutants and carbon emissions? What can governments do to help overcome these barriers?

Policy attention in the international arena covers three concerns. The first lies in the need to participate in international and regional forums in a way which balances the need to commit to reasonable national targets in energy intensity and emissions reduction metrics while ensuring that the country's economic competitiveness and growth prospects are not compromised by inefficient or defective multilateral agreements. How would the financial costs of such agreements be allocated among the parties to such agreements? Who are the likely net donors and net recipients in possible future international or regional climate change agreements?

Twenty-five years ago, the publicly accessible literature of what can be broadly termed the “energy economics” of Singapore was practically nonexistent. Outside of specialized trade publications, proprietary consultant reports and periodic assessments by government agencies often for an internal civil service and ministerial audience, there was little by way of information about how energy issues, at global, regional and domestic levels, were affecting Singaporeans. To be sure, it is also true that the demand for such information primarily emanated from those relative few who “did” energy, that is, those who were in the energy industry as businessmen, academics, or civil servants responsible for some area of activity in the industry.

Energy issues occupied policymakers whose bailiwick include aspects of the energy sector, ranging from managing state-owned power utilities and attracting foreign direct investments in the export-oriented oil refining and petrochemical industry to setting up competitive domestic markets for petrol and diesel. But outside of these government responsibilities, the energy scene in the first decades of independence was primarily a private sector one, revolving around oil. Coal, natural gas, and other primary fuels had little or no role to play in the early years of the city-state. Post-independence government policy with respect to energy sector issues, wrought in an environment which saw the loss of its Malayan hinterland in the Malaysian Federation in 1965, was essentially one of properly managing public utilities, providing a hospitable investment climate for large investments in an export-oriented downstream oil sector, and ensuring a competitive domestic retail market for transport fuels.

Singapore had, by the 1980s, emerged as one of the world's great oil refining and trading centres, with the “East of Suez” region within its sphere of influence. Yet, little systematic work was done on the country's role in energy affairs, unique among its developing country counterparts in Asia, Africa, and elsewhere. The city-state's policymaking went against the grain in much of its practice of economic development. It ensured that energy products were bought and sold in the domestic market at essentially global prices (adjusted for indirect taxes), in contrast to the common practice in developing countries of subsidizing energy fuels for social equity.

It is commonly observed that the growing complexity and strategic importance of energy policy demands a “Whole-of-Government” approach, where specialized ministries and agencies work in a coordinated way across multiple jurisdictions to implement policy. The work of integrating the different strands of Singapore's energy policy was institutionalized with the establishment of the Energy Policy Group (EPG) in March 2006. Led by the Ministry of Trade and Industry (MTI), it comprises key ministries, including Environment and Water Resources (MEWR), Foreign Affairs (MFA), Transport (MOT) and Finance (MOF), and agencies like the Energy Market Authority (EMA), Economic Development Board (EDB), National Environment Agency (NEA), Land Transport Authority (LTA) and Building and Construction Authority (BCA). The EPG plays the role of formulating and coordinating Singapore's energy policies and strategies. In addition to the development of a national energy policy framework, the EPG studies a wide range of energy issues, which include power and transport sectors, energy efficiency, climate change, energy industry, energy research and development (R&D), and engaging in regional and international energy policy cooperation. Coordinating the efforts of all stakeholders will be a constant feature in Singapore's energy policy efforts in the future.

Singapore's national energy policy framework strives to achieve a balance among three objectives, namely retaining economic competitiveness, enhancing energy security, and protecting the environment. In a report released in 2007, MTI identified five strategies under the country's energy policy framework: promoting competitive markets, diversifying energy sources, enhancing energy efficiency, developing the energy industry and investing in energy R&D, and stepping up international cooperation.

PROMOTE COMPETITIVE MARKETS: GETTING PRICES RIGHT

Singapore has come a long way from its early role in the 1890s as a storage and trans-shipment centre for kerosene in the colonial Far East. The first bulk oil cargo destined for Asia was loaded on to the Samuel brothers’ storage tanks in Pulau Bukom in 1892; the vessel Murex brought the cargo from Batum, an oil port in the Black Sea, via the Suez Canal, which was newly opened to oil traffic. Shell established a strategic Far East distribution site for refined oil products with a storage facility in Pulau Bukom, an offshore island south of the main Singapore island.

Each country's specific evolving pattern of energy-economy interactions will determine how various proposals on greenhouse gas (GHG) emission reductions will impact the economy. In preparing their negotiating positions, governments need to be informed of quantitative impacts on costs, prices, and export competitiveness, both at the sectoral and national levels. Planning agencies typically implement computable energy-economy models to deliver informed assessments of the probable impacts of various policies on emission mitigation and energy technology choices.

While quantitative estimates of various energy-economy models set a “baseline” of expected impacts that planning agencies need to know, negotiations in a strategic context, where one party's optimal choice is a function of the choice of other parties, are the focus of games-theoretic models in economics. Climate change is posed in these models as the ultimate global commons problem, with damages imposed on life and property globally being independent of the actual location of GHG emissions anywhere on the planet. Strategic behaviour is inherently hard to model, however, and game theory models are often highly abstract. However, a summary of the main results of the literature is useful in framing the overall context of United Nations Framework Convention on Climate Change (UNFCCC) negotiations.

Given that participants to an international environmental treaty are sovereign nation-states in the United Nations (UN) system, and given the absence of a supranational judicial institution with enforcement powers, the incentives to free ride would be strong for all participants. Given free ride incentives, countries will see advantages in being the last to commit to policy targets, hence risking coordination failure in negotiating agreements. In a large group (such as the UN), the incentives to free ride make the existence of a universal agreement, of net benefit to all countries and in stable equilibrium, highly unlikely. It is more likely that self-enforcing agreements emerge among limited groups of countries within different coalitions of different sizes. Since a global binding agreement is unlikely to be signed by all countries, a more credible scenario is that several parallel agreements emerge over time, much like the case in current international trade and economic cooperation negotiations. The failure in concluding World Trade Organization (WTO) agreements over a range of issues has led to continuous multilateral summits and negotiations for regional economic integration and a multiplicity of investment and trading agreements and blocs.