Structural power and investor mobility: Capital control and state policy in Indonesia, 1965-1990

A theory of the structural leverage of private investors is developed through a case study of changing business-government relations in Indonesia during the twenty-five-year period spanning 1965-1990. Emphasizing the political power manifested in the rapidly expanding ability of mobile investors to relocate their capital across national and sub-national jurisdictional lines, this dissertation explores the constraints mobile investors can present to policy-makers who lack substantial resources to replace those controlled by private actors. Important elements of the analysis include variations in mobility among capital controllers, increasing pressures on jurisdictions to compete with each other to attract and retain mobile investment resources, and factors affecting the willingness and ability of different jurisdictions and their policy-makers to respond favorably to structural pressures. Major oscillations in Indonesian policy between a system of allocation of investment opportunity based on markets and based on the discretion of officials is explained by the relative exposure to and insulation from the structural leverage of mobile investors. Direct state access to oil-boom resources which could replace those supplied by private investors is a key factor in the state's declining responsiveness to capital controllers. Case studies examined for the periods before, during, and after the oil boom include the 1967 Investment Conference for Indonesia (the New Order's first major effort to attract investors after the fall of Sukarno); the Pertamina collapse of 1975; the rise of Team 10 (Tim Keppres 10), the government procurement operation through which patrimonial relations in Indonesia were nourished and solidified; and the Tax Reform of 1984.