Living with Oligarchy: The Clothing Business in Provincial Indonesia Rochman Achwan

1. Living with Oligarchy: The Clothing Business in Provincial Indonesia Rochman Achwan Department of Sociology Faculty of Social and Political Sciences University of Indonesia, Indonesia

2. Previous Theories on Indonesian Economy The State (Schiller and Schiller, 1997) The Market (Papanek, 2006) The Culture (Geertz, 1963) Guiding Theories Politico-business oligarchy Embeddedness

3. Politico-business oligarchy The thesis of politico-business oligarchy provides a concrete and empirical explanation of historical power struggle within the economy and between economic and state actors. The state and its officials are highly embedded in the economy which consists of large corporate capital, play crucial roles in shaping contemporary Indonesian history (Robison, 1986: 9).

4. Embeddedness Fred Block and Peter Evans (2005) view that the state, the economy, and the society are mutually embedded. And this embeddedness is dynamic and it changes overtime through institutional innovation that may be led by the state, the industry or the society. Moreover, the embedding three institutions may bring about positive and negative consequences for economic performance.

5. Ideal Embedding State, Economy and Society (Block & Evans)

6. Central Questions The thesis of politico-business oligarchy and the thesis of embeddedness. The disappearance of economic power of provincial clothing entrepreneurs – as oligarchy thesis found – has brought about different processes of extension, depletion, and move out of clothing business networks. Personal business networks – not power networks - have become a dominant organising principle of clothing business in the province.

7. Site of Research Bali and Pekalongan (Central Java). Both are historically the strongholds of clothing producing areas. Bali and Pekalongan were dubbed respectively as success and failed stories of liberalisation of clothing industry in the 1990s and 1960s.

8. The Concept Elaboration of the theses of politico-business oligarchy and embeddedness

9. Local Institutional Issues Industrial Organisation The Typology of Clothing Entrepreneurs Decentralised and Centralised Power Relations

10. Industrial Organisation Pekalongan clothing industry Two types of organisation: hierarchical (large) and assembly (medium & small enterprises).

11. The clothing industry in Bali Long-established organisation of assembly enterprises.

12. The Typology of Clothing Entrepreneurs Engagement in trading before entering the clothing industry and Voluntary decision to become a clothing entrepreneur are more important than other typology of entrepreneurs in securing strategic positions in the textile/clothing economy

13. Decentralised Power Relations In the post-Soeharto era, the organisation of the Pekalongan clothing industry has been transforming from a hierarchical structure into an interdependency of actors running different sized enterprises.

14. Two dominant business relationships in Bali Personal business relationships Informal business group

15. State Policy and Large Clothing Firms ACFT agreement in January 2010 Tax incentives Modernisation of production machinery

16. Matrix: Embedding State-Capital

17. Concluding Remarks Weak institutional embeddedness Narrrow and unstable business networks Crisis of embeddedness

18. Elaboration The thesis of politico-business oligarchy and its reconstitution in the post Suharto era are not only important to identify the dominant operation of macro institutions but also the operation of power relations in Indonesia. The oligarchy thesis informs how the historically predatory dominance of state-capital has made the feebleness of economic power of provincial clothing entrepreneurs.

19. The weak institutional embeddedness that characterised structural relationships between state-capital and provincial entrepreneurs has brought about the latter to form narrow and unstable business networks. Such type of networks is not durable and easy to be destroyed by waves of economic uncertainty. This is why provincial entrepreneurs unable to significantly innovate their technology and business relations. Crisis of embeddedness becomes a major feature of current Indonesia’s clothing industry. This crisis is marked by the emergence of unusual state-clothing industry alliance to resist global pressures.