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Globalization and the role of local governments : case study of the Surabaya metropolitan area in Indonesia

University of British Columbia

The central government of Indonesia has played a central role in planning and implementing economic policies to attract and utilize foreign investment for industrialization. At the same time, the government has been trying to promote decentralization since the early period of independence. However, the two policies of national economic development and decentralization are sometimes in conflict because of institutional contradictions and the balance of power and responsibilities between central and local government. With this background in mind, the research question of this thesis concerns the linkage between decentralization policies and Indonesia's links with the global economy. To find out an answer to this research question a field study was carried out in the Surabaya Metropolitan Area (SMA), which is the second largest metropolitan area in Indonesia. The case study demonstrates the crucial role that foreign investment plays in local economic development. Foreign investment activities, including both foreign direct investment (FDI) and ODA, have propelled metropolitan population growth and rapid urbanization due to the expansion of jobs and the attractiveness of the SMA to rural migrants. Through such foreign based development projects, local governments and local enterprises have their own linkages to the world economy (especially overseas investors). In turn, the autonomy of local governments has begun to increase, although as yet this can be seen only to a limited extent within Indonesia's 'delayed' decentralization framework. The impact of the global economy on Surabaya has not only a positive economic aspect, but also adverse environmental and social aspects, although these last two aspects have been mainly an indirect result of foreign investment. Governments have to make clear frameworks which can address the critical influence of the global economy on local communities. However, decentralization policies in Indonesia have to be considered in relation to national and local circumstances. Hence, while maintaining its centralized government structure to some extent at least, the Indonesian government should clarify the responsibilities of each level of government within the country's two tier structure of local governance and strengthen the necessary functions of each level of government.

Thesis/Dissertation

application/pdf

2009-03-25

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http://hdl.handle.net/2429/6524

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