Economic Reform When the Constitution Matters: Indonesia's Constitutional Court and Article 33 of the Constitution

Abstract:     
Article 33 of Indonesia's Constitution requires the state to 'control' important branches of production and natural resources. The meaning of 'control' has been a matter of significant debate since Indonesia's independence: does it require the state to manage directly, or is regulation enough? The government has recently sought to break down government monopolies and attract private investment in key sectors. To this end it has enacted a raft of new statutes, but they have been challenged in Indonesia's new Constitutional Court. The court has opted for the 'direct management' interpretation of article 33, striking down statutes that implicitly interpret it as requiring government regulation only. This paper discusses these decisions and, more broadly, problems arising from judicial intervention in economic policy formation. It also considers how the government has sought to circumvent the decisions, and the possible consequences of state non-compliance for the court's future.

Keywords: Indonesia, law, constitutional law, judicial review, comparative law, economic policy

JEL Classifications: K10, K30

Accepted Paper Series