Transport and the rural economy: Institutions and institutional change in Ambeso Village, Indonesia

© 2007 Victoria University of Wellington doi: 10.1111/j.1467-8373.2006.00316.x

Asia Pacific Viewpoint, Vol. 48, No. 2, August 2007ISSN 1360-7456, pp200–218

Transport and the rural economy: Institutions and institutional change in Ambeso Village, Indonesia

William Sabandar

Department of Geography, University of Canterbury, Private Bag 4800, Christchurch, New Zealand.Email: [email protected]; [email protected]

Abstract:

This paper is concerned with the interaction between transport improvements and therural economy. An institutional approach, based primarily on the new institutionalism theory, wasused as the theoretical basis for the analysis. Using the evidence from Ambeso Village of Tana TorajaDistrict, Indonesia, the paper examines the way transport improvements have been introduced andprovided opportunities for positive change as well as individual responses to these opportunities.The paper ends by emphasising the role of institutions in the interaction between transport and therural economy and the need for transport policy and research to transcend its traditional boundariesand address the complexities of institutions and institutional change.

Keywords:

Indonesia

,

institutions

,

rural economy

,

rural transport

,

Tana Toraja

provide opportunities for changes and how ruralindividuals respond to those opportunities areanalysed. The fourth section discusses the casestudy, incorporating the institutional frameworkinto the analysis. Finally, conclusions are drawnto emphasise the role of institutions in the inter-action between transport and the rural economyand the need to take this principle into accountin the formulation of transport studies andpolicies.

Linking rural transport to the new institutionalism

Clarifying the roles of transport improvementsin promoting the rural economy is one of themain challenges in rural transport studies(Howe, 1996; Leinbach, 2000). Wilson (1973)provides a milestone in this field by distinguish-ing two essential stages in the relationshipbetween transport and economic development:one is the role of transport improvements increating economic opportunities, and the sec-ond is the awareness and capacity of individualsto respond to these opportunities. Althoughtransport studies have given enormous attentionto the former, very little attention has been givento the latter. The orthodoxy in transport studies,rooted in the neo-classical economic theory,

Despite some efforts in the rural transport fieldover the last two decades to improve the under-standing of the linkages between transportimprovements and the rural economy, thedynamics of the relationships are still hardlyelaborated (Leinbach, 2000; Rigg, 2002). In anattempt to fill the gap, this paper aims to exam-ine such dynamics by means of a micro-levelanalysis applied in the case of Ambeso Village,Indonesia. Two key issues, based on a two-wayperspective of the relationship, are examined.From the transport perspective, the issue is: towhat extent do transport improvements provideopportunities for rural communities? From therural economy perspective, the question is: towhat extent does the rural population respondto the opportunities brought about by transportimprovements? The paper is structured in fivesections. In the first section, the application ofthe new institutionalism theory into this analysisis discussed. In the second section, the devel-opment context of Tana Toraja District sets thescene for the village-level analysis. The thirdsection discusses the case of Ambeso Village.The process of transport improvement in thevillage is presented and the way this processwas shaped by state and societal institutions isanalysed. Working further with the case ofAmbeso, the ways that transport improvements

Transport and the rural economy

© 2007 Victoria University of Wellington

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assumes that individuals are hyper-rational, sotheir awareness of transport improvementswould be automatic and their response toopportunities created by a transport improve-ment would always be positive. The fact thatpeople live in different economic circumstancesand have different mental constructs owing tothe different paths of the human learningprocess and, therefore, are likely to respond totransport improvements in many different ways,have been widely overlooked by transportresearch.

The new institutionalism offers a theoreticalplatform to more appropriately understand thelinkage between transport and the rural econ-omy, mainly through its institutions and institu-tional change perspectives. Institutions, bothformal and informal, provide the framework ofincentives that guide human interaction (North,1990).

1

Human interaction is shaped by themental constructs of individuals that evolvethrough the human learning process, and is afunction of (i) the information derived fromexperiences filtered by institutions and (ii) thedifferent experiences confronting individualsat different times (North, 1997). Institutionalchange is the outcome of human interactionthat may lead to the widely divergent perfor-mance of economies (North, 1990). In addition,North distinguishes institutions from organisa-tions (although both serve to structure humaninteraction) and illustrates institutions as therules of the game and organisations as theplayers involved in the game. The interactionbetween institutions and organisations shapesinstitutional change in two main ways. First,institutions determine the opportunities avail-able in a society. Second, organisations are cre-ated to take advantage of those opportunitiesand, as the organisations evolve, they influencethe direction of institutional change. North’sinstitutional paradigm clearly links to Wilson’sconcern of the two stages of transport and eco-nomic development linkages.

North’s theory may serve as an entry point forlinking rural transport to the new institutional-ism. A more specific framework can be devel-oped based on the question: how can the linkbetween transport improvements and the ruraleconomy be understood using the new institu-tionalism theory? The link is two-sided. It doesnot just recognise how transport improvements

affect the rural economy, but also that the ruraleconomy may shape the way transport develop-ment is promoted (Fig. 1). The institutionalframework elaborates the role of institutions inpromoting transport improvements in relationto changes in the rural economy. In turn, theframework helps us to understand the changingnature of the rural economy more effectively forthe proper design of transport improvements.Several tenets of the new institutionalism suchas: (i) problems of dysfunctional institutions; (ii)problems of transaction costs; (iii) asymmetriesof information; (iv) social norms and resourceendowments; and (v) technological change canbe incorporated into this framework as the nextillustration of the rural transport developmentprocess reveals.

First, the institutional framework indicatesthat the linkages between transport improve-ments and the rural economy are shaped by theinstitutional environment within which, and thedifferent processes through which, the twointeract. Different societies would have differentsets of institutions (North, 2000) that affect theway transport development is promoted and theway it influences the rural economy. Transportpolicy-makers would make a decision based onthe information they have, which depends onthe institutional mechanisms enabling suchinformation to arrive on their desk. Further-more, the decision over transport investmentmight also be affected by political interests ormoral hazard problems, through which theinvestment is unfairly allocated to the regionthat best serves the political or economic inter-ests of the policy-makers. This outcome mightoccur if the state has poor mechanisms toenforce law and order in the development pro-cess (see Bardhan, 2001). In relation to this, the

Figure 1.

Transport improvements and the rural economy: an institutional framework

Assymmetries ofinformation

Social norms andresource endowments

Technological change

Problems of dysfunctionalinstitutions

Transportimprovements

The ruraleconomy

Problems of transactioncosts

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W. Sabandar

institutional analysis offers tools for analysingincentive models for an effective rural transportdevelopment process. The institutional view, forexample, acknowledges that the provision andmaintenance of transport infrastructure shouldnot be based on market demand, but on thecapabilities of institutions in managing the infra-structure (Schroeder, 1997).

Once rural transport investment is put inplace, one cannot assume that any opportuni-ties opened up by this investment would beevenly distributed among rural people. Rather,those who possess better information about thatopportunity (which can be a function of bettereconomic capability, education, social status orpolitical power) would respond to it more effec-tively, compared with those who did not. Forexample, the improvement of rural roads mightincrease the accessibility of rural people to theurban market. This is, however, not a guaranteethat farmers would be able to sell their agricul-tural produce in that market with a higher profit.Asymmetries of information about prices andother possible markets for the produce (Hoffand Stiglitz, 1993), in addition to high transac-tion costs due to the lack of any guarantee ofthe rights of farmers over their produce (Dor-ward

et al

., 1998), can even lead to the margin-alisation of farmers. All these factors affect thelinkage between transport improvements andthe rural economy.

The institutional approach also recognisesthat different regions would have differentresource endowments that result in differenttransport conditions and different characteris-tics of the economy. Platteau (2000), inspiredby Boserup’s pioneering studies, formulates thisrelationship with specific references to popula-tion density and societal norms. Low populationdensity of the region leads to long distancesbetween rural people and their market. Trans-port costs are high, which leads to high trans-action costs and agricultural marketingchannels stay ill-developed and subject to a lowdegree of competition. In this situation, the mar-ket may therefore fail to emerge or alternatively,natural monopolies may become establishedwith the consequence that farmers suffer fromhigh transaction costs. In addition to populationdensity, moral norms embedded in societieswould shape the trajectory of change and affectthe process of economic development (Platteau,

2000). In societies with bad civic records, forexample, even if formal institutional changesare adequate, social norms will move slowlyand the efficiency of the economic perfor-mances will improve only over decades.

What is more, the institutional frameworkunderstands that the interaction betweentransport improvements and the rural economyis evolutionary and path-dependent. Redmond(2003) views technological improvement as adiffusion process, characterised by a time lagbetween the introduction of an innovation andits adoption by a given individual. Many ruraltransport studies have indicated that adoption ofmotorised technology by rural people in devel-oping countries varies between regions, and isaffected by the local context (see, for example,Starkey, 2001; Porter, 2002). Redmond (2003:677) concluded that ‘individual’s reactions to thenew (technology) depend upon their particulareconomic history and their actual alternatives;hence institutional change is not the result oftechnological determinism but rather is a path-dependent process of cumulative causation’.

The institutional framework also enables usto critically examine the role of the state increating the institutional environment condu-cive for effective rural transport development.Ostrom

et al

. (1993), Schroeder (1997) andLeinbach (2000) provide enlightening entrypoints to this issue. These authors criticised theway transport infrastructure in developing coun-tries has been managed. Donor agencies andnational governments have individually acted toinvest heavily in building transport infrastruc-ture, neglecting the aspect of maintenance. Asa result, much of this infrastructure has deterio-rated to the point where substantial new invest-ments are needed. There has been an unclearinstitutional arrangement in the transport sectorassociated with the incentives facing stakehold-ers in the overall process of rural transport infra-structure development (Schroeder, 1997). Thechallenge is to provide and develop incentivesystems that will allow us to deliver transportimprovements that lead to relatively efficientand equitable outcomes (Leinbach, 2000).

Development context of the region

It is important to understand the developmentbackground of the region before going into a



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more detailed village-level analysis. AmbesoVillage is located in the Tana Toraja District inupland South Sulawesi Province, 300 km to thenorth of Makassar, the capital of the province.The region has long suffered from economicand political marginalisation because of loca-tion, religion and a diffuse power structure(Adams, 1995). Tana Toraja, given its land-locked situation, had long been isolated fromexternal markets. The majority of the Torajaneseare Christian, a minority religion in SouthSulawesi and Indonesia. In addition to theseconditions, the political bargaining power of theTorajanese has been much weaker comparedwith the Buginese and the Makassarese, the twomajor ethnic groups in South Sulawesi (Andaya,1981; Waterson, 2000).

Institutional context

Before the penetration of the modern state intothe Toraja highlands, the Toraja custom hasguided the interactions among the population.Solidarity and cooperation were central to thiscustomary institution, as expressed by its tradi-tional motto of ‘with one vision we will live, butwith diverse vision we will perish’ (

misa’ kadadi patuo, pantan kada di pomate

). The institu-tional arrangement was based on a kinship sys-tem at the local level and a federal system atthe middle and top levels. The lowest commu-nity organisation in the traditional Torajan soci-ety was called

Tongkonan

, which is a group ofhouseholds (

Banua

) tied by a strong and hierar-chical family relationship. Above

Tongkonan

,the next levels of community organisation werebased on a federal system:

Bua or Tondok

(afederation of

tongkonan

),

Lembang

(a federationof

bua

or

tondok

), and federations of

Lembang

.The nature of the relationships between thesefederal organisations was different, dependinglargely on the leadership capability of the head-men of the organisations. Warfare between

tondok

was not rare, but twice they united toface the invasions from Buginese armies in thelate seventeenth century (Andaya, 1981) andthe Dutch colonial forces in 1906 (Adams,1995). Nowadays, although Toraja custom is notrecognised in the formal administration system,its value system is still strongly acknowledgedamong Torajanese transcending the administra-tive boundaries of Tana Toraja District.

2

In 1906, the Dutch colonial regime, the firstmodern institution penetrating into the custom-ary community of Torajan society, forced theabandonment of the practice of customaryinstitutions. The customary community systemwas replaced by a territorial and administrativesystem. Distributed political power in the formof federations of

tongkonan

groups becamehighly centralised power in the hands of theDutch East Indies government. Two towns,Makale and Rantepao, were built as theregional centres for the centralised Dutchadministration. Likewise, Christianity, a modernreligion, was introduced into the society, andthe traditional religion that had historicallybeen associated with the indigenous socialnorms was rejected by the Dutch ReformedMission, GZB (Ngelow, 2004). Understandably,any improvement including transport was toassist the Dutch East Indies government andGZB in controlling the region and introducingthe Christian faith, respectively.

The institution of the independent Indonesia,best represented by the New Order government(1966–98), continued to override the Toraja cus-tom. The introduction of Village AdministrationLaw in 1979 (Law 5 of 1979) formalised villageorganisations and subordinated villages to thecentral government structure. This law is a clearindication of the rejection of local social normsin development practice.

The Indonesian Reform government (1998–present) with a decentralised regional auton-omy law (Law 22 of 1999) has provided peoplewith a greater say in development. In TanaToraja, the introduction of District Law 2 of2001 following Law 22 of 1999 has changedthe village institutional arrangement based onLaw 5 of 1979, bringing more control of devel-opment to the people. It is, however, still tooearly to provide an evaluation of this change.But, given some recognition of the customaryinstitution in the District Law, one might expectgreater participation of customary organisationsin the development process. In addition, it is notan easy task to change the mental model of thecommunity from top-down state-driven devel-opment to development initiatives based oncooperation between the state and the people.Again, the process of institutional change isevolutionary, and the outcomes may not beseen within this generation.

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Transport improvements

Before modern roads came into the region, thepeople were mainly subsistence agriculturalistsrelying on wet rice production and upland drycrops such as cassava. Transport activitieswere mainly internal to the village territory. Thesignificant increase in coffee cultivation in TanaToraja in the late nineteenth century, inresponse to the growing demand of the interna-tional coffee market, stimulated a few externaljourneys from and into the region. Tana Toraja,as one of the centres of coffee production inSouth Sulawesi, was easily integrated into abroader South Sulawesi transport network. At

that time, the Sulawesi transport network wasformed mainly by earth tracks connecting tosome outlet ports. Bigalke (1981: 35) identifieda network of coffee traders connecting TanaToraja with the three main ports in SouthSulawesi: Bungin and Pare-Pare in the south andPalopo in the north (Fig. 2a). Coffee trading,however, was dominated by Buginese traders.Transport from the production centre to thosethree ports was conducted by both horse andhuman power. In the late nineteenth century, itnormally took 1–2 months for a return trip toand from those ports (Bigalke, 1981). Beyondthe three ports, coffee was transported by tradi-tional sailing ships to Makassar. The landlocked

Figure 2.

Ambeso and the South Sulawesi transport network

Source:

Base map from US Defense Mapping Agency (1992); additional data of (a) from Bigalke (1981: 35), of (b) from Bappeda Tana Toraja (2001).



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situation of Tana Toraja, accentuated by theexercise of political and economic power by theBuginese traders over the regional market inSouth Sulawesi, insulated the Torajan farmersfrom information about the regional coffeemarket. This situation led to imperfections in thecoffee market, resulting in marginal gains for thecoffee farmers (Bigalke, 1981).

The road network connecting Toraja high-lands with the lowlands was initially built in theearly 1900s by the Dutch East Indies govern-ment. Some of the road network overlappedwith the coffee trading routes. The Dutchneeded that road to strengthen their politicalcontrol over the upland region. A gravel roadwas built and it was gradually improved by theIndonesian government for use as the mainSulawesi road network. During the Soekarnoperiod (1945–66), the road network was practi-cally unused owing to the rampant ‘rebellionactivities’ in the region. The Soeharto adminis-tration (1966–98) successfully stabilised thispolitical unrest and continued the developmentof the road network. In the early rehabilitationof the Makassar–Toraja road in the 1970s, thejourney by bus from Toraja to Makassar mighttake 1–2 days. By the 1990s, the equivalent triponly needed 8 hours (Fig. 2b).

The case of Ambeso village

Ambeso, located in south-west Tana Toraja(Fig. 2), is a customary village extending fromtime immemorial. Long before any moderninstitution came into the region, an autonomouscustomary regime had been established, guid-ing the interaction of the population. The vil-lage’s existence as a separate legal territorialunit was finally acknowledged in 1998, with thebirth of the Indonesian Reform Era. During thecolonial period (1906–45), the Dutch adminis-trative system combined this customary com-munity with two other customary villages,under the name of Gandang Batu. GandangBatu was, in fact, another customary village,adjacent to Ambeso, but closer to the regionaladministration centre. This Dutch structure wasalso imposed by the central government ofIndonesia during the independence era, until anew village administration law was introducedby the Soeharto government in 1979 (Law 5 of1979), which was not substantially different

from its predecessor. Based on this law, a newadministrative boundary of Gandang BatuVillage was drawn, but the customary village ofAmbeso was still part of it.

Tensions between elites and people from bothcustomary villages have been undeniable giventhe fact that Gandang Batu people gained manyadvantages from that system (i.e. the villageoffice was in Gandang Batu, the village headswere always Gandang Batu men and publicfacilities were mostly built in Gandang Batu).Political struggle by Ambeso people eventuallysucceeded in separating their village fromGandang Batu in 1998. Later on, with the imple-mentation of Law 22 of 1999, which abandonedLaw 5 of 1979, the District Government of TanaToraja introduced a new village system (TanaToraja, 2001). This system provides greaterautonomy for the village communities in man-aging their village affairs. One breakthrough isthe direct election system used to elect a villagehead and a village council to control the author-ity of the village head. In 2002, for the first time,members of the village council of Ambeso werepublicly elected followed by an election for thehead of the village. The long history of Ambesoincorporates institutional change from a villagecontrolled by strong traditional norms to onewith formal written rules.

Transport improvements

Two feeder roads connect Ambeso with theregional arterial road (Fig. 3). One is the mainfeeder road, ‘horizontally’ reaching the mainroad at Mebali (henceforth denoted as theMebali–Ambeso road). The second (signified asthe Sudu–Ambeso road) approaches Ambesofrom the south through Sudu, another villagelocated on the main road. The former road fullybelongs to Tana Toraja District, whereas thelatter is predominantly part of Enrekang District.As Ambeso is administratively a Tana Torajavillage, the Sudu–Ambeso road has mainly beentreated as a ‘back route’ in the district transportsystem. No reliable information was found toindicate when these two routes were firstopened, but from Bigalke’s study of trading net-works (Bigalke, 1981), both paths were possiblyrelated to the coffee trading network in the past.

The Mebali–Ambeso road was initially grav-elled in the 1920s. The Dutch used that path to

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W. Sabandar

strengthen their control over the south-westregion of Toraja. As the road penetrated, a tra-ditional market was gradually formed in BuntuHamlet (denoted by Buntu Market in Fig. 3). Themarket served communities in the south-westregion of Toraja, mainly by, from and for them,but the continuing integration of the region intothe regional coffee trading network increasedthe attractiveness of the market to outside trad-ers. Transport of people and goods was carriedout by walking and horses. Horses were mainlyfor goods transport, but people who did notown horses would carry their own goods bywalking. At that time, motorcycles and carswere only found in two Tana Toraja towns,Rantepao and Makale, and were used by thecolonial government officers.

The Mebali–Ambeso road was again gravelledand widened to four metres in 1968, early inthe New Order Era, as part of the systematiceffort of the new Soeharto government tostrengthen their security control over the region.

People from areas surrounding the road, includ-ing Ambeso, were mobilised to work on the roadproject under the coordination of the Indonesianarmy. The road was then passable for trucks inthe dry season. In 1984, this road started toreceive formal attention from the District Gov-ernment of Tana Toraja, and was given newstatus as a district road. In 1985, an asphaltpavement was introduced through macadampenetration construction. This steady improve-ment of the Mebali–Ambeso road took place for15 years, and by the end of 2000, the 15 kmroad was completely sealed. Apart from districtbudget, central government funds were also putinto this road. The money allocated from thelatter budget to this road was spent mainlybetween 1990 and 1995, when the head of thedistrict of Tana Toraja was a Gandang Batu man.

Until the end of 1985, transport betweenAmbeso and Mebali was mainly by walking(horses were used for carrying goods). Publictransport started operating on this road in 1986.

Figure 3.

Ambeso Village (April 2002)



207

Travel time from Buntu to Mebali was 3 hours,which meant that a return trip could only bemade once a day. With the improvement of theroad, transport became easier and faster,although not cheaper. Travel time to Mebali hasbeen reduced significantly to only 30 minutes,which allows a minibus to make three to fourreturn trips during Market Day. On normal days,the demand for travel is low, reducing the num-ber of public transport vehicles operating onthis route to about 10–15 and the maximumreturn-trip frequency for each vehicle is two.

Road improvements also lead to an increasein the number of motorised vehicles owned byAmbeso people. Before 1990, no motorisedvehicle was owned by the people, but manyhouseholds owned horses to support their trans-port needs. In the mid-1980s, the number ofhorses reached 250. With road improvement,residents started to sell their horses to people inmore remote villages. The first motorcycleowned by an Ambeso person arrived in 1990,and then people started to think about having amotorised vehicle. In 2002, 10 motorcycles andeight cars/trucks were owned by the villagers.Horses were hardly found.

The other feeder road connecting Ambesowith the main road, but through another side ofthe village to the south, is the Sudu–Ambesoroad. The road length is 28 km intersecting themain road at Sudu Market, the regional marketof Enrekang District. The 23 km of this roadwithin Enrekang District has been fully pavedsince 1999. Ironically, the 5 km of road on theTana Toraja side was still impassable for a stan-dard motorised vehicle because of relativelysteep gradients. The District Government ofTana Toraja was reluctant to improve that partof the road because of its potential to facilitatethe infiltration of Sudu Market into the south-west regional economy, drawing it into theEnrekang District mainstream. In terms of trad-ing activities, Ambeso is closer to Sudu than toany of the other regional markets in Tana Toraja(e.g. Mebali/Rante Kalua, Makale andRantepao). The Sudu traders, who are mainlyBuginese, have traditionally been well knownfor their high capacity to buy agricultural pro-duce from Torajan farmers. They have good linkswith regional markets in Makassar and Kaliman-tan. The economic link between Ambeso andSudu, although long established, has become

more substantial since the emergence of theSudu Market in the 1960s. Surplus agriculturalproduction from Ambeso is better accommo-dated at Sudu Market. In the 1980s, Sudu wasthe main regional market for Ambeso people.Transport to Sudu was mainly carried out byhorses. Even nowadays, most farmers preferSudu as their regional market. The transportconnection can be made either through theimproved Mebali–Ambeso road or the tradi-tional Sudu–Ambeso road. For the latter, Amb-eso people need to hire trucks or walk to theborder to pick up the Enrekang public transportthere.

Following the improvement of the road toMebali, other rural facilities and technologieswere introduced to Ambeso. Public electricityentered the village in 1996. By 2000, the pro-portion of households with public electricitywas 28% and 9% owned TV. In terms of agri-cultural production, the first hand-tractorowned by a resident was introduced in 1995.Until 2002, only two were found in this village.Rice production still relies mainly on buffaloand human power for two crops each year. Peo-ple do not have large wet-paddy areas as theregion is hilly, which also hampers the modern-isation of the irrigation system. This is probablythe reason why the hand-tractors are not reallyvalued by the people. The first mechanical ricemill was introduced in 1987, and in 2002 therewere five in the village. A mechanical coffeemill was introduced to the people in 1991, andby 2002 they numbered more than 20. Onefacility built by the government is the school.The first primary school for the village was builtin Buntu in 1986, followed by a junior highschool in 1987. Before that time, parents senttheir children to a primary and junior highschool in Gandang Batu, which is about 8 kmfrom Buntu. Another facility that came into thevillage is the local bank. A local Toraja bankbuilt a branch in Buntu in 2001, creating betteraccessibility for Ambeso people to ‘bankingfacilities’.

Rural change

The following analysis refers to Wilson’s (1973)second hypothesis: how have rural peopleresponded to opportunities created by thetransport improvements in Ambeso Village?

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W. Sabandar

First, road improvements can directly create jobopportunities for local people through theirinvolvement as labourers on the road project.This, however, was not necessarily the outcomein the case of the Mebali–Ambeso road as con-firmed by one of the village men:

3

My father and many people from this villagewere involved in the construction of this[Mebali–Ambeso] road in 1968. The involve-ment was voluntary under Siliwangi Armycoordination. . . . When this road project wasgiven to contractors [between 1984 and 2002],our involvement became little. The contractorscame from Makale and brought their ownlabourers. They did employ a few of our peo-ple, but there were always tensions betweenoutsider labourers and our people. . . . In therecent project [while pointing to the road infront of his house], the contractor did not payfor some of the work done by our people.

As implied by the quote, employment createdby the construction of the Mebali–Ambeso roadwas hardly sustainable. In the 1968 involve-ment, villagers were ‘voluntarily’ mobilised,whereas during the contractor period villagerswere paid as labourers in the project. In bothcases, the coordination between the rural com-munities and the Indonesian army or the con-tractors was done through the village head. Theweak political bargaining power possessed bythe village head (and the rural people accord-ingly) made them powerless in the road con-struction process. In the last project, moreironically, people were cheated by the contrac-tor who abandoned the project without payingfor some of the work completed by rural people.In addition, none of these types of roadimprovement has involved the customaryorganisation, the role of which has weakenedwith its continuing exclusion from the formaldevelopment process. The idea of communityparticipation in these two cases of transportimprovement can be said to be losing itsessence as people were involved mainly asobjects, rather than a subjects, of development.

Second, apart from direct employment, betterroads also create greater opportunities for otherindirect non-farm employment. In 1985, almostall households lived by agriculture alone. By2002, there were about 60 households (10%)that relied on non-farm employment as the

main source of income. Most of them, however,still did farming for home consumption.

The operation of public transport on theMebali–Ambeso route has created new non-farm employment for Ambeso people. In 2002,six passenger minibuses were owned byAmbeso residents, which meant the creation ofat least 12 jobs (six drivers and six conductors).The minibuses were owned by three familieswho then employed their relatives as drivers andconductors. None of the owners actually oper-ated their vehicles, as they preferred to work astraders. The driver and conductor were not paidon a wage basis. Normally, they shared 25% ofthe net profit of the daily minibus operation.

4

This is, however, not enough to fulfil theirhousehold consumption needs. This reflects alack of information on, and access by rural peo-ple to, a fair contract system in public transportoperations and for other non-farm jobs. In thissituation, support from other family memberssuch as wives and children who mainly workon-farm is very important for the household’slivelihood.

It is also interesting to note that opportunitiescreated for public transport operations in theMebali–Ambeso route were responded to morequickly by urban people. More than half of thepublic transport vehicle owners lived in Makale.They were mainly ex-Ambeso or ex-GandangBatu people, working in various urban sectorsin Makale and operating public transport astheir second or third source of income. Thedrivers and the conductors were, of course,those who lived in Makale.

Another source of non-farm employmentopened up by the road is ‘white-collar work’with either government bureaux or private com-panies. With three primary schools and onejunior high school, 31 teachers were working inAmbeso schools. From this total, six teacherswere originally from, and still live in, Ambeso,six teachers have moved to Ambeso (tempo-rarily) to get closer to their workplace, whereasanother 19 teachers lived outside the village.This is another indication that rural opportuni-ties are more progressively taken up by non-rural people. The new local bank similarlycreates employment. An Ambeso woman, whograduated from a university in Makassar in1990, returned home after failing to get a jobthere, and found work in that bank. She was still



209

living with her parents and contributing to thehousehold expenditure.

Being a trader is another type of non-farmemployment enhanced by road improvementsas illustrated by the story of the Ullan family.The family was traditionally an agriculturalhousehold living in Ambeso. In the late 1980s,Ullan was asked by a trader in Sudu to be anagricultural collector in Ambeso. Since then,Ullan and some adult members of the house-hold have actively approached local farmers tobuy their produce. Ullan borrowed money fromthe Sudu trader, collected agricultural producefrom local farmers and, once a week, carriedthe yield to Sudu using a truck provided by thetrader. Local farmers enjoyed an advantage.They did not need to transport their produce tothe Sudu Market (which was very difficult at thattime), even though they now had to sell theproduce at a lower price. The farmers, in fact,enjoyed a very small margin from their produceowing to the transport and transaction cost con-straints. Ullan received a bigger margin, and thetrader, of course, was the winner of this game.

Within five years, Ullan experienced a sig-nificant improvement in economic status. In themid-1990s, a new house was built, a new truckwas financed by the bank, a new passenger carwas bought and some of his children started tobecome involved in the business. Profits fromtrading were also used to expand the area ofagricultural land that he owned. Today, one ofhis daughters, Sitta, is the strongest agriculturalbroker in the region. She specialises in estatecrops including coffee, vanilla and cacao. Shehas a very strong network with more than 20people working to collect the farm produce bygoing from door to door. She gives money inadvance to any farmer on the condition that thefarmer sells all their produce to her. Local farm-ers with few resources have no option as theyneed cash to support their livelihood. Somefarmers do avoid Sitta by taking their produceto other traders or markets, but such strategiesdo not make much difference to their returnsbecause of the transport costs, or the possibilityof being trapped by other middlepersons.

What about those who are living by agricul-ture? In general, better transport providesopportunities for cheaper agricultural inputsand improved technology. This reduces produc-tion costs, which then increases the capacity of

farmers to compete in a wider market. Applica-tion of new technology will also increase thequantity and quality of production, which thenenables local farmers to supply more consum-ers. With those factors operating, farmers willgain more profit that enables them to increasetheir consumption and/or income from theirextra production. In Ambeso, improved agricul-tural production, however, does not automati-cally lead to the increased participation of thefarmer in the market economy. Other economicfactors (i.e. agricultural transaction costs andthe rural credit market) brought about by themultiple effects of transport improvements canintervene, as the case of the Bongga householdreveals.

About 500 m from the Ullan family houselive the Bongga family. This family has one hect-are of farm land, which was planted with arange of vegetables, coffee and vanilla. Bonggaacknowledged that his production has slightlyincreased over the last 10 years. In addition, heis now starting to plant vanilla, which is rela-tively new for the villagers.

5

Increase in produc-tion, however, does not necessarily improvetheir welfare. Bongga gave me one example ofhow difficult it is to obtain a livelihood as afarmer in this village.

When it was time to harvest cabbages, heheard from people coming back from SuduMarket that cabbage was sold for 1000 rupiah/kg there. Rather than selling in the local market,where the return was only 500 rupiah and thedemand for cabbages was low, he thought thatit would be a good gain if he could take hiscabbages to Sudu. The next day he and anotherthree farmers took 10 sacks (about 400 kg) ofcabbage to that market. They hired a privatetruck for 150 000 rupiah to travel to the market,and also spent approximately 50 000 rupiah forporters, taxes and food. They were expecting tobring home 200 000 rupiah. The traders inSudu, however, valued their cabbages at only500 rupiah/kg. They said that there were toomany cabbages in the market now. Facing noalternative, Bongga and his friends despairinglysold their cabbages at that price and returnedhome with nothing. That was, in fact, not a firstexperience. They know that the price is alwayschanging but, because the price in the localmarket was low and demand was not high, theyhad to go to the Sudu Market if they wanted to

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sell more produce. Many farmers have chosento let their cabbages go unharvested whenprices were low.

But this is only part of the story. Experiencesof selling such produce as coffee, cloves orcacao are even more bitter. One of Bongga’scomments was: ‘. . . the price was going up anddown. Last year I sold cloves at 80 000 rupiahper kilo. This year, the price was only 22 000rupiah per kilo. This was not a fair price, as Icalculated I would have no profit unless theprice was higher than 25 000 rupiah.’ Coffeewas sold to coffee traders within the price rangeof 2000–5000 rupiah/kg. ‘But, we cannot waituntil the price was 5000 as we need cash tosupport our livelihood,’ he continued. This wasa really unfortunate situation. Farmers werehappy to sell their coffee at the price of 5000rupiah but they probably never knew thatexport quality Toraja coffee is sold at a price of200 000 rupiah/kg in a hotel in Jakarta, the cap-ital of Indonesia.

Another farmer family, Koto, raised the needfor financial support to improve their farmingproduction. But, the presence of a financialinstitution in the village does not guaranteefarmers’ access to credit. He argued:

The local bank is too tough. Our economy isdependent on the vegetable harvest, which isdone only two times a year. If we borrowedmoney today we have to start repaying it nextmonth, something that is impossible to do. Atthat time our vegetables are just growing, andwe have to wait for four to five months to haveour vegetables sold.

From a discussion with an official of the localbank, it was found that the majority of borrow-ers in that local bank are those who work innon-agricultural sectors. They have more capa-bility to provide collateral and to pay the inter-est as it becomes due than farmers. The managerof the local bank said: ‘This is not our intention.The bank was opened in order to improve theaccess of rural people, who are mainly farmers,to financial resources.’

The situation of the farmer struggling withfinancial resources is complicated by the inte-gration of Buntu Market into the urban eco-nomic mainstream brought about by animproved transport network. The market is nowmore open to the outsiders. Traders and buyers

came from all over South Sulawesi. In October2002, for example, coffee and cloves are har-vested in the south-west region, attracting morepotential players to the market. The people fromthe south-west region sold their coffee, cloves,vanilla, ‘tuak’ (palm-wine) and vegetables,whereas traders from outside sold rice, fish,chili, vegetables, tempe and tofu, eggs, pre-pared food, clothes and footwear in the market.

The penetration of market players from out-side the south-west region (e.g. Makale,Rantepao, Sudu, Palopo, Sidrap, Pare-Pare,Pangkep, Makassar and Jeneponto) alters thepattern of exchange. First, urban penetration ofrural markets offers more consumption items tothe local people and increases the competitionamong traders resulting in more competitiveprices for the items sold. Local buyers enjoy agreater variety of consumption goods and lowerprices than 10 years ago. Second, a more com-petitive market pushes farmers out of directparticipation in the market. With the farmers’growing need for cash stimulated by the avail-ability of more and more consumption items,the local farmers are effectively forced to selltheir agricultural produce at prices determinedby the outsider buyers. Higher demands forconsumption items decrease the money avail-able for further production inputs.

Migration patterns have changed slightlysince the road was improved. Before the roadwas paved, Ambeso people who migrated tocities mainly for continuing education andseeking jobs would never think to return home.Now, returning home after failing to get a jobanywhere is much more of an option. Five uni-versity degree holders are now living unem-ployed in Ambeso. One of them said: ‘Noconnections means no jobs. . . . I have sent jobapplications to probably more than 100 places,but without any luck. I even went to Malaysiato seek a job, but the result was nothing. Idecided to go home, as I think I only waste myparent’s money.’ After returning home, this manwith a desire for an ‘urban lifestyle’ is nowhelping his father on the farm.

In addition, with a higher level of educationavailable in the village, the young people nowmigrate mainly after completing their juniorhigh school. Mince, for example, is an Ambesogirl who migrated to Makassar after completingher junior high school in Buntu, five years ago.



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Her mother, who is a widow and lives by agri-culture, could not continue to pay for Mince’seducation. As junior high school qualificationsare not enough for a formal sector occupation,Mince survives by working as a housemaid fora Toraja family in Makassar. The family pays forMince’s further education. She is now in thesecond year in a finance institute in Makassar.Next year she expects to graduate. When askedher plans after graduation, she said: ‘I will firsttry to get a job here [in Makassar]. If that fails,I will go home to seek a job in Makale orRantepao, . . . I do not think going back [toAmbeso] will be a good option. There will beno job for me there.’

Returning home, after a long time living inthe city, can create another tension related toland ownership. According to the village head,the improvement of the road meant that theproblem of land is now more complicated thanbefore. He gave one example:

There is one family, they moved to Palopo fora job 20 years ago. After retirement, theyreturned home and wanted to become farmersagain. When they left, their half hectare of landwas given to the husband’s brother, who thenfarmed the land. Now, they want to regain thatland from the brother, but he rejected theirrequest. He said that he has maintained thatland for 20 years, which means that the landhas been automatically transferred to him.What makes my head ache is nobody wants tocompromise.

6

When asked about the relationship betweenthat problem and the improved Mebali–Bunturoad, the village head replied: ‘Of course, if theroad was not improved, they would never thinkto return home.’

With economic and social life in Ambesobecoming more and more volatile, subject tomore outside forces, tensions emerge (e.g.between off-farm and non-farm employees or,more specifically, between farmers and traders).One cause of the tension is the increasing dif-ferentiation in income and welfare. For exam-ple, the economic gap between traders andfarmers is obvious. In a discussion with a farm-ers’ group, the chairman told me:

We realise that on average the economy ofpeople here has improved, but a few people

enjoy a very great improvement, while themajority of us do not. . . . to be honest, wefarmers have gained little benefit from theroad. The person who gets maximum benefitfrom that road is Sitta and her family. She nowhas a new car and a good house from therevenue of trading our agricultural produce.Farmers are more in need of a strong farmerorganisation and financial support so they donot need to rely on a trader like Sitta.

Discussion: Theorising the linkages

Transport is commonly a pioneering sector inrural development. Its main role is to provideaccess to and within rural areas to facilitate theoperations of other development sectors and togenerate the capacity of rural people to respondto opportunities created by the development.Such a role leads to the popular perception ofa direct and positive link between transportimprovements and socioeconomic develop-ment in rural life. The fact that transport has along and complex connection with the ruraleconomy has been widely overlooked. In reallife, as shown in the case study above: (i) trans-port development is a dynamic process moti-vated by different relationships between stateand societal institutions; (ii) the process of trans-port improvements interacts dynamically withother economic development forces in ruraland urban settings; and (iii) the rural economyis a complex situation that also responds tochanges in these transport and other develop-ment sectors in dynamic ways. These threeprocesses altogether are shaped by differentresource endowments (e.g. geography, climateand natural resources) and different institutions(e.g. customs, traditions and state constitutionsand policies). Out of these emerge different eco-nomic opportunities, creating different paths ofinteraction between players or organisations(e.g. between the rural population and the out-side traders) and resulting in different outcomesfor different rural areas (Fig. 4).

The institutional framework addresses thissituation through the perspectives of institutionsand institutional change. The Ambeso caseshows us how institutions, and the organisationsthat have evolved as a result of the incentivestructure created by those institutions, haveshaped the pattern of transport improvements.The dominant role of the state in the develop-

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ment process, leaving marginal space forsocietal (customary) institutions, has renderedtransport improvements into exogenous forcesinfluencing rural society. In this sense, moderntransport improvements have promotedimposed, rather than an induced, institutionalchange. In addition, the external forces of trans-port improvements have largely represented theinterests of the state, rather than the needs ofthe people. With the low political and eco-nomic bargaining power possessed by Ambeso,it took nearly a century after the first moderntransport intervention, for the 15-km accessroad to be completely sealed.

The dominant role of the state in develop-ment and institutional change is not a peculiarphenomenon. The state plays a great role inpromoting technological development and,therefore, becomes the most important organi-sation in institutional change (Lin, 2000). InLin’s analysis, the state may provide incentivessuitable for positive institutional change inwhich the new opportunities brought about bythe change are equally distributed. The govern-ment, in this sense, functions as an agent thatmaintains the equalisation of development, andguards against the potential for an uneven dis-tribution of the resulting opportunity set. On theother hand, the state can also become an agentthat promotes disequilibrium (e.g. monopoly orcoercive power) in institutional change if it pro-vides too little, or even too much, intervention

in the process of change. In the Tana Toraja andAmbeso cases, the state has failed to ensure thatthe region’s institutional change had a suffi-ciently distributional role. The state with its highbargaining power determined ‘solutions’ fordistrict and village development. On the otherhand, the customary institution of Toraja hasbeen given marginal, or even no, space in thedevelopment process.

Institutions and organisations also determinethe motives for transport improvements as sig-nified by the Mebali–Ambeso road improve-ments. Rigg (2002) mentioned two primarymotives that drive transport development in thecontext of South-East Asia. One is the politicalfactor, which is the need for the state authorityto strengthen its administrative and securitycontrol over its territory. The second is the eco-nomic imperative, which is the need to integratea region into the economic mainstream throughmarket expansion. With respect to political con-siderations, at least four political motives havedriven the improvements of the Mebali–Ambesoroad: (i) the Dutch colonial desire to control thesouth-west region of Toraja in the early 1900s;(ii) the Indonesian government’s idea tostrengthen their control over the regional rebel-lion in the 1960s; (iii) the intention of theDistrict Government of Tana Toraja to take eco-nomic control of the region; and (iv) the desireof the head of Tana Toraja in the 1990s tostrengthen the relationship with his constituents

Figure 4.

Conceptualisation of transport improvements and the rural economy

State Institutions

Transport improvements The rural economy

Changes inthe opportunity set:

(i) agriculture(ii) employment

(iii) produce markets(iv) rural credit(v) land values(vi) migration

Societal Institutions

Resource endowment



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in Gandang Batu. Those motives have appliedat different times, and during those times eco-nomic motives have also influenced the trans-port improvement process. The presence ofBuntu Market and the projection of Ambesointo the regional economic mainstream explainthe interplay of economic motives in this region.Overall, the case of Ambeso has clearly indi-cated that state intervention in rural transportdevelopment is not only driven by economicrationale, but even more by political motives.

The institutional framework is also relevant toelaborate the change in the rural opportunity setin relation to transport improvements. In thecase of Ambeso, changes in the opportunity setcan be unpacked – although in real life they areinextricably related – into several components:(i) agriculture; (ii) employment; (ii) producemarkets; (iv) rural credit; (v) land values; and (vi)migration. These components of rural changehave affected the overall institution of thevillage economy, summarily represented bygreater economic opportunities, but withincreasing economic gaps and social conflictsamong the population.

Changes in agriculture

Before the coming of modern transport intorural areas, agricultural activities were mainlydirected at household subsistence. Transportimprovements stimulate changes in agriculturalproduction opportunities, which are formed bythe interaction between forces from inside therural setting (i.e. farmers and the land resourcesavailable to them) and from the outside (e.g.input suppliers, traders, agricultural equipmentdealers and the rural credit market). A greatervariety of consumption goods available in ruralareas increases the expectations of farmers toimprove their production. In the case of Amb-eso, varieties of seeds and fertilisers were intro-duced into the village as well as machines suchas tractors, rice mills and coffee mills, after theimprovement of the feeder road. These newtechnologies have enabled farmers to diversifyor intensify their production. The agriculturalproduction of the village has slightly increased,and some farmers have moved from subsistenceto market-oriented agriculturalists. This process,however, has been constrained by several fac-tors. One is the resource endowment of the

region. The hilly topography of the village, forexample, has hampered the introduction of amodern irrigation system. Second, informationabout agricultural inputs was lacking and alsoasymmetric in the sense that it differs betweenfarmers. A similar situation has occurred inaccessing credit for agricultural production,which has been accentuated by the difficultiesthat farmers have when dealing with therequirements of the formal rural credit market.Third, high transaction costs due to a lack ofinformation about market prices for agriculturalproduce have hampered the direct participationof farmers in the market, as shown in the casesof Bongga above. Overall, although there ispotential to improve agricultural production,the structural conditions and the imperfect ruralmarket have reduced the possibility for farmersto take advantage of the new agricultural pro-duction opportunities associated with transportimprovements.

Changes in employment

Transport improvements facilitate more non-farm employment opportunities in rural areas.To what extent do rural people benefit fromthose opportunities? The case of Ambeso showsthat those opportunities not only advantagerural people, but also other key-players fromoutside the village. At least four groups of play-ers can be included in this system.1 Rural people, who are mainly farmers. Trans-

port improvements mean more non-farmemployment available for rural people, eitherin direct ways (as labourers on a transportproject or for public transport operations) orin indirect ways (as government officials,traders or workers in private enterprises).

2 People who previously had no or little con-nection with the local rural system. With thelack of information available to the rural peo-ple about the new opportunities, infiltrationof individuals from urban areas or otherregions is unavoidable. White-collar work,for example, has largely been taken by thesepeople as they were well informed about theopportunities and possessed the qualifica-tions needed by those jobs.

3 Rural people who migrated to the cities butcould not gain a good foothold in the urbaneconomy and returned home to local

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employment made possible by road improve-ments. These people, with more knowledgeabout urban lifestyles and more qualifica-tions, have been another group of competi-tors for the new rural opportunities.

4 Rural people who migrated to, and enjoyedhigher incomes in, the city and subsequentlyinvested in business opportunities in ruralareas. These people received better informa-tion about business opportunities that couldbe emulated in their home village. The caseof a private transport operator living inMakale and investing in the Mebali–Ambesopublic transport service is just one example.

Those four types of key-players compete in adynamic way creating the more advanced ruraleconomy, but also contribute to a more com-plex rural situation. Asymmetries of information– the differences in information between, say,the rural farmers and people from urban areas– have created market imperfections in ruralnon-farm employment. The overall rural econ-omy might be improved with better transportconnections, but the reality is that outsiders takean increasing proportion of the income gener-ated locally. This provides an answer to thequestion posed by Vyas (1982: 53): ‘Why couldnot more employment opportunities be pro-vided for the rural poor in non-agriculturaloccupations?’ The Ambeso case shows thatsome rural farmers have succeeded in gainingbetter livelihoods by shifting from on-farm tooff-farm employment. However, such a gain isachieved in a situation where the majority ofthe non-agricultural occupation opportunitieshave been intercepted by the players fromoutside the local rural social organisation.Although the non-farm economy providesopportunities to improve the rural economy, thecritical issue rests on how these opportunitiescan be proportionally directed to the rural poor.

Changes in produce markets

The change in the rural produce market in Amb-eso that has been associated with the introduc-tion of a modern transport system can be wellillustrated by the coffee market. Before the pen-etration of modern transport, the coffee marketoperated by means of poor tracks and a non-motorised transport system. Poor transport con-nections into the upland Toraja region contrib-

uted to the asymmetries of information availableto different market players, leading to an imper-fect coffee market. Bigalke (1981) indicated thatthe price of Torajan coffee in the late nineteenthcentury at the farmer level was 30 Dutch florinsper pikul (60–65 kg), which was very low com-pared with the price on the Holland market.According to Bigalke, the local farmers feltthemselves cheated by the coffee traders, butthey could not do more as the farmers had notrading access to the international market.Asymmetries of information among players inthe coffee market resulted in an imperfectmarket and this situation led to high transactioncosts experienced by the coffee producer. As acomparison, Manado coffee, which was of sim-ilar quality to Torajan coffee, was valued 101.57Dutch florins per pikul on the Holland market(Bigalke, 1981). By assuming that the interna-tional price of Toraja coffee was similar to thatof Manado coffee, it can be said that the totaltransaction costs of Torajan coffee (adding costsfrom the local farmers to the international mar-ket) was 200% higher than its local price.

Has the improved Ambeso transport systemreduced the transaction costs of coffee? In 2002,the price of coffee at the farmer level variedbetween 2000 and 5000 rupiah/kg. The pricesat the collector and exporter levels were about6000 and 7000 rupiah/kg, respectively. This stillindicates high transaction costs (40–250%higher than the local price). The transactioncosts were even much higher if calculated interms of the international retail price, whichreached 200 000 rupiah/kg. The local farmers,however, have little information about the priceof coffee at the collector, exporter and interna-tional retail levels. In other words, the coffeemarket was still imperfect, even after the pene-tration of modern transport into rural areas.

An imperfect market does not just occur inthe coffee market, it also happens in othercommodity markets. The penetration of moderntransport into Ambeso has attracted outsidetraders to the Buntu Market. The outside traderscame to the market with better informationabout regional prices of goods traded in themarket. On the other hand, the local playershave little information about such prices. Localfarmers have no information about how theprices of cloves, vanilla and other crops couldfluctuate in the regional market. Consequently,



215

they suffered from high transaction costswhether they tried to take their own produce tomore distant markets or relied on the outsidetraders at the Buntu Market.

Changes in rural credit

The informal credit market operated by money-lenders, traders, landlords and so forth was theonly credit system available in the traditionalTorajan society. This system offers relatively highinterest rates, given that village people lackedinformation on, or access to, the formal creditsystem. The government of Indonesia, espe-cially since the New Order period, introduceda series of formal credit market organisations(e.g. agricultural credit and small enterprisecredit) for the rural population. Such schemes,however, were normally found in those ruralareas with good access to banking facilities. Thecondition of the rural transport system, there-fore, matters for the effective operation of theformal credit market in rural areas. Manyauthors, furthermore, have widely criticised for-mal credit systems in developing countries asasymmetries that, therefore, provide less benefitto the rural poor (see, for example, Hoff

et al.

,1993). These authors demonstrated the continu-ing prevalent operation of the informal creditmarket in rural areas as the formal credit marketlends primarily to larger farmers who can easilyprovide formal collateral.

As illustrated by the case of Ambeso, ruraltransport improvements have been associatedwith the introduction of the formal credit mar-ket. A branch office of the local and privatelyoperated Toraja bank (Balo Toraja) was estab-lished in the village with the intention of pro-viding the people with better access to theformal credit market. In addition, althoughwithout a branch office, the state-owned bank(

Bank Rakyat Indonesia

, abbreviated as BRI) hasalso operated through an agent in the village tomake government credit available to the peo-ple. This bank, however, is less flexible thanBalo Toraja, in terms of understanding the realproblems of rural borrowers in the region. Forexample, the BRI was strict with the formal landcollateral mechanism (only land with a statecertificate can be used as loan collateral),whereas Balo Toraja may accept land withoutsuch a certificate, but with a legal guarantee

from the village head. This difference is proba-bly unavoidable given that the credit rule of theBRI is nationally standardised, whereas that ofBalo Toraja is more locally based. As most ofthe land in Ambeso has not been formally cer-tificated, BRI credit has been accessed mainlyby a few larger farmers. Meanwhile, the creditmarket offered by Balo Toraja has been morepopular among the middle-class group in theregion.

Although the BRI and Balo Toraja have intro-duced the formal credit market into the village,the informal credit market is still widely oper-ated in the village. This can be seen in the caseof Sitta who, in the position as a middleman,trader and rich farmer, has also played amonopoly role as the village moneylender. Heroperation, with a very flexible lending require-ment (e.g. no collateral is needed for the agri-cultural credit, as long as the produce will besold to her at prices determined by her) hasbeen very popular among the rural poor. Therural poor, mainly owning small areas of landand/or with their land being uncertificated, andlacking information on rural banking facilities,are still isolated from the formal credit marketoffered by the two modern banks. With allthese factors operating, rural transport improve-ments have not necessarily generated a ruralcredit market that meets the needs of the ruralpoor.

Changes in land values

Land in Ambeso was traditionally controlled byToraja custom, in which the headmen had theresponsibility for managing the distribution ofland among households including mediatingconflicts emerging from any land-related prob-lems. The coming of state law into the villagehas created two different systems of land own-ership: land that is customarily owned and landwith a formal state certificate. The latter has putmore pressure on the former as rural peoplestart to formally certify customary land. Onemain reason is that customary rights to land arenot acknowledged by the formal land system.Certifying land, however, is not an easy matter,as a sum of money plus time to do this businessin the city is needed. Furthermore, informationon how to get land certified was unevenly dis-tributed among the rural population. Those with

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better access to urban centres would possessbetter information about the certification pro-cess than those with limited access.

In addition, the improvement of the feederroad has increased the overall value of villageland and stimulated some changes in land own-ership. First, some rich farmers have added totheir land by buying land from other farmerswho needed cash. This was illustrated in thecase of Sitta who, with savings from her busi-ness, bought some agricultural land from villagepeople. This process has created greater differ-ences in land ownership among the villagers. Inaddition, rural people returning home after along time living in the city (made easier by theimproved transport system) also create pressureon land ownership. The village head hasbecome busier in trying to mediate conflictsabout land ownership. His authority, however,is now limited to customary land that has notbeen certified. Social conflicts between people,as represented by the case of the family return-ing to Ambeso, emerge with the increasingvalue of land in the village.

Changes in migration

The pattern of migration has changed with theimprovement of transport networks. Before thetransport connection was improved, the migra-tion pattern was mostly coloured by (perma-nent) out-migration. Better transport networkscreate a two-way migration pattern. On the onehand, out-migration increases as better trans-port provides more accessible education andemployment opportunities in urban areas. Onthe other hand, return-migration emerges, asrural people who fail to obtain a better life inurban areas will use their reserve opportunity toreturn home to compete for rural non-farmemployment openings created by improvedtransport.

The return-migration phenomenon alsoaffects land-ownership patterns. As moremigrant rural people return home, land-owner-ship becomes a sensitive issue. Given that landin rural areas was traditionally regulated by cus-tomary laws, aimed mainly at the social well-being of the community, the situation becomesmore complicated when the land gainseconomic value as an outcome of improvedtransport.

Conclusions

Transport is unquestionably needed for ruraldevelopment to take place, but the way thevarious components of development interact isinfluenced by the various roles of differentinstitutions. The improved Ambeso transportnetwork has drawn the village closer into themainstream of politics, economy and society.This has stimulated changes in the village econ-omy. The rural change process is initiated by thecreation of opportunities for rural communitiesto improve their socioeconomic livelihood.These opportunities come in the forms ofimproved agricultural production, more non-farm employment, a widening of the producemarket, an expanded formal credit market,increasing land values, better access to educa-tion and health facilities, and can lead to ahigher standard of living. But, owing to a longperiod of sociopolitical marginalisation andeconomic isolation, the opportunities are moreprogressively responded to by outsiders, and bythose villagers who are already among the polit-ical and economic elite of the village. This cre-ates conflicts and enhanced differentiation ineach of the above-mentioned types of change.More non-farm employment creates tensionbetween village people and outsiders. Withinthe village, tension emerges between those whotake non-farm employment opportunities (espe-cially traders) and those who are still in agricul-ture. Urban market penetration pushes thebargaining position of local farmers to marginallevels. With regard to farmer livelihoods, grow-ing demands created by marketisation and con-sumerism conflict with the need to have morecash to increase productivity and/or production.With these factors operating, the improvementof socioeconomic livelihoods is contested bysocioeconomic differentiation. This has made itnearly impossible to generate a simple conclu-sion on the nature of the link between transportimprovements and the rural economy.

Two questions emerge from the institutionalperspective on the case of Ambeso: (i) to whatextent has the institutional environment ofdevelopment shaped the way transport has beenimproved? and (ii) to what extent have transportimprovements promoted changes in the villageopportunity set and affected the mental con-structs of rural individuals?



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Regarding the first question, the case of Amb-eso has indicated how institutions (representedby Torajan custom, the Dutch regime and theIndonesia government) and the organisationsthat have evolved as a result of the structurescreated by those institutions, have shaped thepattern of transport improvements. Transportchanges have mainly been ‘imposed’ ratherthan inherently ‘induced’, and are ‘exogenous’rather than ‘endogenous’, given the overwhelm-ing role of the two modern states in develop-ment. A regional transport system wasintroduced without considering its potentialsynergy with a local transport system. Transportdevelopment undertaken by these two moderninstitutions has been mainly driven by two mainmotives: political and economic. Both of themhave mainly been to serve the interests of thestate and the regional economy rather than therural population. On the other hand, the Torajacustom has played no recent role in transportdevelopment as it has been perceived as tradi-tional and inappropriate. Nevertheless, the factsthat many tracks were originally built throughthe collective action of local communities meanthat the Toraja custom could contribute to ruraltransport development. With the government’slack of capacity to provide sufficient funding forcomplete rural transport development, incorpo-rating customary institutions into the moderndevelopment platform may offer an effectiveapproach for promoting rural accessibility andmobility.

The case of Ambeso has also indicated thattransport improvements stimulate changes inthe rural opportunity set (represented byemployment patterns, agricultural production,rural produce market, rural credit market, landvalues and migration patterns). Adoption ofthese changes by rural individuals has varied,affected mainly by the different mental con-structs and economic capacities of individuals.These, however, are affected by asymmetries ofinformation between individuals plus the costsrequired to access the opportunity set, whichtogether have created imperfect political andeconomic markets. Rural people now enjoygreater economic opportunities, but lifebecomes more complex and is increasinglycoloured by competition and tensions amongkey-players. To better understand who gainsbenefits, and who does not, it is crucial to

explore the role of each key-player. The analysisshowed that almost certainly the outsiders takemany of the benefits away, leaving a smallerproportion of benefits to be competed for byrural people. Rural people who take the remain-ing benefits force the rural poor to stay poor oreven poorer.

In the end, there is no simple answer to thequestion: to what extent do transport improve-ments contribute to the rural economy? Thecase of Ambeso has underlined the need for acritical attitude in understanding the roles ofinstitutions and institutional change in shapingthe process of transport development and ruralchange. The fact that transport improvementsmay even increase the differences in informa-tion, the differences in transaction costs and theimperfections of the market owing to dysfunc-tional institutions may lead to a conclusion thattransport improvements, although they maypromote economic growth, also increase ruraldifferences and conflicts. For transport develop-ment to be effective in promoting the ruraleconomy, the discourse on transport policy andresearch should transcend its traditional bound-aries, and address the complexities of institu-tions and institutional change.

Notes

1 North is interested in both formal and informal institu-tions. The first relates to formal rules such as constitu-tions, laws and formal legal systems, whereas the lattersignifies unwritten conventions, norms, traditions andvalue systems that evolve through the historical processof societies.

2 Informal organisations of

tongkonan

and

lembang

cannow be found in many cities in Indonesia. These organ-isations are used by the Torajanese who live away fromTana Toraja as a means for social interaction and tomaintain their relationship with their homeland.

3 All interviews with Ambeso residents were conductedin confidentiality, and the names of interviewees arepseudonyms.

4 There was no formal contract between the owners ofvehicles and the drivers and conductors. The ownersdetermined their share of 75% to cover costs for vehiclemaintenance and possible opportunistic behaviour ofthe drivers and conductors (e.g. underreporting takings).Yet, the owners’ unilateral action to determine the divi-sion of such an informal contract is, by itself, opportu-nistic behaviour. Lack of trust in this business increasedtransaction costs (see also Nabli and Nugent, 1989: 68–69, for a similar discussion).

5 The spread of coffee plantations in Tana Toraja, includ-ing the investment of several big companies in the cof-

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fee industry in this region, has reduced theopportunities for Ambeso farmers in coffee. This hasbeen another reason for the farmers to move from cof-fee to vanilla cultivation.

6 Land in Ambeso is traditionally regulated by customarylaw. According to this law, the village head is responsi-ble for resolving problems related to land ownership.

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Transport and the rural economy: Institutions and institutional change in Ambeso Village, Indonesia

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