Heterodox Reform Symbioses: The Political Economy of Investment Climate Reforms in Solo, Indonesia

Much of the existing investment climate literature promotes a rule-based 'good governance' approach, in which less advanced economies are advised to adopt orthodox, OECD-type practices in order to facilitate higher investment and growth. Although credible property rights, efficient bureaucracies and low corruption are desirable objectives, it remains questionable whether orthodox prescriptions are the most promising pathway to get there. By taking a detailed look into the political economy of the Javanese city Solo, it is found that informal, relation-based cooperation can provide a constructive platform for policy reform. In the present paper, it is demonstrated that a 'heterodox reform symbiosis' between a dedicated government leader and a diverse range of local firms can bring about important regulatory and administrative reforms and provide important impulses for private investment.