Elusive Agents of Inclusion: Business Interest Associations in the Political Economies of Sri Lanka and Indonesia

Abstract

While research on business interest associations in developing countries are few and far between, we do know, from the small body of literature on the subject, that some business associations in developing countries engage in activities that have the effect of broadening access to political and economic participation (i.e. are inclusive); while others, conversely, engage in activities that constrain access to political and economic participation (i.e. are noninclusive). This thesis seeks to understand why. Additionally, it also investigates how these associations develop inclusive and non-inclusive attributes in the first place. In other words, this project seeks to understand what factors drive some of these associations to promote political and economic inclusion, and what factors drive others to work against it. To find the answer, I conducted a comparative case study of business interest associations in Sri Lanka and Indonesia. While Sri Lankan and Indonesian associations operate in similar political and economic landscapes, they are known to exhibit markedly different insititutional attributes vis-à-vis political and economic inclusion. Sri Lankan associations are known to promote, and contribute towards, political and economic inclusion (e.g. Moore & Hamalai, 1993), while Indonesian associations do not. Indeed, Indonesia’s largest peak business association has been known to work against political inclusion (e.g. Hicks, 2012). The findings of the empirical study suggest that business interest associations which develop, mature and institutionalise organically, embody inclusive political and economic attributes, and do things that have the effect of broadening access to political and economic participation - because such actions advance the collective interests of dominant actors within them. Members of business associations, most of whom are small to medium sized enterprises, benefit from broader access to political and economic participation. Contrary to Olson’s (1965; 1982) overarching characterisation of business representative bodies, this study finds that associations, which developed organically, are not generally utilised by powerful members of the economic elite to rent-seek in pursuit of private, individual gains. Privileged economic elites, who are more likely to rent-seek and are incentivised to constrain access to political and economic participation, do not usually actively participate in business association activities because they already have direct access to political elites and therefore do not need to be represented by a collective body. The activities of business interest associations are, therefore, naturally driven by the interests of smaller commercial entities, who have much to gain from political and economic inclusion. But business associations’ agenda can be hijacked, and their organisation easily used as a tool of control, by powerful external actors – like an oppressive regime. When this happens, their inclusive attributes are sabotaged, and this prompts these associations to behave in ways consistent with Olson’s depiction of a rent-seeking association - even after the said saboteur departs (e.g. Hicks, 2012). This is what happened in Indonesia under Soeharto, when the state interfered with the country’s chamber movement. Business associations’ vulnerability to such external interference and their general timidity towards oppressive regimes is why their role in advancing political economic inclusion can, at best, be characterised as elusive.