Land ownership in Indonesia: Issues and implications of the economic institutional approach

As a factor of production land, in particular, land ownership system, crucially determines the running of a nation’s economy. Land ownership system in Indonesia is quite different from that practised in other countries as it is based on the Undang-undang Pokok Agararia 1960 a peculiar Basic Agrarian Law which combined a modern land law with certain precepts of indigenous land law known as the ‘ulayat’. This study examines, through seconday materials, the impact of this law on Indonesia’s economic governance. It was found that the enforcement of the Undang-undang Pokok Agararia 1960 had triggered a prolonged conflict in Indonesia’s economic governance involving the ‘ulayat’ landowners who contended against the singular focus of the law on economic development at the expense of the locals’ customary values and practices . Accordingly, a more holistic and conciliatory approach is suggested to circumvent the issues raised by the ‘ulayat’ landowners. The approach involves, among other things, institutional reform in current land development.