The aim of this book is to provide an economic analysis of the performance of and policy towards the vital interisland shipping industry since Indonesia's Independence. It represents the fruits of research which began in 1973 when I became a Ph.D. student at the Australian National University with the opportunity to carry out fieldwork in Indonesia, Singapore and the Netherlands. After the thesis had been submitted I obtained a somewhat different perspective as a consultant to the World Bank. Since then I have tried to keep in touch with recent developments on periodic visits to Indonesia. The advantage of this long gestation period is that my original approach and hypotheses have had to stand the test of time. I believe that analysis of the often conflicting forces of competition and regulation still provides rich insight into the industry's continuing poor performance. While circumstances have certainly changed over the past decade, in many respects it is the case that plus ca change plus c'est la meme chose. Consultants' reports are typically ephemeral because they ignore the continuity arising from this historical dimension.

We all have our tools of trade and mine are unashamedly those of the economist. To self-styled “practical men”, economic analysis often seems “too theoretical” and the deregulatory policy implications “too impractical” or “politically unacceptable”. As has been said of History, however, so also of Economics: we ignore it at our peril. As the interisland shipping industry shows all too clearly, economic forces have an annoying tendency of asserting themselves one way or another and thwarting even the best-intentioned of regulations, By the time this happens, however, foreign advisers or bureaucrats have often moved on to greener pastures. For want of analysing the causes of the failure of past policies, their successors then often proceed to make very similar mistakes. Nevertheless, it is essential not to be too pure an economist. Through regulation and personal connections, “political” forces must also be taken into account.