Role of National Council for Aeronautic and Space of Republic

Indonesia (DEPANRI) from Institutional Economic Perspectives

Intan Perwitasari

Magister of Economics and Development Studies, UNDIP, Jalan Erlangga Tengah, Semarang, Indonesia

Center for Aerospace Policy Studies, LAPAN, Jalan Cisadane No. 25 Cikini, Jakarta, Indonesia

Keywords: DEPANRI, Institutional Economy, Social Capital, Transaction Costs.

Abstract: National Council for Aeronautic and Space of Republic Indonesia (DEPANRI) the highest coordination forum

that has the task of formulating aeronautics and space policies in Indonesia, which president is the chairman.

In other countries this council has an important role and still exists today, but its was dissolved. The purpose

of this study is to see the role or contribution of the National Aeronautics and Space Council (DEPANRI) as

long as it stands from an institutional economic perspective. Descriptive approach with unit of social capital

analysis and transaction cost become analysis tool in this research. The results obtained are (i) the low

participation of members and commitment in the members of DEPANRI were description of how asymetric

information, low interest of the member to space issues (not become priority), and not reapons and watched

presidential transtition thats all be a part of social capitall, which be the factor of DEPANRI organization is

not optimal, and (ii) low cost of political economy transactions and low organizational managerial

implementation becomes one of the factors urgency of the existence of DEPANRI that do not carry out

optimally their functions.

1 INTRODUCTION

National Council for Aeronautic and Space Of

Republic Indonesia (DEPANRI) is one of the Non-

Structural Institutions (LNS) which was dissolved by

the government in 2014. It’s was the higest

coordinating body in formulating aeronautic and

space policy in Indonesia. The existence of such

councils in the fields of aerospace namely aeronautics

and space in several countries such as the United

States, Japan and Brazil is a structural institution

strategic nature and still survive until today. The

existence of DEPANRI since its inception in the

1960s, has undergone several changes in

organizational structure. DEPANRI is an

organization whose initial goal is to assist the

President of Indonesia in formulating general policies

in the field of aeronautics and space.

DEPANRI institutional funding as a public

institution originates from the state budget (APBN),

which has undergone a transformation into the body

of a public organization of the National Aeronautics

and Space (LAPAN). The DEPANRI budget merged

into one ceiling in the LAPAN budget, as the

DEPANRI secretary. The Institute of Public

Administration (LAN) recommends the abolition of

DEPANRI which is the basis for the dissolution of

this organization. This dissolution is one indicator of

failure in the concept of institutional economy where

there is asymmetric information from organizational

units in carrying out their functions, where the

performance of the institution is considered

inefficient. The important role of institutions in

economics is a means of reducing uncertainty or

turning it into a risk. The decrease in uncertainty will

reduce transaction costs, so transactions (markets,

management and politics) will increase (Azansyah,

2013).

Institutional economics tries to analyze the

problems that arise from the dissolution of DEPANRI

according to the institutional point of view. Jaya

(2004) in his research tried to see the contractual

relationship between principals in the concept of

state, namely constituents with representative agents.

DEPANRI has a performance contract with

representatives of the people in terms of running the

organization according to their duties efficiently. The

new institutional economy builds its idea that

institutions and organizations strive to achieve a level

of efficiency and minimize overall costs, where the

concept of overall costs, not only in the form of

702

Perwitasari, I.

Role of National Council for Aeronautic and Space of Republic Indonesia (Depanri) from Institutional Economic Perspectives.

DOI: 10.5220/0008435507020708

In Proceedings of the 2nd International Conference on Inclusive Business in the Changing World (ICIB 2019), pages 702-708

ISBN: 978-989-758-408-4

production costs such as the concept of neoclassical

economics, but also transaction costs (Santoso,

2008). Therefore, how the process of DEPANRI's

performance before it was dissolved became an

interesting analysis amid the development of the

existence of similar councils in international forums.

In this study, we will discuss (i) how DEPANRI's role

or social capital contribution to performance output,

(ii) DEPANRI's managerial influence on transaction

costs.

This research is intended to see the application of

institutional economic analysis (social capital and

economic transaction costs) of DEPANRI before

being dissolved by the government, and knowing the

dominant factors that affect the high and low

economic transaction costs which then affect the

performance of these institutions which are

considered inefficient.

2 LITERATURE RIVIEWS

In analyzing institutional economics, it is not only

centered on economic transaction activities but also

on social actions. This action is an action needed to

establish, maintain and or change social relations

(Weber, 1968), including the establishment and

efforts to maintain an institutional framework where

the process of economic transactions can occur. Both

rules that are formal or informal, including the

character of coercion, are components therein.

Political transactions are very significant, namely

transactions that occur between people involved in

politics, bureaucracy and interested groups.

According to Williamson (1979: 239), both

political transactions and economic transactions are

characterized as follows:

a. Uncertainty;

b. Frequency, where transactions often occur; and

c. The degree or level of occurrence of transactions-

including investments in them.

Transaction costs arise because of the occurrence

of economic activities among actors in the

community, namely the use of resources needed

including social transactions (including economic

transactions in them). Defining transaction costs

based on Richert and Furuboth, (2000) are costs for

using the market (market transaction cost) and the

cost of exercising the right to give orders within the

company (managerial transaction cost). Besides that,

there is also a range of costs associated with moving

and adapting to the institutional political framework.

This transaction fee arises because the transfer of

property rights in this case is the result of

technological innovation. In economic activity there

are two types of costs, namely costs related to the

production and physical distribution of an item or

service and both the costs required for an exchange.

The total economic costs are not only determined by

the production costs (technology and inputs used) but

also the transaction costs determined by the

institution. Transaction costs are substantial. Based

on some estimates, transaction costs in the modern

economy market range from 50-60% of net national

products. The development, the economic theory of

transaction costs is used to measure the level of

efficiency of institutional design, where high

transaction costs are one indicator of the inefficiency

of existing institutional design (Sukarsih and

Gunawan, SD, 2012). Furuboth and Richert (2000)

divide transaction costs into three types of costs,

namely market transaction costs, managerial

transaction costs and political transaction costs.

Institutional efficiency is one way to improve

economic and institutional growth which is

considered efficient if transaction costs are low

(Furubotn and Richer, 2000), and social capital has a

positive effect on economic growth (Lapavitsas and

Fine, 2004). Social capital is the norm, trust and

network that is embedded in the social structure of

society that can facilitate collective action for

mutually beneficial relationships (Porter, 1998). The

essence of institutional analysis is how formal rules

(contracts, organizations, political law and systems,

markets) informal rules (systems of values, norms,

traditions, religions, and habits) and enforcement

mechanisms are applied in people's lives. This means

how the DEPANRI institution has so far run the

organization and produced efficient performance by

looking at the development and allocation of

transaction costs and the social capital that is formed

in it in coordinating work between institutions, to

achieve the objectives of aerospace development.

3 METHODS

This study uses a deskriptive analysis aims to carry

out exploration and classification activities on

economic transaction cost data and social phenomena

that occur in organizing DEPANRI. According to

Loeb, Susanna, et.all (2017), descriptive analysis

characterizes the world or a phenomenon—

answering questions about who, what, where, when,

and to what extent, and the goal is to identify and

describe trends, or describe samples in studies aimed

at identifying causal effects, description plays a

critical role in the scientific process in general and

Role of National Council for Aeronautic and Space of Republic Indonesia (Depanri) from Institutional Economic Perspectives

703

education research in particular. The method of data

collection is done by conducting literature studies,

and documentation analysis. The data that used were

secondary data from LAPAN, internet, jurnals or

other.

4 RESULT

In this discussion, it will be analyzed in terms of the

urgency of the existence of the council in aeronautics

and space in international forums, then followed by

an analysis of the contribution of the role of

DEPANRI and the formed social social capital, and

analysis of DEPANRI's economic transaction costs.

4.1 Urgency of Council Needs

The existence of similar councils in several countries

is one of the driving factors for the urgency of the role

of DEPANRI in Indonesia. In this section we will see

how strategic level organizations like DEPANRI in

the United States, and India.

In 1958 (Based on the National Aeronautics and

Space Act of 1958), institutional coordination in the

handling of the United States Aeronautical and Space

(Aeronautical and Space) was handled by the

National Aeronautics and Space Council (NASC),

namely an aeronautical coordinating agency in the

United States called under the name "Council". The

Council advises and assists the President regarding

national space policy and strategy and is directed to

review United States Government space policy and

develop a strategy for national space activities. The

Council also fosters close coordination, cooperation,

and technology and information exchange among the

civil, national security, and commercial space sectors.

Additionally, the Council advises the President on

participation in international space activities (NASA,

2017). The Council is assisted by an Executive

Secretary with no more than three staff. In the

government of President George H.W. Bush formed

the "National Space Council" (NSpC) (1989 to 1993)

which was a little more narrow in scope than NASC.

The newly formed NSpC members include: Vice

President; Minister of Foreign Affairs; Ministry of

defence; Minister of Trade; Minister of

Transportation; Director of the Office of

Management and Budget; Presidential Chief of Staff;

Assistant President for Security; Director of Central

Intelligence; and NASA Administrator. NSpC is

headed by the Vice President. The implementing

institution is the National Aeronautics And Space

Administration (NASA), led by an Administrator and

a Deputy Administrator, and is responsible directly to

the US President (Nasution, et.al, 2010, and NASA,

2017).

Source: Uchino, Takashi (2018)

Figure 1: Governmental in Space Policy of United States.

Indian aerospace activities are coordinated by the

Department of Space (The Department of Space -

DOS). DOS is assisted by the Space Commission, and

the Insat Coordination Committee, and Planning

Committee of the Natural Resource Management

System. DOS, among others, oversees various

institutions such as:

• ISRO;

• National Remote Sensing Agency (NRSA);

• NNRMS;

• PRC;

• NMFK; and

• Space Corporation

By looking at benchmarking above, it can be seen

that the existence of a kind of council has a strategic

position under the President in order to coordinate all

sectors that have an impact in the field of aeronautics

and space. This is actually in line with the authority

inherent in DEPANRI, where the initial formation in

1955 with the legal basis of Government Regulation

Number 5 of 1955, dated February 3, 1955.

4.2 Performance of DEPANRI form

Social Capital Perspektive

The DEPANRI organization underwent a change in

terms of matters including aeronautics but also space

(joint Law Number 83 of 1958 concerning

Aeronautics, December 27, 1958 and Republic of

Indonesia's Presidential Decree Number 99 of 1993,

October 26, 1993 concerning DEPANRI). The

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organization of DEPANRI can be seen in Figure 2

about the National Aerospace Organizational

Structure where, the President of the Republic of

Indonesia as chairman, Minister of Research and

Technology as the vice chairman, and chairman of

LAPAN as secretary.

The function of the DEPANRI Secretariat

(Nasution, Husni, et. Al. 2010) was held by LAPAN,

and all funding needed for the implementation of

DEPANRI activities was integrated on LAPAN

budget. Before, DEPANRI and LAPAN are

independence institution or separate, but then

there was a merger. LAPAN in carrying out its duties

and functions as the DEPANRI Secretariat appoints

one of its organizational units, namely the Center for

Aerospace Analysis and Information (Pussisfogan,

now its called Center for Aerospace Policy).

Pussisfogan has the task, among others: "...

preparation of materials and assessment of materials

in order to carry out the tasks and functions and

secretariat of DEPANRI." In the United States have

secretariats for the conference body (Uchino,

Takashi, 2018), and the same as the DEPANRI

secretariat function.

Previous time the organization only held 2

congresses and 1 session:

a. Organization of the First DEPANRI May 28,

1999;

b. Implementation of the First National

Aerospace Congress, 3-4 February 1998;

c. Implementation of the Second National

Aerospace Congress, December 22-24,

2003;

When compared to how a similar council works

in the United States during the Trump administration,

after 2016 at least the National Space Council has

held meetings until 2019 as many as 5 meetings or

meetings during Mike Pence's leadership, on the

contrary DEPANRI from until 2014, there has never

been a congress or national space council meeting

with lead by President, the last in 2003 during

President Megawati's administration. How the team

and working group can convey and become a policy

in the field of aeronautics and space if there is no

meeting between DEPANRI members namely the

president and its members, or some kind of congress

in 1998 and 2003. From the above, it shows that the

problem of coordination of work between members

of DEPANRI which contains a minimum of echelon

1 (ministerial level) is very difficult. This shows that

it is difficult to realize strong political will on

government policy in the field of aeronautics and

space and coordination of work between agents and

also with principals. From this, it shows that there is

a channel of information or asymetris information

that is interrupted between agents and principals.

Even though there is a contract that must be fulfilled,

that is, the function of the council must be carried out.

If we see the competence of the organisation, the

membership of DEPANRI is the same as the structure

of NSpC or National Space Council US, which

consists of the President and the Ministers. The

cairman of DEPANRI is Indonesia President, with the

member are Minister for Foreign Affairs, Minister for

Defence and Security, Minister for States

Development Planning, Minister for Trade and

Industry, Minister for Research and Technology, the

Chief off Staff of Indonesian Air Force, Minister for

Tourism, Art and Culture, Minister for

Telecomunications, Minister for Transportation, the

Chief off LAPAN and other institution (see Figure 1)

(Wiryosumarto, H, 1999; Nasution, Husni, et.al.

2010)

The conditions of trust and commitment of the

holders of DEPANRI's authority are very low. It has

not been a priority issue for decision makers in our

country to be one barometer of the low intensity of

meetings with members. Even though in terms of

utilization and independence, the issue of aeronautics

and space is a significant sector in developed

countries, even in Indonesia. The high dependence of

these 2 sectors is not only felt at the government level

but also by the wider community. For a number of

countries the two sectors are related to the mastery of

sensitive technology concerning state sovereignty

and state ownership rights, so that the regulation of

resources within it, both aeronautics and space

exploration, is an important concern, in contrast in

Indonesia.

The weak coordination and political will of the

members of DEPANRI became an LNS that was not

optimal in its duties and functions, even though

according to Wiryosumarto (1999), the the council

function as a higets national coordination and general

policy formulation forum in Indonesia aeronautics

and space development. Awareness of the

importance of the functions of the DEPANRI-level

body in various countries, one of which can be seen

in the United States that has mastered space

technology is a comparison that should be seen. In

June, 2017, President Trump signed an Executive

Order to Revigorate the National Space Council,

where appointed Vice President Mike Pence to serve

as the Chair as a part of re-establishing of the national

space council (NASA, 2017, and Vedda, James A.

2016). The interesting thing is how this organization

still exists and works to this day, behind the dynamics

of changing leaders and government. Therefore, the

Role of National Council for Aeronautic and Space of Republic Indonesia (Depanri) from Institutional Economic Perspectives

705

author himself regretted the conditions in Indonesia,

where DEPANRI was dissolved in 2014, and there

was no role for the institution or the structure of other

government organizations that held the role of the

organization

Source: Wiryosumarto, H, (1999)

Figure 2: Organizational Structure of DEPANRI.

4.3 DEPANRI's Managerial Institution

for Transaction Cost

In running the DEPANRI organization, which

originates from the LAPAN budget, it is reflected in

the DEPANRI secretarial implementation budget

from echelon 2 level work units. The mechanism of

the organization is run at echelon 2 and below by

forming technical committees and working groups

which are reflected in the types of expenditures on

their economic transaction costs. In supporting its

activities, economic transaction costs for manajerial

are only reflected in the general expenditure

component:

- salary for teams and working groups;

- material expenditure; and

- activities of meetings and seminars.

DEPANRI's organizational functions are

reflected in the managerial side of the organization

reflected in transaction costs, where coordination

costs are low, where political lobbying costs and other

costs are part of the national coordination forum led

by the President. From 2009 to 2014, the congress had

never been held. To operational secretariate, since

2009 until 2014, were under Rp 500 million, its

means they were low of interest from the budget

planner and they didn't know that its strategic

program, and not priority. If we see how much LPDP

sponsoring 1 research grant that can reach Rp 500

Million in Indonesia, so the nominal budget is so

limited to conduct a meeting or national coordination

(see Figure 3).

Note *: realisation

Source: Center for Aerospace Policy (2012;2013), data

proceed

Figure 3: DEPANRI Secretariat Budget (IDR).

The low cost of political transactions that have an

impact on the low transaction costs of DEPANRI

organizations is an indicator of performance

assessment where the expected output of tasks and

organizational functions is not achieved. Where in

general, the DEPANRI scope of activities carried out

by Nasution, et. Al (2010) are grouped into:

a. activities for formulating national policies

and strategic plans (development and

cooperation);

b. the establishment of national aerospace

institutions;

c. designing national aerospace rules and

regulations;

d. designing ratification of international

aerospace laws and regulations;

e. formulation of basic positions and attitudes

of Indonesia in international political

forums;

f. organizing coordination through Council

Sessions, Congresses, Work Meetings,

Group Technical Meetings,

Interdepartmental Technical Meetings, and

Scientific Forums;

Judging from the urgency of the existence of an

organization involving the chair and members, then

the budget post that has been compiled with low or

minimal political transaction costs, shows the

organization's organization is not optimal. Nasution

(2010) revealed these problems due to factors:

a. the composition of DEPANRI has not been

adjusted to the composition of the United

Indonesia Cabinet for the period 2004 – 2009;

b. the DEPANRI Working Procedure has not yet

been compiled so that the DEPANRI Working

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Group and the DEPANRI Working Group's

duties and functions are unclear;

c. since the DEPANRI technical team is currently

not working optimally;

d. the existence of various DEPANRI working

groups by the Secretary of DEPANRI has not

carried out their duties and functions

optimally;

e. the DEPANRI secretariat as a driving force for

DEPANRI has not worked optimally as

evidenced by the many tasks and functions

that have not been implemented; and

f. membership of the technical committee and

working group is very dynamic with regard to

the transfer of officials to their respective

agencies.

The space community has watched each

presidential transition to see how the new

administration would handle decision making on

space policy and strategy, from leadership in response

to the presidential transition (Vedda, James A. 2016),

and this was not done manajerialy in DEPANRI. In

the USA, while the President does not chair the

Space Council, a role left to the Vice President

(Uchino, Takashi., 2018).

4.4 DEPANRI Products

Depanri has annual performance products, which

become the annual president's report. In the United

States, NSpC or NSC compiles the president's annual

report in a good summary of the Government's

aerospace activities each year. Mandated by law, it

contains information on aerospace activities

conducted by 14 Federal departments and agencies,

as well as appendices containing useful historical data

on spacecraft launches and budget figures (NASA,

2017), and how the president determines overall

national space policy as well as civil, commercial,

and national security space policy (Alver, James G

and Gleason, Michael P, 2018)

DEPANRI's product is formulating aeronautics

and space policies as national guidelines, in this case

such as national space policy. Until now, Indonesia

does not have a national aerospace policy product.

DEPANRI is still relevan as the highest coordination

forum and needs re-establishing to the future because

the cabinet of office or other institution havenot the

outhority like that. There are coordinator ministry in

cabinet structure or other LNS didnot have a function

as DEPANRI on aeronautic and space. LAPAN's

position is liked NASA's position, while NASA

focused on a mission such as research and

development (Uchino, Takashi., 2018).

Based on Vedda, James A (2016) recomendation

to National Space Council in the US, that its relevan

with DEPANRI, so from this research strategy to re-

establishing DEPANRI to be successful such a

council should consider:

1) The president’s level of interest must be

sufficiently high to allow aeronautics and

space issues a place on the agenda over time.

2) Productive relationships with Congress and

relevant agencies must be maintained, its

means that to creat politic transaction cost in

the form of national congressional activities

led by the President,

3) Organizational structure and staffing are

critical to the efficient operation of

interagency policy-making mechanisms, and

follow-up on policy implementation. The

council staff needs to have adequate size and

expertise and a good relationship with the

Office of Management and Budget staff

working on space related budgets,

4) The council and its staff must recognize that

events beyond their control drive the agenda,

so they must be agile enough to quickly adapt,

and

5) Regardless of the formal mechanisms the

council may adopt, informal interactions and

individual personalities matteras part of a form

of social capital.

5 CONCLUSION

From the analysis above, it can be concluded as

follows:

1) The low participation of members and

commitment in DEPANRI members is a

description of weeksness social capital which

is a factor in DEPANRI's organizational role

not optimal and inefficient performance, and

2) The low cost of political costs and manajerial

that reflect transaction costs that do not carry

out optimally their functions, because there is

an expected output gap with non-linear

organizational funding. Organizational and

managerial structures reflected in transaction

costs do not pay attention to the organizational

environment like presidential transition, so

that reflected post-2003 stagnation

Suggestion:

From this study, the authors suggest that need for

re-establishing DEPANRI back as a council with the

function, supported by a mechanism of good social

Role of National Council for Aeronautic and Space of Republic Indonesia (Depanri) from Institutional Economic Perspectives

707

capital between members and an adequate financing

structure according to the needs of the organization.

ACKNOWLEDGEMENTS

Thank you for my lecture Dr. Agr Deden Dinar

Iskandar, Se, MA to the discussion and new

knowledge about institution economic perspective in

this paper.

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