University of South Carolina Law School (US originator, USC)
Gadjah Mada University Graduate Program in Business and Public Law (Indonesian originator, UGM)
University of Indonesia Graduate Law Program (UI)
University of Northern Sumatra Graduate Law Program (USU)
Diponegoro University (UNDIP)
Prof. David Linnan (USC, law)
Prof. Dr. Nindjo Pramono (UGM, law)
Drs. Paripurna Sugarda (UGM, law)
Dr. Suad Husnan (UGM, economics)
Dr. Sri Adiningsih (UGM, economics)
Prof. Cathy Bonser-Neal (Indiana University, economics)
MEETING TIMES & PLACES
The course meets jointly via videoconferencing19:00-21:00 in Indonesia, 08:00-10:00 in South Carolina every Thursday from late August through October. The course also meets jointly via videoconferencing at the same time of day on 3-4 Tuesdays during that same period. The classes may meet separately on other Tuesdays from time to time in the US and Indonesia as determined by local instructors. Classes will meet at USC for videoconferencing in the USC Law Library Computer Lab Videoconferencing Room (Law Library 223), and for any non-videoconferenced meetings in USC Law School classroom 235. Classes will meet at UGM in the PHBK Videoconferencing Facility, at UI-Salemba in the PPS FHUI Videoconferencing Facility, at USU in the PPS (Bidang Hukum) Videoconferencing Facility in the Gedung Rektorat, and at UNDIP in the PPS (Bidang Hukum) Videoconferencing Facility in the Gedung FH-UNDIP.
This course examines functions and reform efforts within the international financial system, including the leading multilateral financial institutions (i.e., International Monetary Fund or IMF, the International Bank for Reconstruction and Development or World Bank, the Bank for International Settlements or BIS and regional development banks like the Asian Development Bank or ADB), particularly post-1997 Asian Financial Crisis. After taking this course you should understand the role and activities of private financial sector actors (in capital, banking and money markets) in developed as opposed to emerging markets, as well as the role of national governments versus the multilateral institutions in financial sector regulation and development. The instruction is aimed at law and business or economics students, covering the finance as opposed to trade aspects of international economic law.
TEXTS AND CONTACTS
There is no printed, off-line text for this course, and we shall post all instructional
materials in bilingual English and Bahasa Indonesia form on the course website
accessed via the Law & Finance Institutional Partnership or LFIP website
(http://www.lfip.org). Teaching faculty will
distribute questions via the class LISTSERV in advance of class meetings to
focus your attention on the relevant problems in materials for individual classes.
You are expected to read all required instructional materials before class with
a view to understanding and answering those questions, and are encouraged to
read other linked materials identified as further background information. Most
of the English language materials can be reached via link on the IMF, World
Bank, or BIS websites, while the Bahasa Indonesia materials are available in
translated form on the course website. Faculty at your participating institutions
will supply passwords for any password protected materials, while the decision
can be made at individual institutions whether hard copies should be provided
to students in either English or Bahasa Indonesia. We shall also be making a
digital recording of teaching faculty presentations (which we want to put on
the website in streaming form, although this probably will not be completed
until the semester is over because the editing takes so much time).
We shall have a course LISTSERV (email@example.com) to keep in touch generally, and for students in the two countries to carry on their own discussions directly. You must join the listserv to fully participate in this class, since the teaching faculty will use it like a bulletin board for announcements about reading assignments, etc. while students and faculty should use it to ask questions and carry on discussions outside our videoconferenced classes. For those of you unfamiliar with the LISTSERV concept, a LISTSERV is simply a system in which e-mail communications are sent to a single address and then distributed to all LISTSERV subscribers. Please consult the LISTSERV information page at http://www.sc.edu/ars/handouts/listserv.html (and look for the entry entitled “How to Subscribe to a List”) for directions on how to subscribe, etc. We will ask teaching faculty to distribute via the LISTSERV their classroom powerpoint presentations as notes. You will not receive the instructors' powerpoint presentations/instructional notes unless you subscribe to the LISTSERV. We may also distribute other photocopied materials for class from time to time.
This course is part of a broader experiment to institutionalize shared and distance education courses between foreign and Indonesian universities, so comments on the experiment are welcome as things develop. The primary contacts for comments at the different universities will be Prof. David Linnan at USC (firstname.lastname@example.org), Prof. Hikmahanto Juwana (email@example.com) or Prof. Erman Rajagukguk (as Ketua PPS UI) at UI, Bpk. Darminto Hartono at UNDIP (firstname.lastname@example.org), Drs. Paripurna Sugarda (email@example.com) or Prof. Nindjo Pramono (as Ketua PHBK) at UGM and Dr. Bismar Nasution (firstname.lastname@example.org) at USU. These persons are also the primary contacts for any administrative questions at the participating universities.
This is a specialized international law course examining international monetary law as the legal side of international economic affairs beyond the international trade and investment law course taught in most law schools. The international financial institutions (IFIs) we study as the constituent parts of the international financial system were formed shortly after World War II. They are referred to collectively as the Bretton Woods system. The treaties creating the institutions and their practice over time has created international monetary law. By the early 1990s there was a growing consensus that the IFIs/Bretton Woods system must change, but minimal agreement on how. Then came the 1997 Asian Financial Crisis, concerning their response to which IFIs/Bretton Woods institutions encountered strong criticism. The criticism continues given, for example, current problems in Latin America. American students need only pay attention to the US Secretary of the Treasury's recent foreign itinerary and ask why he is the cabinet member touring that part of the world and not the US Secretary of State? Indonesia suffered serious economic setbacks under the Asian Financial Crisis, and Indonesian students need only read their newspapers to follow the MPR debate on whether the IMF exercises too much influence on Indonesian government.
There are at least three separate problems to complicate matters. The first problem is a technical one that the financial world has changed drastically over the past 25 years. Once upon a time exchange rates were fixed and capital markets, banking markets and money markets were strictly divided, also along national lines, thus regulated separately within national boundaries. That separation no longer applies in a practical sense, either across markets or borders in the modern world, with the result that in most if not all countries regulators now have problems just keeping up with their private sector charges. Domestic financial sector regulation is changing rapidly precisely because of the underlying market changes, and the regulatory changes are increasingly being orchestrated across borders as a practical response. US students need only remember Enron, creator of a major energy derivatives trading business and until recently new darling of the markets. Indonesian students need think only about IBRA and your country’s banking sector problems, most of which arose out of unhedged heavy borrowings in foreign currencies starting in the early 1990s. The second problem is simply the financial side of globalization, that, when a country blows up in economic terms because its financial sector or markets crash, the local problem can have significant negative effects beyond that country's own borders. That systemic risk is why such problems are an international concern, rather than just a matter of local interest within the individual countries experiencing difficulty. The third problem is that the Bretton Woods system and how it operates cannot be separated on the one hand from the general problem of economic development (the top priority of most of the world outside Western Europe, North America and Japan), or on the other hand from domestic economic policy (because economists typically view the complex of problems largely as one of international coordination of domestic fiscal and monetary policies at the country level). What starts out looking like a formalistic debate about international monetary law reaches down into domestic financial sector regulation and general arguments about economic policy and development.
The course will be organized as follows. Legal presentations will be carried out by Prof. Linnan in the US and Prof. Pramono or Drs. Paripurna in Indonesia. After a short introduction, two meetings will be turned over to Prof. Bonser-Neal for a general presentation of international economic principles outside of international trade. Then, one meeting will be turned over to Dr. Suad Husnan to discuss aspects of the IMF program in Indonesia based on its letters of intent (LOIs), particularly privatization. The course will then devote approximately three meetings to the IMF, followed by three meetings on the World Bank and Asian Development Bank, finishing with three meetings covering the BIS and Indonesian banking problems as a case study. One of the banking meetings will be turned over to Dr. Sri Adiningsih for the economist's perspective on the banking crisis. These are mixed problems of law and economics, and our intention is to use the specifics of the Indonesian situation to illustrate the general problems.
The response of our course is to emphasize legal issues, but also to introduce you to the economic concerns that underlie them. Thus, the course is taught predominantly by lawyers, but economists will teach roughly 25% of the course. The majority of participating students are studying law so why should you care about economics, or conversely why should economics students care about law? Similarly to antitrust law or competition policy, law students need to understand enough about the economic issues to make sense of how the law works (while economics students should understand that the rules written as law shape economic outcomes). There is an underlying tension, because international lawyers seek certainty in legal structures while the economists place their trust in policy flexibility.
If you are a law student interested in a financial sector practice (capital markets or banking law), even within a single country the law is now changing in response to changing markets. Beyond quoting isolated regulations, you really cannot understand where the law is going domestically and why without understanding the underlying economic issues. If you are interested in international practice, you will soon realize that much of private lawyers' work on the international side is in the financial sector, while it is difficult to escape the financial issues if you want to work as a government lawyer on the economic side. We anticipate that US and Indonesian students will entertain different views on various subjects within the course, which you are encouraged to express politely but directly on the LISTSERV. This is part of your education, and you will not learn as much as you should unless you actively participate in the LISTSERV discussions.
By course's end, you should understand the basic issues and legal framework applicable in this broad area. You need this if you plan to work with financial sector clients or on the economic side of government. If it all sounds too esoteric, US students should look 100 miles up the road to Charlotte as a major US banking center where Bank of America and First Union are headquartered (and remember that the major SC banks arguably disappeared during the 1980s precisely because they did not appreciate how quickly the financial world was changing and why). Indonesian students need only contemplate the continuing wreckage of the Indonesian financial system and on-going debates about how to fix its problems, registering that national recovery is still very fragile five years after the Asian Financial Crisis.
GRADING AND PARTICIPATION
Grading will be organized locally at each participating university. For US students the primary contributor to your grade will be performance on two projects prepared as group work for presentation in class and handed in to the instructor in written report form (70%). One project should be in the form of a mock negotiation during the second half of the course, carried out mostly via internet between US and Indonesian student groups representing IFIs and a hypothetical country (assuming there are enough students, organized with one group at each of four Indonesian universities). The other US group project will involve the analytical examination of a specified past financial crisis to answer the question what went wrong and why, and how financial sector regulation should or would not have made a difference in its resolution. The US group projects will incorporate an element of self-grading business-school style, to make sure that all group members invest the required effort in their work. Beyond that, for US students one individual project plus class participation including preparation will be taken into account (30%). The individual project will take the form of a circa 10 page paper examining analytically a substantive problem in the course (privatizations, organization of financial sector regulation, etc.).
There will be no final examination at USC, and our classes should be finished
by early November. Indonesian faculty at participating universities will decide
how to evaluate students for academic credit or the award of course certificates.