Indonesian Industrialization

This paper examines Indonesia.s industrialization performance and policies, including its latecomer status, its generally rapid growth since the mid-1960s, its pronounced policy and performance episodes, and its ambivalent embrace of globalization. Particular attention is accorded to the deep economic-political crisis of 1997.98 and its aftermath, with the benefit of a rich, firm level database. The crisis resulted in slower industrial growth, less industrial mobility, and sluggish formal sector employment growth. We also consider some of the general analytical and policy implications for developing country industrialization from the Indonesian experience.Indonesia, industrialization, economic crises, jobless growth

Economic Reforms in Indonesia after the 1997/98 Economic Crisis

This paper reviews the experience of undertaking reforms in Indonesia after the economic crisis 1997/98, focusing on the reforms made under the last two presidents : Megawati and Susilo Bambang Yudhoyono. The review leads the paper to draw some lessons from the experience. Among other, the role of IMF in disciplining the policy direction, and hence the reforms, is quite evident. This is in the light of dramatic change in the political economy of decision-making process after the crisis, where the power was shifted from the president to the government. The paper also finds that one important constraint for delivering a successful reform is nationalistic ideology which strongly opposes the mechanism for moving towards more efficient market. Meanwhile, in practical terms, the change in political architecture seems to have contributed to the coordination problems across the governmental agencies and ministries, which leads to slow progress in the policy implementation.Indonesia, Organisation of government, IMF

Economic Reforms in Indonesia After The 1997/98 Economic Crisis

This paper reviews the experience of undertaking reforms in Indonesia after the economic crisis 1997/98, focusing on the reforms made under the last two presidents - Megawati and Susilo Bambang Yudhoyono. The review leads the paper to draw some lessons from the experience. Among other, the role of IMF in disciplining the policy direction, and hence the reforms, is quite evident. This is in the light of dramatic change in the political economy of decision-making process after the crisis, where the power was shifted from the president to the government. The paper also finds that one important constraint for delivering a successful reform is nationalistic ideology which strongly opposes the mechanism for moving towards more efficient market. Meanwhile, in practical terms, the change in political architecture seems to have contributed to the coordination problems across the governmental agencies and ministries, which leads to slow progress in the policy implementation.Indonesia, Organisation of government, IMF

How Not to Industrialise? Indonesia's Automotive Industry

This paper examines the development of the Indonesian automotive industry since 1970. After giving an overview of trends and a comparative East Asian assessment, we investigate ownership patterns, the political economy of intervention and key structural features of the industry. Output grew rapidly in the three decades to 1997; there was a significant increase in technological capacity; and some firms in the components and commercial vehicle sectors were approaching international efficiency. However, the highly interventionist policy regime has resulted in an inefficient industry characterised by “back-to-front” industrialisation, uneconomic production runs and minuscule exports. The industry's fundamental weaknesses were exposed by the crisis of 1997–99. Looking beyond the current difficulties, the future challenge will be to develop a globally efficient and integrated industry.

Total factor productivity in Indonesian manufacturing, 1975-1993

This study uses quantitative techniques to estimate total factor productivity (TFP) growth for three-digit non-oil manufacturing industries in Indonesia over the period 1975 to 1993. The thesis begins with a review of growth and structural change in Indonesian manufacturing. Next, a literature review of various aspects of TFP and the theoretical framework is provided. TFP growth for individual sectors and aggregate. TFP growth are calculated and presented to demonstrate the effect of change in the policy regime on TFP growth. Then, the nexus between the economic environment and TFP is examined. The first part of the analysis is directed to measuring TFP growth in Indonesian manufacturing. A number of interesting findings emerged from the analysis. It is shown that periods of slower productivity growth coincided with periods of import substitution. It is also shown that economic deregulation from the mid 1980s enhanced TFP growth. Further decomposition of aggregate value added growth analysis reveals that, prior to the deregulation era; a considerable proportion of output growth was derived from , reallocation of resources and terms of trade gains, while TFP growth within sectors played! minor role. Conversely, during the deregulation era, reallocation of resources and term of trade gains no longer made substantial contribution to output growth, while TFP growth within sectors became more important. The second part of the analysis focuses on assessing the economic environment-TFP nexus. It was found that an increase in demand, whether it comes from import substitution or export expansion, has a strong influence on TFP growth. However, separate analysis for the pre and post-deregulation eras suggests that the importance of import substitution as a TFP growth stimulant diminished during the deregulation era, while export expansion was an important determinant of TFP growth for both periods. It was found that the higher the level of concentration, the higher the TFP growth. This seems to contradict the hypothesis that low competition is associated with high TFP growth. However, using a more accurate measure of competition - the market share instability index - it is shown that competition does positively affect TFP growth. The positive effect of competition on TFP growth is also supported by the finding that protection correlates negatively with TFP growth. The thesis also examined the effect of foreign and government ownership on TFP growth. However, the result is insignificant, probably due to data deficiencies in the estimation of the explanatory variables

Survey of Recent Developments

SUMMARY: Following the remarkably successful 2014 parliamentary and presidential elections in Indonesia, attention now turns to the new president and his agenda for the next five years. President Joko Widodo, known as Jokowi, has emphasised the importance of strong economic growth and rising living standards. But he faces significant, broad-ranging economic challenges and, perhaps not surprisingly, serious discussion of these issues did not feature during the election campaigns. In many respects the economy is at a crossroads, facing the choice between a business-asusual scenario of no reform and consequently sluggish economic growth, and a politically difficult reform agenda that would set it on a higher growth path. Economic policymakers regard the events of 2013 as a mini economic crisis, and they feel vindicated in their explicit preference for stability over growth—that is, for slowing the economy through tighter fiscal and monetary policy and letting the currency decline. For now, the economy is slowing but holding up quite well, especially by comparative international norms and considering foreign and domestic headwinds, including possible macroeconomic and financial fragilities. Here we examine these headwinds—from global economic volatility and declining commodity prices, particularly in the wake of the so-called Bernanke shock of May 2013, to the continuing policy drift at home. We investigate whether there is evidence of an emerging adjustment from the commodity-driven growth of the past decade to some of the traditional tradables sectors, especially manufacturing. While the commodity boom is almost certainly a thing of the past—at least at levels witnessed since 2005—the country's political narratives and the government's microeconomic policies appear to be still premised on an era of plenty funded by a disappearing boom. We speculate on likely options and directions for what in all likelihood will be a ‘Jokowi decade’

Indonesia`s competitiveness and domestic measures under WTO

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