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How Not to Industrialise? Indonesia's Automotive Industry

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Abstract

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.

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  • Haryo Aswicahyono, 2000. "How Not to Industrialise? Indonesia's Automotive Industry," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 36(1), pages 209-241.
    • Handle: RePEc:taf:bindes:v:36:y:2000:i:1:p:209-241
    DOI: 10.1080/00074910012331337843
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    1. Haryo Aswicahyono & Hal Hill, 2004. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(3), pages 277-305.
    2. Sato, Yuri, 1996. "The Astra Group : a pioneer of management modernization in Indonesia," The Developing Economies, Institute of Developing Economies, Japan External Trade Organization(JETRO), vol. 34(3), pages 247-280, September.
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    Cited by:

    1. Noor Aini Khalifah, 2013. "Ownership and technical efficiency in Malaysia's automotive industry: A stochastic frontier production function analysis," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(4), pages 509-535, June.
    2. Shiro Armstrong & Sjamsu Rahardja, 2014. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 50(1), pages 3-28, April.
    3. Sadayuki Takii & Eric Ramstetter, 2005. "Multinational presence and labour productivity differentials in Indonesian manufacturing, 1975-2001," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(2), pages 221-242.
    4. Dionisius Narjoko & Hal Hill, 2007. "Winners and Losers during a Deep Economic Crisis: Firm‐level Evidence from Indonesian Manufacturing," Asian Economic Journal, East Asian Economic Association, vol. 21(4), pages 343-368, December.
    5. Mierzejewska Wioletta & Dziurski Patryk, 2019. "The Diversification Strategy and Business Groups’ Performance in Poland," Journal of Intercultural Management, Sciendo, vol. 11(1), pages 23-45, March.
    6. Michael T. Rock, 2003. "The Politics of Development Policy and Development Policy Reform in New Order Indonesia," William Davidson Institute Working Papers Series 2003-632, William Davidson Institute at the University of Michigan.
    7. Kyunghoon Kim & Arriya Mungsunti & Andy Sumner & Arief Anshory Yusuf, 2020. "Structural transformation and inclusive growth: Kuznets' 'developer's dilemma' in Indonesia," WIDER Working Paper Series wp-2020-31, World Institute for Development Economic Research (UNU-WIDER).
    8. Markus Hassler, 2009. "Variations of Value Creation: Automobile Manufacturing in Thailand," Environment and Planning A, , vol. 41(9), pages 2232-2247, September.
    9. Jacob, J. & Meister, C., 2004. "Productivity gains, intersectoral linkages, and trade: Indonesian manufacturing, 1980-1996," Working Papers 04.14, Eindhoven Center for Innovation Studies.
    10. Saiful Islam & Laura Márquez-Ramos, 2023. "Services and the internationalization of manufacturing firms in Indonesia," SN Business & Economics, Springer, vol. 3(2), pages 1-18, February.
    11. Mitsuhiro Hayashi, 2003. "Development of SMEs in the Indonesian Economy," Departmental Working Papers 2003-01, The Australian National University, Arndt-Corden Department of Economics.
    12. Haryo Aswicahyono & Hal Hill & Dionisius Narjoko, 2010. "Industrialisation after a Deep Economic Crisis: Indonesia," Journal of Development Studies, Taylor & Francis Journals, vol. 46(6), pages 1084-1108.
    13. Hallward-Driemeier,Mary C. & Kochanova,Anna & Rijkers,Bob, 2020. "Does Democratization Promote Competition? : Indonesian Manufacturing Pre and Post Suharto," Policy Research Working Paper Series 9112, The World Bank.
    14. Keiko Ito, 2004. "Foreign Ownership and Productivity in the Indonesian Automobile Industry: Evidence from Establishment Data for 1990-99," NBER Chapters, in: Growth and Productivity in East Asia, pages 229-276, National Bureau of Economic Research, Inc.
    15. Kyunghoon Kim & Andy Sumner & Arief Anshory Yusuf, 2018. "Is structural transformation-led economic growth immiserising or inclusive? The case of Indonesia," Departmental Working Papers 2018-11, The Australian National University, Arndt-Corden Department of Economics.
    16. Rock, Michael T. & Bonnett, Heidi, 2004. "The Comparative Politics of Corruption: Accounting for the East Asian Paradox in Empirical Studies of Corruption, Growth and Investment," World Development, Elsevier, vol. 32(6), pages 999-1017, June.
    17. Doner, Richard F. & Noble, Gregory W. & Ravenhill, John, 2006. "Industrial competitiveness of the auto parts industries in four large Asian countries : the role of government policy in a challenging international environment," Policy Research Working Paper Series 4106, The World Bank.
    18. Yumiko Okamoto & Fredrik Sjoholm, 2005. "FDI and the Dynamics of Productivity in Indonesian Manufacturing," Journal of Development Studies, Taylor & Francis Journals, vol. 41(1), pages 160-182.
    19. Tom Barnes, 2017. "Industry policy in Asia’s demographic giants: China, India and Indonesia compared," The Economic and Labour Relations Review, , vol. 28(2), pages 218-233, June.
    20. Sovath Kenh, 2023. "The impact of development strategy choice on capital mobility and economic growth," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(7), pages 1782-1813, October.
    21. Jojo Jacob & Christoph Meister, 2005. "Productivity gains, technology spillovers and trade: Indonesian manufacturing, 1980-96," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(1), pages 37-56.
    22. James, William E. & Ramstetter, Eric D., 2008. "Trade, foreign firms and economic policy in Indonesian and Thai manufacturing," Journal of Asian Economics, Elsevier, vol. 19(5-6), pages 413-424.

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