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State, Industry, and Business in Indonesia’s Transformation

In: Southeast Asia beyond Crises and Traps

Author

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  • Yuri Sato

    (Institute of Developing Economies)

Abstract

This chapter discusses the importance of institutional arrangements underpinning development strategies, by examining Indonesia’s institutional transformation involving the state, industry, and business during the last five decades. Indonesia’s experience demonstrates that, without institutional arrangements for designing and implementing development strategies, developing countries endowed with natural resources can easily ‘return to nature’ as producer-exporters of primary commodities, regardless of whether they are under authoritarianism or a democracy. Opportunities and challenges are two sides of the same coin. Natural-resource industries can be knowledge-intensive if they are accompanied with innovation in the upstream and in its connection to processing, manufacturing, branding, marketing, and R&D activities along value chains. The state must be effective in arranging institutions to formulate and consistently implement development strategies and in providing incentives for business agents to invest in higher-value-generating activities. Indonesia’s ups and downs in industrial development under inconsistent role of the state will provide implications for other emerging countries with natural resources.

Suggested Citation

  • Yuri Sato, 2017. "State, Industry, and Business in Indonesia’s Transformation," Studies in Economic Transition, in: Boo Teik Khoo & Keiichi Tsunekawa & Motoko Kawano (ed.), Southeast Asia beyond Crises and Traps, chapter 3, pages 71-99, Palgrave Macmillan.
    • Handle: RePEc:pal:stuchp:978-3-319-55038-1_3
    DOI: 10.1007/978-3-319-55038-1_3
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