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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.

Suggested Citation

  • 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, pages 277-305.
    2. Haryo Aswicahyono & Hal Hill, 2014. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, pages 319-346.
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    Cited by:

    1. Sadayuki Takii & Eric Ramstetter, 2005. "Multinational presence and labour productivity differentials in Indonesian manufacturing, 1975-2001," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, pages 221-242.
    2. Jacob, J. & Meister, C., 2004. "Productivity gains, intersectoral linkages, and trade: Indonesian manufacturing, 1980-1996," Working Papers 04.14, Eindhoven Center for Innovation Studies.
    3. 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.
    4. 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, NBER-East Asia Seminar on Economics, Volume 13, pages 229-276 National Bureau of Economic Research, Inc.
    5. 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.
    6. Jojo Jacob & Christoph Meister, 2005. "Productivity gains, technology spillovers and trade: Indonesian manufacturing, 1980-96," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, pages 37-56.
    7. 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.
    8. 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.
    9. Mitsuhiro Hayashi, 2003. "Development of SMEs in the Indonesian Economy," Departmental Working Papers 2003-01, The Australian National University, Arndt-Corden Department of Economics.
    10. 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.
    11. 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.
    12. James, William E. & Ramstetter, Eric D., 2008. "Trade, foreign firms and economic policy in Indonesian and Thai manufacturing," Journal of Asian Economics, Elsevier, pages 413-424.
    13. William E. James & Eric D. Ramstetter, 2005. "Trade, Foreign Firms, and Economic Policy in Indonesian and Thai Manufacturing," Economics Study Area Working Papers 78, East-West Center, Economics Study Area.

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