Indonesia's industrial policy and performance: "Orthodoxy" vindicated

Economic Development and Cultural Change

Volumn 45, Issue 1, 1996, Pages 146-174

  Hill, Hal ^a  

^a AUSTRALIAN NATIONAL UNIVERSITY   (Australia)

Author keywords

[No Author keywords available]

Indexed keywords

DEVELOPING COUNTRY; INDUSTRIAL PERFORMANCE; INDUSTRIAL POLICY; MACROECONOMIC MANAGEMENT; ORTHODOXY; POLICY APPROACH; STATE INTERVENTION;

INDONESIA;

EID: 0030438587     PISSN: 00130079     EISSN: None     Source Type: Journal    
DOI: 10.1086/452261     Document Type: Article

References (76)

1. Governor Park of the Korean Central Bank, quoted in R. Wade, "East Asia's Economic Success: Conflicting Perspectives, Partial Insights, Shaky Evidence," World Politics 44, no. 2 (1992): 270-320, quote on 270.
2. A. H. Amsden, Asia's Next Giant: South Korea and Late Industrialization (New York: Oxford University Press, 1989), pp. 139-40.
3. M. Sadli, "The Private Sector," in Indonesian Economic Development: Issues and Analysis, ed. S. Ichimura (Tokyo: Japan International Cooperation Agency, 1988), pp. 354-69, quote on p. 364.
4. A. R. Soehoed, "Reflections on Industrialisation and Industrial Policy in Indonesia," Bulletin of Indonesian Economic Studies, 24, no. 2 (1988): 43-57, quote on 45.
5. H. W. Arndt, "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, 14, no. 1 (1978): 1-28, quote on 28.
6. A. MacIntyre, "Power, Prosperity and Patrimonialism: Business and Government in Indonesia," in Business and Government in Industrialising Asia, ed. A. MacIntyre (Sydney: Allen & Unwin; Ithaca, N.Y.: Cornell University Press, 1994), pp. 244-267, quote on p. 261.
7. World Bank, The East Asian Miracle: Economic Growth and Public Policy (Washington, D.C.: World Bank, 1993).
8. See D. Papageorgiou, M. Michaely, and A. Choksi, eds., Liberalizing Foreign Trade, 7 vols. (Cambridge, Mass.: Basil Blackwell, 1991).
9. Amsden; C. Johnson, MITI and the Japanese Economic Miracle (Stanford, Calif.: Stanford University Press, 1982); and R. Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton, N. J.: Princeton University Press, 1990).
10. Amsden; C. Johnson, MITI and the Japanese Economic Miracle (Stanford, Calif.: Stanford University Press, 1982); and R. Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton, N. J.: Princeton University Press, 1990).
11. Much of it is cited in the three key references mentioned in the previous paragraph: Amsden; Johnson; and Wade, Governing the Market. A very useful volume, which airs both sides of the argument, is H. Hughes, ed., Achieving Industrialization in East Asia (Cambridge: Cambridge University Press, 1988); see in particular the overview chapter by James Riedel, "Economic Development in East Asia: Doing What Comes Naturally?" (pp. 1-38). Illuminating accounts of various aspects of the political economy of industrial policy are provided by T. S. Biggs and B. D. Levy, "Strategic Interventions and the Political Economy of Industrial Policy in Developing Countries," in Reforming Economic Systems in Developing Countries, ed. D. H. Perkins and M. Roemer (Cambridge, Mass.: Harvard Institute for International Development, 1991), pp. 365-401; and S. Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca, N. Y.: Cornell University Press, 1990). More skeptical of the case for intervention are H. Patrick with L. Meissner, eds., Japan's High Technology Industries: Lessons and Limitations of Industrial Policy (Seattle: University of Washington Press, 1986); World Bank, The East Asian Miracle; and H. J. Smith, "The Role of Government in the Industrialisation of Taiwan and Korea in the 1980s" (Ph.D. diss., Australian National University, 1994).
12. Much of it is cited in the three key references mentioned in the previous paragraph: Amsden; Johnson; and Wade, Governing the Market. A very useful volume, which airs both sides of the argument, is H. Hughes, ed., Achieving Industrialization in East Asia (Cambridge: Cambridge University Press, 1988); see in particular the overview chapter by James Riedel, "Economic Development in East Asia: Doing What Comes Naturally?" (pp. 1-38). Illuminating accounts of various aspects of the political economy of industrial policy are provided by T. S. Biggs and B. D. Levy, "Strategic Interventions and the Political Economy of Industrial Policy in Developing Countries," in Reforming Economic Systems in Developing Countries, ed. D. H. Perkins and M. Roemer (Cambridge, Mass.: Harvard Institute for International Development, 1991), pp. 365-401; and S. Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca, N. Y.: Cornell University Press, 1990). More skeptical of the case for intervention are H. Patrick with L. Meissner, eds., Japan's High Technology Industries: Lessons and Limitations of Industrial Policy (Seattle: University of Washington Press, 1986); World Bank, The East Asian Miracle; and H. J. Smith, "The Role of Government in the Industrialisation of Taiwan and Korea in the 1980s" (Ph.D. diss., Australian National University, 1994).
13. Much of it is cited in the three key references mentioned in the previous paragraph: Amsden; Johnson; and Wade, Governing the Market. A very useful volume, which airs both sides of the argument, is H. Hughes, ed., Achieving Industrialization in East Asia (Cambridge: Cambridge University Press, 1988); see in particular the overview chapter by James Riedel, "Economic Development in East Asia: Doing What Comes Naturally?" (pp. 1-38). Illuminating accounts of various aspects of the political economy of industrial policy are provided by T. S. Biggs and B. D. Levy, "Strategic Interventions and the Political Economy of Industrial Policy in Developing Countries," in Reforming Economic Systems in Developing Countries, ed. D. H. Perkins and M. Roemer (Cambridge, Mass.: Harvard Institute for International Development, 1991), pp. 365-401; and S. Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca, N. Y.: Cornell University Press, 1990). More skeptical of the case for intervention are H. Patrick with L. Meissner, eds., Japan's High Technology Industries: Lessons and Limitations of Industrial Policy (Seattle: University of Washington Press, 1986); World Bank, The East Asian Miracle; and H. J. Smith, "The Role of Government in the Industrialisation of Taiwan and Korea in the 1980s" (Ph.D. diss., Australian National University, 1994).
14. Much of it is cited in the three key references mentioned in the previous paragraph: Amsden; Johnson; and Wade, Governing the Market. A very useful volume, which airs both sides of the argument, is H. Hughes, ed., Achieving Industrialization in East Asia (Cambridge: Cambridge University Press, 1988); see in particular the overview chapter by James Riedel, "Economic Development in East Asia: Doing What Comes Naturally?" (pp. 1-38). Illuminating accounts of various aspects of the political economy of industrial policy are provided by T. S. Biggs and B. D. Levy, "Strategic Interventions and the Political Economy of Industrial Policy in Developing Countries," in Reforming Economic Systems in Developing Countries, ed. D. H. Perkins and M. Roemer (Cambridge, Mass.: Harvard Institute for International Development, 1991), pp. 365-401; and S. Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca, N. Y.: Cornell University Press, 1990). More skeptical of the case for intervention are H. Patrick with L. Meissner, eds., Japan's High Technology Industries: Lessons and Limitations of Industrial Policy (Seattle: University of Washington Press, 1986); World Bank, The East Asian Miracle; and H. J. Smith, "The Role of Government in the Industrialisation of Taiwan and Korea in the 1980s" (Ph.D. diss., Australian National University, 1994).
15. Much of it is cited in the three key references mentioned in the previous paragraph: Amsden; Johnson; and Wade, Governing the Market. A very useful volume, which airs both sides of the argument, is H. Hughes, ed., Achieving Industrialization in East Asia (Cambridge: Cambridge University Press, 1988); see in particular the overview chapter by James Riedel, "Economic Development in East Asia: Doing What Comes Naturally?" (pp. 1-38). Illuminating accounts of various aspects of the political economy of industrial policy are provided by T. S. Biggs and B. D. Levy, "Strategic Interventions and the Political Economy of Industrial Policy in Developing Countries," in Reforming Economic Systems in Developing Countries, ed. D. H. Perkins and M. Roemer (Cambridge, Mass.: Harvard Institute for International Development, 1991), pp. 365-401; and S. Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca, N. Y.: Cornell University Press, 1990). More skeptical of the case for intervention are H. Patrick with L. Meissner, eds., Japan's High Technology Industries: Lessons and Limitations of Industrial Policy (Seattle: University of Washington Press, 1986); World Bank, The East Asian Miracle; and H. J. Smith, "The Role of Government in the Industrialisation of Taiwan and Korea in the 1980s" (Ph.D. diss., Australian National University, 1994).
16. Much of it is cited in the three key references mentioned in the previous paragraph: Amsden; Johnson; and Wade, Governing the Market. A very useful volume, which airs both sides of the argument, is H. Hughes, ed., Achieving Industrialization in East Asia (Cambridge: Cambridge University Press, 1988); see in particular the overview chapter by James Riedel, "Economic Development in East Asia: Doing What Comes Naturally?" (pp. 1-38). Illuminating accounts of various aspects of the political economy of industrial policy are provided by T. S. Biggs and B. D. Levy, "Strategic Interventions and the Political Economy of Industrial Policy in Developing Countries," in Reforming Economic Systems in Developing Countries, ed. D. H. Perkins and M. Roemer (Cambridge, Mass.: Harvard Institute for International Development, 1991), pp. 365-401; and S. Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca, N. Y.: Cornell University Press, 1990). More skeptical of the case for intervention are H. Patrick with L. Meissner, eds., Japan's High Technology Industries: Lessons and Limitations of Industrial Policy (Seattle: University of Washington Press, 1986); World Bank, The East Asian Miracle; and H. J. Smith, "The Role of Government in the Industrialisation of Taiwan and Korea in the 1980s" (Ph.D. diss., Australian National University, 1994).
17. Much of it is cited in the three key references mentioned in the previous paragraph: Amsden; Johnson; and Wade, Governing the Market. A very useful volume, which airs both sides of the argument, is H. Hughes, ed., Achieving Industrialization in East Asia (Cambridge: Cambridge University Press, 1988); see in particular the overview chapter by James Riedel, "Economic Development in East Asia: Doing What Comes Naturally?" (pp. 1-38). Illuminating accounts of various aspects of the political economy of industrial policy are provided by T. S. Biggs and B. D. Levy, "Strategic Interventions and the Political Economy of Industrial Policy in Developing Countries," in Reforming Economic Systems in Developing Countries, ed. D. H. Perkins and M. Roemer (Cambridge, Mass.: Harvard Institute for International Development, 1991), pp. 365-401; and S. Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca, N. Y.: Cornell University Press, 1990). More skeptical of the case for intervention are H. Patrick with L. Meissner, eds., Japan's High Technology Industries: Lessons and Limitations of Industrial Policy (Seattle: University of Washington Press, 1986); World Bank, The East Asian Miracle; and H. J. Smith, "The Role of Government in the Industrialisation of Taiwan and Korea in the 1980s" (Ph.D. diss., Australian National University, 1994).
18. Much of it is cited in the three key references mentioned in the previous paragraph: Amsden; Johnson; and Wade, Governing the Market. A very useful volume, which airs both sides of the argument, is H. Hughes, ed., Achieving Industrialization in East Asia (Cambridge: Cambridge University Press, 1988); see in particular the overview chapter by James Riedel, "Economic Development in East Asia: Doing What Comes Naturally?" (pp. 1-38). Illuminating accounts of various aspects of the political economy of industrial policy are provided by T. S. Biggs and B. D. Levy, "Strategic Interventions and the Political Economy of Industrial Policy in Developing Countries," in Reforming Economic Systems in Developing Countries, ed. D. H. Perkins and M. Roemer (Cambridge, Mass.: Harvard Institute for International Development, 1991), pp. 365-401; and S. Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca, N. Y.: Cornell University Press, 1990). More skeptical of the case for intervention are H. Patrick with L. Meissner, eds., Japan's High Technology Industries: Lessons and Limitations of Industrial Policy (Seattle: University of Washington Press, 1986); World Bank, The East Asian Miracle; and H. J. Smith, "The Role of Government in the Industrialisation of Taiwan and Korea in the 1980s" (Ph.D. diss., Australian National University, 1994).
19. The phrase "chronic economic dropout" is from B. Higgins, Economic Development (New York: Norton, 1968), a widely used text on economic development. Higgins himself has had extensive first-hand experience in Indonesia dating back to the early 1950s.
20. This section relies heavily on H. Hill, The Indonesian Economy since 1966: Southeast Asia's Emerging Giant (Cambridge: Cambridge University Press, 1996).
21. The most detailed comparative analysis of the OPEC nations' economic performance is provided by A. Gelb and Associates, Oil Windfalls: Blessing or Curse? (New York: Oxford University Press, for the World Bank, 1988). The World Bank project was published as I. M. D. Little et al., Boom, Crisis, and Adjustment: The Macroeconomic Experience of Developing Countries (New York: Oxford University Press, for the World Bank, 1993). It draws for its Indonesian material on W. T. Woo, B. Glassburner, and A. Nasution, Macroeconomic Policies, Crises, and Long-Term Growth in Indonesia, 1965-90 (Washington, D.C.: World Bank, 1994). A special issue of World Development ("Adjustment with Growth and Equity," ed. F. Bourguignon, J. De Melo, and C. Morrisson, vol. 19, no. 11 [1991]) assesses the effects of macroeconomic adjustment policies on poverty and income distribution in several countries, including Indonesia.
22. The most detailed comparative analysis of the OPEC nations' economic performance is provided by A. Gelb and Associates, Oil Windfalls: Blessing or Curse? (New York: Oxford University Press, for the World Bank, 1988). The World Bank project was published as I. M. D. Little et al., Boom, Crisis, and Adjustment: The Macroeconomic Experience of Developing Countries (New York: Oxford University Press, for the World Bank, 1993). It draws for its Indonesian material on W. T. Woo, B. Glassburner, and A. Nasution, Macroeconomic Policies, Crises, and Long-Term Growth in Indonesia, 1965-90 (Washington, D.C.: World Bank, 1994). A special issue of World Development ("Adjustment with Growth and Equity," ed. F. Bourguignon, J. De Melo, and C. Morrisson, vol. 19, no. 11 [1991]) assesses the effects of macroeconomic adjustment policies on poverty and income distribution in several countries, including Indonesia.
23. The most detailed comparative analysis of the OPEC nations' economic performance is provided by A. Gelb and Associates, Oil Windfalls: Blessing or Curse? (New York: Oxford University Press, for the World Bank, 1988). The World Bank project was published as I. M. D. Little et al., Boom, Crisis, and Adjustment: The Macroeconomic Experience of Developing Countries (New York: Oxford University Press, for the World Bank, 1993). It draws for its Indonesian material on W. T. Woo, B. Glassburner, and A. Nasution, Macroeconomic Policies, Crises, and Long-Term Growth in Indonesia, 1965-90 (Washington, D.C.: World Bank, 1994). A special issue of World Development ("Adjustment with Growth and Equity," ed. F. Bourguignon, J. De Melo, and C. Morrisson, vol. 19, no. 11 [1991]) assesses the effects of macroeconomic adjustment policies on poverty and income distribution in several countries, including Indonesia.
24. The most detailed comparative analysis of the OPEC nations' economic performance is provided by A. Gelb and Associates, Oil Windfalls: Blessing or Curse? (New York: Oxford University Press, for the World Bank, 1988). The World Bank project was published as I. M. D. Little et al., Boom, Crisis, and Adjustment: The Macroeconomic Experience of Developing Countries (New York: Oxford University Press, for the World Bank, 1993). It draws for its Indonesian material on W. T. Woo, B. Glassburner, and A. Nasution, Macroeconomic Policies, Crises, and Long-Term Growth in Indonesia, 1965-90 (Washington, D.C.: World Bank, 1994). A special issue of World Development ("Adjustment with Growth and Equity," ed. F. Bourguignon, J. De Melo, and C. Morrisson, vol. 19, no. 11 [1991]) assesses the effects of macroeconomic adjustment policies on poverty and income distribution in several countries, including Indonesia.
25. Prominent Indonesian economists have written extensively on the political economy of these reforms. See, e.g., I. J. Azis, "Indonesia," in The Political Economy of Policy Reform, ed. J. Williamson (Washington, D.C.: Institute for International Economics, 1994), pp. 385-416; M. Pangestu, "Managing Economic Policy Reforms in Indonesia," in Authority and Academic Scribblers: The Role of Research in East Asian Policy Reform, ed. S. Ostry (San Francisco: International Center for Economic Growth, 1991), pp. 93-120; and H. Soesastro, "The Political Economy of Deregulation in Indonesia," Asian Survey 29, no. 9 (1989): 853-68.
26. Prominent Indonesian economists have written extensively on the political economy of these reforms. See, e.g., I. J. Azis, "Indonesia," in The Political Economy of Policy Reform, ed. J. Williamson (Washington, D.C.: Institute for International Economics, 1994), pp. 385-416; M. Pangestu, "Managing Economic Policy Reforms in Indonesia," in Authority and Academic Scribblers: The Role of Research in East Asian Policy Reform, ed. S. Ostry (San Francisco: International Center for Economic Growth, 1991), pp. 93-120; and H. Soesastro, "The Political Economy of Deregulation in Indonesia," Asian Survey 29, no. 9 (1989): 853-68.
27. Prominent Indonesian economists have written extensively on the political economy of these reforms. See, e.g., I. J. Azis, "Indonesia," in The Political Economy of Policy Reform, ed. J. Williamson (Washington, D.C.: Institute for International Economics, 1994), pp. 385-416; M. Pangestu, "Managing Economic Policy Reforms in Indonesia," in Authority and Academic Scribblers: The Role of Research in East Asian Policy Reform, ed. S. Ostry (San Francisco: International Center for Economic Growth, 1991), pp. 93-120; and H. Soesastro, "The Political Economy of Deregulation in Indonesia," Asian Survey 29, no. 9 (1989): 853-68.
28. These studies include G. Fane and C. Phillips, "Effective Protection in Indonesia in 1987," Bulletin of Indonesian Economic Studies 27, no. 1 (1991): 105-25, for the year 1987; M. Pangestu and Boediono, "Indonesia: The Structure and Causes of Manufacturing Sector Protection," in The Political Economy of Manufacturing Protection: Experiences of ASEAN and Australia, ed. C. Findlay and R. Garnaut (Sydney: Allen & Unwin, 1986), pp. 1-47, for 1975 and 1980; M. Pitt, "Alternative Trade Strategies and Employment in Indonesia," in Trade and Employment in Developing Countries, vol. 1, ed. A. O. Krueger et al. (Chicago: University of Chicago Press, 1981), pp. 181-237, for 1971; World Bank, Indonesia: Selected Issues of Industrial Development and Trade Strategy, Annex 2, The Foreign Trade Regime (Washington, D.C.: World Bank, 1981), for 1975; and P. Wymenga, "The Structure of Protection in 1989 in Indonesia," Bulletin of Indonesian Economic Studies 27, no. 1 (1991): 127-53, for 1989. An authoritative official view of trade policymaking by a key trade official for much of this period is provided by Suhadi Mangkusuwondo, "Recollections of My Career," Bulletin of Indonesian Economic Studies (in press).
29. These studies include G. Fane and C. Phillips, "Effective Protection in Indonesia in 1987," Bulletin of Indonesian Economic Studies 27, no. 1 (1991): 105-25, for the year 1987; M. Pangestu and Boediono, "Indonesia: The Structure and Causes of Manufacturing Sector Protection," in The Political Economy of Manufacturing Protection: Experiences of ASEAN and Australia, ed. C. Findlay and R. Garnaut (Sydney: Allen & Unwin, 1986), pp. 1-47, for 1975 and 1980; M. Pitt, "Alternative Trade Strategies and Employment in Indonesia," in Trade and Employment in Developing Countries, vol. 1, ed. A. O. Krueger et al. (Chicago: University of Chicago Press, 1981), pp. 181-237, for 1971; World Bank, Indonesia: Selected Issues of Industrial Development and Trade Strategy, Annex 2, The Foreign Trade Regime (Washington, D.C.: World Bank, 1981), for 1975; and P. Wymenga, "The Structure of Protection in 1989 in Indonesia," Bulletin of Indonesian Economic Studies 27, no. 1 (1991): 127-53, for 1989. An authoritative official view of trade policymaking by a key trade official for much of this period is provided by Suhadi Mangkusuwondo, "Recollections of My Career," Bulletin of Indonesian Economic Studies (in press).
30. These studies include G. Fane and C. Phillips, "Effective Protection in Indonesia in 1987," Bulletin of Indonesian Economic Studies 27, no. 1 (1991): 105-25, for the year 1987; M. Pangestu and Boediono, "Indonesia: The Structure and Causes of Manufacturing Sector Protection," in The Political Economy of Manufacturing Protection: Experiences of ASEAN and Australia, ed. C. Findlay and R. Garnaut (Sydney: Allen & Unwin, 1986), pp. 1-47, for 1975 and 1980; M. Pitt, "Alternative Trade Strategies and Employment in Indonesia," in Trade and Employment in Developing Countries, vol. 1, ed. A. O. Krueger et al. (Chicago: University of Chicago Press, 1981), pp. 181-237, for 1971; World Bank, Indonesia: Selected Issues of Industrial Development and Trade Strategy, Annex 2, The Foreign Trade Regime (Washington, D.C.: World Bank, 1981), for 1975; and P. Wymenga, "The Structure of Protection in 1989 in Indonesia," Bulletin of Indonesian Economic Studies 27, no. 1 (1991): 127-53, for 1989. An authoritative official view of trade policymaking by a key trade official for much of this period is provided by Suhadi Mangkusuwondo, "Recollections of My Career," Bulletin of Indonesian Economic Studies (in press).
31. These studies include G. Fane and C. Phillips, "Effective Protection in Indonesia in 1987," Bulletin of Indonesian Economic Studies 27, no. 1 (1991): 105-25, for the year 1987; M. Pangestu and Boediono, "Indonesia: The Structure and Causes of Manufacturing Sector Protection," in The Political Economy of Manufacturing Protection: Experiences of ASEAN and Australia, ed. C. Findlay and R. Garnaut (Sydney: Allen & Unwin, 1986), pp. 1-47, for 1975 and 1980; M. Pitt, "Alternative Trade Strategies and Employment in Indonesia," in Trade and Employment in Developing Countries, vol. 1, ed. A. O. Krueger et al. (Chicago: University of Chicago Press, 1981), pp. 181-237, for 1971; World Bank, Indonesia: Selected Issues of Industrial Development and Trade Strategy, Annex 2, The Foreign Trade Regime (Washington, D.C.: World Bank, 1981), for 1975; and P. Wymenga, "The Structure of Protection in 1989 in Indonesia," Bulletin of Indonesian Economic Studies 27, no. 1 (1991): 127-53, for 1989. An authoritative official view of trade policymaking by a key trade official for much of this period is provided by Suhadi Mangkusuwondo, "Recollections of My Career," Bulletin of Indonesian Economic Studies (in press).
32. These studies include G. Fane and C. Phillips, "Effective Protection in Indonesia in 1987," Bulletin of Indonesian Economic Studies 27, no. 1 (1991): 105-25, for the year 1987; M. Pangestu and Boediono, "Indonesia: The Structure and Causes of Manufacturing Sector Protection," in The Political Economy of Manufacturing Protection: Experiences of ASEAN and Australia, ed. C. Findlay and R. Garnaut (Sydney: Allen & Unwin, 1986), pp. 1-47, for 1975 and 1980; M. Pitt, "Alternative Trade Strategies and Employment in Indonesia," in Trade and Employment in Developing Countries, vol. 1, ed. A. O. Krueger et al. (Chicago: University of Chicago Press, 1981), pp. 181-237, for 1971; World Bank, Indonesia: Selected Issues of Industrial Development and Trade Strategy, Annex 2, The Foreign Trade Regime (Washington, D.C.: World Bank, 1981), for 1975; and P. Wymenga, "The Structure of Protection in 1989 in Indonesia," Bulletin of Indonesian Economic Studies 27, no. 1 (1991): 127-53, for 1989. An authoritative official view of trade policymaking by a key trade official for much of this period is provided by Suhadi Mangkusuwondo, "Recollections of My Career," Bulletin of Indonesian Economic Studies (in press).
33. These studies include G. Fane and C. Phillips, "Effective Protection in Indonesia in 1987," Bulletin of Indonesian Economic Studies 27, no. 1 (1991): 105-25, for the year 1987; M. Pangestu and Boediono, "Indonesia: The Structure and Causes of Manufacturing Sector Protection," in The Political Economy of Manufacturing Protection: Experiences of ASEAN and Australia, ed. C. Findlay and R. Garnaut (Sydney: Allen & Unwin, 1986), pp. 1-47, for 1975 and 1980; M. Pitt, "Alternative Trade Strategies and Employment in Indonesia," in Trade and Employment in Developing Countries, vol. 1, ed. A. O. Krueger et al. (Chicago: University of Chicago Press, 1981), pp. 181-237, for 1971; World Bank, Indonesia: Selected Issues of Industrial Development and Trade Strategy, Annex 2, The Foreign Trade Regime (Washington, D.C.: World Bank, 1981), for 1975; and P. Wymenga, "The Structure of Protection in 1989 in Indonesia," Bulletin of Indonesian Economic Studies 27, no. 1 (1991): 127-53, for 1989. An authoritative official view of trade policymaking by a key trade official for much of this period is provided by Suhadi Mangkusuwondo, "Recollections of My Career," Bulletin of Indonesian Economic Studies (in press).
34. These men were, respectively, head of the Investment Board and Minister of Industry, 1976-83; head of the Investment Board, Minister of Manpower, and Minister of Mines and Energy, 1967-78; and Director-General of Foreign Trade and senior adviser to the Minister of Trade, 1976-88.
35. As Soehoed (n. 4 above) notes, many of his ambitious industrial project plans were rejected. As Suhadi observes, trade policy over this period was primarily ad hoc in nature, responding to approaches from a plethora of special interest groups. The principal exception was a small number of strategic industries, such as rice, fertilizer, and cement, where there was a concerted effort to develop a consistent policy of assistance. A variant of the latter group, which was to become increasingly dominant from the second half of the 1980s, was the so-called technologs, a group centered around the Minister for Research and Technology, B. J. Habibie, who favored government support of a range of initiatives with an explicit emphasis on technological development.
36. For a general assessment of the Dutch Disease theory as it applies to Indonesia, see P. G. Warr, "Exchange Rate Policy, Petroleum Prices, and the Balance of Payments," in The Oil Boom and After: Indonesian Economic Policy and Performance in the Soeharto Era, ed. A. Booth (Singapore: Oxford University Press, 1992), pp. 132-58. For more detailed assessments of the late 1970s exchange rate management and the issue of compensating devaluation, see P. McCawley, "Indonesia's New Balance of Payments Problem: A Surplus to Get Rid Of," Ekonomi dan Keuangan Indonesia (Economics and finance of Indonesia) 28, no. 1 (1980): 39-58.
37. For a general assessment of the Dutch Disease theory as it applies to Indonesia, see P. G. Warr, "Exchange Rate Policy, Petroleum Prices, and the Balance of Payments," in The Oil Boom and After: Indonesian Economic Policy and Performance in the Soeharto Era, ed. A. Booth (Singapore: Oxford University Press, 1992), pp. 132-58. For more detailed assessments of the late 1970s exchange rate management and the issue of compensating devaluation, see P. McCawley, "Indonesia's New Balance of Payments Problem: A Surplus to Get Rid Of," Ekonomi dan Keuangan Indonesia (Economics and finance of Indonesia) 28, no. 1 (1980): 39-58.
38. No suitable efficiency variable is available. Ideally, domestic resource cost (DRC) would be used, but the most complete set of DRCs for Indonesia are strongly correlated with-in fact are directly derived from-EPRs. See P. G. Warr, "Comparative Advantage and Protection in Indonesia," Bulletin of Indonesian Economic Studies 28, no. 3 (1992): 41-70.
39. Fane and Phillips.
40. The output data are from the annual Statistik Industri (Industrial statistics) series released on tape by the Indonesian Central Bureau of Statistics, Jakarta. The data used here are from the "backcast" series, as yet unpublished, which are a more comprehensive set of estimates, for all firms with at least 20 employees. I am most grateful to Kelly Bird for providing these data.
41. There were 119 industries separately identified in Indonesia's industrial statistics over this period. However, several had to be dropped owing to incomplete output data and concordance problems between the SITC-based export data and also because the input-output codes (the basis for the ERP estimates) do not correspond to the ISIC classification in all cases. However, the industries used in the study cover all major industry groups and account for at least 75% of nonoil manufacturing value added in all years.
42. "Success," of course, in this context has an ambiguous connotation. Protection could be successful in the sense of stimulating output growth but of an inefficient variety behind high tariff walls. For this reason, the export and productivity variables are more important in the results, although neither of these variables is really an unambiguous indicator of efficient success.
43. For more details, see R. Chapman, "Indonesian Trade Reform in Close-Up: The Steel and Footwear Experiences," Bulletin of Indonesian Economic Studies 28, no. 1 (1992): 67-84. A number of confidential World Bank reports (especially that of 1993) have provided detailed assessments of the steel industry and other heavy industries in financial distress. These reports cannot, however, be cited.
44. There is an extensive literature on this topic, much of it still unpublished owing to its highly sensitive political nature, a factor that derives from the identity of many of the powerful concessionaires. Important studies include B. D. Fitzgerald, "Export Bans for Industrial Development: The Costs of Indonesian Plywood" (World Bank, Washington, B.C., 1987, unpublished); and H. Lindsay, "The Indonesian Log Export Ban: An Estimation of Foregone Export Earnings," Bulletin of Indonesian Economic Studies 25, no. 2 (1989): 111-23. The export bans were rescinded in May-June 1992, mainly out of fear that such bans may jeopardize Indonesia's international trade negotiating position, but they were in any case replaced by prohibitive export taxes.
45. There is an extensive literature on this topic, much of it still unpublished owing to its highly sensitive political nature, a factor that derives from the identity of many of the powerful concessionaires. Important studies include B. D. Fitzgerald, "Export Bans for Industrial Development: The Costs of Indonesian Plywood" (World Bank, Washington, B.C., 1987, unpublished); and H. Lindsay, "The Indonesian Log Export Ban: An Estimation of Foregone Export Earnings," Bulletin of Indonesian Economic Studies 25, no. 2 (1989): 111-23. The export bans were rescinded in May-June 1992, mainly out of fear that such bans may jeopardize Indonesia's international trade negotiating position, but they were in any case replaced by prohibitive export taxes.
46. There has been a long-established government institute, the Institut Teknologi Tekstil (Institute of Textile Technology), subsequently reconstituted as the Sekolah Tinggi Teknologi Tekstil (College of Textile Technology) and the Balai Besar Penelitian dan Pengembangan Industri Tekstil (Institute for Research and Development of the Textile Industry). But these bodies have always been poorly funded, have lacked clear assignment of objectives, have had little contact with the private sector, and have had virtually no impact on the industry's development. The disappearance of traditional weaving technologies is detailed in H. Hill, "Choice of Technique in the Indonesian Weaving Industry," Economic Development and Cultural Change 31, no. 2 (1983): 337-53. For a detailed analysis of the government's failed attempts to promote a textile machinery industry, see O. Braadbaart, "The Nuts and Bolts of Industry Growth: Textile Equipment Manufacturing in Indonesia" (Ph.D. diss., Catholic University of Nijmegan, 1994).
47. There has been a long-established government institute, the Institut Teknologi Tekstil (Institute of Textile Technology), subsequently reconstituted as the Sekolah Tinggi Teknologi Tekstil (College of Textile Technology) and the Balai Besar Penelitian dan Pengembangan Industri Tekstil (Institute for Research and Development of the Textile Industry). But these bodies have always been poorly funded, have lacked clear assignment of objectives, have had little contact with the private sector, and have had virtually no impact on the industry's development. The disappearance of traditional weaving technologies is detailed in H. Hill, "Choice of Technique in the Indonesian Weaving Industry," Economic Development and Cultural Change 31, no. 2 (1983): 337-53. For a detailed analysis of the government's failed attempts to promote a textile machinery industry, see O. Braadbaart, "The Nuts and Bolts of Industry Growth: Textile Equipment Manufacturing in Indonesia" (Ph.D. diss., Catholic University of Nijmegan, 1994).
48. This is a huge topic with an equally large literature on it. Good overviews are provided by I. K. Mardjana, "Autonomy and Political Control in Indonesian Public Enterprises: A Principal-Agent Approach" (Ph.D. diss., Monash University, 1993); and M. Pangestu and A. D. Habir, "Trends and Prospects in Privatization and Deregulation in Indonesia," ASEAN Economic Bulletin 5, no. 3 (1989): 224-41.
49. This is a huge topic with an equally large literature on it. Good overviews are provided by I. K. Mardjana, "Autonomy and Political Control in Indonesian Public Enterprises: A Principal-Agent Approach" (Ph.D. diss., Monash University, 1993); and M. Pangestu and A. D. Habir, "Trends and Prospects in Privatization and Deregulation in Indonesia," ASEAN Economic Bulletin 5, no. 3 (1989): 224-41.
50. In 1976 it was revealed that the state oil company, Pertamina, had accumulated debts of over $10 billion, equivalent then to almost 30% of the country's GDP. A rescue program was quickly introduced, many of the company's assets were disposed of, and its operations were focused more tightly on the oil and energy sectors. Otherwise, the changes were relatively minor. See P. McCawley, "Some Consequences of the Pertamina Crisis in Indonesia," Journal of Southeast Asian Studies 9, no. 1 (1978): 1-27, for an analysis of the crisis and its repercussions.
51. Referred to in Hill, The Indonesian Economy since 1966 (n. 12 above), chap. 6.
52. Since the mid-1980s these enterprises, and particularly the aircraft factory IPTN, have been the most controversial component of the state enterprise sector. It has been notoriously difficult for anyone-researchers, international agencies, even on occasion the country's Department of Finance - to garner reliable information concerning these projects. D. G. McKendrick, "Obstacles to 'Catch-up': The Case of the Indonesian Aircraft Industry," Bulletin of Indonesian Economic Studies 28, no. 1 (1992): 39-66, is the most complete study to date. Several confidential World Bank reports contain useful financial data corroborating the above conclusions.
53. The lending rates and classifications varied over time, but those cited by R. M. McLeod, "Financial Institutions and Markets in Indonesia," in Financial Institutions and Markets in Southeast Asia, ed. M. T. Skully (London: MacMillan, 1984), p. 65, are indicative. The abbreviated categories (nominal lending rates in parentheses) were rice and maize (9%); small-scale credits (10.5%); special agricultural programs, salt, wheat flour, other agriculture (excluding plantations), exports, fertilizer and insecticide for smallholders (12%); medium-scale credits, manufacturing, most services (13.5%); imports (18%); and others (21%).
54. These studies are B. R. Bolnick and E. R. Nelson, "Evaluating the Economic Impact of a Small Credit Program: KIK/KMKP in Indonesia," Journal of Development Studies 26, no. 2 (1990): 299-312; and R. McLeod, "Finance and Entrepreneurship in the Small-Business Sector in Indonesia" (Ph.D. diss., Australian National University, 1980).
55. These studies are B. R. Bolnick and E. R. Nelson, "Evaluating the Economic Impact of a Small Credit Program: KIK/KMKP in Indonesia," Journal of Development Studies 26, no. 2 (1990): 299-312; and R. McLeod, "Finance and Entrepreneurship in the Small-Business Sector in Indonesia" (Ph.D. diss., Australian National University, 1980).
56. McLeod, "Finance and Entrepreneurship in the Small-Business Sector in Indonesia," found extensive evidence of both these practices in the late 1970s.
57. Chapter 8 of H. Hill, Foreign Investment and Industrialization in Indonesia (Singapore: Oxford University Press, 1988), summarizes the major studies over this period.
58. See ibid., chap. 3.
59. For an overview of these programs, see Thee Kian Wie, "Indonesia," in Industrial Structures and the Development of Small and Medium Enterprise Linkages: Examples from East Asia, ed. S. D. Meyanathan (Washington, D.C.: World Bank, 1994), pp. 95-122. For a detailed analysis of small-to-medium firm dynamics in Indonesia, see the case study by R. A. Berry and B. Levy, "Can Intervention Work? The Role of Government in SME Success" (paper presented at conference held at World Bank, Washington, D.C., February 1994). An analysis of trends in the size distribution of Indonesian manufacturing is provided by H. H. Aswicahyono, K. Bird, and H. Hill, "What Happens to Industrial Structure When Countries Liberalize? Indonesia since the Mid 1980s," Journal of Development Studies 32 no. 3 (1996): 340-63.
60. For an overview of these programs, see Thee Kian Wie, "Indonesia," in Industrial Structures and the Development of Small and Medium Enterprise Linkages: Examples from East Asia, ed. S. D. Meyanathan (Washington, D.C.: World Bank, 1994), pp. 95-122. For a detailed analysis of small-to-medium firm dynamics in Indonesia, see the case study by R. A. Berry and B. Levy, "Can Intervention Work? The Role of Government in SME Success" (paper presented at conference held at World Bank, Washington, D.C., February 1994). An analysis of trends in the size distribution of Indonesian manufacturing is provided by H. H. Aswicahyono, K. Bird, and H. Hill, "What Happens to Industrial Structure When Countries Liberalize? Indonesia since the Mid 1980s," Journal of Development Studies 32 no. 3 (1996): 340-63.
61. For an overview of these programs, see Thee Kian Wie, "Indonesia," in Industrial Structures and the Development of Small and Medium Enterprise Linkages: Examples from East Asia, ed. S. D. Meyanathan (Washington, D.C.: World Bank, 1994), pp. 95-122. For a detailed analysis of small-to-medium firm dynamics in Indonesia, see the case study by R. A. Berry and B. Levy, "Can Intervention Work? The Role of Government in SME Success" (paper presented at conference held at World Bank, Washington, D.C., February 1994). An analysis of trends in the size distribution of Indonesian manufacturing is provided by H. H. Aswicahyono, K. Bird, and H. Hill, "What Happens to Industrial Structure When Countries Liberalize? Indonesia since the Mid 1980s," Journal of Development Studies 32 no. 3 (1996): 340-63.
62. For recent, illuminating accounts of the politics of economic policy, see Azis (n. 14 above); Pangestu (n. 14 above); Soesastro (n. 14 above); J. Bresnan, Managing Indonesia: The Modern Political Economy (New York: Columbia University Press, 1993); J. A. C. Mackie and A. MacIntyre, "Politics," in Indonesia's New Order: The Dynamics of Socio-Economic Transformation, ed. H. Hill (Sydney: Allen & Unwin, 1994), pp. 1-53; and A. Schwarz, A Nation in Waiting: Indonesia in the 1990s (Sydney: Allen & Unwin, 1994).
63. For recent, illuminating accounts of the politics of economic policy, see Azis (n. 14 above); Pangestu (n. 14 above); Soesastro (n. 14 above); J. Bresnan, Managing Indonesia: The Modern Political Economy (New York: Columbia University Press, 1993); J. A. C. Mackie and A. MacIntyre, "Politics," in Indonesia's New Order: The Dynamics of Socio-Economic Transformation, ed. H. Hill (Sydney: Allen & Unwin, 1994), pp. 1-53; and A. Schwarz, A Nation in Waiting: Indonesia in the 1990s (Sydney: Allen & Unwin, 1994).
64. For recent, illuminating accounts of the politics of economic policy, see Azis (n. 14 above); Pangestu (n. 14 above); Soesastro (n. 14 above); J. Bresnan, Managing Indonesia: The Modern Political Economy (New York: Columbia University Press, 1993); J. A. C. Mackie and A. MacIntyre, "Politics," in Indonesia's New Order: The Dynamics of Socio-Economic Transformation, ed. H. Hill (Sydney: Allen & Unwin, 1994), pp. 1-53; and A. Schwarz, A Nation in Waiting: Indonesia in the 1990s (Sydney: Allen & Unwin, 1994).
65. Y. Sato, "The Salim Group: The Development and Behaviour of the Largest Conglomerate in Southeast Asia," Developing Economies 31, no. 4 (1993): 408-41, provides an illuminating account of Indonesia's (and Southeast Asia's) largest business conglomerate, the Salim Group, the sales of which are about 6.5% of Indonesia's GDP. She stresses in particular the opportunistic behavior and short-term orientation of the group.
66. It has, e.g., quickly shifted out of loss-making activities, as noted above, in some instances handing them over to the government by converting its arrears on loans with state banks into government equity. K. Yoshihara, The Rise of Ersatz Capitalism in Southeast Asia (Singapore: Oxford University Press, 1988), offers the most wideranging analysis of conglomerates in Southeast Asia, including his well-known characterization of them as "ersatz capitalists."
67. The major official body, the Indonesian Chamber of Commerce and Industry (Kadin) is regarded as little more than a government mouthpiece, and it possesses little in the way of policy, research, or organizational capacity. An illustration of the underdeveloped state of industry associations has been the acrimonious decade-long dispute among competing industry groups in the textile and garment industries. The dispute has centered on the allocation of textile quotas, the use of export levies for promotional purposes, and broader questions of policy strategy (see A. MacIntyre, Business and Politics in Indonesia [Sydney: Allen & Unwin, 1990]). Despite presidential intervention, it is still simmering.
68. As another illustration, a major program to improve the country's industrial data base that began in the late 1980s found many instances of unenumerated firms across all size, ownership, and regional groups.
69. One caveat somewhat peripheral to this article might also be mentioned. The period under examination extends through 1992. Since then Indo-nesia's rate of economic growth has been broadly maintained, but manufactured export growth has slowed down. It is beyond the scope of this article to explore the reasons for this slowdown, except to note that it has no implications for the merits or otherwise of selective industrial policy. Indeed, the most likely explanations for the slowdown are probably looser exchange rate management (resulting in a real effective appreciation of the rupiah), less efficient administration of the export drawback schemes, and at the ports, serious supply-side bottlenecks, large increases in minimum wages, and increasingly intense competition from China. See the triannual "Survey of Recent Developments" in the Bulletin of Indonesian Economic Studies through 1993 and 1994 for further discussion of these issues.
70. There is now an extensive literature on this subject. The major recent work on the subject is Papageorgiou, Michaely, and Choksi, eds. (n. 8 above). Indonesia is included in these case studies (see M. M. Pitt, "Indonesia," in Indonesia, Pakistan, and Sri Lanka, vol. 5 of Papageorgiou, Michaely, and Choksi, eds., pp. 181-237), but the study confines itself to the late 1960s reforms, whereas the focus of this article is the more recent mid-1980s reforms. For a critical review of the 1991 World Bank volumes (Papageorgiou et al., eds.), see D. Greenaway, "Liberalising Foreign Trade through Rose Tinted Glasses," Economic Journal 103 (1993): 208-22.
71. There is now an extensive literature on this subject. The major recent work on the subject is Papageorgiou, Michaely, and Choksi, eds. (n. 8 above). Indonesia is included in these case studies (see M. M. Pitt, "Indonesia," in Indonesia, Pakistan, and Sri Lanka, vol. 5 of Papageorgiou, Michaely, and Choksi, eds., pp. 181-237), but the study confines itself to the late 1960s reforms, whereas the focus of this article is the more recent mid-1980s reforms. For a critical review of the 1991 World Bank volumes (Papageorgiou et al., eds.), see D. Greenaway, "Liberalising Foreign Trade through Rose Tinted Glasses," Economic Journal 103 (1993): 208-22.
72. There is now an extensive literature on this subject. The major recent work on the subject is Papageorgiou, Michaely, and Choksi, eds. (n. 8 above). Indonesia is included in these case studies (see M. M. Pitt, "Indonesia," in Indonesia, Pakistan, and Sri Lanka, vol. 5 of Papageorgiou, Michaely, and Choksi, eds., pp. 181-237), but the study confines itself to the late 1960s reforms, whereas the focus of this article is the more recent mid-1980s reforms. For a critical review of the 1991 World Bank volumes (Papageorgiou et al., eds.), see D. Greenaway, "Liberalising Foreign Trade through Rose Tinted Glasses," Economic Journal 103 (1993): 208-22.
73. It is worth noting in passing that this too is the subject of much debate among economists. S. Pearson et al. (Rice Policy in Indonesia [Ithaca, N.Y.: Cornell University Press, 1991]); and C. P. Timmer ("Rural Bias in the East and Southeast Asian Rice Economy: Indonesia in Comparative Perspective," Journal of Development Studies 29, no. 4 [1993]: 149-76) have been sympathetic to the notion that the highly interventionist regime has been crucial to the strong output growth, while others have been critical of the welfare effects of intervention. Lest it might be thought that this topic is central to our discussion - e.g., low rice prices constituting a subsidized "wage good" into the industrialization process - it should be noted that domestic rice prices have never deviated significantly (more than 50%) from international prices for prolonged periods. Thus, the Indonesian experience is quite unlike that of, e.g., Korea and Japan.
74. It is worth noting in passing that this too is the subject of much debate among economists. S. Pearson et al. (Rice Policy in Indonesia [Ithaca, N.Y.: Cornell University Press, 1991]); and C. P. Timmer ("Rural Bias in the East and Southeast Asian Rice Economy: Indonesia in Comparative Perspective," Journal of Development Studies 29, no. 4 [1993]: 149-76) have been sympathetic to the notion that the highly interventionist regime has been crucial to the strong output growth, while others have been critical of the welfare effects of intervention. Lest it might be thought that this topic is central to our discussion - e.g., low rice prices constituting a subsidized "wage good" into the industrialization process - it should be noted that domestic rice prices have never deviated significantly (more than 50%) from international prices for prolonged periods. Thus, the Indonesian experience is quite unlike that of, e.g., Korea and Japan.
75. See, e.g., M. Ravallion and M. Huppi, "Measuring Changes in Poverty: A Methodological Case Study of Indonesia during an Adjustment Period," World Bank Economic Review 5, no. 1 (1991): 57-82.
76. Other writers have used the term to characterize macroeconomic policy in East Asia. See, e.g., the reference to "pragmatic orthodoxy" in W. M. Corden, "Managing the Macroeconomy," draft background paper for the World Bank's The East Asian Miracle (n. 7 above).