Economic Policy and Manufacturing Performance in Developing Countries

Economic Policy and Manufacturing Performance in Developing Countries

Edited by Oliver Morrissey and Michael Tribe

This book considers the impact of economic reforms on manufacturing performance and explores policy options for promoting manufacturing. Using country-specific case studies spanning Africa, South Asia, South East Asia and Latin America, the authors examine the evidence for and against both trade liberalisation and government support policy.

Chapter 5: Becoming an exporter of manufactures: the case of Indonesia

John T. Thoburn

Subjects: development studies, development economics, economics and finance, development economics, industrial economics

Extract

John T. Thoburn* During the 1980s Indonesia moved from being a negligible exporter of manufactures to a significant supplier. In 1980 manufactures generated less than 3 per cent of total exports; by 1992 they were nearly 50 per cent (Hill, 1996: 81). This expansion followed a series of trade reforms as Indonesia – a major oil exporter – coped with the collapse in the price of oil (and other primary commodities). The present chapter focuses on the three main manufacturing export sectors: textiles and garments, footwear and electronics.1 It looks at the role of foreign investment and the relation between export-oriented production and the legacy of industries developed under Indonesia’s earlier programme of import-substituting industrialisation. A particular focus is on the operation of the export-promoting trade regime in relation to the needs of each sector, and in relation to the possibilities for economically efficient backward integration by the export sectors.2 In the 1990s, previously exceptionally high rates of non-oil export growth started to slow. From 1994 until the 1997–98 Asian financial crisis, textile, garment and footwear exports never regained their previous momentum, although electronics exports continued to grow rapidly. The period 1992 to 1994 represents something of a watershed in Indonesia’s remarkably rapid development of manufactures exports, and the country’s progress up to then may provide lessons for other countries wishing to move in a similar direction. The year 1994 is taken as our point of reference. Material is derived from 30 interviews with companies and trade associations in...

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