Competitiveness, Technology and Skills

Competitiveness, Technology and Skills

Sanjaya Lall

This book draws together recent contributions by Sanjaya Lall – a leading authority on international investment, technology and industrial policy – on competitiveness and its major determinants. It draws upon his wide experience of competitiveness analysis in Asian and African countries and his recent work on technology and skills. It contains his most important published material as well as previously unpublished articles, and will be of interest to students, researchers and policy analysts interested in industrial development, technology and human resources.

Chapter 10: Technology Policies in Indonesia

Sanjaya Lall

Subjects: development studies, development economics, economics and finance, development economics, industrial economics, innovation and technology, technology and ict


INTRODUCTION Indonesia is a relative newcomer to modern industry and, by any standards, a highly successful one. Its manufacturing sector has enjoyed high and sustained rates of growth, its shares of GNP and exports rising sharply. A modern electronics and transport equipment industry is taking root; the textile industry is well equipped and highly competitive; several heavy intermediate industries have been established; foreign direct investment (FDI) is flowing in strongly; national conglomerates are strong in financial terms and flexing their muscles overseas. Nevertheless, Indonesia’s industrial structure has several weaknesses in terms of technology – the life blood of its longer-term growth and upgrading. The technological base is shallow and backward in comparison to many countries in the region, particularly the large East Asian Tigers; domestic capabilities to absorb and improve upon complex imported technologies are narrow and weak; the capital goods sector, a vital ingredient of industrial deepening, is underdeveloped; the relatively small amount of technological effort that is conducted is concentrated and distorted. Traditional, small-scale, low-productivity activities still dominate manufacturing. Indonesia’s export industries, driven by foreign investment, remain concentrated in simple labour-intensive assembly or resource-processing activities. It is widely accepted that future industrial growth in Indonesia will have to move away from this initial pattern, and that this will require a significant upgrading of technological capabilities. Such capabilities are needed, not to undertake ‘innovation’ at the frontiers of knowledge, but to import the most cost-effective technologies, master them efficiently and adapt and improve upon them, and take on...

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