Chapter 10: Technology Policies in Indonesia
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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