Competitiveness, FDI and Technological Activity in East Asia
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Competitiveness, FDI and Technological Activity in East Asia

Edited by Sanjaya Lall and Shujiro Urata

This book addresses this imbalance with new country studies on the interaction between foreign direct investment (FDI) and technological activity in building export competitiveness. The book covers China, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand, highlighting different strategic approaches to building capabilities in industrial enterprises. The book also includes a general overview and studies of Japanese multinationals overseas.
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Chapter 13: Technology development in Indonesia

Yumiko Okamoto and Fredrik Sjöholm


Yumiko Okamoto and Fredrik Sjöholm 1. INTRODUCTION There are two views of Indonesia’s economic development. One is that its achievement in the three decades prior to the financial crisis was impressive. Indonesia achieved high rates of economic growth, large declines in poverty and widespread basic education coupled with rapid industrialization and structural change (Rock, 1999: 169). Moreover, it succeeded in acquiring and adopting new industrial technology within a short period; this provided the basis for the first stages of industrial growth as well as the expansion of manufactured exports. Thus, the share of the manufacturing sector in GDP rose from about 12 per cent in 1980 to about 26 per cent by 1996.1 The transformation of the export structure was even more impressive: in the early 1980s, Indonesia was wholly dependent on primary exports, but by the early 1990s the share of manufactures had exceeded 50 per cent. The other view is more pessimistic. Indonesia, an economic latecomer by East Asian industrial standards, still operates at the bottom of the technology ladder (Lall, 1998: 141). Its industrial specialization is in relatively low technology and there is little improvement in its technological status over time. This is held to be one factor explaining its failure to achieve a real economic convergence with its wealthier neighbours. Indonesia seems to offer two kinds of lessons on development. The first relates to the management of the first stages of industrialization (how to gain access to the necessary technology and to use it...

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