IDEAS home Printed from https://ideas.repec.org/a/tpr/asiaec/v17y2018i1p73-93.html
   My bibliography  Save this article

The Elusive Pursuit of Import Substitution in 21st Century Indonesia

Author

Listed:
  • Dionisius Narjoko

    (Economic Research Institute for ASEAN and East Asia ERIA Annex Office Sentral Senayan II, 6th floor, Jalan Asia Afrika No. 8 Gelora Bung Karno, Senayan, Jakarta Pusat 10270, Indonesia Author email: dion.narjoko@eria.org)

  • Titik Anas

    (Presisi Indonesia and Padjajaran University Menara BCA, 50th floor Jl. M.H Thamrin No 1, Jakarta 10310, Indonesia Author email: tanas@presisi-indonesia.com)

  • Robertus Herdiyanto

    (Presisi Indonesia Menara BCA, 50th floor Jl. M.H Thamrin No 1, Jakarta 10310, Indonesia Author email: rherdiyanto@presisi-indonesia.com)

Abstract

This study evaluates the possible impact of an import substitution strategy recently implemented by the Government of Indonesia on the development of the intermediate inputs industry. Based on descriptive analysis, the study suggests that the implementation of the strategy was a misguided decision. Experiences from several countries confirm the negative impact of an import substitution strategy. The econometric analysis shows that trade protection impedes firms’ performance. Thus, it would be preferable for the government to have an open trade regime and to intensify foreign presence in the industry.

Suggested Citation

  • Dionisius Narjoko & Titik Anas & Robertus Herdiyanto, 2018. "The Elusive Pursuit of Import Substitution in 21st Century Indonesia," Asian Economic Papers, MIT Press, vol. 17(1), pages 73-93, Winter/Sp.
    • Handle: RePEc:tpr:asiaec:v:17:y:2018:i:1:p:73-93
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/asep_a_00588
    Download Restriction: Access to PDF is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Head, Keith & Ries, John, 1999. "Rationalization effects of tariff reductions," Journal of International Economics, Elsevier, vol. 47(2), pages 295-320, April.
    2. H H Aswicahyono & Hal Hill, 1995. "Determinants of Foreign Ownership in LDC Manufacturing: An Indonesian Case Study," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 26(1), pages 139-158, March.
    3. Haryo Aswicahyono & Hal Hill & Dionisius Narjoko, 2010. "Industrialisation after a Deep Economic Crisis: Indonesia," Journal of Development Studies, Taylor & Francis Journals, vol. 46(6), pages 1084-1108.
    4. Rahardja, Sjamsu & Varela, Gonzalo, 2014. "Nothing to Fear but Fear Itself: Evidence on Imported Intermediates in Indonesia," World Bank - Economic Premise, The World Bank, issue 136, pages 1-6, March.
    5. Bharat Diwakar & Gilad Sorek, 2015. "Economic Development and Stage-Dependent IPR," Auburn Economics Working Paper Series auwp2015-16, Department of Economics, Auburn University.
    6. Dionisius Narjoko, 2014. "Did Better Firms Enter the Indonesian Manufacturing Sector after the 1997-98 Crisis?," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 50(3), pages 371-391, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. World Bank, 2018. "Indonesia Economic Quarterly, December 2018," World Bank Publications - Reports 30969, The World Bank Group.
    2. Gupta, Krisna & Gretton, Paul & Patunru, Arianto, 2022. "Projecting the long run impact of an economic reform: the case of the Indonesian Omnibus Law and concurrent changes in trade policy," Conference papers 333472, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
    2. Breinlich, Holger, 2008. "Trade liberalization and industrial restructuring through mergers and acquisitions," Journal of International Economics, Elsevier, vol. 76(2), pages 254-266, December.
    3. Kaewnern, Hathaipat & Wangkumharn, Sirikul & Deeyaonarn, Wongsathon & Yousaf, Abaid Ullah & Kongbuamai, Nattapan, 2023. "Investigating the role of research development and renewable energy on human development: An insight from the top ten human development index countries," Energy, Elsevier, vol. 262(PB).
    4. Carsten Eckel, 2009. "International trade, flexible manufacturing, and outsourcing," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(4), pages 1449-1472, November.
    5. Baggs, Jennifer, 2004. "Changing Trade Barriers and Canadian Firms: Survival and Exit After the Canada-U.S. Free Trade Agreement," Analytical Studies Branch Research Paper Series 2004205e, Statistics Canada, Analytical Studies Branch.
    6. Dionisius Narjoko & Hal Hill, 2007. "Winners and Losers during a Deep Economic Crisis: Firm‐level Evidence from Indonesian Manufacturing," Asian Economic Journal, East Asian Economic Association, vol. 21(4), pages 343-368, December.
    7. DIARRA, Setou & LEBIHAN, Laetitia & MAO TAKONGMO, Charles Olivier, 2018. "Polygyny, Child Education, Health and Labour: Theory and Evidence from Mali," MPRA Paper 88518, University Library of Munich, Germany.
    8. Christopher Johann Kurz, 2006. "Outstanding Outsourcers: A Firm- and Plant-Level Analysis of Production Sharing," Working Papers 06-02, Center for Economic Studies, U.S. Census Bureau.
    9. John Baldwin & Wulong Gu, 2009. "The Impact of Trade on Plant Scale, Production-Run Length and Diversification," NBER Chapters, in: Producer Dynamics: New Evidence from Micro Data, pages 557-592, National Bureau of Economic Research, Inc.
    10. Sjöholm, Fredrik & Lipsey, Robert E. & Sun, Jing, 2010. "Foreign Ownership and Employment Growth in Indonesian Manufacturing," Working Paper Series 831, Research Institute of Industrial Economics.
    11. Muhamad Purnagunawan & Victor Pirmana, 2013. "Labor market development in Indonesia Has it been for all?," Working Papers in Economics and Development Studies (WoPEDS) 201317, Department of Economics, Padjadjaran University, revised Jul 2013.
    12. Nurina Merdikawati & Sarah Xue Dong, 2021. "Labour Regulation Shift and Labour Intensive Manufacturing," Departmental Working Papers 2021-06, The Australian National University, Arndt-Corden Department of Economics.
    13. Aloysius Gunadi Brata & Henri L. F. De Groot & Wouter Zant, 2018. "Shaking up the Firm Survival: Evidence from Yogyakarta (Indonesia)," Economies, MDPI, vol. 6(2), pages 1-14, April.
    14. Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2014. "Trade, Wages, And Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(4), pages 1305-1348, November.
    15. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Falling Trade Costs, Heterogeneous Firms, and Industry Dynamics," Working Paper Series WP03-4, Peterson Institute for International Economics.
    16. Eslava, Marcela & Haltiwanger, John C. & Kugler, Adriana & Kugler, Maurice, 2009. "Trade Reforms and Market Selection: Evidence from Manufacturing Plants in Colombia," IZA Discussion Papers 4256, Institute of Labor Economics (IZA).
    17. Moritz Ritter, 2015. "Trade and inequality in a directed search model with firm and worker heterogeneity," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(5), pages 1902-1916, December.
    18. Albert Guangzhou Hu & Zhengning Liu, 2014. "Trade Liberalization and Firm Productivity: Evidence from Chinese Manufacturing Industries," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 488-512, August.
    19. Huynh, Kim P. & Petrunia, Robert J. & Voia, Marcel, 2012. "Duration of new firms: The role of startup financial conditions, industry and aggregate factors," Structural Change and Economic Dynamics, Elsevier, vol. 23(4), pages 354-362.
    20. Ben Tomlin & Loretta Fung, 2015. "Exchange Rate Movements and the Distribution of Productivity," Review of International Economics, Wiley Blackwell, vol. 23(4), pages 782-809, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:asiaec:v:17:y:2018:i:1:p:73-93. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.