Comparative Industrialization and the Sustainable Development in Indonesia, China and India: a Long-term Statistical Approach

Fachru Nofrian
Center for Industry, SME and Business Competition Studies (USAKTI)
Jakarta, Indonesia
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Abstract

Even though industrial production in Indonesia has been influenced by the long process of regime changes in the period of 1971-2005, but it has not triggered yet the process of industrialization and so development in Indonesia have not changed significantly despite of its high growth rate for long period notably between 1971 and 1997. This is very different to China’s and India’s experiences where high growth rate is gradually obtained simultaneously with its link to industrialization process. More specifically, the process of industrialization in the three countries has to experience international economic crises that significantly affected the countries between 1995 and 2005. While Indonesia has changed the strategy before and after the crises from import substitution and export promotion to economic liberalization, the effect on industrialization is still insignificant. As for China and India, more diversified and balanced industrialization strategy is recognizable and this has strengthened its economic structure forming stronger technological progress establishment. In order to verify this hypothesis, this study uses input-output analysis approach that directly tackle sustainable development strategy and sectoral interactions that can detail and reveal structural change and innovation, information that is not provided by other methods. The result is extended with the structural decomposition. The analysis shows that Indonesia has experienced a significant sectors growth during the period while the impact of import substitution, export promotion and technical progress to the industrialization process was very weak. Comparative industrialization analysis shows that China and India have stronger import substitution, export promotion and technical progress development than the one in Indonesia. It is observable that the government and the small and medium enterprises could play a significant role in contributing to the effectiveness of industrialization strategy implementation.

Keywords: input-output analysis, industrialization process, international development strategy, import substitution, export promotion, structural decomposition analysis, comparative industrialization

JEL codes : C67, L52, O14, O25, O33, O47

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