The Sources of Industrial Growth in Indonesia, 1985-1995: An Input-Output Analysis
Takahiro Akita Agus Hermawan
This paper analyzes structural changes and the sources of industrial growth in Indonesia between 1985 and 1995 by using the 1985, 90, and 95 input-output tables. It also investigates the changes in the pattern of industrial growth over the 25-year period from 1971-95. In the past three decades, Indonesia appears to have achieved a successful transition from an inward-looking, government-led industrialization financed by oil exports to an outward-looking, market-oriented industrialization based on non-oil exports, in which the turning period was during the 1980-85 period. During 1985-95, the expansion of household consumption remained the main source of output growth as it accounted for about one-half of total output growth; in contrast, the contribution of government consumption was reduced to a negligible level, signifying the declining role of the government sector in output growth. The expansion of exports was also a key factor in output growth in addition to the rise in export-oriented investments. It is noteworthy that export expansion was made, to a large extent, by non-oil exports, rather than oil exports.