The Sources of Industrial Growth in Indonesia, 1985-1995 : An Input-Output Analysis

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This paper analyzes structural changes and the sources of industrial growth in ndonesiabetween 1985 and 1995 by using the 1985, 90, and 95 input-output tables. It alsoinvestigates 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 ofhousehold consumption remained the main source of output growth as it accounted forabout one-half of total output growth; in contrast, the contribution of governmentconsumption was reduced to a negligible level, signifying the declining role of thegovernment 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.
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