| The purpose of this dissertation is to examine the role of the Indonesian government in developing its textile and garment industries which have experienced remarkable expansion during the New Order period. The study was motivated by the ongoing debate between the neoclassical economists and the interventionists about the economic role of government. In the last several years the debate became more heated and focused as adherents of both schools use the success of the East Asian NICs to vindicate their views.;I examined four major aspects that affected the development of the Indonesian textile and garment industries: import-substitution industrialization (ISI) policies, export-oriented industrialization (EOI) policies, the textile export quota allocation system, and government-labor relations.;During the ISI period, the nationalists played an influential role in shaping industrial development policies, strengthened by the oil bonanza. By adopting protective policies the government created a great incentive to produce for the domestic market relative to exports resulting in rapid development of the textile and garment industries. By the mid 1970s, domestic demand for basic clothing had been met and a large export capacity created.;The dramatic drop in oil prices in the mid 1980s forced the government to reorient its industrial development strategy to EOI giving the liberal technocrats the helm of policymaking. The switch to the EOI, however, did not lead to a smaller government role in industrial development. The government took a range of measures to promote exports, creating a great incentive to export relative to sell in the domestic market. As a result, the exports of textiles and garments expanded very rapidly contributing to industrial growth and foreign exchange earnings. The textile export success was also supported by the government's effectiveness in managing export quota allocation and controlling labor unions to create industrial peace.;A comparative study of Taiwan, South Korea and Thailand shows that the governments of these countries also played significant roles in developing their textile and garment industries with a similar pattern of government intervention. Based on these results, I conclude that a government can play a positive role in industrial development by creating a sound macroeconomic and productive environment and providing incentives and disincentives based on performance to enhance entrepreneurs' competitiveness. |
