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The problem with ISI policies in Indonesia
Import substitution industrialization (ISI) has raised its ugly head yet again.
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Downtown cityscape of Seoul, South Korea on a smoggy day. (Shutterstock/File)
W
ith technological progress driving vast economic and societal change the government is planning for the future with its industrial strategy Making Indonesia 4.0, yet, import substitution industrialization (ISI) has raised its ugly head yet again.
In the age of Brexit, with the United Kingdom demanding reduced competition in the labor market, and United States President Donald Trump’s America First policy that aims at bringing sunset industries back onshore, a vocal group is calling for protection of Indonesian industry to make it more competitive.
Far too often, the proponents of ISI time and again refer to the developmental states of South Korea, Japan, Taiwan and Singapore to back up claims that industry in Indonesia is uncompetitive, and thus needs protection and incentives to allow it to grow, with the delusional belief that once these industries become internationally competitive, protection can and will be removed.
While it is unsurprising to see these arguments made on social media, it is especially disheartening to see students and even academics of political economy and development studies comparing the experiences of South Korea with Indonesia to back up their calls for ISI policies.
I refer specifically to the article “Industry 4.0: Yet, we still have basic problems” (The Jakarta Post, May 28).
It appears that the proponents of ISI have not paid attention to the literature published since 1990, the year that London School of Economics professor Robert Wade published Governing the Market and UC San Diego professor Stephan Haggard published Pathways from the Periphery, which systematically dispel the myths of ISI being responsible for the rapid development of South Korea.
To better understand the South Korean developmental experience while explaining why it cannot be applied to the Indonesian context, it is necessary to re-examine the historical origins of the South Korean nation-state and its developmental trajectory.
