Translate [unavailable for this document]
The author would like to thank Professors Masumi Hakogi, Toshiyuki Mizoguchi, Haruko Nokita, and two anonymous referees for valuable comments and suggestions.
1. The "flying geese" paradigm was introduced by Kaname Akamatsu in the 1930s to explain the catching-up process of industrialization of latecomer economies from intra-industry, inter-industry and international aspects.
2. Hill (1997) notes four of them.
3. Deregulation in the taxation included income tax (in 1984), value added tax (in 1985) and property tax (in 1986). Deregulation in trade covered reduction of trade tariff from 0-225 per cent to 0-60 per cent (March 1985), duty drawback and imported inputs (Presidential Decree No. 4/1985 about Custom Duties). Financial deregulation covered the devaluation of Indonesian currency rupiah by 28 per cent (March 1983), abolishment of control on interest rate and credit ceiling (June 1983).
4. Some examples of the policies are the change from import licence to general import, elimination of non-tariff barriers and continued tariff reduction (October 1986-January 1987); simplification of quota on textile (July 1987); continued deregulation on export-import system and foreign investment (December 1987); elimination of monopoly on plastic and steel import (November 1988); introduction of harmonized system (HS) of trade classification (January 1989). Financial deregulation covered abolishment of swap ceiling (October 1986), devaluation of rupiah by 31 per cent (12 September 1986), new bank establishment, reserve requirement from 15 per cent to 2 per cent and abolishment lending limit (October, 1986), share and derivative market (December 1987), financial service (December 1988).
5. The CGE INDORANI model is an economy-wide and sector level static -comparative model of an applied general equilibrium model for the Indonesian economy. The model is derived from the ORANI model first developed by the IMPACT Project at Monash University, Australia (see Dixon et al. 1977; Powell 1991). It has been adjusted in terms of equations, closures, parameters, and data according to the current Indonesian economic conditions and behaviour, which are unique in nature, for example, in the labour market, household breakdown, energy sectors, and regional breakdown.
6. See Empirical Trade Analysis at
7. Since the distribution of RSCA is skewed one, the median is a better measurement than the mean.
8. The Indonesian Central Bureau of Statistics (Badan Pusat Statistik, or BPS) regularly publishes IO table every five years. This paper requires IO Table for 1990, 1995, 2000 and 2005. Since IO Table for 2005 has not been published yet, this paper estimates IO Table 2005 by using the non-survey method known as the "RAS" method. See Miller and Blair (1985) and CEPPS (2004), among others, for the detailed explanation. The 'RAS' method is used to find the matrix of technology by using the available matrix of technology. Let A^sup 2^ and A(O) denote the initial (existing) and the final (updated) technical coefficient matrices in the IO table, respectively. Let R^sup 1^ and S^sup 1^ denote diagonal matrices related to total industry sales by sector i and total inter-industry input purchase by sector j in year 1, respectively. Miller and Blair (1985, p. 281) formulate A^sup 2^ = R^sup 1^A(O)S^sup 1^. Ignoring superscripts and the (0), representing base-year information, we have 'RAS' on the right-hand side. This is the origin of the name of the non-survey technique.
Akamatsu, K. "A theory of unbalanced growth in the World economy". Weltwirtschaftliches Archiv 86 (1961): 196-217.
_____ . "A historical pattern of economic growth in developing countries". The Developing Economies 1 (1962): 3-25.
Amiti, M. and J. Konings. "Trade liberalization, intermediate inputs, and productivity: evidence from Indonesia". IMF Working Paper, WP/05/146, 2005.
Aswicahyono, H. and M. Pangestu. "Indonesia's recovery: export and regaining competitiveness". The Developing Economies 38, no. 4 (2000): 454-89.
Athukorala, P "Trade policy reforms, export strategies, and the incentive structure". Background Paper to the World Bank Study 'Vietnam's Export: Policies and Prospects" . World Bank Vietnam, Hanoi, 2002.
_____ . "Trade policy in Malaysia: liberalization process, structure of protection and reform agenda". ASEAN Economic Bulletin 22, no. 1 (2005«): 19-34.
_____ . "Trade policy reforms and the structure of protection in Vietnam". The World Economy 29, no. 2 (2005ft): 161-87.
_____J. Jogwanich, and A. Kohpaiboon. "Tariff reform and the structure of protection in Thailand". Draft Report. World Bank Thailand, Bangkok, 2004.
Badan Pusat Statistik (BPS). Tabel Input-Output. Jakarta, 1990, 1995, 2000.
Balassa, B. "Trade liberalization and 'revealed' comparative advantage". The Manchester School of Economics and Social Studies 33 (1965): 99-123.
_____ . "Concept and measurement of protection". In The Structure of Protection in Developing Countries, edited by Balassa and Associates. London: The Johns Hopkins Press Ltd, 1971.
Basri, M. "Why trends of protection changed over time in Indonesia?". ISEAS Visiting Researchers Series No. 2. Singapore: Institute of Southeast Asian Studies, 2002.
Booth, A. The Indonesian Economy in the Nineteenth and Twentieth Centuries. A Histoiy of Missed Opportunities. London: Macmillan, 1998.
Center of Economic and Public Policy Studies (CEPPS). "Studi dampak pembangunan PLTN di Semanunjung Muria terhadap sektor ekonomi nasional". Unpublished research. Yogyakarta, 2004. Website
DFAT (Australian Department of Foreign Affairs and Trade). Indonesia: Facing the Challenge. DFAT East Asia Analytical Unit
Dixon, P. B., B. R. Parmenter, G. J. Rayland, and J. M. Sutton. "ORANI, a general equilibrium model of the Australian economy: Current specification and illustrations of use for policy analysis". First Progress Report of the IMPACT Project, vol. 2. Canberra: Australian Government Publishing Service, 1977.
Dumairy. Perekonomian Indonesia. Jakarta: Penerbit Erlangga, 1996.
Fane, G. "Deregulation in Indonesia: Two steps forward, one step back". Agenda 3 (1996): 341-50.
_____ and T. Condon. "Trade reforms in Indonesia: 1987-1995". Bulletin of Indonesian Economic Studies 27, no. 1 1996): 105-25.
Frey, B. "The political economy of protection". In Current Issues in International Trade, edited by D. Greenaway. Macmillan Publisher Ltd, 1985.
Hill, H. Indonesia's Industrial Transformation. Singapore: Institute of Southeast Asian Studies, 1997.
International Monetary Fund (IMF). International Financial Statistics (IFS). Online Database
Karseno, A. R. "Perspective on government policy for industrial competitiveness in Indonesia". In Industrial Policies in East Asia, edited by S. Masuyama, D. Vandenbrik, Chia S. Y., pp. 216-32. Singapore and Tokyo: Institute of Southeast Asian Studies and Nomura Research Institute, 1997.
Kim, C. "Industrial development strategy for Indonesia: Lessons from the Korean experience". Paper presented at a Workshop on "Why Trade and Industry Policy Matters", UNSFIR, Jakarta, 14-15 January 2004.
Kojima, K. "The 'flying geese' model of Asian economic development: Origin, theoretical extensions, and regional policy implications". Journal of Asian Economics 11 (2000): 375^1-01.
Laursen, K. "Revealed comparative advantage and the alternatives as measures of international specialization". Danish Research Unit for Industrial Dynamics (DRUID) Working Paper 98-30, 1998.
Masuyama, S. "The evolving nature of industrial policy in East Asia: Liberalization, upgrading and integration". In Industrial Policies in East Asia, edited by S. Masuyama, D. Vandenbrik, Chia S. Y., pp. 3-18. Singapore and Tokyo: Institute of Southeast Asian Studies and Nomura Research Institute, 1997.
Miller, R. E. and P. D. Blair. Input-Output Analysis: Foundations and Extensions. Englewood Cliffs, NJ: Prentice-Hall Inc., 1985.
Panagariya, A. "East Asia in the new regionalism in the world trade". World Economy 17, no. 6 (1994): 817-39.
Pangestu, M. and S. Stephenson. "Evaluation of Uruguay Round commitments by APEC members". In Priority Issues in Trade and Investment Liberalization: Implication for the Asia Pacific Region, edited by B. Bora and M. Pangestu. Singapore: PECC, 1996.
Powell, A. A. "A Brief Account of Activities over the Period 1st January 1988 to 31st December 1990, with a Prospectus for Further Developments". IMPACT Project Report no. R-08. Centre of Policy Studies. Monash University, 1991.
Rao, B. East Asian Economies: The Miracle, a Crisis and the Future. Singapore: McGraw-Hill Book Co., 2001.
Shalleh, Ismail Muhd and Saha Devan Meyanathan. Malaysia: Growth, Equity, and Structural Transformation. Washington, D.C: World Bank, 1993.
Soesastro, H. and M. C. Basri. "The political economy of trade policy in Indonesia". CSIS Working Paper Series, WPE 092, 2005.
Tambunan, T. T. H. Perekonomian Indonesia: Beberapa Masalah Renting. Jakarta: Penerbit Ghalia Indonesia, 2003.
United Nations (UN). United Nation Commodity Trade Statistics Database,
Vanzetti, D., G. McGuire, and Prabowo. "Trade policy at the crossroads: The Indonesian story". Policy Issues in International Trade and Commodities Study Series No. 28. United Nations Conference on Trade and Development (UNCTAD), United Nations, New York and Geneva, 2005.
Widodo, T. "Economic and environmental impacts of trade liberalization in manufacturing sector". Economics and Finance in Indonesia 55, no. 1 (2007): 1-31.
World Bank. The East Asian Miracle: Economic Growth and Policy. New York: Oxford University Press, 1993.
_____. East Asia: The Road to Recovery. Washington, D.C, 1998.
World Trade Organization) (WTO). Trade Policy Review: Philippines 1999. Geneva: WTO, 1999.
Tri Widodo is a lecturer at the Faculty of Economics and Business, Gadjah Mada University, Indonesia; and currently a student at Doctoral Program, Graduate School of Economics, Hiroshima University of Economics (HUE), Japan.
Effective Rates of Protection
If α^sub ij^ and α^sub ik^ represent the amount of material inputs (J) and primary inputs (k) used per unit of output (i), respectively; P^sub j^ and P^sub k^ are their world market prices; the world market price of output (F1) is set to be unity; and r denotes the percentage excess of domestic world market prices, world market and domestic prices can be represented by equations (1) and (2), respectively:
ll is assumed that the product (i) and its material inputs (J) are traded and primary input (k) are not traded. Differences (r) between domestic and the world market prices of trade goods can be due to tariffs and other protective measures. Hence, equation (2) can be represented by:
Domestic prices of inputs and inputs might be different from international ones. The percentage excess of domestic prices over world market prices for the output and for material inputs is called the nominal rate of protection (T). Taking the contribution of primary inputs to output (value added) as a unit, the effective rate of protection (D) is defined as the percentage excess of the domestic price of the value added unit over its world market price. The relevant world market prices are those a country faces in foreign trade, i.e., cost-insurance-freight (CIF) prices for actual and potential imports and free-on-board (FOB) prices for export. In this paper, it is assumed that domestic prices equal the sum of the CIF price and the tariff in the first case and the sum of FOB price and export subsidies in the second. Since input coefficient are assumed to be constant, this general formulation of effective protection can reinterpreted as the percentage of domestic value added (DVA) over world market value added (WVA).
In this paper, the ERP of Indonesian manufacturing sector is calculated by the use of input-output coefficients, which refer to the value of inputs per unit of output. Under free trade conditions, input-output coefficients (ai) will be equal to the corresponding input coefficient defined in natural units time the ratio of the world market price of the
input to that of output ... (taking again the world market price of output to be one). Equation (3)