MACHINE-TOOLS AND THE INDONESIAN ENGINEERING SUBSECTOR - CONSUMPTION TRENDS AND LOCALIZATION EFFORTS

A sharp rise in machine tool imports after 1986 indicates that the Ind onesian machinery industry is rapidly expanding. Whereas such buoyant growth gives cause for optimism, firm-level evidence reveals that the import substitution policies pursued in the 1980s have saddled the eng ineering subsector with a lopsided structure. Infant industry policies were aimed at engineering goods far beyond the technical capabilities of local manufacturers. Consequently, firms operating in infant indus tries engaged in assembly of imported kits rather than in manufacturin g proper; they developed little or no backward linkages with local com ponents makers; and they were unable to attain international price/qua lity standards.