De-industrialization, re-industrialization, and the resurgence of state capitalism: The case of Indonesia

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.Abstract: Discussions on the developing world's industrial policies have largely neglected the role of state-owned entities. This paper argues that the resurgence of state capitalism has been, in part, the response of developing countries to the recent pattern of structural transformation involving weak manufacturing. Using the case of Indonesia, this paper demonstrates that many middleincome countries have large and diverse state-owned entities in their development policy toolbox and have begun to experiment with these tools in order to change the pace and characteristics of structural transformation. Considering these trends, there is a need to reconsider or 'normalize' the debate on the positive role that state-owned entities can play in stimulating structural transformation and on the institutional and policy design that can foster that role.

Uneven and combined state capitalism

“…The reconfiguration of industrial and innovation policy (including the use of policy banks, the creation of digital champions, and other forms of strategic support to industry) in advanced capitalist economies and in East Asia has therefore not only been about competing in sectors at the technological and productivity frontier (5G technology, big data, the internet of things, artificial intelligence and robotics), but also about ensuring the favourable participation of firms in global value chains (Thurbon and Weiss, 2021). In resource-rich developing economies, vast rents from primary commodity exports provided the material basis for the re-incorporation of state enterprises in the design of new developmental-redistributive strategies, whereby they acted as tools to maximise rent capture, and channel some of these rents to industrial sectors in order to catalyse structural transformation (Kim and Sumner, 2019; Nem Singh and Chen, 2018). In both the developed and developing world, states have expanded their role as owner and provider of capital in the form of money, often at a low cost and with long time-horizons, to support specific segments of capital or sectors (Marois, 2021; Mertens et al, 2021).…”

“…In both the developed and developing world, states have expanded their role as owner and provider of capital in the form of money, often at a low cost and with long time-horizons, to support specific segments of capital or sectors (Marois, 2021; Mertens et al, 2021). This includes the provision of subsidised credit, but also so-called patient capital, equity participation, capital transfers, and financial products such as insurance and state guarantees, via organisational forms as diverse as development banks, state-owned commercial banks, development financial institutions, sovereign investment funds, and state asset holding companies (Kim and Sumner, 2019). Governments have also used state enterprises and policy banks to facilitate the concentration, centralisation, and internationalisation of capital in strategic sectors, such as agro-chemicals, minerals and hydrocarbons (Lim, 2018; Werner, 2021), including via mergers and acquisition abroad, which have become particularly significant given the generalised context of overcapacity and acute international competition previously mentioned.…”

State Capitalism and the New Global D/development Regime

“…Changes in the geographies of production associated with the second‐wave NIDL, driven by mechanisation and automation of large‐scale industry and the relocation of labour‐intensive manufacturing activities to South East Asia, triggered patterns of deindustrialisation in advanced capitalist economies and “premature” deindustrialisation in developing and emerging economies (Charnock and Starosta 2016 ). This underlined the need for state‐provided finance and policies to halt these processes and catalyse structural transformation, particularly to develop high‐technology industries and to support the internationalisation of large capitalist firms (Kim and Sumner 2019 ).…”

“…The recent proliferation of SOEs must also be situated within broader patterns of uneven geographical development and in the context of state strategies to secure their relative position therein. In resource‐rich developing economies, the boom in commodity prices provided the material basis for the re‐incorporation of SOEs in the design of new developmental strategies (Kim and Sumner 2019 ; Nem Singh and Ovadia 2018 ). SOEs played a key role in these strategies as tools to maximise rent capture, and to channel some of these rents to industrial sectors to catalyse structural transformation (Kim and Sumner 2019 ; Nem Singh and Ovadia 2018 ).…”

“…In resource‐rich developing economies, the boom in commodity prices provided the material basis for the re‐incorporation of SOEs in the design of new developmental strategies (Kim and Sumner 2019 ; Nem Singh and Ovadia 2018 ). SOEs played a key role in these strategies as tools to maximise rent capture, and to channel some of these rents to industrial sectors to catalyse structural transformation (Kim and Sumner 2019 ; Nem Singh and Ovadia 2018 ). SOEs also facilitated the concentration and monopolisation of capital in strategic sectors.…”