Trade, foreign firms and economic policy in Indonesian and Thai manufacturing

This paper first examines the rapid growth and changing composition of manufactured exports in Indonesia and Thailand, highlighting the rapid growth of office and computer machinery and electric machinery, somewhat slower growth of non-electric and transportation machinery, as well as the low growth of previously large exports of textiles apparel. Second, the important contributions of foreign multinational enterprises (MNEs) to export growth in the machinery industries, particularly in electric, office, and computing machinery, are documented. Third, the paper describes trade policies in all these industries in some detail, emphasizing how low protection was a key facilitator of rapid export growth in the MNEs that dominated the electric, office, and computing machinery industry, while high protection reduced incentives to export among MNEs in the transportation machinery industry. 2008 Elsevier Inc. All rights reserved. * Corresponding author. Tel.: +81 93 583 6202; fax: +81 93 583 6576. E-mail address: [email protected] (E.D. Ramstetter). 1 See, for example, James & Ramstetter (1997), Ramstetter (1997, 1998, 1999a, 1999b, 2002b) and Ramstetter & Takii (2006). Although this study covers the period through 2000–2003, it is important to note that many of the patterns observed in trade, protection, and MNE activity persisted in subsequent years. See, for example, Kohpaiboon & Ramstetter (2008) and Takii & Ramstetter (2007).