The objectives of this study are to evaluate current industrialisation policy within East Java, to model alternative policies for manufacturing development; to delineate the optimum policies for manufacturing development for the next decade and to examine the likely effects of this manufacturing development on other sectors in the East Java's economy.
Industrialisation is a key factor in the economic development of most countries. Conventional wisdom suggests that industrial growth increases a nation's economy faster than growth in the agricultural sector; and it is the best method of improving general living standards and generating employment opportunities. In addition, the concern for more economic independence in a national sense has often been a major motive to promote industrialisation.
Specifically, the economy of East Java is examined in this thesis using input-output analysis. The parent table, the 1985 Indonesian Input-Output Table, is discussed and the construction methodology for the East Java Input-Output Table is examined. A sensitivity analysis of the East Java Input-Output Table is then undertaken. Projection of East Java Input-Output Tables is completed. Finally, the input-output table is applied to the East Java economy.
Input-output analysis has been used in this thesis because it is the only technique which is capable, within existing data availability, of concentrating on one sector, manufacturing, while still modelling interrelationships with the other sectors. Extended input-output analysis and demo-economic modelling were attempted but were found not to be suited to modelling the East Java economy.
Finally, alternative policies for the industrial development of East Java based upon various trade scenarios were undertaken, specifically these involving export orientation and import substitution within a medium and high growth rate framework. Industries used in the analysis were distinguished by size.
The thesis concludes with a number of policy recommendations.