chapter  6
24 Pages

Trade and Investment Policy Reform

The collapse of international oil prices in the mid-1980s also put pressure on the Indonesian government to reform its trade and investment policies. Prior to the mid-1980s, the Indonesian government had imposed tight controls on foreign investment and trade in an attempt to create an autonomous and integrated industrial sector and promote the development of particular business groups. As government oil and gas revenues increased dramatically during the late 1960s-early 1970s, influence over trade and investment policy was to shift away from the technocrats and towards politico-bureaucrats within the government. The shift towards more interventionist trade and investment policies during the oil boom period was also to benefit the conglomerates. Investors from the East Asian NICs were also to express a desire for greater liberalisation of Indonesia's trade and investment industry policies. The problem for Indonesia was that investors from these countries regarded Indonesia as a much less attractive investment site than many other countries.