ABSTRACT

This chapter discusses the present status and prospect of Small-Scale Industries (SSIs) in Indonesia. It shows the evidence on production linkages between SSIs and other sectors in Indonesia provide some important facts. Methodologically, the extent of backward production linkages (BPLs) and forward production linkages (FPLs) between SSIs and other sectors can be estimated through input-output analysis. Weak production linkages between SSIs and Medium and Large Scale Industries (MLSIs) or stronger external orientation of the latter group of industries for their procurement of intermediate and capital goods can also be attributed to the fact that the manufacture of such inputs is constrained by lack of standardization and low levels of quality control. Most SSIs in LDCs lack the equipment and technical ability to produce standardized inputs for MLSIs. The weight of empirical evidence, though still limited, suggests that the BPLs from rural SSIs to agriculture are frequently quite significant.