ABSTRACT
There is a wide secondary literature that is relevant to the question of industrial concentration and competition in Indonesia. Hal Hill, Indonesia’s Industrial Transformation, Singapore: ISEAS, 1997, and Kelly Bird, ‘Concentration in Indonesian manufacturing, 1975-93’, Bulletin of Indonesian Economic Studies, 35, 1, 1999, pp. 43-73, are prominent here. These concentrate essentially on macro-economic issues that explain the levels of concentration in industrial sectors, while Stijn Claessens et al., ‘The separation of ownership and control in East Asian corporations’, Journal of Financial Economics, 58, 2000, pp. 81-112, and East Asian Corporations: Heroes or Villains?, World Bank Discussion Paper, 409, attempt an analysis of the corporate economy in general and comparisons across the whole of Asia, obscuring some of the complexities and intricate variations persisting among the different corporations in the Asia-Pacific region. While the macroeconomic factors and the comparisons in the above literature are important in giving a context to the history of industrial and corporate growth and concentration, it is only by using a number of corporate case studies in Indonesia, in various economic sectors, a micro-economic study of business groups which allows a much sharper level of analysis of this concentration and offers a more precise view of resource misallocation and competitive efficiency. A study of the micro-economic changes within Indonesian corporations exposes the deeper, institutional and financial growth, making possible an evaluation of the relative contribution of different influences and institutions attracting and utilizing state, private, domestic and foreign capital to achieve the high levels of concentration visible in the two decades since 1979. Kelly Bird and Hal Hill demonstrate how this concentration is further reinforced through pricing and distribution arrangements, assisted by the frenzy of mergers and acquisitions unleashed by the limited privatization programme of state-owned enterprises (SOEs) since the late 1980s.1 What I argue is that only through detailed corporate case histories can one provide the context in which crucial trends in concentration of ownership and monopolies are evolving, contributing to the volatility of 1997.
