ABSTRACT
This chapter conducts a case study of Indonesia’s automotive sector development. The country’s automotive industry is described as part of the economic system of ersatz capitalism, as domestic autochthonous capitalists depend on patronage networks and the technological capabilities of foreign multinational corporations. The case study aims to provide empirical evidence for the causal mechanisms that explain the connection between the institutional constellation of Indonesia’s state-business relations and the outcome of inefficient and dependent domestic capitalists. The chapter first provides an overview of the automotive sector and highlights the fact that it is currently dominated by a few conglomerates such as Astra International with excellent ties to foreign corporations, mainly from Japan. The second part summarizes three different phases of industrial policies toward the automotive sector. Finally, the chapter evaluates Indonesia’s automotive sector development and associated industrial policies.
