The Analysis of The Automotive Import Substitution's Effect to The Rate of Indonesia's Economic Growth (1990-2003)
Abstract
The industrial sector becomes a very important sector in increasing the
economic growth of Indonesia since Indonesia changed its economic structure from
agriculture to the mdustnal sector in 1990s. Some industrial sectors that have
significant roles are textile, steel, chemical, cement, fertilizer and other basic
industries. Automotive as one kind of industry is not so significant to the economic
growth of Indonesia because Indonesia is asmall market for automotive compared to
Malaysia, Thailand and Philippine. The production of automotive is smaller than
those countries. It fluctuated and tended to decrease in 1998 when economic crisis hit
Indonesia and affected the economic growth. The main problem of automotive
production mIndonesia is the availability ofthe components. Indonesia does not have
many producers so that it imports from other countries which will cost more In order
to solve this, the government implemented an international trade policy i.e, import
substitution in 1970s to encourage the local producers to be more competitive The
policy was then renewed in 1999. This research aims to analyze the factors causes the
fluctuation of the automotive production involving tariff rate on import and
components in 1999, exchange rate and the value ofthe automotive components
import (1990 - 2003). It also analyzes the causality between the automotive
production and the rate of the Indonesian economic growth (1990 - 2003) By using
the tariff rate on import and components in 1999 as the dummy variable the
exchange rate and the value ofthe automotive components import as the independent
variable and the automotive production from 1990 - 2003 as the dependent variable
the researcher uses Dummy Model as the econometric model to analyze the
relationship among those variables. While to analyze the causality relationship
between the automotive production and the rate ofeconomic growth the researcher
uses Error Correction Model Engle Granger (ECM - Engle Granger). As the result
the exchange rate has an insignificant and negatively influence to the automotive
production mIndonesia. The value of the automotive import has a significant and
positive relationship with the automotive production. And the tariff rate on import
and components has asignificant and positive influence to the automotive production
It means that the independents variables are influence the automotive production
simultaneously. There are short - run and long - run and feedback causality between
automotive production and the rate ofthe Indonesian economic growth.
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