Perhaps more than any other sector of the economy, manufacturing industry has reflected the fortunes and the policy currents of post-1966 Indonesia. Structural and technological change have been extremely rapid. There was a period of inefficient, state-led industrialization during the oil boom decade, but from the mid-1980s export-oriented manufacturing became one of the primary engines of growth. This sector has also been the arena for some of the New Order's major philosophical debates concerning economic strategy. All parties in that debate agree on the importance of rapid industrial growth, but there have been sharp disagreements over the means of achieving this objective. In the 1970s the debate was over the merits of import substitution versus export-oriented industrialization. By the late 1980s the latter school of thought prevailed decisively, and the focus had shifted to whether Indonesia should follow a popular interpretation of the Korean and Japanese approach, entailing “guided industrial policy” and selective state support of heavy, high-tech industry.

Since 1970, it has been common for Indonesia to be grouped with Asia's dragon economies and to be regarded as one of the next Asian NIEs. By the late 1980s such a characterization was appropriate, but for much of the period it was rather misleading. Indonesia shared geographic proximity and high growth with its dynamic neighbours, but little else. These differences were no more sharply evident than in manufacturing. Unlike the nearby export-led economies, Indonesia's manufactured exports were minuscule until the early 1980s.