INTRODUCTION

Like in most other, newly independent countries, the leaders of newly-independent Indonesia considered industrialization as the best way to achieve a more balanced economy by lessening the country's dependence on agriculture and develop their country more rapidly. To this end, the then Minister of Trade and Industry, Professor Sumitro Djojohadikusumo, in 1951 introduced the Economic Urgency Plan (Rencana Urgensi Perekonomian) for a period of three years. Since this Plan focused on industrial development as the major engine of growth, the Plan was also referred to as the Industrial Urgency Plan.

Indonesia's post-independence industrialization did not start from scratch, but had already started in the late nineteenth century when Indonesia was still the Netherlands Indies. By 1900 a modern manufacturing sector had been set up, largely based in Java which was based upon the processing of primary commodities, both agricultural crops (particularly sugar) and raw materials (especially oil), associated with a large metals and machinery industry, supplemented by utilities and a modest range of light consumer goods and construction materials. During that period Java stood out within Southeast Asia as the area in which steam power was applied most intensively in the late nineteenth century (Dick, 1993: 123). However, because of the small domestic market and an open trade regime, which benefited the manufacturing industries in the Netherlands, particularly its textile industry, rather than the industries in the Netherlands Indies, the further development of a modern manufacturing sector in Indonesia was severely hampered (Dick, 1993: 138).

Another stimulus to industrial development took place in the 1920s. This incipient industrial development took mainly the form of engineering workshops for the large Dutch- and other Western-owned estates, mostly the sugar estates in Central and Eastern Java and the oil palm and rubber estates in Sumatra (Soehoed, 1967: 66). A third stimulus took place when the world economic depression of the early 1930s hit the Netherlands Indies very hard, particularly since the Netherlands Indies, just like The Netherlands, chose to stick with the gold standard, and only devalued the guilder in 1936. To cope with the crisis and stem cheap Japanese imports which flooded into the country, the Netherlands Indies government embarked on an import-substituting pattern of industrialization on densely-populated Java which provided strong protection against imports, particularly from Japan.