The Major Channels of International Technology Transfer to Indonesia: An Assessment

ABSTRACT

Like other developing countries, Indonesia is a net importer of advanced technologies developed in the industrial countries. These technologies are crucial to generate and sustain the rapid economic growth necessary to raise the standards of living of the Indonesian people. In view of the economic importance function of imported technologies, it is important to identify the major sources and channels through which these technologies are transferred to Indonesia and to assess the extent to which the transfer has indeed contributed to the development of local technological capabilities. At its present relatively low level of industrial and technological development, Indonesia should focus its technology strategy on importing those technologies most relevant to its development needs, at the most favourable terms, and to assimilate, adapt and improve these imported technologies, very much like Japan and later the East Asian NIEs – particularly Korea and Taiwan – successfully did in earlier decades. Several studies on technology transfer in Indonesia's manufacturing sector have indicated that foreign direct investment, technical licensing agreements without equity involvement by the foreign licensor, capital goods imports, and participation in world trade through exports have been the major channels of international technology transfer to Indonesia.

Keywords:

• Technology imports
• technology transfer
• local technological capabilities

JEL CLASSIFICATIONS:

• N15
• N75

Acknowledgement

This article is a substantially revised, updated and abbreviated version of Thee (2001a). I am grateful to the International Centre for the Study of East Asian Development (ICSEAD), Kitakyushu, for permission to publish parts of it.