PhD project
Foreign investment and colonial economic growth in Indonesia
The aim of this PhD dissertation is to explore the link between foreign investment and macroeconomic performance in the context of a colonial economic structure in Indonesia between c. 1910 and c. 1960.
- Duration
- 2012 - 2016
- Funding
-
NWO
The aim of this PhD dissertation is to explore the link between foreign investment and macroeconomic performance in the context of a colonial economic structure in Indonesia between c. 1910 and c. 1960. The main emphasis is on Dutch-owned private companies, although some attention will also be given to British investors. The target of the research project is to identify mutual effects of foreign investment and macroeconomic performance. Three specific questions are adressed:
- How did volumes of private foreign investment change in response to business cycles in late-colonial and newly independent Indonesia?
- To what extent did trends in profitability of foreign firms coincide with trends in macroeconomic performance?
- What was the contribution of private foreign investment to Indonesia's high dependence on exports of primary products and subsequent extreme vulnerability to vicissitudes in the world market?
The point of departure is a series of published annual estimates of accumulated Dutch investment in colonial Indonesia from about 1910, coupled with summary statistics available in the secondary literature. The annual estimates need to be critically examined since they form extrapolations from indemnification claims submitted by the owners after their companies had been nationalized by the Indonesian state in 1959.
The next step is a careful selection of individual business firms for detailed analysis. Selection is done in such a way as to ensure a measure of representativeness in terms of type of economic activity and geographical location. The size of the sample is determined as a compromise between the limited time available in any PhD dissertation project and an acceptable level of statistical significance of results. Figures given in annual reports to shareholders on volumes of investment are compared with the series emanating from the indemnification claims. Data on profitability are collected from the annual reports and supplemented by qualitative information from business archives informing us about tradeoffs in firm strategy between short-run gain and long-term commitment. Trends with regard to investment volumes and profitability in individual firms are contrasted with macroeconomic variables, expressing, amongst others, gross domestic product, export revenue, export volumes and generated demand for imports of capital goods. This confrontation makes use of regression analysis and time series analysis.
The chief purpose is to find out the extent to wich business and macroeconomic performance ran parallel over time, both before and after Indonesia's independence. Systematic relationships between quantitative variables are then translated into unique structural characteristics of the colonial economy. Quantitative analysis provides the necessary input for an interpretation along qualitative lines and permits us to address the three research questions formulated above in detail.