Introduction

Abstract

This chapter sets the scene for the entire study and provides a broad overview of the issue of employment and re-industrialisation from the perspective of Indonesia’s economic history since the mid-1960s. It concludes that Indonesia cannot follow the policies primarily based on low wages that created the economic miracle of the past to address its more recent development challenges for at least three reasons. First, a democratic Indonesia must respect labour rights and address growing inequality in order to avoid socio-political discontents. Second, it needs to expand domestic demand in a subdued global environment compounded by competition from other low-wage economies, especially within the ASEAN Economic Community. Third, Indonesia must move to a productivity-driven path in order to be able to compete with other low-wage economies. The chapter further concludes that regional diversity offers decentralised Indonesia the opportunity for inter-industry and inter-regional linkages to create internal “flying geese” of dynamic regional economies, and regional minimum wage can be an important policy tool for such re-industrialisation of Indonesia. Finally, this chapter substantively summarises the content of each chapters, including key policy messages derived from the study.