A study of manufacturing joint ventures in Indonesia

This dissertation examines the nature and structure of joint ventures in the manufacturing sector of Indonesia with the following objectives: (1) examine government's policies toward foreign private investment and joint ventures, (2) investigate the characteristics of joint ventures, and (3) study the impact of joint ventures on the growth of the Indonesian manufacturing sector.;The study finds that 50.2 percent of all manufacturing joint ventures were established between the Indonesian partners and partners from four newly industrialized countries (NICs). Compared to joint ventures with developed and other developing countries, joint ventures with NICs are characterized with low total investment, low investment per worker, low machinery investment per worker, high average number of Indonesian workers and expatriates, and high percentage of output intended for export.;In all industries, joint ventures with developed countries are more capital intensive than joint ventures with LDCs. In terms of market orientation, joint ventures with LDCs are more export oriented than joint ventures with developed countries.;Labor productivity and labor income growth are the most important contributions of joint ventures to manufacturing industries. Significant structural change in the manufacturing sector occurred during the study period. The output and value added shares of labor-intensive industries decreased in favor of capital-intensive industries. Labor productivity, employment, and firm size also increased notably. The study shows that joint ventures made significant contributions to the changes.;In examining Indonesia's ability to attract foreign direct investment in manufacturing joint ventures, the study finds that GNP growth and the ratios of gross domestic investment to GNP, the value of manufactured imports to GNP, the value of exports to value of imports, and the value of commerce, transportation and communication output to GDP are important determinants. On the ownership issue, the study showed that the foreign partners' share of ownership is negatively related to debt/equity ratio but positively correlated to the percentage of joint ventures' output intended for export.