The Bartlett School of Planning


Khairul Rizal

Thesis title: Evolving Regions: how industries rise and fall in Indonesian provinces.

Primary supervisor: Professor Nick Phelps
Secondary supervisor: Dr Jung Won Sonn
Sponsor: SPIRIT Bappenas, Republic of Indonesia
Starting date: September 2013

Thesis Abstract

This research is motivated by constant attempts of the Indonesian government to address regional inequalities. Existing studies are mostly framed by mainstream growth theory attempting to explain the divergence and/or convergence of regional rates of economic growth. Those studies, however, pay insufficient attention to geographically specific socio-political relations in shaping the capacity of regions to grow toward different, and usually diverging, paths of development. In investigating why and how regions differ in their capacity to carry out development, an evolutionary approach is adopted to reveal the place specific aspects influencing regional growth. This research particularly looks at an important aspect of regional development, i.e. its industry structure. Regional industry structures arguably mirror region’s capabilities in developing new industries that, in turn, shape its future development paths. Regional change is understood as an industrial branching process with regions diversifying into industries related to the existing industry structure. While new industries are important for regions to diversify its economic base and to improve its resilience against external shocks, the direction of regional evolution is often assumed moving toward more sophisticated industries. In fact, industries which are highly motivated by lower domestic factor-costs may bring regions to the low-end economic activities. Moreover, while the endogenous process of industrial branching is observed in regions of countries of the Global North, work on regional development in countries of the Global South highlights the role of exogenous relations (often in form of FDI) to initiate development processes. This thesis thus improves evolutionary work on industrial branching by taking into account the direction of branching, the role of FDI, and the influence of factor costs in the evolution of regional industry in Indonesia. Most importantly, the interaction of those endogenous and exogenous forces shapes by specific regional institutions, which are part of the analysis as well. This thesis finds that endogenous evolutionary forces play significant roles; that Indonesian regions evolve toward more sophisticated industries; that FDI plays a rather weak role; that factor costs are small but still influential; and that regional institutions shape and somewhat being shaped by the evolution process of the regional industry.


The Evolution of Regional Industries in Indonesia: the roles of inter-product relatedness, in Pratomo et al 2017. ‘Demographic Change and Regional Development in Indonesia’, Brawijaya University Press, Malang. ISBN: 978-602-432-225-0. http://irsa-indonesia.org/category/publications/

The Complexity of Regional Industry Structure: evidence from Indonesia. Submitted on March 2017 to Bulletin of Indonesian Economic Studies (under revision by November 2017).ent placeholder