Ersatz Capitalism and Industrial Policy in Southeast Asia This book applies and develops the concept of “ersatz capitalism” in the analysis of industrial policy blockades to economic development in Malaysia and Indonesia. Drawing on insights from international political economy, development studies, industrial and innovation policy, and new institutionalism to refer to a specific type of capitalism, the book analyzes different paths and institutions of economic development within the entire East Asian region. Comprehensive theoretical insights are complemented by empirical case studies that relate to country and sectoral studies – the automotive and ICT industries – in Malaysia and Indonesia. Applying contemporary research on international political economy to refer to a specific type of capitalism, the author examines how conflicts of interest between factions of state apparatus, associations, and companies contribute to the failure of developmental policies. The unique combination of theory formation and empirical analysis provides a novel approach to international comparative research on capitalism. The book will be of interest to researchers in the fields of international political economy, development studies, new institutionalism, East Asian and Southeast Asian studies, and industrial and innovation policy. Fabian Bocek worked as a research associate at the Chair of Political Economy and Economic Sociology, Department of Social Sciences, Goethe-University Frankfurt am Main, Germany. Financed by the German Federal Ministry for Economic Affairs and Climate Action, his profession is in the field of promoting innovation, economic policy, and research funding. His research focuses are comparative and international political economy, regional variations and historical development of capitalism in East Asia, institutions of economic development, and modern approaches to industrial, innovation, and research policy. Routledge Studies in the Growth Economies of Asia 143. Trade Unions and Labour Movements in the Asia-Pacific Region Edited by Byoung-Hoon Lee, Sek-Hong Ng and Russell Lansbury 144. International Entrepreneurship: A Comparative Analysis Susan Freeman, Ying Zhu and Malcolm Warner 145. Ritual and Economy in Metropolitan China A Global Social Science Approach Carsten Herrmann-Pillath, Guo Man and Feng Xingyuan 146. Cyber Risk, Intellectual Property Theft and Cyberwarfare Asia, Europe and the USA Ruth Taplin 147. Changing Labour Policies and Organization of Work in China Impact on Firms and Workers Ying Zhu, Michael Webber and John Benson 148. Vietnamese Labour Militancy Capital-labour antagonisms and self-organised struggles Joe Buckley 149. Economic Successes in South Asia A Story of Partnerships Shahrukh Rafi Khan 150. Ersatz Capitalism and Industrial Policy in Southeast Asia A Comparative Institutional Analysis of Indonesia and Malaysia Fabian Bocek 151. India’s Trade Policy in the 21st Century Amita Batra For more information about this series, please visit: https://www .routledge. com / asianstudies /series /SE0133 Ersatz Capitalism and Industrial Policy in Southeast Asia A Comparative Institutional Analysis of Indonesia and Malaysia Fabian Bocek First published 2022 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2022 Fabian Bocek The right of Fabian Bocek to be identified as author of this work has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Bocek, Fabian, author. Title: Ersatz capitalism and industrial policy in Southeast Asia: a comparative institutional analysis of Indonesia and Malaysia/Fabian Bocek. Description: New York: Routledge, 2022. | Includes bibliographical references and index. Identifiers: LCCN 2021056585 (print) | LCCN 2021056586 (ebook) | ISBN 9781032192932 (hardback) | ISBN 9781032192949 (paperback) | ISBN 9781003258520 (ebook) Subjects: LCSH: Industrial policy–Indonesia. | Industrial policy–Malaysia. | Economic development–Indonesia. | Economic development–Malaysia. | Industrial efficiency–Indonesia. | Industrial efficiency–Malaysia. Classification: LCC HD3616.I52 B63 2022 (print) | LCC HD3616.I52 (ebook) | DDC 338.9595–dc23/eng/20220208 LC record available at https://lccn.loc.gov/2021056585 LC ebook record available at https://lccn.loc.gov/2021056586 ISBN: 978-1-032-19293-2 (hbk) ISBN: 978-1-032-19294-9 (pbk) ISBN: 978-1-003-25852-0 (ebk) DOI: 10.4324/9781003258520 Typeset in Times New Roman by Deanta Global Publishing Services, Chennai, India Seal number D.30 / Siegelziffer D.30 Contents List of illustrations vi Abbreviations viii 1 Introduction 1 2 Theoretical framework of ersatz capitalism 14 3 Research design and methods 64 4 Varieties of ersatz capitalism in Malaysia 75 5 Case study of Malaysia’s automotive industry development 106 6 Case study of Malaysia’s ICT industry development 125 7 Varieties of ersatz capitalism in Indonesia 149 8 Case study of Indonesia’s automotive industry development 182 9 Case study of Indonesia’s ICT industry development 205 10 Conclusion 227 Appendix 1: List of interviews 238 Appendix 2: Interview guidelines 240 Index 243 Illustrations Figures 2.1 State types and their functions and modes of government-business relations 23 3.1 Discrimination mechanism of theory-testing process tracing model 67 3.2 Technology mechanism of theory-testing process tracing model 68 7.1 Indonesia’s Global Competitiveness Index sub-rankings in 2018 151 7.2 Value addition by sector as a percentage of GDP 162 8.1 Indonesian automobile production (in thousands), 2005–2018 193 8.2 Indonesia’s automotive sector imports and exports, in million USD 195 Tables 2.1 Evolution of industrial policy paradigms 29 2.2 ASEAN trade partners, 2015 42 2.3 Biggest Southeast Asian companies (Singapore excluded) 46 2.4 National modes of East Asian economic governance and industrial policy 53 2.5 Typology of East Asian business systems 55 4.1 Malaysia’s phases of industrial policy strategies since 1957 79 4.2 Share of Malaysia’s industrial sectors (in percent of GDP), 1960–2015 82 4.3 Sources for manufacturing growth in West Malaysia (in percent of total) 83 4.4 Transformation of Malaysia’s industrial policy approach 96 4.5 Share of capital ownership of limited companies by residents and ethnicity in millions of RM (and percentage of total), selected years 98 5.1 Import tariffs on CBU passenger cars and CKD parts, except for ASEAN trade (in percent) 113 5.2 Import tariffs on ASEAN-traded CBU passenger cars (in percent) 114 5.3 Comparison of total vehicles produced from 1980 to 2017 117 5.4 External trade in Malaysia’s automotive sector, in million RM 118 6.1 Malaysia’s performance in ICT development 126 Illustrations vii 6.2 ICT trade of East Asian countries in comparison 140 6.3 Malaysia’s technology, research, and intellectual property indicators in comparison 145 7.1 Indonesia’s phases of industrial policy strategies since 1945 153 7.2 Top business groups by annual sales in 2012 and their ranking in 1996 166 8.1 Import tariffs on CBU passenger cars, CKD and IKD kits (in percent) 192 9.1 ICT Development Index and subindexes ranking and values in 2017 206 9.2 Indonesia’s ICT development in detail 207 10.1 Comparison of case studies regarding the relevance of causal mechanisms 229 Abbreviations AFTA ASEAN Free Trade Area APEC Asia Pacific Economic Cooperation APT ASEAN Plus Three ASEAN Association of Southeast Asian Nations Bappenas Ministry of National Development Planning (Badan Perencanaan Pembangunan Nasional) BCIC Bumiputera Commercial and Industrial Community BRTI Indonesian Telecommunication Regulatory Body (Badan Regulasi Telekomunikasi Indonesia) CBU Completely Built-up CEPT Common Effective Preferential Tariff CKD Completely Knocked-Down CMA Communications and Multimedia Act CME Coordinated Market Economy DGPI Directorate General of Post and Information Technology DGRE Directorate General of Posts and Information Technology Resources and Equipment DRB Diversified Resources Berhad DSP Investment Priority Scales (Daftar Skala Prioritas) EOI Export-Oriented industrialization FDI Foreign Direct Investment FTZ Free Trade Zone GDP Gross Domestic Product GLC Government-Linked Company GSM Global System for Mobile Communications HDI Human Development Index HICOM Heavy Industries Corporation of Malaysia HS Harmonized System IBRA Indonesian Bank Restructuring Agency IBP Indonesia Broadband Plan ICA Industrial Coordination Act ICT Information and Communications Technology IDI ICT Development Index Abbreviations ix IDR Indonesian Rupiah IKD Incompletely Knocked-Down IMF International Monetary Fund ISI Import Substitution Industrialization IT Information Technology ITU International Telecommunication Union KP3EI Committee on Economic Development Acceleration and Expansion of Indonesia KSO Joint Operation (Kerja Sama Operasi) LCGC Low-Cost Green Car LME Liberal Market Economy MCA Malayan Chinese Association MCIT Ministry of Communications and Information Technology MDC Multimedia Development Corporation MDEC Malaysia Digital Economy Corporation MDP Mandatory Deletion Program METI Ministry of Economy, Trade, and Industry MIC Malayan Indian Congress MIMOS Malaysian Institute of Microelectronic Systems MITI Ministry of International Trade and Industry MNC Multinational Corporation MP3EI Masterplan for Acceleration and Expansion of Indonesia Economic Development MSC Multimedia Super Corridor NAP National Automotive Policy NDP National Development Policy NEM New Economic Model NEP New Economic Policy NGO Nongovernmental Organization NICT National Information Technology Council NITA National IT Agenda OECD Organisation for Economic Co-operation and Development OEM Original Equipment Manufacturer OPP Outline Perspective Plan PBH Revenue-Sharing Agreement (Pola Bagi Hasil) R&D Research and Development RPJMN National Medium-Term Development Plans (Rencana Pembangunan Jangka Menengah Nasional) RPJPN National Long-Term Development Plan (Rencana Pembangunan Jangka Panjang Nasional) RM Malaysian Ringgit SKD Semi Knocked-Down SME Small- and Medium-Sized Enterprise SOE State-Owned Enterprise SPI Social Protection Index