ABSTRACT
The collapse of international oil prices in the mid-1980s also put pressure on the Indonesian government to reform its trade and investment policies. Prior to the mid-1980s, the Indonesian government had imposed tight controls on foreign investment and trade in an attempt to create an autonomous and integrated industrial sector and promote the development of particular business groups. Whilst these policies served the interests of the politico-bureaucrats and the conglomerates, they effectively locked mobile export-oriented manufacturing enterprises out of the economy, in turn retarding the growth of non-oil exports. As long as international oil prices remained high, this was not a problem for the economy because the country's foreign exchange needs could be met by oil and gas exports. With the collapse of oil prices in the mid-1980s, however, the government was to come under strong pressure to make concessions to mobile export-oriented manufacturers who wanted a more liberal trade and investment regime within the country. Only by deregulating the trade and investment sectors and introducing regulatory reforms such as a competition law was there any chance of attracting export-oriented manufacturing investment into the country and thus promoting non-oil exports.
