Della Y.A. Temenggung

Della Y.A. Temenggung is a PhD candidate in the Division of Economics, Research School of Pacific and Asian Studies (RSPAS), The Australian National University. She is currently working on her PhD thesis on technology spillovers from foreign direct investment (FDI) in Indonesia. Della has been working as a lecturer in Industrial Engineering Department, Bandung Institute of Technology (ITB) since 1998. In the same department, she works as a researcher in the Laboratory for Industrial System Planning and Optimization. She worked as a consultant and trainer for industries, industry associations, and government agencies including the Department of Industry and Trade in Indonesia. Her main interests are efficiency and productivity study, optimization techniques, industrial planning, and industrial economics. She holds Master Degree in Industrial Management and Engineering from ITB (2001) and bachelor degree in Industrial Engineering from the same university (1998).She received the National Best Student Award from the President of Indonesia and the Graduation Award (cum laude) from the ITB Chancellor. Della has been involved with various organizational activities and is currently the President of the ANU- Indonesian Student Association of Australia (PPIA).

Problem of Policy Coordination and Planning: Lessons from FDI in Indonesia.

It is nowadays widely recognized that foreign direct investment (FDI) has important economic growth and development effects. More importantly, FDI can also create technology spillovers to the host country's local firms. It is suggested that external effect or spillovers from FDI is the most significant channel for the dissemination of modern technology, rather than formal technology transfer arrangement The expectations of gaining from technology spillover persuade many developing countries, including Indonesia, to offer various incentives to attract FDI. However, the cross-country studies provide mixed evidence on the presence of technology spillover from FDI. Mixed evidence from the empirical studies seem to suggest that rather than being an automatic process, technology spillover from FDI depends on local firms and host country specific characteristics, such as: host country absorptive capacity, trade policy and investment policy. This implies that well coordinated government policies need to be design not only to attract FDI, but also to get maximum benefit from the presence of FDI. Using the results from the cross-country studies, this paper will discuss the Indonesian government polices related to the issue. Compare to other developing countries which are considered as successful countries in attracting FDI and gaining significant benefit from the presence of FDI in term of technology spillovers, there are some indications of policy planning and coordination problem in Indonesia. For example, the technological capability that would determine the country's capacity to absorb new technology is very low. This would limit the benefit gains from FDI, even that the investment regime has been liberalized. Following the discussion on the problems, this paper will offer some policy recommendation for the future.