Abstract
This chapter examines the effects of natural resources on the course of industrial development and offers a model that assumes the coexistence of natural and nonnatural resource industries in one country. The model shows how the prices of natural resources and institutions of a country affect patterns of industrial development. The model combines the logic of catch-up industrialization with the debate on whether natural resources are a curse or opportunity for developing countries. The assumptions of the model are fit for Southeast Asia, which participates in the regional dynamism of non-resource-based industrialization, while keeping natural resource industries active. This chapter uses the model to examine Indonesia and demonstrates that industrial development can move backward when there are surging resource prices without effective policies in place.
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