Resource-based industrial policy in an era of global production networks: Strategic coupling in the Indonesian cocoa sector

Abstract

Abstract Processes of industrialisation have long been associated with labour productivity improvements, rising incomes, and ultimately economic and social development. The preferred policy strategy to achieve these development objectives, however, remain intensely debated. A specific policy strategy of resource-based industrialisation (RBI), involving pre-export value addition to raw materials, is frequently pursued by resource-rich countries in the global south. We apply the analytical framework of Global Production Network (GPN) theory, and its central notion of strategic coupling, to the case of cocoa processing in Indonesia. Our findings demonstrate that the apparent success of an RBI policy in encouraging growth of a domestic cocoa processing sector, primarily through the use of export restrictions, is highly dependent on industry-specific GPN dynamics. Through an assessment of downstreaming policies in Indonesia, this paper provides an explanation for the success and limitations of such industrial policies in the contemporary global economy. Industry outcomes are strongly influenced by Indonesia's position within a set of globally-connected networks and the alignment of national policy with the particular strategies of lead firms within these networks in a processes of strategic coupling. We further argue that the inherent importance of upstream supply within resource-based industrialisation demands further attention when applying concepts of strategic coupling to this particular policy framework.