This article analyses structural changes and the sources of industrial growth in Indonesia between 1985 and 1995 by using the 1985, '90, and '95 input-output tables. It also investigates the changes in the pattern of industrial growth over the 25-year period of 197195. In the past three decades, Indonesia appears to have achieved a successful transition from an inward-looking, government-led industrialization financed by oil exports to an outwardlooking, market-oriented industrialization based on non-oil exports, in which the turning period was during the 1980-85 period. During 1985-95, the expansion of household consumption remained the main source of output growth as it accounted for about one-half of total output growth; in contrast, the contribution of government consumption was reduced to a negligible level, signifying the declining role of the government sector in output growth. The expansion of exports was also a key factor in output growth in addition to the rise in export-oriented investments. It is noteworthy that export expansion was made, to a large extent, by non-oil exports, rather than oil exports. I. Introduction Indonesia, as a developing country, has been formulating industrial development strategies since the late 1960s through five-year development plans (REPELITAs), which detail the goals and steps for each phase of the country's development process. Each REPELITA focuses on different aspects of industrial development due to the varying conditions at the beginning of each five-year period. The previous REPELITA, of course, forms a guideline for the subsequent REPELITA. For example, REPELITA I, during the early industrialization period, emphasized industries that support agriculture through backward and forward linkages. REPELITA II, in contrast, stressed industries that maximize employment creation. In sum, the long-term purpose of industrial development is to establish a stronger and more balanced economic structure that includes advanced industrial sectors sustained by viable agriculture sectors. At the early stage of industrialization, Indonesia employed import-substituting industrialization in order to stimulate manufacturing industries, especially consumer goods industries. The government controlled imports by imposing high tariffs and non-tariff barriers to protect domestic production. These efforts were the main drivers of the industrial and Gross Domestic Product (GDP) growth rates. The average annual growth rates of manufacturing value added and GDP were 15 per cent and 7.5 per cent in the 1970s, respectively. This rapid industrial growth was brought about by a large expansion of domestic demand, which was supported by a massive inflow of foreign exchange due to increasing oil exports. Unfortunately, the government did not pay much attention to the relatively small and easily saturated domestic market. Therefore, when oil prices fell in 1982 and domestic demand dropped, the annual average growth rate of GDP decreased markedly to only 4 per cent per year from 1982-85. The decline in oil prices in the 1980s encouraged the government to adopt export-- oriented industrialization. Several deregulation measures were introduced to raise non-oil and gas exports. These measures were quite effective in changing the structure of the Indonesian economy. Before the 1980s, the oil and gas sectors constituted more than 70 per cent of total exports. However, by the early 1990s, the contribution of the oil and gas sectors decreased to less than 30 per cent of total exports, while the manufacturing share increased to more than 50 per cent. In the late 1980s and the early 1990s, Indonesia achieved an average annual GDP growth rate of more than 6 per cent, comparable to the rapid growth period of the 1970s. However, this rapid growth rate was achieved without the benefit of extensive oil revenue windfalls. Many researchers have analysed industrialization and structural changes in Indonesia. …