AbstractBy using the historical method which consists of four stages, namely; heuristics, criticism, interpretation, and historiography, this article tries to examine the development of the substitution industry in Indonesia, including its background, its influence on industrial development in Indonesia, and the weakness of import substitution policies in developing countries that implement import substitution policies in their industrialization. Some important data in this article were taken from the library of the Central Bureau of Statistics, in the form of the Statistical Pocket Book of Indonesia in 1960 and 1966. The other important sources were data and articles from the Bulletin of Indonesia Economic Studies and Prisma obtained from the Central Library of Population Studies and UGM Policy, Yogyakarta. The existing data was then criticized so that historical facts were obtained, for example, the protection policies taken by the Indonesian government for industrial products in the early 1980s. Furthermore, the facts are analyzed at the interpretation stage. There are several findings in this article, first, the import substitution industry policy was implemented by the Government of Indonesia during the Repelita II period. Second, the Industrialization policy was related to the development strategy of the New Order Government which prioritized economic growth. Third, the Import Substitution Industry policy was supported by the New Order Government by providing a legal umbrella to guarantee the legality of various foreign companies operating in Indonesia. Fourth, the modern textile industry, automotive assembly industry, food products, and oil processing are rapidly growing in Indonesia through the Import Substitution Industry.
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