Fostering internal dynamism for reindustrializing Indonesia

This paper introduces the concept of internal dynamism in Indonesia, defined as the extent of economic interconnectedness across provinces. We develop a new measure – the economic spread index – using interregional input-output data. Results show that internal dynamism first increased (1995–2000) and then declined (2000–2010) before recovering (2011–2016). The decline is associated with decentralization and a concurrent trend of deindustrialization, while the recovery reflects more coordinated national policies. These findings suggest that strengthening interregional integration can enhance internal dynamism and support reindustrialization, offering a potential source of growth amid post-pandemic disruptions and rising global protectionism.