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Moving towards a National Economy in Late Colonial Indonesia

In Tapanuli, a province in western Sumatra, economic expansion in the late colonial period was frustrated by the problems of transportation in its mountainous and inaccessible terrain. In 1921, Resident F.C. Vorstman of Tapanuli stated in his succession report: ‘The construction of main roads is one of the most powerful means to improve economically backward regions’. This statement is not very surprising in itself, but it does reveal that some government officials had a clear idea of the impediments of economic development in the Outer Islands of colonial Indonesia, and how these obstacles could be overcome. As I will argue in this contribution, the development of infrastructure was one of the major factors in a process of increasing economic integration in Indonesia in the late colonial period. Moreover, infrastructural improvements were more significant in stimulating national economic development than the government policies under the Ethical Policy.