<![CDATA[The development of new trade theory which incorporates the interaction between trade and international capital flows indicates if the possibility of changes in a countrys comparative advantage due to the opening of international capital flows. International capi tal flows allow for changes in the industrial structure of a country depends on the composition of the products produced in that coun try. More capital-intensive types of products produced by a country, the greater the need for capital and the higher marginal rate of capital that can be given to attract greater international capital flows. Therefore, a comparative advantage should be seen as dynamic rather than static. As a country with large population, Indonesia tends to specialize in labor -intensive products. The other hand, efforts to attract foreign direct investment are very intensively conducted. The estimation results indicate if there was a shift in the pattern of industrial specialization Indonesia, from labor âintensive tends toward capital intensive.]]>
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