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The Economy of Indonesia is the largest economy in Southeast Asia, is one of the emerging market economies of the world, and also the member of G-20 major economies. It has a market economy in which the government plays a significant role by owning more than 164 state-owned enterprises and administers prices on several basic goods, including fuel, rice, and electricity. In the aftermath of the financial and economic crisis that began in mid-1997, the government took custody of a significant portion of private sector assets through acquisition of nonperforming bank loans and corporate assets through the debt restructuring process.
Bank Indonesia headquarter in Jakarta Under the "New Order" GDP per capita grew 545% from 1970 to 1980 as a result of the sudden increase in oil export revenues from 1973 to 1979. However, in the 1980s oil glut, the GDP per capita shrank 20% from 1980 to 1990 and by 13% from 1990 to 2000. During the thirty two years of president Suharto’s "New Order" government, Indonesia’s economy grew from a per capita GDP of $70 to more than $1,000 by 1996. Through prudent monetary and fiscal policies, inflation was held between 5%–10%, the rupiah was stable and predictable, and the government avoided domestic financing of budget deficits. Much of the development budget was financed by concessional foreign aid. In the mid-1980s, the government began eliminating regulatory obstacles to economic activity. The steps were aimed primarily at the trade and finance sectors and were designed to stimulate employment and growth in the non-oil export sector. Annual real GDP growth averaged nearly 7% from 1987–1997, and most analysts recognized Indonesia as a newly industrialized economy and emerging market. High levels of economic growth from 1987–1997 masked a number of structural weaknesses in Indonesia’s economy. Growth came at a high cost in terms of weak and corrupt institutions, severe public indebtedness through mismanagement of the financial sector, the rapid depletion of Indonesia’s natural resources, and a culture of favors and corruption in the business elite. Corruption particularly gained momentum in the 1990s, reaching to the highest levels of the political hierarchy as Suharto became the most corrupt leader according to Transparency International’s corrupt leaders list. As a result, the legal system was very weak, and there was no effective way to enforce contracts, collect debts, or sue for bankruptcy. Banking practices were very unsophisticated, with collateral-based lending the norm and widespread violation of prudential regulations, including limits on connected lending. Non-tariff barriers, rent-seeking by state-owned enterprises, domestic subsidies, barriers to domestic trade and export restrictions all created economic distortions. From Wikipedia, the free encyclopedia : Wholesale of food, beverages and tobacco |
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