Indonesia Economic Conditions from the Mid-1980s to the Mid-1990s

An impressive evolution has been registered in the economic field, as shown by the simple figure of GDP per resident, which almost doubled from the mid-1980s to the mid-1990s, despite the increase in population. These results are largely the effect of planning policies conducted by governments according to the cadences of five-year plans whose main objectives were the increase of agricultural production, the strengthening of the manufacturing industry and the diversification of production, the increase of the infrastructural endowment. (v. tab.).

The area cultivated is constantly increasing, and food production is also increasing (I. is the third world producer of rice), having achieved self-sufficiency, except in some unfavorable years. At the same time, farming continued to progress and so did fishing (over 4 million tonnes of catch per year). But it is above all in the field of productions destined for export that the Indonesia has made the greatest progress (the country is the second largest producer of rubber and palm oil in the world, the third of cocoa, the fourth of coffee, among the first for spices, bananas, timber, cane sugar). For Indonesia 1999, please check

The development of the industry was at first based on the local processing of the rich mineral productions, giving rise to the birth of a rather important metallurgical industry (tin, nickel, aluminum) which joined the oil refining industry. Also not negligible are the mineral products that are exported without prior processing, as well as natural gas and precious minerals (gold, diamonds). The incidence of oil, which in any case remains the main active voice of foreign trade, has drastically reduced (from 80 to 20 % of total exports).

Alongside oil, with a slightly lower exported value, however, textiles and clothing appear: it is in this sector, in fact, that the manufacturing industry (whose contribution to the formation of GDP has strongly increased in the last decade) achieved the most considerable expansion. These are largely small and very small enterprises, with modest application of capital and large use of labor, decidedly export-oriented. Their success is mainly determined by the very low cost of labor, whose working conditions, however, expose the sector to heavy criticism from the international community. The latter, in demanding respect for workers’ rights, in fact accuses the Indonesian industry (like that of other countries of the Southeast Asia) to implement some kind of unfair competition; in this sense, and also given the aired commercial retaliation, further growth in the sector appears uncertain. In addition to the textile industry, it is worth mentioning at least the automotive industry (largely Korean capital).

From the point of view of infrastructures, especially as regards communications, the situation does not appear as advanced: the archipelagic condition of the Indonesia it certainly does not facilitate the solution of the problem, but even within the individual islands, excluding Java, the development of the road network remains proportionately modest. Of great importance are the port system, mainly intended for the embarkation of exported products, and the development of civil aviation which annually achieves a few hundred kilometers flown.

Overall, the economic system of Indonesia it has been performing among the best in the world since the 1970s, naturally bearing in mind the relatively low starting values. However, as the economic events that occurred in 1998-99 have shown, the country’s productive structure remains very fragile. The main problem seems to be of a financial nature and is clearly linked to the vastness of the external debt accumulated over the years to face the constant current account deficit; this, in turn, largely depends on the export of capital from Indonesia and by the modesty of productive reinvestments (as well as by very extensive phenomena of tax evasion and the like). As a result, about one third of the export value is absorbed by interest expense.

Despite the nationalization, implemented in the past, of a large part of the production activities, a substantial share of the production remained in the hands of foreign or transnational companies, or very few local entrepreneurs: these and those prefer to invest their profits elsewhere, as is the case of Indonesians of Chinese origin, who now direct their capital in China, while the elements of corruption present in the system do not allow an acceptable redistribution of the wealth produced, despite the commitments made by the government in the fight against poverty.

Recent privatization measures and incentives to reinvest in the country, especially in disadvantaged areas, as well as certain fiscal initiatives, have somewhat alleviated internal difficulties and increased the availability of productive capital, but have not decreased exposure. of the Indonesian system to fluctuations or international financial speculations. At the same time, the liberalization of the entry of foreign capital (amounting to approximately 40 billion dollars in 1995) has accentuated the dependence on the financial market. Since the summer of 1997, a currency and financial crisis was thus triggered which produced an increase in the prices of consumer goods such as to cause protests and accidents in much of the country, both in urban and rural areas.

Indonesia bananas