Jakarta Doing Business
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‘The most dramatic economic collapse anywhere in the past five decades’ is how one World Bank official described the calamitous disintegration of the Indonesian economy in the autumn of 1997. In 1998, economic output in Indonesia declined by more than 12 per cent and the national currency, the Rupiah, lost 80 per cent of its value.
The crash occurred after more than a decade of uninterrupted growth at between eight and ten per cent annually. In January 1998, the IMF was forced into arranging its largest-ever financial rescue package, totalling US$43 billion, in order to prevent total economic collapse. During 1999, the economy stabilised and has since 2000 has resumed steady annual growth of around four per cent; but the legacy of the crisis is still evident in the wariness of foreign donors and investors to deal with Indonesia: under the Suharto regime, much of the economy functioned under a system of ‘crony capitalism’ and this has yet to be effectively addressed, let alone dismantled. More importantly for the Indonesian people, the sudden mass unemployment which followed the collapse of thousands of enterprises continues to cause widespread hardship.
Thirty years earlier, as Indonesia’s economic expansion began in earnest after the upheavals of the mid-60s, the country was far less developed than many of its neighbours. However, it was able to exploit its considerable mineral resources as a foundation on which to build an industrial economy. Oil and natural gas are the most important raw materials produced by Indonesia; it is still one of the largest exporters of liquefied natural gas. The country is also the second-largest producer of tin and extracts substantial quantities of other metals and metal ores (bauxite, copper, silver gold and nickel) as well as coal and rubber. Much of the processing of these products is now done within the country.
The agricultural sector (including fishing and forestry) remains important but more as a source of employment – it accounts for half the work force – than for its contribution to the economy. The service sector grew rapidly from the beginning of the 1980s onwards. Tourism has become a major industry and a vital source of foreign exchange: 1996 revenue was estimated at more than US$6 billion. Transport and communications, financial services and international freight traffic also made important contributions. Howev
