Economy of Indonesia

According to cheeroutdoor, the transformation of the colonial structure of the economy began in 1950.

The courses of liberal economics (1950–57), directed economics (1957–65), economic democracy (1966–98), and development reform (since 1998) were taken as the basis of state economic policy. The first long-term development plan (1969/70-1994/95) included five interconnected medium-term plans.

The average annual GDP growth rate was 2–3% in 1950–65, 7.2% in 1975–84, 7.1% in 1985–95, and 7.8% in 1996. As a result of the financial crisis, GDP growth in 1998 fell to 13.8%. Inflation rose from 12 to 77.6%. GDP declined from $220 billion in 1996 to $141 billion in 1999. In 2001 it only rose to $156 billion. The GDP growth rate in 2002 was 3.7%. Per capita income rose from $75 in 1966 to $1,013 in 1996. However, in 1998 it dropped to $484. Indonesia has moved from the ranks of middle-income countries to the group of low-income countries. Per capita income in 2001 rose to only $740. Officially registered unemployment increased from 5.5% in 1998 to 6.4% in 1999.

In 2001, in the structure of GDP, the share of the agricultural sector, including fishing and forestry, was (in%) 16.39, mining – 13.59, manufacturing – 26.11, trade, hotels, restaurants – 16.09, electricity -, gas, water supply – 1.16, construction – 5.64, transport and communications – 5.35, finance and business services – 6.20, services – 9.46.

The share of employed in the structure of GDP (2001, in%): in the agricultural sector, including fishing, forestry, 43.77; in trade 19.24; in the manufacturing industry 13.31; in services 12.12; in other industries 11.56.

Indonesia has approx. 350 mining enterprises. The share of the industry in GDP is 13.59%, the industry employs 725 thousand people, or 0.8% of all employed (2001).

According to the Constitution of 1945, all mineral resources belong to the state and must be used to the maximum extent to improve the well-being of the people.

The following are mined: oil, natural gas, coal, gold, silver, as well as iodine, sulfur, phosphates, quartz sand, kaolin, asphalt, granite, marble, limestone, etc. Deposits of tin, bauxite, copper, nickel, and manganese ores are being developed. The mining companies are united in the Indonesian Association of Mining Enterprises.

The share of the manufacturing industry in GDP is 26.11%, 10.6% of workers are employed in the industry (2001). In 2000 there were more than 22 thousand large and medium-sized enterprises (0.8% of all enterprises), but they produced 89% of the added value created in the industry.

The largest enterprise in the metallurgical industry is the integrated steel complex “Krakatau Steel” in Cilegon (West Java), which ranks first in Southeast Asia in terms of production. The complex has the necessary infrastructure, including the largest deep-sea port of Chiandung.

In the aluminum industry, the leading enterprise is the Japanese-Indonesian enterprise “PT. Inalum”.

The oil refining industry has 8 plants with a total capacity of St. 1 million barrels per day, which belong to Pertamine. Seven liquefied gas plants provide products that provide Indonesia 1st place in the supply of liquefied gas to the world market. In 2001, the law on oil and gas was adopted. It is intended to weaken Pertamina’s monopoly in the industry, which is deprived of the right to conclude contracts on behalf of the government. By 2005 it is supposed to eliminate its monopoly on processing, transportation, storage and sale of oil and oil products.

The petrochemical industry provides the country with nitrogen fertilizers, benzene, methanol, and paraxylenic acids.

The cement industry developed rapidly, part of its products are exported.

The leading branches of light industry are textile, food and flavoring, leather goods, woodworking, furniture, and pharmaceuticals. In 2001, the total value of the industry’s output was 36.8 trillion rupees, 15.6% came from the food industry.

Since the 1980s new industries appeared – electrical, electronic, and old ones were also modernized. Shipbuilding has received significant development, the centers of which are the shipyards of the ports of Tanjung Priok, Tanjung Perak, Belawan and Tanjung Ugang.

In the automotive industry, with the participation of the world’s leading auto companies, the assembly of a number of brands of cars, trucks, buses, as well as the production of individual components, has been established.

The total area of land in agricultural circulation (excluding Papua and Moluccas) in 2000 was 46.9 million hectares, land under buildings and household plots 17.2 million hectares, plantations occupied 16.7 million hectares (26.08%), 12.9 million hectares (20.19%) were under rain-fed fields and orchards, 8.8 million hectares (13.74%) were under forest, 7.8 million hectares (12.15%) were under irrigated fields.

Rice dominates in food crops, corn, maize, soybeans, sugar cane, and tobacco are grown. In 2001, there were 11.5 million hectares under rice, from which 50.5 million tons of paddy were harvested (56.4% in Java). The average yield of rice is 44 centners per 1 ha.

The plantation sector is represented by state, private (local and foreign) plantation farms. The main plantation crops: Hevea (539 thousand hectares), oil and coconut palms, coffee trees, cocoa beans, tea, spices.

Indonesia ranks in the world: 2nd place after Thailand in the production of rubber (1.23 million tons were exported in 2002), 2nd-3rd place (depending on the year) in the supply of palm oil, 4th place in the production coffee (the total area under this crop exceeds 1.2 million hectares). Peasant farms produce 95% of all coffee.

Indonesia maintains its leading position as a supplier of copra, nutmeg, pepper, vanillin, and ranks 4th in cocoa beans.

The share of fisheries is 2.9% of GDP. Catch of crabs, shrimps, tuna 4 million tons (2000). Illegal fishing brings losses to St. $2 billion per year. The potential for catching fish is estimated at 6.7–7.5 million tons.

Java, Bali and a number of provinces in Sumatra have a well-developed road network. The total length of roads was St. 360 thousand km, of which 57% are asphalted (2001). Roads are divided into state, provincial, district. Before the crisis of 1997-98, a government program was adopted for the construction of high-speed highways, bridges connecting Sumatra with Java; the islands of Bali and Madura with Java. But due to financial difficulties, its implementation is only partially carried out.

The railway communication has received insignificant development. The length of railways in Java is 5.1 thousand km, and in Sumatra, unrelated sections of railways in the aggregate amount to 1300 km (2001). Projects have been developed to modernize existing roads and build new ones in Sumatra, Java, and Kalimantan.

The ocean fleet has more than 50 ships. Inter-island traffic is served by 2,793 locally built ships and a huge traditional fleet.

There are 658 seaports in Indonesia, of which: under the jurisdiction of the state company “PT. Pelindo “- 112. The largest ports: Tanjung Priok, Tanjung Perak, Semarang (in Java), Belawan (Sumatra), Dumai (Riau). Batam Island (6 ports) is becoming a world-class transshipment port. In addition to these ports, there are three more cargo terminals and more than 40 shipyards. Another port – in Makassar – is the sea gate to Eastern Indonesia.

The total number of aviation companies exceeded 30, the number of aircraft in public and private companies 514, of which 412 aircraft and 102 helicopters (2001). There are about 180 commercial airports in Indonesia, of which 41 are large. The main international airport is named after Sukarno Hatta in Chengkarang (near Jakarta). Hang Nadim International Airport on Batam accepts DC-10 and Boeing 747 class aircraft. Airports in Eastern Indonesia have been expanded and modernized – Sam Ratulangi in Manado, Hassanuddin in Makassar, Sepingan in Pontianak.

In 2001, there were 8,351 post offices and 6.7 million telephones. State-owned companies PT. Indosat” and “PT. Telcom, as well as the private PT. Satelindo”. It is planned to create a multimedia communication infrastructure “Nusantara XXI century”.

The tourism industry is one of the most profitable industries (4-6 billion US dollars per year). In 2001, 5.1 million tourists visited Indonesia. Due to the terrorist attack in Bali on September 12, 2002, approx. 1.5 million tourists have canceled their tours to Indonesia, and tourism revenues have decreased by almost $1 billion. Indonesia is simplifying visa and customs procedures, and is coordinating tourism policy with other ASEAN countries.

In industrial policy, the government proceeds from the need to increase the competitiveness of Indonesian goods in the world market. Expanding the capabilities of medium and small enterprises allows us to solve the problems of employment, the development of import substitution. The modernization of processing enterprises should help increase added value and strengthen Indonesia’s position in the world market as one of the leading suppliers of agricultural products. Weakening the industry’s dependence on imported components is one of the central tasks.

Indonesia continues its investment climate liberalization policy. Foreign companies are granted long-term contracts for a 30-year period with the right to extend the term of activity. Opening of companies with 100% foreign capital is allowed. Almost all sectors are open for foreign investment, incl. industry, infrastructure, nuclear energy. Companies operating in bonded zones are provided with special benefits, almost complete exemption from taxes and fees.

Indonesia has signed multilateral agreements with over 50 countries and is a member of the Multilateral Investment Guarantee Agency.

In 2000, the government restricted the activities of foreign companies in public transport, inter-island shipping, domestic trade, cinema (filming, distribution), radio and television broadcasting. A new law on foreign investment is being developed, according to which foreign investors will be equated with national ones.

The financial crisis of 1997-99 exposed the structural weakness of the banking system. In 1997, the Agency for the Restructuring of the Banking System was formed, which carried out the restructuring and recapitalization of banks. Based on the merger of 4 state-owned banks, the Mandiri Bank was created. Bank Negara Indonesia, Bank Rakyat Indonesia, Bank Tabungan Negara, 26 provincial development banks and 12 former private banks came under government control. The number of banks decreased from 237 in 1997 to 149 in 2000. These and other measures helped to improve the banking system.

Indonesia maintains a policy of strict budgetary discipline. The financial year is the same as the calendar year.

2003 state budget based on economic growth of 4%, GDP of Rs 1940 trillion, Rs 9000/USD, inflation 9%, 3-month central bank bond rate 13%, oil price $22 for 1 barrel The budget deficit should be 1.8% of GDP.

The share of tax revenues in the budget does not exceed 80%. OK. 40% of the expenditure part of the budget is allocated to service the external debt. The expenditure part of the budget includes current expenditures and the development budget.

The development budget is set at 65.1 trillion rupees (3.4% of GDP). 15.1 trillion is allocated for education, culture, youth development and sports; for agriculture, fisheries, irrigation 9.5 trillion; for transport, meteorology and geophysics 9.1 trillion; for defense and security 7.2 trillion; for social needs, health care 6.6 trillion rupees.

External debt in 2002 amounted to 133.1 billion US dollars, incl. state 69.4 billion, debts of the private sector 63.7 billion. almost 1/2 of GDP.

The relative fiscal stability of 1990–96 was broken by the crisis. Laws on regional autonomy transfer some of the fiscal functions and responsibilities to district and municipal authorities.

Foreign trade in 2002 continued to recover from the crisis. Export revenues amounted to $57 billion (of which the non-oil and gas sector contributed $44.9 billion). 31.2 billion was spent on imports, while the non-oil and gas sector accounted for 24.8 billion dollars. The volume of trade between Indonesia and the Russian Federation is approx. $250 million.

Indonesia refused further IMF assistance in 2003. Indonesia entered the process of forming the ASEAN free trade area (AFTA), signed an agreement on ASEAN + 3, agreements on the creation of ASEAN-PRC, ASEAN-Japan and ASEAN free trade zones by 2010-15 -India. It takes part in all APEC events, supports all collective actions to combat international terrorism and ensure the security of regional trade and economic contacts. Initiated the establishment of the Southwest Pacific Dialogue.

At the WTO, Indonesia supports trade liberalization by insisting on the removal of protectionist barriers imposed by the US and other developed countries, and using WTO rules to protect the domestic market. It is the only Asian country in OPEC. Complies with the established production quota of 1.27 million barrels. per day and is in favor of inviting the Russian Federation to OPEC.

As a member of the Coffee Growers’ Association, Indonesia is participating in joint efforts to prevent coffee prices from falling. In 2000, the Trilateral Cooperation of Rubber Producers was established, which included Indonesia, Malaysia and Thailand. In August 2002, the Tripartite Consortium of Rubber Producers was formed to coordinate the efforts of the parties in matters of pricing.

Economy of Indonesia