Category: Indonesia

Modernizing Indonesia’s Financial Sector

Reforms of the financial sector in Indonesia since 1997 have mitigated the key risk factors that caused the economic crisis of 1997. The first of these was structural weaknesses in the financial sector, particularly the banking system. The second was heavy borrowing by both the banking system and the corporate sector from foreign sources.  Indonesia’s Central Bank had warned that the risk of losses due to the currency exchange rate of private and state-owned companies’ foreign debts are still high and continue to haunt throughout 2015.

Indonesia Strives to Reach its Economic Potential

Indonesia has come a long way since former president Suharto adopted a new economic stabilisation policy in 1996. However, the country must take steps to improve infrastructure and enhance data measurement if it is to realise its economic potential.

Factors Surrounding Indonesia’s Interest Rate Cut

Bank Indonesia (BI) surprised everyone when it eased monetary policy at its February meeting. Moving into line with global trends, it cut the policy interest rate by 25 basis points to 7.5 percent, even though analysts had predicted no change. While the change is surprising, it has a sound rationale but is not without risk.

Indonesia’s Jokowi Heads Overseas and Leaves Domestic Tensions Behind

Indonesian President, Joko Widodo’s (Jokowi) decision to embark on his first official overseas visit has been overshadowed by domestic controversy. The planned meet-and-greet with the leaders of Malaysia, Brunei and the Philippines seemed to be a way of escaping the domestic tensions between two of the country’s key law-enforcement institutions: the police (Polri) and the anti-corruption commission (KPK).

Indonesia’s Poverty Reduction Strides During Decentralization were Offset by Rising Inequality

How effective was Indonesia in addressing poverty and inequality in the decentralisation period?

In the first decade of the decentralisation period, from 2001–10, Indonesia’s GDP grew at an average annual rate of only 5.4 percent. This was significantly slower than during 1990–96, prior to the Asian financial crisis, when Indonesia’s GDP grew at an average rate of more than 7 percent per year.

Jokowi’s High Risk, High Reward Strategy for Indonesia

No more ‘business-as-usual’ is the Jokowi government’s message in the 2015 budget. Cut fuel subsidies, ramped up infrastructure spending, and rising revenues. These three steps deliver a 1.9 percent fiscal deficit, down from 2.2 percent in 2014. This leaves space for a fiscal response in case the global economy turns less friendly. The success of this bold strategy depends on whether the dash for immediate results risks delaying or possibly even sacrificing medium-term gains.

The Oil Business is Still Big Business in Indonesia

Indonesia’s ‘oil bonanza’ is now over. It ceased to be a net oil exporter and became a net importer in 2004. Indonesia currently produces only slightly above 800,000 barrels per day while the consumption level is about 1.4 million barrels per day. This leaves about 600,000 barrels for net import. In the golden era of oil in the 1980s and 1990s, Indonesia produced 1.6 billion barrels per day while total consumption was about 800,000 barrels per day.

Indonesia Asserts that Natuna and its Gas Reserves are in their Waters

The mutuality of Asia’s economic interests centring on deepening economic integration is a potential foundation for building an Asian economic community that encompasses the ASEAN 10 plus their six neighbours, Japan, South Korea, China, India, Australia and New Zealand.

More Thoughts on the Economic Prospects for Indonesia

We begin the 2014 ‘year in review’ series, looking at developments in Asia over the year past and the prospects for the year ahead, with a look at how Indonesia is travelling and the prospects for its economy.