Indonesian economic policies and performance, 1960-98

There are few other countries, if any, in which the variations in performance, policy and external conditions have been as wide as those which have occurred in Indonesia since the 1960s. Oil prices have boomed and collapsed; macroeconomic policy has varied between conservative orthodoxy and hyperinflation; trade policy has varied between strong protectionism and relative openness; finally, Indonesia has been the most severely affected of all the countries hit by the Asian crisis which began in 1997. This paper summarises Indonesia's economic policies and growth performance since the 1960s, and tries to find out if performance has varied systematically with policy. Section 2 provides an overview of Indonesian economic development since 1960, the first year for which national income estimates were published by the Indonesian Central Bureau of Statistics (BPS: Biro Pusat Statistik) and a year which roughly corresponds to the intensification of the inflationary and inward-looking policies adopted in the latter part of the Sukarno era. In sub-section 3a the historical summary in Section 2 is used to divide the entire period since 1960 into four policy sub-periods; in sub-section 3b growth rates are compared between these sub-periods, without making any allowance for non-policy effects on growth. Sub-section 3c attempts to make rough corrections for the effects of the oil boom and of the tendency for poorer countries to grow faster than richer ones. Section 4 summarises the findings on the association between policies and performance.