| Indonesia has a market-based economy where a | | | | domestic demand and caused the absence of new |
| significant role is played by the government. | | | | investment. Formal sector employment lowed |
| There are a lot of state-owned enterprises. | | | | significantly. Economic data provide evidence |
| The government administers prices on several | | | | that the economic turnaround of 1999 has |
| basic goods: fuel, rice, electricity. After | | | | continued. Real GDP growth reached 4.13% in |
| financial and economic crisis that began in | | | | August 2000. Results of GDP growth are record |
| mid-1997, the government took care of a great | | | | exports, manufacturing growth, and increase |
| portion of private sector propriety. It | | | | household consumption. Besides there has been |
| acquired non-performing bank loans and | | | | a significant increase in corporate debt |
| corporate assets. Indonesia's economy grew | | | | restructuring. But Indonesia's banking and |
| from a per capita GDP of $70 to $1,000 by | | | | corporate sectors are still extremely weak. |
| 1996. Inflation was held in the 5%-10% range | | | | Banking sector reform has stalled. Progress |
| with the help of effective monetary and | | | | on corruption cases is slow. Since the late |
| fiscal policies. The government managed to | | | | 1980s, there have been significant changes |
| avoid domestic financing of budget deficits, | | | | that encouraged its economic growth. This |
| it was financed by foreign aid. (Lindblad J. | | | | growth was financed from private investment, |
| 1996)In the mid-1980s,the government began | | | | both foreign and domestic.But new foreign |
| eliminating obstacles to economic activity. | | | | investment approvals fell by two-thirds |
| Its policy was aimed at the external and | | | | between 1997-1999. The crisis pointed out |
| financial sectors. The government tried to | | | | areas where additional reform was needed. |
| stimulate employment and growth in different | | | | They were legal and judicial system, |
| export sectors. Annual real GDP growth | | | | competitive processes, and adoption of |
| averaged nearly 7% from 1987-1997. As a | | | | internationally acceptable accounting.After |
| result most analysts recognized Indonesia as | | | | improvements in the laws recently, |
| a newly industrializing economy and emerging | | | | Indonesia's intellectual property rights |
| major market. But nevertheless there were | | | | regime remains weak; lack of effective |
| some structural weaknesses in Indonesia's | | | | enforcement and the area of private |
| economy during 1987-1997, the legal system | | | | infrastructure projects are of a great |
| was very weak, and there was no effective way | | | | concern Indonesia. It has a large labor |
| to enforce contracts, collect debts. | | | | force, abundant natural resources and modern |
| Non-tariff barriers, domestic subsidies, | | | | infrastructure, but nevertheless private |
| barriers to domestic trade, and export | | | | investment in projects ceased during the |
| restrictions all created economic | | | | crisis. |
| distortions. (Howard D.,Vincent J.H., | | | | |
| Lindblad J. 2002)The regional financial | | | | Conclusion.So, what is happening in East |
| problems influenced Indonesia in late 1997 | | | | Asia now? Strictly speaking, the same, that |
| and cause economic and political crisis. But | | | | happened before it: the countries of |
| in October 1997, Indonesia and the IMF | | | | Confucian culture play formation of new |
| reached agreement. It concerned an economic | | | | global center of economic and political |
| reform program aimed at macroeconomic | | | | power, and still the leading role. Certainly, |
| stabilization and elimination of some of the | | | | the region cannot equally compete with 3 main |
| most damaging economic policies.The effects | | | | centers of world economy and policy - the |
| of financial and economic crisis were | | | | USA, ЕС, Japan. Most of the |
| considerable. In 1998, real GDP was 13.7%, | | | | countries of the region still are poor, |
| but in mid-1999 real GDP growth for the year | | | | frequently inwardly unstable, and their |
| was only 0.3%. Inflation reached 77% in 1998. | | | | development is based on the use of the |
| Events of 1997-1998 forced Indonesia to | | | | adopted technologies. |
| import great amounts of rice. It reduced | | | | |