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