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Survey of recent developments


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  • Hadi Soesastro
  • Raymond Atje


The composition of the incoming cabinet has been a disappointment: the president's clear election victory seemed to give him the opportunity to appoint a more strongly reformist group of ministers. The new government says it intends to involve the private sector heavily in infrastructure provision, and that it recognises the need to improve the business environment, but there has been little concrete progress so far, and it has yet to show the will and capacity to do what is required. In late December Aceh province was devastated by an earthquake and a catastrophic tsunami. About a quarter of a million Indonesians were killed and countless others injured. Vast numbers have lost their livelihoods, and material damage is estimated at $3 billion, although the natural gas producing facilities remain intact. The international community showed itself to be favourably disposed to the incoming government, and committed generous disaster assistance. The economy grew increasingly rapidly in 2004, and investment spending has at last begun to record sustained high rates of growth. The budget outcome for the year is expected to be reasonably close to plan, despite the previous government's failure to reduce the enormous waste resulting from electricity and fuel price subsidies. Monetary policy was tightened toward the end of the year in response to accelerating inflation. A deposit insurance agency to be established under newly enacted legislation is unlikely to be able to prevent banking collapses, or the transfer of the resulting losses to the general public; the legislation seems merely to codify most of the actions taken on an ad hoc basis in 1999-98 when the banking system collapsed. Meanwhile, yet another banking scandal has led to the closure of a private bank, after a seemingly unwarranted delay by the central bank. The government has announced its intention gradually to adjust electricity and fuel prices upwards. The Constitutional Court has annulled a new electricity law allowing greater private sector participation and competition in this sector, however. Similar court actions now seem likely whenever the government enacts laws aiming to enhance efficiency through these means. After less than four years of decentralisation, the underlying laws have been replaced. The new laws can be interpreted as an attempt to shift government authority back towards the centre, but there has also been an attempt to redress the regionally inequitable fiscal impact of current revenue sharing arrangements.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Bulletin of Indonesian Economic Studies.

Volume (Year): 41 (2005)
Issue (Month): 1 ()
Pages: 5-34

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Handle: RePEc:taf:bindes:v:41:y:2005:i:1:p:5-34

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  1. Haryo Aswicahyono & Hal Hill, 2004. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(3), pages 277-305.
  2. Stephen Marks, 2004. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(2), pages 151-175.
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Cited by:
  1. Anne Booth, 2005. "The evolving role of the central government in economic planning and policy making in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(2), pages 197-219.
  2. Kunal Sen & Liesbet Steer, 2005. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(3), pages 279-304.
  3. Ross McLeod, 2003. "Towards improved monetary policy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 39(3), pages 303-324.
  4. Hada Soesastro & Haryo Aswicahyono & Dionisius A. Narjoko, 2007. "Economic Reforms in Indonesia After The 1997/98 Economic Crisis," EABER Working Papers 21861, East Asian Bureau of Economic Research.
  5. Jean-Christophe Gaillard & Elsa Clavé & Océane Vibert & Azhari & Dedi & Jean-Charles Denain & Yusuf Efendi & Delphine Grancher & Catherine Liamzon & Desy Sari & Ryo Setiawan, 2008. "Ethnic groups’ response to the 26 December 2004 earthquake and tsunami in Aceh, Indonesia," Natural Hazards, International Society for the Prevention and Mitigation of Natural Hazards, vol. 47(1), pages 17-38, October.
  6. Thee Kian Wie, 2005. "Policies Affecting Indonesia's Industrial Technology Development," Hi-Stat Discussion Paper Series d05-121, Institute of Economic Research, Hitotsubashi University.
  7. Ross Mcleod, 2006. "Indonesia's new deposit guarantee law," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 42(1), pages 59-78.
  8. Prema-chandra Athukorala & Budy P. Resosudarmo, 2005. "The Indian Ocean Tsunami: Economic Impact, Disaster Management and Lessons," Departmental Working Papers 2005-05, The Australian National University, Arndt-Corden Department of Economics.
  9. Ross Mcleod, 2005. "The struggle to regain effective government under democracy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(3), pages 367-386.


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