Indonesia

Part II analyzes the development of five developing countries from the perspective of quality growth. This chapter focuses on Indonesia, which has achieved high growth over a long period since 1968, with an average real GDP growth rate of 5.6%, thanks to its abundant resources and stable political and economic systems. Income inequality improved significantly until the mid-1980s but widened in the twenty-first century. The decline in oil prices in the 1980s and the Asian Financial Crisis in 1997 temporarily caused a sharp drop in growth due to the country’s structural problems. The engine of economic growth shifted from oil in the 1970s to export-oriented manufacturing in the late 1980s, and then to multiple resources and domestic demand in the 2000s. The key features of the country’s growth from the perspective of quality growth are: (1) it has achieved sustained high growth due to the transformation of its growth engines over time, while this is not necessarily linked to the inequality trend; (2) the country has strengthened its resilience through experiences of external shocks, thereby enabling the country to withstand similar shocks later; (3) the stagnant manufacturing employment might pose a constraint on the sustainability of future growth.