Indonesia – Economic Growth and Development Post-New Order

Rizky Wibisono

Abstract


This article seeks to analyze the optimal conditions for for future economic growth in various periods of time for the Indonesian economiy - it presents a brief overview of the archipelago's economic history from its occupation by the Dutch VOC to the Suharto regime and his New Order, and uses economic data and analysis to construct normative predictive views on future growth. The author has found that Indonesia's recent economic history has been marked by exceedingly severe levels of price volatility, namely, the hyperinflation of the 60s, and the resulting cautious and prudent nature of fiscal and monetary policy. These factors, as well as other economic variables contributing to economic growth, lead the author to believe that within the short and medium terms, three main variables determine the state of growth in the economy – foreign direct investment, domestic consumption, and export industry – particularly palm oil and minerals. In the long term, however, continued economic growth will rely on the extent of the government multiplier after large infrastructure projects have been completed – determining the existence and/or extent of the government deficit and hard-won macroeconomic stability. In addition, increased freedom and convenience of access to factor inputs will be large determinents of discovery and development of dynamic competitive advantage, another factor believed to be significant in long-term economic growth.

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