10.1 -Tuly 16, lqq 8 I NDONESIA A MA CR O ECO NO M IC U PD AT E INDONESIA IN CRISIS A Macroeconomic Update The World Bank Washington, D.C. July 16, 1998 CURRENCY EQUIVALENTS Exchange rate as of July 16, 1998: US$1.00 = Rp. 13,100 FISCAL YEAR Government April 1 - March 31 Bank Indonesia April 1 - March 31 ACRONYMS & ABBREVIATIONS ADB Asian Development Bank AMU Asset Management Unit APKINDO Plywood Producers' Association BPPC Clove Marketing Board BPS Central Statistical Bureau BULOG State Logistical Agency GDP Gross Domestic Product IBRA Indonesian Bank Restructuring Agency IMF International Monetary Fund INDRA Indonesian Debt Restructuring Agency JEXIM Japan Export-Import Bank KKN Corruption, collusion, nepotism L/C Letter of credit NTT East Nusa Tenggara PLN State Electricity Company SAKERNAS Labor force survey SUSENAS Household survey INDONESIA IN CRISIS A Macroeconomic Update Table of Contents Summary Chapter 1: Indonesia in Crisis From contagion to collapse 1.3 Four microeconomic causes of the crisis 1.8 Weathering El Niffo 1.11 The current economic situation 1.12 Conclusion 1.15 Chapter 2: Nurturing a Recovery Priorities in macroeconomic policies 2.2 Macroeconomic outlook 2.12 External financing requirements 2.15 A low case scenario 2.15 Conclusion 2.16 Chapter 3: Protecting the Poor Poverty will rise 3.1 Employment will fall 3.2 Effects on health and education 3.3 Policy challenges in the short term 3.5 The importance of good agricultural and natural resource policies 3.9 The importance of good institutions 3.11 Conclusion 3.11 Statistical Annex This report was written by a team led by Vikram Nehru and comprising Lloyd Kenward, Aart Kraay, Andrew Mason, and Magda Adriani. The peer reviewers were Amar Bhattacharya, Joshua Felman, Anwar Nasution, and Joseph Stern. The team is grateful to the following for their contributions and comments: Benu Bidani, Pieter Bottelier, Stephen Dice, Michael Edwards, Ben Fisher, Bruce Harris, Jorge Garcia-Garcia, Kristalina Grigorieva, Scott Guggenheim, Nunu Hendrowiranto, Masahiro Kawai, Homi Kharas, Chad Leechor, Samuel Lieberman, Lloyd Mckay, Richard Newfarmer, Hubert Neiss, Sean Nolan, Jacqueline Pomeroy, Richard Roulier, Julian Schweitzer, Gurushri Swamy, Vinod Thomas, Dennis de Tray, Thomas Walton, and Eloy Eduardo Vidal. Secretarial support was provided by Jessica Ardinoto and Inneke Herawati. The report was discussed with government officials on July 7 and 8, 1998. Indonesia in Crisis: A Macroeconomic Update Summary Indonesia is in deep crisis. A country that achieved international community. This report suggests a five decades of rapid growth, stability, and poverty point agenda of action for the near term requiring the reduction, is now near economic collapse. concentrated focus of government policy and the full support of the international community: Within the space of one year Indonesia has seen its currency fall in value by 80 percent, inflation soar to * Protect the poor. The real tragedy of the over 50 percent, the economy swing from rapid Indonesian crisis is its effects on the poor and growth to even more rapid contraction, unemployment vulnerable. They are confronted by falling real climb rapidly, and the stock exchange lose much of its wages, fewer employment opportunities, and rising value. Foreign creditors have withdrawn, investors prices of food and other essentials, including health have retreated. Capital and entrepreneurs have fled. and education services. Their first line of defense is to Long-standing defects in governance, earlier work longer hours in the informal sector, sell assets, camouflaged by rapid growth, have now been draw down savings, and seek help from informal unmasked as fatal flaws. Unfortunately, the crisis hit family and social networks. But they need help when Indonesia was experiencing its worst drought in desperately. An early resumption of growth would be fifty years, and the international oil price was welcome. In addition, the Government could help the registering a sharp decline. Social unrest has erupted poor in three ways. First, it must ensure the and shaken to its very core the political stability of the availability of food and other essentials at affordable nation. Years of development and poverty reduction prices. This means subsidizing key commodities, are at risk. especially rice, and ensuring effective distribution. As better techniques are found to target fuel and food No country in recent history, let alone one the size of subsidies, these could be reduced. Second, it must Indonesia, has ever suffered such a dramatic reversal create employment opportunities and help generate of fortune. The next years will be difficult and incomes through labor-intensive public works uncertain. The economy is expected to contract this implemented by local communities. Good year by 10-15 percent, inflation could exceed 80 geographical targeting would be an efficient way to percent, and the number of poor could well double. reach the poor, and ensuring participation by women Will Indonesia be able to pull through without should be a key objective when designing and irreversible economic damage? It must. Too much is choosing projects. Third, the Government needs to at stake for Indonesia and the world. Indonesia, after preserve the availability of key social services, all, is the world's fourth largest country, an important especially basic health and education. The anchor of stability in East Asia, and with an government's "Stay in School" campaign, block impressive past record of development and social grants for primary and junior secondary schools, and progress. the targeted scholarship program should all help considerably. But health services need to be more A five point agenda effective in reaching the poor. To be sure, recovering from this desperate situation * Obtain substantial additional foreign financial will be slow and difficult. Much will depend on assistance. Falling government revenues and the whether the nation can achieve the necessary political pressing need to protect the poor through subsidies stability for implementing a difficult and complex and higher expenditures on social safety nets is agenda of economic reforms, and whether it will expected to boost the budget deficit to about 8.5 receive the necessary financial support from the percent of GDP. Indonesia now has no option but to Summary - Page 2 - choose between curtailing subsidies and critical social Government. The second is placing the Indonesian programs, and seeking additional foreign financing. Bank Restructuring Agency (IBRA) on a sustainable For budgetary reasons, therefore, foreign financing footing, by providing it with adequate resources and needs are expected to be about $8 billion more in qualified personnel so it can become fully effective. FY98/99 than they were in FY97/98. Net foreign IBRA needs a clear charter supported by adequate financing roughly equal to the fiscal deficit will also funds needed to meet the claims of depositors and be needed in FY99/00. To achieve this level of creditors of IBRA banks, restructure non-viable IBRA disbursements it is critical that donors consider banks, and recapitalize those banks under IBRA providing their additional financial support in the form management that will be restored and privatized. The of program rather than project loans. This will not third is ensuring that IBRA's asset management unit is only provide much needed foreign exchange but up and running as quickly as possible, using fair and finance the fiscal gap without fueling inflation. transparent procedures for asset acquisition, sale, and resolution. And the fourth is developing mechanisms * Deal with the debt overhang. The overhang of the for ensuring that exporters have adequate working private sector domestic and external debt, together capital. This issue is being addressed in a variety of with depreciation of the Rupiah, has paralyzed many ways, including through a cash collateral facility for enterprises. Thus restructuring it is one of the highest confirmation of import letters of credit, the provision priorities of government. The Frankfurt agreements of working capital finance for imported inputs, and the are an important step forward. But they are only a possibility of an export credit guarantee facility. beginning. To add further impetus to the negotiations between debtors and creditors that must follow, three additional steps are needed: ensuring the maximum developments since April have allowed the new participation of external creditors in the Frankfurt Goverment to take steps in improving goverance framework; developing a framework or set of agreed . . - . . ~~~~~~and transparency. A number of measures have principles for resolving the domestic debt of already been taken that serve as a signal that this corporates in a manner that is equitable and integral Government will break with the "ways of the past". with the restructuring of their external debt; and fair, This includes efforts by the new Goverment to fearless, and effective operation of the new review and dismantle goverment contracts that were bankruptcy law to help facilitate the restructuring of offered through corruption, collusion and nepotism the corporate sector and encourage debtors to expeditiously renegotiate their debt obligations and (KlN). But imrvng gernance w edi toe a policy priority that extends well into the medium term. get productive assets back to work. These three In the immediate future the most important steps will steps, in combination with efforts to rebuild the be to implement arrangements for private sector banking system, are essential to restart the flow of enterprises to compete with BULOG in importing and credit to viable corporations. marketing all items other than rice; finalizing transparent arrangements for private sector * Resuscitate the banking system. 'The iwrseni participation in the provision of public infrastructure; crsi hs inrae th bakn system's fiaca and developing an action plan for designing and troubles to the point where the viability of the rest of implementing competition policy. An important the economy is threatened. Reestablishing credit fuhlement ithe Govery.en prvtat flows and dealing with the problems of troubled banks is more pressing than ever. Four priorities need policy, where the Goverment could be open to allegations of malfeasance, especially as public assets special attention. The first is implementing measuresartobsldiadeesdmrk.Spclcrewl to help relatively sound banks restore credit flows and ave to be taken t enrestransar ecin each step become a core for future banking operations. This along the way and every effort is made to acquire the could entail new equity from foreign strategic bs osbepiefrtesl ses investors and additional capital injections from best possible price for the sold t existing owners. Both forms of equity could then be supported further by tier-two capital from the Summary - Page 3 - Conclusion With firm, consistent implementation of the reform program and adequate foreign financing, there are The seriousness and urgency of Indonesia's financial good prospects that Indonesia will return to sustained and economic crisis cannot be overstated. This has to growth in the medium term. After all, thirty years of be reflected in the fundamental nature of the reforms rapid growth have added significant strengths to the that are pursued and the speed and integrity with economy. The country has accumulated an which they are implemented. For its part, the impressive stock of human and physical capital. international community must come forward in this Agriculture and industry are well integrated with the time of Indonesia's greatest need with substantial global economy. Savings rates are among the highest increases in financial and technical assistance. in the world. And the economy possesses a rich natural resource base, a large domestic market, and an industrious, innovative, and educated people. Indonesia: Country Economic Memorandum Chapter 1: Indonesia in Crisis "Crises and deadlocks when they occur have at least this advantage, that they force us to think." -- Jawaharlal Nehru Indonesia is in deep crisis. But words alone cannot increasing rural poverty. The forest fires of 1997, describe the numbing shock that has been inflicted touched off by the common but ill-advised (and on this country of 200 million people -- the fourth illegal) practice of burning to clear land, grew to largest in the world. Just a year ago, Indonesia was disastrous proportions in the extremely dry enjoying its 30th year of virtually uninterrupted conditions. rapid growth. Investors were beating a path to its door demanding to participate, and contribute, to its To make matters worse, even the international growing prosperity. Inflation was low, foreign trading environment has turned pernicious. Oil exchange reserves plentiful, the government budget prices have tumbled by 30 percent, sending in surplus. The comforting proximity of other Indonesia's terms of trade into a nose-dive. Japan, booming East Asian economies generated synergies the hub of East Asia's success in the past, is facing for Indonesia through trade and capital flows. troubles of its own. And other East Asian These, mixed with high levels of domestic savings neighbors, many afflicted by the same malaise as and investment, promised little interruption to Indonesia, are trimming imports and competing continued rapid development and poverty reduction. furiously with each other for higher export shares in third country markets. But what a difference a year makes. Today the Indonesian economy is near collapse. Foreign This report notes that, notwithstanding this dramatic exchange markets have singled Indonesia out from reversal of fortune, Indonesia's future prospects are other South-East Asian economies for special still not tarnished irretrievably. To be sure, punishment. External creditors have withdrawn. recovering quickly from this reversal and restoring Investors have retreated. A country that prided growth will be difficult. But it is not impossible. itself on excellent macroeconomic management has Much will depend on whether the nation can seen its currency fall in value by more than 80 achieve the necessary political stability for percent. Hyperinflation has become a distinct implementing a difficult and complex agenda of possibility. Weaknesses in the corporate and economic reforms. banking sectors have been magnified into fatal flaws. Urban unemployment has climbed to The first item on that agenda is stabilizing the unprecedented levels. The budget this year is economy while preserving productive assets. This expected to register its largest deficit ever. Social will require close attention to monetary and fiscal unrest has erupted into widespread violence and policies together with urgent restructuring of banks shaken to its very core the political stability of the and corporates. The second is restoring domestic country. and international confidence and preparing the economy for recovery and sustained rapid growth. Cruelly, nature has also chosen to inflict its full fury This will require consistent and diligent focus on at this difficult time, bringing Indonesia its worst questions of governance -- developing the legal drought in 50 years. Declines in food production framework and strengthening legal institutions, have added to Indonesia's woes, increasing pressure ensuring effective oversight of banks, releasing on dwindling foreign exchange reserves, lowering timely and accurate monetary and financial data, rural incomes, reducing domestic demand, and increasing transparency in fiscal management, and Chapter 1: Indonesia in Crisis Page 1.2 Figure 1.1 Before the crisis, Indonesia showed few signs of impending trouble 1 In relation to crisis episodes in other ..... foreign exchange reserves... countries, pre-crisis Indonesia did better on growth GDP g-ooh -Reo.o in r/o Pta~~~~~~~~~~~~~~~~~~~~~~~~~~,nlho of imports Po ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~5 4~~~~~~~~~oo 4%~~~~~~~~~~~~~~~~~~~~~~~~~ Z/ . - ---- ----- . _ All _ ps 2 Alcndsepizodfs............................ ll th OYo All Pt-sh; q}iAo'-. 2% - Al nisqio,Tid. 1% 0%~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -5 4 -3 -2 -I 0 Yprisnorh thfinsi Yeo pnorhocosi. .... inflation ... ... the external current account deficit.... RoSe of ji=t3alon C44leno .ooo =2dod4i4 16% 5 /lidonesia~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~l on. op/.o 14% A , . , , \otris -%-- -4% .5 4 .3d-2 .1 12%~~~~~~~~~~~~~~~~~~~~~~~~2 - - - - - -3% -~~~~~~~~- - 3-2 4%~~~~~~~~~~~~~~~~~~~~~~~~~2 Y-0 pnor thz -b cz ... the real effective exchange rate ............... .... and the fiscal deficit. ppppp dep-tiaho Frid dcfidilz (-vf pp-oltip) sha fC(DP 12% 3 1% '~~~~~~~~~~~~~~~~~~~~~~~-% 6% Oli \ ~~~All pont%s1 - - - - - - - - - - - - - - - - - - - -5 - .3 - -2-/o \ /pdapgsia .' ~~~~~~ ~ ~ ~~~~~~~~-2%M . . . .......................... .............. -3% \3- / -' -2 Y pnpr l0 the prisis 4% -3% . -5- 2- .5% 45 - -3 -2 -1 0fi Source: IFS and Global Development Finance Database. See Endnote I for technical details of how this figure was constructed. Chapter 1: Indonesia in Crisis Page 1.3 stamping out corruption. And all the while, the foreign exchange reserves, and inflation (Figure Government will need to protect the poor from the 1.1). worst effects of the financial and agricultural crisis on grounds of economic justice, social stability, and A number of market institutions took comfort from sustaining broad support for the reforms. these statistics. Newsletters of investment banks issued in July and August 1997 were optimistic that Indonesia's crisis spells immense dangers and Indonesia would be untouched by the travails of difficulties ahead for the Indonesian people. But as Thailand. Euromoney's country risk assessment for Nehru's quote reminds us, the crisis also should Indonesia did not show any change in Indonesia's force a rethink -- not so much about what went ranking as late as September 1997. The major wrong (important as that may be) but about the international credit rating agencies did not signal future, especially of such fundamental questions as increased risk until the crisis in Indonesia was well the direction of development, national values, underway (Table 1.1). And the markets showed economic and social justice, and the role of their bullishness too. Indonesia's stock exchange government -- all of which are reflected and peaked only on July 8, 1997, six days after Thailand resonate in economic policies. floated its currency.2 The price of bonds and syndicated loans barely budged in secondary From contagion to collapse markets (Figure 1.2). Interest rate premia for country risk displayed no perceptible change. Few predicted the Indonesian crisis, and certainly Surveys of market participants showed them with none its severity. True, some observers expressed rosy views of Indonesia's short-term prospects right concern about the economy's growing vulnerability, up to the point when the crisis hit (Table 1.2).3 pointing to rising external debt, slowing export growth, and declining international competitivenss. Expectations about Indonesia changed dramatically But their doubts seemed petulant in the face of after July 1997, however. The pebble that began Indonesia's excellent growth performance over the avalanche was the decision to float the Thai baht three decades and its record of poverty reduction. on July 2. On July 11, the Philippines floated the And besides, most macroeconomic indicators peso, and in defense, the Indonesian authorities seemed in such fine fettle. Indeed, Indonesia widened the exchange rate band from 8 to 12 seemed better positioned than many other crisis countries on such bellweather indicators as growth, Figure 1.2 the fiscal stance, the external current account, Bigre 1.2 Bond prices migrated south only in October Table 1.1 (Price of 10-year, fixed rate, US dollar denominated Tal*. Indonesian Government bond issued July 30, 1996) Indonesia risk was downgraded well after the crisis began Standard & Poor's a/ Moody's b/ 95 - -' Date of rating Rating Date of rating Rating 90 May 30, 1996 BBB Mar. 14, 1994 Baa3 80,f^ Oct. 10, 1997 BBB- Dec. 21, 1997 Bal 75 a/ Foreign currency rating. 65 b/ Foreign currency, long-term bonds. 60 Rating remained unchanged between these dates. Source: Standard & Poor's; Moody's Source: Bloomberg Chapter 1: Indonesia in Crisis Page 1.4 Table 1.2 Sanguine private sector (Results from a survey of the private sector; responses are on a scale of 1-7, with 7 indicating strong agreement) Survey statement Year of Indonesia Other World survey Asia Your country is unlikely to be End 1995 5.3 6.2 4.9 in recession over the next two End 1996 6.2 5.3 4.9 years. The exchange rate of your End 1995 4.2 5.0 4.6 currency is expected to be very End 1996 5.8 5.1 4.9 stable in the next two years. The exchange rate of your End 1995 5.1 5.1 4.5 country reflects economic End 1996 5.7 4.8 4.4 fundamentals Source: World Competitiveness Survey, as reported in Kaufinan, Mehrez and Schmukler (1998). percent. The rupiah immediately dropped by about short-term external obligations. Until July, thanks 7 percent as managers of international mutual funds to large differences in domestic and international and hedge funds began to pull out of East Asia in interest rates and a predictable exchange rate,4 the general. Then, when it became obvious the vast bulk of corporates found the terms so attractive exchange rate band would be too expensive to that they borrowed abroad without hedging (Figure defend, the Indonesian authorities floated the rupiah 1.4). But when the rupiah began to depreciate faster on August 14 and almost simultaneously tightened than the historical trend rate and the exchange rate monetary policy, so much so as to push overnight band was widened, the potential foreign exchange rates to a punishing 81 percent. These pre-emptive losses arising from these unhedged borrowings actions were widely praised at the time as examples became glaringly obvious. Several corporates of pro-active management, for which the Indonesian began to buy foreign exchange to hedge their future Government was so well known. But it was clearly liabilities. This tended to further weaken the rupiah. not enough. What followed was a depreciation of When the exchange rate band was removed, the the exchange rate that seemed almost exponential -- trickle of corporates steadily grew to a flood and the first slow, then faster, and then dizzyingly fast. The depreciation of the exchange rate accelerated, value of the rupiah vis-a-vis the dollar fell by 10.7 especially as, by this time, many creditors were percent in July, 25.7 percent in August, 39.8 percent reluctant to lend to Indonesian corporate borrowers. in September, 55.6 percent in October and So just as the demand for foreign currency climbed November, and 109.6 percent in December (Figure sharply, supplies faded. On October 13, the 1.3). At the risk of simplifying a complex process, Government invited the IMF to assist. this exponential plunge can be divided into five stages. The second stage in Indonesia's exchange rate story covers November and the first week of December in In the first stage, the depreciation may have been 1997, the period immediately following the triggered by investor funds reducing their exposure announcement of the first IMF package. to Indonesia but it was propelled forward by Implementation of the program began with the unhedged Indonesian corporates covering their Figure 1.3 Seeing the crisis through the prism of the rupiah exchange rate (Spot rate and intervention bands, August 1995 - May 1, 1998) 4th IMF package, Rupiah 1US$ June 28 17000. 17000 16000. Habibie -16000 2900 .2900 President, 15000. May 21 -15000 2800 Floating oftRupiah, 2800 Rumors of 14000 August 14CBS, Feb-2 , 14000 2700 .2700 13000. Election campaign Bank guarantee 13000 2600 Election campaign ens2600 anucm tJn27Riots, 12000. pe May 14 12000 2500 Rumors of band 2500 11000. devaluation Spot Rate -11000 2400 iNeYok2400 10000. 20Flaigo 10000 9000 F ~~~~~~~~~~~~~~~~~~~~~~~~~Ta aht July 2 and 2300 Budget speech -9000 9000. ~ ~ ~ ~ ~ RmosofLwr Philippines Paso Jan-6 8000. 2200 President's heat, bandevto Jl112200 -8000 Increase in bank July 4. July 27 disturbances reserve requirments Rumo)urs of 7000- 2100 2100 Suharto's health, ,/I7000 6000- 2000 1 ~~~~~ ~~~~~~~~~~~~~~~~~~~~~~Dec-9 I3trd IMF 6000 2000. . * . . . . . . .. . . ..*.2000 IPackage, -6000 5000 - 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~st IMF package pr8Frankfurt 6000. ~~~~~~~~~~~~~~~~~~~~Nov-5 2nd IMF Agreement, 5000 package Jan- June 4 4000. 15 -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4000 3000. -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3000 2000 i . . .... .... .... .... . . . ...I.... * . . ..H .1 ..S 2000 04 -~~404C44 C4 t4 i. 404N, 4S7ource: BaZnk nd"onesiNa. NNNC Source: Bank Indonesia Figure 1.4 Cheaper to borrow abroad without hedging Percent a year 20 Cost of borrowing in Rp 16 Cost of borrowing off-shorefid/ly hedged Saving from borrowing 12 off-shore unhedged 8 Cost of Boffowing --_._.---------_-.________.___ off-shore rmhedged Note The cost of borrowing in zupiah is the on-shore interest rate on working capital. The fiuily hedged cost of borrowing offshore is SIBOR plus the 3-month SWAP premium and plus an indicative spread of 2.5 percentage points The unhedged cost of borrowing offshore is the 3-month SBOR plus an indicative spread of 2 5 percentage points Source: Bank Indonesia. closing of 16 banks. The rationale was to demonstrate the Government's determination to In the third stage, the rupiah parted company with deal directly and decisively with financially other South East Asian currencies. Up to this troubled banks. Instead, the action led to a loss of time, the depreciation of the rupiah had remained confidence in the rest of the banking system. within a broad trend that had been set by the other Large deposit withdrawals from private banks currencies (Figure 1.5). But on December 9, prompted the central bank to issue emergency 1997, it suddenly began to depreciate much more credits in ever-increasing amounts to ensure these rapidly. The date is significant, because it was banks did not go under. The earlier crisis in the then that President Suharto's trip to Kuala corporate sector was now overlaid with a crisis in Lumpur was canceled on grounds of poor health. the banking sector. In response foreign banks The combination of the financial crisis, an began to cut their inter-bank lines and trade credit upcoming election, and an aging, sick President, lines, sending the rupiah sharply lower from Rp. ratcheted the level of uncertainty to yet an 3250 to the US dollar to Rp. 4000. Sophisticated unprecedented level. To make matters worse, the investment analysts were quick to spot the budget announced on January 6, 1998, was implications for inflation and further exchange rejected by the markets as being too optimistic rate depreciation, not to mention the accumulation and lacking credibility. Indonesia saw widespread of contingent fiscal liabilities that were being capital flight for the first time. In the first three accumulated in the form of the central bank's weeks of January, the exchange rate depreciated outstanding stock of emergency liquidity credit from Rp. 4850 to the dollar to Rp. 13,600, at one and the deterioration in the balance sheets of the point touching Rp. 17,000 during the day's private national banks. No wonder then, that trading. The slide of the rupiah during this foreign exchange dealers continued to short the frenzied period did not pause to register that the rupiah, bringing further downward pressure on President himself signed the second letter of the currency. intent with the IMF. The absence of corporate Chapter 1: Indonesia in Crisis Page 1. 7 and banking reform in the new policy package did points in a day on a couple of occasions, albeit at not help. a rate between Rp. 7500 to Rp. 8500 to the US dollar. The fourth stage was ushered in on January 27, 1998, when the Government made two The fifth stage began with simmering student announcements that began the slow process of protests against price rises and the Suharto r6gime cooling the foreign exchange markets and which reached boiling point when four students restoring confidence. The first was a plan to were killed in Jakarta. This sparked massive restructure financially troubled banks; and the demonstrations calling for reforms of the political second was an initiative to deal with the overhang system and eventually escalated into widespread of private corporate debt. Rumors about the riots, arson, and looting directed largely at the impending establishment of a currency board President's family and friends and at the ethnic helped too, but not for the reasons trumpeted by Indonesian-Chinese community. Some 1,200 its supporters. Finally, the announcement of a people perished in the violence. The exchange third IMF package on April 8, 1998 with rate collapsed by more than 50 percent from Rp. comprehensive coverage of virtually all major 8,000 in early May to over Rp. 16,000 by mid- issues -- financial and social -- had a salutary June. The foreign exchange market was effect on the foreign exchange market. These unusually thin with virtually no one supplying factors notwithstanding, the exchange rate dollars and renewed pressure for capital flight continued to gyrate, even changing 5 percentage from, among others, the ethnic Indonesian- Figure 1.5 Indonesia parts company from other crisis countries (Index of nominal exchange rates for selected Asian countries, July 1, 1997 - May 13, 1998) 6.5 - Indonesian Rupih 6.5 6.0 -Malaysian Ringgit 6.0 - - Thailand Baht 5.5 - Philippines Peso 5.5 -.-.-- Korean Won 5.0 5.0 4.5 4.5 4.0 4.0 3.5 3.5 3.0 3.0 2.5 2.5 1.50.- 2.0 1.5 A 1.5 1.0 ........ ~~~~~~~~~~~~~~~~~~~~~~~1.0 0.5 0.5 a: cr or ar cn cr. a: a C z cc co co c II I!I I I I I [ I I 7'. C'-a C--a ~~~~~~~~co co G O G ZnS1 ' .E C_ D ° ° ' CQ C: E CD Note: July 1, 1997 =1.00 Source: Bank Indonesia; Dow Jones Chapter 1: Indonesia in Crisis Page 1.8 Box 1.1 Improving debt statistics Over the last several years, official statistics consistently under-estimated the amount of private external debt owed by Indonesia. It was only in October 1997, some three months into the crisis, that Bank Indonesia revealed the result of surveys showing that Indonesia's short-term debt and cross-border obligations were lower than previously indicated. Some observers have speculated that this information, if publicly known earlier, would have cooled the ardor of international investors for Indonesia, and so prevented the crisis. Not so. For the most part, this information was already in the public domain through the statistics of the Bank for International Settlements. And it did not seem to make much difference to courting investors. Chinese community. No amount of encouraging last few years;5 by December 1997, US$20.8 news -- the peaceful transition to a new billion had to be paid back in one year or less, and Presidency, the subsequent restraint shown by the the average maturity was a short 18 months army, the Frankfurt debt agreement, liberalization (Figure 1.6). of foreign investment, rapid progress on privatization, new press freedoms -- seemed to Such a large stock of external debt at such short counteract the uncertainty caused by the political maturities made Indonesian corporates situation. particularly vulnerable to changes in outside sentiments. Corporates could have protected Four microeconomic causes of the crisis themselves if they had only hedged their foreign debts. But they chose not to do so to save costs Although a lot more analysis will no doubt be and earn higher profits. Moreover, nobody really undertaken of Indonesia's crisis, tentative thought that the exchange rate could depreciate as conclusions on its causes are urgently needed to rapidly as it did. Finally, moral hazard could have support the formulation of policies for nurturing played a part as well. Firm owners, mistakenly or the economy to health and for shaping not, may have believed that the Government international financial support for Indonesia. The would come to their rescue should the exchange Thai crisis was clearly the trigger that set the rate take a turn for the worse, a practice they had explosion. But, in addition, four key observed oftentimes before. microeconomic factors combined to exacerbate Indonesia's affliction from foreign contagion to The Government (and its advisors) may also have macro collapse. been culpable. Steeped in the importance of private sector freedoms and wedded to openness First, there was a rapid build-up of private in the capital account, the authorities, while external debt in recent years. Between 1992 and concerned about the growth of private external July 1997, about 85 percent of the increase in debt, genuinely held that this was a matter for the external debt was due to private sector borrowing. private sector to handle on its own without This was mostly the result of good government interference. An appropriate stance macroeconomic management that attracted for managing uncorrelated commercial risks, foreign private resources. Indonesia was a victim perhaps. Unfortunately, as Latin America's of its own success. Foreign creditors were eager experience in the 1980s and 1990s showed, a to lend to a country which had low inflation, a mass collapse of overextended firms caused by a budget surplus, an abundant and relatively well- sudden change in expectations can convert a educated labor force, good infrastructure, and a private sector problem into a massive public relatively open trading system. Unfortunately, the sector one. And indeed, this is what happened in average maturity of the credit extended to Indonesia. Indonesia's private sector declined sharply in the Chapter 1: Indonesia in Crisis Page 1.9 Figure 1.6 Pre-crisis Indonesia was vulnerable on two fronts It had accumulated too much short term private ...and domestic credit was growing unusually quickly from debt. aflawed banking system. (The ratio of short term private debt to foreign (Annual growth of domestic credit in percent) reserves) 1.8 i .donesia G-wh iD dOlnSk -rCdit I 0% 1.6 1.4 V 1.2 6% l.a .* . ~~~~~~~~~~~~~~~~~~~~~~~~~~~~All ~m-is ,4d 0.8~ ~ ~~Pilpi 4% 0.6 All coui,8ies 0 4 0.2 o. _ __5 .4 3 .2 .0.0 Y_a pfir~ a.e. Source: BIS See endnote 1. Second, Indonesia's banking system went into it caused panic withdrawals of deposits from most the crisis with several well-recognized flaws even private national banks. as credit growth was rapid (Figure 1.6).6 The practice of classifying loans by repayment The deteriorating situation in the banking system performance rather than collectability masked the eventually led external creditors to cut interbank actual condition of loan portfolios. Accounting lines and refuse confirmation of letters of credit and provisioning rules had not kept pace with the drawn on Indonesian banks. Liquidity shortages, increased sophistication of the banking system always a problem, now became acute. Foreign and did not provide important "early warning" currency deposits plummeted (Figure 1.7).7 signals on the true financial health of banks. Many banks raised deposit rates to entice Inadequate enforcement of central bank depositors back. But to no avail. Determined that regulations meant that rules covering intra-group no further banks would need to close, especially lending, loan concentration, and creditworthiness from want of liquidity, the Central Bank pumped criteria were consistently violated with impunity. funds into the failing banks, and on January 27, The legal framework did not support contract 1998, the Government announced a guarantee enforcement when borrowers failed to repay. covering all depositors and creditors of locally incorporated banks. In end-September 1997, the Not surprisingly, numerous banks were seriously outstanding stock of liquidity support stood at Rp. undercapitalized, and some even insolvent, well 17 trillion; by April 1998, a mere six months before the crisis began. So when the currency later, it had ballooned to Rp. 127 trillion -- almost began to depreciate, banks were poorly positioned three times the level of base money at end-1997. to absorb further deterioration in their portfolio. Today, it stands at Rp. 148 trillion. In the case of In early November 1997, the central bank closed some banks, the emergency credits they owe 16 banks that were completely insolvent and in exceeds their equity several times over and are. particularly bad financial condition. Small equivalent to over three-quarters of their total depositors were protected by guaranteeing assets. deposits of Rp. 20 million or less. But rather than instilling fresh confidence in the banking system, Chapter ]: Indonesia in Crisis Page 1. 10 Figure 1.7 Meltdown of a banking system After October 1997, there was a sharp decline in .. especially foreign currency deposits.. deposits. (Share of deposits in M2) (US$ billion) 92,8% 20 20 92.6% isS1 92 4% 16 16 92 2% 14 92 D% i2 X d? C, .1mX Q z rU i e Z ¢ 2 < v 2 e 2 3 ~ < X 8 z: 2 e 2 .... despite sign ifcant increases in interest rates ... ... prompting the authorities to inject liquidity credits to save banks from collapsing. (interest rate, percent) (Rp. trillion) 100 0 Tnlh1on Rp 1so 160 90 90 80 00 140 140 Ov-oighot 70 JIBOR 70 120 120 60~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~2 60 0>7f -60 lo00 loo 10 - 1 0 so08 40 40 30 . 30 60 60 20 20 40 40 10 /........................ ;8Ox.mo=lhSBI0 20 20 C.0 £ 0 Source: Bank Indonesia the political strength of established commercial * A third factor contributing to the crisis was interests were well known to all those who did the question of governance. This was not a new business there. concern. Even before July 1997, the same surveys depicting investors as bullish on the None of these perceptions registered significant Indonesian economy also showed them displaying downturns before July 1997, suggesting they did strong concerns about the bureaucracy, red tape, not precipitate the crisis. But they did color the corruption, insider trading, and the soundness of perceptions of how Indonesia would manage the the financial system. In fact, in a sample of 53 crisis and whether it had the institutional capacity countries on the prevalence of bribery, Indonesia to respond quickly, fairly, and effectively. It helps ranked dead last.8 In addition, Indonesia's weak explain why Indonesia has been singled out for legal system, the arbitrariness and lack of such harsh punishment by the markets even transparency in government decision making, and though its economic situation prior to the crisis Chapter 1: Indonesia in Crisis Page 1.11 was no worse, and often better, than those of Weathering El Nifo other South East Asian economies. Equally, these perceptions weakened the willingness of foreign As if the financial crisis was not trouble enough donors to offer financial support immediately and for Indonesia, fate handed another devastating ease the pain of Indonesia's adjustment. In some blow by visiting upon the country perhaps the sense, then, this "crisis of confidence" has been worst El Niflo drought this century.9 The El Nifno the most damaging of all of Indonesia's crises, of 1997/98 is remarkable not just for its severity because it postponed the return of private but because it had two distinct peaks -- the first in financial flows and slowed the provision of July/August, 1997 and a second in March 1998. interim official funding. Apart from its delayed onset, the cumulative rainfall during 1997 was well below normal * The fourth and final factor was the throughout the country. This unusual weather unfortunate political juncture at which the crisis pattern has followed El Nifno-like conditions in hit Indonesia. The government was entering its five years out of the last six, which had already final six months of a five-year term and faced the depleted the meager reserves of farming usual uncertainties of a Presidential election. communities, especially in the Eastern Islands. What made this election more uncertain than previous ones, however, was the age of the What the financial crisis has done to wreck President (76 years) and signs that his health was Indonesia's urban firms, nature seems to be doing less than robust. This made the choice of vice to ruin its rural farms. The effect of El Nifio is to president a particularly important one, and postpone the planting of rice, delay the next seemingly unending rumors about leading and cropping season, and so affect yields. Total rice lagging candidates added to the rupiah's gyrations production in 1997 fell by 4 percent, but some in foreign exchange markets. More important, the provinces in the country registered sharper government was facing its worst crisis in over 30 declines.10 The top five rice growing provinces years just when many of its key ministers were were not affected severely, except for West Java, understandably reluctant to make decisions with where rice production declined by 4 percent. long-term ramifications that their successors would then have to live with and implement. Large areas of Sumatra and Kalimantan were affected not only by irregular rain but also by The following cabinet did not survive for long, smoke and haze generated by forest fires. Only however. The deteriorating economic situation, the magnitude of these fires can be blamed on El increases in food and fuel prices, and calls for Nifio, not their origin; for that, blame land President Suharto's resignation and political clearing activities of plantation operators, reforms reached a crescendo in May 1998, transmigration contractors, timber culminating in two days of mass violence, looting, concessionaires, and to a smaller extent, and arson in cities throughout Indonesia, smallholders. including the capital, Jakarta. The resignation of Mr. Suharto as President, the appointment of Mr. In many of the more isolated parts of the eastern Habibie to succeed him, and Mr. Habibie's provinces, such as East Nusa Tenggara, hunger is selection of several respected technocrats as a common phenomenon and the timely delivery of cabinet ministers appears to have calmed the food is of prime concern. Since people consume country, at least temporarily. But the political essentially what they produce, a drought year can situation remains fluid and uncertain, its fragility result in starvation unless food is distributed by vulnerable to a further worsening in economic the Government. In these areas, the period just conditions. prior to the corn crop is known as the period of "ordinary hunger" (lapar biasa). In drought years, this period becomes one of "extraordinary Chapter 1: Indonesia in Crisis Page 1.12 hunger" (lapar luarbiasa). It is clear, 1997/98 external debt service which cut into investment was an "extraordinary hunger" year. expenditures; second, the withdrawal of external creditors and reductions in domestic credit In areas better served by markets, farmers only availability meant fewer investment resources; produce part of what they eat and buy the rest. and third, lower investment by some corporates Here, harvest failures may not result in food affected their suppliers who subsequently lowered shortages (thanks to grain supplies by BULOG), their own investment -- the so-called "accelerator but they do result in income declines. So people effect". Construction and real estate were the first may go hungry or starve for want of money. (and the hardest) to be hit, but other non-tradables such as transport and domestic trade soon BULOG's rice stocks in December 1997 followed. The vortex of collapsing domestic amounted to 1.9 million tons, clearly not enough demand even overwhelmed producers of import to fill the production shortfall of 2.7 million tones. substitutes who might otherwise have benefited To plug the gap between projected demand and from the exchange rate depreciation. The current stocks, BULOG imported 2 million tons in unequivocal gainers were exporters, especially early 1998. Another 3.1 million tons is to be those exporting natural resources; exporters of imported during the rest of the year. manufactures have been handicapped by a shortage in trade finance (see below). The agricultural crisis has further strained the country's shrinking foreign exchange supply, * The condition of the banking system mirrors contributed to rising prices, lowered domestic that of corporates. Even well managed private demand, and reversed progress in rural poverty national banks did not have the financial reduction. It is noteworthy that within the entire resilience to withstand the exchange rate tsunami. panoply of policy changes that constitutes the First, their foreign exchange-denominated Government's reform program, reforms in liabilities ballooned. Second, their assets agricultural policies are conspicuous by their crumbled as defaults climbed. Third, their deposit absence. It is an issue to which this report will base shriveled as panicked depositors withdrew return in the last chapter. their money. Fourth, each time the currency depreciated, the rupiah value of dollar- The current economic situation denominated loans climbed and the banks' capital-asset ratios fell. By January 1998, many Indonesia's economic situation is bleak. At its private banks were technically insolvent. The core is the massive depreciation of the real deposit and creditor guarantee introduced on exchange rate, one of the largest in any country January 27, 1998 may have staunched the worst since the second world war; and emanating from of the hemorrhaging but certainly did not stop it. this have been implications for domestic demand, In the first three months of 1998 alone, Bank the banking system, corporate balance sheets, Indonesia pumped Rp. 54 trillion into the banks, inflation, trade and the balance of payments, more than the total it had pumped in during the government finances, and eventually growth, entire second half of 1997. incomes, employment, welfare, and poverty Figure 1.8). On January 27, 1998, the government also announced the creation of the Indonesian Bank * The most immediate effect of the exchange Restructuring Agency (IBRA), which became rate depreciation was a collapse in domestic operational in February. Fifty four banks were demand: -2.5 percent in the last quarter of 1997, transferred to IBRA's control in February -7.9 percent and -17.6 percent in the first and 1998.12 They accounted for about 40 percent of second quarters of 1998.11 Investment was hit the deposits of the banking system and their particularly hard. Three factors contributed: first, outstanding commitments to Bank Indonesia unhedged corporates had to pay higher levels of exceeded 200 percent of their capital. On April 4, Chapter]1: Indonesia in Crisis Page 1. 13 Figure 1.8 The story in pictures Rapid depreciation of the rupiah .... ... fueled sharp increases in prices.... (Daily Rupiah per US$ spot rate) (12 month Percentage change in Consumer & Food Price index) 2,000~~~~~~~~~~~~~~~20 31000~~~~~~~~~~~~~~~~~~~~~~3 4.000~~~~~~~~~~~~~~~~~~~~.0 ~5,000 600F 6,000 ~~~~~~~~~~~~~~~~~~6,000 7,000~~~~~~~~~~~~~~~~~~~~1,0 9,000 9~~~~~~~~~~~~~~~~2000 2 10,OGO ~~~~~~~~~~~~~~~~~~~~13,000 3,00 6,0001~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1'0 2 13.000] -1000 ... Rupiah/US$S produced higher interest rates and increased their .... generated greater volatility in the market for foreign variability.., exchange... (Overnight interbank call rate) (3-month swap rate premium, in percent per year) 100%I 45 70%/ 60%' 30 30%. 23 40%/ 20 30%/ Is 20% 10 10%. 0%/ 00~~~~~~~~~~~ ....triggered a slide in the Jakarta stock tmrket .... .... and contributed toward a loss of depositor (Jakarta Stock Exchange Index) confidence in private national banks. (Ratio of deposits in private national banks to deposits in all commercial banks) 750 64 700 62 600 ~~~~~~~~~~~~~~~~~~~~~~06 050 600 56 450 4~~~~~~~~~~~~~~~~~~~~~~0 4 ~~~~~~~~~~~~~~~~~~~~~~~46 4~~~~~~~~~~~~~~~~~~~~~~~~4 44 30 1 40 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ L 73~~~~~~~~~~= 0 0 - Chapter 1: Indonesia in Crisis Page 1.14 1998, IBRA took management control of seven of Despite a precipitous decline in the terms of trade these banks, suspending the rights of the (Figure 1.9), the deficit narrowed to -1.4 percent shareholders.13 Another seven were effectively of GDP in 1997/98, owing to the sharp closed.14 And then on May 28, 1998, IBRA took depreciation in the real exchange rate and the over the management of Indonesia's largest concomitant collapse in domestic demand. private bank, Bank Central Asia, following a run Exports grew smartly notwithstanding problems on its deposits for over a week. in the availability of trade finance and despite the dip in oil prices. And imports receded slightly, * Inflation soared, driven by the exchange rate slowing significantly in the last two quarters of depreciation and more than accommodated by the the fiscal year, under pressure from shrinking sharp increase in the money supply needed to domestic demand and the exchange rate effect on prop up the banking system. By end-June 1998, the price of imports. inflation over the previous 12 months had reached 59 percent, compared to only 5.1 percent before * The government budget is under tremendous the crisis broke a mere year ago.15 The bulk of strain, reeling from the impact of weaker this increase was due to a rise in the price of economic activity, lower oil prices, and increased tradables, especially clothing and food; an subsidies as a result of the rupiah depreciation and exception was the administered price of fuels (a higher inflation. The budget registered a surplus tradable) which helped contain increases in the of I percent of GDP in 1996/97 and 1997/98. But price of energy (1.7 percent). In contrast, the the 1998/99 budget has had to be revised thrice so price of nontradables increased by only 12.6 far, with the latest estimates projecting a deficit of percent during the same period. 8.5 percent of GDP. This, despite various measures to increase revenues, including * The external payments position is in dire privatization of state enterprises (see Chapter 2). straits. The problem lies not with the balance of payments' current account deficit -- which the * All these factors combined to lower GDP depreciating currency and contracting domestic growth significantly. Over 1997, growth may market is likely to transform into surplus -- but have averaged 4.7 percent, but this masked a the capital account. Simply put, Indonesia sharp deceleration during the last two quarters. experienced a total US$19 billion swing in By the first half of 1998, GDP had contracted by overall capital flows in 1997/98.16 Set this 12.2 percent. The virtual standstill in construction next to 1997/98 GDP of US$142 billion (admittedly at market rates) and net external Figure 1.9 reserves of US$13 billion, and the immensity of The terms of trade declined precipitously in 1997 the crisis becomes immediately clear. (International terms of trade, 1993-1997) The capital account deteriorated because of the odw... Quafr.yTe.mofTrde*1999-1997 decline in new private capital inflows, the (199Q3 OlOO) reluctance of foreign creditors to rollover bank 125 and corporate external short term debt, and the 10A repatriation of portfolio investments. Despite a 1 boost of US$4 billion in loans from the IMF, 105 gross reserves of Bank Indonesia fell to US$19 100 billion by end-June 1998, down from US$28.8 95 billion a year earlier. 90 85 The current account deficit of the balance of so8 payments did as well as could be expected. Source: BPS Chapter 1: Indonesia in Crisis Page 1.15 and weaknesses in manufacturing and services domestic and international investors, built have contributed to a rising number of lay-offs. painstakingly over years, was shattered in months. Urban unemployment has climbed sharply, Long-standing defects in governance, earlier although reliable estimates are not available. One camouflaged by rapid growth, have now been government agency reckons that unemployment exposed as fatal flaws. The financial sector is in could climb to 14 million (15.1 percent of the collapse. Worse, the crisis coincidentally hit when workforce) by the end of the year. The drought in Indonesia was experiencing its worst drought in agriculture has inflicted lower incomes to food fifty years. Years of progress in development and growers in the eastern islands even as the poverty reduction are at risk. Social tensions depreciation of the rupiah has showered windfall have erupted into violence, tearing asunder the gains on cash crop exporters. stability that Indonesia had enjoyed for over three decades. And this is just the beginning. Conclusion Economic conditions are likely to get worse before they get better. What can be done and how Indonesia's problems began with contagion but the economy could be expected to fare is the nobody could have guessed the speed and severity subject of the next chapter. of the crisis that followed. The confidence of Endnotes exchange rate on the inflation differential between 'Figure 1.1 is constructed as follows. We begin with Indonesia and the US, specified in the following form: annual data on nominal exchange rates over the period 1957-1995 for a sample of 150 countries. We then log(nexch)t = 7.55+ 0.67 (log idncpi - log uscpi)t_ identify crisis episodes as years in which the nominal (494) (10.0) * exchange rate depreciated by more than 25 percent, and did not depreciate by more than 25 percent in any 2 of the preceding five years. This latter stipulation rules adj R = 0.98 out episodes of successive devaluations that occurred in a number of countries with sustained high inflation. where nexch is the nominal exchange rate (defined as This yields a sample of 122 crisis episodes. Next, for rupiah to I US dollar), idncpi is the Indonesian each of the five years preceding the crisis, we compute consumer price index and uscpi the US consumer price the median over these 122 episodes of the indicated index. This suggests that a I percentage point increase variables. This is plotted as a dotted line in Figure 1.1. in the differential between the domestic price level In addition, for all countries and years for which data and the US price level, led to a depreciation of the was available, we computed the median value of each nominal rupiah/dollar exchange rate of 0.68 percentage indicator for all non-crisis episodes. This is indicated points the following quarter. The adjusted R2 of 0.98 as a solid line in Figure 1.1. The definitions of the indicates that 98 percent of the variation in the indicators are as follows: dependent variable can be explained by variations in the independent variable. Although the Augmented Growth: Real per capita GDP growth Dickey Fuller (ADF) tests indicate that the nominal Reserves: Year-end non-gold reserves/(total exchange rate and the domestic and US consumer exports/12) price index are nonstationary, the equation forms a Inflation: Growth in the consumer price index, fourth cointegrating relationship. quarter over fourth quarter. 5 The average maturity of Indonesian debt declined Current Account Deficit: selfexplanatory. because (a) the share of commercial bank borrowing Real Depreciation: Fourth quarter over fourth quarter increased, and (b) the maturity of commercial bank growth in the real exchange rate, defined as the debt was less thaq the average maturity of Indonesian nominal exchange rate vis-a-vis the US dollar adjusted debt. But the average maturity of commercial bank by relative consumer prices. debt itself barely changed between 1994 and 1997 Domestic Credit Growth: Nominal growth in domestic 6 See World Bank. 1997. "Indonesia: Sustaining credit less inflation less real GDP growth. Growth with Equity", World Bank Report No: 16433- Fiscal surplus(+)/deficit(-): General government IND, May 30, 1997 (Washington D.C.: World Bank). surplus/deficit divided by GDP. 7 The decline in foreign currency deposits from Debt to GNP Ratio: Total debt divided by GNP. private national banks between November 1997 and Short-Term Debt/Reserves: Total debt of maturity less April 1998 equalled some 9 percent of (1997) GDP. than one year, divided by year-end nongold reserves. 8 See D. Kaufman, G. Mehrez, and S. Schmukler (1998). "The East Asian Crisis - Was It Expected". All but the last two indicators are drawn from the Manuscript, World Bank. International Financial Statistics of the IMF. The last 9 The El Nifio effect this year is at least as severe as two are drawn from the World Bank's Global that in 193940, which was the last time this century Development Finance database, and cover only with summer oscillation indices of similar severity. developing countries. See Fox, James. (1998). "El Nifo Report: Indonesia", 2 Unlike in Korea and Thailand, where equity markets paper prepared for the World Bank, Manuscript. showed some nervousness in 1996 and early 1997. '° The five provinces with the largest declines were 3 See D. Kaufman, G. Mehrez, and S. Schmukler Maluku/Irian (32 percent), Sulawesi Utara (19 (1998). "The East Asian Crisis - Was It Expected", percent), Sulawesi Tenggara (16 percent), Lampung manuscript, World Bank. (13 percent), and Sulawesi Tengah (12 percent). 4 Before July 1997, about 90 percent of the variation " In real terms; compared to the same period in the in the nominal exchange rate could be explained by a previous year. straightforward time trend. This is corroborated in the 12 They included four state banks, 39 private national results of a regression of the rupiah/US dollar nominal banks, and 11 regional development banks. Chapter 1: Indonesia in Crisis Page 1.17 13 Each of these banks had borrowed more than Rp. 2 trillion from Bank Indonesia. 14 These banks, which were small, had borrowed more than 500 percent. of their capital from Bank Indonesia. 15 Refers to the increase in the CPI. 16 Overall capital flows were a positive US$11.8 billion in 1996/97. In 1997/98, they are expected to be a negative $7.0 billion (before arrears and rescheduling). Chapter 2 Nurturing A Recovery "The secret of success is constancy to purpose". -- Benjamin Disraeli The economy is in deep recession. The last time integrated with the global economy, especially this happened was in 1963. Nobody needs when compared to other developing countries. reminding of those dark days, when inflation These strengths are not insignificant and need to be spiraled upward, capital inflows slowed to a borne in mind when considering Indonesia's trickle, debt service exceeded total export earnings, prospects over the medium to long term. agricultural output declined by 4 percent, and economic conditions bred a dangerous cocktail of The most immediate need, however, is to stabilize political and social tensions. It took five difficult the economy and kindle a recovery. This will years before stability was finally restored and the require three broad dimensions to macroeconomic economy began to grow rapidly. policy priorities: resuscitating domestic demand to restore production as quickly as possible while In the dark days of the current crisis, it is natural to stabilizing the exchange rate and keeping inflation be pessimistic and compare the Indonesia of today in check; structural reforms to lay the policy and with that of thirty five years ago. In one respect, institutional foundations that will cement the Indonesia is in a more difficult economic situation recovery and help it mature into rapid, sustained today -- the economic contraction expected this growth over the medium term; and protection of year is much worse than in 1963 (Figure 2.1). But the poor and vulnerable from the worst effects of in others, Indonesia is in a far better position. the crisis. Easier said than done, of course. Thirty years of rapid growth have added significant Powerful vested interests, fragile political stability, strengths to the economy. Savings rates have been social tensions, international pressures, a regional among the highest in the world and the country has economic slowdown, concerns for the poor, accumulated an impressive stock of human and administrative capacity, sustainability of natural physical capital. Agriculture and industry are well resource exploitation -- these are only a few of the pressures that will constrain policymakers. The Figure 2.1 degrees of maneuverability are few. And this is Worse than the '60s quite apart from the sheer immensity and (GDP growth, 1962-1998, in 1993 prices) complexity of the task ahead. Policy reforms will need to be introduced on a wide front at the same per cent time. Sequencing them will be material. 14 12 Implementing them will be difficult. Adjusting 10 constantly to changing circumstances will be essential. Explaining their rationale to the public 4 and to the world at large will be crucial. Above all, 2 ---------------------------------- showing constancy to purpose will be critical, with -2 V l the Government unswayed by pressures for 4 populist policies and undeterred by adversity. -6 -8 -10 This is also a time for the international community -12 -14 to unite in providing increased support to H! Z~ z a az E2 a a E~ a m 2'. Indonesia and ease the task of stabilization and Note: Growth for 1998 is projected. recovery. The economy's predicament is serious Source: BPS and there is an urgent need for additional external Chapter 2: Nurturing a Recovery Page 2.2 resources to help finance enlarged social safety net macroeconomic stability through the transition programs for the poor and vulnerable. The critical with appropriate and compatible fiscal and need for these programs has swelled the monetary policies. Each of these is necessary for government's projected budget deficit to 8.5 restoring stability, regaining the confidence of percent of GDP in 1998/99, the largest ever since international investors, and resuming growth. the 1960s. Only half this gap can be financed Clearly, none can be accomplished quickly. Over from the existing pipeline of official project and the longer term, attention will also have to be given program assistance. The remainder -- estimated at to addressing other fundamental weaknesses -- the US$4-6 billion -- is to come from additional legal system, competition policy, corruption, commitments from multilateral and bilateral unsustainable patterns of natural resource use, and sources. Increased financial support will also be development of social and political institutions. needed next year and the year after. Without such No quick fixes here, either. Confidence is not a assistance, there are only two options left for the symmetric notion. It can be shattered quickly. Government: cut back subsidies and social safety Rebuilding it takes time. net programs; or finance these programs through higher borrowing from the central bank (which Restructuring corporate debt. Large sections of would have to print the money) and face the Indonesia's corporate sector are in severe financial increased risk of hyperinflation. In either case, the difficulty. To be sure, several companies, poor would be the ones who suffer most and the especially export-oriented foreign firms and joint- nation could face considerable political and social ventures, have benefited from the exchange rate unrest. depreciation or have parent firms with deep pockets that can help them withstand the crisis. Priorities in macroeconomic policies But the bulk of Indonesian-owned firms are being literally crushed under a massive burden of One way of handling a financial crisis is to throw external and domestic debt. money at it, and when the crisis is over, mop up the excess.' Unfortunately, Indonesia does not Indonesia's external debt stands at US$138 billion have this luxury. The crisis, after all, is a crisis of (Table.2.1).2 Of this, private corporates owe confidence in the rupiah. Throw more rupiah at US$64.5 billion, the bulk of which is owed indebted corporates and banks and the exchange commercial banks (Figure 2.2). Indonesian banks rate will depreciate rapidly, sending the economy owed another US$13.6 billion, of which US$12.8 into hyperinflation. And the Government cannot billion was from interbank lines. throw more dollars at the problem either because the country's short-term external liabilities far Total amortization payments falling due for exceed liquid foreign exchange reserves and, calendar year 1998 is estimated at US$32 billion unsurprisingly, international market sentiment (before any restructuring). Of this, 20 percent is precludes commercial borrowing abroad in large public and publicly-guaranteed debt amounts. (government, state enterprises, and state banks). The rest is private debt, most of it corporate So there is little alternative to restoring confidence (corporate and domestic securities owned by except the old-fashioned way -- earning it. To do non-residents), with over two-thirds short-term.3 this will mean responding successfully to four major policy challenges that confront Indonesia: Apart from those that were naturally hedged by restructuring the corporate debt overhang; dint of their export earings, the depreciation of reforming and strengthening the banking system; improving governance; and maintaining the rupiah meant that virtually all corporates are Chapter 2: Nurturing a Recovery Page 2.3 Figure 2.2 finding it almost impossible to meet their In comparison to other East Asian economies, external debt-service obligations and are commercial bank lending to Indonesia was geared consequently also defaulting on their domestic .... least to the banks.. loans. Central to a resolution of this crisis will Sh- oftw - ni bm,k bor,o mg be a mechanism to reduce this debt burden and 70% restore Indonesia's corporate capital stock to productive use. It is in this context that the 60% Frankfurt debt agreement reached on June 4, 1998 is of such critical importance. The agreement comprises three components: a 40% framework for restructuring the external debt of corporates; a scheme to repay interbank debts; 30% and an arrangement to maintain trade finance facilities (Box 2.1). 0 A government guarantee of fioreign exchange risk i = - e will form the core in the framework for corporate 31 _ _ _ _ _ _ ...moderately to the public sector.. Table 2.1 b b-,q Who owes what to whom 14% (External debt in US$ billions, March 1998) a_ 12% 10% Debtor Amount e% 6% 4% Public sector 65.56 Government 54.39 2% State enterprises 11.18 State banks 5.61 Corporates 5.57 Private sector 72.46 Private banks 8.00 ... and most to private sector corporates. Corporates 64.46 boznk borolntg 70% Total external debt 138.02 60% Memo items 50/%. Debt owed by: Corporates b/ 70.03 40%_ _ Bank credit 64.60 30VI. Domestic securities 5.43 Banks 13.61 2 0% Interbank lines 12.83 10% Domestic securities 0.78 0% 'C 0 U 0.e . =5 . l a/ AsofJuly8, 1998. * b/ Includes state enterprise debt a_v Source: Bank Indonesia Note: Percent of total commercial bank lending, June 1997. Source: BIS Chapter 2: Nurturing a Recovery Page 2.4 Box 2.1 Breathing room for corporates: some details of the Frankfurt agreement The Indonesian debt restructuring agreement reached in * Eligible debt: Estimated at US$64 billion (of which, Frankfurt on June 4, 1998 comprised three components however, substantial amounts are expected to be written -- corporate debt, interbank lines and trade finance. off, refinanced, or restructured independently). Corporate debt Interbank debt * Coverage: Foreign currency debt of corporations * Modalities and coverage: Exchange for new loans of to nonresident creditors. existing obligations of Indonesian banks to foreign banks * Voluntary scheme, requiring the agreement of both maturing by March 31, 1999 (including most creditor and debtor. derivatives). * Minimum terms of restructured foreign debt: three * Tenor and interest rate of new loans, and years of grace and eight years to maturity. maximum/minimum proportion of loans that any foreign * Period during which the scheme is open for entry: bank can exchange for new loans of each maturity will Likely to be August 1, 1998 to June 30, 1999. be: * Cap on interest rate on the renegotiated foreign 1 year, LIBOR + 275 bp, maximum 15 percent; loan: LIBOR plus 3 percentage points. 2 years, LIBOR + 300 bp, maximum 30 percent; * Exchange rate risk guarantee: will be provided for 3 years, LIBOR + 325 bp, maximum 45 percent; the initial conversion of foreign debt into rupiah 4 years, LIBOR + 350 bp, minimum 10 percent. debt. * Dollar guarantee: New loans to benefit from a dollar * Payment terms on the rupiah loans: The rupiah guarantee from Bank Indonesia. loans will be indexed stay constant in real terms. * Arrears on interbank debt and trade credit to tendering * Terms on rupiah loans: 8 years' tenor, real interest banks to be cleared before the exchange. rate of 5.5 percent. . Rollover: In the period before the exchange, informal * Accelerated payment option for rupiah loans: five rollover agreement reached in Tokyo will be in effect. years' tenor, real interest rate of five percent. * Estimated amount eligible: approximately US$9 billion * "Buy down" option: Debtors can "buy down" (there is some uncertainty on the amount eligible for (appreciate) the accounting exchange rate by 10 or derivatives and the amount owed by foreign 20 percent if they agree to pay a real interest rate subsidiaries). that is higher than the base real interest rate by 2.9 percentage points and 6.4 percentage points Trade Credit respectively. * "Early bird" incentive: The interest rate for the * Modalities and coverage: Individual foreign banks to first two years will be reduced by 0.5 percentage undertake, by means of a letter to Bank Indonesia, to use point if firms enter in the early part of the entry best efforts to maintain their level of trade credit period. provision as at end-April, 1998. * Default by the corporate borrower: If the * Term offacility: One year. borrower defaults on three consecutive monthly * Dollar guarantee: Eligible debt to benefit from dollar payments, INDRA is no longer obligated to pay the guarantee from Bank Indonesia. creditor. . Arrears on trade credit to banks involved to be cleared * Termination value: In the event of default or before undertakings enter into effect. voluntary withdrawal, INDRA will refund any * Reporting requirements: Monthly reporting to Bank balance that has been accumulated with it, minus Indonesia and creditor bank's own supervisory authority. an accumulated premium of 1 percent per annum * Rollover: In the period before the formal commitments on the outstanding balance of the rupiah loan, enter into force, informal rollover will be in effect in which INDRA will retain. During the grace period accordance with agreement reached in Tokyo. the termination value will be reduced. * Estimated amount eligible: US$4-6 billion (data discrepancies remain to be ironed out). Chapter 2: Nurturing a Recovery Page 2.5 debt restructuring. Participation in the scheme will debtors and the hundreds of foreign and domestic be voluntary and decided jointly by debtors and creditors to whom they owe debts. For a speedy creditors. Each debtor- and creditor will be resolution, both sides will need to recognize the expected to re-negotiate the debt, agree on possible extent of the loss and its allocation. This will be debt reductions, debt/equity swaps or other the thorniest element in the negotiations, and much techniques to lower the repayment stream. To will depend on the timeliness and accuracy of participate, the terms of re-negotiated loans must information supplied by the debtors. Here too, the have a minimum maturity of eight years, with a Government could play a role, devising incentives three year grace period. Of course, the agreement to encourage financial transparency among could also include other concessions from lenders debtors. on existing debt, and efforts by the borrower to repay debts, including though the sale of some The aim of corporate debt restructuring, of course, assets. would be to improve the liquidity position of corporates, avoid disruption in production, and The restructuring of Indonesia's external corporate restore the capacity of corporates to repay their debt will have to take place in the context of wider financial obligations. This is at the very heart of financial restructuring of corporates that would the stabilization program, for without solvent and include debt renegotiations with domestic banks. creditworthy corporates, a restored banking system In this context, the Government is considering a would have no corporate clients. To be successful, framework that could include: developing corporate debt restructuring will also need to be comprehensive debt maps of the foreign and accompanied by corporate reorganization, domestic debt of major corporations and including bankruptcy, liquidation, downsizing, conglomerates; and election by creditors of mergers, and acquisitions. Thus, continuing work representatives to creditors' committees which is needed to identify legal and regulatory obstacles would then negotiate a specific borrower's debts to corporate reorganization and to smooth the equitably. If one of the domestic creditors process. In this regard, an effective bankruptcy include banks under the supervision or system is essential, both as a way of encouraging management of IBRA, it is anticipated that IBRA corporates to negotiate with their creditors as well could then become an active participant in these as a genuine means to expeditiously resolve negotiations and would, in many instances, be disputes about arrears. A special bankruptcy court elected to the creditors' committee to represent the and modified procedures for bankruptcy will interests of its banks.. become effective in August. The rest will be up to the thousands of Indonesian Indonesia can learn from Mexico's implementation Figure 2.3 Mexico's debt situation in 1982 was similar, yet different, to Indonesia's in 1997 Some debt indicators in Indonesia are On the other hand, Indonesia has Although its short-term debt is similar to 1982 Mexico's. larger private debt. backed by a higher level offoreign exchange reserves. (in percent) (Private non-guaranteed debt in US$ (Private short-term debt as a share of billions). foreign exchange reserves) USS billion Mio 3o ] 80 111do,..j 16M 60 Mt | 70 14 SoI7I - ___ Indonesia. Source: World Debt Tables and Bank Indonesia. Chapter 2: Nurturing a Recovery Page 2.6 of the FICORCA scheme. By limiting the window To encourage them in this direction, Bank of opportunity through which exchange rate risk Indonesia and the Ministry of Finance are guarantees are available, the Government holds an considering providing tier-two capital, generally in important lever to accelerate the process. the form of subordinated loans, as well as entering Moreover, debtors and creditors alike will benefit into discussions with foreign banks to attract their equally from a quick conclusion to the negotiations investment in the banking sector. Other facilities and a rapid restoration of normal credit relations. could also be offered, including refinancing Nevertheless, markets will need to be patient. support and special lines of credit. Indonesia's private sector debt problem is larger and more complex than Mexico's was in 1983 For banks in financial trouble, Bank Indonesia has (Figure 2.3).4 tightened procedures for granting liquidity credits and is expecting higher standards of information Restructuring banks. The worsening crisis has disclosure. Bank Indonesia also needs to fortiify increased the banking system's financial troubles bank supervision, especially of troubled banks, and to the point where the viability of the rest of the ensure compliance with prudential regulations. economy is threatened. Hence, reforms to The new loan classification and provisioning rules reestablish credit flows and deal with the problems are an improvement over past practice. All banks of troubled banks is more pressing than ever. are required to achieve a minimum capital Many national banks need urgent action to resolve adequacy ratio of 4 percent of risk weighted assets their bad debts and restructure their portfolios. by end-1998, rising to 8 percent by end-1999 and The objective now is threefold: to assure the safe 10 percent by end-2000. The minimum net capital and sound operation of the banking system and requirement of Rp. 250 billion is being abandoned ensure the availability of essential banking for existing banks to allow them to focus on services; to quickly establish the necessary legal achieving specified capital adequacy ratios in their infrastructure and high standards of banking restructuring. To improve the quality of financial supervision, thereby enabling the creation and information, Bank Indonesia is introducing maintenance of a sound banking system; and to regulations on bank disclosure, particularly for resolve problems of weak and insolvent banks portfolio quality, loan concentration, and while containing the cost to the Government and ownership structure. In this context, supervisors maintaining confidence in the system through a should be required to pay particularly close government guarantee for all depositors and attention to limits for loans to connected parties creditors. and large loan concentrations. Bank Indonesia is also encouraging banks to adopt accounting The highest priority in the financial sector is for systems that are in line with international best Bank Indonesia to identify and revitalize key well- practice. Better accounting practices will help managed banks, help them restart lending to management and the supervisory authorities detect creditworthy customers, and reintegrate them into financial trouble before it becomes serious. interbank and international financial markets. With help from the World Bank and the Asian Finally, there is IBRA's task of restructuring or Development Bank, Bank Indonesia is retaining resolving troubled banks and their stock of bad international accounting firms to conduct portfolio debts. IBRA's job is huge, its human resources reviews of 16 "sound" private banks to establish few. It still doesn't have an operational budget their financial credentials and help them regain and all employees continue to be temporary and access to trade facilities and interbank lines. In generally part time. Not only has it taken over the addition to seeking relief under the Frankfurt management of eight banks, but is responsible for accord on interbank debts, if these banks are resolving the assets and liabilities of another seven appropriately recapitalized they could be the suspended banks. And this is just the beginning. potential core around which a more efficient, restructured, banking system could be organized. Chapter 2: Nurturing a Recovery Page 2.7 The dearth of human resources in IBRA has meant These are heavy, arduous, and involved that seven of the eight banks under IBRA's responsibilities. To fulfill them well, IBRA needs management have been "twinned" with state banks all the help it can get. who are providing the management teams. But this is an interim arrangement until successor * First, it must have a well-understood, legally- arrangements can be found, such as management based charter of rights and responsibilities. contracts with international banks. To assist in decisions about their future, a high priority was * Second, it needs adequate numbers of skilled accorded to subjecting these banks to portfolio staff. Staff seconded by Bank Indonesia has reviews. Preliminary drafts of these reviews helped, but more will be needed, preferably confirn that assets are overstated, liabilities from the private sector. understated, non-performing loans area at high levels, and all are insolvent.5 These reviews were * Third, IBRA needs to function without conducted by internationally-recognized firms. In interference from the Government or Bank the second "wave", additional IBRA banks will be Indonesia. To help achieve this, the subject to similar asset portfolio reviews for Government has agreed to appoint an completion by the middle of August, 1998. Independent Review Committee composed of five members, associated staff, and a In dealing with the seven suspended banks, IBRA consulting firm. Two Indonesian members of must retain the confidence of the public in the high repute have already been nominated and Government's guarantee to all depositors and the three international members will be creditors. Payments have to be made promptly and selected in consultation with the IMF, the accurately. More complex aspects of the guarantee World Bank, and the ADB.. -- such as for foreign currency deposits -- will need to be understood clearly and clarified for the * And fourth, IBRA needs a clear charter benefit of the public. In this regard, new guidance supported by financing in the right amounts from Bank Indonesia is forthcoming. and at the right time. Funds will be needed to meet the claims and cover the extraordinary Supervisory responsibilities for the 40 banks under losses of IBRA banks, resolve the non-viable IBRA's umbrella will be returned to Bank IBRA banks, and recapitalize those banks Indonesia, leaving IBRA free to focus on bank under IBRA management that will be restored restructuring. IBRA also needs to develop and privatized. Additional bonds will be contingency plans in case Bank Indonesia entrusts issued to finance IBRA during FY98/99. The additional banks to its care, or if more banks need estimated budgetary cost in FY98/99 is Rp. 15 to suspend their operations. trillion, representing the interest on these bonds. In all cases, transparent and objective Finally, progress with getting the Asset criteria will need to be employed to build Management Unit (AMU) operating has been credibility and obtain the trust of depositors, slow. Meanwhile some of the interim asset shareholders, and creditors alike. management contracts with IBRA banks expired at the end of June and were extended at extraordinary A particular concern in the financial sector is the meetings of the banks' shareholders. It is now scarcity of import finance and, more importantly, urgent to that the asset management unit within pre-shipment export finance, which could severely IBRA is up and running quickly using fair and damage non-oil export earnings. Importers, transparent procedures for asset acquisition, sale, exporters and producers cannot utilize import L/C and resolution. confirmation arrangements to import goods because they do not have access to bank loans. Producers do not have access to pre-shipment export finance loans from banks to convert raw Chapter 2: Nurturing a Recovery Page 2.8 materials into finished goods and meet selling, production. Finally, the World Bank is providing marketing and administrative expenses. Lack of technical assistance to Bank Indonesia to facilitate pre-shipment export finance is also preventing trade financing and develop schemes that will exporters from utilizing import finance facilities support renewed provision of pre-shipment trade that have been arranged with ECAs. finance by Indonesian banks. The issue of trade finance is being addressed The cost of resolving the banking crisis in through a variety of means. First, Bank Indonesia Indonesia will be high, but how high is difficult to has established a cash collateral facility with seven tell just yet. It could reach 20-30 percent of GDP foreign banks to ensure that country risk is not a and may even venture higher. Even so, Indonesia barrier to the confirmation of L/Cs by would still not have recorded the costliest financial correspondent foreign banks. Second, the debacle in recent decades (Figure 2.4). That Frankfurt debt accord included a trade finance dubious distinction goes to Argentina. component which requires the best efforts of foreign creditors to maintain their level of trade Improving economic governance. The task of credit to Indonesia as of end-April 1998 (Box 2.1). improving governance is equally critical for the Third, JEXIM recently extended a US$1 billion short term as it is for the next several decades. In loan to cover confirmation of import L/Cs opened the short term, for example, bank and corporate on Indonesian banks and to cover working capital debt restructuring will need to be done honestly loans to finance imported inputs for export and transparently, according to law and well- Figure 2.4 The direct costs of banking crises can be high (shares of GDP) Argentina 1980-82 Chile 1981-83 i; 'tI Uruguay 19818-4 ig,0 9i Israel 1977- 83 Cote d'Ivoire 1988-91 ' Venezuela 1994-95 Senegal 1988-91 Benin 1988-90 . Spain 1977-85 Mexico 1995 ' Mauritania 1984-93 i Bulgaria 1995-96 Tanzania 1987-93 Hungary 1991-93 , Finland 1991-93 Brazil 1994-95 Sweden 1991 Ghana 1982-89 Sri Lanka 1989-93 Malaysia 1985-88 A Norway 1987-89 Sri Lanka 1989-93 USA 1984-91 0 10 20 30 40 50 60 Source: Caprio and Klingbiel 1996; World Bank 19976 Chapter 2: Nurturing a Recovery Page 2.9 established rules. This is essential for the because of a corrupt court system and a business credibility of these actions and the ultimate success culture that precluded bankruptcy as a solution to of the reforms. In the longer term, Indonesia will financial failure. This will need to change. If have to broach broader issues of governance -- cases of corruption in the courts are brought to the strengthening the civil service, developing a notice of the authorities, the culprits must be strong, independent, and effective judicial system indicted irrespective of their level in the judicial supportive of a market economy entering the 21st system. century, promoting decentralization, building a new relationship between government and civil Bankruptcy laws and rules, fairly and fearlessly society, and stamping out corruption. In a nutshell, implemented, will assist the orderly exit of firms. Indonesia has an opportunity to reinvent its This is an essential adjunct of market competition. government. It would be presumptuous of us to But that competition must also be free and fair. delve into details on how this complex and difficult This is not only good for efficiency, it forms the issue needs to be tackled; that should be the result very foundation of a just and impartial market of additional study and research within Indonesia system. Developing a sound and effective and subsequent discussion and debate. Perhaps, at competition policy, and supporting it with a legal some point in the near future, it could become the framework, must become a government priority. special topic of a World Bank economic report on The pervasiveness of anti-competitive practices Indonesia. has been at the root of much of the skepticism about the Government's determination to pursue But first things first. Three urgent governance genuine reforms. Correcting this is important for issues confronting the Government are the two reasons. First, it is a central element in the bankruptcy law, competition policy, and the effort to regain the confidence of markets. And privatization program. The three form the initial second, it is critical to gaining support from the building block for a competitive corporate sector international donor community. and are important signals for how Indonesia's business culture will move toward being more fair The government is committed to implementing a and transparent. law on competition to establish guidelines for fair business practices and to avoid anti-competitive The new bankruptcy law is an improvement over behavior. The necessary regulations on mergers, the existing one which had remained virtually acquisitions, and anti-competitive behavior will be unchanged since 1905. The new revisions define a completed by September 1998 and a broader draft time frame within which bankruptcy declarations law by December 1998. In the interim, however, need to be resolved, add provisions on interim the Government has eliminated the most egregious actions that may be taken by creditors, confirm the examples of government-supported private and functions and obligations of a receiver, clarify the public monopolies. Among these are BPPC (the procedures for cassation appeals to the Supreme clove monopoly) and APPKINDO (the plywood Court, and explain the rights and obligations of cartel). In other areas, such as food import, debtors during bankruptcy proceedings. To hear storage, and distribution, the Government is and decide bankruptcy cases, the Government has making markets contestable by removing barriers established a Special Commercial Court with to entry by private and foreign firms and giving specially assigned judges and has drawn clear them equal access to subsidies. The government distinctions between it and the Courts of General has curtailed implicit subsidies to individuals or Jurisdiction. groups of firms by eliminating tax and credit privileges for the national car, lowering the But a new bankruptcy law alone is not going to fix prohibitive export taxes on logs and rattan to more the problem. More important will be its steadfast realistic levels, and rescinding the ban on crude implementation without fear or favor. The old law palm oil (together with its derivatives) and had rarely been used, its mechanisms untested, replacing it with an export tax. Chapter 2: Nurturing a Recovery Page 2.10 crucial aspects of governance will be made much To signal a change in business culture, an effort is easier in a stable macroeconomic environment. So underway by the new Government to review and managing aggregate demand during the transition dismantle government contracts that were offered to stabilize the exchange rate and lower inflation is through corruption, collusion and nepotism a crucial fourth component of the reform program. (KKN). An example of this is the review of all There are three reasons why it is also the most supply and distribution contracts with Pertamina, difficult. First, public resources are scarce and the state oil and gas company. A further example demands upon them huge. It will require tough of this is the Government's commitment to audit decisions and steady nerves to make the right Pertamina and the Reforestation fund, along with choices and then stick to them. Second, the BULOG and PLN. Similarly, the Government has economy is being subjected to such massive withdrawn the requirement that logging shocks that relationships between key- economic concessions only be awarded to companies owning variables -- which normally tend to hold under wood processing facilities. Work is also underway conditions of relative stability -- almost certainly to finalize implementing rules and regulations do not hold now. And third, policymakers no underpinning a new decree (Keppres 7) that longer have the luxury of making mistakes; the governs private participation in the provision of economy is fragile, confidence frail. public infrastructure featuring transparent competitive bidding practices. The biggest constraints lie with the government budget. Despite efforts to raise taxes and improve TheGvn mentihas cmittite to tax administration, the plunge in economic activity competingean a mbitio usle privatwilatie paroram. and lower oil prices will depress total revenues Seven additional enterprises will be partially from about 16.2 percent of GDP in FY97/98 to privatized this fiscal year (Bukit Asam, Jasa 141 percent in FY98/99. To au ment these Marga, Pelabuhan Indonesia II, Pelabuhan g Indonesia III, Angkasa Pura II, Perkebunan resources, the Government intends to divest shares NsnaaIanKrkt.or ein twelve listed state companies, including the Nusantara IV and Krakatau Steel). For each ofdoetcadiertonleeomuctos these enterprises, and for five that are already firms Indosat and Telkom -- actions that will yield partially privatized (Telkom, Indosat, Semen GekTambang), a further 1.6 percent of GDP in capital revenues Grsk Tabn Tmhan nk and push total revenues to 15.7 percent of GDP investment banks have already been appointed to and 2.2 make the necessary preparations. Part of the (Table 2.2). preparatory work needed is the formulation of an Expenditure levels in the budget are expected to be appropriate regulatory framework to ensure that 24.2 percent of GDP, their level negotiated privatized state monopolies are not simply between the Government and the Fund to keep the transferred to the private sector in a manner budget deficit to 8.5 percent of GDP. Of this, inconsistent with the proposed competition policy- about 4.8 percent is expected to be financed from The initial handling of a proposed sale of shares in identified and committed external funds -- the rest Krakatau Steel temporarily raised questions about will need to be forthcoming as additional new the transparency of the process, but the commitments from multilateral and bilateral Government has taken decisive measures to ensure donors. transparency by including specific steps to be taken prior to completing the sale of any Expenditure levels reflect the Government's enterprise. The need for transparency cannot be concerns with protecting the poor, maintaining overstated, especially given the difficult economic investments in human capital, and pursuing bank conditions in which these sales will be transacted. restructuring. Subsidies are expected to increase to 6.2 percent of GDP with no further increases Managing aggregate demand. The task of assumed for this fiscal year in administered prices restructuring banks and corporates and improving Chapter 2: Nurturing a Recovery Page 2.11 Table 2.2 are expensive and tend to benefit the poor only Fiscal accounts at a glance marginally. In the next months, policymakers will (Percent of GDP) turn their attention to better targeting subsidies to the poor; with such programs in place, reducing FY97/98 FY98/99 subsidies in the budget to more sustainable levels (actual) (revised) can be achieved without fear that the poor will be hurt. In this context, the Government is committed Revenues 16.2 15.7 to designing a system to adjust all administered Oil and gas 4.6 5.2 prices on a more regular basis by the end of March Non-oil 11.6 8.9 1999. Privatization 0.0 1.6 The development expenditure budget has had to be Current expenditures 10.6 17.0 completely restructured to ensure that priority Subsidies 3.1 6.2 expenditures for the poor and social safety net Interest 1.7 3.3 programs are not just protected but increased Other 5.8 7.5 substantially. Infrastructure projects in water, Goverment savings 5.6 -1.3 transport, and energy have been slashed. This has permitted significant increases in health and Development expenditures 6.6 7.2 education spending, which will permit services to Social sectors 1.0 1.6 be restored to their FY96/97 levels, including Special employment schemes 0.0 0.9 targeted programs to finance essential drugs for Other 4.6 4.7 rural and urban health centers, prevention of communicable diseases, nutrition improvement Budget deficit 1.0 8.5 programs, referral health services, scholarships for Financed by: needy students, block grants for primary and Financemal finance 1.648secondary students, and training for primary school Domestic finance- -06 4. teachers. Additional employment for roughly 3 Exceptional finance .. 3.7 million people will be provided to replant forest areas, improve urban slums, renovate health Note: Social sectors include education, health, food centers and school buildings, repair rural and urban production and small scale credit. roads, reconstruct traditional markets burned in the Source: Government of Indonesia. May riots, and maintain irrigation schemes. Finally, the costs of bank restructuring for the fiscal year are estimated to amount to 1.6 percent of GDP, comprising the cost of servicing IBRA for fuel, electricity, rice, soybean, wheat flour, bonds issued by the Ministry of Finance. sugar, and fishmeal. The average prices of petroleum products and power have been increased In total, one third of development expenditures by 38 and 25 percent respectively since the now fund social safety net programs. Expenditures beginning of April, but further increases are being going to conventional investments will decline 25 deferred in FY98/99 to avoid exacerbating social percent in real terms. Some of the reallocations -- tensions. to health, education, increased and special employment schemes at local level -- reflect The rationale for postponing adjustments in desirable priority shifts, if the expenditures can be administered prices of foods and fuels is to ease used effectively to increase the delivery of services the transition to lower real incomes and especially to the poor. Increased emphasis on maintenance to protect the poor. But the Government and a great reduction in new construction is recognizes full well that fuel and food subsidies properly taking place in infrastructure in the short run. Chapter 2: Nurturing a Recovery Page 2.12 volatility through the auction system in a thin Difficulties surrounding budgetary management market. are matched by those facing monetary policy. Many standard monetary relationships -- the In the next few months, monetary policy will money multiplier, demand for money, the interest remain tight, with base money and net domestic elasticity of deposits -- have broken down in the assets of the banking sytem held broadly flat. This crisis, so monetary developments will have to be will involve an increase in velocity and the monitored constantly to inform adjustments in continuation of high interest rates in the short term, monetary aggregates. Fortunately, Bank Indonesia which the authorities consider justified in light of has upgraded its monitoring capacity significantly the rupiah's weakness. But the stance of monetary and is even publishing weekly monetary data with policy will be kept under close review and adjusted a short lag. when necessary to accommodate developments in the exchange rate, inflation, and the real economy. The biggest risk to monetary control lies with the After the next few months, the monetary stance provision of liquidity support to troubled banks. could be eased to allow room for the economy to On March 30, Bank Indonesia introduced a new, recover rationalized system to do this. This system will rely more on non-financial penalties; earlier, these Macroeconomic outlook facilities were available at punitive rates of interest that invariably went unpaid. The Indonesian economy is at its most critical juncture in over thirty years. The destiny of the But the new structure for liquidity support will nation hangs in the balance and the direction it require stringent controls and close supervision. If takes will depend on chance as well as choice. a bank uses this facility, it should prompt Bank Chance, because Indonesia's economic future will Indonesia to send its inspectors on-site and develop be shaped by many factors over which it has no a program with the bank's management to fix the control -- the pattern and intensity of rainfall, problem. To add weight to its inspection teams, trends in international oil prices, developments in Bank Indonesia should insist upon a graduated Japan. Choice, because Indonesia has control over system of penalties that could include, for many of its own policies, decisions, and actions example, the preparation of a business plan to which together can spell the difference between restore liquidity; cessation of dividend payment success and failure. and connected lending; limits to foreign exchange and derivatives business; and possibly cancellation To the virtually limitless potential combinations of of the foreign exchange licence. chance and choice should be added the stresses and strains being applied to Indonesia's fragile social Controlling liquidity support is only one concern and political fabric. Such complex and uncertain of monetary policy. Withdrawing liquidity that circumstances and such rapidly unfolding events was earlier pumped in is another. The key tend to make projections of the future redundant instrument for this -- Bank Indonesia Certificates well before the ink is even dry. Yet, in this (SBIs) -- has, therefore, played an important role in section, we include our projections of how the managing aggregate demand. To strengthen economic crisis could evolve. We do so for good monetary control, Bank Indonesia is preparing to reason. Not because we have any unique insight phase out the current system of setting SBI rates into the future, but because we consider that administratively, replacing it with an auction projecting the future can be a useful exercise in system. The intention is to ensure transparency in examining and highlighting constraints to interest rate policy and avoid any hint of stabilization and recovery and assessing what they manipulation of interest rate levels. Nevertheless, imply for economic policy, for the people of the authorities need to take adequate precautions in Indonesia, and for the international community. safeguarding against increased interest rate Chapter 2: Nurturing a Recovery Page 2.13 Table 2.3 A glimpse of things to come ---------actual--------- ------------------projected------------------ 96/97 97/98 98/99 99/00 00/01 Growth rates (in percent a year) Real GDP 7.8 1.0 -10 to -1S -2 to +2 +2 to +4 Investment 10.2 -11.0 -55.0 4.0 6.0 Imports 11.3 -5.8 -14.0 5.0 9.0 Key ratios (in percent) Current account balance/GDP -3.5 -1.0 1.7 1.8 1.5 Total debt service/exports 34.2 39.5 38.0 35.0 34.0 Gross reserves in months of imports 7.0 4.6 5.1 5.1 5.1 Source: BPS; Bank Indonesia; World Bank staff estimates. Unlike other economies which have experienced a Our base case projections show GDP likely to fall large real depreciation in their currency (Figure by 10-15 percent in FY98/99 and remain stagnant 2.5), Indonesia is not expected to see an immediate in FY99/00 (see Table 2.3). Domestic demand has boom in non-oil and gas exports; in fact, exports plunged due to a sharp decline in investment, the are likely to grow relatively slowly owing to collapse of banks and corporates, and dwindling limited access to trade finance (especially for real incomes. Even export growth appears to be potential new exporters), the depletion of input slowing as trade finance becomes increasingly stocks, lack of buyer confidence, and prolonged scarce, Indonesian exporters cannot maintain uncertainty and social unrest. In this respect, delivery deadlines, and export orders are plunging. Indonesia will differ from the normal course taken Despite few demand pressures and the deferment by other countries which have experienced a large of further increases in administered prices, the real depreciation (Figure 2.5). Imports are continued depreciation of the exchange rate has expected to shrink considerably, suppressed by the pushed our inflation forecast to 80 percent or severe contraction in domestic demand and a major above for this year. How this evolves over the increase in import costs. We estimate imports are outer years of the projection period will depend to now likely to fall by about 15 percent in FY98/99 a large extent on developments in the foreign before beginning to recover FY99/00 (Table 2.3). exchange markets, the outcome of fiscal and The fall in imports would be even larger if such monetary operations, and the availability of foreign large rice imports were not needed for FY98/99. finance. Economic compression will result in rapidly rising The balance of payments is projected to record a unemployment (and greater potential for labor current account surplus for at least the next two strife), a decline in social welfare, and a doubling years, about 1.8 percent of GDP for FY98/99 and in the incidence and depth of poverty. This issue is 2.3 percent of GDP for FY99/00. Oil and gas discussed in greater detail in Chapter 3. exports are hard hit by a decline in the oil price, now projected at $13 per barrel for FY98/99. Chapter 2: Nurturing a Recovery Page 2.14 Figure 2.5 International experience with large real depreciations International experience shows that large real depreciations: are unusual, ... lead to persistent changes in the level of the real exchange rate,... (Frequency of annual real exchange rate changes) (the real exchange rate index) Fnqu%nc0 Rea eoch-pgr rab: msdox 2.5% IS\ Modia for 1.rgr 200 140 deprooiasio- epioodrr 130 1.5%A 120 l.II Mediwn fr all 0.5% _dpreoiation episod.s 0%~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 L-ea,5% Borron25% B-50eenSO50 B5sa,n75 % Gre..7rd.w 90 25% aad 50%. ad75% and 00% 100% R.) ... ha rhawte n 0 in -S 4 -3 -2 -. 0 1 2 3 4 S Year- sin rcl da prciarioo teel ..... and are followed by a rebound of growth, .... ... although the surge in net exports is short-lived (Real per capita GDP growth) (Export-import ratio) 4% :|: M_for5ll a dcttahJiwR~lsed | 1.00 SIx1/\~~~~~~~~~~~~~~~~~~Mes, ,, r I\noogo 2/p iiidi d n depre Mc di , firnci S.o 3% ~ ~ Y .... ra 0.00idi dovenlsio lpor 2% 2% ... ~~~~~~~~~~~~~~~~~~~~~~~~~~0.90 2% .... 0.8 0% ~~~~~~~~~~~~~~~~~~~~~~~~0.80 4 -3 ~~~~~~~I 2 I ~~~~~~~~ .5%~~~~~~~~~~~~~~~~~~~~~~d.f .2% 0.70L -2% -~~ ~ ~~~~~~~~~~~~~~~~~~5 .4 .3 .2 .5 0' 5 2 3 4 5 Yea,, .Iaae real dp,d,d e d wn Ye ar ire-ral d&p-ieia5- -t0 Source and technical details: See Endnote 1 in Chapter 1. Despite this gloomy near-term outlook, there of Government, which will inject new purchasing remain some potential bright spots in the economy power into the domestic economy reversing a that, in combination with firm, consistent vicious circle of decreased demand and production. implementation of the Government's reform Exports of labor-intensive manufactures also hold program, could rekindle growth. Agriculture, for considerable potential, especially if the problem of example, is expected to recover gradually with the trade finance can be resolved (see above). Export fading of El Niflo, adding to local incomes and earnings from tree crops (relatively unaffected by demand and re-energizing off-farm activities. This El Nifio) could rise significantly, even in the near would complement the expansionary fiscal stance term. And minerals production (copper, coal, gold, Chapter 2: Nurturing a Recovery Page 2.15 tin, and nickel), most of it destined for export increased official grants and loans will ease the markets, also shows encouraging strength. severity of the adjustment in output and mitigate the effects on the poor. The point at which the Indonesian economy bottoms out and starts rising again is difficult to Indonesia will need about US$13-14 billion of predict. Part of the uncertainty lies in Indonesia's official foreign financing in 1998/99. This main markets in East Asia, several of which are includes the additional US$6 billion in exceptional experiencing economic difficulties of their own. financing recently organized to fund the program Continued political uncertainty at home could negotiated between the authorities and the IMF. delay the return of confidence (and flight capital). The financing needs for 1999/00 will need to equal It is important for the recovery, therefore, that the the budget deficit for that year which may not be as reforms discussed above are implemented speedily high as in 1998/99, but will nevertheless be higher and consistently, and the reform program is than in years past. Considering the highly volatile constantly adjusted in light of changing economic situation and unusual uncertainties in the circumstances. East Asia region as a whole, these financial requirements will be kept under continuous review. At some point in the next few years, Indonesia will turn the corner and resume growth, albeit not at the A departure from previous years is the urgent need pace of past decades. After all, the economy for "program lending", not "project lending". The continues to possess significant strengths: a rich reason is large projected fiscal deficits this year natural resource base, a large domestic market, an and next that require external financing if the industrious, innovative, and educated people, and Government is to avoid inflationary financing. a stock of physical infrastructure that now lies Program lending, in which the Government is the substantially under-utilized. But even if growth borrower, not only fills a foreign financing gap, were to resume fairly soon, per capita incomes in but makes available to government counterpart Indonesia are unlikely to return to their July 1997 rupiah funds that can be used to finance current level before 2005. It is unfortunate that Indonesia and capital expenditures (as counterpart funds for will enter the next millennium on such a project loans). comfortless prognosis. In essence, it would have lost more than a half-decade of development. A low case scenario True, the recovery period could shorten, depending upon the speed with which political and Even with additional foreign financing, however, economic stability returns and the vigor and there is no guarantee that the Indonesian economy integrity with which reforms are implemented. But will be able to engineer a recovery with the factors impeding a quick recovery are equally moderating inflation and an appreciating exchange strong: a mountain of external debt which will still rate. Continued political uncertainty could have to be repaid, a large fiscal deficit which will precipitate further social unrest and impede any still have to be lowered, and the loss of the many incipient return of confidence among domestic and ethnic Indonesian-Chinese entrepreneurs who left international investors. The consequences for the the country which will still be felt keenly in the exchange rate and inflation would leave Indonesia economy. few remaining options to stave off economic collapse. The number of poor, already expected to External financing requirements double, would rise even more. The fragile social fabric of the country could be torn asunder, making A critical element in this scenario of gradual any subsequent economic recovery a protracted recovery and growth is the availability of adequate process. GDP could collapse by over 15 percent amounts of external finance. After all, Indonesia is and inflation would rise to levels last seen only in recovering from a severe and sudden loss of dollar the early 1960s. liquidity; replacing some through an infusion of Chapter 2: Nurturing a Recovery Page 2.16 Conclusion international donor community. External financing needs will be large. They will also be uncertain The next few years will be difficult and uncertain because much depends on how the economic for the Indonesian economy. The massive situation evolves over the coming year. The depreciation of the currency and the sharp Government's policy agenda, on the other hand, contraction in the economy puts Indonesia in will be independent of the level of uncertainty. uncharted waters. Will Indonesia be able to pull The priorities will be reestablishing through without irreversible damage to its macroeconomic stability, restructuring corporate economy or society? It must. Too much is at stake debt, reforming the banking system, and improving for Indonesia and for the world. Indonesia, after governance. Most important, considerable efforts all, is the world's fourth largest country, an will be needed to mitigate the worst effects of the important anchor for stability in Asia, and with an crisis on the poor and vulnerable. This is the impressive track record of poverty alleviation. subject of the next chapter. This places a special responsibility on the Chapter 2: Nurturing a Recovery Page 2.17 Endnotes ' See Kindleberger, C.P. 1989. Manias, Panics, and Crashes: A History of Financial Crises (New York: Basic Books). 2 Estimate for March 31, 1998, as of July 8, 1998. Includes domestic securities held by non-residents. 3 The average maturity of private debt is estimated to be only 18 months. 4 The amount of Mexico's commercial bank debt that was renegotiated in 1984 was US$47.7 billion (World Bank. 1985. World Development Report, 1985: International Capital and Economic Development, page 28 (New York: Oxford University Press). 5 It should be noted, however, that these reviews disregard the value of collateral. 6 Caprio G. Jr. and D. Klingbiel. 1996. "Bank Insolvency: Bad Luck, Bad Policy, or Bad Banking?" in M. Bruno and B. Pleskovic, eds., Annual World Bank Conference on Development Economics 1996, Washington D.C.: World Bank. Chapter 3 Protecting the Poor "These are the times that try men 's souls." -- Thomas Paine The real tragedy of the Indonesian crisis is its effects expeditiously and effectively, despite a difficult on the poor and vulnerable. In many respects, this budgetary situation and a creaking administrative tragedy has yet to unfold, and its dimensions are and institutional mechanism not particularly well likely to be sobering. The number of poor could suited for this purpose. well double in coming years, and even this may be an underestimate. The last three decades had seen Poverty will rise an unprecedented and steady decline in the poverty rate from over 50 percent in 1970 to an estimated 10 By mid-1997, the incidence of poverty was about percent in 1997. Key welfare indicators had 10.1 percent of the population (Figure 3.1).1 If real improved too. Life expectancy increased by 17 GDP declined in 1998 by, say, 12 percent, the years; the infant mortality was cut by over 60 incidence of poverty could increase to about 14.1 percent; and universal primary school enrollment percent in 1999, or about 29 million people (Figure was achieved. All this is now in danger of reversal. 3.2). The coming months will try men's souls. The The most visible effects of the crisis seem to be in recession will mean lower earnings, more lay-offs, urban areas -- lay-offs among urban construction and massive unemployment among school leavers. and manufacturing workers, for example. The The drought has added to the misery of the rural numbers bear this out. The poverty level in urban poor. Lower incomes and higher costs could push areas is expected to more than double from 3.8 parents to yank their kids from school. The ill may percent in 1997 to 8.3 percent in 1999; in rural risk their health and even death rather than face areas, the increase will be from 13.7 to 17.6 percent. paying steeply higher bills for doctors, hospitals, and But it will be rural areas that will see the biggest medicines. Children and women, especially absolute increases in the number of poor, notably pregnant women, are most at risk. among agricultural households hit by El Nifno (Figure 3.3). Not surprisingly, households in the This chapter notes that a resumption of growth is the agricultural sector are vulnerable to smaller single most important factor that will help the poor. economic shocks; their average per capita This central result reinforces the critical importance expenditure was only about 57 percent higher than of the policies described in Chapter 2. But the the poverty line prior to the crisis, whereas average chapter also notes that growth alone is not enough. per capita expenditure among households in both There are clear areas for public action to help manufacturing and construction was more than twice mitigate the worst effects of the crisis on the poor the poverty line (Figure 3.4). and vulnerable. The challenge in Indonesia will be to ensure these actions are implemented Chapter 3: Protecting the Poor - Page 3.2 - Figure 3.1 Figure 3.2 Dramatic progress in poverty alleviation ... ... could be reversed as a result of the crisis 60 _ 22 -- ----- - - - -- - - --- -- - -- - - ------ -- -- -- . -- - 50- All ffd. . 40i,,,, = 30 xx ------ 20 iL 10 1970 1980 1990 1994 1996 , J-,,96 E,d M-,97 E,d M.98 E,d M.,99 ld M,,rhOO Source: World Bank staff estimates Unfortunately, some of the regions hit hardest by the Employment will fall drought are also among the poorest, such as East Nusa Tenggara (NTT), East Timor, and Irian Jaya. As the economy has contracted, the demand for Recent field investigations in NTT suggest, for labor has fallen, especially in urban areas. This has example, that average losses in corn production resulted in increased open unemployment, although during the last rainy season were on the order of 30 precise estimates of the increase are difficult to percent or higher, with complete crop failure in obtain.2 some locations. If average agricultural sector income were to drop by 10 percent in these areas, Of even greater concern are the crisis-induced then the incidence of poverty would be expected to effects on underemployment. The poor, after all, increase to a shocking 42.7 percent. cannot afford to be unemployed; so they tend to work in ill-paying jobs to earn enough to survive. Certainly, the magnitude of underemployment is likely to be much greater than open unemployment. Figure 3.3 Figure 3.4 Poverty will rise Agricultural households are more vulnerable (Projected poverty trends in selected sectors) (Per capita expenditure as a percentage of the poverty line, for selected sectors) 20 -- - - 15 - - - - - - - - - - - - - - --- - Sour:-. World ------ Source: World Bank staff estimates. Source: World Bank staff estimaes. Chapter 3: Protecting the Poor - Page 3.3 - Box 3.1 Table 3.1 Geographic ironies Real wages fell throughout Indonesia (Changes in real wages for weeding in selected Within Indonesia. The most immediate poverty effects of provinces) the crisis are actually a result of the drought. In most 12-Month 6-Month parts of the country, it has been rainfall, not finance, that Province Change Change has most hurt the poor. Farmers in rainfed areas have (1/97-1/98) (7/97-1/98) been hit harder than those in irrigated areas. West Java -6.8 -10.0 Central Java -12.1 -13.4 Even within small geographic areas, there can be large East Java -13.1 -11.2 differences in the effects of El Nino. This year, rainfall West Sumatra -5.2 -5.0 has been scattered and variable so that areas of severe South Sulawesi -8.0 -5.7 shortages are sometirnes in close proximity to areas of West NusaTenggara -8.2 -12.0 sufficiency (J. Fox, 1998, background paper). Source: World Bank Staff estimates. Across Southeast Asia. While El Nifuo has punished Indonesia (and to some degree, the Philippines, Papua school to try to cope with the crisis.4 This is New Guinea, and Australia), rainfall pattems have been a happening in Indonesia. Government estimates boon to rice crops in Thailand, Vietnam, and South suggest that about 6 percent of primary school China. While farmers in Indonesia are facing a severe students and 13 percent of junior secondary school drought, Thai farmers are experiencing record surpluses. students are at risk of dropping out (approximately 1,650,000 and 1,100,000 students respectively), In 1996, 37 percent of those employed would have while an additional 400,000 primary school been considered underemployed.3 And the graduates are unlikely to continue onto junior underemployed are more likely to be poor (Mason secondary school.5 and Baptist, 1996). Indeed, some Indonesian communities have shared underemployment to avoid open unemployment (See Box 3.2). So policy makers must look beyond open unemployment to understand the welfare effects of the crisis. Figure 3.5 Real wages in 1997 compared to previous years Not only have unemployment and underemployment (Real wage trends for weeding, East Java, in average increased, but real wage rates have declined (Table 1995 prices) 3.1). Wage trends in 1997, when compared to 1995, highlight the severity of the impact of the crisis and hW r drought on incomes and welfare (Figure 3.5). 2650 2600 '. s e 1996 Effects on health and education 2X 250 The crisis is not only affecting current income but 25/ threatening future income earning capacity by 2 1997 hurting the health and education of Indonesians, especially the Indonesian poor. 240 1 5 235 \ In times of crisis, the education of children tends to 2300 suffer first. Households pull their children out of J F M A M J J A S 0 N D Month Source: BPS Chapter 3: Protecting the Poor - Page 3.4 - Box 3.2 l Box 3.3 Coping with crises Children pay a heavy price In the past, Indonesians coped with crises in two ways: Meetings with school principals in Maluku and South in times of rural hardship, they sought urban Sulawesi indicate that the crisis is affecting many schools, opportunities; in times of urban crisis, they returned to the especially in poorer communities. The principals village to ride out the storm. But today, Indonesians have reported, for example, that more families are finding it to cope with twin shocks -- financial crisis and drought. difficult to pay parent association fees (BP3). Absences So neither cities nor villages provide safe havens. are higher this year as children spend more time helping parents eam money. More students have dropped out this Nonetheless, field visits suggest that good information year than last. Children were eating less in the morning flows, flexible labor markets, and informal institutions are before coming to school and appear to be buying less helping people cope with some of the harshest impacts of from local food vendors and this is affecting students' the crisis. One focus group held recently among men of concentration. Students were also reported to be buying Kelurahan Kalianyar (West Jakarta) provide insights on fewer school supplies. how this is being achieved. Schools too are beginning to feel the pinch. Declines in Each year, many residents of Kalianyar return to their local government revenues, fixed nominal levels of public villages at Idul Fitri -- the Moslem New Year. When funding, and rising prices, are squeezing schools they go back to the cities, their relatives and friends tend financially. The costs of printing exam materials have to accompany them in the hope of finding temporary become prohibitive. To make things worse, more employment. This year, however, a clear message teachers are arriving late to school; to save money, they resonated throughout Kelianyar -- very few jobs were have switched to less expensive, but slower and less available in Jakarta. Not surprisingly, migration levels reliable, forms of transportation to work. were 60 percent lower than in a normal year. If the experience of Kalianyar has been replicated The Goverment is taking steps to avert this. For elsewhere in Indonesia (a hypothesis yet to be tested), then less migration to cities has meant more workers in ample, it launched a nationwide campaign with rural areas. But rural unemployment has not increased. World Bank support to keep children in school and Instead, real wages have declined. This is because minimize drop-outs in the upcoming school year. In farmers appear to have responded by hiring more than the addition, revisions to the 1998/99 budget now usual amount of labor at lower wages. include significant reallocations in government spending toward basic education. But in a departure Other local initiatives have helped. In and around urban from previous practice, the government is being Kalianyar, for example, trash collectors and local security forced to rely much more on foreign financing of its people employed by the community accepted lower education budget. This would be unremarkable wages so that no one would be fired. Many in small firms technically lost their jobs, but were still being paid excep th inuthe past foreign aid for education has reduced wages by their employers. Some reported tha tended to disburse slowly. So actual expenditures landlords, often neighbors or family, had temporarily may well fall short of the budget unless measures reduced -- or refrained from raising -- rents. And in are taken to acelerate disbursements and simplify several places, local religious organizations provided procedures. relief to the poorest in the neighborhood. The outlook for health is more sobering than that of education. The sharp depreciation of the exchange This has happened before, of course. In 1987-89, rate has raised the prices of drugs, vaccines, for example, enrollment among the poor dropped by contraceptives, and other medical supplies. Small 7 percent at the junior secondary level; and in 1987- surveys carried out in Jakarta and West Java show 92, enrollment among the poor similarly declined by that drug prices have increased two- to three-fold 5 percent. Recent field investigations suggest that it since the crisis started. Drugs are in short supply, so could be happening again (Box 3.3). Chapter 3: Protecting the Poor - Page 3.5 - Figure 3.6 much so that some health centers have closed for Rising prices lack of medicines. (Trends in the Consumer Price Index (July 1997=100) As in education, the revised budget for health 370 370 includes increased allocations to ensure health 350 351 services are maintained at their 1996/97 level. 330 330 Subsidies for drugs provided to public health centers 310 . ,210 290 290 will continue. Even so, they will not be enough to 270X 270 avoid significant increases in drug costs, which in 250 i 250 combination with declining availability, could have 230 230 devastating consequences for the poor. Worse, 210 210 higher prices may deter the poor from seeking health 190 190 care on a timely basis. Most worrying, pregnant ''° .. . 017O women may turn to untrained traditional midwives _ ° _ _ ° I_, -,____7_ _a__7 when delivering at home, raising risks to both Source: BPS mother and baby. Add to that the reduced ability of the poor to purchase staple foods and the overall picture could be pretty grim. Infants and children isolated pockets of hunger in eastern Indonesia. The are especially vulnerable. For them, malnutrition rapid rise in the price of rice is of particular concern. could cause lifelong impairment. A large part of a poor household's budget is spent on rice (Figure 3.7). A 30 percent increase in the Policy challenges in the short term real price of rice reduces the income of the urban poor by between 6 to 8 percent. True, increases in The crisis looming over Indonesia's poor is huge. the rice prices benefit rice farmers. But not all Once growth resumes, of course, employment farmers produce rice. And among those that do, opportunities and income gains will reduce their smallholders may actually be net consumers of rice misery. But that will take several years. In the and so are vulnerable to rice price increases. Of meantime, the Government must do all it can to course, those that have lost their rice crop to El Nifno protect the poor as much as possible from the are completely exposed to the price of rice. harshest effects of the crisis. In particular, it must: Moreover, for landless laborers and the new urban protect the poor against catastrophic shortfalls in poor (such as laid-ff construction workers), among consumption; and ensure that short-term declines in the poorest people in Indonesia, a 30 percent real incomes and public spending do not lead to increase in rice prices means a 10 percent decline in irreversible losses in human capital with long-lasting their real income. effects on welfare and productivity. To achieve this will require actions in four areas: Keeping rice prices low is of the utmost priority for the new government. But rice price subsidies * ensure the affordability and availability of food; appear to be a relatively expensive way of * maintain the purchasing power among poor transferring resources to the poor. The cost of households; transferring one dollar to the poorest 15 percent is * preserve critical social services; and estimated at about $8.20. This could be reduced to * take special measures to protect women and about $3.60 if low quality rice were used (and would children from the worst consequences of the improve "self-targeting"). As costly as it appears to crisis. be, the rice price subsidy is probably the most efficient among generalized commodity subsidies Ensure the affordability and availability of food. for targeting the poor, with the possible exception of Food prices have soared (Table 3.6). Moreover, dried cassava chips (gaplek).6 This makes the there is evidence of acute food shortages and effectiveness of BULOG especially important. Chapter 3: Protecting the Poor - Page 3.6 - Figure 3.7 overall distribution system appears to be The poor spend more of their incomes on rice functioning, a decline in th number of distributors (Household budget shares for rice, by decile, 1996) and very thin levels of inventories have made the system vulnerable to disruptions. It is important the Government continue to monitor these conditions 30 very closely and respond in ways that strengthen the 25.- markets, including providing security to ethnic- @ 20 ___________________ Chinese, placing a high priority on using labor- * *0 * | l_ intensive public works programs to reconstruct 15 H U -_ _ markets destroyed during the recent unrest, and 10o 1 1 Eu___ focusing on access to credit under the SME 5 1111111 * | | | _schemes. 0 IIIIIII I Maintain purchasing power among poor 1 2 3 4 5 6 7 8 9 10 households. If properly designed, labor intensive Expenditure Decile public works programs can help maintain the purchasing power of poor households. In fact, the Government has a long history of using labor Source: SUSENAS intensive public works programs, called padat karya. But to effectively reach the poor, padat karya projects need to pay attention to the following five elements of program design: There seems less justification for maintaining . geographical targeting subsidies on other commodities, such as wheat (to . below market wage rates be eliminated by end-October), sugar, and corn. The . high wage share poor spend a relatively small amount of their income . high participation by women, and on these products compared to rice. As important, . flexibility subsidizing these commodities is costly and in any case these subsidies tend to accrue largely to middle Good geographical targeting is an efficient way to and upper income groups. Soybean is a possible reach the poor. But recent data on poverty by sub- exception because it is an important source of region are scarce. One solution would be to use protein to the poor. available data on poverty patterns and over-lay that with data on agro-climatic features of specific areas Not only should food be affordable, but it should that signal a locality's vulnerability to drought. also be readily available. There is some concern that Indonesia's distribution channels have been Setting an appropriate wage rate is critical. The damaged by economic collapse and social unrest. wage rate should be set somewhat below prevailing Ethnic-Chinese, although small as a fraction of market wages for unskilled workers so that the Indonesia's population, are nevertheless key players public works programs truly function as safety nets at every link in the distribution chain throughout the for the poor. Recent analysis of the Maharashtra country. Being victims of the recent violence, they Employment Guarantee Scheme in India showed have reduced inventories to the bone to minimize that when the program wage was raised, the poor potential losses from any recurrence of unrest. tended to be left out and more benefits went to the Moreover, high interest rates and perceived risk non-poor (Ravallion, Datt, and Chaudhuri, 1993).7 have meant a withdrawal of short-term credit from the distribution system, forcing traders and retailers The wage share in total costs should be kept high. to operate on a purely cash basis and providing (Although too high a wage share can compromise strong incentives to minimize stocks. While the Chapter 3: Protecting the Poor -Page 3.7 - the quality of assets created.) Experience from Table 3.2 around the world suggests that the wage share is How much does it cost to transfer one dollar to the generally between 50 to 66 percent with the latter poor? probably being most appropriate for Indonesia (World Bank, 1997). Poor & Poor near poor Labor intensive public works programs should (Bottom (Bottom 30%) ensure they are open to participation by women. 15%S) Special effort is needed to publicize public works Rice price subsidies' $3.60- $2.10-$3.60 programs to women. It is also important to include $8.20 projects that are more likely to attract participation Public works by women.8 programs2 Padat karya-type $3.81-$5.33 $2.54-$3.56 Program mechanisms needflexibility. It is possible, programs3 that as circumstances change or additional VIP-type programs $2.08 $1.85 information becomes available, work sites may need The range of costs reflect price subsidies on low and to be changed o the mix of projects need to be average quality rice, respectively. Cost savings result altered. from the "self-targeting" nature of lower quality rice. 2 Differences in the costs for targeting the poor vs. the Public works programs are better at targeting the poor plus "near poor" reflect differences in poor than rice subsidies. Transferring a dollar to the assumptions about what proportion of the wages paid pooresth15 ericentubsidies. costsfeupwngardofl$. fothr out actually go to the target group (See Annex I for poorest 15 percent costs upward of $3.81 ior details.) traditional padat karya programs and approximately 3 The cost range reflects relatively better or worse $2.08 for VIP-style programs (Table 3.2).9 But targeting efficiency due to "leakage" of wage much depends on their design and implementation. opportunities to non-poor and possible "administrative Corruption, for example, if pervasive, can raise leakage" of funds to officials at various levels during these costs considerably So much so that the total project implementation (see Annex 1). Under costs of mitigating the poverty impacts of the crisis conditions with extremely high levels of administrative through public works could more than double if the leakage, the costs of transferring a dollar to the poor program is not well targeted or if there is skimming through padat karya-type programs could be much program ~~~~~~~~~~~~~higher than reported here. off the top as resources pass through the system Sourcepor tedhere. (Table 3.3). It is urgent, therefore, that the Government demonstrably cleans up the corruption Table 3.3 that corrodes the effectiveness of institutions Totting up the bill responsible for delivering public services to the The cost of selected transfers to reduce crisis-induced poor. One way to bring pressure to bear is to poverty appoint a blue-ribbon panel from civil society to incurrentrupiah review the effectiveness of various poverty Total value of the rice Rp. 5.0 trillion reduction programs and advise the Government on subsidy which ones work and which do not. Increase in poverty gap due Rp. 1.2 trillion Preserve critical social services. Despite enormous to the crisisR pressures on the budget, it is important that recently Cost of closing the poverty increased allocations for public spending on basic gap through publics works education be preserved. In the short-term, this may programs: involve reallocating resources from other parts of Padat karya-type Rp. 4.6-6.5 trillion the education system.10 Through the year, programs supplementary funding may become necessary. VIP-type programs Rp. 2.5 trillion Source: World Bank Staff estimates. Chapter 3: Protecting the Poor - Page 3.8 - Poor households are particularly responsive to the Table 3.4 price of education (World Bank, 1993; Mason and Shrinking gender gap Rozelle, 1998). So targeted subsidies to lower (Number of female students per 100 male students, schooling costs can be especially effective in 1976-93, by level of education) keeping poor children in school. Junior Senior Year Primary Secondary Secondary The best way to achieve this would be to use block 1976 85.9 65.1 56.7 grants for poor primary schools, and scholarships 1983 91.0 74.0 69.3 for the poorest junior secondary school students. 1987 92.3 80.8 75.8 Block grants are a better option at primary school 1990 94.4 84.2 79.1 level because they would reach a broader mass of 1993 93.3 87.0 84.0 children. Scholarships are better at junior secondary Source: World Bank, 1997 level because the scale of the problem there is smaller and this facilitates better targeting toward the poor. Providing information about the programs The same is true for health and nutrition. Studies in to intended beneficiaries is essential for success. So other countries show that parents pay greater would be mechanisms to redress grievances as they attention to the health and nutrition of boys than arise. girls, especially when times are bad (Alderman and Gertler, 1997; Behrman, 1988; Wang, 1997). So Budget allocations for essential drugs, vaccines, and monitoring the gender dimensions of health and primary health care also need to be preserved. If nutrition will be important too. Special attention necessary, the Government may have to reallocate will need to be made for pre- and post-natal care. If resources from other parts of the health system. pregnant women choose to deliver at home to save Special effort will have to be made to ensure that costs, it would raise health risks for mothers and recently increased allocations for the health budget babies, possibly increasing Indonesia's already high are used wisely and disbursed according to schedule. maternal and infant mortality rates. The communicable disease and community health programs will get special attention. In addition, the Will the increase in unemployment affect women Government will need to maintain adequate supplies disproportionately? The evidence suggests that, on of essential drugs, vaccines, and contraceptives in balance, women are as likely to be affected as men, health centers and sub-centers (Puskesmas and with men experiencing the majority of lay-offs from Puskesmas Pembantu) in the poorest and most hard- construction and manufacturing and women bearing hit areas of the country. 1 the brunt in the trade, hotel and restaurant sectors (Table 3.5, Table 3.6). But there are exceptions. In Protect women and children. Women and some manufacturing subsectors, women may be children-especially girls-may find themselves at particularly vulnerable. A recent survey shows that particular risk as a result of the crisis. For example, in the textile industry, women constitute the majority evidence from other countries suggests that parents' being laid off. In Bandung alone, of the 6,000 decisions to send girls to school are more price workers that firms laid off, 4,000 were women. ILO sensitive than for boys.12 So far, Indonesia has estimates that 240,000 women will lose their jobs in made enormous progress in narrowing the gender 1998 just in the textile and garment industry alone. gap in education (Table 3.4).13 But this could be And these do not include the countless women who reversed, even if temporarily. While we do not work in their homes on a "putting out" system believe that this will actually happen, it will be (sewing on buttons, for example) who will also be prudent to monitor the gender composition of severely affected. dropouts and enrollments to ensure that recent gains are not reversed. Chapter 3: Protecting the Poor - Page 3.9 - Table 3.5 Table 3.6 Growth and employment Where will the jobs be? (Employment elasticities with respect to growth, (Employment shares, by gender, and projected shares of 1991-96: by gender and for selected sectors) new unemployment in selected sectors) Males Females Shares of new Manufacturing 0.56 0.63 Employment unemployment Construction 0.74 0.57 shares (Projected, 1999) Trade, Hotel, 0.89 0.93 (Actual, 1996) Restaurant Males Females Males Females Finance 0.40 0.57 Manufacturing 54.6 45.4 51.2 48.8 Construction 96.9 3.2 97.6 2.4 All Sector 0.32 0.32 Trade, hotels, 48.9 51.1 47.8 52.2 Source: SAKERNAS 1991, 1996. restaurants Finance 72.7 27.3 65.4 34.6 Since there will be large numbers of both women All Sectors 61.8 38.2 62.1 37.9 and men among the newly unemployed, public Source: SAKERNAS 1996; World Bank Staff works programs should be designed with both calculations. genders in mind. There is indeed some merit to the view that employment of women should be given Indonesia has recently undertaken significant policy preference, because income in their hands tends to reforms in agriculture, including eliminating increase household welfare more than if it were in BULOG's import monopoly over wheat, wheat the hands of men.14 flour, sugar, soybeans, and garlic; reducing tariff rates on all food items to a maximum of 5 percent The importance of good agricultural and natural and abolishing local content regulations; dissolving resource policies restrictive marketing arrangements for plywood; and deregulating trade in agricultural products across Agriculture sector growth has played a critical role district and provincial boundaries, including those in reducing rural poverty over the last two decades. for cloves, cashew nuts, oranges, vanilla, and In the context of the crisis, strong agricultural livestock. It is expected that consistent growth can also play an important role in mitigating implementation of these reforms will help to foster some of the worst poverty effects. The direct consequences of strong agriculture sector growth are clear; growth will raise the incomes of some of Flgurel3.8 Indonesia's poorest citizens (Figure 3.8).15 Strong Agricultural growth helps the poor agricultural growth will also provide a safety net for agriculture with 3% and 6% growth in FY99/00) newly unemployed urban workers by providing ad earnings opportunities to return migrants until 30 broader economic conditions improve. 25 l fO 20._11 L 0. 0 Clearly, the more rapid agricultural growth, the 15 _ stronger the anti-poverty benefits. The end of El , 10 l Nino and the return of normal weather will help s5 enormously. However, Indonesia cannot rely solely 0 ] on the expectation of good weather. Providing an 1996 1997 1998 1999 2000 2000 agricultural policy environment that fosters strong growth, particularly among smallholders, will be 0 3% Real Growth in Agriculture essential. *6% Real Growth in Agriculture Source: World Bank staff estimates Chapter 3: Protecting the Poor -Page 3. 10 - investor confidence and to allow for more efficient Izin Lokasi, reinforcing provincial and local spatial and productive investment. Moreover, a number of planning, and developing a program of land titling these reforms will benefit smallholder producers and that recognizes customary and communal land rights thus foster poverty-reducing growth. will help create and strengthen incentives for such investments. This would have particularly important There are several other key areas, however, where implications for poverty reduction in some of the providing a supportive policy environment will poorest areas in eastern Indonesia (Box 3.4). further strengthen the poverty-reducing capacity of the agricultural and natural resource sectors. These * moving toward sustainable management of include: Indonesia's forests. The rate and pattern of forest exploitation in Indonesia is far from sustainable. ensuring adequate incentives to rice farmers. The reforms already adopted are steps in the right There are clear trade-offs between keeping rice direction, but more can be done. Using forest prices low for consumers and providing adequate products more efficiently can generate incomes and production incentives to farmers. In the medium growth, and do so sustainably. Necessary steps term, however, it will be important to move rice include locating and securing the resource base, prices towards the world market price, on trend, to improving procedures for allocating concessions, ensure an appropriate supply response, to avoid designing better incentives for managing them well, smuggling overseas, and to provide appropriate and ensuring that monitoring and enforcement is earnings opportunities to farmers. effective. * reforming the role of government in the * increasing the efficiency of irrigation and marketing and distribution of food commodities. water resources management. Agricultural This includes further deregulation of trade in food productivity can be improved dramatically by crops over the medium term, except for rice, increasing the productivity of existing irrigation possibly replacing administrative mechanisms for schemes (rather than expansion of irrigation food security and price stabilization with financial infrastructure and swamp reclamation) and by instruments that serve the same purpose. instituting and effective irrigation operations and maintenance (O&M) program. - improving trade and price policies affecting the rural sector. Reducing non-tariff barriers to * maintaining the integrity of the rural constraining agricultural markets, including export financial system and protecting it from accumulating restrictions on low-quality agricultural commodities ills in the rest of the financial system. This includes (for example, some grades of rubber, vanilla, cocoa, the phasing out of related input and credit subsidies coffee, and low quality rattan lampit mats), will to agriculture. provide better earnings opportunities to smallholder producers. Other measures, such as freeing up international trade in fertilizer, agro-chemicals, and Box 3.4 seeds, and privatizing state-owned fertilizer and o seed companies will also serve to increase . semedtitiveness, willductivity, ean incmeasein The crisis may be Indonesia-wide, but the poorest competitiveness, productivity, and incomes regions are particularly vulnerable. Even before agriculture. the crisis, poor households (as a share of the * improving land administration and total) in NTT, East Timor, and Irian Jaya were increasing security of land tenure. The current threefold the national average. El Niuo hit these system of rural land alloation for development provinces particularly hard. And since they don't represents a major obstacle to investf ent in tree export much, they are unlikely to benefit crops in the outer islands. Abolishing the system of substantially from the rupiah's depreciation. So Indonesia's strategy to help the poor should pay special attention to the poor in these provinces. Chapter 3: Protecting the Poor - Page 3.11 - The importance of good institutions decentralization has been shown to be especially useful in adapting resource use to meet local needs The same governance and institutional factors that more effectively, increasing the capacity of local contributed to the financial crisis unfortunately also governments, and empowering local communities to affect the Government's capacity to deliver essential help themselves. It is particularly important that services to the poor and to manage Indonesia's decentralization of project identification and natural resources properly. It is urgent that this be implementation leads to closer oversight of INPRES changed. A highly centralized civil service and funds and better identification of the beneficiaries of budgetary structure leave little freedom, flexibility, government programs. or even capacity at local levels. The process for allocating government resources is less than Last but not least, the Government must introduce a transparent, little information is disseminated about system that provides timely and accurate government services that are being financed (so they information on the locations and condition of the are not used well), and pervasive corruption in the poor. Such information is not just important for implementing agencies absorbs resources intended monitoring changes in poverty, but will be critical for the poor. Local participation in the design and for adjusting allocations in expenditures for poverty selection of projects is not encouraged. And there programs to improve targeting, and will help is virtually no process by which the grievances of Government in determining the effectiveness of the poor can be heard and suitable actions taken in different services reaching the poor. modifying or even redesigning local poverty alleviation programs. Conclusion These institutional weaknesses, rooted deep in The crisis facing Indonesia's poor is the most urgent Indonesia's history and culture, debilitate the of all. Much of the progress in poverty reduction effectiveness with which the Government can over the past few decades will be reversed. The protect the poor. The Government must take number of poor could well double and for the first immediate and serious action to send a clear signal time in years, urban poverty is expected to become that the old ways will not be tolerated. Further significant. The Government must respond quickly delays will harm the credibility of Government and in four ways: ensure that essential commodities are the effectiveness of reforms and programs aimed at affordable to the poor and easily available; provide helping the poor. At the same time, reforms will employment and income generating opportunities to need to be implemented in the context of a more poor households and communities; preserve critical fundamental overhaul of government institutions social services, notably basic health and education; necessary to improve the quality of public services and protect vulnerable groups, especially women and the honesty, efficiency, and capacity of civil and children, from the worst consequences of the servants. crisis. But to do so effectively, the Government must also overhaul its institutions, especially those In the meantime, for more effective anti-poverty delivering services to the poor. And it must stamp programs, the Government should consider the out corruption by empowering local communities approach adopted in the Village Infrastructure and representatives of civil society to oversee the Projects and Kecamatan Development Project, in implementation of poverty programs and provide which resources are transferred to local levels and avenues for the poor to express their grievances and communities are involved in the allocation funds have them redressed. and the supervision of local projects. Such Chapter 3: Protecting the Poor - Page 3.12 - Endnotes '° In the longer-term, policy makers should focus on Official estimates of poverty, using SUSENAS data improving quality (at all levels), strengthening local from January 1996, indicated that the incidence of management capacity, and providing opportunities for the poverty was 11.3 percent nationwide. The estimate for enhanced private sector participation in providing mid 1997 was derived from projecting these estimates education, especially at the secondary and tertiary levels. forward. 11 Recent analysis by the World Bank indicated that 2 Estimates, such as the one appearing in the April 14, publicly provided basic health care is significantly 1999, Jakarta Post, for example, report estimates of 13.4 underfunded. The crisis may create the opportunity for a million unemployed by March 1999-an unemployment longer-term change in the government's strategy toward rate of about 15 percent. However, these calculations basic health care, with greater focus on demand-side should be treated with caution, because they assume that interventions and regulatory instruments and less on the entire fall in the demand for labor will result in expansion of direct service delivery. For instance, on the unemployment. This, of course, will not be the case. demand side, the government could provide subsidies to Declining demand for labor will also result in increased the poor to promote greater access to private health care underemployment and lower real wages. providers. 3 Underemployment is here defined as working less 12 Gertler and Glewwe, 1991; Lavy, 1991; Mason and than 35 hours per week,. Khandker, 1997. 4 One household coping strategy is to take children out '3 World Bank, 1997. of school, both to save on school fees and associated 14 Haddad and Hoddinott, 1995; Thomas, 1990; 1997; expenses and to help earn additional income. Lundberg, Pollack, and Wales, 1997. 5 Simulation analysis based on SUSENAS data suggests 15 Strong growth in agriculture has not only benefited that these figures may represent upper bound estimates. those working in agriculture; rising agricultural incomes 6 These estimates assume that in the short-term there are have led to increased demand for labor in supporting no producer income losses, that is, that the drought has industry and services and rising rural wages. eliminated marketed surpluses. Under such assumptions, the average cost of subsidizing rice is simply the fiscal cost of the subsidy and its administration. In the medium term, assuming rains and marketable surpluses return, then retaining the price of rice below the world market price (on trend) would result in considerable income losses to rice farmers. These income losses could dramatically increase-possibly double-the costs of subsidizing rice. 7 In many places, including Indonesia, there are statutory minimum wages set above prevailing market wages that governments feel obliged to respect in designing public works programs. In such cases, it is important to make exceptions for these types of poverty or crisis-relief programs to ensure that it is indeed the poor who benefit. A number of countries have made such exceptions, generally with the cooperation of trade unions. 8 In a recent program in Argentina, for example, special programs were designed that would be more attractive to women to replace works involving construction that tended to attract only men. 9 VIP stands for Village Infrastructure Projects which are financed by the World Bank. The projects have proven very effective in decentralizing infrastructure development and involving local communities in project selection. Statistical Annex INDONESIA IN CRISIS A MACROECONOMIC UPDATE STATISTICAL ANNEX a List of Tables Population and Employment 1. Population and Growth Rates by Province, 1930-1997 2. Distribution of Population by Age Group and Sex, 1961-1995 3. Employment by Main Industry, 1971-1997 4. Population Distribution by Province and Urban & Rural, 1980-1997 National Income Accounts 5. Gross Domestic Product by Industrial Origin at Current Market Prices, 1983-1997 6. Gross Domestic Product by Industrial Origin at Constant Market Prices, 1983-1997 7. Expenditure on GDP at Current Market Prices, 1983-1997 8. Expenditure on GDP at Constant Market Prices, 1983-1997 International Trade & Balance of Payments 9. Balance of Payments, 1983/84-1997/98 10. Selected Non-oil Exports, 1986-1997 11. Value of Exports by Principal Country of Destination, 1985-1997 12. Value of Imports by Principal Country of Origin, 1985-1997 External Debt & Capital Flows 13. Summary of Public and Publicly Guaranteed External Debt, 1983-1996 14. External Public Debt Outstanding as of December 31, 1996 15. Service Payments, Commitments, Disbursements and Outstanding Amounts of External Public Debt, 1980-2011 Public Finance 16. Central Government Budget Summary, 1984/85-1997/98 17. Central Government Receipts, 1984/85-1997/98 18. Central Government Expenditures, 1984/85-1997/98 19. Development Expenditures, 1984/85-1997/98 a With the exception of the tables on external debt, the Statistical Annex is a compilation of official data from government sources. In some instances, these data may differ from data in the main text due to different World Bank definitions and methodologies in constructing the statistical series. Statistical Annex Monetary Statistics 20. Money Supply (Ml), 1983-1997 21. Changes in Factors Affecting Money Supply, 1983-1997 22. Consolidated Balance Sheet of the Monetary System, 1983-1997 23. Banking System Credits by Economic Sector, 1983-1997 24. Banking Credits Outstanding in Rupiah and Foreign Exchange by Group of Banks, 1984-1997 25. Commercial Bank's Outstanding Investment Credits by Economic Sector, 1984-1997 26. Commercial Bank's Outstanding Funds in Rupiah and Foreign Exchange by Group of Banks, 1984-1997 27. Interest Rates on Deposits at Commercial Banks, 1985-1997 Agricultural Statistics 28. Principal Agricultural Products by Subsectors, 1984-1997 29. Production of Major Crops by Type of Estate, 1984-1997 30. Rice-Area Harvested, Production and Yield, 1984-1997 Industrial Statistics 31. Index of Manufacturing Production by Selected Industry Group, 1986-1997 32. Production of Minerals, 1984-1997 33. Crude Oil Production by Company, 1974-1997 34. Domestic Sales of Petroleum Products, 1983-1997 Prices 35. Consumer Price Index, 1983-1997 36. Indonesia Wholesale Price Index, 1983-1997 37. Domestic Prices of Petroleum Products, 1980-1998 Investment Statistics 38. Approved Foreign Investment by Sector, 1984-1997 39. Approved Domestic Investment by Sector, 1984-1997 INDONESIA Table 1. Population And Growth Rates by Province, 1930-1997 Region Population ('000) Average growth rate (% p.a.) 1930 1961 /a 1971 /a 1980 1985 1990 1995 1996 b/ 1997 b/ 1930-61 1961-71 1971-80 1980-85 1985-90 1990-95 1990-97 Java 40 ,086 ,270 22, 107,528 114,733 116,37 117,756 1.3 1.9 2.0 1.8 1.5 1.3 1.3 DKIJakarta 811 2,973 4,579 6,503 7,885 8,225 9,113 9,341 9,524 4.3 4.4 4.0 3.9 0.8 2.1 2.1 WestJava 10,586 17,615 21,624 27,454 30,830 35,380 39,207 40,118 40,905 1.7 2.1 2.7 2.3 2.8 2.1 2.1 Central Java 13,706 18,407 21,877 25,373 26,945 28,519 29,653 29,881 30,064 1.0 1.7 1.7 1.2 1.1 0.8 0.8 DlYogjakarta 1,559 2,241 2,489 2,751 2,930 2,915 2,917 2,915 2,912 1.2 1.1 1.1 1.3 -0.1 0.0 0.0 EastJava 15,056 21,823 25,517 29,189 31,262 32,490 33,844 34,124 34,352 1.2 1.6 1.5 1.4 0.8 0.8 0.8 Sumatra 8,255 15,739 20.809 28,017 32, 36,436 40,830 41,841 42.712 2.1 2.8 3.4 3.1 2.2 2.3 2.3 Lampung 361 1,668 2,777 4,625 5,905 6,006 6,658 6,806 6,931 5.1 5.2 5.8 5.0 0.3 2.1 2.1 Bengkulu 323 406 519 768 943 1,181 1,409 1,464 1,515 0.7 2.5 4.5 4.2 4.6 3.6 3.6 South Sumatra 1,378 2,773 3,441 4,630 5,370 6,278 7,208 7,413 7,594 2.3 2.2 3.4 3.0 3.2 2.8 2.8 Riau 493 1,235 1,642 2,169 2,548 3,283 3,901 4,057 4,192 3.0 2.9 3.1 3.3 5.2 3.5 3.6 Jambi 245 744 1,006 1,446 1,745 2,016 2,370 2,459 2,535 3.6 3.1 4.1 3.8 2.9 3.3 3.3 WestSumatra 1,910 2,319 2,793 3,407 3,698 4,001 4,323 4,390 4,451 0.6 1.9 2.2 1.7 1.6 1.6 1.5 NorthSumatra 2,542 4,965 6,622 8,361 9,422 10,254 11,115 11,306 11,463 2.2 2.9 2.6 2.4 1.7 1.6 1.6 Aceh 1,003 1,629 2,009 2,611 2,972 3,417 3,848 3,945 4,030 1.6 2.1 3.0 2.6 2.8 2.4 2A Kalimantan 2,170 4,102 5,155 6,723 7,722 9,111 1,71 1i02,8 11,099 2.1 2.3 3.0 2.8 3.4 2.8 2.9 West Kalimantan 802 1,581 2,020 2,486 2,819 3,237 3,636 3,732 3,813 2.2 2.5 2.3 2.5 2.8 2.3 2.4 Central Kalimantan 203 497 702 954 1,118 1,398 1,627 1,686 1,735 2.9 3.5 3.5 3.2 4.6 3.1 3.1 South Kalimantan 836 1,473 1,699 2,065 2,273 2,599 2,893 2,960 3,021 1.8 1.4 2.2 1.9 2.7 2.2 2.2 East Kalimantan 329 551 734 1,218 1,512 1,877 2,314 2,429 2,531 1.7 2.9 5.8 4.4 4.4 4.3 4.4 Sulawesi 4,231 7,079 8,528 10,409 11,554 12,519 13,732 14.020 14,269 1.7 1.9 2.2 2.1 1.6 1.9 1.9 CentralSulawesi 390 693 914 1,290 1,511 1,705 1,938 1,997 2,047 1.9 2.8 3.9 3.2 2.4 2.6 2.6 NorthSulawesi 748 1,310 1,719 2,115 2,313 2,480 2,649 2,686 2,721 1.8 2.8 2.3 1.8 1.4 1.3 1.3 South Sulawesi 2,657 4,517 5,181 6,062 6,610 6,983 7,558 7,693 7,808 1.7 1.4 1.8 1.7 1.1 1.6 1.6 SoutheastSulawesi 436 559 714 942 1,120 1,351 1,587 1,643 1,693 0.8 2.5 3.1 3.5 3.8 3.3 3.3 Otherlslands 4,219 7,106 8,630 11,071 12,316 13,654 14,988 15,295 15554 1.7 2.0 2.8 2.2 2.1 1.9 1.9 Bali 1,101 1,783 2,120 2,470 2,649 2,779 2,896 2,924 2,946 1.6 1.7 1.7 1.4 1.0 0.8 0.8 WestNusaTenggara 1,016 1,808 2,203 2,725 2,995 3,371 3,646 3,708 3,760 1.9 2.0 2.4 1.9 2.4 1.6 1.6 EastNusaTenggara 1,344 1,967 2,295 2,737 3,061 3,270 3,577 3,641 3,698 1.2 1.6 2.0 2.3 1.3 1.8 1.8 Maluku 579 790 1,089 1,410 1,609 1,853 2,087 2,142 2,189 1.0 3.3 2.9 2.7 2.9 2.4 2.4 IrianJaya 179 758 923 1,174 1,371 1,631 1,943 2,021 2,086 4.8 2.0 2.7 3.2 3.5 3.6 3.6 East Timor n.a n.a n.a 555 631 750 840 860 876 n.a n.a n.a 2.6 3.5 2.3 2.2 Indonesia 25 978 12 t64,47 179,248 194,755 198,343 2039 0 9 2 L /a Includes adjustment for the exclusion of rural Irian Jaya. /b End year population figures projected based on 1990 Population Cencus. Source: Central Bureau of Statistics, 'Population Census Reports' year 1961, 1971, 1980 and 1990; 'Statistical Yearbook of Indonesia 1984'; and 'Intercensal Population Survey (SUPAS)' year 1985 and 1995. INDONESIA Table 2. Distribution of Population by Age Group and Sex, 1961-1995 ('000) 1961 1971 1980 1985 1990 1995 Age Group Male Female Total Male Female Total Male Female Total Male Female Total Male Female Total Male Female Total 0-4 8,529 8,649 17,178 9,675 9,560 19,235 10,872 10,422 21,294 11,008 10,543 21,551 10,766 10,120 20,887 10,475 9,977 20,452 5-9 7,744 7,701 15,445 9,593 9,302 18,895 10,889 10,446 21,335 11,379 10,739 22,118 11,791 11,290 23,081 11,130 10,659 21,788 10-14 4,353 3,892 8,245 7,406 6,875 14,281 9,179 8,525 17,704 10,783 10,113 20,896 10,998 10,438 21,437 12,038 11,671 23,709 15-19 3,865 3,905 7,770 5,627 5,779 11,406 7,552 7,806 15,358 8,335 8,232 16,567 9,553 9,367 18,920 10,273 10,006 20,279 20-24 3,480 4,373 7,853 3,627 4,461 8,088 6,010 7,055 13,065 6,385 7,903 14,288 7,662 8,486 16,148 8,037 9,114 17,151 25-34 7,392 8,610 16,002 7,722 9,226 16,948 9,685 9,920 19,605 12,026 12,442 24,468 13,962 14,770 28,732 15,060 16,230 31,290 35-44 5,765 5,406 11,171 7,062 7,119 14,181 7,876 8,172 16,048 8,538 8,485 17,023 9,778 9,475 19,253 12,871 12,351 25,221 45-54 3,587 3,511 7,098 4,360 4,213 8,573 5,761 5,856 11,617 6,418 6,514 12,932 7,036 7,284 14,320 7,953 7,419 15,371 55-64 1,913 1,865 3,778 2,224 2,373 4,597 3,297 3,354 6,651 4,150 4,474 8,624 4,615 4,887 9,502 5,235 6,142 11,377 65+ 1,183 1,245 2,428 1,450 1,539 2,989 2,200 2,593 4,793 2,619 2,954 5,573 3,213 3,749 6,962 3,859 4,257 8,116 Not stated 60 57 117 7 8 15 11 9 20 4 3 7 3 5 8 0 0 0 Total 47871 49,214 97,085 60,455 119,208 73332 74,158 147,490 81645 82402 164,047 89,376 89,872 179,248 96930 97,825 194,755 Percentage distribution 0-4 17.8 17.6 17.7 16.5 15.8 16.1 14.8 14.1 14.4 13.5 12.8 13.1 12.0 11.3 11.7 10.8 10.2 10,5 5-9 16.2 15.6 15.9 16.3 15.4 15.9 14.8 14.1 14.5 13.9 13.0 13.5 13.2 12.6 12.9 11.5 10.9 11.2 10-14 9.1 7.9 8.5 12.6 11.4 12.0 12.5 11.5 12.0 13.2 12.3 12.7 12.3 11.6 12.0 12.4 11.9 12.2 15-19 8.1 7.9 8.0 9.6 9.6 9.6 10.3 10.5 10.4 10.2 10.0 10.1 10,7 10.4 10.6 10.6 10.2 10.4 20-24 7.3 8.9 8.1 6.2 7.4 6.8 8.2 9.5 8.9 7.8 9.6 8.7 8.6 9.4 9.0 8.3 9.3 8.8 25-34 15.4 17.5 16.5 13.1 15.3 14.2 13.2 13.4 13.3 14.7 15.1 14.9 15.6 16.4 16.0 15.5 16.6 16.1 35-44 12.0 11.0 11.5 12.0 11.8 11.9 10.7 11.0 10.9 10.5 10.3 10.4 10.9 10.5 10.7 13.3 12.6 13.0 45-54 7.5 7.1 7.3 7.4 7.0 7.2 7.9 7.9 7.9 7.9 7.9 7.9 7.9 8.1 8.0 8.2 7.6 7.9 55-64 4.0 3,8 3.9 3.8 3.9 3.9 4.5 4.5 4.5 5.1 5.4 5.3 5.2 5.4 5.3 5.4 6.3 5.8 65+ 2.5 2.5 2.5 2.5 2.5 2,5 3.0 3.5 3.2 3.2 3.6 3.4 3.6 4.2 3.9 4.0 4.4 4.2 Not stated 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total 100.0 100.0 100.0 100.0 100.0 100.0 100_0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: Central Bureau of Statistics, 'Population Census Reports' year 1961. 1971, 1980 and 1990; 'Statistical Yearbook of Indonesia 1984'; and 'Intercensal Population Survey (SUPAS)' year 1985 and 1995. INDONESIA Table 3. Employment by Main Industry 1971-1997 /a 1971 1980 1982 1985 1990 1995 1996 1997 Main Industry million % million % million % million % million % million % million % million % Agriculture, forestry, hunting& fishery 26.5 64.2 28.0 54.8 31.6 54.7 34.1 54.6 35.5 50.1 35.2 44.0 37.7 44.0 35.8 41,2 Mining and quanying 0.1 0.2 0.4 0.7 0.4 0.7 0.4 0.7 0.7 1.0 0.6 0.8 0.8 0.9 0.9 1.0 Manufacturing 2.7 6.5 4.4 8.5 6.0 10.4 5.8 9.3 8.2 11.6 10.1 12.6 10.8 12.6 11.2 12.9 Electricity, gas & water 0.0 0.1 0.1 0.2 0.1 0.1 0.1 0.1 - 0.1 0.1 0.2 0.3 0.2 0.2 0.2 0.3 Construction 0.7 1.6 1.6 3.1 2.2 3.7 2.1 3.4 2.8 4.0 3.8 4.7 3.8 4.4 4.2 4.8 Wholesaleandretail trade &restaurants 4.3 10.3 6.6 12.9 8.6 14.8 9.4 15.0 10.6 15.0 13.9 17.3 16.1 18.8 17.2 19.8 Transportation, storage&communications 1.0 2.3 1.5 2.9 1.8 3.1 2.0 3.1 2.7 3.8 3.5 4.3 3.9 4.6 4.1 4.8 Finance, insurance, real estate & 0.1 0.2 0.2 0.4 0.1 0.2 0.3 0.4 0,5 0.7 0.7 0.8 0.7 0.8 0.7 0.8 business services Publicservices 4.1 10.0 7.7 15.1 7.1 12.3 8.3 13.3 9.7 13.7 12.1 15.1 11.7 13.7 12.6 14.5 Others 1.9 4.6 0.7 1.4 0.0 0.0 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total 41.3 100.0 51.2 100.0 57.8 100.0 62.5 100.0 70.8 100.0 80.1 100.0 85.7 100.0 87.0 100.0 /a Refers to population 10 years of age and above who worked during the week previous to the census, Source: Central Bureau of Statistics, 'Statistical Yearbook of Indonesia year 1975, 1982, 1985, 1990; and 'Intercensal Population Survey (SUPAS)' year 1985 and 1995, Labor Force Situation in Indonesia 1996 and 1997 (August). INDONESIA Table 4. Population Distribution by Province and Urban & Rural, 1980-1997 1980 1990 1995 1997 Average Growth Rate (% p.a) Region Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural 1980-90 1990-95 1995-97 1980-90 1990-95 1995-97 Java 22,926 68,291 3 7,4 66, 88 5.28 4.54 2.11 0.13 (0.67) (0.20) DKIJakarta 6,072 409 8,223 0 9,113 0 9,351 0 3.08 2.08 1.30 0.00 0.00 0.00 West Java 5,771 21,679 12,208 23,170 16,738 22,469 17,722 22,464 7.78 6.51 2.90 0.67 (0.61) (0.01) Central Java 4,756 20,611 7,695 20,822 9,460 20,194 9,938 19,969 4.93 4.22 2.50 0.10 (0.61) (0.56) DlYogyakarta 607 2,143 1,294 1,619 1,693 1,223 1,521 1,393 7.86 5.52 (5.23) (2.77) (5.44) 6.70 East Java 5,720 23,449 8,916 23,572 10,850 22,994 11,366 22,790 4.54 4.01 2.35 0.05 (0.50) (0.44) Sumatera 5,48 2 7,129 12,018 28,812 12,784 M 29, 14 5.42 5.28 3.13 1.88 1.21 0.57 Lampung 577 4,047 747 5,257 1,046 5,612 1,135 5,679 2.62 6.96 4.17 2.65 1.31 0.60 Bengkulu 72 695 240 939 362 1,047 399 1,070 12.73 8.57 4.92 3.04 2.20 1.12 South Sumatra 1,267 3,361 1,839 4,438 2,185 5,023 2,272 5,158 3.80 3.50 1.97 2.82 2.50 1.33 Riau 588 1,576 1,047 2,234 1,340 2,560 1,423 1,759 5.94 5.05 3.06 3.55 2.77 (17.12) Jambi 183 1,262 433 1,581 644 1,726 708 2,647 9.00 8.26 4.88 2.28 1.77 23.82 West Sumatra 433 2,973 808 3,191 1,083 3,240 1,159 3,238 6.43 6.04 3.42 0.71 0.31 (0.03) North Sumatra 2,127 6,224 3,639 6,613 4,568 6,547 4,821 6,502 5.51 4.65 2.74 0.61 (0.20) (0.34) Aceh 234 2,377 540 2,876 790 3,057 867 3,089 8.74 7.93 4.73 1.92 1.23 0.52 Kalimantan 1,441 5,276 2,507 6,596 3,183 7,288 3,382 7,465 5.69 4.89 3.09 2.26 2.02 1.21 West Kalimantan 417 2,068 643 2,592 788 2,848 828 2,915 4.43 4.14 2.55 2.29 1.90 1.18 Central Kalimantan 98 856 245 1,151 366 1,262 402 1,291 9.58 8.32 4.81 3.00 1.86 1.15 South Kalimantan 441 1,622 703 1,894 867 2,027 917 2,053 4.78 4.28 2.84 1.56 1.37 0.65 East Kalimantan 485 729 915 960 1,162 1,152 1,235 1,206 6.55 4.89 3.09 2.78 3.72 2.31 Sulawesi 1,654 8,746 2,761 9,750 3,612 10,121 3,842 10,201 5.26 5.52 3.14 1.09 0.75 0.39 Central Sulawesi 115 1,169 281 1,422 424 1,514 460 1,535 9.31 8.56 4.17 1.98 1.26 0.67 North Sulawesi 355 1,760 565 1,913 696 1,953 733 1,959 4.76 4.27 2.62 0.84 0.41 0.15 South Sulawesi 1,096 4,963 1,685 5,295 2,137 5,422 2,257 5,450 4.40 4.86 2.79 0.65 0.47 0.26 Southeast Sulawesi 88 854 230 1,120 355 1,232 392 1,257 10.06 9.11 5.02 2.75 1.93 1.02 Other Islands 1,342 9,659 2,494 11,150 3,270 11,717 3,494 11,845 6.39 5.57 3.36 1.45 1.00 0.54 Bali 363 2,106 734 2,043 994 1,902 1,068 1,861 7.29 6.24 3.66 (0.30) (1.42) (1.08) WestNusaTenggara 383 2,340 582 2,790 687 2,959 716 3,002 4.26 3.37 2.07 1.77 1.18 0.73 EastNusaTenggara 205 2,532 372 2,896 497 3,081 534 3,116 6.12 5.94 3.69 1.35 1.25 0.56 Maluku 153 1,256 352 1,499 513 1,574 560 1,587 8.71 7.79 4.51 1.79 0.98 0.43 Irian Jaya 237 870 395 1,234 500 1,442 530 1,501 5.23 4.83 2.90 3.56 3.17 2.03 EastTimor 0 555 58 689 80 760 86 777 0.00 6.52 4.01 2.18 1.97 1.13 Indonesia 32.846 114.486 55.391 123,808 69.937 124,818 73,0 125,267 53 477 24 079 0.16 DA Source: Central Bureau of Statistics, 'Statistical Yearbook Of Indonesia 1984'; SUPAS 1985 and 1995, and Welware Statistics 1997. INDONESIA Table5 . Gross Domestic Product by Industrial Origin at Current Market Prices, 1983-1997 /a (Rp. billion) 1983 base II 1993 base 1983 1985 1986 1987 1988 1989 1990 1991 1992 1993 11 1993 1994 1995 19960 1j9975 1. Agriculture,Livestock 17,765 22,513 24,871 29,116 34,278 39,164 42,149 44,721 s33 55,746 11 SS,963 66,072 77,896 88,041 100,349 Forestry and Fishery D a Farm food crops 11,126 13,860 15,085 17,540 21,124 24,492 25,908 26,149 29,443 31,404 II 32,093 34,941 42,200 47,622 54,239 b. Non-foodoropsib 2,670 3,693 4,225 5,119 5,634 6,197 6,667 7,604 8,717 9,422 II 9,015 10,587 12,667 14,148 16,260 c. Livestock products 1,754 2,427 2,640 3,015 3,545 3,814 4,368 5,126 6,041 7,026 II 6,203 7,102 8,079 9,347 10,857 d. Forestry 994 938 1,001 1,247 1,448 1,635 1,855 2,018 2,180 2,541 II 6,268 6,897 7,390 7,883 8,545 e. Fishery 1,220 1,595 1,921 2,196 2,528 3,027 3,352 3,823 4,353 5,353 5,385 6,544 7,561 9,041 10,448 2. Mining & Quarrying t6,107 13,571 11,503 17 17,62 21,823 26,119 31,403 29,907 30,750 11 31,497 33,507 40,195 45,916 59,492 a Oil&naturalgas 15,103 12,584 10,502 15,979 15,525 19,283 21,789 26,126 23,384 23,169 11 23,121 23,070 25,410 28,120 37,318 b.Oth. mining & quarrying 1,004 987 1,001 1,287 1,637 2,540 4,330 5,277 6,523 7,581 11 8,377 10,437 14,785 17,796 22,175 11 3. Manufactunug 9,896 15,503 17,185 2 26,252 30,323 38,910 47,666 56,2 67,441 11 73,556 89.241 109,689 135,581 159,830 a. Refineryoil 359 1,864 1,915 1,820 2,026 2,148 3,575 3,807 4,322 5,211 11 5,541 5,855 6,599 8,340 8,476 b. LNG 1,871 2,424 1,969 2,097 2,948 3,299 3,715 4,714 4,384 4,253 4,253 4,584 4,800 5,854 7,916 c.Non-oil&gas mfg. 7,666 11,216 13,301 17,233 21,278 24,876 31,621 39,145 47,836 57,977 63,763 78,802 98,290 121,387 143,438 4. Electricity,gas &woter 314 396 647 747 869 1,008 1,258 1,750 2,1 2,714 3290 4,577 5655 6,594 7,586 5. Construetion 4,597 5,302 5,314 6,087 7,169 8,884 10,749 12,902 15,305 188140 1 22,513 28,0i7 34,452 42,025 47,013 6. Trade, Hotel & Restaurant 18,419 15,4i7 17,122 21.048 24,379 28,856 33,000 36,954 42,732 49,789 11 55,298 63,859 75,640 88,S78 104,433 a. Retail&swholesale trade 9,811 12,962 14,235 17,561 20,389 24,441 27,712 30,770 35,645 41,496 11 44,605 51,134 60,379 70,787 83,454 b. Hotels & Rest. 1,608 2,455 2,887 3,487 3,991 4,415 5,288 6,184 7,086 8,293 II 10,693 12,725 82,464 18,091 20,979 7. Transport&Communications 4,098 6,100 6,407 7,443 8,140 9,306 11,000 13,908 17,099 20,728 II 23,249 27,353 30,795 34,926 42,232 a. Transport 3,694 5,539 5,770 6,639 7,227 8,280 9,694 12,327 15,133 18,183 11 20,101 23,191 25,477 29,246 35,199 b. Communications 404 562 637 804 913 1,025 1,306 1,581 1,966 2,545 II 3,148 4,162 5,318 5,680 7,033 8. Banks & Finance 2,359 3,496 4,037 4,795 5,322 6,667 ,287 10,158 12,500 15,257 11 14,005 87,818 20,852 23,071 25,373 9. Ownership of Dwellings/ 2,356 2,775 2,976 3,349 3,736 4,151 4,891 5,925 6,596 7,611 II 9,695 88,239 11,899 83,237 14,790 Real Estate /c I 10 OtherServices 8,712 11,924 12,622 13,814 84,797 17,004 9,236 22,065 26,323 33,842 11 37.709 40,539 47,441 54,363 63,239 a. Public 5,712 7,925 8,307 8,912 9,446 11,174 12,801 14,622 17,309 22,458 il 22,458 22,755 26,555 29,753 33,597 b. Other Private& Services /d 3,001 3,999 4,315 4,903 5,351 5,830 6,434 7,443 9,014 11,384 ii 15,251 17,784 20,886 24,610 29,643 ars Dnmnsotic Produets iz 20= ~ J ~ W .a I ~ ~ L2 ~ SA IL ': Preliminary figures. 00 Very preliminary figures. /a. In 1996, the Govemment released national accounts series using a 1993 base, based on an up-dateofthe 1990 Input-Output Table and refined estimates of some sub-sectors. lb. Includes the former smallholder and estate food crops under the National Accounts with 1983 base. /c. Using 1983 base, this line refers only to Ownership of Dwellings. Using the new base, it includes Real Estates. /d. Includes Business Services. Source: Central Bureau of Statistics. INDONESIA Table 6. Gross Domestic Product by Industrial Origin at Constant Market Prices, 1983-1997 /a iRp. billion) 1983 bose 1I 993 bose 1983 1985 1986 1987 1988 1989 1990 1991 1992 1993 II 1993 1994 1995 1996' 1997-' 1. Agriculture, Livestock 17,765 19,300 199 20,224 21,214 21,1 22,357 22,71S 24,226 24,569 11 58,963 59,291 61,S85 63,743 64,149 Forestry and Fishery 1I a. Farm food crops 11,126 11,986 12,287 12,415 12,974 13,489 13,558 13,484 14,527 14,356 II 32,093 31,408 32,952 33,647 33,048 b. Non-foodcrops/b 2,670 3,087 3,142 3,258 3,458 3,549 3,724 3,924 4,111 4,351 11 9,015 9,472 9,912 10,331 10,772 c. Livestock products 1,754 2,037 2,064 2,111 2,212 2,244 2,328 2,468 2,665 2,814 6,203 6,451 6,790 7,132 7,422 d Forestry 994 851 889 968 1,013 974 1,003 1,003 980 997 11 6,268 6,301 6,304 6,384 6,346 e. Fishery 1,220 1,341 1,418 1,472 1,557 1,663 1,745 1,835 1,943 2,053 II 5,385 5,660 5,928 6,248 6,561 2. Mining & Quarryiny 16,107 15,4S0 16,309 16,366 1,S93 16,664 17,532 19,317 18,958 19,370 11 31,497 33,262 35,502 37,569 38,182 a. Oil & natural gas 15,103 14,513 15,237 15,219 14,692 15,391 16,030 17,513 16,719 16,66711 23,121 23,720 23,720 24,063 23,734 b. Oth. mining&quanying 1,004 968 1,072 1,146 1,201 1,273 1,502 1,804 2,239 2,70411 8,377 9,542 11,782 13,506 14,447 3. Manufacturine 9,896 13,431 14,678 6,2 18,182 19,856 22,337 24,585 26,964 29,484 II 73,556 82,649 91,67 102,260 108,631 a Refinery oil 359 767 927 938 981 990 1,094 1,137 1,202 1,187 II 5,541 5,548 5,392 6,292 5,747 b. LNG 1,871 2,919 2,923 3,233 3,595 3,685 4,093 4,433 4,663 4,753 II 4,253 4,721 4,390 4,572 4,745 c Non-oil &gas mfg 7,666 9,746 10,828 12,064 13,607 15,181 17,150 19,015 21,099 23,544 63,763 72,380 81,855 91,396 98,139 4. Electricity, gas & water 314 361 430 495 549 616 726 843 928 1,022 3,290 3,703 4,292 4,841 5,414 5. Construction 4,597 4,508 4,609 4,803 5,259 5,878 6,673 7,424 8,224 9,223 II 22,513 25,858 29,19S 32,924 35,037 6. Trade,Hotel& Restaurant 11,419 12,399 13,399 14,356 15,657 17,338 18,569 19,576 21,009 22,850 11 55,29S 59,504 642 69,372 731 a. Retail& wholesale trade 9,811 10,412 11,238 12,005 13,035 14,447 15,425 16,214 17,406 18,96911 44,605 47,620 51,397 55,497 58,756 b. Hotels & Rest. 1,608 1,987 2,161 2,351 2,621 2,891 3,143 3,363 3,603 3,881 11 10,693 11,885 12,834 13,875 14,405 7. Transport & Communications 4,098 4,487 4,669 4,939 5,212 5,812 6,368 6,869 7,555 8,302 II 23,249 25,189 27,329 29,701 32,204 a. Transport 3,694 4,032 4,178 4,394 4,626 5,151 5,596 6,003 6,601 7,192 II 20,101 21,400 22,932 24,445 26,040 b. Communications 404 455 490 545 586 660 772 867 954 1,110 II 3,148 3,788 4,397 5,257 6,164 8. Banks & Finance 2,359 3,020 3,483 3,659 3,752 4,291 4,894 5,535 6,256 7,070 II 14,005 15,945 1 19,903 20,597 9. Ownership of Dwellings 2,356 2,461 2,545 2,654 2,762 2,878 2,999 3,120 3,249 3,411 II 9,695 10,087 10,643 11,266 11,826 Real Estates /c 10. Other Services 8712 9,635 10,161 10,788 11,502 12,188 12,764 13,242 13,817 14,405 11 37,709 39,155 40,967 42,842 44,485 a Public 5,712 6,455 6,862 7,366 7,932 8,397 8,783 9,052 9,320 9,509 II 22,458 22,752 23,046 23,338 23,617 b. OtherPrivate& Services/d 3,001 3,180 3,299 3,422 3,570 3,791 3,981 4,189 4,497 4,897 II 15,251 16,403 17,921 19,503 20,869 Gross Domestic Products 1 9 51 = II Q 2l 2il2= a !07 1 MAD Preliminary figures. Very prelinminary figures. /a In 1996, the Govemment releosed national accounts series using a 1993 base, bosed on an up-date of the 1990 Input-Output Table and refined estimates of some sub-sectors. /b Includes the former smaltholder and estate food crops under the National Accounts with 1983 bose. /c. Using 1983 base, this line refers only to Ownership of Dwellings. Using the new bose, it includes Real Estates. /d Includes Business Services Source: Central Bureau of Statistics. INDONESIA Table 7. Expenditure on GDP at Current Market Prices, 1983-1997 /a (Rp. billion) 1983 base II 1993 base 1983 1985 1986 1987 1988 1989 1990 1991 1992 1993 II 1993 1994 1995 1996 1997- 1. Privateconsumpton 47,063 57,201 63,355 71,989 81,045 88,752 106,312 125,036 135,880 158,342 Il 192,958 221,514 279,876 331,586 388,255 2. Govemnnentconsumphion 8,077 10,893 11,329 11,764 12,756 15,698 17,573 20,785 24,731 29,757 29,757 31,014 35,584 40,299 42,293 3. Grossfixedinvestment 19,468 22,367 24,782 30,980 36,803 45,660 55,633 63,894 70,820 78,243 11 86,667 105,381 129,218 157,653 179,269 4. Changes in stock/b 2,793 4,837 4,243 8,166 8,007 13,171 15,072 16,848 22,405 28,286 II 10,546 15,681 15,900 6,372 17,994 5. Exports of goods and II nonfactor services 19,847 21,534 20,010 29,874 34,666 42,505 51,953 62,264 76,384 85,454 88,231 100,504 119,593 137,533 174,423 6. Less: Imports of goods and II nonfactorservices 19,626 19,835 21,036 27,956 31,171 38,601 50,946 61,376 70,337 78,065 II 78,383 91,874 125,657 140,812 177,898 Gross Domestic Product 7,623 96,97 102,683 124,817 142,1085 167,18S 195,597 227,450 259,885 302,018 II 329,776 382,220 454,514 532,631 624,337 :Revised figures. *: Preliminary figures. /a. In 1996, the Govemment released national accoants series using a 1993 base, based on an up-date of the 1990 Input-Output Table and refined esdimates of some sub-sectors. lb. Residuals. Source: Central Bureau of Stadsdcs. INDONESIA Table 8. Expenditure on GDP at Constant Market Prices, 1983 - 1997 /a (Rp. billion) 1983 base II 1993 base 1983 1985 1986 1987 1988 1989 1990 1991 1992 1993 11 1993 1994 1995 1996' 1997'. 1. Privateconsumption 47,063 49,448 50,530 52,200 54,225 56,476 62,053 66,584 68,485 72,476 I 192,958 202,038 234,245 254,500 273,593 2. Govemmentconsumption 8,077 8,991 9,241 9,226 9,924 10,965 11,317 12,113 12,819 12,830 I 29,757 30,443 30,851 31,681 31,740 3 Gross fixed investment 19,468 19,616 21,422 22,597 25,201 28,568 32,732 34,867 36,589 38,671 86,667 98,589 112,386 128,699 134,034 4. Changes in stock/b 2,793 6,641 6,333 5,049 1,120 1,417 3,303 1,990 2,314 3,404 Ii 10,546 17,063 15,853 9,010 4,733 S Exports of goods and Ii nonfactor services 19,847 19,495 22,460 25,745 26,016 28,733 28,863 34,600 39,675 42,297 88,231 96,260 104,492 112,391 119,445 6. Less: Imports of goods and II nonfactor services 19,626 19,109 19,906 20,299 16,504 18.723 23,050 26,929 28,697 29,971 II 78,383 89,752 114,035 121,863 129,858 Gross Domestic Product 77,623 85,082 90,081 94,518 99,981 107,437 115_217 123,225 131,185 139,707 329,776 354,641 383,79 t 414,419 433,685 Rivised figures. Preliminary figures. /a, In 1996, the Govemment released national accounts series using a 1993 base, based on an up-date of the 1990 Input-Output Table and refined estimates of some sub-sectors. /b. Residuals. Source: Central Bureau of Statistics. INDONESIA Table 9. Balance of Payments, 1983/84 - 1997/98 (US$ million) 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 /c 1. Netoilexports/a 6,016 5,845 4,004 1,426 2,334 1,535 2,311 2,882 2,158 1,327 319 1,372 1,175 1,259 -69 2. Net LNG exports/a 1,355 1,971 2,119 1,158 1,426 1,525 1,600 3,128 2,404 2,188 2,215 2,415 2,298 3,279 1,626 3. Non-oil exports (net) -11,522 9,784 -7955 6,635 -5466 4,919 -5510 -9751 8 914 6 -5,474 7,275 -10,460 -12,606 4,049 Exports, fob 5,367 5,907 6,175 6,731 9,502 12,184 14,493 15,380 19,008 24,823 27,170 31,716 37,138 39,267 45,829 Imports, cif -14,346 -12,921 -11,186 -10,385 -11,763 -13,586 -16,478 -21,609 -24,066 -26,390 -25,410 -30,815 -37,597 -41,126 -39,067 Services (nonfreight) -2,543 -2,770 -2,944 -2,981 -3,205 -3,517 -3,525 -3,522 -3,856 -4,509 -7,234 -8,176 -10,001 -10,747 -10,811 4. Currentaccount(1+2+3J A415 -,6 182 -4,051 -1,2 -31 :AL 2561 2 _s2M -8 1.492 5. Official capital disbursements 5,793 3 519 3,432 5,472 4,575 6,588 5,516 5,006 5,600 5,755 6,195 5,651 5,730 5,298 8,493 IGGI 4,255 3,189 2,751 3,978 4,368 5,603 4,698 4,929 5,292 5,567 5,795 5,651 5,380 4,898 7,652 Special assistance 0 0 0 0 0 2,169 1,807 1,542 1,069 886 556 314 205 232 0.0 Progran aid 84 52 38 48 30 23 6 0 0 0 0 0 0 0 3,036 Project aid 4,171 3,137 2,713 3,930 4,338 3,411 2,885 3,387 4,223 4,681 5,239 5,337 5,175 4,666 4,616 ODA 1,902 1,442 1,332 1,932 2,807 2,406 2,300 2,766 3,165 3,078 3,697 3,662 3,540 2,914 2,654 Non-ODA 2,269 1,695 1,381 1,998 1,531 1,005 585 621 1,058 1,603 1,542 1,675 1,635 1,752 1,962 Others 1,538 330 681 1,494 207 985 818 77 308 188 400 0 350 400 841 6. Amortization -1.010 :L92 1 -2,129 -,4 -,6 -,8 4,082 -182 -44 -5,132 -4 -5939 -6,118 -4,118 7. Other capital (net) 1191 499 572 1,232 1,709 -211 575 5,856 4,133 4,284 4,648 4,645 11,672 13,487 -9,7 Direct investment 193 245 299 252 544 585 722 1,424 1,531 1,705 1,971 2,566 5,357 6,546 1,832 Others 998 254 273 980 1,165 -796 -147 4,432 2,602 2,579 2,677 2,079 6,315 6,941 -10,905 8. T 1823 5 529 D 806 3.9 1,199 263 2 771 12 4,476 45 -7,190 9. Errors and omissions 247 -91 -498 -.6 57 1j,42 -558 263 -218 -1199 -2044 -646 -1825 -700 :,3 10. Monetary movements /b -2070 -667 -30 738 -1,586 677 -248 -3302 -981 :.439 -727 -616 -2651 3,898 10,022 /a Gross exports less imports of goods and services of the oil and LNG sector respectively. /b Until 1996/97 monetary movement based on the change of official reserve, based on the change of gross foreign asset afterward. A negative amount refers to an accumulation of assets. /c Preliminary figures. Source: Bank Indonesia. INDONESIA Table 10. Selected Non - oil Exports, 1986 - 1997 (US$ million) 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1. Rubber 720 966 1,296 1,013 885 924 1,039 959 1,268 1,986 1,894 1,505 2. Coffee 830 550 560 488 372 355 236 333 750 622 598 583 3. Palm oil & Cemel 103 169 325 296 253 335 465 535 878 973 1,017 1,662 4. Rattan 96 147 119 153 275 275 307 333 354 374 324 204 5. Foodstuff 95 94 180 248 308 382 467 455 603 670 747 881 6. Shrimps, Lobster, Tuna 284 352 588 558 705 811 802 902 1,056 1,093 1,058 1,097 7. OtherAnimalProducts 83 115 169 231 293 354 445 465 557 585 617 684 8. Tin 139 147 355 291 176 146 148 92 121 240 310 277 9. Copper 158 154 233 316 400 146 687 646 879 1,551 1,397 1,548 10. Nickel 120 131 367 466 319 512 269 304 334 410 374 233 11. Aluminum 202 219 288 318 216 304 214 165 204 354 320 280 12. Iron Steel 83 219 372 424 367 172 381 464 454 522 608 660 13. Plywood 1,004 1,707 2,092 2,325 2,690 356 3,219 4,128 3,650 3,452 3,544 3,477 14. Textiles 279 415 597 779 1,084 2,772 2,470 2,311 2,517 2,908 2,683 3,390 15. Handicraft 31 48 156 241 346 1,539 541 663 978 655 526 1,027 16. Electrical app. 65 48 81 162 237 379 1,017 1,301 1,774 2,724 3,593 3,261 17. Garment 527 614 822 1,248 1,570 2,203 3,212 3,395 3,096 3,324 3,187 4,181 18. Pulp and Paper 33 101 147 199 250 312 401 483 782 1,504 1,369 1,953 Others 2,261 2,991 3,844 5,612 5,832 8,292 10,916 12,025 13,493 17,097 12,915 16,337 Total Non-oil Exports 6,552 8,472 11621 13,919 14758 18054 2 2 29870 324 37079 43,240 Source: Bank Indonesia INDONESIA Table 11. Value of Export by Principal Country of Destination. 1985-1997 (US$ million) 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Asean 1,983 1,514 1,704 2,079 2,429 2,516 3,197 4,361 4,746 5,704 6,070 7,212 8,648 Malaysia 77 82 94 184 220 253 342 488 586 738 987 1,110 1,506 Thailand 81 83 87 151 234 189 267 353 468 401 703 823 847 Philippines 199 108 71 87 149 161 168 181 285 365 590 689 793 Singapore 1,626 1,239 1,449 1,653 1,818 1,902 2,410 3,314 3,372 4,150 3,767 4,565 5,462 Brunei 0 2 3 4 8 11 10 25 35 50 24 27 40 Hongkong 348 345 420 554 549 618 703 881 901 1,321 1,657 1,625 1,778 Japan 8,54 6,644 7,393 8,018 9,321 10,923 10767 10,761 11,172 1929 12,288 12,885 12,461 Other Asia 1,475 1,171 1,869 2,415 2,934 4,035 5,540 6,567 6,980 7,645 9,069 9,952 11,203 Africa 160 179 150 272 217 199 394 419 463 638 621 639 771 USA 4,040 2,902 3,349 3,074 3,497 3,365 3,509 4,419 5,230 5,829 6,322 6,795 7,113 Canada 46 60 94 101 108 139 172 289 304 322 359 368 398 Other America 326 182 48 47 50 102 184 328 469 562 759 758 950 Australia 149 159 310 293 387 403 628 746 774 705 915 1,216 1,511 OtherOceania 81 83 43 31 59 84 39 53 78 67 156 71 69 EEC 1,114 1,341 1,540 2152 2,340 3,029 3,743 4,844 5,296 6,615 7,446 7,848 United Kingdom 191 197 212 349 384 517 654 844 1,005 1,038 1,129 1,193 1,231 Netherlands 392 453 493 646 681 723 838 1,100 1,086 1,324 1,452 1,667 1,835 WestGermnany 255 334 361 456 493 750 907 978 1,178 1,263 1,382 1,489 1,459 Belgium&Luxemburg 45 91 109 177 173 210 258 401 366 409 539 682 788 France 71 93 102 164 209 286 386 495 500 426 520 564 497 Demnark 3 6 13 20 36 54 74 97 98 110 III 126 145 Ireland 2 2 7 17 22 35 43 46 40 37 37 38 55 Italy 152 152 175 221 234 276 382 583 615 661 784 744 823 Greece 3 6 3 2 4 9 18 29 46 63 79 86 88 Portugal 0 7 10 22 24 17 14 16 29 39 49 46 42 Spain 0 0 55 78 80 152 169 255 333 454 535 813 886 Soviet Union 78 52 82 38 100 81 40 70 125 91 134 134 65 Othersin Europe 194 174 133 144 171 183 229 231 288 417 452 714 627 Total 18,588 14,806 17,135 19,218 22,162 425677 29145 33,969 36,826 40054 45,418 49,815 53,443 Source: Central Bureau of Statistics INDONESIA Table 12. Value of Import by Principal Country of Origin, 1985-1997 (US$ million) 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Asean 962 1,120 1,243 1,305 1,766 2,430 2,465 2,593 2,603 2,928 3,953 4,885 5,276 Malaysia 52 50 139 276 369 326 407 525 517 579 767 824 865 Thailand 48 72 75 96 210 183 278 345 235 407 737 1,095 867 Philippines 23 28 82 36 63 649 81 52 57 65 81 90 127 Singapore 839 969 947 896 1,122 1,272 1,699 1,670 1,793 1,877 2,368 2,875 3,411 Brunei 0.0 1.0 0.0 1.0 2.0 0.0 0.0 1.0 1.0 0.0 0.5 0.8 6 Hongkong 53 94 104 133 179 273 232 229 247 241 275 262 325 Japan 2,644 3,128 3,596 3,386 3,767 5,300 6,327 6,014 6,248 7,734 9,217 8,504 8,252 Other Asia 1,727 1,681 1,924 2,266 3,203 4,633 5,156 5,496 5,972 6,870 8,376 8,662 8,171 Africa 160 103 153 201 202 170 195 213 140 332 608 643 684 USA 1,721 1,483 1,415 1,736 2,218 2,520 3,397 3,822 3,255 3,594 4,756 5,060 5,441 Canada 198 214 303 274 311 407 354 459 410 497 811 786 682 Other America 191 174 211 224 455 519 597 488 625 755 11,88 1,089 926 Australia 461 413 463 578 925 1,186 1,378 1,413 1,399 1,542 2,016 2,535 2,427 OtherOceania 69 71 80 96 98 115 118 136 161 186 206 245 234 EEC 1,705 1,796 2,354 2,511 2,572 4,060 4,705 5,400 5,651 5,827 7,253 7,880 7,191 United Kingdom 300 342 325 340 360 440 603 719 782 710 902 1,118 1,084 Netherlands 215 189 316 258 248 550 505 507 626 564 842 493 566 WestGermany 677 719 836 887 920 1,502 2,061 2,141 2,072 2,473 2,819 3,001 2,629 Belgium & Luxemburg 101 89 142 159 167 232 254 324 340 292 401 394 339 France 284 281 392 465 406 643 544 816 853 786 1,064 1006.0 1,016 Denmark 18 26 26 22 31 61 49 124 158 106 105 191.0 159 Ireland 9 4 6 6 8 74 13 23 21 22 41 39.3 35 Italy 101 144 237 248 348 410 536 558 523 670 791 1212.1 918 Greece 0 0 2 3 6 5 8 12 26 61 76.1 52 Portugal 0 2 6 3 2 6 4 2 2 4 8 4.6 23 Spain 0 0 66 120 82 136 131 178 262 174 219 345 370 Soviet Union 3 5 16 45 51 53 48 47 97 220 438 378 287 Othersin Europe 365 435 510 494 611 764 899 969 1,517 1,264 1,631 2,000 1,784 Total 10,259 10,717 12,372 13,24 16,358 22,430 2,71 27,279 28,325 31,990 40,628 42,929 41,680 Source: Central Bureau of Statistics INDONESIA Table 13. Summary of Public and Publicly Guaranteed External Debt, 1983-1996 /a (in million US$) 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 External debt data Disbursed and outstanding debt (DOD) /b 21493 22,274 2784 3,1 4 41,183 44,262 4,4 51,89 5,6 5716 63,95 6 Bilateral/multilateral 11,750 12,147 14,985 18,479 24,661 26,378 28,103 33,007 37,589 40,081 44,298 49,996 51,268 46,160 Other /c 9,743 10,127 11,799 14,142 16,186 14,805 16,159 15,037 14,302 13,583 12,858 13,929 14,041 13,948 Commitments 5,687 4,816 4,584 4,104 5,995 6,087 7,643 6,691 8,811 7,878 8,137 7,712 10,954 7,814 Bilateral/multilateral 2,294 2,745 2,433 1,923 4,793 4,730 5,768 5,282 6,321 5,185 4,923 5,495 7,108 5,057 Other /c 3,393 2,072 2,151 2,182 1,202 1,357 1,875 1,409 2,490 2,693 3,214 2,217 3,846 2,757 Gross disbursements 4,980 3,895 3,550 4,222 5,440 6,387 6,942 5,009 6,944 7,830 6,889 7,627 6,665 7,540 Bilateral/multilateral 1,731 1,937 1,602 1,900 3,655 4,180 4,275 3,969 5,104 5,075 4,477 4,915 4,254 3,955 Other /c 3,249 1,958 1,948 2,322 1,785 2,207 2,667 1,040 1,840 2,755 2,412 2,712 2,411 3,585 Net disbursements 3,688 2,295 1,206 1,602 2,033 1,965 2,004 405 2,289 2,647 1,198 2,081 1,048 1,048 Bilateral/multilateral 1,180 1,372 981 1,016 2,523 2,877 2,935 2,383 3,328 3,084 2,332 1,623 1,101 1,101 Other /c 2,508 924 226 586 -490 -912 -931 -1,978 -1,039 -437 -1,134 458 -53 -53 Net resource transfers 2,455 667 -438 -470 -234 -561 -775 -2,408 -655 -347 2035 1,167 -2,725 -2 725 Bilateral/multilateral 732 810 288 96 1,449 1,577 1,550 796 1,544 1,069 82 -850 -1,567 -1,567 Other /c 1,723 -143 -726 -566 -1,683 -2,138 -2,325 -3,204 -2,199 -1,416 -2,117 -317 -1,158 -1,158 Public debt service 2,524 3,228 3,988 4,692 5,674 6,948 7,717 7 417 7,599 8,177 8,924 8,794 9,487 11,663 Amortization 1,291 1,600 2,344 2,620 3,407 4,422 4,938 4,604 4,655 5,183 5,691 5,546 5,714 8,044 Interest 1,233 1,628 1,644 2,072 2,267 2,526 2,779 2,813 2,944 2,994 3,233 3,248 3,773 3,619 Public debt service 2,524 3,228 3,988 4,692 5,674 6,948 7,717 7,417 7,599 8,177 8,924 8,794 9,487 11,663 Bilateral/multilateral 999 1,127 1,314 1,805 2,202 2,605 2,724 3,171 3,573 4,016 4,403 5,778 5,804 7,164 Other /c 1,525 2,101 2,674 2,887 3,472 4,343 4,993 4,246 4,026 4,161 4,521 3,016 3,683 4,499 /a Data in this sector refer to public medium and long term loans. Loans with a maturity of less than one year, credits for LNG expansion, LPG and paraxylene projects, and grants are not included. /b End of year. /c Suppliers' credits, loans from financial institutions, export credits, bonds and nationalization only. Source: IBRD Debtor Reporting System, based on data provided by Bank Indonesia. INDONESIA Table 14. External Public Debt Outstanding as of December 31, 1996 (US$ '000) Type of creditor/ Debt outstanding Major reported creditor country Disbursed Undisbursed Total new commitments Jan 1-Dec 31 1996 Suppliers' Credits Japan 1,574,628 225,544 1,800,172 173,398 Total suppliers' credits 1,574,628 225,544 1,800,172 173,398 Financial Institutions Austria 21,381 159,982 181,363 144,736 Belgium 1,096 3,449 4,545 4,700 France 133,205 16,827 150,032 0 Hong Kong 1,092,723 302,362 1,395,085 0 Japan 597,052 506,358 1,103,410 60,356 Multiple Lenders 4,046,040 1,142,160 5,188,200 1,101,000 Netherlands - 65,654 65,654 67,925 Norway 631 40,521 41,152 26,875 Singapore - 500,000 500,000 0 Spain - 15,000 15,000 8,000 Switzerland - 4,045 4,045 4,411 United Kingdom 111,559 534,927 646,486 573,624 Total financial institutions 6,003687 3,291,285 9,294,972 12991,627 Bonds Multiple Lender 715,000 - 715,000 0 United States 426,000 - 426,000 400,000 Total bonds 1,141,000 - 1 141,000 400,000 Nationalization Netherlands 64,694 - 64 694 0 Total nationalization 64,694 0 64,694 0 Multilateral Loans Asian Dev. Bank 5,070,259 4,202,038 9,272,297 1,013,717 EEC 3,973 - 3,973 0 European Dev. Fund - 2,506 2,506 0 IBRD 11,138,491 4,619,029 15,757,520 1,193,700 IDA 735,546 - 735,546 0 Intl. Fund Agr. Dev. (IFAD) 67,542 89,683 157,225 0 Islamic Dev. Bank 18,056 129,723 147,779 66,864 Nordic Invest. Bank 199,424 36,685 236,109 50,000 Nordic Invest. Fund 15,522 - 15,522 0 Total multilateral loans 17,248,813 9,079,664 26,328,477 2,324,281 Source: IBRD Debtor Reporting System, based on data provided by Bank Indonesia. INDONESIA Table 14. External Public Debt Outstanding as of December 31, 1996 (US$ '000) Type of creditor/ Debt outstanding Major reported creditor country Disbursed Undisbursed Total new commitments Jan I-Dec 31 1996 Bilateral Loans Australia 730,419 237,106 967,525 68,467 Austria 5,333 - 5,333 0 Belgium 98,145 43,113 141,258 8,078 Brunei 92,079 - 92,079 0 Bulgaria 342 - 342 0 Canada 453,526 102,326 555,852 0 China 40,793 1,605 42,398 0 Czechoslovakia 11,403 - 11,403 0 Denmark 51,257 343 51,600 0 Egypt, Arab Republic of 478 - 478 0 France 1,028,483 113,551 1,142,034 0 German Dem. Rep. 9,378 - 9,378 0 Germany, FedRep.of 3,189,667 1,431,102 4,620,769 138,724 Hungary 2,845 - 2,845 0 India 59 - 59 0 Italy 189,336 20 189,356 312 Japan 19,094,764 6,859,255 25,954,019 2,235,824 Korea, Republic of 69,504 43,287 112,791 0 Kuwait 48,428 51,359 99,787 40,747 Netherlands 925,020 12,478 937,498 0 New Zealand 344 - 344 0 Norway 17,851 9,503 27,354 0 Other 21,333 7,000 28,333 0 Pakistan 1,161 - 1,161 0 Poland 16,017 - 16,017 0 Romania 2,297 - 2,297 0 Saudi Arabia 46,913 14,181 61,094 0 Spain 220,544 70,992 291,536 8,119 Switzerland 31,064 - 31,064 0 United Kingdom 46,771 20,081 66,852 0 United States 2,279,521 570,209 2,849,730 232,853 USSR 167,126 - 167,126 0 Former Yugoslavia 19,198 - 19,198 0 Total bilateral loans 28,911,399 9,587.511 38,498,910 2,733,124 Export Credits Austria 933,964 236,602 1,170,566 17,023 Belgium 184,707 87,538 272,245 5,830 Demmark 77,768 - 77,768 0 Finland 22,062 7,558 29,620 3,620 France 1,346,829 266,358 1,613,187 81,745 Germany, FedRep.of 71,813 2,792 74,605 20,968 Japan 59,605 11,138 70,743 0 Netherlands 271,947 203,707 475,654 6,329 Norway 14,906 42,042 56,948 0 Spain 80,530 29,366 109,896 0 Sweden 69,641 - 69,641 0 Switzerland 462,997 96,996 559,993 0 United Kingdom 1,138,135 474,555 1,612,690 56,228 United States 429,189 67,797 496,986 0 Total export credits 5,164,093 1,526,449 6,690,542 191,743 Total exteralpublicdebt 60108312 2710.453 83818.767 7814173 Source: IBRD Debtor Reporting System, based on data provided by Bank Indonesia. INDONESIA Table 15. Service Payments. Commitments. Disbursements and Outstanding Amounts of Total External Debt, 1980 - 2011 (US$ '000) Debt outstanding at Transactions during period Other Changes end of period Disbursed Including Commit- Disburse- Service Payments Cancel- Adjust- only Undisbursed ments ments Principal Interest Total lations ment /a Actual 1980 20,937,697 30,420,359 4,277,373 3,245,505 1,632,494 1,451,811 3,084,305 118,261 1,343,066 1981 22,761,139 33,805,826 5,008,002 3,845,429 1,784,995 1,707,127 3,492,122 163,286 325,746 1982 25,133,280 38,847,056 7,067,267 4,410,336 1,942,084 1,914,070 3,856,154 5,472 -78,480 1983 30,229,384 44,069,191 5,686,879 6,392,696 1,798,027 1,943,231 3,741,258 197,669 1,530,951 1984 32,025,604 46,152,969 4,816,038 4,840,324 2,270,173 2,575,904 4,846,077 26,707 -435,379 1985 36,715,241 52,664,318 4,583,947 4,170,204 3,421,579 2,401,135 5,822,714 514,815 5,863,797 1986 42,916,411 60,291,399 4,104,406 4,829,475 3,285,238 2,698,512 5,983,750 184,999 6,992,912 1987 52,494,917 71,957,065 5,994,820 7,489,770 4,057,399 2,940,534 6,997,933 635,419 10,363,663 1988 54,078,473 72,944,387 6,087,327 8,179,570 5,296,940 3,345,242 8,642,182 511,210 708,145 1989 59,401,728 78,040,191 7,643,407 9,008,916 5,993,871 3,839,209 9,833,080 307,264 3,753,532 1990 69,933,712 90,343,455 6,691,047 10,024,228 5,984,646 3,983,084 9,967,730 792,119 12,388,982 1991 79,547,725 100,178,464 8,811,427 11,758,429 6,870,955 4,620,831 11,491,786 2,102,942 9,997,479 1992 88,002,159 107,367,151 7,878,074 13,532,913 7,843,980 4,512,662 12,356,642 1,212,412 8,467,005 1993 89,171,878 109,869,339 8,136,637 8,084,176 9,137,539 4,951,220 14,088,759 428,180 3,931,270 1994 107,823,935 129,206,719 7,711,600 12,546,541 8,951,065 5,316,014 14,267,079 402,882 20,979,726 1995 124,398,325 149,419,065 10,954,145 13,628,469 10,196,922 6,219,010 16,415,932 570,584 20,021,415 1996 129,032,999 152,743,450 7,814,173 20,980,971 14,812,009 6,647,172 21,459,181 558,315 10,887,504 Projected 1997 119,593,753 134,874,459 - 8,090,965 17,530,210 5,745,352 23,275,562 338,779 1998 112,013,859 121,067,445 - 6,227,120 13,807,013 5,029,145 18,836,158 1999 102,016,804 107,270,478 - 3,799,933 13,796,988 4,279,204 18,076,192 - - 2000 92,455,370 95,356,770 - 2,352,287 11,913,722 3,531,079 15,444,801 2001 85,854,851 87,325,986 - 1,430,318 8,030,837 2,900,901 10,931,738 2002 80,731,356 81,388,698 - 813,850 5,937,342 2,519,312 8,456,654 2003 75,936,372 76,100,623 - 493,170 5,288,154 2,218,090 7,506,244 2004 71,026,147 71,087,853 - 102,545 5,012,770 1,912,997 6,925,767 2005 66,387,352 66,398,664 - 50,396 4,689,190 1,686,944 6,376,134 2006 61,552,237 61,552,619 - 10,926 4,846,041 1,391,565 6,237,606 2007 58,086,357 58,086,731 - - 3,465,880 1,137,501 4,603,381 2008 54,966,635 54,966,987 - - 3,119,717 976,131 4,095,848 2009 52,097,755 52,098,106 - - 2,868,880 834,066 3,702,946 2010 49,356,640 49,356,988 - - 2,741,116 706,700 3,447,816 2011 47,062,994 47,063,331 - - 2,293,646 582,543 2,876,189 /a This column shows the amount of arithmetic imbalances in the amount outstanding, including undisbursed, from one year to the next. The most common causes of imbalance are changes in exchange rates and transfers of debts from one category to another in the table. Source: IBRD Debtor Reporting System, based on data provided by Bank Indonesia. INDONESIA Table 16. Central Government Budget Summary, 1984185-1997198 IRp. billion) Actual 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1. Domestic revenues 15,931 20,939 17,385 21,731 23,414 31,504 42,193 42,582 48,863 56,113 66,418 73,014 84,792 108,184 2. Routine expenditures /a 9,406 12,006 13,717 17,341 20,935 24,335 29,121 29,050 33,605 40,290 44,069 50,435 61,568 84,606 3. Govennment saving (1-2) 6,525 8,933 3,669 4,390 2,479 7,169 13072 13,532 15,257 22,349 27 2 23,578 4. Development expenditures 8,375 11,740 9,091 9,770 12,317 15,394 18,251 23,075 26,906 28,428 30,692 28,781 33,454 46,938 5 Balance3 (-41 1849 -25807 423 -8225 5-179 -9542 -11,649 -12,605 3 0 -23361 Financed by: 6. Program aid 69 69 1,791 685 2,666 966 1,347 1,386 517 0 0 0 0 0 7. Project aid 1,711 2,760 3,722 4,871 7,458 7,365 7,035 8,590 10,581 10,753 9,838 9,009 11,048 23,817 8. Change in balances (-= increase) 69 -22 -90 -176 -286 -105 -3,203 -433 551 1,852 -1,495 -2,807 -818 -456 /a Includes debt service payment Source: Ministry of Finance. INDONESIA Table 17. Central Government Receipts, 1984/85 - 1997/98 (Rp. billion) Actual 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 Taxes on income 12850 1546 9,832 13,60 14586 19932 262 2,40 29,206 23 336 35 8 7,0 Income tax 2,042 2,071 2,603 2,876 4,432 5,755 8,250 9,727 12,516 14,759 18,350 19,239 25,496 28,458 Corporate tax on oil /a 10,430 12,925 6,687 10,083 9,536 13,381 17,740 15,070 15,331 12,503 13,399 13,276 19,872 35,357 IPEDA/property tax /b 213 165 239 212 362 604 786 944 1,107 1,485 1,632 1,923 2,280 2,655 Others/c 165 301 303 289 256 191 217 299 252 283 303 319 570 530 Taxes on domestic consunption 1,746 3,071 3,988 4,932 5.778 7,468 9,919 1106 12,984 1656 178 194 24, 29308 Sales/value added tax 874 2,191 2,986 3,826 4,367 5,986 8,119 9,146 10,742 13,944 14,087 16,655 20,393 24,501 Excises 873 880 1,003 1,105 1,410 1,482 1,800 1,915 2,242 2,626 3,001 3,299 4,217 4,807 Taxes on intemational trade 627 723 1.350 1,622 1,517 2,066 2,840 2,888 3,232 3,569 3,338 3,588 2,877 3,115 Import duties 541 674 1,269 1,442 1,376 1,892 2,800 2,871 3,223 3,555 3,218 3,543 2,807 2,990 Exporttax 86 48 80 180 141 173 40 17 9 14 120 44 70 125 Nontax receipts 708 1,685 2,216 1,717 1,533 2,039 2,442 2.593 3.440 6.945 7,260 7,966 9,087 8,761 Domestic revenue 15,930 20,939 1 23 241 31504 42J19 45 48 56,113 61 7,64 842 108,184 Development funds 1,781 2,830 5,513 5,556 2 8,330 8,382 9,975 11098 11193 9,838 9,009 11,048 23817 Program aid 69 69 1,791 685 2,666 966 1,347 1,386 517 441 0 0 0 0 Projectaid/d 1,711 2,760 3,722 4,871 7,458 7,365 7,035 8,590 10,581 10,753 9,838 9,009 11,048 23,817 Total revenues 23769 22898 27286 33,538 39,835 50,575 5257 59,961 67,306 7626 82.023 95,840 3 /a Since 1984/85, witholding tax eliminated as separate category and combined with income tax. /b Since January 1986, Ipeda replaced by duties from ownership of building. /c Classification changed to other tax (included in miscellaneous levies which consist of other taxes, stamp duty and proceeds from sales of petroleum products). /d Includes commercial bank and suppliers' credits for development projects. Source: Ministry of Finance. INDONESIA Table 18. Central Government Expenditures, 1984/85 - 1997/98 (Rp. billion) Actual 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 Personnel expenditures 3,141 3,930 4,438 4,545 5,489 6,206 7,088 8,166 9,554 11,145 12,595 13,001 18,021 19,175 Wages and salaries 2,259 3,005 3,459 3,499 4,209 4,829 5,598 6,352 7,595 9,145 10,181 11,048 14,507 15,236 Rice allowance 416 393 415 447 569 589 643 930 891 834 973 734 1,140 916 Food allowance 287 294 288 296 359 373 384 393 479 493 756 560 1,175 1,199 Other 100 158 177 177 203 243 265 281 315 418 368 370 748 792 External 79 80 100 127 149 172 199 211 274 255 317 290 451 1,031 Material expenditures 1,165 1,351 1,311 1,296 1,227 1,704 1,842 2,328 2,929 3,032 4,319 5,175 7,244 9,032 Transfers to regions 1,787 2,496 2,769 2,811 3,011 3,577 3,888 4,376 5,384 6,909 7,272 8,227 9,841 9,872 Debt service payments 2,776 3,323 5,058 8,157 11,4 11,924 12,816 12,838 14,524 17,163 18,403 .2 23,3 29,697 Intermal 30 20 0 0 78 149 239 240 275 121 104 1,620 1,293 1,640 External 2,746 3,303 5,058 8,157 10,962 11,776 12,577 12,598 14,249 17,042 18,218 17,896 22,139 28,057 Oil subsidy 508 450 0 402 82 707 3,306 930 692 1,280 687 0 1,416 15866 Others 30 457 140 129 86 217 182 411 524 761 793 1,923 1,615 964 Routine expenditures 9,406 12,006 13,717 17,341 20,935 23 29,121 29,050 33,605 40,290 44 61,568 84606 Development expenditures /sa0 9 2 317 _, _7 23,075 28428 30692 2 33454 46,938 17_781 23747 a 8 27111 33,252 392 372 , 6 2 792_6 95022 131545 /a For details see Tables 19 Source: Ministry of Finance. INDONESIA Table 19. Development Expenditures, 1984/85 - 1997/98 (Rp. billion) Actual 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1. Departments 2,680 4,861 2,660 3,151 2,365 3,154 5.134 7484 10,033 10,916 9,478 101 1 2. General INPRES programs 540 563 567 656 801 721 t.062 1,414 1,829 2,049 4,706 4,655 5,283 6,076 Subsidies to provinces 253 280 293 281 325 319 482 582 700 741 1,318 1,257 1,424 1,662 Subsidies to Regencies 195 185 188 262 361 270 400 583 802 916 2,558 2,474 2,920 3,465 Subsidies to villages 93 99 86 113 116 132 181 249 326 392 829 924 939 949 3. Sectoral INPRES programs 824 746 760 812 526 499 I.250 1 840 2.224 2,134 949 864 1.131 1,533 Primary schools 565 572 536 498 241 100 369 515 645 595 538 494 595 925 Health 71 94 109 93 90 101 i74 267 316 340 412 370 536 608 Markets /b 26 5 I1 3 4 8 13 5 2 3 0 0 0 0 Replanting/reforestration/c 61 4 30 34 16 16 33 74 96 111 0 0 0 0 Roads/d 101 71 74 184 175 274 661 979 1,165 1,084 0 0 0 0 4. Regonal development nsin land & buildinR tax /e 166 117 215 169 327 543 688 859 983 I 334 i,485 1,750 2,072 2,416 5. Irian Jaya and East Timor 3 24 7 5 6 0 0 0 0 0 0 0 0 0 Iola] (2-5) Transfer to loaleoenmAl LM l z ,jQ LM I= lm im L12 ZU LI ±2.2M 6. Fertilizer subsidv 732 917 467 763 200 1.5 265 300 175 175 815 143 368 547 7. Giovemment capital participation (PritP) 208 762 232 25 177 888 644 988 138 381 425 380 505 119 8. Others 1,502 1,027 498 293 572 1,075 2,173 1.600 943 689 1,022 1,057 961 854 Taal (I-i 6.655 9.016 5.407 5874 974 L2a2 1L216 14485 1625 = J8 !9759 23043 9. Pro*ectaid 1,781 2,830 5,513 5,556 8,330 8382 9,975 11,098 10753 9,838 9 1400 23817 Tntal( 8436 11845 10920 1439 0098 6360Q L= ,= 19598 2446 272 28,428 2 8768 341 4 6,9 38 to. AL Jo Ila 1J2 9 ia 1 l -1 2 L !_7!1 A L =12 -L 2 ( - = increases) /a Included Defence Agency /b Since 1994/1995 subsidies for market is accomodated to subsidies to Regencies /c Since 1994/1995 subsidies for replanting is accomodated to subsidies to regencies, and for Reboisation accomodated to subsidies to Villages /d Since 1994/1995 Road subsidies are accomodated to Province and Regency subsidies /e Including duties of gains from ownership of land and building /f Differences between total development expenditure in this table and total indicated in Central Government Budget Summary (table 16) Source: Ministry of Finance INDONESIA Table 20. Money Supply (MI), 1990 - 1997 (Rp. billion) End of Period Total Currency Demand deposits Change over period Amount (%) Amount (%) Amount (%)- 1983 7,569 3,333 44 4,236 56 448.0 6.3 1984 8,581 3,712 43 4,869 57 1012.0 13.4 1985 10,104 4,440 44 5,664 56 1523.0 17.7 1986 11,677 5,338 46 6,339 54 1573.0 15.6 1987 12,685 5,782 46 6,903 54 1008.0 8.6 1988 14,392 6,246 43 8,146 57 1707.0 13.5 1989 20,114 7,426 37 12,688 63 5722.0 39.8 1990 1 22,155 7,780 35 14,375 65 7,145 47.6 II 23,205 8,279 36 14,926 64 7,281 45.7 HI 22,982 8,930 39 14,050 61 5,789 33.7 IV 23,819 9,094 38 14,725 62 3,705 18.4 1991 I 23,570 9,026 38 14,544 62 1,415 6.4 11 24,609 8,824 36 15,785 64 1,404 6.1 III 25,805 9,025 35 16,780 65 2,823 12.3 IV 26,342 9,346 35 16,996 65 2,523 10.6 1992 1 27,318 11,025 40 16,293 60 3,748 15.9 11 26,844 9,944 37 16,900 63 2,235 9.1 III 27,626 10,440 38 17,186 62 1,821 7.1 IV 28,779 11,478 40 17,301 60 2,437 9.3 1993 1 30,592 12,324 40 18,268 60 3,274 12.0 11 31,563 12,386 39 19,177 61 4,719 17.6 III 35,041 13,106 37 21,935 63 7,415 26.8 IV 36,805 14,431 39 22,374 61 8,026 27.9 1994 1 37,908 15,340 40 22,568 60 7,316 23.9 II 39,886 15,825 40 24,061 60 8,323 26.4 III 42,195 17,555 42 24,640 58 7,154 20.4 IV 45,374 18,634 41 26,740 59 8,569 23.3 1995 I 44,908 18,902 42 26,006 58 7,000 18.5 11 47,045 19,186 41 27,859 59 7,159 17.9 Hi1 48,981 19,564 40 29,417 60 6,786 16.1 IV 52,677 20,807 39 31,870 61 7,303 16.1 1996 I 53,162 21,121 40 32,041 60 8,254 18.4 II 56,448 21,271 38 35,177 62 9,403 20.0 III 59,684 21,055 35 38,629 65 10,703 21.9 IV 64,089 22,487 35 41,602 65 11,412 21.7 1997 1 63,565 23,312 37 40,253 63 10,403 19.6 II 69,950 23,754 34 46,196 66 13,502 23.9 III 66,258 23,916 36 42,342 64 6,574 11.0 IV 78,343 28,424 36 49,919 64 14,254 22.2 Source: Bank Indonesia. INDONESIA Table 21. Changes in Factors Affecting Money Supply, 1983-1997 (Rp. billion) Public Sector Claims Net claims on official Total change in Broad Net on entities Claims on Net Money Supply (M2) End of foreign Central & public business & other Amount Percentage period assets Government enterprises individuals items (%) /c 1983 /a 3,272 -1,534 61 2,371 -582 3,588 32.4 1984 3,531 -3,235 190 3,646 -858 3,274 22.3 1985 1,751 -214 511 3,333 -165 5,216 29.1 1986 /b 1,870 469 252 4,547 -2,630 4,508 19.5 1987 2,444 1,538 729 6,245 -4,732 6,224 22.5 1988 -549 247 659 11,069 -3,313 8,113 23.9 1989 409 -1,175 1,444 22,132 -6,104 16,706 39.8 1990 -2,171 -3,877 -921 35,809 -2,914 25,926 44.2 1991 7,499 -1,355 104 20,263 -12,083 14,428 17.0 1992 7,013 -1,292 492 15,257 -1,475 19,995 20.2 1993 -934 731 1,505 30,230 -5,383 26,149 22.0 1994 -4,428 -4,686 -485 37,845 1,064 29,310 20.1 1995 7,354 -7,472 1,305 47,504 -565 48,126 27.6 1996 18,015 -2,757 4,626 51,768 -5,658 65,994 29.6 1997 17,344 -16,486 5,031 132,031 -70,909 67,011 23.2 /a Does not include revaluation adjustment to foreign exchange balances resulting from the rupiah devaluation of March 30, 1983. The adjustments amount to Rp. 1,962 billion in net foreign assets; Rp. 131 billion in net claims on Central government; Rp. 106 billion in blocked account; Rpl46 billion in official entities and public enterprises; Rp. 148 billion in claims on private enterprises and individuals; Rp. 620 billion in time and savings deposits; and Rp. 1,399 billion in net other items. /b Includes changes resulting from the exchange rate adjustment on September 12, 1986 from Rpl,134 to Rpl,644 per US Dollar /c Includes government blocked account Source: Bank Indonesia. INDONESIA Table 22. Consolidated Balance Sheet of the Monetary System, 1983-1997 (Rp. billioni Endofperiod 1983/a 1984 1985 1986/b 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Netforeignassets 8,837 12,368 14,119 15,99 18,43 17,4 l2 16,122 23 I 30,634 20 232,626 54 67,9 Domestic credit 9,744 10,34 5 19,243 27,755 39 730 62,131 93,142 4 126,611 19 191,751 233,088 ~2S6725 407_301 Claims on public sector Central govemment -5,739 -9,098 -9,376 -8,878 -7,337 -7,108 -8,309 -12,202 -13,581 -14,873 -14,142 -18,828 -26,300 -29,057 .45,543 Claims on official entities and public enterprises 5,040 5,230 5,741 5,993 6,722 7,381 8,825 7,904 8,008 8,500 10,005 9,520 10,955 15,581 20,612 Government-blocked account -240 -116 -52 -.1 -84 .66 -40 -24 0 0 0 0 0 0 0 Claims on private enterprises and individuals 10,683 14,329 17,662 22,209 28,454 39,523 61,655 97464 117,727 132,984 163,214 201,059 248,433 300,201 432,232 Assets=liabilities 18,581 22,713 28,094 35,232 46,188 57,614 S0,424 109,264 135,775 157,245 188,777 217,023 265,714 337,366 475,286 Import deposits 242 218 268 402 424 684 632 1,048 966 890 1,699 1,541 1,779 2,099 1,419 Netotheritems 3,676 4,558 4,673 7,169 11,879 14,932 21,088 23,586 35,751 37,302 41,876 40,970 41,297 46,635 118,224 Money and quasi money 14,663 17,9327 2 2661 33885 41,99S 58,704 S4,630 99,058 119,053 145_202 174,512 222,638 288,632 355,643 Money 7,569 8,581 10,104 11,677 12,685 14,392 20,114 23,819 26,341 28,779 36,805 45,374 52,677 64,089 78,343 Currency 3,333 3,712 4,440 5,338 5,782 6,246 7,426 9,094 9,346 11,479 14,431 18,634 20,807 22,487 28,424 Demand deposits 4,236 4,869 5,664 6,339 6,903 8,146 12,688 14,725 16,995 17,301 22,374 26,740 31,870 41,602 49,919 Quasi money 7,094 9,356 13,049 15,984 21,200 27,606 38,590 60,811 72,717 90,274 108,397 129,138 169,961 224,543 277,300 /a Includes change resulting from the foreign exchange balances adjustment of March 30, 1983 from Rp702.50 to Rp970 per VS Dollar, amrounting to Rp. 1,962 billion in net foreign assets; Rp. 131 billion in net claims on Central govemment; Rp. 146 billion in claims on ofticial entities and public enterprises; Rp. 106 billion in blocked account; Rp. 148 billion in claims on private enterprises and individuals; Rp. 620 billion in time and savings deposits; and Rp. 1,399 billion in net other items. /b Includes changes resulting from the exchange rate adjustment on September 12, 1986 from Rpl, 134 to Rpl,644 per US Dollar Source: Bank Indonesia. INDONESIA Table 23. Banking System Credits by Economic Sector, 1983-1997/a (Rp. billion) Sectors 1983/f 1984 1985 1986/g 1987 1988 1989 1990 1991 /h 1992 1993/i 1994 1995 1996 1997 Agriculture 1,226 1,318 1,656 2,097 2,656 3,610 5,283 7,176 8,465 1,2 ,07 13860 I525 17,630 6 In rupiah 1,226 1,318 1,656 2,097 2,630 3,572 5,214 6,884 7,979 9,173 10,368 12,026 13,661 15,158 20,340 In foreign exchange 0 0 0 0 26 38 69 292 486 1,108 1,689 1,834 1,864 2,472 5,662 Miningb 806 384 258 394 385 444 591 615 743 762 777 799 913 1,693 5,316 In rupiah 806 384 258 394 372 424 456 570 614 605 416 359 434 716 2,769 Inforeign exchange 0 0 0 0 13 20 135 45 129 157 361 440 479 977 2,547 Manufacturing industry/c 5,207 6,667 7,592 9,005 10,917 14,956 20,333 30,502 33 131 37,458 53 601 72,088 78, 111,679 In rupiah 4,595 6,205 7,069 8,839 10,508 13,994 17,654 25,002 24,828 26,197 36,334 42,236 48,476 51,984 56,123 In foreign exchange 612 462 523 166 409 962 2,679 5,500 8,303 11,261 15,098 17,975 23,612 26,866 55,556 Trade/d 5,132 6,344 7,255 8,399 10,247 13,888 20,109 29,737 33 049 32944 37 54224 70,586 82, In upiah 4,781 6,299 7,214 8,329 10,065 13,682 19,342 27,267 28,842 28,100 31,470 36,840 43,608 55,763 57,471 In foreign exchange 351 45 41 70 182 206 767 2,470 4,207 4,844 6,324 7,532 10,616 14,823 24,793 Service rendering industryn 2,277 3,169 4,183 4,345 5,460 7,382 10424 17,897 20,066 2SS9 35,824 50,S06 66,584 91,655 113,569 In rupiah 2,253 3,088 4,047 4,130 5,151 6,917 9,600 14,943 16,683 21,979 30,167 42,453 57,432 78,392 85,598 In foreign exchange 24 81 136 215 309 465 824 2,954 3,383 3,920 5,657 8,353 9,152 13,263 27,971 Others 651 931 1,213 2,162 3,187 3,721 6,866 11,769 17,371 1 1 18832 25277 4 In upiah 651 929 1,210 2,156 3,143 3,667 6,709 11,197 16,326 14,653 12,374 18,824 25,265 32,478 39,233 Inforeignexchange 0 2 3 6 44 54 157 572 1,045 921 13 8 12 29 71 _Q1 159957 26,402 440 97,696 1 234611 2 378,34 In rupiah 14,312 18,223 21,454 25,945 31,869 42,256 58,975 85,863 95,272 100,707 121,129 152,738 188,876 234,491 261,534 In foreign exchange 987 590 703 457 983 1,745 4,631 11,833 17,553 22,211 29,142 36,142 45,735 58,430 116,600 /a Credits outstanding end of period. Includes investment credits, KIK and KMKP Excludes interbank credits, credits to central government and to nonresidents, bridging finance credit, foreign exchange component of project aid project aid, local cost of investment fund accounts and credit extended to bank branches abroad /b Includes credits to PERTAMINA for repayment of foreign borrowing. Since March 1979, credit in foreign exchange to PERTAMINA has been converted to rupiah credits. Ic PTocessing of agricuhlural products is classified under manufacturing industry according to Internaional Standard Industrial Classification (ISIC 1968). Starting 1980, credits for construction which were previously included in manufacturing industry are now included in service-rendering industry. /d Includes credits for food procurement and hotel projects. /e Credits for electricity, gas and water supply are included in service-rendering industry sector. /f Includes foreign exchange revaluation announting to Rp. 251 billion. /g Includes revaluation adjustment dueto the devaluation of September 12, 1986. /h Since 1991 excludes Bark Indonesia /i As of 1993 includes Commercial Banks ex Non-Bank Financial Institutions. Source: Bank Indonesia INDONESIA Table 24. Banking Credits Outstanding in Rupiah and Foreign Exchange by Group of Banks, 1984 - 1997/a (Rp. billion) 1984 1985 1986 /d 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Bank Indonesia direct credits /b 870 964 1,144 1,347 1,547 696 718 783 771 158 130 71 26 50 Inrupiah 870 964 1,144 1,347 1,547 696 718 783 771 158 130 71 26 50 In foreign exchange 0 0 0 0 0 0 0 0 0 0 0 0 0 0 State banks 13,345 15,374 17,782 21,676 28,631 39,579 55,826 59,861 68,236 71,760 80,010 93,480 108,92 153,26 In rupiah 12,959 14,925 17,711 21,225 27,614 37,151 50,648 52,628 58,133 59,738 68,085 79,394 93,051 113,436 In foreign exchange 386 449 71 451 1,017 2,428 5,178 7,233 10,103 11,805 11,925 14,086 15,874 39,830 Private NationalBanks/c 3,552 4,746 6,272 8,423 11,10 20,216 34,975 44A2 63995 90,504 116,88 156,412 176,26 In rupiah 3,480 4,631 6,061 8,175 11,536 18,955 31,458 39,467 39,685 55,076 76,506 99,466 130,194 135,475 In foreign exchange 72 115 211 248 374 1,261 3,517 4,985 5,667 8,919 13,998 17,420 26,218 40,787 Foreign Banks 1,046 1,073 1,204 1,406 1,913 3,115 6,177 8,512 9,330 14,733 18,366 24,245 27,584 48,606 Inrupiah 914 934 1,029 1,122 1,559 2,173 3,039 3,177 2,889 6,315 8,147 10,016 11,245 12,623 In foreign exchange 132 139 175 284 354 942 3,138 5,335 6,441 8,418 10,219 14,229 16,339 35,983 Tal 18813 2157 26,402 352 44,001 63,606 97,696 113608 9 1 9 189010 234,682 292,947 378184 In rupiah 18,223 21,454 25,945 31,869 42,256 58,975 85,863 96,055 101,478 121,287 152,868 188,947 234,516 261,584 In foreign exchange 590 703 457 983 1,745 4,631 11,833 17,553 22,211 29,142 36,142 45,735 58,431 116,600 /a Credits outstanding at end of period. Includes investment credits, KIK and KMP. Excludes interbank credits, credits to Central Government and to non-residents, bridging finance credit, foreign exchange components of project aid, project aid, local cost of investment fund accounts and credits extended to bank branches abroad. /b Excludes liquidity credits, includes credits to Pertamina for repayment for foreign borrowing. /c Includes regional gevemment banks /d Includes revaluation adjustment due to devaluation on September 12, 1986. Source: Bank Indonesia. INDONESIA Table 26. Commercial Banks Outstanding Investment Credits in Rupiah and Foreign Exchange by Economic Sector, 1984-1997 (Rp. billion) End of period 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 /b 1994 1995 1996 1997 Credits outstanding/a 4,140 5.156 6,486 7,635 14 14292 2 2 35223 4 3 436 2 7 3 100,735 Agriculture 555 948 1,292 1,690 2,284 3,357 4,520 5,450 7,050 8,730 9,865 10,564 11,737 14,629 Mining 178 224 367 342 372 358 373 459 459 310 196 256 405 1,321 Manufacturing industty 2,440 2,466 3,098 3,567 4,817 6,424 8,920 10,484 15,416 17,371 19,516 23,159 24,248 35,094 Trade 168 396 443 435 632 1,022 2,157 3,372 4,099 7,192 6,154 8,468 11,891 17,928 Servicerenderingindustry 770 1,098 1,215 1,560 2,249 3,010 4,307 5,032 7,150 9,110 11,405 16,827 22,162 31,763 Others 29 24 71 41 68 121 457 951 1,049 0 0 0 0 0 /a Excludes Small Scale Investment Credits, investment credits to the Central Govenmment and to non resident, bridging finance credit, foreign exchange components of project aid, project aid, local cost of investment fund accounts and credit extended bank branches abroad. /b Since of April 1993 includes Commercial Banks exs. Non-Bank Financial Institutions. Source: Bank Indonesia. INDONESIA Table 26. Commercial Banks' Outstanding Funds in Rupiah and Foreign Exchange by Group of Banks, 1984-1997 /a (Rp. billion) 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Deposits State Banks 10,035 12,916 15,193 18,111 22,527 29,731 40,638 41,812 52,600 61,684 64,283 75,920 90,434 133,042 Private Banks 3,020 4,550 5,435 8,040 11,167 19,655 33,951 43,143 51,079 67,541 88,925 117,451 164,979 177,193 Regional Development Banks 700 825 797 954 1,300 1,674 2,550 3,228 3,697 4,773 6,183 7,812 8,522 8,796 Foreign Banks 1,743 1,883 2,086 2,226 2,516 3,315 6,016 6,935 7,474 8,681 11,015 13,581 17,783 38,582 Total 15,498 20174 23,511 29,331 37,510 54,375 83,155 9,118 114,850 142,679 1, 214,764 281,71 357,613 Share in Total Deposits State Banks 64.8 64.0 64.6 61.7 60.1 54.7 48.9 44.0 45.8 43.2 37.7 35.4 32.1 37.2 Private Banks 19.5 22.6 23.1 27.4 29.8 36.1 40.8 45.4 44.5 47.3 52.2 54.7 58.6 49.5 Regional DevelopmentBanks 4.5 4.1 3.4 3.3 3.5 3.1 3.1 3.4 3.2 3.3 3.6 3.6 3.0 2.5 Foreign Banks 11.2 9.3 8.9 7.6 6.7 6.1 7.2 7.3 6,5 6.1 6.5 6.3 6.3 10.8 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Annual Growth Rate in Deposits StateBanks 19.7 28.7 17.6 19.2 24.4 32.0 36.7 2.9 25.8 17.3 4.2 18.1 19.1 47,1 Private Banks 42.5 50.7 19.5 47.9 38.9 76.0 72.7 27.1 18.4 32.2 31.7 32.1 40.5 7.4 Regional Development Banks 40.6 17.9 -3.4 19.7 36.3 28.8 52.3 26.6 14.5 29.1 29.5 26.3 9.1 3.2 Foreign Banks 24.7 8.0 10.8 6.7 13.0 31.8 81.5 15.3 7.8 16.1 26.9 23.3 30.9 117.0 Total 25.0 30.2 16.5 24.8 27,9 45.0 52.9 14.4 20.7 24.2 19.4 26.0 31.2 26.9 /a Total funds are the sum of demand, time and savings deposits includes non resident and central govemment accounts Source: Bank Indonesia. INDONESIA Table 27. Interest Rates 1985-1997 (% p.a) Time Deposits /a Year SBI's SBPU's Interbank Discount Discount State Bank Private National Bank /a Call Money Rate Rate Less than 3 6 12 24 Less than 3 6 12 24 /a /b /b 3 mos /c mos mos mos mos 3 mos /c mos mos mos mos 1985 n.a n.a n.a 13.4 14.6 16.0 17.8 18.3 15.6 17.2 18.9 20.8 21.8 1986 n.a n.a n.a 13.3 14.2 14.7 15.2 16.0 15.4 16.1 17.0 18.3 21.6 1987 n.a n.a n.a 15.5 17.0 17.3 17.0 17.4 17.8 19.2 20.1 19.8 20.5 1988 14.22 n.a n.a 15.8 16.2 18.2 17.8 16.8 20.8 20.5 21.0 20.9 21.2 1989 12.02 12.10-14.90 n.a 15.1 16.2 17.2 18.1 18.8 17.5 18.3 19.3 20.2 20.8 1990 21.20 17.45 20.54 21.2 20.6 19.4 18.1 18.5 22.6 21.4 20.5 19.8 21.0 1991 14.91 17.37-20.17 18.75-25.74 20.0 21.3 22.3 22.5 21.0 21.8 22.6 23.3 23.4 18.6 1992 11.95 13.00-17.00 13.50-18.50 17.4 18.6 19.8 20.9 21.0 19.2 20.4 21.2 21.7 18.7 1993 8.74 7.99-12.00 10.09-13.39 11.2 10.8 14.3 15.7 18.5 14.8 15.8 16.6 17.1 17.4 1994 9.74 7.65-11.48 11.00-15.50 9.7 9.9 11.6 12.1 14.1 13.6 13.8 13.8 14.0 17.8 1995 13.56 11,81-13.53 14.89-15.75 14.4 13.9 14.8 13.9 14.0 17.4 17.4 17.2 16.0 16.2 1996 14.06 11.76-13.00 15.30-15.75 15.3 15.0 16.3 16.0 15.2 17.5 17.8 17.7 17.3 16.6 1997 33.63 7.29- 18.35 14.75 - 15.25 19.4 20.7 15.3 15.6 15.4 24.0 20.3 17.1 17.1 16.9 /a Weighted average rate. Overnight interest rate on Interbank Call Money transactions recorded at the Jakarta Clearing House /b Seven days Money market securities (SBPUs) and Bank Indonesia Certificate transactions /c One month time deposit rate used as representative rate. Source: Bank Indonesia. INDONESIA Table 28. Principal Agricultural Products by Subsectors, 1984-1997 ('000 tons) Product 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Food crops Paddy /a 38,136 39,033 39,727 40,078 41,676 44,726 45,179 44,689 48,240 48,181 46,641 49,744 51,101 49,377 Com 5,288 4,330 5,920 5,155 6,652 6,193 6,734 6,256 7,995 6,460 6,869 8,246 9,307 8,771 Cassava 14,167 14,037 13,312 14,356 15,471 17,117 15,830 15,954 16,516 17,285 15,729 15,441 17,002 15,134 Sweet potato 2,156 2,161 2,091 2,013 2,159 2,224 1,971 2,039 2,171 2,088 1,845 2,171 2,018 1,847 Soyabeans (shelled) 769 870 1,227 1,161 1,270 1,315 1,487 1,555 1,870 1,709 1,565 1,680 1,517 1,357 Groundnuts (shelled) 535 528 642 533 589 620 651 652 739 639 632 760 738 688 Fisheries Saltwater fish 1,713 1,822 1,923 2,017 2,170 2,272 2,370 2,505 2,692 2,886 3,080 3,293 3,384 3,482 Freshwaterfish 548 573 607 653 711 765 793 807 851 909 900 971 1,069 1,099 Meat and dairy Meat 742 808 860 895 937 971 1,028 1,099 1,239 1,378 1,493 1,507 1,632 1,697 Eggs 355 370 432 452 443 456 484 510 572 573 689 736 780 783 Milk/b 179 192 220 235 265 338 346 360 367 388 427 433 441 446 Cash crops Rubber 1,033 1,055 1,109 1,130 1,176 1,209 1,275 1,284 1,399 1,476 1,499 1,573 1,574 1,549 Coconut/copra 1,750 1,920 2,114 2,075 2,139 2,208 2,332 2,337 2,455 2,588 2,649 2,704 2,761 2,752 Coffee 315 311 339 380 386 401 413 419 437 439 450 458 459 454 Cloves 49 42 55 58 61 55 66 84 73 67 78 90 89 59 Tea 126 127 136 126 137 141 155 159 154 165 139 154 169 151 Sugar 1,810 1,899 1,894 2,176 1,918 2,108 2,119 2,253 2,307 2,329 2,454 2,077 2,094 2,190 Tobacco 108 161 164 113 116 81 156 161 112 121 130 140 151 137 Pepper 46 41 40 49 56 68 70 69 65 66 54 59 52 50 Cotton 12 45 53 48 40 39 33 14 13 14 14 8 8 5 Palm oil 1,147 1,243 1,350 1,506 1,800 1,965 2,413 2,658 3,266 4,003 4,008 4,480 4,899 5,385 Palm kernel 247 258 266 319 360 393 504 551 559 707 797 942 1,085 1,190 Forestry /c Teakwood 758 777 798 689 725 725 780 778 780 745 805 902 842 843 Other timber 27,716 24,277 27,403 28,255 28,485 24,409 25,312 23,892 28,267 26,848 24,027 24,850 26,069 26,084 /a Dry husk paddy grain ready for milling. /b In million of liters /c In '000 cubic meters. Source: Central Bureau of Statistics and Ministry of Agriculture, and Ministry of Forestry INDONESIA Table 29. Production of Maior Crops by Type of Estate, 1984-1997 ('000 tons) Product 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997a/ Smaliholders Rubber 704 720 763 795 839 853 913 919 1,030 1,102 1,139 1,191 1,193 1,181 Coconut/copra 1,737 1,905 2,098 2,055 2,117 2,193 2,313 2,317 2,426 2,558 2,601 2,662 2,687 2,680 Coffee 291 288 316 359 362 377 384 390 409 410 422 430 436 431 Cloves 48 41 53 57 59 53 64 82 70 66 76 88 87 57 Tea 24 30 31 25 26 25 31 32 32 37 30 33 34 31 Sugar 1,397 1,450 1,417 1,744 1,499 1,621 1,609 1,610 1,653 1,685 1,673 1,368 1,512 1,571 Tobacco 104 156 159 110 113 77 152 157 110 119 128 137 148 134 Pepper 46 41 40 49 56 68 70 69 65 66 54 59 52 50 Cotton 12 45 53 48 40 38 33 13 13 14 14 8 8 5 Palm oil 0 0 0 0 0 0 0 0 0 582 839 1,001 1,134 1,294 Palm kemel 0 0 0 0 0 0 0 0 0 105 162 196 233 265 Private estates Rubber 121 124 150 135 143 141 145 146 163 166 172 182 179 177 Coconut/copra 13 15 16 20 22 15 19 20 29 30 27 28 55 54 Coffee 9 10 10 8 10 11 13 13 11 12 11 11 10 10 Cloves I 1 2 1 2 2 2 2 2 2 2 2 2 2 Tea 18 17 18 21 23 26 29 30 28 33 31 34 39 34 Sugar 83 106 106 109 103 181 204 257 178 251 272 287 265 256 Tobacco 0 0 0 0 0 0 0 0- - - - - - Pepper 0 0 0 0 0 0 0 0- Cotton 0 0 0 0 0 0 0 0- Palm oil 329 339 385 352 435 597 789 884 1,077 1,370 1,597 1,864 2,058 2,291 Palmkernel 69 71 73 76 87 119 179 181 172 209 296 362 454 506 Government estates Rubber 208 211 196 200 194 215 217 219 205 208 188 200 202 190 Coconut/copra 0 0 0 0 0 0 0 0 0 18 21 15 19 18 Coffee 15 13 13 13 14 13 16 16 17 17 18 17 13 13 Cloves 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Tea 84 80 87 80 88 90 95 97 94 95 78 87 97 86 Sugar 330 343 371 323 316 306 306 386 476 394 509 422 317 363 Tobacco 4 5 5 3 3 4 4 4 2 2 2 3 3 3 Pepper 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Cotton 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Palm oil 818 904 965 1,154 1,365 1,368 1,624 1,774 2,189 2,051 1,572 1,614 1,707 1,800 Palm kernel 178 187 193 243 273 274 325 370 388 393 339 384 397 419 /a Preliminary figures. Source: Central Bureau of Statistics and Ministry of Agriculture INDONESIA Table 30. Rice - Area Harvested, Production and Yield, 1984 - 1997 Area Average Paddy Rice Year harvested yield output output /a Growth ('000 ha) (tons/ha) ('000 tons) ('000 tons) (%) 1984 9,764 3.91 38,134 25,933 8.0 1985 9,902 3.97 39,033 26,542 2.3 1986 9,988 4.00 39,726 27,014 1.8 1987 9,923 4.04 40,078 27,253 0.9 1988 10,138 4.11 41,676 28,340 4.0 1989 10,531 4.25 44,726 29,072 2.6 1990 10,502 4.30 45,179 29,366 1.0 1991 10,282 4.35 44,689. 29,048 -1.1 1992 11,103 4.34 48,240 31,356 7.9 1993 11,013 4.38 48,181 31,318 -0.1 1994 10,734 4.35 46,641 30,317 -3.2 1995 11,439 4.35 49,744 32,334 6.7 1996 11,570 4.42 51,102 33,216 2.7 1997 11,141 4.43 49,377 32,095 -3.4 a/ Estimated on the basis of a conversion factor of 0.68 from paddy into rice for the years prior to 1989, and a factor of 0.65 for the years 1989 and following. Source: Central Bureau of Statistics. INDONESIA Table 31. Index of Manufacturing Production by Selected Industry Group, 1986-1997 /a (1983 = 100) Code of Industry Description/b 1986 1987 1988 1989 1990 1991 1992 1993 1994/c 1995 1996 1997/d Group 31121 Condensed and dried milk, creamnery and processed butter, fresh and preserved cream (6) 87.5 94.0 123.3 122.5 142.2 154 1 160.6 215 6 132.3 156 5 237.2 265 4 31330 Malt& liquorcontainingmalt(5) 94.4 113.2 116.4 117.2 146.8 160.1 142.0 173.5 115.5 137.9 120.9 696 31420 Clove cigarettes (80) 147.4 166.5 177.7 196.2 226.4 1655 165.3 176.2 117.2 120.5 109.7 1429 31430 Other cigarettes (13) 78.8 81.9 79.2 782 807 95.4 111.3 87.1 118.0 119.8 152.5 143.6 32111 Spinning yarns (53) 129.9 130.5 1690 196.2 253.5 273.7 313.1 312.0 1009 114.7 1275 123.6 32114 Weavingmills(exceptjuteweavingproducts(409) 1307 144.3 172.9 187.6 216.9 2150 238.2 236.3 104.1 1082 103.7 98.3 32117 Batik(65) 95.8 81.8 83.9 111.1 144 0 218 5 190.0 176 5 1418 140.5 190.7 258 3 32130 Knitting mills (73) 219.2 233.3 239.8 312.8 347.2 449.2 3320 324.4 155.1 135.5 137.8 989 32411 Footwear(32) 113.1 91.5 111.2 184.9 2082 230.4 324.5 355.2 95.6 88.0 96.1 82.5 33113 Plywood(40) 139.3 1927 242.1 266.2 2567 273.7 295.7 268.0 104.5 103.4 900 99.0 34112 Paperproductsfocultural(23) 159.2 159.7 242.0 251.5 298.1 2922 429.8 459.2 100.7 1092 128.0 145.8 35119 Basic chemicals (50) 119.0 156.4 139.0 1529 174.0 189.5 1518 178 1 86.7 76.6 66.4 70.2 35122 Fertilizer(10) 166.0 121 8 129.7 143.7 158.1 158.1 1521 153.6 108.6 98.2 89.4 78.7 35210 Paint, vamish, and lacquers (25) 135.6 126.5 91.2 129.9 136.6 127.2 182.6 283.7 101.6 93.8 104 1 122.9 35232 Cosmetic (8) 108.7 142.3 175.5 154.4 167.3 178.5 216.0 113.6 997 957 61.9 57.1 35511 Tyres and tubes (22) 109.5 79.2 109.7 141 2 157.4 205.6 223.8 220.2 89.8 92 3 97.3 90.9 36211 Glassandglassproducts(21) 178.0 149.3 1246 145.2 163.3 254.6 236.8 265.8 118.6 1446 136.6 146.5 36310 Cement (7) 144.4 150.9 149 8 198 1 206.4 217.9 244.9 300.7 134.4 165.8 177.8 229 4 37101 Basic iron and steel industries (16) 1549 147.1 167.4 199.0 259.1 476.5 427.1 552.6 1105 86.5 76.1 83.4 38139 Pre-fabricated Structural metal products (59) 1102 118.7 125.7 180.6 224.4 190.9 2104 202.3 168.0 310.2 212.9 64.8 38320 Radio,TVs, andconsumerelectroncs 906 869 118.1 153.9 180.6 114.7 111.2 113.1 109.5 110.0 139.9 193.1 38392 Drycell batteries (7) 123.9 115.5 158.6 179.1 192.6 158.7 174.1 1908 104.5 115.6 104.5 220.4 38431 Motorvehicles(23) 114.7 126.8 115.8 1325 2000 212.9 116.0 98.0 153.8 131.0 138.9 304.9 38433 Motorvehiclecomponentandapparatus 98.0 81.3 76.8 106.0 104.9 187.5 2521 322.7 151 1 152.5 77.5 1294 General index 128.4 143.5 164.2 184.1 209.4 232.3 257.9 286.8 1176 130.5 139.1 163.7 /a The annual figures shown here are calculated as the average of quarterly indices. /b Figures in brackets N( )" indicate the number of establishments covered in that group. /c Starting in 1994, the base year is 1993=100. /d Third quarter 1997. Source: Central Bureau of statistics. INDONESIA Table 32. Production of Minerals, 1984 - 1997 Petroleum Tin Copper ore Nickel Iron sand Natural Year (mln bbls) concentrate concentrate ore Bauxite Coal concentrate Gold /a Silver /a gas ('000 tons) (kg) (kg) (mmscf) 1984 516.5 23.2 190.3 1,066.8 1,003.2 1,468.2 83.0 2,247 38,585 1,521.5 1985 483.8 21.8 223.4 961.9 830.5 1,942.1 130.9 2,604 38,075 1,580.0 1986 507.2 24.0 251.2 1,533.1 648.8 2,572.3 153.3 2,948 44,075 1,628.9 1987 479.0 26.1 259.8 1,825.7 635.3 2,813.5 194.0 3,117 49,046 1,732.1 1988 484.7 30.6 294.7 1,733.2 505.8 4,094.6 202.7 3,877 57,603 1,846.9 1989 514.2 31.3 331.5 2,020.9 862.3 9,246.7 142.7 4,625 63,597 1,968.3 1990 533.6 30.4 398.6 2,217.4 1,205.7 10,461.5 145.4 9,355 62,158 2,828.2 1991 581.2 30.4 656.5 2,300.3 1,406.1 14,143.0 173.2 13,889 77,897 2,461.8 1992 550.7 28.2 906.7 2,511.6 803.5 23,120.5 287.8 37,987 99,954 2,582.6 1993 547.4 30.4 928.2 1,975.8 1,320.4 27,605.3 341.3 42,097 9Q,301 2,661.9 1994 551.1 31.1 1,065.5 2,311.5 1,342.4 31,238.5 334.9 42,605 107,026 2,941.6 1995 547.0 38.4 1,516.6 2,513.4 899.0 41,516.7 348.4 62,818 265,222 2,999.3 1996 553.9 51.0 1,758.9 3,426.9 842.0 47,338.6 425.1 83,660 254,893 3,166.6 1997 589.6 55.2 1,840.7 2,830.0 808.7 52,074.3 487.4 91,010 280,715 2,651.8 /a Since 1983, production of gold and silver including private enterprises. Source: Central Bureau of Statistics. INDONESIA Table 33. Crude Oil Production by Company, 1974-1997 a/ ('000 bbls) Production Average Contract of work sharing Total daily PERTAMINA LEMIGAS Caltex C & T Stanvac Subtotal contract output 1974 40,143 362 329,907 1,959 16,626 348,492 112,840 501,837 1,375 1975 32,590 306 300,879 1,944 13,889 316,712 127,247 476,855 1,306 1976 31,333 268 304,616 1,803 12,787 319,206 199,512 550,319 1,504 1977 30,706 285 292,950 2,459 11,974 307,383 276,749 615,123 1,685 1978 31,271 195 275,349 2,266 11,853 289,468 275,763 596,697 1,635 1979 30,316 213 266,048 1,856 10,811 278,715 271,203 580,447 1,590 1980 29,891 205 258,325 2,046 11,578 271,949 274,971 577,016 1,577 1981 29,515 175 255,515 1,799 13,141 270,455 284,693 584,838 1,602 1982 27,375 195 175,928 1,422 13,214 190,564 270,055 488,189 1,338 1983/b 26,947 233 191,307 1,411 11,766 204,484 286,384 518,048 1,419 1984 31,002 203 - 1,533 4,372 5,905 513,652 550,762 1,505 1985 30,071 170 - 1,358 5,130 6,488 453,190 489,919 1,342 1986 29,328 193 - 1,228 6,085 7,313 478,078 514,912 1,411 1987 26,775 210 - 1,236 8,354 9,590 475,854 512,429 1,404 1988 24,789 /c - 1,368 13,413 14,781 451,941 491,511 1,343 1989 25,567 Ic - 2,044 13,233 15,277 473,341 514,185 1,409 1990 24,483 /c - 1,972 10,587 12,559 496,664 533,706 1,462 1991 24,989 /c - 1,462 8,845 10,307 545,937 581,233 1,592 1992 24,722 /c - 1,401 8,136 9,537 516,409 550,668 1,505 1993 26,427 /c - 1,327 5,304 6,631 517,567 550,625 1,504 1994 24,139 /c - - - - 527,008 551,147 1,506 1995 21,129 /c - - - - 525,848 546,977 1,499 1996 24,668 /c - - - - 523,966 548,634 1,499 1997 34,797 /c - - - - 554,765 589,562 1,611 /a Production of crude oil including condensate lb Since May 1983, contract of work data have been consolidated. /c Since 1988, Lemigas data have been included in Pertamina. Source: Ministry of Mines and Energy, Directorate General Oil & Gas. INDONESIA Table 34. Domestic Sales of Petroleum Products, 1983-1997 /a (000 bbis) 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Aviation gas 83 73 66 63 56 60 60 59 58 54.0 51.0 50 51 51 47 Aviation turbo 3,686 4,374 4,442 3,806 4,199 4,445 4,286 4,607 4,889 5,315 6,039 10,188 10,969 7,206 7,345 Premium gasoline 247 523 738 1,024 1,431 1,838 2,451 1,047 /b lb lb /b lb lb /b Regular gasoline 24,380 24,909 25,206 27,083 29,048 30,855 33,199 39,005 43,023 45,308 46,733 52,463 57,798 63,747 68,087 Kerosene 48,224 45,213 43,954 43,618 43,352 44,664 46,601 49,472 50,573 53,850 54,242 56,110 58,188 61,656 62,602 Motor diesel 49,790 48,567 47,682 47,421 54,075 59,143 64,508 72,950 80,837 92,061 104,460 100,730 106,755 119,138 137,706 Industrial diesel 9,978 10,285 10,329 8,855 8,319 8,809 9,515 10,720 10,806 11,318 11,445 11,174 10,069 8,679 8,917 Fuel oil 21,149 23,625 22,863 18,004 19,054 18,097 18,329 24,847 28,899 29,313 30,154 25,456 25,543 24,524 32,980 Total 157,537 157,569 155,280 149,874 9 167,911 178,949 202,707 219,085 237,219 253,124 256,171 269,373 285,000 317,684 /a Excluding lubricating oil and similar products. /b Discontinued. Sourcew Ministry of Mines and Energy, Directorate General Oil and Gas. INDONESIA Table 35. Consumer Price Index, 1983 - 1997 /a /b (April 1977 - March 1978 = 100) End of Foodstuff Housing Clothing Others Total Change period (%) /c 1983 212.70 238.08 214.04 221.54 221.53 11.46 1984 226.35 269.99 220.58 246.54 241.63 8.76 1985 230.89 289.36 228.03 259.67 252.20 4.31 1986 263.90 302.90 250.40 275.00 275.30 9.16 1987 296.14 321.40 270.35 297.91 300.75 9.24 1988 320.07 335.35 280.02 307.38 317.56 5.59 1989 104.07 109.56 108.12 105.68 106.41 6.10 1990 111.49 123.94 113.41 118.55 116.98 9.93 1991 122.64 133.74 119.46 135.02 128.60 9.93 1992 130.19 139.95 128.33 139.66 135.08 5.04 1993 136.81 163.16 138.90 153.98 148.83 10.18 1994 157.00 178.60 147.50 161.70 163.20 9.66 1995 179.14 188.93 157.42 173.33 177.83 8.96 1996 189.99 198.00 166.76 190.72 189.62 6.63 1997 227.88 210.36 179.96 206.72 211.62 11.60 /a The consumer price index for Indonesia has been used commencing March to replace the Jakarta cost of living index. /b Starting 1989, using new base period (April 1988-March 1989 = 1 00). /c End-year basis Source: Central Bureau of Statistics. INDONESIA Table 36. Indonesia Wholesale Price Index, 1983-1997 /a (1983 = 100) Sectors /b 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Agriculture (44) 100 113 118 128 145 163 177 191 206 225 251 298 355 400 445 Mining&quarrying(6) 100 109 117 125 132 143 156 169 188 201 218 237 266 296 318 Manufacturing(140) 100 103 115 123 143 156 166 176 194 206 218 231 256 265 275 Imports(53) 100 113 119 129 158 164 178 191 201 208 211 215 230 243 260 Exports(38) 100 fit 112 85 118 118 131 159 153 159 157 157 178 203 238 Excludingpetroleum&gas(34) 100 114 115 130 170 183 195 2033 212 226 255 298 306 353 303 Petroleum (4) 100 112 113 73 103 99 112 148 139 143 137 128 142 173 204 Generalindex(2SI) 100 111 116 116 142 149 162 178 187 197 204 215 240 259 282 General index excluding exports (243) too l11 117 127 149 160 173 185 199 210 221 235 261 280 298 General index excluding exportsofpetroleum(224) 100 110 116 125 146 161 172 182 198 211 227 250 285 303 326 /a This new index replaces the previous WPI based on 1975. Figures show the average for year. /b Figures within brackets "( )" indicate the number of items represented in that sector. Source: Central Bureau of statistics. INDONESIA Table 37. Domestic Prices of Petroleum Products,1980 - 1998 (Rp./liter) Jan-I, 1980- May-I, 1980- Jan-4, 1982- Jan-7, 1983- Jan-12, 1984- Apr-I, 1985- Jul-10, 1986- May-25, 1990- Jul-Il, 1991- Jan-8, 1993- May-5, 1998- May-16, 1998- Apr-30, 1980 1-Jan-82 Jan-6, 1983 Jan-lI, 1984 Mar-31, 1985 Jul-9, 1986 May-24, 1990 Jul-10, 1991 Jan-7, 1993 May-4, 1998 May-16, 1998 Present Aviation gas 100 150 240 300 300 330 300 330 400 420 600 600 Aviation turbo 100 150 240 300 300 330 300 330 400 250 600 600 Premium gasoline 140 220 360 400 400 440 440 /a /a /a /a /a Regular gasoline 100 IS0 240 320 350 385 385 450 550 700 1,200 1,000 Kerosene 25 38 60 100 150 165 165 190 220 280 350 280 Motor diesel 35 53 85 145 220 242 200 245 300 380 600 550 Industrial diesel 30 45 75 125 200 220 200 235 285 360 350 350 Fuel oil 30 45 75 125 200 220 220 220 220 240 350 350 /a Discontinued since May 20, 1990 Source: Ministry of Mines and Energy, Directorate General Oil and Gas. INDONESIA Table 38. Approved Foreign Investment by Sector, 1984-1997 /a (US$ million) Sector 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Agrcultue 0 9 126 117 8 122 117 14 66 138 690 1,153 1,306 437 Forestry 0 0 0 5 26 4 20 1 138 22 0 0 136 0 Fishery 0 11 4 12 46 47 20 1X 28 0 40 231 S0 27 Mining & quarrying 0 0 0 0 0 0 116 0 2,312 0 0 0 1,697 2 Manufacturing 0 687 537 852 3,828 4,246 5,822 3,970 5,669 3,423 18,739 30,441 19,884 24,857 Food 77 6 34 54 231 223 99 382 213 141 1,235 1,332 691 573 Textiles&leather 1 7 9 118 213 581 1,094 532 591 419 396 471 515 373 Wood & wood products 0 0 32 45 104 106 218 62 34 50 68 263 101 70 Paper&paperproducts 0 25 47 109 1,506 211 730 822 686 202 5,120 2,540 2,907 5,353 Chemicals&rubber 96 338 294 209 1,544 2,512 1,991 923 2,342 1,171 7,743 19,368 7,362 12,339 Nonmetallicminerals 0 3 0 251 30 184 125 133 841 98 632 289 793 1,457 Basic metals 609 65 39 7 61 106 825 197 47 186 2,082 292 651 357 Metal products 210 244 82 57 129 292 460 856 863 1,114 1,423 2,258 2,939 2,332 Others 9 0 0 3 10 30 281 62 52 42 40 3,628 3,925 2,004 Construction 17 122 65 42 2 16 77 26 41 97 77 206 297 307 Trade & hotels 84 0 0 196 405 98 874 4,019 919 1,088 430 1,029 1,762 472 Wholesale trade 0 0 0 0 0 0 0 0 0 693 87 31 45 9 Hotels 84 0 0 196 405 98 874 4,019 919 394 344 999 1,717 463 Transport & communications 4 0 70 213 3 5 803 167 14 85 145 5,539 695 5,900 Real estate and business services 0 29 25 20 117 181 902 570 1,136 3,292 3,604 1,314 4,076 1,831 Tot_0 7 859 443 7 875 8 10.323 44 23.724 39.915 2 3 33. /a Intended Capital Investment. Amount represents original approvals plus expansions minus cancellations. Source: Investment Coordinating Board. INDONESIA Table 39. Approved Domestic Investment by Sector, 1984-1997 /a (Rp billion) Sector 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Agriculture, fisheries and livestock 277 899 1,879 2,885 2,698 3,418 6,442 3,468 1 952 2,835 7,140 8 621 16,026 14,642 Forestry 19 37 21 640 487 252 593 310 534 258 262 1,476 46 166 Mining 8 38 89 290 111 94 155 182 236 69 112 205 460 126 Manufacturing 1,332 1,632 1,842 5,518 9,747 12,931 39,850 27,624 19,079 24,037 31,933 43,962 62,703 90486 Textiles 127 97 263 1,289 2,309 3,563 12,561 3,646 2,546 3,539 5,518 7,177 3,366 6,831 Chemicals 272 928 773 2,047 3,039 4,062 7,894 8,425 3,299 7,689 5,150 8,740 13,335 22,425 Electrical goods 0 0 0 0 0 0 0 0 0 5 12 620 3,486 11,151 Other manufacturing 933 607 806 2,183 4,399 5,307 19,395 15,553 13,235 12,804 21,253 27,425 42,517 50,078 Construction 67 270 74 50 31 146 87 275 215 187 731 848 1,550 877 Hotels 214 312 17 139 537 1,265 4,703 3,895 3,115 3,051 4,342 3,792 5,019 2.588 Real estate 31 267 169 174 846 936 1,783 2,633 536 3,049 3,336 4,659 8,688 3,960 Others 1 296 325 569 460 551 2,898 1,785 3,675 5,965 5,434 6,290 6,224 7,028 ToIal 1,9_49 3.5 417 10.265 14.916 19.594 56.511 41.078 29342 39.450 5 6 100715 119.873 /a Figures refer to intended capital investments, and represent original approvals plus approved expansion minus cancellations. Source: Investment Coordinating Board.