Report No. 3307-IND PILE COPY Indonesia Development Prospects- and Policy Options April 6, 1981 East Asia and Pacific Regional Office FOR OFFICIAL USE ONLY o Dm o z ~~m This document has a restricted distribution and may be used by recipients only in the performance of their official duties. its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Before November 15, 1978 US$1.00 = Rp 415 Rp 1.00 = US$0.0024 Rp 1 million = US$2,410 After November 15, 1978 US$1.00 = Rp 625 Rp 1.00 = US$0.0016 Rp 1 million = US$1,600 FISCAL YEAR Government - April 1 to March 31 Bank Indonesia - April 1 to March 31 State Banks - January 1 to December 31 FOR OFFICIAL USE ONLY PREFACE This report is based on findings of a mission comprising Nissim Ezekiel (IFC), Chandra Sharma (DPS), Lyn Squire, Andrew Steer, Michael Walton and Sarath Rajapatirana (Mission Leader), of the East Asia and Pacific Country Programs Department. The Mission visited Indonesia in October/November 1980. A draft of the report was discussed with the Government in March 1981. This document has a restricted distribution and may be used by recipients only in the performance of | their official duties. Its contents may not otherwise be disclosed without World Bank authorization. INDONESIA DEVELOPMENT PROSPECTS AND POLICY OPTIONS Table of Contents Page No. SUMMARY AND CONCLUSIONS 1. INTRODUCTION .... . . . . . . . . . . . . . . . . . . . . . 1 2. RECENT TRENDS IN THE ECONOMY ... . . . . . . . . . . . . . . 4 Domestic Production and Expenditures . . . . . . . . . . . . 4 The Balance of Payments. 8 The Government Budget . . . . . . . . . . . . . . . . . . . 10 Prices and Competitiveness .13 Monetary Developments .15 3. OPTIONS FOR MACROECONOMIC POLICY . . . . . . . . . . . . . . . 17 Elements of the Policy Package Aimed at Structural Transformation of the Economy . . . . . . . . . . . . . . 18 Foreign Trade Policies .18 Investment, Efficiency and the Regulatory Enviroment . . . . 20 Domestic Resource Mobilization and Financial Intermediation 22 Price Policy and the Role of Subsidies . . . . . . . 25 Summary of the Two Policy Scenarios . . . . . . . . . . . . 29 Implications for Incomes, Employment and Equity . . . . . . 31 4. ISSUES IN PUBLIC EXPENDITURES ... . . . .... . . . . . . 34 Review of Sectoral Programs ... . . . . . . . ..... . 34 Constraints to Implementation of Development Programs . . . 47 5. THE EMERGING RESOURCE POSITION ... . . . . . ....... . 50 Prospects for the Oil Sector . . . . . . . . . . . . . . . . 50 Non-Oil Exports .54 Import Policies and Projections . . . . . . . . . . . . . . 57 The Budget .61 6. POLICY TOWARDS EXTERNAL CAPITAL INFLOWS AND DEBT MANAGEMENT . 64 Financing Requirements and Creditworthiness . . . . . . . . 64 Capital Inflows from Official Sources . . . . . . . . . . . 65 Policy Towards Private Capital Inflows . . . . . . . . . . . 68 Foreign Exchange Reserves and Debt Management . . . . . . . 70 ANALYSIS AND PROJECTIONS APPENDIX .72 STATISTICAL ANNEX .80 M4AP .............................. .. . 146 Page No. TABLES IN TEXT 2.1 Growth of Gross Domestic Product at 1973 Market Prices 5 2.2 Growth of Gross Domestic Expenditure at 1973 Market Prices 6 2.3 Balance of Payments - 1978/79-1980/81 9 2.4 Central Government Budget Summary 1977/78-1980/81 11 2.5 Selected Monetary Indicators 15 3.1 Effective Rates of Protection accorded to Selected Industries in 1975 19 3.2 Selected Public Enterprises Investment Programs 23 3.3 Alternative Scenarios for Domestic Oil Prices and Subsidies 28 3.4 Summary of Two Growth Scenarios 30 3.5 Sector Employment Elasticities 32 4.1 Education and Health Statistics for Selected Countries - 1975/78 44 4.2 Public Expenditures on Health Education 44 4.3 Annual Additional Needs for Technical/Scientific/Managerial Manpower 1980-90 and Output 1979 46 5.1 Indicators of Oil Exploration Activity 50 5.2 Key Oil Sector Projections - 1980/81-1990/91 51 5.3 Domestic Consumption of Oil Products 52 5.4 Net Oil Balance 53 5.5 Projected Exports under Alternative Cases 55 5.6 Projected Imports under Alternative Cases 58 5.7 Real Growth Rates of Exports and Imports under Alternative Cases 59 5.8 Projected Resource Balances and Terms of Trade Development 60 5.9 Projected Government Revenue and Expenditure 1980/81-1985/86 62 6.1 Balance of Payments Projections Under High and Low Cases 65 6.2 New Commitments of External Public Debt by Source 1975-80 66 6.3 Projected New Commitments of Grants and Medium- and Long-Term Loans: High Case 68 6.4 Disbursed Medium- and Long-Term Public Debt Outstanding 71 SIUMMARY AND CONCLUSIONS i. The main theme of this report is that Indonesia will have a resource surplus during the first half of the 1980s, and that this comfort- able resource position provides Indonesia with a unique opportunity to undertake a series of policy reforms and an expanded program of investment in export production, import replacement, and alternative energy supplies, that in turn will ensure sustained development during the second half of the decade and beyond. Implementing the policy changes and investment programs in support of these structural changes will pose many challenges for economic management. They are nevertheless essential to address the vast and varied development needs of the country. Indeed, without such a program of structural adjustment, it will be difficult for the Government to continue making reasonable progress towards one of its major development goals - the alleviation of poverty - in the latter part of the decade when foreign exchange availabilities will again be limited. Current Economic Trends ii. The Indonesian economy was more buoyant in 1980 than 1979./1 A higher GDP growth rate, increasing income from a higher level of domestic economic activity and favorable terms of trade effects, a balance of payments surplus, and relative monetary stability characterized the 1980 performance. Highlights of this performance include a record rice harvest of nearly 20 million metric tons, a current account surplus in the balance of payments of almost $3.0 billion, and a real GDP growth rate of over 7%. The latter compares with an increase of 4.9% in 1979 and an average annual real GDP growth rate of 6.6% in the 1973-79 period. iii. The strong balance of payments was principally the result of oil sector related net export earnings which increased by $3.0 billion in 1980/81. Although the volume of oil exports declined, an increase in the average price of oil by 46% to $33.00 per barrel, and an expansion in the volume of LNG exports, produced the increase in oil sector earnings. Despite the rapid increase in liquidity stemming from the large inflow of oil income, the rate of increase in consumer prices declined from 28% in 1979 to 17% in 1980. While domestic prices continued to rise more rapidly than international prices, half the gains in competitiveness secured through the November 1978 devaluation for manufactured exports and import substitutes were still retained by the end of 1980. iv. The inescapable fact is that average per capita income in Indone- sia is still very low, the current resource surpluses notwithstanding. Each $1 billion earned in foreign exchange adds less than $7 to per capita /1 The 1979 performance was analyzed in last year-s Bank report, "Indonesia: Long Run Development and Short Run Adjustment", Report rlo. 2788-IND, February 1980. - ii - income, which is provisionally estimated at $405 for 1980. The present foreign exchange surplus tends to mask existing dimensions of poverty, which include limited access to basic services and the urgent need for more productive utilization of Indonesia-s most important development resource - its large and rapidly growing labor force. Preliminary results of the 1980 population census show total population to be 147 million. The future growth of the labor force based on this estimate will be 3.2% p.a. compared to the 2.3% estimate made in 1976. Some 2 million persons will therefore enter the labor market each year in the first half of the 1980s. These figures underscore the urgency of using the additional resources to expand productive employment in agriculture, industry, public works and the service sectors. Growth Prospects and Policy Adjustments v. Higher oil prices have clearly improved the prospects for rapid growth in Indonesia. Foreign exchange surpluses are likely to continue throughout the first half of the 1980s, during which time growth will be constrained more by absorptive capacities of the economy and by the produc- tivity of domestic investment than by the availability of foreign exchange. In the second half of the 1980s, however, a secular decline in the volume of oil available for export is probably inevitable, which, in the absence of policy reforms aimed at a structural transformation of the economy, is likely to limit the growth of Indonesia's import capacity, thereby slowing growth in production, incomes, and employment. vi. To help analyze the outlook, two sets of illustrative projections have been prepared: a "High" case, in which Indonesia adjusts successfully in 1981-85, and thus ensures sustained rapid development after 1985; and a "Low" case in which it does not. In the former case, GDP continues to grow in real terms at 7-8% a year throughout the decade. Per capita income would rise from an estimated $405 in 1980 to $710 by 1990 (at constant 1980 prices), $70 higher than under the Low case. Even after a dramatic curtail- ment of import growth under the Low case, the balance of payments moves rapidly into a large and unsustainable deficit in the latter part of the decade. Under the High case on the other hand, the transition from relative foreign exchange surplus to shortage is altogether more gradual. By 1990, the current account deficit is projected to be stable and sustainable and equivalent to about 2.5% of GDP. It should be stressed that macroeconomic projections for Indonesia are very sensitive to assumptions about oil and LNG price changes. In this report all balance of payments projections assume that the export price for oil and LNG will increase by 3% p.a. in real terms. The report's conclusions with regard to the overall superiority of the High case, however, remain valid regardless of the precise oil export price assumptions. Should the international oil price rise less fast than projected, the resource deficits would re-emerge sooner, which makes it more urgent to adopt the High case policy scenario. The High case is achievable, depending on policies in key areas: the foreign trade regime, the regulatory and investment climate, domestic resource mobilization and financial intermediation, and pricing and subsidies. - iii - vii. Foreign Trade Policy. To avoid the re-emergence of a serious foreign exchange constraint in the latter part of the decade, substantially increased investments will be required in export and import replacing industries in which Indonsia has a comparative advantage. This will require adjustments in the current trade regime which includes tariffs, subsidies, quantitative restrictions and excise duties. These adjustments must lead to a trade regime which approaches a degree of neutrality in the relative profitability of export and import competing activities. Towards this end, a number of elements will be required. These include a simplification of the system of protection so that import tariffs and excise taxes are the sole sources of protection for domestic industries; unification of the tariff structure and gradual reduction of the level and variance of effective rates of protection (to be achieved by reducing import tariffs and export duties on final goods and raising tariffs in appropriate cases on intermediate goods). These changes would not only have the effect of setting Indonesia's non-oil export industries on a more competitive footing, but also of significantly reducing the current inflationary pressures within the country. The Government has already announced its intention to further reduce import tariffs, but further changes on the lines indicated above will be needed. viii. The Investment and Regulatory Environment. Indonesia's investment rate with respect to GDP has risen from 17% in the early 1970s to about 23% in 1980. By 1985 the investment rate would have to rise to about 27% of GDP and then level off close to 30% by the latter part of the 1980s. Both the volume and the efficiency of new investment would be enhanced by a simplified regulatory environment. In combination with the reform of the trade regime, such a simplification of the regulatory system will improve the efficiency of investment by the ensuing changes in resource allocation. With few exceptions, the objectives of the regulatory system in Indonesia are similar to those found in most countries. They include preservation of national control of particular activities, increasing domestic value added and promotion of regional development. It is mostly in practice, application and in its complexity that Indonesia's system differs from other countries. Certain changes have already been undertaken, to reduce the complexity on the system. But further reforms are an essential complement to changes in trade and financial policy. Simplification of the system is a long term goal. Initial steps that could be taken in the short-run include: evaluation of applications on the basis of sound cost-benefit analysis (an attempt in this direction is already underway at BKPM); revision of application forms to eliminate superfluous requirements; further simplification of the list of investment priorities; use of broader categories of projects qualifying for special facilities. ix. Domestic Resource Mtobilization and Financial Intermediation. Financial policies and institutions have a crucial role to play during and beyond the restructuring process. Despite the present increase in national - iv - savings arising from oil revenues, medium and long term efforts will be needed to raise domestic resource mobilization. This follows from the prospects of declining oil related revenues beyond the medium term and from the fact that an enhanced investment program has to be financed outside the Government's budget in the medium term. For example, investment programs planned for industry, electricity and tree crop sectors will leave a gap in excess of $6.0 billion even after accounting for retained earnings and transfers from the Government budget. To fill this gap, it is important that in the medium term policies are directed more towards mobilizing domestic resources, and in providing private and public enterprises with greater access to domestic and international capital markets. Efforts should also be made to raise non-oil revenues in the budget, through improved tax administration, and to encourage deposit mobilization efforts through the banks. In this latter respect, the Government is already exploring ways in which the expansion of credit by commercial banks could be also linked to savings mobilization performance. In addition, consideration could be given to raising the costs of commercial banks access to Bank Indonesia's rediscount facilities thereby providing greater incentives for these banks to increase the level of their deposit liabilities. The present problem of maintaining price stability while raising public expenditures has to be tackled through monetary surpluses in the implementation of the budget. To the extent that these surpluses are generated, bank credit can be extended to the private sector and public enterprises. x. Improvements in the efficiency of financial intermediation processes will be a key element for transferring funds for increased investments from surplus to deficit sectors. At present, the financial intermediation process must cope with the fact that the majority of foreign exchange resources accrues to the Government. Currently budget transfers and equity participation provide the primary mechanism for transferring these funds to the nongovernment sector. With further major increases in investment in the private and public enterprise sectors, the financial system must become better equipped to deal with these transfers. xi. Price Policy and Subsidies. Budgetary subsidies have risen rapidly in recent years to a level of Rp 2.1 trillion ($3.4 billion) in the 1981/82 budget - equal to 15% of the total budget, or 4.0% of GDP. The largest subsidy is that on oil products which increased by 82% in the 1981/82 budget to Rp 1.5 trillion ($2.4 billion). The economic subsidy (the difference between international and domestic prices) on oil is much larger, and in 1980 amounted to more than $3 billion, equivalent to about 3.5% of GDP. Arguments in favor of maintaining low domestic oil prices are based on poverty alleviation, inflation control, and environmental protection considerations. The report describes why the subsidization of oil products is an ineffective method of achieving those objectives, and recommends that the subsidy be gradually reduced, and eliminated by the latter part of the 1980s. Such a policy would achieve annual foreign exchange savings of about $7 billion (at current prices) and annual budgetary savings of about Rp 9 trillion (also in current prices), by the end of the decade, sufficient to virtually double the Government's investment program. In addition, realistic energy input pricing would improve resource allocation and thus provide a more efficient foundation for sustained economic growth in the second part of the decade. xii. The budgetary subsidy on oil products amounts annually to about $5 for each person in the lowest 40% income group and about $13 for each person in the upper 60% income group. Despite the small absolute amount benefiting members of the poorest group, the abolition of the oil subsidy would however impose a comparatively high burden upon them, and careful thought should be given to the phasing of the price increases and to ways in which the budgetary savings from reduced subsidies could be used to supplement the incomes of the poor. For example, the savings would over time be sufficient to finance a large portion of the rural electrification program on Java, and could be used also to target subsidies toward the lower income groups for consumption of other, more efficient, energy sources such as bottled LPG. In circum- stances of poverty, inflation and structural adjustment, movement of domestic prices to international and efficient levels has to be accomplished gradually, with due regard for its impact on income distribution. In some countries this can be accomplished through taxation policies and in others, where such policies are not effective in redistributing income, targeted subsidies can be used. The Government is aware of the long-term costs of continuing subsidies as well as the short-run adjustment costs in raising domestic oil prices to international levels. The Government raised domestic oil prices in May 1980 by 50% on average and in announcing the price increases reiter- ated its commitment to reduce the subsidy over time and stated inter alia that such reductions will enable it to finance a larger development program. xiii. Policy reform in the areas suggested above, would need to be complemented by expanded public expenditure programs for supporting agricultural services and industrial production designed to raise income and employment. In addition, expenditures on the social sectors are needed to directly support poverty alleviation programs as well as raise labor produc- tivity through education, health and nutrition. Sector Development Programs xiv. Agriculture. A continued good performance in this sector will be critical for improved food security, income generation, employment and the balance of payments in the 1980s. Although agricultural institutions are predominantly within the private sector, the Government plays a vital role in provision of infrastructure and services. Large public investments will be needed to maintain a 3.5% growth rate in the sector in the 1980s. While emphasis on rice production must continue, special attention to crops such as sugar and soya, for which large gaps between production and consumption have emerged, will be needed. Key elements for expenditure expansion in the sector include continued intensification, specially further development of irrigation systems in Java, extension of the cultivated area in the Outer Islands and the improvement of support services and better marketing and processing services. The future growth of the irrigation subsector will be increasingly dependent on new irrigation development rather than rehabili- - vi - tation both in Java and the Outer Islands. With the additional resources, the Government is now in a position to develop large integrated dams where economically justified. There is also an urgent need to expand tertiary canal systems and to improve routine maintenance to reap greater production benefits from the existing systems, and to develop technical and managerial capability to undertake new schemes. xv. The tree crops subsector, which will be an important foreign exchange earner and in which there are millions of smallholders, will make an important contribution to the structural transformation. The Government has a ten year development program for rubber, coconuts, oil palm, coffee, and cocoa that aims at rehabilitation, replanting and expansion. The success of the program will depend on the alleviation of manpower, organizational and financial constraints. The latter constraint applies especially in regard to smallholders. xvi. The transmigration program is seen by Government as an important vehicle for easing population pressures in Java, and of providing low income families with greater access to opportunities to earn higher incomes. Performance of the program has improved considerably in relation to past years, but manpower shortages, weak interagency coordination, and shortages of land appropriate for food production continue to hamper progress. Better site selection, improved reliability of agricultural inputs, cooperative development, and the provision of livestock are needed to improve incomes in food crop settlements. xvii. Industry. A two-pronged approach to industrial development will be needed in the 1980s. One element will be the development of a number of capital intensive projects designed to replace imports of intermediate goods or expand exports of raw materials where economical. The Government has plans in hand for investments in petrochemicals (methanol, olefins, aromatics), fertilizers, cement, pulp and paper, basic metals and mining. A subsidiary objective of this part of the strategy is to deepen the industrial structure. The other element of the strategy will be the promotion of production from medium and small-scale industries using more labor-intensive methods. The policy reforms suggested in the trade regime and the investment licensing system will serve this element of the industrial strategy. Increased profitability in manufactured export industries is essential for the successful development of the industrial structure. xviii. Energy. Domestic oil consumption is growing rapidly, and as a result the volume of oil exports is expected to decline beyond the mid- 1980s, even though production prospects have improved compared to earlier assessments. Development of alternative energy sources - especially coal, hydropower and geothermal - which currently account for less than 10% of total energy consumption has therefore become a priority. Successful - vii - development of nonoil energy sources will require heavy investment in exploration and development and a revision of the present pricing policy. For example, PLN plans to increase its installed generating capacity at an average of 16% a year from 2,700 MW at present to 11,700 MW in 1990. It is unlikely that a program of this size - with a total cost of $14 billion - can be financed without substantial local borrowing for the domestic currency component, estimated at $4-5 billion. This underscores the need for the further development of the domestic capital market. xix. Transport. Because of rapidly growing demand for transport facilities arising both from income growth and from regional dispersion of this growth, an expanded expenditure program is warranted for the sector. Priorities for the 1980s will include increased budgetary allocations and improved organization for road and bridge maintenance, rationalizing the existing regulation framework to reduce costs, especially in inter-island shipping, targeting of subsidies to specific routes and continuing emphasis on expanding infrastructure to support development of new roads and secondary ports in the Outer Islands. xx. Human Resource Development. Although much progress has been made in the provision of education, health and nutrition in the last decade, key social indicators for Indonesia suggest that the level of services avail- able remain relatively modest in comparison to many other countries. Increased emphasis on human resource development will thus be a major challenge for the 1980s. It will serve as a vehicle for raising labor productivity as well as poverty alleviation. Although Indonesia has made great strides in expanding primary education, progress in secondary and tertiary levels has been much slower and participation rates at these levels are lower than the averages for all low income countries. Given that skilled manpower has emerged as the primary constraint to the use of additional resources, expanded expenditures on education and training should have a high priority. Large, and in some areas growing gaps between supply and demand for technical and professional manpower justify substantial investments in education beyond the secondary level. In the short and medium-term the purchase of skills abroad, short-term training programs and on-the-job training facilities will help to bridge some of these gaps. The success of development programs in the 1980s will depend heavily on progress made in alleviating the skilled manpower constraint. xxi. In the field of health, physical achievements have been rapid in Java, but even here it is unclear whether the newly established infra- structure is effectively utilized. The secondary level referral facilities and support services are still inadequate. Many district hospitals are in poor condition and not functioning well, while district health administrations have received inadequate support from the central level. In the Outer Islands, both infrastructure and service facilities are needed. Extension of disease control and prevention programs such as malaria control and immunization programs to the Outer Islands is a priority. The expenditure - viii - expansions must be accompanied by greater in-service training to raise the quality of health service, improved drug supply, and expansion of the network of health centers and subcenters at district levels. Balance of Payments and External Capital Inflows xxii. The projected balance of payments surplus in the first half of the 1980s clearly has significance for the Government-s external borrowing strategy. Increased creditworthiness, as evidenced by attractive interest rates, maturities and grace periods on commercial debt incurred in 1980, ensures Indonesia's continued access to credit markets. But the question should be raised whether Indonesia should continue to borrow from external sources while the current account surpluses persist. In examining this question it is useful to distinguish between capital from official and from commercial sources. xxiii. Since foreign exchange resources are not at present a binding constraint on development, continued capital aid to Indonesia has to be justified more by technical assistance embodied in financial flows than by financial flows themselves. Foreign donors, and especially members of the IGGI, have been a major source of financial and technical assistance for Indonesia. Programs and projects developed with the capital and technical assistance of donors are making an important contribution to the monumental development tasks of overcoming poverty, disease, malnutrition, and the lack of basic services. Donors have developed a stock of knowledge in designing projects and programs in specific sectors; they have a close association with the implementing agencies, and have a commitment to development assistance that goes well beyond financial transfers. There is therefore a clear case for continued capital assistance for programs and projects that include technical assistance, training, and technology transfers. In this manner donors can play an important role in assisting the Government in the program of structural adjustment. xxiv. New commitments of loans from official bilateral and multilateral sources are projected to remain relatively stable at about $2.5 billion throughout the 1980s. However, it is expected that the average terms for this borrowing will harden. A declining share of loans at highly conces- sional rates is projected to be offset by increased use of official export credits. xxv. With the prospect of continued resource surpluses for several years, Indonesia now has the option of using more of its own funds. For this reason, the report suggests a reduced level of borrowing from private sources and especially from the Euro-dollar market in the first half of the 1980s. The level of public borrowing from private sources would, however, have to rise again by the mid-1980s in anticipation of the projected balance of pay- ment deficits. New public and private borrowings from private markets are - ix - projected to reach about $6 billion annually by the end of the 1980s in the High case, a level that would be well within the limits of prudent borrowing for Indonesia at that time. xxvi. Direct private investment can also play an important role in the transfer of managerial skills and technology and in employment creation in the 1980s. If the policy reforms suggested under the High case were adopted, the decline in net real inflows of direct foreign investment that has persisted since 1974, could be reversed. Under the High case net inflows are therefore projected to rise by 5% a year in real terms from less than $200 million at present to $500 million a year by 1990. This rate is slightly above the rate at which direct investment in developing countries generally is likely to grow in the future. xxvii. Official reserves which at end of March 1981 stand at $7.1 billion (equivalent to 6.9 months of non-oil imports) are expected to rise under the High case to about $25 billion by the end of the decade (equivalent to 3.9 months of imports). Under the Low case, balance of payments deficits towards the end of the decade cause a rapid depletion of official reserves, which by 1990 are projected to amount to about $13 billion (equivalent to about 2.9 months of imports). xxviii. Disbursed and outstanding external public debt is estimated to be $15.2 billion at the end of March 1981 and is projected under the High case to grow by about 9% annually to about $34 billion by 1990. The ratio of interest and amortization payments (on public and private debt) to export receipts which declined sharply in 1980/81 is expected to remain stable at about 12% during the first half of the 1980s. Under the High case it would rise only slightly to 13% by 1990. Under these circumstances Indonesia should have no difficulty in maintaining a manageable external financial position. 1. INTRODUCTION 1.01 There were two central themes in last year-s economic report on Indonesia,/1 namely: (a) how to contain in the near future the inflationary pressures associated with the windfall revenues from oil; and (b) how to use the windfall revenues to lay the foundations for sustained economic growth and greater equity in the longer-term. These are retained in the present report. But there is more emphasis this time on policy changes and investment programs needed for long-term structural reform and less on short-term monetary and fiscal management issues. The special features of oil-associated resource surpluses - and especially their external origin - will pose many challenges for the economic management of Indonesia in the 1980s. The main theme of this report is that a program of structural reform is needed in the first half of the 1980s to ensure rapid growth and improved distribution during the second half of the decade and beyond. 1.02 Indonesia's medium-term economic prospects appear brighter than a year ago. Higher oil and LNG prices and improved production prospects, at least for the next few years, are likely to increase Indonesia-s foreign exchange resource surpluses in the medium-term. This gives the opportunity to maintain GDP growth at 7-8% p.a. in real terms during the 1981-84 period, exceeding the 6.5% p.a. visualized at the time of preparation of Repelita III. Nevertheless, the longer-term prospects for growth, employment, and equity will depend crucially on policy changes made between now and the mid-1980s. Mainly as a result of rapid domestic consumption growth, oil exports are expected to decline from the mid-1980s. 1.03 Foreign exchange surpluses have, for the time being, overcome the financial constraint which plagued Indonesia for the most of the past two decades. However, other constraints to development remain and have now come to the fore. These include skilled manpower, administrative capacity and the capacity of the construction sector. Because the resource surpluses were not anticipated when Repelita III was drawn up, strategies to break the nonfinancial constraints have to be articulated, expenditure programs identified, and the implementation machinery improved. The Government is now gearing up to these new tasks as there is growing awareness /1 "Indonesia: Long run Development and Short Run Adjustment," World Bank report No. 2788-IND, February 1980. - 2 - of the unique opportunity afforded by the oil revenues to address the many and varied development needs of the country. 1.04 By all standards Indonesia remains a poor country despite the current resource surpluses. Each $1 billion earned in foreign revenues adds less than $7 to per capita income, which is provisionally estimated at $405 for 1980. Although this level is much higher than that of most low income countries, it masks existing dimensions of poverty, limited access to basic services and the need for more productive utilization of Indonesia-s most important development resource: its large and rapidly growing labor force. From the data on distribution of households by levels of per capita consumption, it is estimated that in 1976, the latest year for which data is available, some 40% of the total population were subsisting on less than $90 per year. 1.05 In the areas of health, education, water supply and other basic services, there is both the need and the scope for a substantial effort in the 1980s. Provisional 1980 population census results suggest that life expectancy in Indonesia has increased from less than 50 years in early 1970 to around 55 years in 1980. But this is still less than that in the majority of middle income countries. The challenges in education are formidable in view of the shortages of skilled manpower. While primary school enrollment is higher than for most other low income countries, secondary and high school enrollment at 21% and 2% are below the averages of 24% and 4% respectively for low income countries, and only about one-half and one-fifth respectively of the middle income country averages. 1.06 Preliminary results of the 1980 population census put the total population at 147 million, about 2 million more than had been generally expected on the basis of earlier projections. This has important implications for the provision of basic services and for policies aimed at increasing the rate of labor absorbtion in the economy. Recent estimates for the future growth of the labor force at 3.2% p.a. compare with the 2.3% p.a. estimate made in 1976. The revised growth rate for the labor force raises the number of new entrants to the labor market from 1.5 million p.a. to 2.0 million p.a. during the 1981-84 period. This underscores the urgency of using resources now available to expand productive employment in agriculture, industry, public works and service sectors. 1.07 The duration of foreign exchange surpluses cannot be predicted with accuracy. Even though oil production prospects have improved, the analysis of this report suggests that, if present domestic oil consumption rates continue, net exports of oil will begin to decline in the mid-1980s. In the absence of policy changes and investment programs to stimulate alternative sources of export and income growth, significant resource deficits are projected to re-emerge during the second-half of the 1980s. But even if oil production prospects were to improve beyond current expectations, the case -3 - for structural transformation would remain valid. Production in the oil sector is highly capital and skill-intensive and therefore input requirements differ from domestic factor supplies. Hence, domestic consumption and pro- duction linkages are very limited and it will be very difficult to achieve employment and equity goals within the present structure of the economy. 1.08 The plan of the report is as follows: Chapter Two reviews recent economic trends. Chapter Three considers broad macroeconomic options for managing the resource surplus in the medium-term and policy changes required for longer-term growth. Chapter Four focuses on sectoral development issues and investment programs and identifies a number of constraints that cut across many sectors. Chapter Five presents balance of payments and budget pro- jections for the 1980s under the alternative scenarios. Finally, Chapter Six reviews policies towards external assistance and borrowing, in the light of the prevailing foreign exchange surplus. - 4 - 2. RECENT TRENDS IN THE ECONOMlY 2.01 Key economic indicators confirm that the Indonesian economy recovered fully in 1980 from the 1979 slump. A higher GDP growth rate, improved terms of trade, a balance of payments surplus, and relative monetary stability characterized the 1980 performance. Private consumption expenditures also rose sharply, as reflected for example in a 50% increase in motor vehicle purchases and larger-than-ever numbers of Indonesian pilgrims to Mecca. 2.02 Underlying these recent developments were three dominant factors: continuing adjustments to the November 1978 devaluation resulting, inter-alia, in the recovery of domestic production; a bumper rice harvest and strong agricultural growth generally; and increases in foreign exchange earnings brought about by increases in the international price of oil. This chapter traces the impact of these factors on domestic production and expenditures, the balance of payments, the Government's budget and the domestic price level and monetary policy. Domestic Production and Expenditures 2.03 Economic growth in 1979 was well below that of the previous few years. In constant 1973 prices GDP grew by 4.9%, compared with an annual growth rate of 6.9% in the period 1973-78 (Table 2.1). The rice harvest, which jumped by a remarkable 10.4% to 17.5 million tons in 1978, increased only 2.2% to 17.9 million tons in 1979; while the production of corn, sweet potatoes and ground nuts was lower than in 1978. The production of logs also fell despite favorable world market prices. Estate crop production once again showed the strongest growth in the agriculture sector due to earlier government investments in the public estates, particularly in oil palm and tea, production of which grew by 20% and 39% respectively. - 5 - Table 2.1: GROWTH OF GROSS DOMESTIC PRODUCT AT 1973 MARKET PRICES (Percent per annum) Percent of total 1978 1979 1980 /a 1980 Agriculture 5.2 2.2 5.0 31.7 Farm food crops 5.9 1.4 6.9 18.9 Estate crops 4.2 10.2 3.9 2.3 Others 4.3 2.1 2.1 10.5 Mining and quarrying -2.8 0.3 -1.5 9.7 Manufacturing 11.2 9.2 11.6 13.4 Construction, electricity, gas and water 13.6 7.7 9.4 6.4 Services 4.0 6.9 9.2 38.8 Gross domestic product 6.8 4.9 7.0 100.0 /a Provisional estimate. Source: Biro Pusat Statistik 2.04 Industrial production for the domestic market performed poorly in 1979 following the November 1978 devaluation and the relatively tight credit policy associated with it. Prices of imported raw materials and intermediate inputs rose without full compensation from increased output prices, thus squeezing profitability, while domestic demand weakened due to depressed real incomes. Business uncertainty in the first part of the year also had a depressing effect on the domestic market. Worst affected were goods produced exclusively for the home market, with high import content and facing high income and price elasticities of demand. Thus, for example the production of automobiles, radios and sewing machines fell by 36%, 34% and 21% respectively./l Production for export performed well in industries which had excess capacity or scope for rapid supply response. The initial period of business uncertainty was followed by a strong recovery of private investment towards the end of the year. 2.05 Table 2.2 summarizes the macroeconomic developments from the expenditure side. As could be expected following a major devaluation, some components of domestic expenditure grew more slowly in 1979 compared with /1 All figures on industrial production refer to the fiscal year 1979/80. - 6 - trend rates, while foreign demand for Indonesia's exports was buoyant. Unfortunately, increased exports were not sufficient to compensate for depressed domestic demand. Fixed capital formation by domestic companies was disappointing (see Annex Tables 10.2 and 10.3), with domestic investment approvals 10% below the previous year. Foreign investment approvals, however, appeared impressive at $1.7 billion compared with $470 million in 1978, but this performance was strongly influenced by the $800 million Asahan aluminum smelter. The implementation of foreign investment as reported by BKPM in 1979 was 21% below that of 1978 (in current prices), suggesting some post- ponement of investment expenditures./I Table 2.2: GROWTH OF GROSS DOMESTIC EXPENDITURE AT 1973 MARKET PRICES (Percent per annum) Average annual growth 1978 1979 1980/a 1973-1978 Private Consumption 8.3 8.2 12.9 7.7 Government consumption 10.7 16.3 14.9 10.1 Gross domestic fixed capital formation 15.1 4.4 11.4 15.1 Imports of goods & NFS 15.6 13.9 10.0 15.9 /a Provisional estimate. Source: Biro Pusat Statistik 2.06 International terms of trade moved strongly in Indonesia-s favor in 1979, ensuring a rapid growth in national income despite the modest growth in the national product. Export unit values rose on average by 76% while import prices rose by less than 11%. Gross domestic income thus rose by 12.9% as against the 4.9% GDP growth. By way of comparison, in 1974, after the first major oil price rise, Gross Domestic Income and GDP grew by 20.6% and 7.6% respectively. 2.07 In contrast to 1979, 1980 was characterized by high domestic demand as real incomes were restored and previously deferred expenditures were under- /1 Because of paucity of data total private investment and foreign investment outlays cannot be disaggregated from overall Gross Domestic Investment figures. - 7 - taken. Consumer and investor confidence returned as the cost-induced inflationary pressures of the post-devaluation period were gradually brought under control. Real GDP growth is estimated by the Government at 7.1% in 1980 - higher than the average Repelita III target of 6.5%. With further improvements in Indonesia's terms of trade, national income growth exceeded 10% in 1980. 2.08 Domestic investment approvals amounted to Rp 1.5 trillion in 1980 compared with Rp 689 billion in 1979, indicating the beginning of a new private investment boom. In real terms /1 approvals of domestic investment in 1980 were higher than for any previous year. Applications for investment licenses in 1980 were particularly high in the chemical, wood processing and forestry industries, the latter two reflecting the recent government emphasis on domestic processing of timber (see para. 2.16). 2.09 Foreign investment approvals amounted to $776 million in 1980, down from $1,765 million in 1979 (which was dominated by the $800 million Asahan aluminum smelter), but about equal in real terms to the annual average of the past five years. However, many of the new approvals related to expansion of existing facilities and to revisions in cost estimates rather than to new investments. The general decline in new foreign investment in the nonoil sectors that has prevailed since the mid-1970s appears to be continuing. 2.10 The agricultural sector provided a strong impetus to the economy in 1980, growing by about 5%. The excellent rice crop of almost 20 million tons, up 11% from last year, was due to relative absence of pests, expanded use of fertilizer and favorable weather. It has resulted in strong consumer demand in rural areas (particularly East Java) and stable grain prices. Aggregate output of secondary food crops was relatively stable in 1980, with increases in some crops such as cassava, peanuts and soybeans being offset by lower corn production. The area under corn, which fell by 15% in 1979, declined again in 1980. The main reasons were the increased intensity of rice cultivation, which precludes intercropping with corn, and substitution of cassava for corn due to high export demand for staples. Reflecting strong growth in demand and the slow rate of increase in production, imports of sugar and soyabean grew rapidly in 1980, as did imports of wheat. 2.11 The construction sector showed particularly impressive growth in 1980, but was still unable to meet the demand for construction services. The excess capacity which characterized the building industry in 1979 has been superceded by shortages of construction materials and skilled labor. In the first ten months of 1980, construction costs rose at a rate double that of the overall wholesale price index./2 Cement consumption, which in /1 Wholesale price index used as deflator. /2 Between December 1979 and October 1980, the wholesale price index for construction materials rose by 20.3% while the overall non-export WPI rose by 10.2%. - 8 - 1979 rose by only 1.4% increased by over 20% in 1980, resulting in severe shortages. Cement imports were at their highest levels since 1976 and exceeded exports. Balance of Payments 2.12 In 1979/80 Indonesia enjoyed a current account surplus in more than two decades. The $2.0 billion surplus was a $3.1 billion improvement over the previous year and matched the increase in net earnings from oil and LNG exports. Although the volume of oil exports declined by 7% in 1979/80, the increase in the average export price from $13.50 per barrel in 1978/79 to $22.50 in 1979/80, and the 78% increase in the volume of LNG exports from a low base, accounted for the increase in net oil and LNG export earnings. 2.13 Nonoil merchandise exports, which account for 35% of total earnings, increased by 55% in 1979/80, largely due to higher prices. Volume increases were confined to palm oil, coffee, tin, copper and miscellaneous manufactures. The most dramatic volume increase for any one category was in manufactured exports including garments, textiles, and electronic parts. These items grew by 140% to $1.0 billion under the impetus of the devaluation and the export certificate scheme. The increased volume of exports of manufactures primarily stemmed from a reallocation of existing production capacity from the weak domestic market to the more profitable overseas market rather than from creation of new production capacity just for the export market. 2.14 In 1979/80 total nonoil imports grew by 23% to $9.2 billion (or about 8.7% in real terms). Although similar in the aggregate to the average growth of 8.4% a year in real terms between 1973 and 1978, the composition of the import growth in 1979/80 was markedly different from the past. Rice imports rose to $744 million, an increase in volume of 140%. Imports of intermediate goods increased by 16% reversing a downward trend. The largest gains here were in chemical inputs and textiles, reflecting the strong demand from manufacturing plants for export-oriented production. The reduction of tariffs on these imports was also a factor which contributed to their rapid growth. Capital goods imports, however, remained at a relatively modest level in 1979/80, reflecting the previously-mentioned weak investment climate. Imports of nonrice consumption goods fell by 7.5% in real terms, due to the devaluation-induced relative price shifts and the low level of consumer spending. 2.15 In the capital account, disbursements of public medium- and long- term loans declined in nominal terms; net transfers (disbursements less amortization plus interest payments) were already negative. This was largely due to the prepayment of over $400 million of debt. The net foreign assets (NFA) of Indonesian commercial banks rose by $1.9 billion, and official reserves by $1.7 billion. Official reserves rose to $4.6 billion, the equiva- lent of 5.6 months of nonoil imports and net nonfactor services. In addition the state-owned commercial banks were holding NFA amounting to $2.3 billion. - 9 - Table 2.3: BALANCE OF PAYMENTS (US$ billions) 1978/79 1979/80 1980/81 (estimate) Merchandise exports 11.35 17.49 22.41 Oil and LNG (gross) 7.37 11.32 16.66 Nonoil 3.98 6.17 5.75 Merchandise imports -10.90 -13.67 -17.58 Oil sector -3.36 -4.44 -6.08 nonoil -7.54 -9.23 -11.50 Nonfactor services (net) -0.59 -0.66 -0.97 Resource balance -0.14 3.26 3.86 Factor services (net) -1.01 -1.26 -0.96 Official transfers 0.05 0.05 0.08 Current account balance -1.10 2.05 2.98 Direct foreign investment (net) 0.27 0.22 0.17 Public medium- and long-term loans (net) 0.66 0.61 1.88 Other capital (net) 0.88 -1.17 -2.53 Deposit money banks -0.32 -1.87 -1.70 Other 1.30 0.70 -0.83 Change in official reserves -0.71 -1.69 -2.51 Net official reserves 2.92 4.61 7.11 Memorandum Item: Net foreign assets of deposit money banks (DMBs) 0.43 2.30 4.00 Source: See Tables 1-3, Analysis and Projections Appendix for details. - 10 - 2.16 For 1980/81 total gross receipts from oil and gas exports are expected to be about $16.9 billion, an increase of 50% over the previous year. Nonoil exports on the other hand are expected to decline slightly in 1980/81. This is mainly due to an expected decline in timber exports, a modest increase in the value of perennial crop exports (palm oil exports are expected to fall), lower coffee and rubber prices, and a much weaker performance in manufactured exports. Timber exports, which account for one-third of total nonoil exports, are expected to fall in volume by about 30% in 1980/81, due to the introduction of the "Three Minister-s Decree" in May 1980 which requires that a certain proportion (currently 66%) of domestic logs be processed within Indonesia. The poor performance of manufactured exports is mainly due to the recovery of domestic demand, including in particular fertilizer and cement. 2.17 Nonoil imports are expected to increase by about 10% in real terms in 1980/81. Increased capital imports, reflecting an improved investment climate as well as the sharp rise in public sector development spending, and large imports of cement and fertilizer to meet domestic shortages, account for the higher rate of import growth. Rice imports on the other hand are projected to decline given the 1980 bumper harvest which enabled BULOG to procure a record 1.6 million tons of rice domestically. With the increased rate of economic activity, other consumer goods imports are expected to grow by about 10% in real terms for the year. 2.18 The current account is expected to record a surplus of almost $3 billion in 1980/81, to which must be added net inflows of medium- and long-term loans of about $1.9 billion and direct private investment inflows of about $170 million. An outflow of $2.5 billion on the "other capital" account is expected, mainly as a result of a large increase (about $1.7 billion) in the foreign assets held by the commercial banks and to trade financing (about $700 million) provided by Indonesia in connection with its oil exports. Official reserves are expected to rise by about $2.5 billion to $7.1 billion, equivalent to nearly seven months of nonoil imports. The Government Budget 2.19 Revenues. Government revenue continues to grow rapidly. The 1979/80 domestic revenue of Rp 6.7 trillion was equivalent to an 18% increase in real terms over 1978/79, and the expected receipts of about Rp 10 trillion for 1980/81 is equivalent to a further 25% real increase./l These gains are almost entirely due to higher oil revenues which in 1980/81 account for 70% of total domestic revenue. The 1981/82 budget revenues (including foreign aid) /1 The estimated receipts for 1980/81 include a revised estimate of oil revenue and an upward revaluation of nonoil tax revenue to take account of high first semester returns and a higher inflation estimate. - 11 - are forecast by the Government to be Rp 13.9 trillion, which is 14% higher in real terms than the 1980/81 budget./1 The pattern of revenue in the 1981/82 budget follows that of 1980/81 with Rp 8.6 trillion (70%) coming from oil and LNG receipts. Table 2.4: CENTRAL GOVERNMENT BUDGET SUMMARY, 1977/78-1980/81 (Rp billion) 1977/78 1978/79 1979/80 1980/81/a 1981/82/a Domestic revenues 3,508.2 4,266.1 6,696.8 9,066.3 12,274.4 Routine expenditures /b -2,120.5 -2,743.7 -4,061.8 -5,529.2 -7,501.1 Government savings 1,387.7 1,522.4 2,635.0 3,526.1 4,773.3 Development expenditures -2,157.6 2,555.6 4,014.2 5,027.7 -6,399.2 Balance -769.9 -1,033.2 -1,379.2 -1,501.6 -1,625.9 Counterpart funds /c 35.8 48.2 64.8 65.2 64.8 Project aid 737.6 987.3 1,316.3 1,436.4 1,561.1 Change in balance -3.5 -2.3 -1.9 - - (-=increase) /a Announced budget, figures for previous years show actual outcome. /b Includes debt service payments. /c Program aid. Source: Ministry of Finance 2.20 Domestic revenue increases in 1979/80 and 1980/81 were largely related to the domestic oil price increases of 110% since April 1979 and marked a significant effort in this area. Nonoil tax performance on the other hand was poor in 1979/80. A mediocre tax effort by international standards worsened significantly in 1979/80 following the fiscal measures introduced in early 1979 to alleviate the domestic impact of the devaluation and the depressed state of the economy. Nonoil tax revenue as a proportion of nonmining GDP declined from 9.8% in 1978/79 to 8.8% in 1979/80, and the overall buoyancy with respect to nonfarm/nonmining GDP was only 0.6, /1 7% higher than the 1980/81 outcome, now estimated at Rp 11.3 trillion. - 12 - compared with a historical experience of slightly over 1.0./I In the 1981/82 budget, nonoil revenues are estimated at Rp 3.7 trillion, indicating a slightly improved tax effort, despite selected rate reductions. Personal income taxes, domestic sales taxes, customs duties and sales taxes on inputs all declined significantly in real terms, and only export taxes increased. Some improvement in the buoyancy is likely in 1980/81. Good first semester receipts suggest a buoyancy of about 0.9, which implies a further slight decline in tax effort. No major new measures to raise revenues from nonoil revenues were introduced during 1979/80 or 1980/81 mainly because oil revenues have been adequate for Government needs. This continues to be true for the 1981/82 budget. 2.21 External assistance passing through the budget has been steadily declining in relative importance. In 1979/80 this source of funds stagnated in real terms, and the budgeted value of Rp 1.5 trillion in 1980/81 implies a decline of at least 5% in real terms. In 1980/81 external assistance funds account for less than 15% of domestic revenues, compared with 20% in 1978/79. This trend is likely to continue. The 1981/82 budget estimates foreign aid receipts at Rp 1.6 trillion, implying a further 6% real decline over the 1980/81 budget. These external assistance funds were used to finance development expenditures and in 1978/79 they accounted for 41% of total outlays. Since then, these funds have financed a steadily declining share of development expenditures and in the 1981/82 budget they are projected to meet only 25% of these outlays. 2.22 Expenditures. The routine budget accounted for 50% of total expenditures in 1979/80. Its share in total expenditures is expected to rise to 52% in 1980/81, owing to further large increases (about 47% in nominal terms) in subsidies, personnel expenditure and transfers to the regions. For the last two items a 50% increase in salaries to public servants and military personnel is the main cause of the increase in routine expenditures. In the 1981/82 budget, there is a further shift towards routine expenditures which account for 54% of the total outlays. This shift is largely due to the increased subsidies. 2.23 Producer and consumer subsidies have risen from Rp 97 billion in 1977/78, or 2% of routine and development expenditures, to an estimated Rp 1,450 billion in 1980/81, nearly 13% of expenditure. The 1981/82 budget allocated Rp 2.1 trillion or 15% of total budgeted expenditures to subsidies. Of this amount, Rp 1.5 trillion is on account of the oil subsidy. Since /1 The buoyancy is the proportionate change in tax divided by the propor- tionate change in the tax base. A buoyancy greater than unity indicates a rising tax effort. Nonmining GDP is used in calculating the tax effort to abstract from the impact of the oil sector, but retain a figure comparable with other countries. Nonfarm nonmining GDP is used for the buoyancy as the best aggregate proxy for the various tax bases. - 13 - 1977/78, about a quarter of the Government's incremental revenue has been used to increase subsidies. The most dramatic increase has been in the oil subsidy (Table 3.3). The food subsidy has risen to an estimated Rp 170 billion and the fertilizer subsidy to Rp 213 billion in 1980/81. The food subsidy, covering rice, wheat and sugar has been rising owing a higher food imports, increased prices, and the decision to hold domestic prices down for equity and social stability reasons. Fertilizer prices have been declining in real terms to improve producer incentives. This rapid increase in subsidies has been a major vehicle for distributing the windfall income from higher oil prices among the population. One consequence, however, has been a steady decline in the share of development outlays in total expenditures. In 1977/78 these accounted for 50% of the total; by 1981/82 they are expected to be about 46% of total expenditures. An emerging issue for policy is whether subsidies can and should be maintained at their current high levels. The report takes up this question in Chapter Three. 2.24 For the last two years, the composition of incremental expenditure in the development budget has been markedly different from the historical pattern. In 1979/80, 17% was allocated to Government capital participation and 14% to general public services (comprising law, defence and security, and government apparatus). The social sectors - health, education and housing and water supply also experienced significant increases in expenditure whereas allocations to the main productive sectors other than industry and mining grew little or declined. Overall, basic development expenditure, excluding the fertilizer subsidy, Government capital participation and general public services, grew at a steady 6-8% p.a. in real terms for the three years to 1979/80. The 1980/81 development budget showed a real growth rate of nearly 20%, with the main beneficiaries of incremental resources being transportation, education, agriculture and regional development (mainly INPRES). In the 1981/82 budget the largest beneficiaries of incremental development expenditures are education, industry and mining, and manpower and transmigration. Prices and Competitiveness 2.25 Indonesia's inflationary experience over the last two years has been dominated by the influence of the November 1978 devaluation, the rising price of oil exports, and the monetary and fiscal policy consequent upon those events. In the period October 1978-November 1980 the consumer price index for Indonesia rose by 55%, while world consumer prices rose on average by 30%. Internal prices inevitably rise following a major devaluation due to increased prices for tradable goods, but the extent to which domestic inflation may exceed the internatonal rate without eroding competitiveness is open to question and depends on the foreign exchange or "traded" component of domestic expenditure. An "appropriate" consumer price rise may be defined as that which would maintain the gain in competitiveness secured from the - 14 - devaluation. Calculations based on import requirements derived from input- output tables for Indonesia suggest that domestic prices could "appropriately" adjust by about 15% above world prices. Thereafter, any excess of Indonesian inflation over world rates would result in a gradual reduction in competi- tiveness. The extent to which gains in competitiveness are being eroded by domestic cost inflation differs according to sector and no single measure can capture trends in competitiveness in all export and import substitution industries. Separate indices have been constructed for traditional exports, manufactured exports and import substitutes./l The competitiveness of traditional nonoil exports, which rose by 65% between October 1978 and October 1979, has remained virturally unchanged since than, as international commodity prices have continued to rise at about the same rate as domestic prices. For manufactured exports and import substitutes almost half the gains in competi- tiveness have been retained two years after the devaluation despite domestic price inflation. In mid-1980, the indices for manufactured goods and import substitutes, which had both risen by 50% in November 1978 were respectively 19% and 25% above their predevaluation levels. 2.26 On a year-over-year basis the rate of increase of the consumer price index (CPI) rose from 7.3% in September 1978 to 31% in October 1979 and then fell steadily /2 for the next eleven months to reach a low of 15% in /1 Traditional Exports: since producers are "price-takers" in international markets, domestic profitability is a better measure of competitivenes than international price differences. The ratio of the nonoil export component of Indonesia's wholesale price index (WPI) to the price index for Essential Commodities in rural Java and Madura is employed here to measure supply incentives. Manufactured Exports: since Indonesian exports compete primarily against manufactured exports from other Asian countries, the ratio of exchange rate-adjusted average price indices of eight Asian countries (Malaysia, Thailand, Singapore, Philippines, Taiwan, Korea, Sri Lanka and India) to the manufactured goods component in Indonesia-s WPI, is used here to measure changes in competitiveness. Import Substitutes: ratio of trade-weighted export unit values (adjusted for exchange rate changes) of seven industrial countries to Indonesia's Consumer Price Index (Trade weights are Japan 45%, USA 21%, Germany 11%, Singapore 9%, Netherlands 5% and Australia 4%). /2 With the exception of May 1980, when domestic prices for oil and oil products were increased an average of 50%. - 15 - September 1980. By December 1980 the rate had again risen to 17.1%. In the past year the smallest increase has come from the food component of the CPI (12.0% October 1979-October 1980) due in part to ample rice supplies. BULOG purchased a record /1 1.6 million tons of domestically produced rice to support the price paid to farmers. The highest price rise (18.4%) was in the "housing" component due in part to the 50% increase in the price of kerosene in May and to rapidly rising construction costs. Table 2.5: SELECTED MONETARY INDICATORS Credit Currency to public and Time & Total Credit to enterprises demand saving Liqui- businesses & official deposits deposits dity and indivisual entities - - - - - - - - - percent change - - - - - - - - - - April 1, 1979-March 31, 1980 34 48 39 20 9 April 1, 1980-December 31, 1980 31 34 33 29 18 (annualized) (46) (48) (46) (40) (25) October 1, 1978-Sept. 30, 1980 92 113 99 65 61 Change in NFA Change in net claims of banking system on central Government - - - as percent of change in liquidity - - - April 1, 1979-March 31, 1980 175 -83 April 1, 1980-December 31, 1980 105 -76 October 1, 1978-Sept. 30, 1980 158 -70 Monetary Developments 2.27 Rising inflation towards the end of 1980 was virtually inevitable given the rapid expansion of the money supply. Indeed, it is surprising that price increases throughout most of 1980 were relatively moderate. Table 2.5 summarizes the trends in some key monetary indicators. In the 24 months following the devaluation, total liquidity grew by 99% while prices rose by 55%. This relationship is broadly in line with historically estimated money demand functions for Indonesia which suggest that the money supply can /1 This compares with a previous high of 0.9 million tons in 1978. - 16 - expand at about 12% a year before creating inflationary pressures./l Real money balances were run down during 1979 due to a high and uncertain inflation rate, but appear to have been fully rebuilt during 1980. It is, therefore, very unlikely that the money supply could continue to expand at its current pace (about 46% for the 1980/81 fiscal year) without causing a substantial increase in inflation. From Table 2.4 and Annex Table 6.1 it is evident that the primary reason for such rapid monetary expansion is the high proportion of the foreign exchange accruing to the Government being changed into rupiah and spent domestically through the budget./2 On the other hand, credit to the private sector has increased in real terms over the last two years by only 6.5%. /1 This is derived from an estimated income elasticity of money demand of 1.5. /2 The Government presents a balanced budget and balanced accounts every year and, as a result, budgetary outlays rise with revenues. However, some expenditures are not disbursed during the same year. The monetary surplus (change in net claims of the banking system on the Central Government) thus generated - Rp 1.2 trillion in 1979/80 - was not suffi- cient to sterilize the balance of payments surplus (change in net foreign assets of the banking system). - 1 7 - 3. OPTIONS FOR MACROECONOMIC POLICY 3.01 Indonesia-s short- and medium-term resource outlook is dominated by developments in the energy sector. The two key features of the current situation are: (a) Indonesia's current account surplus in the balance of payments is likely to continue until the mid-1980½s; but (b) In the absence of policy changes aimed at a structural transfor- mation of the economy, large resource deficits are likely to re-emerge in the second half of the decade. 3.02 Higher oil prices have clearly improved the prospects for rapid growth in Indonesia, at least in the first half of the 1980s. In this report it has been assumed that the real export price for oil and LNG will rise at 3% p.a. throughout the decade of the 1980s. In this period, growth will be constrained more by absorptive capacity than by the availability of foreign exchange. A secular decline in the volume of oil available for export beyond 1983/84 is probably inevitable, and this will lead to the re-emergence of a foreign exchange constraint. Since earnings from oil exports would still account for some 55% of total export receipts in the mid-1980s, the overall growth of exports may decline sharply, thereby limiting the growth in Indonesia's import capacity and slowing the growth in incomes, production and employment. 3.03 Thus, Indonesia faces a major challenge over the next few years - to adjust to the declining volumes of oil exports and the consequent potentially severe constraints imposed on import capacities. The adjustment process has two stages. In the first half of the 1980s, when the balance of payments position is likely to be strong, it will be possible to undertake a series of major policy reforms and an expanded program of investment in export promotion, import replacement and alternative energy sources. Such a program of structural adjustment would lay the foundations for sustained economic development in the latter part of the decade. In this latter period, current account deficits would emerge again, but with adjustment along the lines proposed, these would be moderate both in relation to Indonesia's GDP and its capacity for foreign borrowing. Sustained growth at 7-8% a year in real terms would be possible while maintaining a manageable internal and external financial position. 3.04 Without a program of structural adjustment along the lines proposed in this chapter, Indonesia would face the prospect of foreign exchange constraints that would lead to a sharp slowdown in the growth of incomes and employment. In these circumstances, it would be difficult indeed for the Government to make much progress towards one of its major development objectives - the alleviation of poverty. - 18 - 3.05 To help analyze the outlook with and without significant policy changes, two sets of illustrative projections have been prepared. They are designated "High" and "Low" cases, and they are based on alternative policy responses to the current situation. The Low case shows an unsuccessful adjustment in 1980-85; the foundations for a manageable balance of payments position and sustained growth in the latter part of the decade are not established. The High case represents a much more successful adjustment, with growth being maintained throughout the 1980s at 7-8% a year. The High case is achievable, depending on policy actions in key areas: policies towards external trade and export promotion; regulation and productivity of investment; domestic resource mobilization and financial intermediation; and changing the pattern of energy production and consumption. A successful outcome will require carefully designed programs in each of these areas. Elements of a Policy Package Aimed at Structural Transformation of the Economy 3.06 The proposed package comprises measures in four policy areas: the foreign trade regime, the efficiency and regulation of investment, financial policies, and subsidies. The proposed measures are inter-related and should be conceived as a package because, in combination with each other, they are likely to be more effective than if taken in isolation. For example, a simplification of the investment licensing system and certain financial reforms are important complements to the liberalization of the trade regime, since without them, entrepreneurs would find it more difficult to respond to the changed market signals brought about by the new trade regime. Similarly, a reduction of the oil subsidy is an essential complement to the continued high investment program advocated in this chapter. Without it, the investment program would have to be severely reduced in the second half of the 1980s owing to re-emerging foreign exchange and budgetary constraints. 3.07 Foreign Trade Policies./l Indonesia depends heavily on exports of oil and gas (75% of total earnings) and on agricultural products and minerals (21% of earnings) for its foreign exchange. Manufactures other than processed agricultural products account for less than 5% of total earnings. The projected rapid increase in earnings from LNG exports will be largely offset by the decline in the volume of oil exports from the middle of the decade. Export receipts may not keep pace with the growth in demand for foreign exchange which will be associated with economic growth of 7-8% a year./2 /1 A more detailed analysis of the foreign trade regime and the regulatory environment and the policies needed to develop a more dynamic foreign trade sector and investment environment is found in "Indonesia: Selected Issues of Industrial Development and Trade Strategy" (World Bank draft report 1980). /2 Details of export projections are set out in Chapter 5. - 19 - 3.08 If, over the longer-term, Indonesia is to avoid the constraint on growth that would be imposed by a lack of foreign exchange, a substantially better performance in the growth of exports and further progress in import substitution based on a liberalized import regime, will be needed in the 1980s. Increased investments will have to be made in the export sector and in import-replacing industries. This, in turn, will require improved profit- ability, especially in a number of export industries, and a continuation of recent efforts to reform the trade regime in Indonesia. The devaluation of the Rupiah in November 1978, together with associated policy measures, represented the first significant attempt in recent years to reduce the inward-looking bias of the trade regime by encouraging exports and liberalizing imports. The Government has already announced its intention to further reduce import tariffs. There is therefore already movement in the right direction, but further changes will be needed. 3.09 The trade regime in Indonesia is characterized by the use of numerous policy instruments, including tariffs, subsidies, differentiated credit and interest rates, tax and MPO rates, import prepayments, quantitative restrictions and government directives. International trade also tends to be restricted by port and customs procedures that cause delays and raise costs. Though the average level of effective protection in Indonesia is relatively moderate (about 30%),/l the range of rates is extremely wide, as is illustrated in Table 3.1 below. Table 3.1: EFFECTIVE RATES OF PROTECTION ACCORDED TO SELECTED INDUSTRIES IN 1975 Batik industries - 35% Sugar refining - 9% Palm oil - 5% Rice milling 1% Cigarettes 5% Industrial electrical machinery and apparatus 10% Spinning industries 56% Wearing industries 192% Made-up textile goods (excl. wearing apparel) 298% Electrical appliances and housewares 341% Motor vehicles 718% 3.10 The present trade regime not only has the effect of discouraging international trade, but it also fosters a misallocation of resources by protecting high cost domestic market-oriented industries at much higher rates than labor-intensive production for export. A further result of the protective policies followed in the later half of the 1970s has been the /1 Source: "Indonesia: Selected Issues of Industrial Development and Trade Strategy"; (World Bank draft report 1980). - 20 - creation of excess capacity in many industries such as cable, furniture, car assembly, pharmaceuticals, corrugated boxes and canvas fabrics. 3.11 The main objective of the reform of the trade regime is to restructure the economy along more competitive lines to promote exports. At the same time expansion of some major new import substitution activities can be justified on comparative cost grounds. Some of these activities include industries that are capital intensive and would not contribute to employment, although they would have a significant impact on the balance of payments and value added. The basic elements of a reform of the trade regime would include: (a) simplification of the system of protection. Import tariffs combined with appropriate excise taxes should, as a rule, be the sole source of protection for domestic industries; (b) unification of the tariff structure and reduction in average tariff levels over time. The Government appears to be committed to move towards lower tariffs generally, but the desirability of movement towards unification at the same time may not be fully recognized; and (c) simplification and standardization of the export certificate scheme. A broader range of manufactured goods could be included in the scheme, whether or not they are currently exported, and certificate levels could be set according to more broadly defined commodity groups than at present. 3.12 Some of these policy changes will not be easy to bring about and will have to be undertaken gradually. For example, a program to rationalize and lower the tariff structure may have to be phased over a period of several years and even then special facilities to assist potentially efficient industries in adjusting to the new rates may be needed. The adoption of these general principles for tariff reform does not preclude continued protection of certain industrial activities when justified on infant industry or strategic considerations. 3.13 The recommended trade policy reform would also have the effect of reducing inflationary pressures in the economy which is an extra advantage under the current economic circumstances in Indonesia. Any expenditure on imported, rather than on domestically produced goods results in a lower growth of the domestic money supply and consequently tends to hold down the rate of inflation. Therefore, for any given monetary target, a liberaliza- tion of imports will allow a significantly higher domestic investment program. 3.14 Investment, Efficiency and the Regulatory Environment. Indonesia has raised its investment rate from about 17% of GDP in the early part of the 1970s to a current level of about 23%. As the earlier discussion indicated, additional investment will be needed to expand export and import replacement industries, and to develop alternative sources of energy for the domestic market. The capital intensive nature of the investments in import replacement and in energy development will tend to raise the share of investment in GDP even further. - 21 - 3.15 The prospective rise in the investment rate should not over- shadow the importance of efficiency in the use of investment and of policies for promoting this. Of particular concern here is the efficiency of public enterprises. Efficient industrialization, for example, can be helped by policies that discourage undue capital intensity and do not protect domestic industry excessively. Another major aspect of efficiency in resource use and one of particular importance for Indonesia is the regulatory environment. It is to this issue that we now turn. 3.16 Like other countries, Indonesia regulates many economic activities through a number of administrative controls and licenses. The system aims to achieve a host of objectives that range from broad ones - such as the preservation of national control over particular activities, the increase in domestic value added, the promotion of regional development and the support of economically weak groups - to narrow ones such as the protection of particular industries or even firms. There are, of course, many other specific objectives related to environmental protection, wages, working conditions, and the number of foreign personnel working in Indonesia. With few exceptions, the objectives of the regulatory system in Indonesia are similar to those found in most countries. It is mostly in its application and complexity that Indonesia's regulatory system differs from other countries. Yet, in one respect at least - foreign exchange transactions - the Indonesian economy is relatively unrestricted. Indonesia, unlike most developing countries, has virtually no restrictions on capital movements. 3.17 Reform of the regulatory system to achieve the objectives of the system at a lower economic cost is an essential complement to suggested reforms of the trade regime and financial policy. The main objective of a reform of the regulatory system is to allow resource allocation to take place in line with the incentive structure which will emerge from trade reforms. The investment licensing system could be the starting point to reform the regulatory system. Certain changes have already been initiated in the licensing system such as the decision (1978) to make the BKPM (Investment Coordinating Board) a one stop agency, from which a number of licenses can be obtained at the same time. Another recent improvement in the system has been the removal of restrictions on the import of second hand machinery. 3.18 However, many other regulations remain and tend to counteract efforts to improve resource allocation in line with trade policy and other reforms. First, the new incentives that trade reforms can establish for both export promotion and import substitution may not be fully effective, if the granting of industrial licenses continues to be strongly influenced by Government-s assessment of the balance between existing capacity and domestic demand in the relevant industry. Protection of present capacity may unintentionally help high cost industries to operate, with deleterious effects on efficiency. Second, it may prevent new entrepreneurs, - 22 - including the economically weak, from entering certain industries, foster monopolies and, paradoxically, contribute to the creation of excess capacity. Third, another high cost of the present system is the uncertainty created by its complexity and the possibility of conflicting interpretations of licensing requirements and tax laws. It also entails the maintenance of a large bureaucracy to administer the system while shortages of skilled administrative personnel and managers are pervasive. 3.19 Obviously, wholesale simplification of the regulatory system cannot be undertaken overnight. Besides, certain entrepreneurial groups who at present derive unintended benefits from the monopoly power sustained by the present system may well resist attempts to simplify and liberalize the system. Thus, simplification of the system is a long term goal. However, some initial steps can be taken during the coming years. These could include: (a) evaluation of investment applications on the basis of sound cost-benefit analysis. An attempt in this direction is already underway; (b) revision of criteria to evaluate applications for investment licenses so as to eliminate superfluous requirements; (c) further simplification of the DSP list of investment priorities administered by BKPM, using broader categories of investment projects qualifying for tax and other benefits; (d) the recent introduction by the Ministry of Industry of a detailed classification of subsectors that do not qualify for investment incentives, should be used for statistical purposes only, as it may otherwise unintentionally become a constraint on private investment in the relevant sectors. To coordinate and supervise efforts to streamline and simplify the regulatory system, the Government may wish to establish a high level Deregulation Commission with special authority to intervene in the relevant agencies and processes. 3.20 Domestic Resource Mobilization and Financial Intermediation. A successful program of structural adjustment (the High case) would mean that the share of investment in GDP would rise to a level of about 27% by the mid-1980s and then level off at close to 30% of GDP by the end of the decade./l With its resource surpluses in the first half of the 1980s Indonesia would have little difficulty in mobilizing the necessary government savings for development expenditures. There are, however, real limits to how far consumption in a low income country like Indonesia can be restrained. In the latter part of the decade therefore, a large part of the further increase in investment from 27% to 30% of GDP is assumed to come from foreign savings. 3.21 Financial policies and banking institutions have a crucial role to play during and beyond the restructuring process. Not only must they be capable of transferring savings to the investing sectors in an efficient intermediation role, they must also be capable of mobilizing additional /1 In the Low case, investment levels off at 25% of GDP by the mid 1980s; there is a much smaller increase in domestic savings so that relative dependence on foreign borrowing is higher. - 23 - resources. In the Indonesian context the financial intermediation process has to cope with special circumstances. Since oil exports are the major source of the incremental financial resources injected into the economy through the budget and indirectly through the banking system, the task of preserving domestic monetary stability presents a far greater challenge than if the incremental resources had been generated domestically. During the restructuring process, financial policies must complement the trade and investment licensing reforms discussed above, so that the private sector and public enterprises will have sufficient funds to invest in activities that became profitable with the reforms. 3.22 Resource surpluses originating in the oil sector accrue directly to the government's budget. Public expenditures and equity participation through the budget are the main mechanisms to transfer the funds to the nongovernment sector. The extent to which the banking system can provide additional credit for investment and working capital without risking monetary instability depends in large measure on the monetary surplus generated by the Government through the budget. Current projections are that in the High case budget savings will rise from Rp 4.6 trillion in 1980/81 to Rp 11.7 trillion in 1985/86. There is, however, little scope to transfer these surpluses to the private and public enterprises if reliance is placed solely on the traditional mechanisms discussed above. The transfer of some surpluses through budgetary subsidies (oil and food) is neither sufficient nor the optimal means to increase productive investment in the nongovernment sector. Without an adequate broadening and deepening of the financial intermediation process such as the creation of longer term financial instruments and the institutional capacity to handle them, the expansion of expenditures by public enterprises and the private sector will continue to be more dependent on self finance or external borrowing than is necessary given Indonesia's resource position. 3.23 A problem of particular significance is the financing of public enterprises investment programs. Table 3.2 below gives some preliminary orders of magnitudes for the planned expansion of certain public enterprises; expenditure plans of the private sector are not known. it illustrates the very high demand for funds that will arise as a consequence of planned expenditures. Table 3.2: SELECTED PUBLIC ENTERPRISE INVESTMENT PROGRAMS ($ billion at 1980 prices) 1981/82 1985/86 1990/91 Industry 1.8 4.6 5.1 Tree crops 0.8 1.8 4.2 Electricity 0.6 2.0 4.2 Total 3.2 8.4 13.5 - 24 - 3.24 Even for limited areas of public enterprise investment in industry, tree crops and electricity, there will be tremendous demand for funds. This demand will more than double within the next five years and quadruple by 1990. Clearly, even if we assume that as much as 15% of these expenditures can be financed from cash flow and another 10% through public expenditure participations (historically such participation has not exceeded 5% of government savings), this still leaves a gap of $6.2 billion in 1985/86 and $10 billion in 1990/91 to be financed through domestic and foreign borrow- ings. In other words, public enterprises will have a large resource gap to fill which lends further support to the High growth case because budget savings would be substantially higher than in the Low case. Those increased budget savings could, if domestic financial intermediation is efficient, effectively reduce the need for foreign borrowing by public sector enter- prises. Although savings through the budget are necessary, they are not sufficient to lead to investments outside the government sector. Improved and increased financial intermediation will be needed. Furthermore, total savings, including nongovernment savings, must be stepped up to meet the growing demand for funds for an accelerated investment program. The present public enterprise expenditure plans will thus entail some foreign borrowing given the dearth of domestic private capital funds. Two principal methods for foreign borrowing by these enterprises are through government guarantees and through direct contracting for debt without guarantees. In their overall impact both approaches represent a charge against future exchange earnings. No simple criteria exist for making a choice. A number of elements can be considered, however, in developing a borrowing strategy for public enterprises. First, because of the Government's comfortable resource position, there is now the possibility to increase Government-s equity participation in public enterprises which would also enhance their borrowing capacity. Second, government guarantees for loans can be given depending on the financial and economic viability of the projects. Although legally a distinction is made between guaranteed and nonguaranteed borrowing, in terms of economic analysis both options lead to similar results and should be treated as a part of the country-s external liabilities. Finally, financing from whatever sources has to be considered in relation to their impact on the overall structure, and terms of total debt obligations of the country. 3.25 Financial policy reforms to perform the critical resource mobili- zation and intermediation functions will thus be an important element of the recommended policy package. One short term concern for financial policy, however, is the need to sterilize part of the foreign exchange earnings, to avoid an acceleration of inflationary pressures. The primary instrument for this, given the nature of the surplus, is budgetary policy. The resulting control of inflation may incidentally also allow real interest rates to become positive. Over the long run positive real interest rates will be a critical factor for domestic resource mobilization through increased private sector savings. The other domestic resource mobilization objective is to raise nonoil revenues in the budget. As noted earlier the buoyancy of nonoil revenues with respect to nonoil GDP has been very modest in recent years which is suggestive of an insufficient tax effort. Signi- ficant improvements can still be made in the areas of tax administration - 25 - and collection. Remaining uncertainties that enterprises face in determining their tax liabilities also require urgent attention. 3.26 To improve financial intermediation, deposit mobilization efforts should and can be encouraged even within the present system of monetary controls. For example, monetary authorities have for sometime been consi- dering the possibility of linking ceilings on the expansion of commercial bank lending to savings mobilization performance. Furthemore, it would be advisable to make access to Bank Indonesia's rediscount window more costly in relation to deposit mobilization efforts. This could be achieved by shifting from a system of indirect subsidies through the rediscount window, to a system of direct budgetary subsidies for priority credits. Finally, it is most important that efforts should continue to be made to achieve institutional improvements for state banks through better training and technical assistance to reduce costs of operations. 3.27 Price Policy and the Role of Subsidies. Budgetary subsidies have been rising rapidly and amount to Rp. 2.1 trillion ($3.4 billion) in the 1981/82 budget, equal to 15% of the total budget or 4.2% of GDP. The largest subsidy is that on domestic consumption of oil products, budgeted at Rp 1.5 trillion ($2.4 billion) for 1981/82, an increase of 82% over 1980/81. The other main subsidies channeled through the budget are on food and fertilizer. The budgetary subsidy on oil is much smaller than the true economic cost of the subsidy./l In 1980/81 the average domestic price per barrel of refined products was $17, compared with an international price of about $40 per barrel of similar products. Total domestic consumption amounted to 140 million barrels implying a total economic subsidy of about $3 billion, equivalent to about 3.5% of GDP. The oil subsidies are dominated by two products, kerosene and automative diesel fuel, accounting for about 50% and 35% respectively of the economic subsidy. 3.28 Three arguments are frequently advanced in favor of low, sub- sidized fuel prices: (a) Subsidized fuel prices help alleviate poverty and improve income distribution. The current oil subsidies certainly raise the real income of the lower income groups but by only a small amount and they also worsen income disparities. According to 1976 expenditure survey data, about 20% of kerosene is consumed by the poorest 40% of the population, implying that for every Rp. 100 of kerosene subsidy benefiting a member of the poorest 40%, Rp. 266 will benefit members of the upper 60%. An increase in the kerosene price to the world level (about three times the current domestic /1 The former is based on the difference between Pertamina's actual cash outlays for crude oil (which includes a large amount of pro rata crude priced at a small fraction of international values) plus costs of marketing and distribution, and revenues from domestic sales, whereas the later concept measures the difference between the opportunity cost of crude used by Pertamina and sales. - 26 - price) would impose a burden on the poor, and careful thought should be given to the phasing of the price increases and to ways in whiclh the budgetary savings from reduced subsidies could be used to supplement reduced incomes of the poor - such as subsidizing more efficient alterantive forms of energy, possibly including rural electrification and bottled lPG. The case for accelerating rural electrification will be further discussed in Chapter 4. (b) Raising energy prices will cause an increase in the rate of inflation because of cost-push factors and also because fuel prices have an important psychological impact on general wage and price movements. There are two reasons why the effect on the overall price level of a reduction in the oil subsidy would be small and possibly even negative. First, the energy content of economic activity in Indonesia is still very low./l Even very substantial domestic oil prices would effect consumer prices only marginally./2 Second, the increased budgetary revenue (reduced subsidy) would have an initial deflationary impact (on the demand side), and reduce the need for converting oil revenues into rupiahs to finance Government development programs by the same amount. The annual budget subsidy on oil products is currently equivalent to over 25% of the stock of money in circulation and demand deposits. Given these relative magnitudes, domestic oil pricing in Indonesia could be used as a powerful tool of fiscal policy. If the Government should decide not to use all of the incremental revenues resulting from a decrease in the oil subsidy, the overall effect may be to reduce inflation. (c) Higher domestic oil prices would result in further deforestation and the erosion of watersheds. The cross-price elasticity between kerosene and firewood is not known with any confidence, but it has been estimated /3 that the subsidy serves to protect at most only about 20,000 ha. of land vulnerable to erosion. If this estimate is reasonably accurate the budgetary cost of protection per hectare is approaching $100,000, roughly two hundred times the cost of replanting a hectare! /1 Energy consumption per capita in Indonesia in 1978 was slightly over 200 kilograms of coal equivalent (KCE) compared with an average of 900 KCE in middle income countries and 7,000 KCE in industrial countries c.f. W4orld Bank: World Development Report 1980. /2 Total domestic consumption of fuel oil products accounts (at current prices) for about 4% of GDP, and a rough calculation based on the 1975 input-output table suggest that the direct and indirect price effects of a doubling of domestic oil prices would raise the consumer price index by about 4%. This ignores psychological effects which could lead to further price increases. /3 David 0. Dapice, "Some Notes on Oil Product Consumption in Indonesia," forthcoming in Malcolm Gillis & Peter Timmer, Public Policy in Indonesia: Issues and Methodology. (Oegelslanger, Main and Gunn, 1981). - 27 - 3.29 There are three major reasons why oil subsidies should be gradually reduced: first, foreign exchange savings through reduced domestic consumption growth, could amount to almost $7 billion dollars (in current prices) annually by the end of the decade if domestic prices were raised to world levels (see table 5.4). Second, annual budget savings could amount to Rp. 9 trillion (in current prices) by the end of Repelita IV. Over a five year period, this saving would be sufficient to finance rural electrification in a large part of Java and other socially oriented programs for the Outer Islands and would lead to significant additional reductions in kerosene consumption. Finally, realistic input pricing would improve resource allocation and thus provide a more efficient foundation for sustained economic growth in the second part of the decade. Realistic domestic oil pricing would also eliminate relative price incentives for illegal resale at higher prices in foreign markets. 3.30 Under the High case it is assumed that the economic subsidy on domestic oil products is gradually reduced, and eliminated by the end of Repelita IV. A 12% real increase in the domestic price each year until 1988/89 is required to achieve domestic consumption of 281 million barrels by that year./l In the Low case, it is assumed that there are no nominal increases in domestic oil prices for the next two years and thereafter modest real increases. This results in a domestic consumption figure of 334 million barrels by 1988/89. Table 3.3 illustrates the effects of the alternative price assumptions on domestic consumption, budgetary and economic subsidies, and government savings. By the end of Repelita IV the annual difference in domestic consumption would be about 53 million barrels, equivalent to almost $5 billion (current prices) in foreign exchange earnings and Rp. 11.5 trillion in budgetary revenues, sufficient to allow a virtual doubling of government financed development expenditures. The difference in consumption would, of course, be greater were it not for the fact that income is projected to grow more rapidly under the High case./2 Reducing the rate of increase in domestic oil consumption is therefore a key issue for the balance of payments and the rate of investment. The Govern- ment is aware of the long-term costs of continuing the oil subsidy as well as the short-run adjustment costs in raising domestic oil prices to international levels. The Government raised domestic oil prices in May 1980 by 50% on the average and in announcing the price increases reiterated its commitment to reduce subsidies over time and stated inter alia that such reductions will enable it to undertake an expanded development program. /1 This includes a 12% real price increase in the current fiscal year, 1981/82, despite the Government-s announced intention not to raise domestic oil prices this year. To compensate for delayed price adjust- ment, the High case has to assume that domestic oil prices will be raised by 25.4% in real terms in 1982/83 or alternatively 13% p.a. in real terms through 1988/89. /2 If in both cases income grew at the same rate as the Low case, (i.e. 5-6% p.a.), the annual difference in consumption by 1988/89 would be 88 million barrels, equivalent to $6.3 billion in foreign exchange earnings and Rp. 19.0 trillion in budgetary revenues (in current prices). - 28 - Table 3.3: ALTERNATIVE SCENARIOS FOR DOMESTIC OIL PRICES AND SUBSIDIES 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1988/89 A. High Case Real price rise /a (% p.a.) - 12 12 12 12 12 12 Consumption /b (mbbl p.a.) 141 154 168 183 200 219 281 (Economic subsidy Rp. trillion) 2.4 2.7 3.0 3.2 3.2 3.2 - Budgetary subsidy (Rp. trillion) 1.1 1.2 1.3 1.4 1.3 1.0 -3.0 Public savings (Rp. trillion) 4.6 5.8 7.0 8.5 10.0 12.5 25.0 B. Low Case Real price rise /a (% p.a.) - -15 -12 5 5 5 5 Consumption /b (mbbl p.a.) 141 164 189 209 230 254 334 (Economic subsidy Rp. trillion) 2.4 3.3 4.5 5.5 6.5 7.6 11.3 Budgetary subsidy (Rp. trillion) 1.1 1.8 2.8 3.6 4.5 5.2 8.5 Public savings /c (Rp. trillion) 4.6 5.2 5.5 6.1 6.8 8.3 13.5 /a Increase in domestic oil prices above the domestic consumer inflation rate, which is projected to be 15% in 1981/82, 12% in 1982/83 and 10% annually thereafter. /b Based on an income elasticity of 1.7 and price elasticity of 0.3. Under the High case the income elasticity is assumed to fall to 1.5 from 1985 onwards due to a less energy intensive structure of production and the development of alternative energy sources. /c This measure of public savings does not take into account the reduced non- oil revenues from the Low case. - 29 - 3.31 The extent of subsidies on other commodities has also been growing, and serious price distortions are emerging which have adverse effects on productivity. The 1981/82 budget includes Rp. 0.6 trillion for non-oil subsidies, divided about equally between fertilizer and food. However, this figure greatly underestimates the true economic subsidies involved. For example, while the import price of sugar in 1980 rose to over $800 per ton, BULOG continued to procure sugar from domestic mills at about $450 per ton which implies a tax on producers and a subsidy to consumers of $350 per ton on sugar thus procured./1 In the medium and long-term it is important that domestic producers should receive incen- tives from rising world prices. If low consumer prices are deemed necessary it would be preferable to explicitly target subsidies to consumers through the budget while allowing producers to receive the economic price. Another important example of this principle is the case of palm oil. Domestic crude palm oil producers are required to sell to fractionation plants at a substantial discount below the export price. Although the domestic consumer price is officially determined, it remains effectively uncontrolled. This means that high profit margins are earned by fractionation plants and/or traders. The unintended effect is that as a growing proportion of crude palm oil production is thus diverted to the domestic market at the expense of the palm oil estates, incentives for further investment in oil palm decline. 3.32 With regard to the large and rapidly growing fertilizer subsidy it should be mentioned that this important subsidy has enabled the Govern- ment to maintain slightly improved producer incentives to rice growers without commensurate increases in the guaranteed floor price for gabah (unmilled rice). Given the great economic and psychological importance of the price of rice in the Indonesian economy, the fertilizer subsidy policy can be said to have been a major element in the Government's overall anti-inflation strategy. The point has now been reached, however, that both the price of natural gas (input for urea - Indonesia's dominant fertilizer) and the price of fertilizer need review. The prevailing artifically low price of natural gas is slowing down exploration and may retard the start up of projects that would be dependent on gas. Summary of the Two Policy Scenarios 3.33 Adoption of the package of policy reforms as described above would not only result in higher growth during the first half of the 1980½s but, more importantly, would lay the foundations for sustained rapid development including progress towards employment and equity objectives in the second half of the decade. A summary of the main features of these two scenarios is set out in Table 3.4. /1 From April 1, 1981, the domestic producer price paid by BULOG was raised to $560 per ton, which is close to current import c.i.f. prices. - 30 - Table 3.4: SUMMARY OF TWO GROWTH SCENARIOS (average annual percentage growth rates) High Case Low Case 1980/81- 1985/86- 1980/81- 1985/86- 1973/80 1985/86 1990/91 1985/85 1990/91 Agriculture 3.4 3.5 3.5 3.5 3.0 Industry 9.2 9.0 11.2 7.5 7.0 Manufacturing 12.0 12.0 12.0 9.0 7.0 Other sectors 8.8 9.0 8.0 9.0 8.0 Investment 12.6 12.0 10.0 10.0 5.5 Exports 6.1 6.2 4.2 5.0 1.7 Imports 15.0 9.9 7.3 7.6 7.0 Crude oil pro- duction 2.2 4.5 1.2 4.5 1.2 Crude oil con- sumption 13.0 9.1 9.3 13.0 9.8 Exportable oil surplus - 2.8 -3.4 1.2 -5.2 GDP 6.7 7.5 8.2 7.0 6.5 /a GDP/person 4.4 5.2 5.9 4.7 4.2 /a The 6.5% p.a. GDP growth is an average rate for the period. Given that the foreign exchange constraint will re-emerge, GDP growth could fall to about 5% p.a. in the latter part of the decade. The main factors explaining the superior performance under the High case are: (a) the larger volume and greater efficiency of both public and private investment and output that would result from the various measures recommended. (b) the greater profitability of production for export and the result- ant investment leads to more rapid growth of non-oil exports, thereby strengthening the balance of payments and import capaci- ties. Both the faster rate of growth and increased labour intensity of production would create greater employment opportunities. - 31 - 3.34 The differences in outcome between the High and Low cases are most marked in the latter part of the decade, since it is only then that, under the Low case, investment is constrained by a shortage of foreign exchange. It is probable that, even in the period of 1981-85, investment growth would be more rapid in the High case (12%) than in the Low case (10%) due to a more attractive investment climate in the former. The greatest difference in sectoral growth rates occurs in manufacturing, where responsiveness to improvements in the regulatory and trade environment and to availability of foreign exchange financing is projected to be greatest. By 1990, the manufacturing sector would account for 17.5% of nonmining GDP (in constant 1979 prices) under the High case, but only 13% under the Low case./l Agricultural growth would be about half a percentage point higher in the High case, principally due to increased output of perennial crops brought about by the reduction of export restrictions. Perhaps the comparison of growth rates underplays the qualitative differences in the two outcomes. Should the foreign exchange constraint become more binding in the Low case, a reduction in the growth rate becomes necessary to sustain external equilibrium. The implication of such a reduced growth rate will be serious for employment and equity objectives. Implications for Incomes, Employment and Equity 3.35 Under the High case, GNP per person would increase from $405 in 1980 to $710 by 1990 (at 1980 constant prices), whereas in the Low case per capita income would be smaller by some $70 in 1990 (also at 1980 con- stant prices). This difference in income would more than compensate for the gradual removal of subsidies (the economic value of which were about $20 per person in 1980). Even among lower income families, average incomes would be higher and access to public services improved as a result of diverting these subsidies. Moreover, subsidy policies cannot be sustained over the long run, unlike improvements in equity, that are based on the creation of more productive employment opportunities. 3.36 One major objective of the policy reforms under the High case is the creation of productive employment opportunities for the estimated 2 mil- lion new entrants into the labor market per year and for those who are currently forced into marginal activities because of under-employment. Since it is possible to achieve the high growth rate without commensurate gains on the employment front, the emphasis is not on high growth for its own sake. The Low case on the other hand can hardly provide for the absorption of the growing labor force let alone a reduction in current under-employment. The nature of the issues is brought out by the sectoral employment elasticities as reflected in Table 3.5. /1 In 1979 the manufacturing sector accounted for 11% of non-mining GNP. - 32 - Table 3.5: SECTOR EMPLOYMENT ELASTICITIES, 1961-71 & 1971-78 GDP growth rate Employment growth rate Employment (% p.a.) (% p.a.) elasticities 1961-71 1971-78 1961-71 1971-78 1961-71 1971-78 Agriculture 2.75 3.53 1.48 2.13 0.54 0.60 Industry 6.42 12.89 4.94 3.20 0.77 0.25 Services 4.24 9.63 5.18 6.31 1.22 0.66 All sectors 3.97 8.04 2.57 3.32 0.65 0.41 Source: World Bank Staff estimates 3.37 Table 3.5 is based on observed relationships between output growth and employment growth in Indonesia. It suggests that of the two policy scenarios only the High case offers the prospect that employment growth will approximate the growth of the labor force. Moreover, with improvements in resource allocation, sector employment elasticities should increase over their historical values. 3.38 Given the present structure of the economy, it is clear that in the aggregate, agriculture must continue to be a major source of incremental employment. These remarks reinforce the importance of alleviating constraints on public expenditure both in agriculture proper and in supporting infra- structure such as roads, as will be discussed in Chapter 4. Given its relatively small size at present it is unlikely that manufacturing will be a major source of additional employment in the medium-term at least./1 In the aggregate, incremental employment from manufacturing is, for the time being, bound to remain modest compared to incremental agricultural employment. This is an important observation since countries that have enjoyed rapid increases in economy-wide real wages have done so largely as a result of an expanding demand for industrial labor. When real wages started to increase rapidly in the Republic of Korea during 1968-73, period, for example, the manufacturing sector accounted for 36% of incremental employment compared with only 6% in Indonesia for the period 1971-78. 3.39 Although the manufacturing sector in Indonesia cannot be the major source of incremental employment in the near future, establishing the appropriate environment for a rapid expansion of output from private manufacturing is an immediate concern. In the medium-term the demands placed on the construction sector will have the added virtue of strengthening the /1 This does not of course mean that that additional employment per dollar invested is necessarily greater in agriculture than it is in industry. In fact, for small- and medium-scale industry, the employment effects per dollar of additional investment may well be greater than most branches of agriculture. - 33 - overall demand for unskilled labor. Facilitating the expansion of construction activities is thus important, not only to speed the implementation of public programs, but also as a powerful instrument of job creation. During the next decade the construction sector could become, if it is not already, the major source of incremental productive employment outside agriculture. 3.40 The suggested reforms - especially those related to trade and the incentive system - will thus accelerate the growth in the demand for labor and may therefore be expected to contribute to the Government s equity objec- tives which are given first priority in Repelita III and other important statements of Government policy. Increased employment opportunities provide the primary basis for improved income distribution. In addition, the targeting of subsidies will also improve the welfare of those who are most in need of help. The present subsidies benefit the high income groups more than the low income groups. Although the contribution from the manufacturing sector towards employment creation will be small in the medium-term, in the long run it becomes the main sector for employment creation. Increased investments in agriculture and tree crops that are expected to result from trade reforms will absorb millions of small farmers in these activities. Finally, the expansion of public expenditures on social sectors - health, nutrition and education - as recommended in Chapter 4 will also contribute to equity objectives. The same applies to enlarged programs for transmigration, rural roads and improved maintenance of irrigation systems and for infrastructure creation. 3.41 In conclusion, it should be stressed that the projection of Indonesia's resource position is highly sensitive to international oil and LNG price assumptions. If the export price should rise less fast than assumed (3% p.a. in real terms), a resource deficit would appear sooner than currently projected. The report's conclusion with regard to the overall superiority of the High case policy scenario however remain unaffected by this. If anything, the possibility of more slowly rising international prices, underlines the urgency of adopting the policy changes associated with the High case as early as possible. - 34 - 4. ISSUES IN PUBLIC EXPENDITURFS 4.01 Policy reforms needed to lay the foundations for an accelerated program of development were set out in Chapter 3. These policies would have to be complemented with an expanded public development expenditure program. This chapter reviews public expenditure programs in the major sectors and suggests areas in which outlays can be expanded. It concludes with a brief review of some of the key constraints to expansion. 4.02 An expanded program of public development expenditures will be needed to support the policy proposals in Chapter 3 for several reasons. First, agricultural and industrial production programs designed to raise incomes and employment must be assisted directly, for example through improved agricultural support, power, transport and communication services. In many regions of the country these basic services are still far from adequate. Second, despite its oil wealth there is still widespread poverty in Indonesia. Growth in income through expanded production programs is vital to reducing the incidence of absolute poverty. However, the worst aspects of poverty include not only low incomes, but also malnutrition, high rates of child mortality, disease and lack of education. To further reduce the incidence of poverty, expanded programs will be needed in each of these areas. Review of Sectoral Programs 4.03 Agriculture. Agriculture is the largest sector in the economy, contributing 30% to GDP in 1979 and accounting for 61% of total employment; its performance is critical to both expanding export earnings and reducing imports and it provides a majority of total employment. Continued increases in agricultural production coupled with increased labor productivity will be an essential element in Indonesia's development in the 1980½s. Agricultural enterprises are predominantly within the private sector, but the Government plays a vital role in provision of infrastructure and services. Public expenditures for a variety of supporting services for agriculture must be accelerated to maintain the 3.5% growth in agricultural output discussed in the High case in Chapter 3. 4.04 The rapid growth in agriculture in the 1970's stemmed in large part from extensive public investment in rehabilitation of existing facilities and services, most of which were relatively quick to yield benefits. Increased production in the 1980-s will continue to come from more intensive use of existing areas and from bringing new land into cultivation. But higher production from areas already under cultivation will increasingly require heavy investments in longer-gestation projects that will be slow to yield benefits (e.g. new irrigation systems rather than rehabilitation of existing ones, watershed protection and development). At the extensive margin it will be lower quality or increasingly inaccessible land that will be brought into production. All of these factors will lead in the direction of - 35 - relatively higher public outlays to ensure that agricultural output continues to expand at a rate of 3.5% a year. Slower growth in agriculture will jeopardize food security, poverty and employment objectives, and will put unreasonably heavy burdens on the nonagricultural sectors in meeting these objectives. 4.05 A broad strategy to accelerate public expenditures in the sector should include: (a) continued intensification and the fine tuning of the irrigation system in Java while extending the cultivated area in the Outer Islands, including transmigration and other multipurpose projects; (b) improvement of input distribution services (seeds, research, extension); and (c) better marketing and processing facilities. 4.06 A high proportion of past expenditure has been in support of expanding rice production, though allocations to nonrice food crops and a range of tree crops have also increased. Ninety-five percent of Indonesia's rice production is grown under irrigated or wetland conditions. Although average yields in these areas are already close to four tons of paddy per hectare, yields can continue to increase through application of improved agronomic technology and better water management. The record 1980 rice crop of nearly 20 million tons is, in large part, due to the Government's support of improved input services, irrigation development and the reduction in the relative price of fertilizers./l Research accounts for a small fraction of expenditure but will continue to be a critical complementary input for all crops. 4.07 Expansion of irrigation, along with growing use of HYV technologies, has played an especially important role in increasing rice production. In the past most of the attention has been given to rehabilitation of old systems on Java. The future growth of the irrigation subsector will be increasingly dependent on new irrigation development in both Java and Outer Islands. With the increased availability of finance the Government is now in a position to develop large integrated dams on Java, where these are economi- cally justified. A $250 million project at Kedungombo and another project at Jatigede are likely to go ahead in the near future and other sites should he appraised without delay. It has been estimated that almost $700 million (1980 prices) should be invested in irrigation annually (excluding dams) if the country is to satisfy the growing demand for rice./2 4.08 However, the rate at which new schemes can be developed is critically dependent on the technical and management skills available to the Directorate General of Water Resources Development (DGWRD). This agency has /1 The decrease of the urea-gabah floor price ratio by 75% between 1976 and 1980 has significantly strengthened producer incentives without major shifts in the price of rice relative to other crops. /2 See the Indonesia Irrigation Program Review, World Bank Report No. 2027a-IND. - 36 - shown remarkable development in staff quality and availability, but in rela- tion to its rapidly growing tasks, it is short of critical manpower. Also, at present the capacity of local contractors in surveying, mapping and construction is inadequate and, within Government, the scarcity of skilled manpower - in particular, experienced managers and planners - is a serious constraint on irrigation development. One area of potentially high payoff is improved routine maintenance of existing systems. The present allocation of about Rp 5,000 per hectare seems inadequate and goes mainly on salaries and support expenditures. Increasing expenditures for maintenance should have a very high rate of return and is one of the most profitable areas for use of Government funds in the subsector at this time. To be effective, however, increased allocations will have to be complemented with intensive training of DGWRD field staff and greater support for water user associations. The rapid expansion of tertiary canal systems is another high priority area for additional investment. The ecological precariousness of many areas in Java, owing to the continued deforestation of hill sides and extremely intensive cultivation, remains a matter of concern. The existing regreening program has had disappointing results and the Government is now developing a more intensive project-oriented approach to watershed management. 4.09 Preliminary conclusions of a new World Bank study on secondary food crops in Indonesia suggest tllat within a very wide range of relative prices, domestic demand for staples other than rice (sweet potatoes, cassava and corn) is unlikely to be very buoyant in the years to come. Unless there are domestic processing or export possibilities, it would not be prudent to aim at a production expansion rate significantly higher than historical rates. With regard to sugar and soya, there is a large and rapidly growing gap between domestic production and consumption of those crops. There may be great potential for increased sugar production in the Outer Islands. Although the Government has identified about 20 sites, their viability has yet to be established through the necessary feasibility studies, including cane trials and hydrological surveys, all of which are urgently needed. 4.10 A continued moderate growth in demand for secondary food crops, however, should not in any way distract from the need for more and better research and other support services to raise productivity and thius, improve farm incomes. The Government provides services for these crops in the form of credit, extension advice and support for input distribution, in particular through the BIiAAS, INMAS and the newer INSUS programs. These programs have met with varying success and are currently the subject of intensive study by the Government and others. Depending on the results of the studies there may be opportunities for increased allocations of expenditures for these programs. However, the immediate priority should be to maintain a good environment for farmers in terms of availability of inputs, marketing outlets and adequate price incentives. 4.11 The estate crops sector, once one of the most productive in the world, suffered from relative neglect until the 1970-s; major replanting and rehabilitation has been underway for much of the past decade however. The sector currently provides almost two-thirds of nonoil and nontimber export - 37 - earnings and could again become a major source of export growth in the future. The Government has a ten year program (1979/80-1988/89) for rubber, coconut, oil palm, coffee, cocoa and sugar that aims at rehabilitation, replanting and expansion which would cover more than five million hectares by the end of Repelita IV. It would require a capital outlay of about $10 billion (at 1980 prices) for field establishment alone./I Because of gestation lags and the yield cycle of tree crops, production benefits from this program would not be fully realized until the 1990s. Nonetheless, the Government estimates that export earnings would rise from $1.4 billion in 1978 to $3 billion in 1983 and $6.5 billion in 1988, reflecting plantings from the mid-1970's. The new investment program would generate employment at a low investment cost per job for some 130,000 staff and 2.2 million new smallholders, as well as raise incomes of the 4 million rural families now in the sector. 4.12 A major program of expansion and rehabilitation of the tree crop sector is justified both from an employment and balance of payments view point. However, the program's targets are substantially above current implementation capacity, even if finance is available. The major constraint is the lack of technical and managerial staff and the acute shortage of extension workers. Investment in training is therefore of critical importance. In addition, the organizational structure and the system of financing this development should be reviewed. Improvement of the supply of long-term finance through institutional and other means will be of particular benefit to the sector. Review of international experience suggests that an alternative for providing finance for smallholder tree-crop programs which has worked well in other countries is through taxes levied on production (cess funds) with funds provided for planting and rehabilitation on a grant basis. It may nonetheless be preferable to concentrate for the time being on trying to make the existing system which is based on subsidized small holder credit programs work, before re-introduction of the cess system which in the past has been less successful in Indonesia than in other countries. Furthermore, the feasibility of establishing vertically-integrated, crop-specific boards with overall responsibility for policy formulation and program implementation merits consideration. 4.13 Transmigration. The transmigration program is seen by Government as an important vehicle for easing population pressures in parts of Java, for regional development, for broadening the country's agriculture base and for providing low income families with greater access to opportunities for economic advancement. Following the reorganization of the transmigration program in 1978, the Government's first objective was to resettle large numbers of farmers to meet the immediate goals of decreasing population pressure on critical lands and improving food security both for the nation and those who moved. It was assumed that incomes would be low, but higher than that of the target population in the areas of origin. Improved incomes were to be obtained in a second generation of projects intended both to increase /1 Assuming average costs of $2,000 per hectare. - 38 - production (by opening additional land, adding tree crops or irrigation) and to improve rarketing (by upgrading infrastructure and promoting cooperative development). Proposed Government expenditures for transmigration in Repelita III amount to US$2.0 billion or 8.7% of the projected development budget. 4.14 In the first two years of Repelita III, the Government resettled nearly 90,000 families (400,000 people), of the 125,000 families targeted for movement through the transmigration program. This was a much improved performance and required Government½s strong committment, new organizational arrangements, and increased availability of funds. For 11 of the 18 provinces receiving transmigrants, investments in this program constitute the largest single component in their budgets. In five of the least populated provinces, transmigration provides from 40% to over 50% of proposed development expenditures, making it potentially the principal vehicle for regional development in these areas. 4.15 Although substantial progress has been made in the past two years, the program still suffers from a variety of shortcomings. Manpower shortages, weak interagency coordination, and shortages of land appropriate for food production continue to hamper progress. The Government is considering a wide range of options to improve settler welfare further, as incomes are still low while costs to individual settlers are relatively high. Better site selection, improved reliability of agricultural inputs, cooperative development and the provision of livestock are intended to improve incomes in food crop settlements. Another promising avenue has been the development by the Directorate General of Estates of a settlement program in which migrants themselves establish 2 hectares of tree crops after their arrival on site. This program called Perkebunan Inti Rakyat (PIR) is projected to settle 75,000 families in Repelita III. 4.16 Another problem facing the program is the availability of land suitable for food crop production. It has become apparent that the traditional receiving areas of Sumatera, Sulawesi and South Kalimantan will have very little land remaining which is suitable for large-scale food crop development at the end of Repelita III. Other areas of potential settlement in Kalimantan and Irian Jaya are not yet well-known and may contain valuable commercial forests which increase settlement costs and pose conflicts in terms of resource management. It is, therefore, likely that Repelita IV developments will emphasize better infrastructure utilization through "filling-in operations such as tree crop settlements, small sites, spontaneous migration and regional development schemes. 4.17 Industry. Under the High case discussed in Chapter 3, the combination of policy changes and increased investment could result in an industrial output growth exceeding 11% a year during the 1980 s. As noted in that chapter the policy measures included reform of the trade regime, and - 39 - investment licensing procedures, and measures to improve resource mobilization and financial intermediation. The object of these reforms would be the establishment of an industrial structure consistent with the country-s comparative advantage and capable of contributing significantly to employment, balance of payments and equity objectives. 4.18 Indonesia must adopt a two-pronged approach to its industrial strategy in the 1980-s. One element will be the development of a number of capital-intensive projects designed to replace imports of intermediate goods or expand exports of raw materials. A subsidiary objective of this part of the strategy is to deepen the industrial structure. The other element of the strategy will be the promotion of production from medium- and smaller-scale industries for both domestic and export markets using more labor-intensive technologies. Given the present stage of Indonesia's industrial development and its particular resource endowment, such a strategy seems appropriate. However, care will be needed to ensure that the capital- intensive projects are indeed economically justified and, in the case of the import replacement industries, that they can operate free of subsidies with a cost structure that will permit production of intermediate inputs at internationally competitive prices. Unless these industries can provide industrial inputs at competitive prices Indonesia may experience difficulty in developing a suitable scale of manufactured exports that can compete in foreign markets. 4.19 The Government is planning a program of large-scale investments in petrochemicals, (methanol, olefins, aromatics), fertilizers, cement, pulp and paper, basic metals (steel and aluminum) and mining (coal, nickel, bauxite and iron sands). The export-oriented methanol project at Bunyu ($200 million) was delayed by negotiations over joint venture arrangements and will now also be implemented in the public sector. The fertilizer and cement industries are well established. Planned expansions totalling $0.4 billion in fertilizer and $0.2 billion in cement to meet the sharply increased domestic demand are being given high priority. Major projects in the basic metals sector, including the expansion of Krakatau Steel ($0.7 billion) and Asahan Aluminum ($0.8 billion) are underway. The Asahan complex will begin exports in 1982 and reach maximum capacity by 1984. Krakatau Steel½s Phase II expansion for hotstrip mills and a slab steel plant has started, but a related cold rolling mill is being delayed because of the Government-s intention to implement it as a separate project. 4.20 The large and complex olefins project at Arun ($1.6 billion), designed to meet domestic requirements for plastic raw materials and related projects is still being evaluated by the Government and potential foreign partners. Its economic viability remains to be established and depends in particular on gas prices that reflect opportunity costs. The aromatics project, also at Arun, appears to be less attractive now because of the depressed state of the world market for synthetic fibers. For pulp and - 40 - paper, the main problem is the remote location of most projects (apart from the expansion of the Leces plant and a new scheme in Central Java). The substantial infrastructural outlays required are unlikely to be justified by the paper projects alone. A second issue is that pulp and paper production is relatively energy intensive. In evaluating new projects it will be important to take account of the heavily subsidized domestic fuel prices. Subsidies on fuel used as an industrial input may lead to a misallocation of resources and it will be difficult to eliminate subsidies after these industries get entrenched in the economy. In the mining sector, the long-delayed Gag Island nickel project ($1.0 billion) is not expected to reach the production stage before 1987/88 because of international market constraints. Expansion of bauxite mining capacity is being examined in order to supply part of the Asahan complex-s alumina requirements, but this may prove too costly, because of the low grade of the bauxite. Similarly, studies are underway for the supply of iron ore to Krakatau steel from coastal Java iron sands, but the high titanium content may make mining economically unattractive. 4.21 Despite the size of the program, the impact of the above mentioned large industrial and mining projects on exports and employment will be relatively modest. Of the projects considered firm at this stage, substantial exports are likely only from methanol ($50 million p.a.), the Asean fertilizer project (about $60 million p.a.), and the Asahan Aluminum operation ($400 million)./l Of the projects not considered firm at this stage only the aromatics project could generate a substantial amount of exports. The total direct job creation from all these capital-intensive projects would not exceed 20,000. This implies a direct investment/employment ratio of approximately $0.8-1.0 million per job. While indirect employment creation would be larger, the implication is that most employment creation in industry will have to come from the private sector and public enterprises which engage in labor intensive activities, in particular from small and medium sized manufacturing enterprises. 4.22 Energy Development. Indonesia has unusually large and diverse conventional energy resources, including oil, natural gas, coal, hydropower, geothermal and fuel wood. Fuel wood currently acounts for 50% of total energy consumption, with most of the remainder coming from oil products. As noted in Chapter 3, domestic consumption of oil products is growing rapidly (about 12.5% a year since the mid-seventies) and supply is limited. Beyond the mid-1980 s the volume of oil exports is expected to decline even though production prospects for oil have improved compared to past assessments. Development of alternate sources of energy - especially coal, hydropower and geothermal, which currently account for less than 10% of total consumption - has, therefore, become a matter of priority for the Government. /1 All these export figures are in gross terms and at 1980 prices. - 41 - 4.23 The prospects for the oil and gas sector are examined in some detail in Chapter 5. It should be noted here however, that because about a third of the oil consumed domestically is currently being imported (due to a mismatch between refinery product mix and demand for refined products), increasing domestic refining capacity is an important element of energy sector strategy. Towards this end, refining expansions in Balikpapan and Cilacap are underway, while the financing delays earlier encountered in implementing the Dumai hydro-cracker have now been resolved. The Government has decided to finance the project from its own funds. A fourth refinery project to be located either in the Eastern part of the country or near Jakarta is under consideration. Total Government investments planned in the oil sector (excluding the fourth refinery) amounting to some $2.2 billion, are proceeding. 4.24 Successful development of nonoil energy sources will require a revision of the present pricing policy and as well as increased exploration for nonoil sources of energy, and as discussed in Chapter 3, the extent of oil subsidies should gradually be reduced. In the case of kerosene, this should be combined with a program to develop alternative sources of energy for cooking and lighting such as solid fuels, LPG and electricity, to reduce the impact on household incomes. In exploration, there is an urgent need to accelerate the identification of geothermal and hydropower resources, and to carry out an integrated study of the coal sector. Development of these energy sources is essential to reducing the power sector's current extremely high dependence on oil. 4.25 Power use is now supply-constrained. The National Electric Power Corporation (PLN) plans to increase its installed generating capacity at an average of 16% a year from 2,700 MW at present to 11,700 MW in 1990/91. The estimated cost of the program is $14 billion in current prices, of which the domestic currency component will amount to about $4-5 billion. It is unlikely that a program of this magnitude can be financed without substantial local borrowing which underscores the need for the accelerated development of the domestic capital market as discussed in the previous chapter. The PLN-s expansion program as presently conceived will have little impact on the growth of oil consumption by the power sector during this decade unless extra efforts are to be made to accelerate the development of geothermal and coal resources and to implement hydropower on schedule. 4.26 Rural electrification has greater potential, particularly in Java. However, present programs are fragmented and unless there is proper coordination between the various agencies involved, the Repelita III target of electrifying 6-7% of the country's villages is unlikely to be achieved. PLN is an effective organization, but to realize a sharply expanded program it will have to be further strengthened. Its professional and managerial manpower resources are already fully stretched. Combined with efforts to increase professional and managerial manpower it may be appropriate to consider establishing a separate department within the PLN with responsi- bility for rural electrification. - 42 - 4.27 Fuelwood is increasingly in short supply on Java and Bali but is abundant in parts of the Outer Islands. Investment in this sector could he very significant, but the options are less well defined. The greening and reforestation programs require additional support, and studies are needed to determine possible uses of residues from commercial logging for wood gasification and charcoal. 4.28 Transport. Under the impetus of high income growth the demand for transport services is rising rapidly. In the 1970½s the road vehicle population increased by about 15% p.a. for commercial vehicles and 23% p.a. for cars, while domestic marine dry cargo traffic increased by about 15% p.a. Assuming the GDP growth rate is maintained at 7-8% p.a. and regional develop- ment priorities are pursued, transport demand will grow by at least at 14% a year during the 1980½s. Priorities for public expenditures in the sector include upgrading the existing network primarily in Java and establishing new infrastructure to support development programs in the Outer Islands. 4.29 A recent transport sector study by the World Bank staff has suggested a number of priorities for transport sector policy. First, the existing transport infrastructure facilities cannot be exploited to their full potential because they are either in poor condition or they are inadequately managed. Because of inadequate maintenance, a substantial proportion of the national highway system can be utilized only to a limited extent; stevedoring and customs practices cause considerable delays in cargo processing thus raising costs in the ports. Although technical capacities in the main ports are adequate at present, a number of improvements in secondary ports will be required. Second, the regulatory framework has had detrimental effects on the supply and use of existing facilities. Rigid licensing practices and across-the-board subsidies in inter-island shipping have hampered efficient route allocations and also resulted in substantial operating losses. Finally, existing practices for transport planning and regulation could be improved to ensure cost effective solutions to meeting specific demands. 4.30 Priorities for transport sector policy formulation include: (a) larger budgetary allocations and improved organization of responsibility for road and bridge maintenance, (b) rationalizing the existing regulatory framework with a view to minimizing transport costs especially in inter-island transport, (c) targeting of subsidies to specific routes such as the pioneer services while reducing general transport subsidies, and (d) continuing emphasis on expanding infrastructure to support development projects and programs in the Outer Islands, including secondary port expansion and (e) improving coordination of investment planning among the different modes. 4.31 Social Sectors. Although much progress has been made in the provision of education, health, nutrition, and other basic services during the last decade, key social indicators for Indonesia suggest a relatively - 43 - modest level of services available in comparison with many other countries. Increased emphasis on human resource development is thus a major challenge for the 1980's. As the productivity of human capital strongly depenids on healthl and education, a clear link exists between the level of economic progress and development of thie social sectors./l The 1980 population census measured a larger than previously projected population which probably implies that a correspondingly larger expansion of services is needed. The Government has, in fact, reiterated its commitment to improving social services to meet equity objectives. The current resource surpluses provide an opportunity to accelerate progress in these sectors. 4.32 During the 1970's Indonesia made very impress;, progress t'n expanding primary education. Participation rates were raised from about 70% in the early 1970's to well above 90% by 1980. However, progress at the secondary and tertiary level was much slower. As Table 4.1 indicates, participation rates at these levels were lower than the averages for all low income countries, and substantially below those for middle income countries. Table 4.2 provides a further illustration of the relatively low level of spending on education in Indonesia in comparison with the middle income countries of East Asia. /1 World Development Report: World Bank, August 1980. - 44 - Table 4.1: EDUCATION AND HEALTH STATISTICS FOR SELECTED COUNTRIES, 1975-78 Low-income Middle-income Indonesia countries countries GNP per capita 1978 (US$) 360 200 1,250 HIealth Statistics Life expectancy at birth (years) 47 50 61 Child death rate per 1,000 (aged 1-4) 15-16 20 10 Population per physician 14,580 9,900 4,310 Education Statistics Enrollment in primary school (% of age group) 86 77 97 Enrollment in secondary school (% of age group) 21 24 40 Enrollment in higher education (% of age group) 2 4 11 Adult literacy 62 38 71 Source: World Development Report, 1980, and mission estimates. Table 4.2: PUBLIC EXPENDITURES ON HEALTH AND EDUCATION (US$ per capita) 1978 GNP Public expenditure on per capita 'Health (circa 1976) Education (1975-78) Malaysia 1,090 13 73 Philipines 510 3 13 Thailand 490 2 20 Indonesia 360 1 9 Sources: 'Iealth Sector Policy Paper, World Bank 1980 and Information collected by World Bank. - 45 - 4.33 The shortage of trained manpower will be a major constraint to development in the 1980's and both formal and nonformal education must be expanded to alleviate this constraint. Large gaps between supply and demand for technical and professional manpower are likely to justify further educational investment. However, the planning of secondary education expansion requires care, in view of the high level of unemployment among qc--ndary school leavers. In the short-term, there will be a need for special training schemes while general education investment catches up. In addition, there is evidence that the quality of education has suffered during the past decade of rapid expansion, and that inequalities in educational opportunity between urban and rural areas, public and private institutions, and between Java and the other islands are substantial. Regional differences in academic achievements are striking. For example in a recent national achievement test, children in Jakarta obtained scores in the grade nine examinations that were 78% higher than those of the Eastern Islands and Sulawesi. To tackle these problems, the Government is now taking measures to revise curricula, upgrade teachers, publish and distribute more textbooks and experiment with alternative means of providing education through the "small school" and "open secondary school" programs. Investment in teacher training is of particular importance. 4.34 In the long run, an expansion of the educational system is critical. Table 4.3 reveals the magnitude of the likely gaps between demand for and supply of selected skills. Clearly, an uncritical focus on quantities is inappropriate, especially in the light of the existing levels of unemployment among the educated. Although the Government has prepared a comprehensive plan to address current deficiencies in secondary and in higher and technical education, and although the proportion of development expenditures allocated to education increased from 5.3% in 1974/75 to 11.4% in 1980/81, all available evidence suggest that the social return to investment in education probably exceeds that of most other investments. The Government has increased allocations to the education sector in the 1981!82 budget by 37% in nominal terms. Further such increases will probably be needed in subsequent years. - 46 - Table 4.3: ANNUAL ADDITIONAL NEEDS FOR TECHNICAL/SCIENTIFIC/ MANAGERIAL MANPOWER, 1980-90, AND OUTPUT 1979 Annual additional Stock needs (1980-90) Growth due to University rate p.a. Economic Attri- output in 1979 1990 1979-90 growth tion Total 1979 Engineers 15,000 69,000 15 5,000 500 5,500 1,400 Scientists 5,000 21,000 14 1,600 200 1,800 500 Agriculturalists 8,000 26,000 11 1,800 - 2,000 1,300 Accountants 1,600 11,000 19 900 200 900 200 Economists 5,000 16,000 11 1,000 1,200 300 Administrators/ Managers n.a. 337,000 n.a. n.a. n.a. n.a. 500 /a n.a.: not available. /a Output in business administration. Source: World Bank Staff estimate. 4.35 Despite considerable progress in expanding the network of basic health facilities, serious imbalances in services and facilities between Java and the Outer Islands still exist. In the latter areas problems of access to basic health facilities and quality of health services are especially serious. Also, disease control and prevention programs, such as malaria control and some immunization programs, have not yet heen fully extended to the Outer Islands. The secondary-level referral facilities and support services are still inadequate. Many district hospitals are in poor condition and not functioning well. District health administrations have received inadequate support from the central level, the supply and distribution of drugs have posed considerable logistical problems, and there are no organized systems for staff development. The quality of health services available is thus poor and health facilities remain underutilized in many areas as a consequence. The Government is well aware of these shortcomings, and to overcome them it has mounted a variety of programs which include the following elements: (a) greater emphasis on inservice training of existing medical and paramedical staff; (b) improvements in the organization of drug supply and distribution; (c) establishment of disease control programs, particularly in transmigration areas; and (d) expansion of the network of health centers and subcenters with emphasis on district levels. - 47 - Constraints to Implementation of Development Programs 4.36 In its efforts to carry out a larger development program the Government is faced with a number of constraints which tend to slow imple- mentation or raise the cost of these programs. Perhaps the most serious is the pervasive shortage of skilled manpower. Other constraints include a variety of administrative procedures, and the capacity of the construction industry to implement a larger program of public works. Progress in resolving these bottlenecks will have a significant bearing on the Government's success in carrying out its programs. 4.37 Manpower. The acute shortage of skilled manpower is the single most important constraint to the effective utilization of the large and sudden increase in foreign exchange revenues. The magnitude of this manpower problem is illustrated by the fact that in 1976, 0.7 percent and 9.3 percent of the Indonesian labor force had received higher education and secondary education respectively, whereas the corresponding figures for Malaysia in 1974 were 1.8 percent and 25.8 percent and for Korea 10.4 percent and 60.6 percent. Expenditure programs in agriculture, for example, will almost certainly be constrained by the availability of technical manpower during the next few years. Historical evidence reveals that the level of SIAPs (unexpended budgetary balances available for expenditures in subsequent years) rose from 18% of potential domestic development expenditure in agriculture and irrigation in 1977/78 to 32% in 1979/80. It appears that the availability of technical and managerial manpower, which grew at a slower pace than budgetary resources, had already become the major determinant of the rate at which funds could effectively be channeled into agriculture. A draft World Bank report on manpower training requirements for the agricultural sector suggests that for the period 1980-84, the supply of personnel available for food and tree crop development will increase at a rate of 11% a year. However, to satisfy the manpower needs of the Ministry of Agriculture for projects planned for Repelita III, a manpower supply growth rate of about 25% p.a. would be required. If many areas food crops and estate crops use the same type of personnel and there will be a trade-off between expansion of the two subsectors. Similar trade-offs will have to be faced in other sectors. 4.38 Whilst the overall shortage of trained and experienced manpower is a national problem, this should not distract from the fact that there is considerable unemployment of young educated people, particularly in urban areas. For example, the overall unemployment rate in Indonesia is estimated at less than 3 percent and yet approximately 30 percent of urban males aged 20 to 24 who have completed senior high school were unemployed in 1979. This may indicate that the skills imparted through the school system do not match the requirements of urban employers or that school leavers choose to remain unemployed in the hope of securing a preferred position. Either way, the evidence suggests that urban labor markets contain a reserve of unemployed, educated resources that could be mobilized for development. In the short-term special training measures could be adopted, including incentives for private firms to train workers, lowering of certification requirements for specific jobs, and short courses for para-professional health and agricultural field workers. - 48 - Similarly, at the other end of the age distribution, labor force participation of males over 50 is considerably lower in urban than in rural areas. In the public sector there may be a case for relaxing retirement rules, and allowing older managers and technicians to continue to work if they wish./l Elimina- tion of unemployment among the educated young and encouraging older, experienced workers to remain in the labor force would ensure a more effective use of the existing stock of trained manpower. 4.39 In a situation where foreign exchange is not a binding constraint but where skilled human resources are extremely scarce, one solution is the purchase of additional skills from abroad. Indonesia could also take advantage of opportunities to send more students abroad for further education and training in as wide a range of skills and subjects as possible. This is an area where members of the IGGI could take the lead in establishing a vastly expanded fellowship program and assisting with the placement of Indonesian students. At the same time, Indonesia is now in a position to buy substantial quantities of technical assistance in the international market. It should take advantage of foreign loans or equity participation whenever these involve inflows of technical assistance and policy advice that is not otherwise available. Use of foreign trainers could be particularly beneficial. Members of the IGGI may be able to assist Indonesia both in the direct provision of technical expertise and policy advice embodied in its loans and in the recruitment, selection and supervision of international consultants. Provision of assistance in the social sectors will be of special value, since the private market for technical assistance in these areas is very limited. In the private sector, greater flexibility in the granting of work permits for specialized foreign personnel could help to exploit more effectively the expanded potential for private domestic investment that has been created by the country s favorable resource position. 4.40 Administrative Procedures. Successful implementation of an expanded public expenditure program will, in part, be determined by budgetary procedures and other aspects of the administrative framework. Improvements in these areas are needed to complement efforts to expand the supply of trained manpower. Some of the measures - the simplification of the DIP system and the adoption of post-auditing of development expenditures - introduced in the 1980/81 budget have served this objective especially well. Although it is too early to judge the full impact of these changes, it is noteworthy that more than 50% of an enlarged budget was disbursed to the executing agencies during the first six months of this fiscal year (1980/81) compared with less than 35% in the corresponding period of 1979/80. It does not automatically follow that the rate of physical implementation has correspondingly increased, but this is an encouraging sign. /1 This would be a major help for example to the public sector estates where more than two-thirds of senior management are due to retire during Repelita III. - 49 - 4.41 Other changes associated with Keppres 14A and Keppres 10, however, may influence the implementation of public investments. For example, Govern- ment contracts below $32,000 are now reserved for small contractors, bidding is to be restricted to firms located in the area in which the work is to be done which may cause initial delays. These requirements imply trade-offs between efficiency and equity which must inevitably occur whenever more than one objective is pursued. To ensure a rapid dispersion of the oil windfall to as large a population as possible, as intended, further procedural improve- ments are needed. Such reforms include the recent efforts to reduce delays in the despatch of operational instructions by some departments, the development of standard contract documents and more liberal approval of multiyear contracts by the Ministry of Finance. Additional efforts to build up project preparation capacities within public departments, agencies and enterprises and monitoring systems, have now became crucial. Other efforts to improve budgetary systems as well as policies to ease land purchases for public projects deserve continued close attention. 4.42 Construction Capacity. A rapid expansion in public development expenditures will strain the capacity of the construction sector. During the period 1975-79, the national accounts reveal that construction's contribution to GDP increased at a real rate of 12.5% a year. Since construction accounts for about 55% of public development expenditures (including project aid), increased expenditures on irrigation, housing, roads land settlement and maintenance can be expected to result in unprecedented increases in the demand for construction services. Demand pressure has already been revealed in price increases; in 1979 the increase in the price deflator for construction was 40%, compared with only 33% for the GDP price deflator. Similar problems have surfaced in other oil-exporting countries and they underscore the importance of promoting an efficient and responsive construction industry in Indonesia. 4.43 In such buoyant circumstances, it is unlikely that qualified contractors among the weaker economic groups will encounter serious diffi- culties in securing adequate work loads. Efforts to increase their capacity to meet expected future demands, however, remain critical. For example, small contractors could be encouraged to pool resources - financial, personnel and equipment - in order to undertake larger and more complex projects. Additional financing could be provided either through the banking system for smaller contractors or through equity participation in the case of the large public and private eompanies. Increased funds for prefinancing loans are especially important as a means of minimizing start-up delays. The current policy of indirectly subsidizing the movement of Indonesian construc- tion workers to the Middle East also merits reconsideration in present circumstances. Relaxation of restrictions on the use of foreign technical and managerial specialists, and the promotion of equipment-leasing companies are other measures that would improve supply response in the construction sector. - 50 - 5. THE EMERGING RESOURCE POSITION Prospects for the Oil Sector 5.01 The combined influence of higher oil prices, political uncertainties in the Persian Gulf and the favorable tax climate has caused a dramatic increase in exploration /1 and secondary recovery activity in Indonesia. As a result, prospects for the oil sector have improved. Table 5.1 summarizes the increased activity. The figures for 1980 may not yet fully reflect the oil companies response to the improved conditions since at present there is a shortage of drilling equipment, seismic vessels, and skilled personnel, and it is likely that in 1981 there will be a further rise in exploration activity. Production sharing contracts recently signed and scheduled for signing contain work programs and commitments to minimum exploration activity that suggest that new drilling will continue to expand. Table 5.1: INDICATORS OF OIL EXPLORATION ACTIVITY 1977 1978 1079 1980 /a Total expenditures on oil and gas, exploration and development ($ mln.) 830 920 1,100 1,800 Exploration ($ mln.) 140 250 380 700 Seismic investigation (sq.km.) 14,398 16,607 32,374 59,000 Number of exploration wells 107 137 152 215 Number of development wells 356 366 291 490 /a Estimate. /1 The 215 exploration wells drilled in 1980 exceeded the previous record of 212 in 1974. - 51 - 5.02 The key oil sector projections for production and consumption that underly the macroeconomic projections for the High Case are set out in Table 5.2 below. The oil production projections reflect the above mentioned renewed exploration activity in the sector. An increase in oil production is expected for 1980/81 for the first time since 1977 and the Repelita III target of 1.83 mbd by 1983/84 is within reach. A slower growth in production compared to the 1981-84 period is assumed up to 1990, when output is expected to reach 2.0 mbd. This is considered as the most likely outcome in discussing alternative policy options for the Indonesian economy. Table 5.2: KEY OIL SECTOR PROJECTIONS - 1980/81-1990/91 (million barrels a year) 1980/81 1985/86 1990/91 Crude oil production 576 688 730 Domestic consumption 144 218 340 Exportable surplus 432 470 390 5.03 The projections of domestic oil consumption in Table 5.2 are based on the High case; that is, they assume that the Government will adopt a domestic oil pricing policy aimed at the gradual elimination of subsidies by the latter part of the decade. A more relaxed domestic oil pricing policy (the Low case) would lead to a sharper decline in the availability of oil for export beyond 1983/84. With regard to the export price of oil (and LNG) both the High and Low case assume an annual 3% increase in real terms. - 52 - Table 5.3: DOMESTIC CONSUMPTION OF OIL PRODUCTS Total Annual percentage real Percent of growth 1973-79 Crude price total A. Oil Elasti- change /b consumption consump- B. Sectoral city 1973-79 (1979) tion growth /a (A/B) (%) Kerosene 35.8 11.9 7.5 1.58 -29 Automotive diesel oil 27.3 19.6 13.7 1.42 -32 Gasoline 17.2 10.4 13.8 0.75 -15 Fuel oil 10.7 9.5 6.6 1.44 - 7 High speed diesel 6.0 13.8 8.7 1.59 -15 Aviation fuel 3.0 13.5 13.8 0.98 -25 Total 100.0 13.2 6.6 2.0 -25 /a Economic sectors or expenditures groups have been selected as roughly corresponding to the use of the oil products. For Kerosene: household income (approximated by total private consumption); for automotive diesel, gasoline and aviation fuel: the transport sector; for high speed diesel: the industrial sector; for fuel oil and total: GDP growth. /b Domestic oil product prices deflated by Jakarta cost of living index. 5.04 As Table 5.3 shows, the responsiveness of energy consumption to growth in income has appeared to be high. In particular the crude elasticity of kerosene consumption with respect to income has been over 1.5, an extremely high figure by world standards. This is because the real price of oil products in general, and kerosene and automotive diesel fuel in particular, has been falling and consumption has responded significantly to price as well as to income changes. Consumption projections presented in Table 5.4 are based on an average price elasticity of demand for oil products of -0.3 and an average income elasticity of 1.7. In the High case the elasticity is projected to decline after 1985 due to the development of alternative energy - 53 - Table 5.4: NET OIL BALANCE (Million Barrels) /a Actual Eat Projected 1977/78 1978/79 1979/80 TlTg/hT 1981/82 1983/84 1984/85 1990/91 Crude oil production 615 597 576 576 600 668 680 730 (daily rate) (1.64) (1.64) (1.58) (1.58) (1.64) (1.83) (1.86) (2.00) Consumption High case ) 102 112 130 144 154 183 200 340 Low case ) 164 209 230 404 Exportable surplus /b High case ) 513 485 446 429 446 485 480 390 Low case ) 436 459 450 326 International oil price index /c 60 60 100 146 165 206 226 385 Net oil exports (US$ billion)/d High case ) 4.35 3.79 6.31 9.79 10.88 14.13 15.21 17.09 Low case ) 10.36 12.45 13.08 9.33 /a Crude equivalent. /b Equal to total exports of crude and products minus imports of crude and products. For gross export and import assumptions (see Analysis and Projections Appendix, Table 4). /c World Bank projections. For dollar values (see Analysis and Projections Appendix, Table 4). /d The difference in the exportable surplus is valued in refined product prices, not crude oil prices. - 54 - sources and a reduced labor intensity of production). Net oil exports in 1990 are shown to be almost twice as high under the High Case as under the Low Case. The need for investment in new refineries for the domestic market will also be influenced by the subsidy policy. Table 5 of the Analysis and Projections Appendix shows new refinery requirements under each scenario. 5.05 The prospects for Indonesia's LNG industry are bright, with the possibility of LNG export earnings becoming equal to net oil export earnings by the end of this decade. Currently, there are five LNG trains in operation. The Government plans to increase capacity to eleven trains by 1984/85, with possibly as many as 18 by 1990/91. Although the supply of gas remains plentiful, difficulties in marketing may delay implementation of the program. It now appears that the U.S. West Coast market will remain closed to LNG imports for environmental reasons, leaving Japan as the only market for some years to come. Table 6 of the Analysis and Projections Appendix summarizes the probable growth in LNG exports under the assumption that thirteen trains will be operational by the end of the decade. Even under these conservative assumptions, however, net earnings can be expected to rise to $10 billion in current prices ($4.5 billion when deflated by an international inflation index to 1979 prices). Nonoil Exports 5.06 Table 5.5 summarizes the projections of export earnings throughout the 1980s under the High and Low cases. More detailed projections for the High Case are given in Table 1 of the Analysis and Projections Appendix. 5.07 Timber, which accounted for 32% of total nonoil exports last year is expected to fall in volume by about 30% in 1980/81, and to remain at that level for the next two years. The decline stems from the introduction of the "Three Ministers" Decree in May 1980 which requires that a certain proportion (currently 66%) of domestic logs be processed within Indonesia.!l Exports of sawnwood and plywoods/veneers, on the other hand are expected to grow throughout the 1980s at an annual rate of about 6% and 15% respectively due to increased investments in sawmill and plywood factories./2 As a result, the proportion of total wood exports accounted for by logs will decline from 83% in 1979/80 to about 75% in 1983/84 and to about 60% in 1990. /1 This decree is difficult to implement and it is possible that the recorded decline in volume exaggerates its effectiveness, as more logs may be exported unofficially. /2 Between January and September 1980 the Investment Coordinating Board (BKPM) granted 41 licenses for this purpose, although the number of applications was more than double that. BKPM was hesitant to issue further licences on the grounds that additional investment would make some small existing sawmills processing plants unprofitable. Clearly some conflict of objectives is involved here since the principal purpose of the export quotas is to encourage domestic processing (as was the case with rattan and untreated leather in 1979). - 55 - Table 5.5: PROJECTED EXPORTS UNDER ALTERNATIVE CASES (US$ billions current prices) High Case Low Case 1979/80 1980/81 1985/86 1990/91 1985/86 1990/91 Agriculture & Forestry 4.63 4.01 8.36 12.69 8.00 10.96 Timber 1.97 1.27 3.63 4.66 3.40 3.82 Rubber 1.03 1.09 1.85 3.37 1.85 3.05 Beverages & Tobacco 0.86 0.85 1.31 2.16 1.31 2.02 Other 0.77 0.80 1.57 2.50 1.44 2.07 Metals & Minerals 0.54 0.66 2.04 3.47 2.04 3.47 Manufactures 1.00 1.09 4.00 13.34 3.23 8.34 Total non-oil exports 6.15 5.75 14.40 29.50 13.27 22.77 Oil sector (gross) 11.33 16.66 32.04 46.13 30.53 40.31 Oil 9.98 14.64 24.85 31.47 23.34 25.65 LNG 1.35 2.02 7.19 14.66 7.19 14.66 Total Exports 17.49 22.42 46.44 75.63 43.80 63.10 - 56 - 5.08 Exports of perennial crops are expected to increase substantially in the medium term due principally to ambitious government rehabilitation and planting programs. The annual increase in rubber production and exports, which is currently 1.5% for smallholders and 3% for estates, will rise in Repelita IV as new planting and rehabilitation undertaken in Repelita III becomes productive. Under the High case, it is projected to grow at about 3%-3.5% for smallholders and 8%-9% for estates. Palm oil production is already growing rapidly (8% p.a.) and is expected to continue at about the same pace. Palm oil exports in the next three years, however, will not grow as rapidly due to the government's policy of substituting palm oil for coconut oil in domestic consumption. Exports of coffee and tea are projected to grow at rates considerably lower than new Government targets; programs and institutional support for coffee and tea smallholders remain inadequate, and production from private domestic tea estates has stagnated. 5.09 The outlook for exports of metals in the 1980s is good. Nickel and aluminum could show impressive growth. Over 28,000 tons of tin are now exported annually, making Indonesia the world½s fourth largest producer. There is considerable scope for further expansion, with large sites with good potential in offshore Sumatera, which are beginning to be explored and exploited. 5 10 The international environment for manufactured exports from develop- ing countries is likely to be less favorable than in the 1970s due to slower income growth and increased protectionism in industrialized countries, hut is still unlikely to be a serious constraint on the rapid expansion of manu- factured exports from countries, such as Indonesia, beginning from a rela- tively low base ($1.0 billion in 1980/81). World trade in manufactures will grow at about 8-9% a year, with manufactures from low income countries growing at perhaps 10% a year despite the less than favorable export climate in the 1980s than in the 1970s. Indonesia must act to benefit from the growth in manufactures. There will be scope for replacing exports of other East Asian countries that are graduating into more sophisticated types of manufactured exports. Some products have attracted protectionist attention from OECD countries and Indonesia now faces textile import quotas from a number of countries, notably from members of the EEC./1 At this time of relative foreign exchange abundance in Indonesia, when concessional financial transfers are less crucial to Indonesia's development, continued access to the markets of industrialized countries is one of the most important means whereby they can contribute to the raising of real income levels among the /1 The Government has recently negotiated some increase in the UK quota but quotas for garments in EEC countries generally remain well below actual levels of imports from Indonesia in 1979. - 57 - poor in Indonesia. If appropriate policies with regard to investment, export promotion and the incentive framework are undertaken, Indonesia's manufactured exports can continue to grow in real terms at an annual rate of about 20%. This is lower than the 36% compound annual growth achieved between 1973/74 and 1979/80, but is high by world standards, although by no means unprecedented. The growth in utanufactured exports from Indonesia will come from continued high growth of small and medium private companies and from large-scale public and joint-venture enterprises in such sectors as fertilizers, petrochemicals and electronics./1 However, continued fast growth of manufactures is by no means assured at this stage. It will require vigorous action by the Government to improve the trade policy environment along the lines discussed earlier, and especially to improve the profitability of investment in export production relative to import substitution. Import Polices and Projections 5.11 Import growth will be particularly sensitive to investment and income growth and to changes in the structure of production within Indonesia. Table 5.6 summarizes projections for capital, intermediate and consumer goods imports under the alternative cases. 5.12 During the 1970s, capital goods imports grew at a rate about 1.3 times as fast as the rate of growth of investment, implying an increasing import-intensity of investment./2 This trend is expected to continue for the remainder of Repelita III, with capital imports growing in real terms between 15% (Low case) and 18% (High case). Thereafter the elasticity of capital imports to investment is expected to fall as foreign exchange availability once again becomes a constraint, and as the capacity of Indonesia's domestic capital goods industry increases. In the second half of the decade therefore, imports of capital goods are projected to grow between 9% (Low case) and 12% (High case). 5.13 Imports of intermediate goods (accounting for 28% of nonoil imports), which have declined slightly in real terms since the mid-1970s due to past investments in input-producing industries (notably fertilizer and cement), are expected to rise by between 6% (Low case) and 10% (High case) annually up to 1985/86 due to increased industrial activity. A number of major investments expected to begin production from 1983 will substitute for /1 Two of the large public sector projects, currently being planned will begin producing for the export market in 1984/85. The Bunyu Methanol and the Asean Fertilizer plants will earn about $75 million and $126 million (current prices) respectively from exports in that year. /2 The ratio of capital goods imports to GDI rose from 27% in 1973 to 37% in 1979. - 58 - imported intermediate goods. For example the olefins plant, expected to come on stream in 1985/86 will produce almost enough plastic materials to offset the current imports of about $300 million. At present, over half of the 600,000 tons of paper consumed domestically is imported and the new paper mills under preparation will reduce imports. The new investments in fertilizer and cement production will probably not reduce imports from their present levels in the next 3-4 years but will be sufficient to satisfy increased domestic demand. The current trade policy of high effective protection rates on final products and lower rates on intermediate goods encourages the development of industries specializing in the assembly of imported intermediate goods. Under a non-escalated tariff structure, foreign trade would be characterized by a lower growth of intermediate goods imports, higher final goods imports and higher exports. For this reason, it is assumed that under the High case, intermediate imports would remain constant in real terms after 1985, while under the Low case they would continue to grow annually at 6% in real terms. Table 5.6: PROJECTED IMPORTS UNDER ALTERNATIVE CASES (US$ billions at current prices) High Case Low Case 1979/80 1980/81 1985/86 1990/91 1985/86 1990/91 Consumer goods 2.39 2.87 6.14 10.99 5.74 9.44 Intermediate goods 2.76 3.49 8.21 11.55 6.82 12.23 Capital goods 4.07 5.14 16.31 38.13 13.58 28.23 Total nonoil imports 9.22 11.50 30.66 60.67 26.14 44.90 Oil sector imports 4.35 6.08 11.55 19.10 12.05 21.04 (gross) Total imports 13.57 18.54 42.21 79.77 38.19 70.92 5.14. Rice imports are expected on average to show no dramatic changes in volume throughout the decade. Import growth will be slow at 1.5% per year under the assumption that the domestic rice price will increase at the same rate as domestic inflation; annual imports are expected to rise to 2.2 million tons by 1985/86 and reach 2.4 million tons by the end of the decade. Wheat imports, however, are expected to continue to rise rapidly from 860,000 tons in 1979/80 to about 1.4 million tons in 1986/87 and over 2 million tons in 1990/91. - 59 - 5.15 Imports of other consumer goods will be sensitive to trade policy reforms and are anticipated to rise at an average annual rate of between 7% (Low Case) and 9% (High Case) up to 1985/86, (compared with an average rate of 7% between 1973 and 1978). Under the High case the rate of growth of these imports is projected to decline slightly after that time to be equal to that of overall consumption growth. In the Low case the tightening resource situation combined with an investment program biased towards import subsitu- tion will cause the growth in consumer goods imports to fall to 5% in the second half of the decade. Under both cases, the growth of imports falls after 1985, but for different reasons. In the High case there is successful import replacement due to the restructuring of the economy away from capital intensive industries relying heavily upon intermediate goods, towards an unbiased industrial structure characterized by self-sustaining intermediate and final goods industries. In the Low Case it is due to the re-emergence of a serious foreign exchange constraint, which will result in lower economic growth. Table 5.7: REAL GROWTH RATES OF EXPORTS AND IMPORTS UNDER ALTERNATIVE CASES /a (Average Annual Growth Rates) 1980/81-1985/86 1985/86-1990/91 A. Exports Total exports High case 6.2 4.2 Low case 5.0 1.7 Nonoil exports High case 10.5 9.1 Low case 8.7 5.3 B. Imports Total exports /b High case 9.9 7.3 Low case 7.6 7.0 Nonoil exports High case 11.9 8.4 Low case 8.4 7.6 /a Both imports and exports deflated by the import price index, so that export growth is measured in terms of import capacity. /b Including net nonfactor services. - 60 - Table 5.8: PROJECTED RESOURCE BALANCES AND TERMS OF TRADE DEVELOPMENT (US$ Billion, current prices) 1979/80 1980/81 1983/84 1985/86 1988/89 1990/91 A. Resource Balance Exports High case ) ) 38.77 46.44 61.82 75.63 ) 17.49) 22.41 Low case ) ) 37.30 43.80 51.83 63.10 Imports High case ) -33.74 -42.21 -63.09 -79.77 )-13.57 -17.59 Low case ) -32.73 -38.19 -56.42 70.92 Nonfactor services (net) - 0.66 - 0.97 - 1.37 - 1.89 - 2.70 - 3.53 Resource balances High case ) 3.66 2.34 - 3.97 - 7.67 ) 3.25 3.87 Low case ) 3.20 3.72 - 7.29 -11.35 B. Terms of Trade Export price index 100 130 181 214 264 303 Nonoil exports 100 103 139 166 199 223 Oil sector 100 146 205 249 323 385 Import price index 100 118 142 176 217 341 nonoil imports 100 114 146 167 200 224 Terms of trade index /a Total 100 100 127 122 122 126 Nonoil sector 100 90 95 99 100 100 /a Export price index divided by import price index multiplied by 100. - 61 - 5.16 As can be seen in Table 5.8 under both cases the resource balance is likely to remain highly favorable throughout the first half of the decade although more so under the Low than the High Case. In the second half of the decade the resource picture is reversed with the balance moving rapidly and heavily into deficit under the Low Case, while under the High Case the transition to relative foreign exchange scarcity is altogether more gradual and sustainable. Experience in other developing countries suggest that a resource gap of 2-3% of GDP is sustainable in the long run. By the end of the decade the resource gap under the Low Case is estimated to be over $11.3 billion, equivalent to about 4.5% of projected GDP. Under the High Case the gap is estimated at $7.7 billion, equivalent to about 2.5% of projected GDP. 5.17 In conclusion, it should be mentioned that international oil price developments will play a crucial role in Indonesia's resource position in the 1980s. The precise outcome of the resource projections is highly sensitive to changes in the oil and LNG price assumption (3% increase p.a. in real terms is assumed in this report), but conclusions with regard to policy implications are not. A lower real increase in international oil prices would increase the urgency for the adoption of the High case policy scenario. The Budget 5.18 The future outlook on Government resources available for development expenditures will depend on revenue from oil and LNG production, domestic resource mobilization through the budget, the growth of routine/current expenditures and the maintenance of reasonable macroeconomic stability. Table 5.9 summarizes estimates for the first three factors up to 1985/86 under the alternative cases. 5.19 Revenue projections for oil and LNG are derived from production projections in the Analysis and Projections Appendix Tables 4 and 6. Export prices of the oil sector are expected to rise in real terms by 3% annually, with the cost of oil production rising at 5% p.a. in real terms to take account of the shift towards higher cost fields and secondary recovery. The cost of LNG production rises at the international rate of inflation. Government revenue is slightly under 80% of operating income for oil, on average, and 60% of operating income for LNG. As a result of the relatively moderate export price increases assumed, growth of revenue is slower than in the past two years. From 1980/81 to 1983/84 the real growth is only about 20% compared with 80% from 1978/79 to 1980/81. The growing importance of LNG is apparent: in 1985/86 it will be 14% of total oil and LNG earnings. - 62 - Table 5.9: PROJECTED GOVERNMENT REVENUE AND EXPENDITURE 1980/81-1985/86 (Rp trillion current prices) 1980/81 estimate 1981/82 1985/86 A. High Case Oil revenue /a 6.8 8.1 14.0 LNG revenue 0.4 0.5 2.2 Subtotal 7.2 8.6 16.2 of which net revenue /b (6.1) (7.1) (15.2) Nonoil revenue 3.0 3.8 8.0 Total domestic revenue 10.2 12.4 24.2 Current expenditure /c 5.6 6.6 11.7 of which oil subsidy (1.1) (1.2) (1.0) Budget savings 4.6 5.8 12.5 (Constant 1980/81 prices) /d 4.6 4.9 6.9 B. Low Case Oil and LNG revenue 7.2 8.6 16.2 of which net revenue /b (6.1) (6.8) (11.0) Nonoil revenue 3.0 3.8 7.8 Total domestic revenue 10.2 12.4 24.0 Current expenditure /c 5.6 7.2 15.9 of which oil subsidy 1.1 1.8 5.2 Budget savings 4.6 5.2 8.1 (Constant 1980/81 prices) 4.6 4.4 4.5 /a Gross of subsidy. /b Less the budgetary subsidy on oil. /c Includes personnel expenditure, material expenditure, transfers to the regions, interest and all subsidies. /d Based on assumption of domestic inflation rate of 18% in 1981/82, 15% in 1982/83 and 10% thereafter. - 63 - 5.20 The projection of nonoil tax revenue is based on the historical experience with optimistic assumptions. Direct taxes and the sales tax are assumed to follow the past underlying relationship with the tax bases, after accounting for Government discretionary action./l For excises and export taxes the historical buoyancies /2 are used. For import duties and sales tax on imports, a buoyancy of 0.5 with respect to the level of imports is used for 1981/82, in anticipation of further reductions in tariffs on imports of capital and intermediate goods. After 1981/82 the historical buoyancy is used. (Nontax receipts have been declining in recent years, but are assumed to remain constant in real terms in the future). The result is equivalent to an overall buoyancy of about 1.25 with respect to GDP, and results in tax receipts in 1985/86 almost 50% higher than in 1980/81 under the High case. The ratio to nonmining GDP would rise from 8.8% in 1980/81 to 9.5% in 1985/86. Although this would mark a significant improvement over the past, nonoil revenue would still only account for a third of domestic revenues in 1985/86. The resultant growth rate in total real revenue, although much less than in the past, is still healthy, at about 7% p.a., slightly less than anticipated GDP growth. 5.21 Current expenditure /3 on goods and services are assumed to grow at the same rate as GDP while the projection of interest payments is based on past and projected borrowing. Government policy towards subsidies, and in particular the oil subsidy, is by far the single most important policy - determined factor affecting domestic resource mobilization, Government savings, and the key factor that distinguishes the High from the Low case with respect to the budget. /1 That is, the historical elasticity, which has been greater than the buoyancy, is used. /2 See footnote on page 12 for the definition of buoyancy. /3 The definition of current expenditure differs from the routine budget only in the exclusion of amortization of Government debt and the inclusion of the fertilizer subsidy. - 64 - 6. POLICY TOWARDS EXTERNAL CAPITAL INFLOWS AND DEBT MANAGEMENT Financing Requirements and Creditworthiness 6.01 The macroeconomic projections and prospects analyzed in Chapters 3 and 5, and the review of sectoral issues and public expenditure programs in Chapter 4, provide a framework to consider Indonesia's external assistance needs. While macroeconomic projections are fraught with difficulties, a reasonable set of assumptions regarding the behavior of GDP, investment, savings, and import and export growth, coupled with a review of absorptive capacity in the different sectors, support the conclusion that foreign exchange availability will not be a major constraint on growth in Indonesia, during the first half of the decade. As the balance of payments projections in Table 6.1 indicate, the current account will remain in surplus until the mid 1980s under both the High and Low growth cases. In this period official reserves are projected to rise steadily from their current level of $7 billion to about $24 billion by 1985/86 - the equivalent of about 9 months of imports. 6.02 In the second half of the decade the balance of payments position deteriorates in both cases. In the High case the current account remains manageable, with the deficits equal to about 2.5%, of GDP by 1990/91 being financed with inflows of medium and long-term loans, short-term capital inflows (from a draw-down of assets held abroad by commercial banks), and limited use of official reserves. In the Low case however, the current account deficit would become very large. The reason, of course, is that with only limited progress towards the objectives of structural adjustment in the first half of the 1980s, the export growth rate is very low. Large deficits would rapidly emerge as Indonesia tries to maintain imports sufficient to sustain a GDP growth rate of even 6% a year. In this Low case the current account deficit would be about 4.5% of GDP by 1990/91 - a level that would be inconsistent with the maintenance of internal and external financial stability. In these circumstances Indonesia would have little choice but to cut growth in production, incomes and employment even further. 6.03 At the present time however, Indonesia's external borrowing capacity is strong indeed. Commercial loans contracted in 1980, with only 0.5% interest over LIBOR, attractive maturity and grace periods, equally attractive terms for other costs of loans, and the continued success with bond sales, all point to the high creditworthiness rating attributed by foreign private lenders to Indonesia. The question then is whether Indonesia should continue to borrow from external sources while the current account surpluses persist. In examining this question it is useful to distinguish between capital from official and from commercial sources. - 65 - Table 6.1: BALANCE OF PAYMENTS PROJECTIONS UNDER HIGH AND LOW CASES (US$ billions) High Case Low Case 1983/84 1985/86 1990/91 1983/84 1985/86 1990/9 Resource balance 3.65 2.34 -7.67 3.20 3.27 -11.35 Factor services -0.11 0.54 0.06 -0.10 0.44 - 1.35 Interest on public debt -1.20 -1.40 -2.43 -1.19 -1.40 - 2.78 Other (net) 1.09 1.94 2.49 1.09 1.88 1.43 Official transfers 0.05 0.05 0.05 0.05 0.05 0.05 Current account 3.95 2.93 -7.56 3.15 4.25 -12.65 Public MLT loans (net) 1.61 1.11 3.08 1 61 1.30 3.08 Disbursement 3.08 3.00 6.57 3.08 3.19 7 27 Amortization -1.47 -1.89 -3.49 -1.47 -1.89 - 4.19 Private directinvestment 0.25 0.30 0.50 0.1 0.1 0.1 Other capital -1.92 -1.05 3.21 -1.92 -1.05 3.21 Change in reserves -3.89 -3.29 0.77 -2.94 -4.60 6.25 (- = increase) Memo items Net official reserves 17.41 23.90 25.46 16.53 24.54 13.07 Reserves as month of non-oil imports 9.1 8.8 3.9 9.7 10.5 2.9 Debt service ratio (%) /a 12.2 11.0 13.1 13.7 12.5 19.9 /a Ratio of debt service payments for public and private external debt to exports (with oil and LNG on a net basis). Capital Inflows from Official Sources 6.04 The main inflows from official sources come in the form of grants and loans from members of the IGGI. The members of the IGGI, and other donors, have traditionally played two important roles in Indonesia: (a) provision of technical assistance and technology transfers via aid programs; and (b) provision of financing - frequently on concessional terms - for imports needed for the Government's development programs. As Table 6.2 indicates, new commitments of grants and loans on concessional terms averaged about $1.12 billion a year in the past three years. Loans at market terms from official bilateral and multilateral sources amounted to $1.04 billion a year in the same period. - 66 - Table 6 2: NEW COMMITMENTS OF EXTERNAL PUBLIC DEBT BY SOURCE, 1975-80 (US$ million) 1975 1976 1977 1978 1979 1980/a Grants 68 61 66 46 52 70 Concessional Loans 376 503 705 914 1222 1092 Bilateral 376 503 705 771 1081 930 Multilateral - - - 143 141 162 Loans at Market Terms 2901 2632 1024 1789 2602 2316 Official Export 401 943 81 59 320 480 Credits and Associated Suppliers's Credits Multilateral 389 673 542 607 936 719 Other Commercial Loans 2111 1016 401 1123 1346 1117 Total Gross Commitments 3345 3196 1795 2749 3876 3478 Less Replacement Loans - - - 200 470 60 Total Net Commiments 3345 3196 1795 2549 3406 3418 /a Bank of Indonesia estimates. 6.05 Despite its oil wealth, Indonesia is still a poor country. Programs and projects developed with capital and technical assistance of donors are making an important contribution to the monumental development tasks of overcoming poverty, disease and malnutrition, and lack of basic services. There is a clear case for continued financial support for projects and programs that include technical assistance, training and technology transfer through capital assistance. In many cases this can best be done by maintaining programs in which donors have developed special expertise. 6.06 The comfortable foreign exchange position provides Indonesia with funds to buy part of the technical know-how needed for development in the international market. But not all such purchaseable technical knowledge is an adequate substitute for technical assistance associated with project and program aid. Donors have developed a stock of knowledge in designing - 67 - projects and programs in specific sectors in Indonesia; they have been closely associated with the implementing agencies and have a commitment to support development efforts that goes well beyond commercial technical transfers. For this reason, a dollar of technical assistance associated with project aid frequently provides more benefits to Indonesia than market purchased technical know-how of equal cost. 6.07 Capital aid and technical assistance cannot be disentangled in many cases. Thus under the present circumstances in Indonesia capital aid becomes an adjunct in external development assistance. Because financial and technical transfer components vary by project and program, it is not possible to define the overall level of assistance needed in financial terms as in the more conventional case of aid needed to fill a resource gap. 6.08 Nonetheless, the supply of funds from donors is limited. With many of the oil-importing developing countries facing an extremely difficult period of adjustment to the realities of higher energy prices and slower growth in export markets, donors and the Government alike must be satisfied that these scarce funds are used to best advantage. The essence of the argument presented in Chapters 3 and 4 is that Indonesia also faces a period of structural adjustment, if it is to successfully lay the foundations for sustained development throughout the 1980s. Unless it does so, the current development momentum may falter, and serious balance of payments constraints may re-emerge in the second half of the decade. Donors have an important role to play in assisting the Government in such a program of structural adjustment. In this context, several areas suggest themselves as priorities for foreign assistance. Support for upgrading and expanding technical and professional manpower is urgently needed. As a first priority for the 1980s technical and managerial manpower availability has to be raised to utilize Indonesia's incremental resources effectively. Second, continued support for programs and delivery systems in food production, health, education, and water supply, and programs to address basic social needs remain very important. Finally, donors should continue to support projects and programs aimed at employment generation and long-term structural transformation and diversification of the economy as a whole, the broad outlines of which were set out in Chapters 3 and 4. It may be especially important for donors to support programs and projects in the more remote regions where institutional capacities are less well developed, especially in those regions which have yet to participate fully in the development of the country. 6.09 Traditionally, much of the development aid provided by members of the IGGI and other donors, was financed at concessional rates. Indonesia-s comfortable external financial position and increased borrowing capacity have, of course, weakened the case for providing assistance on highly concessional terms. Given the changing needs of other developing countries and the global responsibilities of many donors, it would be prudent for Indonesia to expect somewhat harder terms for loans related to donor-supported programs and - 68 - projects. In this connection, there is a strong case for financing a larger share of total project aid with export credits from official sources. Finally, it should be mentioned that the provision of a portion of total bilateral assistance in the form of grants remains desirable, mainly because of the greater flexibility that is normally associated with the use of grant aid as opposed to loan financing in Indonesia. 6.10 In summary then, the need for project and programs assistance from donors continues to be of vital importance to Indonesia. There is little justification for donors to reduce their degree of commitment because of Indonesia-s comfortable financial position projected for the medium-term. Indeed, a well defined program of assistance to support the structural transformation in the medium term, if successful, will reduce the need for financial assistance in the longer term. On this basis new commitments of loans from official bilateral and multilateral sources are projected to remain relatively stable at about $2.5 billion throughout the 1980s (see Table 6.3). The average terms on which these funds are borrowed would harden however, as the share of loans at highly concessional rates gradually declines. Increased use of official export credits are assumed to offset declines in these concessional loans. Table 6.3: PROJECTED NEW COMMITMENTS OF GRANTS AND MEDIUM- AND LONG-TERM LOANS: HIGH CASE (US$ billion) Sources 1981/82 1985/86 1990/91 Official grants 0.10 0.05 0.05 Loans from official sources 2.40 2.60 2.60 Private loans /a 0.70 1.40 5.80 Total 3.20 4.05 8.45 /a Includes private external debt. Policy Towards Private Capital Inflows 6.11 An overall borrowing strategy must look beyond the use of official loans. The temporary accumulation of foreign exchange surpluses has implications for borrowing from commercial sources. The Government now has greater freedom to substitute the use of own funds for foreign borrowing if - 69 - and when circumstances make that desirable, and to be highly selective in the use of commercial funds generally. The prepayment of some high interest or floating rate loans may also become attractive, depending on returns to reserves and other factors. In recent years, several old commercial loans have in fact been replaced by newer loans on more favorable terms for that reason. 6.12 As Table 6.2 indicates, Indonesia has borrowed substantial amounts from private sources during the past three years. Some of these funds have come in the form of suppliers- credits, and there have been several Government bond issues in private markets; but the bulk of the borrowings - more than $1 billion a year since 1978 - have come from the Euro-dollar and similar markets. With its present strong external financial position Indonesia now has the option of using more of its own funds as an alternative to borrowing commercially. While there may be a case for small selective commercial borrowing for certain specific purposes, continued large scale borrowing in the Euro-dollar market would appear to have little justification at this time. If, for example, liquidation of foreign assets is costly at a given point in time, compared to short-term borrowing rates, selective borrowing for short-term roll-overs may be economically more attractive. There may also be a case for selective borrowings at fixed interest rates for specific projects where returns depend on technology transfer and risk spreading. 6.13 In these circumstances, a sharply reduced level of borrowing from private sources is projected for the first half of the 1980s (see Table 6.3) and then to rise again to meet the emerging balance of payments deficits. By the latter part of the decade public and private borrowing from commercial sources is projected to approach $6 billion a year. 6.14 A second element in private capital flows is private direct investment. For the transfer of managerial skills and technology as well as for employment absorption, private investment is an important vehicle. The manufacturing, mining, and tree crops sectors are likely to be the most attractive for private foreign investment. 6.15 Although private foreign investment has declined in real terms since 1974, a majority of potential investors believe that Indonesia is an attractive country in which to invest. The basic thrust of encouraging private foreign investment lies in reducing uncertainties that affect new foreign investors by defining licensing, tax and ownership regulations more clearly and by adopting more flexible ceilings and procedures for the granting of work permits to foreign personnel. If the investment climate was clarified along these lines, the decline in net inflows in real terms of direct private investment that has persisted since 1974 could be reversed. A nominal annual growth rate of 12% throughout the decade would be reasonable in these conditions, bringing the net annual inflow to $500 million by 1990. This is equivalent to a 5% annual growth in real terms, - 70 - slightly above the rate at which private direct investment in developing countries generally is likely to grow in the future. These inflows could play an important role in the restructuring process that now needs to be initiated. From a purely financial point of view, private foreign investment will enable risk sharing between Indonesians and foreign investors and will thus help to raise total investment. Foreign Exchange Reserves and Debt Management 6.16 Indonesia now (end March 1981) holds official foreign exchange reserves of about $7.1 billion, equivalent to 4.6 months of gross imports (6.9 months of nonoil imports). In addition, state-owned commercial banks hold $4.0 billion in net foreign assets. Although the current level of reserves is higher, both absolutely and relatively, than the average level of reserves held by Indonesia in any previous year, it should not be considered excessive in relation to the reserve cover needed to undertake the various reforms discussed in Chapter 3 and the investment programs discussed in Chapter 4 and the associated import requirements. Nor should there be the presumption that a policy to reduce reserves is desirable for its own sake. The report s projections demonstrate that the accumulation of reserves is essentially a medium-term phenomenon. From a monetary stability point of view, an increase in external reserves in the current circumstances is an essential corollary to controlling inflation through monetary surpluses in the budget. This is a reflection of the Government's decision to spend some of the incremental revenues later than now for reasons of stability. Optimal use of reserves inevitably entails a comparison at the margin of real returns to reserve holding with real returns to their expenditure domestically or abroad. 6.17 In the High case, official reserves rise steadily to about $24 billion - the equivalent of 9 months of nonoil imports - by the mid-1980s. With the emergence of current account deficits in the second half of the 1980s, the level of official reserves stabilizes at around $25 billion by 1990/91. However, by 1990/91 this level of reserves is the equivalent of about 4 months of imports which may be regarded as reasonable. This situation is in contrast to the Low case where there is a sharp reduction in official reserves in the latter part of the decade to a level equivalent to only about 3 months of imports. In this case, further declines would be unavoidable in the absence of more restrictive growth policies which would be needed to ensure a manageable external position. 6.18 Private external debt is a part of the total debt obligations of the country. The servicing of this debt lays a claim on the same resources as the servicing of public foreign debt. Information on the terms and maturity structure of nonguaranteed private external debt is not available from official sources. Bank staff estimates based on lender sources put the amount of outstanding and disbursed medium- and long-term private foreign - 71 - debt at $2.5 billion at the end of 1979. With improved economic prospects for Indonesia, the Indonesian private sector is likely to increase private foreign borrowing to finance business expansions. There are at present no foreign exchange restriction on private foreign borrowing or on private foreign debt service payments. Although no changes in this policy are suggested, it is recommended that a special effort be made to monitor private capital flows. 6.19 Indonesia's disbursed and outstanding external public debt is estimated to be $15.2 billion at the end of March 1981 (see Table 6.4). In addition, there is approximately $8 billion of undisbursed public debt. Private external debt of maturities of one year or more is estimated by the World Bank at about $2.5 billion at the end of 1979. Table 6.4: DISBURSED MEDIUM- AND LONG-TERM PUBLIC DEBT OUTSTANDING (US$ billion) 1979/80 1980/81 1985/86 1990/91 Sources Official (bilateral and multilateral) 8.53 9.67 18.48 24.95 Private 4.74 5.54 4.63 9.21 Total 13.27 15.21 23.11 34.16 6.20 Under the borrowing assumptions for the High case which were discussed earlier in this chapter, the total disbursed medium- and long-term public debt outstanding would rise by 9% a year to about $34 billion in 1990/91. 6.21 The ratio of interest and amortization payments to export receipts declined sharply in 1980/81 mainly because of the large increase in export receipts./1 It is projected to remain stable at about 12% during the first half of the 1980s. In the High case it would rise slightly to 13% in the second half of the decade; but in the Low case the burden of debt service payments would begin to rise sharply and could approach 20% by 1990. /1 The definition of debt service used here includes payments related to private external debt. Export receipts include oil earnings on a net basis. - 72 - Analysis and Projections Appendix 1. Exports: High Case 2. Imports: High Case 3. Balance of Payments: High Case 4. Oil Sector Projections 5. Petroleum Fuel Products Projected Supply and Demand 6. LNG Projection 7. Terms of Trade Index 1973-1990 _ 73 - Pro1 00 - -.0- .- ~ ~ - - - -00-0-- - -- -oo-e o l rOOGO r = o0-.-r _ o 0r 00 0 - 0 e t OON0OC r0 _0, 01 -, . - rl _ r0r _o _ - _ C . o 0 - .--O O- - r - - o - - rr oo'cr oo rrrOoo OO o 0 OOcOS0-n X.raeorOOo.0-r'.0-tOO ¢ 00°'r-'.00 ° .0-o or-Cr>Or-cOrCoc .0000-- o--o-- - - - -- - -- -- --- --- -~ ' - t C ~ 0 0 0 or e ~ r _r 2ooo-,.t or - .- - C- -r _ _ _ _ i r oo Cor--.r o _r d0.A - roOdd drr- OO dadrr0_ _ _-- 0v dOOoC r° r° eo d OC00 r ° r 00V r ° e -- _-r - do-S CNr_0dd__C -t_O.- - - - - - - - - - - I . . .._. . . . . . . . .-. . .o.o. .-. . 0I. ..CN . .O . . . . . . . -C. -O _0 0- ' _r d'N 00 00 . 00 C .-00 -- -o0 -- 0 0 0-Cr- r or0 0 0 -0 r-0 rl _ _.nr ro_ ~ 4d - - u = o .rd;rI r ; rod r, nCIC r CorO d .3 ; t< S- rd2r 2Cr r r ~~~0 ~ r _- or _0 4~ 0:0 - Q -~ a or + o+aer da a + 0 *: 0 0 + O- -A 0 0 + 0-; C 0J C- +A O -r X ~ ~ ~~ o- 0 0-e iE ii 0 0- oo .- -XX @ ==ai r ;os ?= r r~~~~~~~~~~~~ or 0 0 .r0 INDONESIA COUNTRY ECONOMIC MEMORANDUM Imports: High Case (US$ million) Actual Est. Projected 1q73/ 1974/ 1975/ 1976/ 1977/ 1978/ 1979/ 19R0/ 1981/ 1982/ 1983/ 1984/ jq85/ 1986/ 1987/ 1988/ 1989/ 1990/ 74 75 76 77 78 79 so 81 82 83 84 85 86 87 88 89 90 91 A. Current Prices 1. Rice 389 493 275 333 650 341 744 781 918 1,077 1,191 1,321 1,460 1,579 1,712 1,851 2,006 2 ,172 2. Other consumption goods 610 457 631 1,024 1,326 1,572 1,651 2,089 2,478 2 ,922 3,449 4,046 4 684 5,327 6,058 6, 65 7, 794 8,818 3. Intermediate goods 1,163 2,162 1,771 1,603 1,721 2,085 2,760 3,493 4,144 5,111 6,254 7,141 8,210 9,142 9,717 10,291 10,918 11,546 4. Capital goods 776 1,229 2,413 3,207 3,544 3,545 4,070 5,140 6,603 8,424 10,763 13,322 16,309 19,892 23,680 28,090 33,377 38,130 5. Total nonoil imports 2,938 4,341 5,090 6,167 7,241 7,543 9,225 11,503 14,143 17,534 21,657 25,830 30,663 35,940 41,167 47,097 54,095 60,666 6. Oil sector /a 460 1,910 2,272 2,640 2,909 2,264 4,349 6,084 7,512 9,495 12,085 11,426 11,554 13,139 14,775 15,992 17,476 19,097 7. Nonfactor services (net) 194 263 345 490 536 586 659 975 1,002 1,174 1,370 1,613 1,889 2,058 2,355 2,701 3,086 3,534 8. Imports + NFS 3,592 6,514 7,707 9,297 10,686 11,493 14,238 18,544 22,657 28,203 35,112 38,859 44,104 51,137 58,289 65,790 74,657 83,297 B. Price Index (1979 - 100) 1. Rice 107 165 110 77 82 111 100 133 154 178 194 212 231 246 263 280 299 319 2. Other goods 48 60 69 71 76 88 100 113 123 133 144 155 165 175 186 197 209 221 3. Total nonoil imports 52 65 70 71 77 89 100 114 125 135 146 157 167 178 189 200 212 224 4. Oil sector /a 40 55 65 67 72 81 100 129 143 159 174 190 207 223 241 260 281 303 5. NFS 48 60 69 71 76 88 100 110 119 128 137 148 159 168 178 189 200 212 6. Imports + NFS 50 61 68 70 75 86 100 118 129 143 155 167 179 193 199 211 225 237 C. Constant 1979 Prices 1. Rice 364 299 250 432 793 307 744 587 596 605 614 623 632 642 651 661 671 681 2. Other consumption goods 1,271 762 914 1,442 1,745 1,786 1,651 1,849 2,015 2,197 2,395 2,610 2,845 3,044 3,257 3,485 3,729 3,990 3. Intermediate goods 2,423 3,603 2,567 2,258 2,264 2,369 2,760 3,091 3,462 1,842 4,227 4,607 4,976 5,224 5,224 5,224 5,224 5,224 4. Capital goods 1,617 2,048 3,497 4,517 4,661 4,028 4,070 4,549 5,368 6,334 7,474 8,595 9,884 11,367 12,731 14,259 15,970 17,253 5. Total nonoil imports 5,675 6,712 7,228 8,649 9,465 8,490 9,230 10,076 11,440 12,878 14,710 16,435 18,337 20,777 21,863 23,629 25,594 27,148 6. Oil sector /a 1,150 3,456 3,492 3,940 4,040 4,153 4,349 4,716 5,253 5,972 6,945 6,014 5,582 5,892 6,131 6,151 6,219 6,303 7. Nonfactor services (net) 404 438 500 690 705 666 659 886 842 917 1,000 1,090 1,188 1,225 1,323 1,429 1,543 1,667 A. Imports + NFS 7,229 10,606 11,270) 13,259 14,21() 13,309 14,238 15,678 17,535 19,761 22,655 23,315 24,682 26,526 29,317 31,209 33,242 35,118 /a Including services (see Table 4 of this Appendix for disaggregation). - .al 56 m l I NrnnNFP IA COUNTRY FCONOMIC MFMnRAMA1'rM Ralance of Payments .is?h Case (I15S n11 Inn) Ac tual Pro - tced 1971/74 l174/I5 19/5/76 1976/7 7 19R71/7 9I7/79 1970/812 10n0/g1 1991/R2 I982/R1 IQlR8/4 1QR4/Rs l55fp6 IQRP/Aq I uNT(FT Summary of Balance of Payments 1. Exports 1,010 6,581 7,2S3 9,213 10,R61 11,153 17,48P 27,414 ?6,340 12,159 3R,76S 41,P70 4.,'&,43 6l,a1' 7S,67F (a) Oil and l.NC (gross) 1,105 4,54F 5,41(0 6,150 7,354 7,374 11,17t 16,661 1,8nh6 '3,66h 2P,4n0 71,S77 7.030 10,9qn0 46,177 (b) Nonoil 1,905 2,033 1,R71 7,963 3,507 1,97Q 6,165 9,753 6,543 R,41l In,35P 17,151 14,4n4 '1,nl4 'o 49" 2. Imports (I ncl. net NFS) -3,592 -6,514 -7,707 -9,297 -10,6R6 -11,493 -14 ,233 -18,544 -27,657 -2A,7(0l -15,117 -IR,a69 -44,10n6 _sS,70n .3,Q707 (a) Oil sector /a -460 -1,910 -2,272 -7,640 -2,909 -3,364 -4,'.1 -6,nR4 - 7,S12 -0,405 -12,0S8 -11,472 -11,55 c -1",len7 (h) Nonoil imports -2,938 -4,341 -5,050 -6,167 -7,241 -7,543 -9,210 -11,503 -14,141 -17,514 -71,6S7 5,P83n 30,66f 47,nn, 6,AA66 (c) NFS (net) -194 -263 -345 -4Q0 -536 -586 -65q -87S -I,0O2 -1,174 -1,17n -1 ,61 - I,'p -1,701 -1,5134 3. Resource balance -582 67 -424 -84 175 -14n 1,2S5 3,870 1,693 3,054 1,653 A,no 2,11737 .3,071 -7,r71 4. Factor services -170 -205 -410 -718 -P65 -1,015 -1,761 -9S7 -67n -'7n -10-, 177 54' 710 61 (a) Interest public debt /b -62 -80 -165 -318 -441 -85 -772 -807 no4 -1,069 -1,1n6 -1,308 _151q -1,777 -,tin (b) Other (net) -108 -125 -265 -40O -4b4 -S30 -4b9 -150 263 69q 1InQ9 1,S3S 1,q4n 7,5s4^ ,40n 5. Capital grants 50 75 75 61 66 46 57 76 100 sn 0n sn sn sn0 5 6. Balance on current account -702 -63 -77Q -741 -624 -1,100 2,n46 7,0QR 3,111 3,636 305" 1,726 -.7,970 -1,171 -7,S60 7. Direct foreign investment 331 518 454 287 285 771 217 170 170 '00 7Sn 777 3n0 5son 0nn P. Public M & LT loan /b (a) Disbnrsenent 909 1,170 7,152 2,332 1,956 1,638 1,940 2,P64 2,PRI 1,053 1,077 3,101 2.q90 4,Q06 r 7'l (b) Amortization -149 -212 -352 -437 -P25 -977 -1,335 -Q97 -1 ,041 -1,193 -1,474 -1,717 -1,Pq8 -',41bn -3,494 (c) Net disbursements 760 908 1,800 1,R95 1,131 660 604 IR77 1,81R IR,60 1,601 1,lPo 1,l 10 7,440 3,n77 9. OIther capital (net) -25 -1,392 -1,839 -442 -140 8RA -1,075 -2,S76 -7,S00 -1,863 -1,l,S -1,74Q -1,04° ca ' '0, 10. Change In reserves (- Increase) -364 9 364 -1,001 -651 -708 -1,60 -2,510 -2,671 -3,7R8 -3,8P8 -3,107 .1,701 -165 -771 11. Net official reserves 929 920 556 1,557 2,208 2,q16 4,606 7,116 9,737 13,S70 17,4n8 20,610 21,0n1 76,736 ' 45n Reserves in months of non-oil imports 6 NFS 3.5 2.4 1.2 2.R 3.4 4.1 5.6 6.n 7.7 8.7 9.1 o.n 8.Q s.4 3.n Public debt service as 1: of exports /c 8.3 6.3 10.3 11.7 15.0 18.4 16.1 10.7 10.5 In.n In.n q.n °.4 °.? In0. Memorandum Item Net forelFn assets of the banksing system 6,906 11,116 16,117 21,4721 27,I0nR 31.10 36,101 3,Q3 134,650 Total reserves /d in months of nonoil imports and net NFIS 8.4 in.p 17.8 13.R 14.2 13.0 13.3 1.0 1c /a Includes services (see Table 4 of this appendix for disaggrepatlon). /b Based on IRR8 external debt data. 7 Oil exports on net hasis. 7'd Includes foreign assets of deposit money banks in addition to official reserves. - 76 - Analysis . Projections Appendix Table 4 I NDONES SIA COUNTRY ECONOMIlC '1F.(RANDllM Oil Sector Projection (million barrels and million dollars) Actual Projected 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 hbl S bbl S 661 S bbl $ hbl $ bbl $ 1. Crude Produiction 976.2 576 600 635 668 680 2. Refining Inpu,ts 206.4 206 206 206 206 280 (a) Crude domestic /a 181.1 IRI 181 181 181 255 (b) Crude imports 25.1 569.1 29 822 25 9'.7 25 1,040 25 1,IS5 25 1,270 3. Domestic Consumption 130.6 144 154 169 181 200 (a) Domestic refineries 114.9 118 115 115 115 165 (b) Imports 15.7 4Q4.5 26 1,201 19 2,032 53 3,085 68 4,400 15 2,488 4. Gross Exports 441.9 9,978.5 443 14,644 470 17,52Q 505 21,115 538 24,074 25,036 (a) Crude 390.5 8,766.4 399 13,127 419 I5,545 454 18,886 487 22,500 425 21,590 (b) Products /b 51.4 1,212.1 44 1,517 51 1,984 51 2,229 51 2,474 59 3,446 5. Gross Imports (= 2(b) + 3(b)) 41.0 1,063.6 51 2,023 64 2,959 78 4,125 93 5,555 60 3,758 6. Cost of Production and Services - Foreign Exchange Component 2,607.1 3,076 3,691 1,428 5,287 6,071 (a) Cost of production 765.2 (b) Service payments 1,841.9 7. Net Oil (- 4 - 5 - 6) Current Account 6,307.8 9,345 10,879 12,562 14,132 15,207 Weighted Average Price per barrel (a) Crude 22.5 32.9 37.1 41.6 46.2 ;10.8 (b) Products - exports /c 23.6 34.5 38.9 43.7 48.5 58.4 (c) Products - imports 31.5 46.2 52.1 58.2 64.7 71.1 Projected 1585/86 1986/87 1987/88 1988/89 1989/90 1990/91 bbl S bbl S bbl $ hbl $ bbl S 6bb S 1. Crude Production 6R8 696 705 713 721 730 2. Refining Inputs 365 369 374 178 381 410 (a) Crude domestic 340 344 354 363 366 395 (b) Crude imports 25 1,400 25 1,528 20 1,334 15 1,092 15 1,192 15 1,301 3. Domestic Consumption 218 237 258 281 306 340 (a) Domestic refineries 208 223 279 290 305 328 (b) Imports 10 784 14 1,198 20 1,868 20 2,038 29 3,225 32 3,881 4. Gross Exports 434 24,864 395 27,411 400 27,841 362 29,564 368 30,110 355 31,470 (a) Crude 348 19,488 352 21,507 351 23,411 350 25,480 340 27,030 335 29,044 (b) Products /b 84 5,376 72 5,904 49 4,430 41 4,084 28 3,080 20 2,426 5. Gross Imports 2,184 2,726 3,202 3,130 4,417 5,182 (2(b) + 3(b)) 6. Cost of Production and Services - 6,818 7,588 8,446 9,400 9,021 9,203 Foreign Exchange (a) Cost of production (b) Service payments 7. Net Oil (= 4 - 5 - 6) 15,862 17,097 16,193 17,034 16,672 17,085 Wleighted Average Price per barrel (a) Crude 56.0 61.1 66.7 72.8 79.5 86.7 (b) Products - exports 64.0 82.0 90.4 99.6 110.0 120.0 (c) Products - imports 78.4 85.6 93.4 101.9 111.2 121.3 /a Including 150,000 bbl/day crude Imputs to Singapore refineries under processing agreement. 7i Projections assume domestic output of products equals 80% refinery inputs. 7J Currently product exports mainly consist of LSWR, but after opening of Dumai and Balikpapan hydrocrackers the proportion of LSWR will fall and other products, e.g., Naptha will become more significant. - 77 - Analysis and Projections Appendix Table 5 INDONESIA COUNTRY ECONOMIC MEMORANDUM Petroleum Fuel Products Projected Domestic Supply and Demand (thousand barrels per day) 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1988/89 1990/91 Refining Capacity /a Existing (nine refineries) 250 250 250 250 250 250 250 250 250 New refineries Balikpapan 90 180 180 180 180 Cilacap 90 180 180 180 180 Dumai 30 60 60 60 Subtotal 180 390 420 420 420 Total domestic 250 250 250 250 430 640 670 670 670 of which kerosene 92 92 92 92 164 248 260 260 260 Domestic Demand All products /b High case 386 422 460 501 548 600 656 770 931 Low case 386 449 518 573 630 696 766 915 1,107 of which kerosene /c High case 139 143 147 151 155 160 166 178 204 Low case 139 158 176 186 195 205 216 208 263 Deficit (Surplus) All products /b High case 136 172 210 251 218 (40) (14) 100 261 Low case 136 199 268 324 300 56 96 245 437 Kerosene High case 47 51 55 59 (9) (88) (94) (82) (56) Low case 47 66 84 94 31 (43) (44) (52) 3 /a Capacity to produce the eight BBM products: aviation fuel and oil, gasoline (super and premium), kerosene, automotive and industrial diesel, and fuel oil. Exclusive of the proposed but indefinite Sorong/Jakarta/Batam island refinery that would come on stream in the late 1980s or early 1990s. /b Calculated using income elasticity of 1.7 (falling to 1.5 in the High Case after 1985) and a price elasticity of -0.3. /c Income elasticity of 1.0 and price elasticity of -0.4. INDONESIA COUNTRY ECONOMIC MEMORANDUM LNG Projection 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1988/89 1990/91 Exports (fob) Volume (MMT) 1.4 4.1 7.3 7.5 7.5 7.5 9.1 10.8 15.7 17.4 20.7 Existing plants 1.4 4.1 7.3 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5 Expansions /a Bontang 0.8 1.7 3.3 3.3 3.3 X Arun 0.8 1.6 3.3 3.3 3.3 Arun II 1.6 3.3 3.3 Other 3.3 Price ($/MMT) /b 116 126 184 269 304 340 377 416 458 594 708 Gross export value ($ mln.) 162 516 1,345 2,017 2,277 2,553 3,433 4,491 7,193 10,341 14,657 Cost of recovery and services /c (foreign exchange component) 69 291 678 785 862 942 1,243 1,597 2,552 3,462 4,712 Net foreign exchange earnings 92 225 667 1,232 1,415 1,611 2,190 2,894 4,641 6,879 9,945 /a This assumes delays of almost a year on present construction schedules. The Bontang and Arun I expansion are for the Japanese market. The Arun II expansion is under negotiation for the US market. One other expansion (two trains) is v D e 5 assumed to come on stream at the end of the 1980s. a X 0 /b Assumed to rise at 3% above the international inflation rate, i.e., 100% linked to price of oil. X f m w /c Based on assumption that unit cost of recovery rises at international rate of inflation and that "contractors' share" ° 1^ X per unit output rises at 3% above the international inflation rate. 0 0.0 Analysis & - 79 - Projections Appendix Table 7 INDONESIA COUNTRY ECONOMIC MEMORANDUM Terms of Trade Index (1979 = 100) Nonoil exports: /a Total exports: /b nonoil imports (incl. NFS) imports (incl. NFS) 1973/74 80 58 1974/75 75 70 1975/76 63 72 1976/77 79 80 1977/78 89 84 1978/79 89 76 1979/80 100 100 1980/81 90 110 1981/82 95 114 1982/83 98 121 1983/84 98 127 1984/85 99 121 1985/86 99 121 1990/91 100 126 /a Based on price indices of nonoil exports (Table 1) and nonoil imports, including net NFS (Table 2). /b Based on price indices of total exports (Table 1) and imports including net NFS (Table 2). - 80 - STATISTICAL ANNEX - LIST OF TABLES Population and Employment 1.1 Population 1930, 1961, 1971, 1980: Average Annual Growth Rates, 1930-80 and Population Density, by Region and Province. 1.2 Distribution of Population by Age Group and Sex. National Income Accounts 2.1 Gross Domestic Product by Industrial Origin at Current Market Prices, 1967-79. 2.2 Percentage Distribution of GDP at Current Market Prices, 1971-79. 2.3 Gross Domestic Product by Industrial Origin at Constant 1973 Market Prices, 1971-79 2.4 Percentage Distribution of GDP at Constant 1973 Market Prices, 1971-79. 2.5 Expenditures on GDP at Current Market Prices, 1971-79. 2.6 Expenditures on GDP at Constant 1973 Market Prices, 1971-79. 2.7 Estimate of the Terms of Trade Effects, 1971-79. 2.8 Average Growth Rates and Selected Economic Indicators 1974-79. International Trade and Balance of Payments 3.1 Balance of Payments, 1973/74-1979/80. 3.2 Nonoil Exports, 1971/72-1979/80. 3.3 Export Values by Country of Destination, 1971-79. 3.4 Import Values by Country of Origin, 1971-79. 3.5 Oil Balance of Payments, 1976/77-1979/80. 3.6 LNG Balance of Payments , 1977/78-1979/80. External Debt 4.1 External Public Debt Outstanding Including Undisbursed as of December 31, 1979. - 81 - 4.2 Service Payments, Commitments, Disbursements and Outstanding Amounts of External Public Debt. 4.3 External Public Debt by Country and Type of Creditor as of December 31, 1979. 4.4 External Public Debt as of December 31, 1979, by Major Currencies and Countries. 4.5 Loan Commitments by Country (1974-1979). 4.6 IGGI and Non-IGGI Disbursements and Net Resources Transfers, 1974-79. 4.7 Summary External Debt Data, 1974-79. 4.8 Selected Debt Indicators, 1973-79. 4.9 Net Resource Transfers, 1975-79. Public Finance 5.1 Central Government Budget Summary, 1972/73-1981/82. 5.2 Central Government Receipts, 1972/73-1981/82. 5.3 Central Government Expenditures, 1972/73-1981/82. 5.4 Development Expenditures, 1972/73-1980/81. 5.5 Development Expenditures by Sector, 1974/75-1981/82. 5.6 Project Aid by Sector, 1974/75-1980/81. Monetary Statistics 6.1 Money Supply, 1971-80. 6.2 Changes in Factors Affecting Money Supply, 1972-80. 6.3 Consolidated Balance Sheet of Monetary System, 1973-80. 6.4 Consolidated Balance Sheet of Monetary Authorities, 1974-80. 6.5 Banking System Credits by Economic Sector, 1973-80. 6.6 Banking System Credits by Type of Bank3, 1974-80. 6.7 Small-Scale Investment Credits and Permanent Working Capital Credits, 1974-80. - 82 - 6.8 Medium-Term Investment Credits by Economic Sector, 1973-80. 6.9 Time Deposits with State Banks, 1971-80. Agricultural Statistics 7.1 Principal Agriculture Products by Subsectors, 1968-79. 7.2 Agricultural Production of Major Crops by Type of Products, 1969-79. 7.3 Rice-Area Harvested, Production and Yield, 1968/79. 7.4 Rice Production, Imports, Procurement and Consumption, 1960-79. 7.5 Area Covered Under Rice Intensification Programs, 1969-79. Other Sectors 8.1 Production of Selected Industrial Goods, 1969/70-1979/80. 8.2 Production, Imports and Estimated Consumption of Cement, 1967-79. 8.3 Production of Minerals, 1973-79. 8.4 Crude Oil Production, 1973-79. 8.5 Petroleum Products - Supply and Demand, 1969-79. 8.6 Domestic Sales of Petroleum Products, 1971-80. Prices 9.1 Cost of Living Index in Jakarta, 1970-79. 9.2 Consumer Price Index - Jakarta and Indonesia, 1979-81. 9.3 Wholesale Price Indices in Indonesia, 1971-80. 9.4 Domestic Price of Petroleum Products, 1972-80. Investment 10.1 Approved Foreign Investment by Sector, 1967-80. 10.2 Implementation of Foreign Investment by Sector, 1967-79. 10.3 Approved Domestic Investment by Sector, 1967-79. - 83 - ANNEX Table 1.1 INDONESIA COUNTRY ECONOMIC MEMORANDUM Population 1930, 1961, 1971, 1980: Average Annual Growth Rates, 1930-80 and Population Density, by Region and Province (U°°°) Density Census Growth rate (%) (persons/sq km) Region 1930 1961/a 1971/a 1980 1930-61 1961-71 1971-80 1971 1980 Java 41,718 62,993 76,103 91,282 1.3 1.9 2.0 576 DKI Jakarta 811 2,907 4,576 6,506 4.2 4.6 4.0 7,756 West Java 10,586 17,615 21,633 27,490 1.7 2.1 2.7 467 Central Java 13,706 18,407 21,877 25,365 1.0 1.7 1.7 640 DI Jogjakarta 1,559 2,241 2,490 2,745 1.2 1.1 1.1 786 East Java 15,056 21,823 25,527 29,175 1.2 1.6 1.5 533 Sumatra 8,255 15,743 20,813 27,980 2.1 2.8 3.3 44 Lampung 361 1,668 2,777 4,622 5.1 5.2 5.8 83 Bengkulu 323 406 519 768 0.7 2.5 4.4 25 South Sumatra 1,378 2,773 3,444 4,621 2.3 2.2 3.3 33 Riau 493 1,235 1,642 2,163 3.0 2.9 3.1 17 Jambi 245 744 1,006 1,440 3.6 3.1 4.1 22 West Sumatra 1,910 2,319 2,793 3,402 0.6 1.9 2.2 56 North Sumatra 2,541 4,969 6,623 8,357 2.2 2.9 2.6 94 Aceh 1,003 1,629 2,009 2,608 1.6 2.1 2.9 36 Kalimantan 2,169 4,102 5,153 6,721 2.1 2.3 3.0 10 West Kalimantan 802 1,581 2,020 2,483 2.2 2.5 2.3 14 Central Kalimantan 203 497 700 950 2.9 3.5 3.5 5 South Kalimantan 836 1,473 1,699 2,069 1.8 1.4 2.2 45 East Kalimantan 329 551 734 1,219 1.7 2.9 5.8 4 Sulawesi 4 7,079 8,535 10,377 1.9 1.9 2.2 45 Central Sulawesi 390 652 914 1,289 1.7 3.4 3.9 13 North Sulawesi 748 1,351 1,718 2,091 1.9 2.4 2.2 90 South Sulawesi 2,657 4,517 5,189 6,054 1.7 1.4 1.7 71 Southeast Sulawesi 436 559 714 943 0.8 2.5 3.1 26 Bali 1,101 1,783 2,210 2,470 1.6 1.8 1.7 381 West Nusa Tenggara 1,016 1,808 2,202 2,724 1.9 2.0 2.4 109 East Nusa Tenggara 1,343 1,967 2,295 2,722 1.2 1.6 1.9 48 Maluku 579 790 1,089 1,407 1.0 3.3 2.9 15 Irian Jaya 179 758 923 1,146 4.8 2.0 2.4 2 East Timor n.a. n.a. n.a. 553 n.a. n.a. n.a. n.a. Total Indonesia 60,593 97,019 119,233 147,383 1.5 2.1 2.0 63 n.a. = not available. /a Includes adjustment for the exclusion of rural Irian Jaya. Sources: Population Census Reports, 1961 and 1971, Preliminary Results, 1980 Census; and Statistical Pocketbook 1979/80. - 84 - ANNEX Table 1.2 INDONESIA COUNTRY ECONOMIC MEMORANDUM Distribution of Population by Age Group and Sex (-000) 1961 1971 1980 Age group Males Females Total Males Females Total Males Females Total 0-4 8,524 8,644 17,168 9,716 9,571 19,287 11,331 11,062 22,393 5-9 7,741 7,696 15,437 9,641 9,357 18,998 10,062 9,852 19,914 10-14 4,345 3,888 8,237 7,374 6,946 14,320 8,960 8,856 17,816 15-19 3,861 3,901 7,762 5,678 5,784 11,462 8,106 7,945 16,051 20-24 3,476 4,369 7,845 3,577 4,433 8,010 6,872 6,715 13,587 25-34 7,386 8,604 15,991 7,747 9,300 16,047 9,443 9,889 19,332 35-44 5,762 5,403 11,164 7,069 7,134 14,203 7,341 7,494 14,835 45-54 3,586 3,509 7,095 4,315 4,223 8,538 5,630 5,787 11,417 55-64 1,912 1,864 3,776 2,122 2,265 4,387 3,418 3,811 7,229 65+ 1,182 1,245 2,427 1,415 1,557 2,971 2,068 2,741 4,809 Unknown 60 57 118 4 4 8 - - - Total 47,838 49,181 97,019 58,658 60,575 119,233 73,231 74,152 147,383 ---------------------------- Percentage distribution ------------------------- 0-4 17.8 17.6 17.7 16.6 15.8 16.2 14.9 15.5 15.2 5-9 16.2 15.6 15.9 16.4 15.4 15.9 13.3 13.7 13.5 10-14 9.1 7.9 8.5 12.6 11.5 12.0 11.9 12.2 12.1 15-19 8.1 7.9 8.0 9.7 9.5 9.6 10.7 11.1 10.9 20-24 7.3 8.9 8.1 6.1 7.3 6.7 9.1 9.4 9.2 25-34 15.4 17.5 16.5 13.2 15.4 14.3 13.3 12.9 13.1 35-44 12.0 11.0 11.5 12.1 11.8 11.9 10.1 10.0 10.0 45-54 7.5 7.1 7.3 7.4 7.0 7.2 7.8 7.7 7.8 55-64 4.0 3.8 3.9 3.6 3.7 3.7 5.2 4.7 4.9 65+ 2.5 2.5 2.5 2.4 2.6 2.5 3.7 2.8 3.3 Unknown 0.1 0.1 0.1 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 Source: Employment and Income Distribution in Indonesia, Appendix Tables A-1, A-2 and mission estimates for 1980. INDONESIA COUNTRY ECONOMIC MEMORANDUM Gross Domestic Product by Industrial Origin at Current Market Prices, 1967-79 (Rp billion) 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 Agriculture 457 1,069 1,339 1,575 1,646 1,837 2,710 3 497 4,003 4,812 5,906 6 706 9,145 Farm tood crops =UT -- 8-23 -7 6T -7T 1571 0 21753 37,4T 37,660 T99 3 Farm nonfood crops 46 133 199 214 196 226 323 386 358 481 762 801 1,112 Estate crops 19 47 69 83 107 118 152 191 184 213 326 404 624 Livestock products 33 53 89 103 124 135 173 223 303 346 305 462 550 Forestry 6 35 59 102 142 173 355 423 413 513 525 653 942 Fishery 54 75 101 112 116 114 134 179 191 215 328 393 552 1 00 Lfl Mining & quarrying 23 87 129 173 294 491 831 2,374 2,485 2,930 3,600 3,869 5,172 Manufacturing 62 179 251 312 307 448 650 890 1,124 1,453 1,817 2,185 2,R25 Electricity, gas & water 3 9 13 15 18 20 30 52 70 98 106 116 130 Construction 14 45 75 100 128 174 262 406 590 813 1,023 1,242 1,844 Commerce, hotels, etc. 149 356 476 619 592 769 1,118 1,775 2,104 2,552 2,959 3,450 5,601 Transport & communications 19 57 77 96 162 182 257 442 521 663 821 980 1,383 Banking, etc. 4 12 22 33 45 53 83 113 151 207 236 396 641 Ownership of dwelling 17 41 53 66 85 103 143 194 258 319 542 671 906 Public administration & defense 41 116 136 183 214 290 405 585 864 1,074 1,394 1,685 2,180 Other services 59 125 147 169 181 197 264 380 473 547 607 668 835 Gross Domestic Product 848 2,097 2,718 3,340 3,672 4,564 6,753 10,708 12,643 15,467 19,011 21,967 30,661 Note: Totals do not add due to rounding. Source: BPS. - 86 - ANNEX Table 2.2 INDONESIA COUNTRY ECONOMIC MEMORANDUM Percentage Distribution of GDP at Current Market Prices, 1971-79 (%) 1971 1972 1973 1974 1975 1976 1977 1978 1979 Economic Sectors Agriculture, forestry, fishery 44.8 40.3 40.1 32.7 31.7 31.1 31.1 30.5 29.8 Mining 8.0 10.8 12.3 22.2 19.6 18.9 18.9 17.6 16.9 Manufacturing 8.4 9.8 9.6 8.3 8.9 9.4 9.6 9.9 9.2 Electricity, gas & water 0.5 0.4 0.5 0.5 0.6 0.6 0.6 0.5 0.4 Construction 3.5 3.8 3.9 3.8 4.7 5.3 5.4 5.7 6.0 Transport & communications 4.4 4.0 3.8 4.1 4.1 4.3 4.3 4.5 4.5 Other services 30.4 30.9 29.8 28.4 30.4 30.4 30.1 31.3 33.2 Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Expenditure Categories Private consumption 77.1 74.5 70.9 67.8 69.2 67.7 65.6 65.6 59.1 Government consumption 9.3 9.1 10.6 7.8 9.9 10.3 10.9 12.1 11.4 Gross domestic investment 15.8 18.8 17.9 16.8 20.3 20.7 20.1 21.3 22.6 Exports, net -2.2 -2.4 0.6 7.6 0.6 1.3 3.4 1.0 6.9 Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: Based on BPS data (Tables 2.1 and 2.5). ANNEX - 87 - Table 2.3 INDONESIA COUNTRY ECONOMIC MEMORANDUM Gross Domestic Product by Industrial Origin at Constant 1973 Market Prices, 1971-79 (Rp billion) 1971 1972 1973 1974 1975 1976 1977 1978 1979 Agriculture 2,479 2710 2,811 2,811 2,944 2,981 3,135 3,204 Farm food crops 1,436 1,415 1,573 1,681 1,696 1,756 1,734 1,836 1,861 Farm nonfood crops 302 329 323 307 312 325 392 388 402 Estate crops 154 160 152 174 183 188 201 210 231 Livestock products 160 169 173 186 202 216 177 184 169 Forestry 258 276 355 325 274 310 318 352 368 Fishery 131 130 134 138 144 150 159 166 172 Mining & quarrying 551 674 831 859 828 952 1,070 1,040 1,044 Manufacturing 490 564 650 755 848 930 1,058 1,176 1,285 Electricity, gas & water 25 26 30 37 41 46 49 53 60 Construction 171 222 262 320 365 385 464 529 563 Commerce, hotels, etc. 924 1,028 1,118 1,224 1,294 1,351 1,438 1,530 1,633 Transport & communications 210 229 257 288 303 343 428 490 558 Banking, etc. 64 75 83 88 102 117 151 165 183 Ownership of dwelling 93 121 143 174 198 209 252 288 306 Public administration & defense 326 393 405 443 564 596 689 768 798 Other services 250 256 264 270 277 284 280 297 304 Gross Domestic Product 5,545 6,067 6,753 7,269 7,631 8,156 8,871 9,471 9,936 Note: Totals do not add due to rounding. Source: BPS. - 88 - ANNEX Table 2.4 INDONESIA COUNTRY ECONOMIC MEMORANDUM Percentage Distribution of GDP at Constant 1973 Market Prices, 1971-79 1971 1972 1973 1974 1975 1976 1977 1978 1979 Economic Sectors Agriculture, forestry, fishery 44.0 40.8 40.1 38.7 36.8 36.1 33.6 33.1 32.2 Mining 9.9 11.1 12.3 11.8 10.9 11.7 12.1 11.0 10.5 Manufacturing 8.8 9.3 9.6 10.4 11.1 11.4 11.9 12.4 12.9 Electricity, gas & water 0.4 0.4 0.5 0.5 0.5 0.6 0.6 0.6 0.6 Construction 3.0 3.7 3.9 4.4 4.8 4.7 5.2 5.6 5.7 Transport & communications 3.8 3.8 3.8 4.0 4.0 4.2 4.8 5.2 5.6 Other services 30.1 30.9 29.8 30.2 31.9 31.3 31.8 32.1 32.5 Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Expenditure Categories Private consumption 72.1 70.5 70.9 75.0 74.4 74.0 72.5 73.4 74.4 Government consumption 9.4 9.2 10.6 8.8 11.0 11.0 11.8 12.2 11.9 Gross domestic investment 15.6 17.0 17.9 19.8 21.6 21.4 22.9 24.6 24.8 Exports, net 2.9 3.3 0.6 -3.6 -7.0 -6.4 -7.2 -10.2 -11.1 Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: Based on BPS data (Tables 2.3 and 2.6). SQ 89 -ANNEX - 89 - Table 2.5 INDONESIA COUNTRY ECONOMIC MEMORANDUM Expenditures on GDP at Current Market Prices, 1971-79 (Rp billion) 1971 1972 1973 1974 1975 1976 1977 1978 1979 Private consumption /a 2,833 3,402 4,791 7,259 8,744 10,464 12,458 14,409 18,123 Government consumption 341 414 716 1,147 1,254 1,591 2,077 2,659 3,488 Gross domestic investment 580 857 1,208 1,797 2,572 3,205 3,826 4,671 6,918 Export of goods & nonfactor services 529 754 1,354 3,105 2,851 3,430 4,466 4,788 9,214 Less import of goods & nonfactor services 611 863 1,316 2,294 2,778 3,222 3,817 4,559 7,082 Gross Domestic Product 3,672 4,564 6,753 10,700 12,643 15,467 19,011 21,967 30,661 Net factor income abroad -67 -159 -245 -507 -556 -432 -678 -852 -1,324 GNP 3,605 4,405 6,508 10,201 12,087 15,035 18,332 21,115 29,337 GDS 498 748 1,246 2,608 2,645 3,412 4,475 4,900 9,050 GNS 431 589 739 2,101 2,089 2,980 3,797 4,048 7,726 GDI/GDP (%) 15.8 18.8 17.9 16.7 20.3 20.7 20.1 21.3 22.6 GDS/GDP (%) 13.6 16.4 18.5 24.2 20.9 22.1 23.5 22.3 29.5 GNS/GNP (%) 12.0 13.4 16.4 20.5 17.3 19.8 20.7 19.2 26.3 /a Residual. Note: Totals do not add due to rounding. Source: BPS. ANNEX - 90 - Table 2.6 INDONESIA COUNTRY ECONOMIC MEMORANDUM Expenditures on GDP at Constant 1973 Market Prices, 1971-79 (Rp billion) 1971 1972 1973 1974 1975 1976 1977 1978 1979 Private consumption /a 3,998 4,276 4,791 5,454 5,679 6,032 6,433 6,955 7,395 Government consumption 518 561 716 641 836 897 1,044 1,156 1,185 Gross domestic investment 867 1,032 1,208 1,440 1,650 1,749 2,028 2,333 2,463 Export of goods & nonfactor services 891 1,123 1,354 1,403 1,267 1,425 1,744 1,776 1,934 Less import of goods & nonfactor services 730 925 1,316 1,669 1,801 1,946 2,378 2,749 3,040 Gross Domestic Product 5,545 6,067 6,753 7,269 7,631 8,156 8,871 9,471 9,936 Terms of trade effect -260 -312 0 863 584 641 1,030 1,112 2,017 GDY 5,285 5,755 6,753 8,132 8,215 8,797 9,901 10,583 11,953 GNP 5,465 5,896 6,508 6,900 7,271 7,790 8,448 8,957 9,368 GNY 5,205 5,584 6,508 7,763 7,855 8,431 9,478 10,069 11,385 GDS 769 918 1,246 2,037 1,700 1,868 2,424 2,472 3,373 GNS 689 747 1,000 1,668 1,340 1,501 2,001 1,958 2,805 GDI/GDP (%) 15.6 17.0 17.9 19.8 21.6 21.4 22.9 24.6 24.8 GDS/GDY (%) 14.6 16.0 18.5 25.0 20.7 21.2 24.4 23.3 28.2 GNS/GNY (%) 13.2 13.4 15.4 21.5 17.1 17.8 21.1 19.4 24.6 /a Residual. Note: Totals do not add due to rounding. Source: BPS. - 91 - ANNEX 5EaF7e 2.7 INDONESIA COUNTRY ECONOMIC MEMORANDUM Estimate of the Terms of Trade Effects, 1971-79 (Rp billion) 1971 1972 1973 1974 1975 1976 1977 1978 1979 Exports in current prices 530 754 1,354 3,105 2,851 3,430 4,466 4,788 9,214 Exports in 1973 prices 891 1,123 1,354 1,403 1,267 1,425 1,744 1,776 1,934 Exports price index 59 67 100 221 225 241 256 270 476 Imports in current prices 611 862 1,316 2,294 2,778 3,222 3,817 4,559 7,082 Imports in 1973 prices 730 925 1,316 1,669 1,801 1,946 2,378 2,749 3,040 Imports price index 84 93 100 137 154 166 161 166 233 Exports (imports capacity) 631 811 1,354 2,266 1,851 2,068 2,774 2,888 3,951 Terms of trade effect -260 -312 0 863 584 643 1,030 1,112 2,017 Net factor income from abroad in current prices -67 -159 -246 -507 -556 -432 -679 -852 -1,324 Net factor income from abroad in 1973 prices -80 -171 -246 -369 -360 -367 -423 -514 -568 Net foreign inflows (1973 prices) -179 -285 -208 228 -310 -247 -27 -375 343 Net foreign inflows (Current prices) -148 -267 -208 304 -483 -224 -30 -623 808 Note: Totals do not add due to rounding. Source: Based on BPS data (Tables 2.5 and 2.6). - 92 - ANNEX Table 2.8 INDONESIA COUNTRY ECONOMIC MEMORANDUM Average Growth Rates and Selected Economic Indicators, 1974-79 Compound growth rate 1974-79 (% p.a.) Agriculture 2.7 Industry 8.4 Mining 4.0 Manufacturing 11.0 Electricity, gas, water 10.1 Construction 12.0 Services 8.7 GDP 6.4 Private consumption 6.3 Government consumption 13.0 Total consumption 7.0 GDI 11.3 Exports 6.6 Imports 12.7 GDY 8.0 Factor payments 9.0 GNP 6.4 GNY 8.0 GDS 10.6 GNS 11.0 Economic indicators Constant prices Current prices ICOR /a 3.4 GDI/GDP 1975-79 23.1% 21.0% Average domestic savings rate 1975-79 23.5% 23.7% Marginal domestic savings rate /b 35.0% 32.3% Average national savings rate 1975-79 20.0% 18.7% Marginal national savings rate /b 31.4% 28.2% Imports/GDP 1975-79 27.0% 21.5% Exports/GDP 1975-79 18.5% 24.8% Resource balance/GDP 1975-79 3.7%/c 3.3% Import elasticity /b 1.98 1.01 /a GDI 1974-78: GDP 1974-79. lb Between 1974 and 1979. 7c (Exports [Imports capacity] - Imports) GDP. Source: Based on BPS data, Table 2.1-2.7. - 93 - ANNEX Table 3.1 INDONESIA COUNTRY ECONOMIC MEMORANDUM Balance of Payments, 1973/74 - 1979/80 (US$ million) /a 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 ---------------------- Actual ---------------------- 1. Net oil /b 641 2,638 3,138 3,710 4,352 3,785 6,308 2. Net LNG /b - - - 93 225 667 3. Nonoil (net) -1,397 -2,776 -3,992 -4,512 -5,135 -5,165 -4,985 (a) Exports, f.o.b. 1,905 2,033 1,873 2,863 3,507 3,979 6,165 (b) Imports, c.& f. -2,938 -4,341 -5,090 -6,167 -7,241 -7,543 -9,230 (c) Service (nonfreight) -364 -468 -755 -1,208 -1,401 -1,601 -1,920 4. Current account (1+2+3) -756 -138 -854 -802 -690 -1,155 1,990 5. SDRs - - - - 64 65 6. Official transfer & capital 643 660 1,995 1,823 2,106 2,101 2,49 (a) IGGI 556 513 945 1,596 1,694 1,625 2,008 (i) Program aid 281 180 74 147 157 94 239 (ii) Project aid 275 333 871 1,449 1,537 1,531 1,769 - ODA (275) (333) (482) (513) (661) (814) (912) - Non-ODA (-) (-) (389) (936) (876) (717) (857) (b) Non-IGGI 87 147 1 227 412 476 487 (c) Cash loan - - 1,049 - - - - 7. Debt repayment (principal) -81 -89 -77 -166 -761 -632 -692 8. Miscellaneous capital 549 -131 -1,075 38 176 392 -1,315 (a) Direct investment 331 538 454 287 285 271 217 (b) Trade credits 18 13 14 -32 -50 - - (c) Others 200 -682 -1,543 -217 -59 121 -1,532 9. Total (4 through 8) 355 302 11 893 831 770 2,543 10. Errors & omissions 5 -311 -353 108 -180 -62 -853 11. Monetary movements -360 9 364 -1,001 -651 -708 -1,690 /a Provisional actual. /b Gross export value minus (i) oil sector imports and other foreign exchange cost of production, refin- ing and marketing of oil; and (ii) factor payments to foreign companies. In the foregoing definition "foreign exchange cost" are exclusive of service payments on account of Pertamina's debts, but include payments resulting from tanker deals. Net LNG is defined similarly. Source: Bank Indonesia. - 94 - AN?FX Tahle 3.2 INDONESIA COUNTRY ECONOMIC MEMORANDUM Nonoil Exports, 1971/72 - 1979/80 _ la 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1077/78 1978/79 1970/8T- Timber Value 170 275 720 615 527 885 943 1,130 1,969 Volume 8,840 12,701 15,704 12,434 11,335 15,770 15,651 16,050 14,78O Price 19 22 46 49 46 56 60 70 133 Rubber Value 215 211 483 425 381 577 608 774 1,025 Volume 809 826 902 842 846 892 873 920 941 Price 266 255 535 505 450 647 697 841 1,089 Palm Oil Value 45 42 89 184 142 147 202 221 257 Volume 212 245 279 303 417 415 438 413 439 Price 212 171 319 607 341 354 461 535 594 Coffee Value 54 83 79 92 112 330 626 508 713 Volume 72 111 96 105 142 143 179 231 237 Price 750 748 823 876 789 2,308 3,496 2,200 3,009 Tea Value 31 31 31 50 50 64 120 98 91 Volume 46 46 46 51 61 64 60 67 70 Price 674 674 674 980 820 996 2,007 l,46q 1,303 Tobacco Value 20 32 46 36 40 41 59 58 60 Volume 19 27 35 26 21 21 27 27 25 Price 1,053 1,185 1,314 1,385 1,756 1,954 2,194 2,130 2,384 Pepper Value 21 21 31 22 25 55 62 66 46 Volume 24 24 25 14 17 33 31 38 24 Price 875 875 1,240 1,571 1,454 1,668 2,012 1,729 1,913 Palm Kernel Value 5 4 6 8 4 4 5 2 12 Volume 59 51 37 30 41 30 25 6 33 Price 85 78 162 267 98 140 218 333 364 Copra Value 8 6 3 - - - - - 13 Volume 67 61 21 - - - - - 27 Price 119 98 143 - - - - - 48I Copra Cake Value 12 14 19 22 29 36 33 34 52 Volume 236 303 224 236 363 375 301 323 354 Price 51 46 85 93 80 96 111 105 146 Tapioca Value 14 12 7 30 17 10 13 28 59 Volume 434 304 117 455 234 133 184 433 540 Price 32 39 60 66 73 75 68 65 109 Other Food Stuff Value 28 26 49 47 37 52 48 65 79 Animal & Product Value 23 42 90 92 105 146 17Q 212 252 Tin Value 64 70 98 166 158 181 253 324 3R8 Volume 20 21 22 24 22 27 25 26 28.2 Price 3,200 3,333 4,455 6,917 7,541 6,707 10,110 12,454 11,752 Copper Value - 13 56 102 74 95 74 64 95 Volume - 28 126 222 189 230 188 168 186 Price - 464 444 459 392 413 395 3R2 512 Other Minerals Value 18 19 21 28 25 44 36 35 58 Miscellaneous Value 56 76 77 114 144 196 246 360 996 Total Value 784 977 1,905 20 1,873 2,863 3,507 3,979 6 /a Provisional actual. Value: In millions of US$ Volume: In thousands of tons Price: US$/ton Source: Bank Indonesia. _ 95 ANNEX Table 3.3 INDONESIA COUNTRY ECONOMIC MEMORANDUM Export Values by Country of Destination (%) 1971 1972 1973 1974 1975 1976 1977 1978 1979 Japan 44.6 50.7 53.2 53.5 44.1 41.7 40.2 39.2 46.1 ASEAN 17.7 9.7 11.7 8.6 10.3 8.9 10.6 12.7 14.3 Malaysia 2.5 1.7 1.0 1.0 0.9 0.3 0.2 0.2 0.4 Philippines 2.1 0.5 - - 0.5 1.1 1.2 1.7 1.1 Singapore 13.0 7.5 10.6 7.5 8.9 7.5 9.2 10.7 12.6 Thailand - - - 0.1 - - - 0.1 0.2 Other Asia 3.6 4.7 5.4 3.8 4.3 4.3 5.8 5.8 5.9 USA 15.6 14.9 14.5 21.3 26.3 28.7 27.8 25.4 20.3 Other America 0.5 4.2 2.1 6.0 8.3 7.6 5.3 6.9 3.0 EEC 13.6 11.9 8.8 4.9 5.6 7.2 8.5 7.5 7.6 France 0.6 0.6 0.5 0.3 0.2 0.4 0.6 0.5 0.5 West Germany 5.0 3.7 3.7 2.2 1.9 2.4 2.2 1.9 2.2 Netherlands 5.8 4.4 3.1 1.9 2.5 2.7 3.4 3.0 2.6 United Kingdom 1.0 1.3 1.0 0.3 0.4 0.5 0.6 0.5 0.6 Other EEC 1.2 1.9 0.5 0.1 0.6 1.2 1.7 1.6 1.7 Other Europe 2.3 2.7 2.4 1.4 0.7 1.0 1.0 1.2 1.1 Australia 2.0 0.8 1.7 0.3 0.3 0.4 0.5 0.9 1.2 Other Oceania - 0.1 - - - - - 0.1 0.3 Africa 0.1 0.3 0.2 0.2 0.1 0.2 0.3 0.3 0.2 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: Indikator Ekonomi (BPS). ANNEX - 96 - Table 3.4 INDONESIA COUNTRY ECONOMIC MEMORANDUM Import Values by Country of Origin 1971 1972 1973 1974 1975 1976 1977 1978 1979 Japan 32.8 34.0 29.3 29.4 30.9 26.2 27.1 30.1 29.2 ASEAN 7.7 9.3 8.7 9.3 8.6 14.0 14.3 9.7 11.7 Malaysia 0.4 0.5 0.5 0.3 0.4 0.4 0.3 0.3 0.5 Philippines 0.2 0.3 0.5 0.3 0.3 0.3 0.3 1.1 0.7 Singapore 6.3 6.5 4.9 6.5 7.2 9.7 8.6 6.8 7.5 Thailand 0.8 2.0 2.8 2.2 0.7 3.6 5.1 1.5 3.0 Other Asia 11.7 11.8 17.3 16.5 14.3 12.8 16.9 17.0 18.7 USA 15.8 15.6 18.8 15.9 14.1 17.4 12.4 12.4 14.3 Other America 0.5 0.7 0.9 1.4 1.8 1.2 2.3 2.4 1.8 EEC 20.3 17.8 16.5 17.7 18.6 21.2 20.8 19.0 14.9 France 1.5 1.3 1.7 1.9 1.9 3.5 3.0 2.5 2.0 West Germany 9.5 7.5 7.2 8.2 7.6 8.6 7.8 8.9 6.4 Netherlands 4.6 4.3 3.3 2.7 2.8 3.0 4.2 2.2 1.7 United Kingdom 4.2 4.1 3.8 3.8 3.5 3.1 3.8 3.1 2.7 Other EEC 0.5 0.6 0.5 1.1 2.8 3.0 2.0 2.3 2.1 Other Europe 5.3 3.7 3.2 5.4 5.8 2.4 2.2 4.5 3.9 Australia 2.9 3.3 3.5 3.4 3.3 3.4 3.0 3.3 3.1 Other Oceania 0.1 0.3 0.2 0.4 0.3 0.4 0.5 0.6 0.6 Africa 2.9 3.5 1.6 0.6 2.3 1.0 0.5 1.0 1.8 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: Indikator Ekonomi (BPS). INDONESIA COUNTRY ECONOMIC MEMORANDUM Oil Balance of Payments 1976/77 - 1979/80 (ln 11$ miEllions) 1918/79 1979/80 1976/77 1977/78 I II ILL IV Total II Iil0 IV Total 1. Exports, FOB 6,349.7 7,191.7 1,767.8 1,654.5 1,740.1 1,695.5 6,857.9 1,919.1 2,382.6 2,587.8 3,089.0 9,978.5 C.O.W. 2,880.5 2,776.2 804.2 696.0 575.0 553.0 2,628.2 627.5 801.5 857.0 1,044.2 3,330.2 Prod. sharing 1,561.8 1,750.8 433.8 390.9 458.9 471.6 1,755.2 556.3 579.2 474.2 601.0 2,210.7 In kind (COW + PS) 1,221.7 1,703.3 341.4 366.4 452.7 434.0 1,594.5 441.4 616.2 774.0 838.9 2,670.5 Pertamina 685.7 961.4 188.4 201.2 253.5 236.9 880.0 293.9 385.7 482.6 604.9 1,767.1 2. Imports -1,948.0 -1 640.0 -463.1 -417.7 -455.7 -492.9 -1,829.4 -525.5 -532.8 -381.1 -389.0 -1,828.8 C.O.W. -111.0 -138.9 -3.9 -49.0 -0.7 -28.3 -111.9 -28.5 -35.6 -45.3 -37.2 -146.6 Prod. sharing -1,024.6 -720.3 -192.5 -156.4 -230.7 -248.0 0827.6 -262.3 -231.9 -103.7 -85.1 -683.0 Pertamina -812.4 -780.8 -236.7 -212.3 -224.3 -216.6 -889.9 -234.7 -265.3 232.1 -267.1 -999.2 3. Services -692.1 -1 200.0 -311.8 -342.9 -286.0 -302.4 -1,243.1 -323.3 -478.9 -511.9 -527.8 -1,841 9 C.O.W. I3E -75 TB3 5 -122.1 -105.2 -106.4 -472.2 -114.6 -155.6 -157.0 -206.6 -633.8 Prod. sharing -92.4 -433.1 -107.1 -105.0 -102.2 -108.0 -433.3 -133.9 -179.9 -223.2 -270.2 -807.2 Pertamina -161.1 -269.4 66.2 -115.0 -78.6 -88.0 -348.6 -74.8 -143.4 -131.7 -51.0 -400.9 4. Current Account (1 + 2 + 3) 3,709.6 4,351.7 992.9 893.9 998.4 900.2 3,785.4 1,070.3 1,370.9 1,694.8 2.171.8 6,307.8 C.O.W. ,13U3 zjT39. d 7;9 524.9 469.1 418.3 2,044.1 484.4 610.3 654.7 828.3 2,577.7 Prod. sharing 444.8 597.4 134.2 129.5 126.0 115.6 505.3 160.1 167.4 147.3 217.8 692.6 In kind (COW + PS) 1,221.7 1,703.3 341.4 366.4 452.7 434.0 1,594.5 441.4 616.2 774.0 838.9 2,670.5 Pertamina -287.8 -88.8 -114.5 -126.9 -49.4 -67.7 -358.5 -15.6 -23.0 118.8 286.8 367.0 5. Miscellaneous Capital -710.3 -198.4 -78.8 6.7 -46.1 -128.7 10.5 -132.0 -252.6 -246.6 -273.0 -904.3 Reimbursement LNG EiY" T57T - - - - - - 5.2 - - 5.2 Debt repayments -485.8 -278.5 -66.7 -55.8 -58.1 -40.2 -220.8 -51.5 -39.6 -48.5 -29.6 -169.3 Short-term (-98.1) (-12.0) (-0.2) (-0.5) (-3.1) (-3.4) (-7.2) (-2.0) (-6.2) (-0.6) () (-8.8) MP/IT borrowing (-145.4) (-106.1) (-38.3) (-11.7) (-31.4) (-10.6) (-92.0) (-30.9) (-7.9) (-25.2) (18.9) (-82.9) Special projects (-34.8) (-28.2) (-3.3) (-14.3) (-) (-14.5) (-32.1) (-) (-14.4) (-) (i) (-14.4) Crude debt repayments (-207.5) (-132.2) (-24.9) (-29.3) (-23.6) (-11.7) (-89.5) (-18.6) (-11.1) (-22.7) (-11.6) (-64.1) Project prefinancing -59.8 -8.7 - -0.5 -4.0 -9.1 -13.6 -1.6 -1.4 - - -3.0 Oil export credit -234.0 -73.4 -12.1 63.0 16.0 178.0 244.9 -78.9 -216.8 -198.1 -243.4 -737.2 Payments due (4,177.5) (5343.1) (1,258.8) (1,255.7) (1,293.7) (1,371.1) (5,179.3) (1,282.3Z) (1,551.7) (1,F37.8) (2,234.Q) (6,906.7) Receivables (-4,411.5) (-5,269.7) (-1,270.9) (-1,192.7) (-1,277.7) (-1,193.1) (-4,934.4) (-1,361.2) (-1,768.5) (-2,035.5) (-2,478.3) (7,643.9) 6. Total (4 + 5) 2,999.3 4,153.3 914.1 900.6 952.3 1,028.9 3,795.9 938.3 1,118.3 1,448.2 1,898.8 5,403.5 7. Errors and omissions -50.3 15.0 -0.1 8.3 18.9 12.1 39.2 -10.2 8.8 64.5 119.4 182.6 8. Monetary movements -2,949.0 -4,168.3 -914.0 -908.9 -971.2 -1,041.0 -3,835.1 -928.1 -1,127.1 -1,512.7 -2,018.2 -5,586.1 Source: Bank Indonesia. INDONESIA COUNTRY ECONOMIC MEMORANDUM LNG Balance of Payments 1977/78 - 1979/80 (In US$ millions) 1978/79 1979/80 1977/78 1 II TIT IV Total I li III IV Total 1. Exports, FOB 161.7 102.9 141.3 127.9 144.1 516.2 208.9 300.9 327.3 508.2 1,345.3 a. C 6 F 188.9 118.3 164.9 150.2 170.9 604.3 244.0 340.5 367.4 559.1 1,511.0 - MBTU (million) ( 71.2) ( 43.2) ( 57.6) ( 51.3) ( 64.2) (216.3) ( 78.8) ( 90.6) ( 90.3) (113.4) ( 373.1) - M/T (million) ( 1.4) ( 0.8) ( 1.1) ( 1.0) ( 1.2) ( 4.1) ( 1.5) ( 1.8) ( 1.8) ( 2.2) ( 7.3) - Price ($/MMBTU) ( 2.63) ( 2.73) ( 2.86) ( 2.92) ( 2.66) ( 2.79) ( 3.09) ( 3.76) ( 4.07) ( 4.93) ( 4.05) b. Freight 27.2 15.4 23.6 22.3 26.8 88.1 35.1 39.6 40.1 50.9 165.7 - $/MMBTU ( 0.42) ( 0.43) ( 0.43) ( 0.43) ( 0.43) ( 0.43) ( 0.44) ( 0.44) ( 0.44) ( 0.45) ( 0.45) 2. Imports, C&F -17.0 - 8.6 -10.8 -15.2 -18.2 -52.8 -20.3 -21.4 -24.8 -28.9 -95.4 3. Services -52.2 -60.4 -74.0 -51.5 -52.9 -238.8 -75.5 -119.1 -172.9 -215.2 -582.7 Cost of recovery -21.8 -55.9 -68.7 -48.2 -50.0 -222.8 -61.0 -94.5 -137.1 -135.6 -428.2 Contractor's share -30.4 - 4.5 - 5.2 - 3.2 - 2.9 -15.8 -14.3 -24.5 -35.6 - 79.3 -153.7 Other charges - - - 0.1 - 0.1 - - 0.2 - 0.2 - 0.1 - 0.2 0.3 - 0.8 4. Current Account (1 + 2 + 3) 92.5 33.9 56.5 61.2 73.0 224.6 113.1 160.4 129.6 264.1 667.2 5. Miscellaneous Capital -79.0 -25.6 -22.1 -55.2 -43.7 -146.6 -86.5 -75.7 -63.4 -109.2 -334.8 Debt repayments (JILCO ex escrow account) -29.7 -16.4 -16.1 -23.6 -40.6 -96.7 -40.9 -40.7 -36.7 -22.1 -140.4 LNG export credit (net transfers to escrow and special account) -49.3 - 9.2 - 6.0 -31.6 - 3.1 -49.9 -45.6 -35.0 -26.7 -87.1 -194.4 6. Total (4 + 5) 13.5 8.3 34.4 6.0 29.3 78.0 26.6 84.7 66.2 154.9 332.4 7. Errors and omissions 13.9 0.5 - 1.8 2.7 0.1 1.5 - 1.5 -10.1 - 6.8 -5.1 - 23.5 8. Monetary movements -27.4 - 8.8 -32.6 - 8.7 -29.4 -79.5 -25.1 -74.6 -59.4 -149.8 -308.9 BUN -11.9 - 8.0 - 7.3 - 8.0 - 5.1 -28.4 -24.5 -34.6 -57.9 -146.1 -263.1 Pertamina - 0.8 - 0.8 - 0.6 - 0.7 - 0.4 - 2.5 - 0.6 - 0.9 - 1.5 - 3.7 - 6.7 Pertamina (straight to B.I. as debt repayments) -14.7 - -24.7 - -23.9 -48.6 - -39.1 - - - 30.1 Source: Bank Indonesia. _ 99 - ANNE Table 4.1 Page 1 INDONESIA COUNTRY ECONOMIC MEMORANDUM External Public Debt Outstandinz Including Undisbursed as of Dec. 31. 1979 With Malor Reported Additions Through SePt. 30. 1980 Debt Repayable in Foreign Currency and Goods (in thousands of US dollars) Major Reported Type of creditor Debt OutstandinE Additions Jan. 1 Creditor country Disbursed Undisbursed Total to Sept. 30, 1980 Suppliers' Credits Australia 4,812 105 4,917 France 48 - 48 Germany, Fed. Rep. of 1,071 106,430 107,501 - Japan 1,414,323 56,830 1,471,153 15,081 Korea, Rep. of 42,440 51,560 94,ooo 0 Ietherlands 22,119 - 22,119 - Switzerland 1,031 - 1,031 - Tanzania 707 - 707 - United States 615 - 615 Total Suppliers' Credits 1,487.166 214.925 1,702.091 15,081 Financial Institutions Belgium 119,386 22,795 142,181 32,581 Canada 10,000 340,000 350,000 - France 352,918 325,957 678,875 16,791 Germany, Fed. Rep. of 250,231 382,477 632,708 185,475 Hong Kong 25,294 1,496 26,790 432,500 Italy 7,330 22 7,352 _ Japan 165,532 - 165,532 Netherlands 340,508 577 341,085 Norway 78,092 18,390 96,482 - Singapore 129,969 192,663 322,632 - Sweden 25,314 30,320 55,634 _ Svitzerland - 161,392 161,392 _ United Kingdom 151,106 55,615 206,721 3,658 United States 1,271,367 154,262 1,425,629 30,000 Multiple Lenders - - - 512,000 Total Financial Institutions 2.927,047 1.685.966 4.613,013 1.213.005 Bonds Germany Fed. Rep. of 57,753 - 57,753 - Japan 41,720 - 41,720 - Kuwait 25,631 - 25,631 - Netherlands 39,360 - 39,360 _ Svitzerland - - - 47,468 Total Bonds 16446 - 164,464 47,468 Nationalization Netherlands 226,922 - 226,922 Total Nationalization 226.922 - 226,922 - - 100 - ANNEX Table 4.1 Page 2 Major Reported Type of creditor Debt Outstanding Additions Jan. 1 Creditor country Disbursed Undisbursed Total to Sept. 30, 1980 Multilateral Loans Asian Development Bank 175,860 737,431 913,291 60,700 IBRD 739,059 1,803,602 2,542,661 527,000 IDA 525,357 254,636 779,993 162,000 Islamic Dev. Bank - 27,090 27,090 - Total Multilateral Loans i,44o,276 2,822,759 4,263.035 749.700 Bilateral Loans Abu Dhabi 240 14,835 15,075 - Australia 5,212 3,371 8,583 2,172 Austria 787 17 804 119 Belgium 101,603 - 101,603 3,565 Bulgaria 1,907 - 1,907 Canada 187,689 147,117 334,806 - China 71,718 - 71,718 - Czechoslovakia 63,581 - 63,581 - Denmark 67,195 16,075 83,270 - Egypt, Arab Rep. of 3,186 - 3,186 - France 237,111 127,783 364,894 110,696 German Dem. Rep. 52,289 - 52,289 - Germany, Fed. Rep. of 780,559 458,293 1,238,852 229,774 Hungary 15,860 - 15,860 - India 10,335 117 10,452 - *Iran 156,987 -907 157,894 _ Italy 76,710 - 76,710 - Japan 1,933,777 1,135,102 3,068,879 261,861 Kuwait 190 50,339 50,529 _ Netherlands 328,811 221,275 550,086 66,958 New Zealand 3,442 471 3,913 _ Pakistan 12,056 - 12,056 - Poland 89,307 89,307 - Romania 12,806 - 12,806 - Saudi Arabia 62,477 63,407 125,884 - United Kingdom 14,629 - 14,629 - United States 1,905,802 504,107 2,409,909 152,530 USSR 708,312 2,256 710,568 - Yugoslavia 166,602 45,463 212,065 - Multiple Lenders - - - 151,500 Total Bilateral Loans 7,071,180 2,790.935 9,862,115 979,175 Total External Public Debt 13.317,055 7,514,585 20,831,640 3,004,429 Notes: (1) Only debts with an original or extended maturity of over one year are included in this table. (2) Debt outstanding includes principal in arrears, but excludes interest in arrears. TABLE 2 INDONESIA SERVICE PAYMENTS. COMMITMENTS. DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31. 1979 WITH MAJOR REPORTED ADDITIONS THROUGH SEPTEMBER 30, 1980 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) TOTAL YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S 0 U R I N G P E R I 0 0 OTHER CHANGES BEGINNING OF PERIOD DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL- ADJUST- ONLY UNDISBURSED MENTS MENTS- -----------:---------------- LATIONS MENT * PRINCIPAL INTEREST TOTAL : (1) : (2) (3) (4) (5) (6) (7) (8) (9) 1975 6.357.153 9.018,100 3.276.974 2.152.098 351,981 165,481 517.462 2.132 -224.080 1976 8.014.325 11.716.881 3.133.314 2,332.301 437.387 318.042 755.429 9.797 147.842 1977 10.018.350 14.550.853 1.727.081 1.956.156 824.699 441.259 1.265,958 14,780 714.359 1978 11.671.344 16.152.814 2.703.897 1.637.913 977,356 485.256 1.462.612 41.388 1.113.680 1979 13.124.715 18.951.647 3.824.691 1.940,103 1.334.547 772,093 2.106.640 149.808 -460,339 1980 13,317.055 20.831.644 * * * * * * THE FOLLOWING FIGURES ARE PROJECTED * * * * * * 1980 13.317.055 20.831.644 3.004.429 2.722.258 999.906 832,496 1.832,402 - -89.947 1981 14.949.456 22.746.220 - 2.691.861 1.061.703 949.614 2,011,317 - i 1982 16.579.605 21.684.518 - 1.939,590 1.274.511 1.036.083 2.310,594 - -12 0 1983 17.244.659 20.409.995 - 1.363,435 1.388.601 1.029.872 2.418.473 - -9 1984 17,219.487 19.021.385 - 931.577 1,567.194 988.597 2.555.791 - 5 1985 16.583,874 17.454,196 - 464.353 1,664.760 916.115 2.580.875 - 6 1986 15.383,468 15,789,442 - 198.812 1.507.147 798.535 2.305.682 - -17 1987 14.075,119 14.282.278 - 123.710 1.398.631 688.754 2.087.385, - -17 1988 12.800.177 12.883.630 - 64,671 i.361.238 586.699 1.947,937 - -12 1989 11,503,597 11,522.380 - 17.201 1.216.623 488.262 1.704.885 - 3 1990 10.304.178 10.305.760 - 1.383 970.100 408.806 1.378.906 - -1t 1991 9.335.450 9.335,649 - 186 866.261 359.065 1.225,326 - -1 1992 8.469,374 8.469.387 - 13 787.676 328.588 1.116.264 - -2 1993 7.681.709 7.681.709 - - 757.108 293.516 1.050.624 - -16 1994 6,924.585 6.924.585 - - 737.619 260.227 997,846 - -IS 1995 6.186.951 6.186.951 - - 680.090 228.952 909.042 - 29 1996 5,506,890 5.506.890 - - 669.973 200,750 870.723 - -22 1997 4.836.895 4,836.895 - - 633.126 172.949 806.075 - 21 1998 4.203.790 4.203.790 - - 599,698 147.468 747.166 - 3 1999 3,604.095 3,604.095 - - 555.758 124.321 680.079 - -12 '43 1- . THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONE YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS FROM ONE CATEGORY TO ANOTHER IN THE TABLE. ANNEX - 102 - Table 4.3 INDONESIA COUNTRY ECONOMIC MEMOFANDUM External Public Debt by Country and Type of Creditor as of December 31, 1979 (US$ million) Bilateral/ multilateral Other /a Total Dis- Incl. Dis- Incl. Dis- Incl. bursed undis- bursed undis- bursed undis- only bursed only bursed only bursed Australia 5 9 5 5 10 14 Austria 1 1 - - 1 1 Belgium 102 102 119 142 221 244 Canada 188 335 10 350 198 685 Denmark 67 83 - - 67 83 France 237 365 353 679 590 1,044 Germany 781 1,239 309 798 1,ogo 2,037 Italy 77 77 7 7 84 84 Japan 1,934 3,069 1,621 1,678 3,555 4,747 Netherlands 556/b 777/b 402 402 958 1,179 New Zealand 3 4 - - 3 4 Switzerland - - 1 162 1 162 United Kingdom/c 15 15 151 207 166 222 United States 1,906 2,410 1,272 1,426 3,178 3,836 Total Bilateral IGGI 5,871 8,484 4,251 5,858 10,122 14,342 Asian Development Bank 176 913 - - 176 913 IBRD/IDA 1,264 3,323 _ - 1,264 3,323 Total Multilateral IGGI 1440 4,236 - 1,44 4,236 Total IGGI 7.311 12,720 4,251 5,858 11,562 18,578 Non-IGGI 1,428 1,632 327 622 1,755 2,254 Total 8,739 14,352 4,578 6,480 13,317 20,832 L Suppliers, financial institutions, bonds. / Includes nationalization debt. /c Bilateral debts amounting to about $75 million were cancelled in 1979. Note: Data in this table refer to public sector and medium-term debt with an original maturity of one year or more. Figures rounded to nearest million. Totals may not add due to rounding. Source: IBERD External Debt Reporting System based on data provided by Bank Indonesia. INDONESIA COUNTRY ECONOMIC MEMORANDUM External Public Debt as of December 31, 1979, by Major Currencies and Countries Amount Amount ($ billion) Share (%) ($ billion) Share (%) Currency Disbursed Total Disbursed Total Country Disbursed Total Disbursed Total US dollar 5.96 7.41 45 36 Japan 3.55 4.75 27 23 Yen 2.13 3.32 16 16 USA 3.17 3.83 24 18 DM 1.13 2.26 9 11 West Germany 1.09 2.03 8 10 DFL 0.94 1.16 7 5 Netherlands 0.95 1.18 7 6 w Ruble 0.71 0.71 5 3 France 0.59 1.04 4 5 Fr. franc 0.59 1.04 4 5 USSR 0.71 0.71 5 3 Other 0.94 1.47 7 7 Other countries 1.81 3.03 14 15 Multiple 0.91 3.46 7 17 Multilateral 1.44 4.26 11 20 organizations Total 13.31 20.83 100 100 Total 13.31 20.83 100 100 Source: IBRD External Debt Reporting System based on data provided by Bank Indonesia. INDONESIA COUNTRY ECONCFIC MV1ORANDUH Loan Coinitents by Country (1974-1979) (US$ million) Bilataral/multilateral /e Other /b Total 1974 1975 1976 1977 1978 1979 1974 1975 1976 1977 1917 1979 1974 1975 1976 1977 1978 1979 Australia - - - - 6 3 6 - - 6 - - 6 - - 6 6 3 Austria I - - - - - - - - - - - 1 - - - - - Belgium 8 9 8 9 10 11 - 126 - - - 15 8 135 8 9 10 26 Canada - 14 223 5 61 11 - - - - 350 - - 14 223 ' 411 11 Denmark - - 57 - - 10 - - - - - - - - 57 - - 10 France 35 16 - 26 77 5 35 331 88. 101 132 75 70 347 88 127 209 80 Germany 51 126 13 76 86 236 - 3 470 - 76 395 51 129 483 76 162 631 Italy - - - - - - 9 - - - - - 9 - - - - - Japan 376 173 132 425 187 597 1,181 213 335 79 128 133 1,557 386 466 504 315 730 Netherlands 47 - 89 hi - 55 38 310 1 - 9 37 a5 310 90 41 9 92 New Zealand - 1 1 - - - - - - - - - - 1 1 - - - Switzerland - - - - - - - - - - - 153 - - - - - 153 United Kingdom - - - - - - - 143 50 - 42 47 - 143 50 - 42 47 United Statee 59 143 430 66 348 224 216 903 250 250 225 457 275 1,048 680 316 573 681 1 Total Bilateral 0 IGCI 577 482 953 648 775 1.152 1.485 2.031 1.194 436 962 1.313 2.062 2.513 2.146 1.082 1.736 2.465 $* Asian Developaent Dank 78 78 109 136 199 235 - - - - - - 78 78 109 136 199 235 IBRD/IDA 198 311 564 406 551 815 - - - - - - 195 311 564 406 551 815 Total Multilateral IGGI 273 389 673 542 750 1.050 _ I _ - I _ 273 389 673 542 750 1,050 Total IWCI 850 871 1.626 1,190 1.525 2.202 1.485 2.031 1.194 436 962 1.313 2.335 2.902 2.819 1.624 2.486 3.S15 Non-ICCI - 283 113 193 25 45 - 92 202 - 193 265 - 375 315 103 218 310 Total 850 1 154 1.739 1.293 1,550 2.247 1.485 2.123 1.396 436 1.155 1.578 2.335 3.277 3,134 1.727 2.704 3,825 La Specific loan and/or project agreements signed. Amounts may therefore differ from din,or's pledge or budget allocation, general treements, frame- streemente, exchange of notes and other forus of bilateral commitment preceding specific comitesnta. Crante are excluded. /b ruppliers, financial lnstitution., bonds. Note: Data in this table tefer to public sector mdium- and long-term loans with a maturity of one year or more. Figures rounded to nearest million. Totals may not add due to rounding. Source: IBRD External Debt Reporting System based on data provided by Bank Indonesia. INDONESIA COUNTRY ICOWNIC HEUORANWIt IGGI and Hon-IGGI Dieburpente and Hot Resource ]Monsetr. 1974-79 (USS million) 9Uct-erel/multtl terel /e Other lb Total 1974 1975 1976 1977 1978 1979 1974 1975 1976 1977 1978 1979 1974 1975 1976 1977 1970 1979 Croce Disbursemento bilateral IGGI 399 394 61S 478 631 435 633 1,550 1,316 g98 592 975 1,032 1,944 1,931 1,466 1,223 1,411 Hultilateral ICCI 88 184 291 268 216 279 - - - - - - a8 164 291 268 216 279 Total ICCI 467 578 9G6 746 647 714 3 1 1.316 988 2 975 J.20 2,128 2.222 I! M . 43 1.690 Non-ICGI _ _ 17 124 131 62 - 24 93 98 67 187 - 24 110 222 198 250 Total Croae Disbursem.tent ALI 7 9 870 978 776 in 1574 L1f9 1.086 65 1,162 1,120 2,152 2,332 1.956 1,637 194G0 Hot Disbureements Le Bilateral IGCI 369 360 561 39S 501 273 492 1,322 1,061 304 (141) (3) 861 1,682 1,622 699 359 270 Hultilaceral IGCI 88 184 290 266 208 252 - - - - - - 68 184 290 266 208 2S2 Total ICGI 457 544 8|51 661 709 525 492 1.322 1,06l 304 (141) (3 94S 66 l 912 965 567 522 jon-lGCG (41) (30) (15) 91 62 (10) - (35) (2) 75 31 92 (41) (66) (17) 166 93 62 Total Not Dg u-reoeantj 416 1 - 836 mJ SIIS 4 1.287 lS9 _ 379 (119) 69 906 1.00 1,8195 1,131 660 604 Net Resource Transfers a lilatorel IGCC 319 294 472 262 354 84 465 1,229 675 34 (382) (451) 784 1,523 1,347 316 (30) (368) Multilateral IGI 86 180 282 230 145 167 - - - - - - 86 180 282 230 145 167 Total IGI 405 47 754 S12 499 251 465 1,229 875 __ ( (2 451) 870 1703 1629 546 115 (201) Hon-ICCI (43) (32) (186) 81 47 (28) - (37) 34 63 12 61 (43) (68) (52) 144 59 34 Total Net Raoourc* Transfers 362 442 736 593 546 223 465 192 641 __17 (370) _390) 627 1.634 1,577 690 174 (167) clud4ag grants. 1auppliers. filnxcial institutions, bonds. | EqU410 gross disbursements mInus amortt:atton. Ed Equals gross disbureements mnus debt service, Note; Data In this table refer to disbursemente and resource transfers of public sector mediuu- and long-term debt with a aturity of one year or more. Figures rounded to nearest mtllton. Totals may not add due to roundtns. Sourcet IBRD External Debt Reporting Systea based on data provided by Bank Indonesti. - 106 - ANNEX INDO!!SIA Table 4.7 courETY ECONOMIC 1MZ.RANDUM Suin,ry Erternal Debt Data, / 1974-79 1974 1975 1976 1977 1978 1979 US$ Million Disbursed and Outstanding Debt (DOD) lb 6,357 8 014 10.018 11.671 1312 13.31T Bilateral/muitilatersl 5 s,o 5,913 7,077 Other /e 1,739 3,008 4,105 4,594 4,691 4,578 Total Debt Outstanding. ela. Undisbursed (TDO) lb 8 ll 7 14 1 1 2 20.832 Bilateral/multilateral 6,26T 7,202 8,950 10,6 4 12, 13 IW,352 Other /z 2,751 4,515 5,601 5,489 6,139 6,480 Commitments 2. 3.277 3.134 1,727 2.704 '.825 Bilateral/lmltilateral -850 1,154 1,739 1,292 1,549 2,247 Other 1,485 2,123 1.395 435 1,155 1,578 Gross Disbursements a2 2.152 2,332 1.95 1.637 1.940 Bilatersl/multilateral T87 578 923 870 978 776 Other /z 633 1.574 1,409 1,086 659 1,162 Net Disbursements 508 1.800 1.895 .131 660 604 Bilaterul/multilateral -16 514 8 752 771 515 Other /c 492 1,287 1,059 379 (110) 89 r7c =csfouce ransfetrs 8 ..614 1.5T 4c 17L 6 .7 Bilateral/a itilateral ---L42 736 593 5he 2_3 Other /c 465 1,192 841 97 (370) (390) Public Debt Service 292 S1T T55 1.266 1.463 2,107 Amortization 212 352 437 .825 978 1,335 Interest so 165 318 441 485 772 Public Debt Service 5 755 .266 1,46 2.106 Bilateral/multilateral 124 1 I3 187 2771T 554 Other . 168 381 - 568 989 1,029 1,552 Disbursement Indicator Undisbursed Debt/DO) 30 32 31 28 6 Bilateral/multilateral ~5 30 -34 3 4 40 Other le 37 33 27 16 24 28 Gross Disbursements/Commitments () /d 48 66 74 113 61 51 Bilateral/maultilateral 57 50 53 67 63 35 Other /e 43 74 101 250 57 74 Gross Disbursements /Undiab. Debt and Commitments () - 36 34 23 20 Bilateral/multilateral - 21 23 20 19 12 Other - 50 50 56 32 38 Wet Disb./Gross Disb. (5) 81 84 81 58 40 31 Bilateral/multilateral 89 90 79 Other /e 78 82 75 35 - 8 let Resource Transfers/Gross Diab. (5) T4 76 68 35 11 - Bilateral/multilateral T74 7T 80-r 68 5 29 Other /c 73 76 60 9 _ - /a Data in this table refer to public sector medium- sand long-term loans. Loans with a maturity of less than one year and grants are not included. l End of year. Suppliers, ffnaneiaLl institutions, bonds. Gross disbursements as S of commitments. Gross disbursements as % of undisbursed debt (TDO-DOD) at beginning of year plus cosmitments during the year. Source: IBRD External Debt Reporting System based on data provided by Bank Indonesia. - 107 - ANNEX Table 4.8 IMDONESIA COUITRY ECONOMIC MEORANDUM Selected Debt Indicators, 1973-79 /a 1973 1974 1975 1976 1977 1978 1979 Ratio DOD/exports 1.73 0.80 0.87 0.87 0.92 1.03 0.76 latio DOD/COP 0.32 0.24 0.26 0.27 0.26 0.26 0.27 Ratio TDO/exports 2.22 1.40 1.24 1.27 1.34 1.42 1.19 Ratio TDO/GDP 0.41 0.35 0.38 0.39 0.36 0.38 0.42 Debe saevica/exports (Z) 7.04 7.85 7.10 8.20 11.65 12.88 12.04 Deobt service/GDP (Z) 1.3 1.1 1.7 2.0 2.8 3.0 4.30 Debt service/Governmant revenues (2) 9.0 6.9 9.8 10.9 14.8 17.0 16.30 Interest oan DOD/average DOD /a (Z) 1.3 1.4 2.3 3.5 4.0 4.0 5.80 Total 4ebt service/average DOD lb (2) 4.5 5.0 7.2 8.4 11.7 11.9 16.00 Amortizatioa/average TDO /a (%) 2.5 2.7 3.4 3.3 5.4 5.5 6.70 Total debt service/grose disbursements (2) 23 27 24 32 65 90 108 Gross diiburseents/imports (iocl. NFS) (Z) 25 17 28 25 18 14 14 Met disbursement*/imports (incl. NFS) (2) 21 14 23 20 11 6 4 Net resource transfers/imports (mncl. WPS) (2) 19 9 26 17 7 2 1 DOD - Disbursed and Outstanding Debt TDO - Total Debt Outstanding, mncl. unalsbursed p... In US4 Billion GDP 16.30 25.90 30.50 37.30 45.10 49.40/d 49.05 Experts /c 3.01 6.60 7.28 9.21 10.86 11.3S 17.50 Imports + net NFS /c 3.59 6.51 7.70 9.30 10.69 11.49 14.24 Government revenues /c 2.35 4.24 5.30 6.93 8.52 8.64/e 12.90 /a All ratios involving exports and imports treat trade flows relating to oil on a gross basis. Values appearing in the 1980 report have been recalculated. /b Average of debt outstanding at beginning and and of year. 77 GOI fiscal year. 7T Converted at average 1978 exchange rate of US$1 - R2 441. 7 Converted at average 1978/79 exchange rate of US$1 - Ip 494. Source: Debt data from Table 4.1; GDP from Table 2.1; Exports and Imports from Table 3.1; Government revenues from Table 5.1. - 108 - ANNEX INDONESIA 'Tabl 4.9 Page I COUNTRY CONOMIC MEMORANDUM Net Resource Transfers, 1975 Gross met met Comit- dliburse- Aeortia.- disburse- resource minats seats tioa *mte Inctroet transfers 1. Coneeseional ADB - 17.7 - 17.7 0.6 17.1 DA - 106.9 - 106.9 1.7 105.2 Subtotal - 124.6 - 124.6 2.3 122.3 AustriA - 0.2 - 0.2 - 0.2 * lguM 8.9 - 0.1 (0.1) 0.5 (0.6) Canada 14.2 22.1 - 22.1 - 22.1 Denmrk - 3.6 - 3.6 - 3.6 ternce 16.4 17.5 2.4 15.1 2.2. 12.9 Germany, Jed. Rep. 50.8 31.7 6.1 25.6 7.5 18.1 Italy - - 1.9 (1.9) 0.4 (2.3) Japga 173.0 190.4 8.5 181.9 29.4 L52.5 Netherlaeds - 22.1 1.8 20.3 3.5 16.8 Nek Zoalead 0.9 0.7 -0.7 - 0.7 Switzerland - - - - - - United XLngdom 0.2 8.9 0.1 8.8 0.1 6.7 gaited StAtes 111.6 81.1 5.9 75.2 20.1 55.1 Subtotal 376.0 378.3 26.8 351.5 63.7 237.6 Total IGGI 376.0 502.9 26.8 476.1 66.0 410.1 NmIC4I - - 30.5 (30.5) 1.2 (34.7) Total 376.0 502.9 57.3 445.6 67.2 378.4 2. Noncone-.sional ADS 78.3 2.5 - 2.5 0.2 2.3 1 m 310.5 56.8 - 56.8 1.6 55.2 Subtotal 388.8 59.3 - 59.3 1.8 57.5 Australia - - 4.0 (4.0) 2.7 (6.7) Belgium 1i26.3 Z.6 0.4 8.4 2.7 5.7 Canada _ _ _ Denmrk - - - - Framne 331.4 54.6 17.8 36.8 3.1 33.7 Cermany, Fed. Rep. 77.9 - 2.3 (2.3) 0.6 (2.9) Italy - - - - - - Japsa 212.7 493.5 108.4 385.1 18.6 366.5 Natherlands 310.4 27.5 19.3 6.2 21.9 (13.7) Swltzerland - - - - - Unlted Kingdom 142.5 3.3 39.2 (35.9) 6.0 (41.9) United States 936.4 978.3 44.0 934.3 39.6 894.7 Subtotal 2,137.6 1,566.0 235.4 1,330.6 95.2 1,235.4 Total IGCI 2,526.4 1,625.3 235.4 1.389.9 97.0 1.292.9 Nor-IGGI 374.7 23.9 59.3 (35.4) 1.3 (36.7) Total 2,901.1 1L649.2 294.2 1,354.5 98.3 1.256.2 /a lacludes grants. 7T De to rounding some figures may slightly differ from other tables. Source: IBUD External Debt Reporting System based on data provided by Bank Indonesia. External Debt Division Economic Analysis and Projections Department - 109 - AMu INDOWKSIA Table 4.9 COM ECONO?aC NVOIANDUM Net Resource Transfer, 1976 Gross Not Not Co t- disburse- _ ArtLsa- disburs.- reseewe meaue mate tele *mot Iterest tranafore 1. Couce.aional DI M- 23.0 0.1 22.9 1.8 21.1 IDA - ".4 - 99.4 2.4 97.0 Subtotal _ 122.4 0.1 122.3 4.2 118.1 AustrUi 0.3 - 0.3 - 0.3 lelgim 8.4 16.9 0.I 16.8 0.5 16.3 Canada 35.5 - - - - Desmark - 1.3 0.1 1.2 - 1.2 France - 14.2 4.8 9.4 2.7 6.7 Cermny, Fed. Rep. 12.7 29.4 10.4 19.0 8.9 10.1 Italy _ _ 2.9 (2.9) 0.3 (3.2) JIpan 131.6 176.3 18.3 158.0 33.5 124.5 Netbhuland 89.0 15.8 2.6 13.2 3.8 9.4 Now Zealand 0.7 0.5 - 0.5 - 0.5 Swit2erland - - - - - - unlted Kingdom - 4.1 0.9 3.2 0.1 3.1 URited Statan 155.0 106.6 9.0 97.6 26.4 71.2 Subtotal 432.9 365.4 49.1 316.3 76.2 240.1 Total ICCS 432.9 487.8 49.2 438.6 80.4 358.2 bNe-SCCG 70.0 - 32.3 (32.3) 1.3 (33.6) Total 502.9 487.8 41.5 406.3 81.7 324.6 2. Noucoucesional ADn 109.3 11.5 - 11.5 0.6 10.9 hID 563.5 157.2 0.9 156.3 3.4 152.9 Subtotal 672.8 168.7 0.9 167.A 4.0 163.J Australla - - 4.0 0.4 0.1 (0.3) telgit. - 54.5 - 54.5 3.5 51.0 Canada 188.0 27.1 - 27.1 1.4 25.7 Denmrk 56.7 - - - - - FiaTe 87.8 132.8 9.3 123.5 11.0 112.5 gemary, Fed. Rep. 470.4 202.2 0.2 202.0) 7.6 194.4 Italy - 5.0 - 5.0 - 5.0 JapaD 334.6 573.7 143.1 430.6 36.4 394.2 Netherlands 0.7 88.1 21.6 66.5 12.7 53.8 Switxerland - Wnited Kingdom 49.7 74.7 4.9 69.8 3.2 66.6 United States 524.9 407.3 80.4 326.9 122.6 204.3 Subtotal 1,712.8 1.565.4 259.9 1,305.5 198.5 1,107.0 Total lCCI 2.385.6 1.734.1 260.8 1,473.3 202.5 1,270.8 Don-tOOl 244.8 110.5 95.1 13.4 33.9 (18.5) Total 2,630.4 1,844.6 355.9 1,488.7 236.4 1 252.3 /a Excludes grants. 73 Due to rounding som flgures may slightly differ from other tables. External Debt Division Ucomaomc Analysis and Projectione Department - 110 - ANNEX IlDONESIA Table 4.9 Page 3 COUNTRY ECONOMIC MEMORANDUM Net-lesource Transf&rs. 1977 Gross Not Not Conait- disburse- Amortiza- disburse- rasource Menat ments tion ments Interest transfers 1. Conc*esional ADD - 12.3 0.1 12.2 1.6 10.6 IDA - 49.0 - 49.0 3.1 45.9 Subtotal - 61.3 0.1 61.2 4.7 56.5 Austria - - - - - - Belgium 9.1 9.1 0.1 9.0 0.5 8.5 Canada - 24.5 - 24.5 - 24.5 De a rk - - 0.3 (0.3) - (0.3) France 26.1 8.4 4.4 4.0 2.7 1.3 Cer uky, Fed. Rep. 65.7 23.6 11.4 12.2 10.0 2.2 Italy - - 2.7 (2.7) 0.3 (3.0) Japan 406.4 142.7 26.8 115.9 40.8 75.1 Netherlands 40.7 2U.7 4.2 21.5 4.6 16.9 Now Zealand - - - - - - Switxerland - 1.0 - 1.0 - 1.0 United Kingdon - 4.5 1.1 3.4 - 3.4 Utited States 61.8 114.1 9.3 104.8 23.8 81.0 Subtotal 609.8 353.6 60.3 293.3 82.7 210.6 Total IGGI 609.8 414.9 60.4 354.5 87.4 267.1 NoW-IGGI 95.4 27.4 32.6 (5.2) 3.8 (9.0) Total 705.2 442.3 93.0 349.3 91.2 258.1 2. Nonconcessional ADS 136.0 15.8 0.1 15.7 2.2 13.5 lUND 405.5 190.6 1.4 189.2 29.2 160.0 Subtotal 541.5 206.4 1.5 204.9 31.4 173.5 Australia 5.6 - 0.4 (0.4) 0.1 (0.5) belgius - 4".1 - 44.1 6.7 37.4 Can"da 4.7 44.3 2.0 42.3 4.0 38.3 Denmark - 2.2 - 2.2 0.1 2.1 PFrue 100.6 110.4 26.4 84.0 17.7 66.3 *- . .y, r .. Rep. 10.0 137.8 97.6 40.2 24.4 15.8 V . - 1.6 - 1.6 0.2 1.4 Japan 97.6 334.8 197.6 137.2 45.0 92.2 Netherlands - 118.7 25.2 93.5 28.7 64.8 Switzerland - - - - - - United Kingdom - 48.3 12.5 35.8 8.1 27.7 United States 255.2 270.0 345.4 (75.4) 165.5 (240.9) Subtotal 473.7 1,112.2 707.1 405.1 300.5 104.6 Total IGCI 1.015.2 1.318.6 708.6 610.0 331.9 278.1 Non-ICCi 6.7 195.2 23.0 172.2 18.1 154.1 Total 1,021.9 1,513.8 731.6 782.2 350.0 432.2 /a Excludes grants. 7S Due to rounding omse figures nay slightly differ from other tables. External Debt Division Econole Analysis and Projections Department - 111 - ANNEX INDONESIA Table 4.9 Pag. 4 CONTY ECONOMIC ?fORMU Het Resouree Transfer*, 1978 Goee not net Cmait- dibuarse- Amrtit- disburse- resource mats tun sats Iaterest transfers 1. Casessioal AD8 24.0 6.3 1.1 5.2 2.3 2.9 1U9.0 29.5 - 29.5 3.5 26.0 Subtotal 143.0 35.8 1.1 36.7 5.8 28.9 Austra - - - - - - 1e1gim 10.3 10.3 0.1 10.2 0.7 9.5 Canada 60.7 5.2 - 5.1 - 5.2 D dmuLrk - - 0.3 (0.3) - (0.3) Irane 77.0 5.9 5.3 0.6 3.3 (2.7) Germay, led. Rep. 82.1 19.5 14.9 4.6 10.9 (6.3) Italy - - 2.7 (2.7) 0.3 (3.0) Japan 186.7 222.5 45.3 177.2 58.1 119.1 Netherlads - 28.7 4.3 24.4 6.1 18.3 Nw. Zealand - - - - - - Svitserrld - - - _ - _ United Kingdom - 0.5 4.1 (3.6) 0.1 (3.7) Unlted States 330.4 136.8 26 124.2 23.4 100.8 Subotal 747.2 429.4 89.6 339.8 102.9 236.9 Total ICCI 890.2 465.2 90.7 374.5 108.7 265.8 _10-1= 24.7 28.8 46.2 (17.4) 3.7 (21.1) Total 914.9 494.0 136.9 357.1 112.4 244.7 2. Umeonceesional ADS 174.7 12.3 0.5 11.8 4.6 7.2 432.0 167.9 6.7 161.2 53.1 108.1 Subtotal 606.7 180.2 7.2 173.0 57.7 115.3 Autrala 6.2 11.5 0.7 10.8 0.4 10.4 B.1M - 10.0 9.0 1.0 10.5 (9.5) Canada 350.0 35.0 1.8 33.2 7.2 26.0 lnmrk - 4.3 - 46.3 2.4 43.9 fraen 131.8 120.8 56.7 64.1; 35.1 29.0 Germy, Fed. Rep. 80.1 232.2 114.6 117.6 19.9 97.7 Italy - 0.3 - 0.3 0.2 0.1 Japan 12.2 167.3 197.5 (30.2) 67.8 (98.0) Netbhrlads 8.5 40.6 23.5 17.1 27.7 (10.6) Switserlsnd - - - - - - UaLted Kingdom 41.9 45.8 23.1 22.7 9.8 12.9 Ulited States 242.5 a.8 346.9 (263.1) 103.8 (366.9) Subtotal 969.2 793.6 773.8 19.8 284.8 (265.0) Total ICC! 1,595.9 973.8 781.0 192.8 342.5 (149.7) 3ct-ICCI 193.0 170.1 59.4 110.7 30.3 80.4 Total 1,788.9 1,143.9 840.4 303.5 372.8 (69.3) 1 E ecludes grants. Wea to rounding sm figures may slightly differ fro, ocher tables. External Debt Division geonmic Analysis and Pro jections Dep.rtmnt - 112 - ANNEX INDONESIA Table 4.9 Page 5 COUNTRY ECONOMIC MEMORANDUM Net Resource Transfers, 1979 /a, /b Gross Net Net Commit- disburse- Amortiza- disburse- resource ments ments tion ments Interest transfers 1. Concessional ADB 25.0 4.6 2.1 2.5 2.5 - IDA 89.0 29.8 0.4 29.5 3.8 25.7 Subtotal 114.0 34.4 2.5 32.0 6.3 25.7 Austria - - - - - - Belgium 11.0 11.0 0.3 10.7 0.7 10.0 Canada 10.8 9.3 - 9.3 - 9.3 Denmark 9.5 - 0.3 (0.3) - (0.3) France - 18.4 5.9 12.5 3.5 9.0 Germany, Fed. Rep. 231.0 23.9 19.2 4.7 14.0 (9.3) Italy - - 2.9 (2.9) 0.3 (3.2) Japan 530.8 157.0 54.2 102.8 58.8 44.0 Netherlands 54.9 23.9 6.6 17.3 7.6 9.7 New Zealand - - - - - - Switzerland - - United Kingdom - 0.6 2.1 (1.5) - (1.5) United States 215.1 160.5 19.1 141.4 52.5 88.9 Subtotal 1,063.1 404.6 110.6 294.0 137.4 156.5 Total IGGI 1,177.1 439.0 113.1 326.0 143.7 182.2 Non-IGGI 45.2 5.5 46.0 (40.6) 4.4 (44.9) Total 1,222.3 444.5 159.1 285.4 148.1 137.3 2. Nonconcessional ADB 210.4 45.7 1.5 44.2 7.1 37.1 IBRD 726.0 198.9 23.3 175.6 71.7 103.9 Subtotal 936.4 244.6 24.8 219.8 78.8 141.0 Australia 3.4 0.2 1.8 (1.6) 0.8 (2.4) Belgium 15.2 4.3 24.5 (20.2) 14.2 (34.4) Canada - 20.7 6.2 14.5 13.2 1.3 Denmark - 7.6 - 7.6 3.7 3.9 France 80.0 46.8 97.8 (51.0) 28.0 (79.0) Germany, Fed. Rep. 400.1 64.0 145.6 (81.6) 33.9 (115.5) Italy - - - - 0.2 (0.2) Japan 199.1 157.2 226.3 (69.1) 162.9 (232.0) Netherlands 37.4 97.9 63.9 34.0 42.7 (8.7) Switzerland 153.4 - - - - - United Kingdom 46.7 30.7 38.8 (8.1) 14.4 (22.5) United States 465.7 576.0 424.6 151.4 185.9 (34.5) Subtotal 1,401.0 1,005.4 1,029.5 (24.1) 499.9 (524.0) Total IGGI 2,337.4 1,250.0 1,054.3 195.7 578.7 (383.0) Non-IGGI 265.0 245.5 121.1 124.4 45.3 79.1 Total 2,602.4 1,495.5 1,175.4 320.1 624.0 (303.9) /a Excludes grants. 7 Due to rounding some figures may slightly differ from other tables. External Debt Division Economic Analysis and Projections Department INDONESIA COUNTRY ECONOMIC MEMORANDUM Central Government Budget Summary, 1972/73 - 1981/82 (Rp billion) 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 -------------------------------- Actual -------------------------------- -Budget- -Budget- 1. Domestic revenues 585.1 977.1 1,759.2 2,200.8 2,877.0 3,508.2 4,266.1 6,696.8 9,055.3 12,274.4 2. Routine expenditures /a 444.3 704.1 1,000.5 1,246.8 1,610.3 2,120.5 2,743.7 4,061.8 5,529 2 7,501.1 3. Government saving (1-2) 140.8 273.0 758.7 954.0 1,266.7 1,387.7 1,522.4 2 635.0 3,526.1 4,773.3 4. Development expenditures 290.7 473.7 966.4 1,425.2 2,043.5 2,157.6 2,555.6 4,014.2 5,027.7 6,399.2 5. Balance (3-4) -149 9 -200.7 -207.7 -471.2 -776.8 -769.9 -1,033.2 -1,379.2 -1,501.6 -1,625.9 Financed by: 6. Counterpart funds /b 87.2 93.6 37.6 20.5 10.2 35.8 48.2 64.8 65.2 64.8 7. Project aid 62.3 114.1 195.9 471.4 773.6 737.6 987.3 1,316.3 1,436.4 1,561.1 8. Change in balances 0.4 -7.0 -25.8 -20.7 -7.0 -3.5 -2.3 -1.9 - - (- = increase) /a Includes debt service payments. /b Program aid. Source: Ministvy of Finance. |i - 114 - ANNEX Table 5.2 INDONESIA C(1:%'RY ECONOMIC MEMORANDUM Central Government Receipts, 1972/73 - 1981/82 (Rp billion) 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 -------------------------------- Actual ---------------------------------- Budget Budget 'ay-s _ncome 301.1 511.1 1,234 5 1,558.3 2,029.2 2,515.9 2,996.3 5,129.3 7,429.7 10,038.2 .c u tax 2S.9 33.3 43.4 65.3 87.4 103.0 122.2 148.1 174.1 207.1 COu ,late tax 30.4 49.3 100.0 131.3 132.1 176.5 226.5 297.1 356.4 558.4 Corporate tax ot fl 197.9 346.9 973.3/a 1,205.2 1,593.4 1,946.5 2,308.7 4,259.6 6,430.1 8,575.2 Withholding tLa- 31.8 56.5 78.4 97.0 147.0 202.3 232.5 291.3 324.1 512.6 IPU.DA 15.1 19.5 29.0 35.8 42.6 53.3 63.1 71.4 78.9 87.6 Other - 5.2 10.4 23.7 26.7 34.3 43.3 61.8 66.1 97.3 -Aes on b-urstI. Eonsumption 125.9 168.0 161.0 234.4 322.1 376.2 491.4 537.2 624.1 874.5 Sales tax 36.2 55.6 86.3 122.4 164.6 183.8 221.1 192.2 251.8 293.7 Excises 46.8 62.4 76.2 98.5 131.7 180.4 252.9 326.4 350.9 553.0 Other oil revenues 31.6 37.8 -16.0 -1.3 16.6 - /b - /b - /b - / - /b Miscellaneous levies 11.3 12.2 15.4 14.8 9.2 12.0 17.4 18.6 21.4 27.8 Taxes on International Trade 141.4 253.6 300.7 309.5 421.5 482.7 587.0 843.0 828.7 1,142.4 Import duties 76.8 132.4 160.9 175.1 256.0 286.9 295.3 316.7 343.7 538.9 Sales tax on imports 29.9 51.5 69.1 73.4 102.0 115.5 125.5 137.2 145.9 222.4 Export tax 34.7 69.7 70.7 61.0 63.5 79.3 166.2 389.1 339.1 381.1 Nontax Receipt 16.7 44.4 62.1 98.6 104 2 133.4 191.4 187.3 172.8 219.3 Domestic Revenue 585.1 977.1 1,759.2 2,200.8 2,877 0 3,508.2 4,266.1 6,696.8 9,055.3 12,274.4 Development Funds 149.5 207.7 233.5 491.9 783.8 773.4 1,035.5 1,381.1 1,501.6 1,625.9 Counterpart funds /c 87.2 93.6 37.6 20.5 10.2 35.8 48.2 64.8 65.2 64.8 Project aid /d 62.3 114.1 195.9 471.4 773.6 737.6 987.3 1,316.3 1,436.4 1,561.1 Total Revenues 734.6 1,184.8 1,992.7 2,692.7 3,660.8 4,281.6 5,301.6 8,077.9 10,556.9 13,900.3 /a Excludes underpayment of revenues, estimated at about Rp 340 billion, due to the Government by Pertamina. 7W Oil subsidies shown as Government expenditures (see Table 5.3). /c Program aid. 7W Includes commercial bank and suppliers credits for development programs/projects. Source: Ministry of Finance. INDONESIA COUNTRY ECONOMIC MEMORANDUM Central Government Expenditures, 1972/73-1981/82 (Rp billion) 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 - - ---------- - ---------------------- Actual ------------------------- - -------- Budget Budget Personnel Expenditures 197.4 258.9 408.0 565.0 639.4 880.8 1,001.6 1,419.9 2,055.5 2,412.3 Wages and salaries 125.6 166.5 292.8 386.4 425.8 661.1 760.3 1,053.9 1,503.4 1,742.3 Rice allowance 32.2 50,7 60.2 116.5 124.4 125.6 132.8 179.9 268.4 289.3 Food allowance 13.3 16.2 26.5 33.1 49.7 50.9 51.2 109.9 194.7 248.5 Other 19.4 18.2 17.9 17.5 26.2 28.4 33.6 47.1 52.8 81.5 External 6.9 7.3 10.6 11.5 13.5 14.8 23.7 29.1 36.2 50.6 Material Expenditures 92.1 109.1 167.0 292.3 325.2 356.5 419.5 569.0 683.6 994.3 Domestic 82.5 99.5 155.2 280.1 315.8 346.3 398.4 539.6 651.5 950.4 f External 9.6 9.6 11.8 12.2 9.4 10.0 21.1 29.4 32.1 43.9 Subsidies to Regions 94.6 113.1 206.9 256.6 311.0 469.9 522.3 669.9 985.8 1,209.4 West Irian 10.6 8.2 13.2 13.4 18.6 18.7 22.1 25.0 35.4 42.0 Other regions 84.0 104.9 193.7 243.2 292.4 451.2 500.2 644.9 950.4 1,167.4 Debt Service Payments 49.4 73.7 69.2 67.9 180.3 227.6 534.5 684.1 770.3 963.7 Internal 5.3 11.1 5.2 2.8 11.3 6.9 8.8 36.5 25.0 30.0 External 44.1 62.6 64.0 65.1 169.0 220.7 525.7 647.6 745.3 933.7 Other Expenditures 10.8 149.3 149.4 65.0 154.4 185.9 265.8 718.9 1,034.0 1,921.4 Food subsidy - - 144.0 50.0 39.1 - 43.5 124.9 169.7 309.7 Oil subsidy - - - - 34.5 65.1 197.0 534.9 828.3 1,511.1 Others 10.8 149.3 5.4 15.0 80.8 120.8/a 25.3 59.1/b 36.0/c 100.6/d Routine Expenditures 444.3 704.1 1,000.5 1,246.8 1,610.3 2,120.5 2,743.7 4,061.8 5,529.2 7,501.1 Development Expenditures /e 290.7 473.7 966.4 1,425.2 2,043.5 2,157.6 2,556.6 4,014.2 5,027.7 6,399.2 Total Expenditures 735.0 1,117.8 1,966.9 2,672.O 3,653.8 4,278.1 5,299.3 8,076.0 10,556.9 13,900.3 /a Includes debt service transfer to Pertamina (Rp 86.4 billion). 7b Includes Pertamina subsidy (Rp 48.1 billion). 7T Includes general election (Rp 16.5 billion). 7h Includes general election (Rp 81.0 billion). 7e For details, see Tables 5.4 and 5.5. co Source: Ministry of Finance. INDONESIA COUNTRY ECONOMIC MEMORANDUM Development Expenditures, 1972/73 - 1980/81 (Rp billion) 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 -------------------------------- Actual ------------------------------ Budget General /a Departments 126.8 171.4 226.2 403.5 568.5 744.5 851.0 1,480.3 2,133.5 Subsidies to villages 7.1 5.7 11.4 14.4 19.8 23.2 24.0 31.0 50.7 Subsidies to kabupatens 16.3 19.2 42.7 55.8 62.1 69.1 70.9 87.1 119.6 Irian Jaya 1.6 3.3 4.2 6.0 5.1 5.5 5.9 - n.a. Subsidies on commercial import of fertilizer - 33.5 224.7 133.5 105.4 31.8 82.6 125.0 212.5 Investment through the banking system 36.4 57.1 98.0 125.7 226.7 166.9 128.5 252.8 210.3 Primary schools - 16.4 19.7 48.2 57.7 85.0 111.8 155.8 250.8 Others /b 4.4 12.4 67.0 83.5 122.3 165.3 143.7 393.7 368.4 Subtotal 192.6 319.0 693.9 870.6 1,116.6 1,291.3 1,418.4 2,525.7 3,345.8 Subsidies to provinces 20.7 20.7 47.6 47.4 59.7 75.4 86.8 100.8 166.7 IPEDA 15.1 19.9 29.0 35.8 42.6 52.5 63.1 71.4 78.9 Total (excl. project 228.4 359.6 770.5 953.8 1,269.9 1,419.2 1,568.3 2,697.9 3,591.3 aid) Project aid 62.3 114.1 195.9 471.4 773.6 737.6 987.3 1,316.3 1,436.4 Total (incl. project 290.7 473.7 966.4 1,425.2 2,043.5 2,156.8 2,555.6 4,014.2 5,7.7 aid) DXI /a Excluding project aid. /b Including INPRES. Source: Ministry of Finance. INDONESIA COUNTRY ECONOMIC MEMORANDUM Develop=ent Expenditures by Sector, 1974/75 - 1981/82 (Rp billion) Actual Total Actual Bdgetet Total 1974/75 1975/76 1976/77 1977/79 1978/79 Repelit. 11 1979/80 T198081 1981712 Repeita III 1 1 1 1~~~~~~~~__L777 197 7 --I 9 91-O 81 R. 1t I Sector A.ount share Amount share A=ount share Am.ount hare Amount share Asount share Amount share Amount share Amount share Amount share Agric-lture & irrigation 299 31.0 270 19.0 364 17.8 380 17.6 450 17.6 1,763 19.3 509 12.7 739 14.7 942 14,7 3,049 13.9 (of which fertlli.er subsidy) (225) (23.3) (134) (9.4) (105) (5.1) (32) (1.5) (83) (3.2) (609) (6.7) (125) (3.2) (213) (4.2) ( - ) ( - ) Industry 6 miming 70 7.3 120 8.4 201 9.8 139 6.4 205 8.0 734 8.0 403 10.0 338 6.7 522 8.2 1,589 7.3 Electric power 78 8.1 123 8.6 224 11.0 223 10.3 272 10.6 920 10.1 330 8.2 421 8.4 492 7.7 2,529 11.6 Transportation 4 tourism 125 12.9 326 22.9 408 20.0 355 16.5 413 16.2 1,627 17.8 465 11.6 708 14.1 810 12.7 3,384 15.5 Manpower and trans=igration 3 0.3 10 0.7 27 1.3 61 2.8 95 3.7 196 2.1 162 4.0 299 5.9 436 6.8 1,241 5.7 R.egional develop=ent 138 14.3 165 11.6 190 9.3 251 11.6 275 10.8 1,019 11.1 336 8.4 483 9.6 613 9.6 2,143 9.8 Education 51 5.3 114 8.0 136 6.7 211 9.8 251 9.8 763 8.3 362 9.0 575 11.4 787 12.3 2,279 10.4 Health 22 2.3 38 2.7 45 2.2 71 3.3 79 3.1 255 2.8 142 3.5 197 3.9 259 4.( 829 3.8 Housing S water supply 6 0.6 14 1.0 27 1.3 90 4.2 56 2.2 192 2.1 117 2.9 141 2.8 156 2.4 532 2.4 Ceneral public services /a 52 5.4 74 5.2 110 5.4 123 5.7 224 8.8 583 6.4 473 11.8 605 12.0 738 11.5 2,256 10.3 Government capital participation 105 10.9 132 9.3 234 11.5 190 9.8 162 6.3 823 9.0 465 11.6 180 3.7 201 3.1 370 1.7 Others /b 18 1.9 39 2.7 79 3.9 65 3.0 73 2.9 274 3.0 250 6.3 344 6.8 445 7.0 1,648 7.6 Total Developm.ent Expenditures 966 100.0 1,425 100.0 2,044 100.0 2,157 100.0 2 0556 100.0 9,148 100.0 4,014 100.0 5,028 100.0 6,399 1n0.O 21,849 100.0 Total (encl. fertilizer subsidies) 741 1,291 1,939 2,125 2,473 8,540 3,8R9 4,815 21,949 In USS billion Total 2.33 3.43 4.93 5.20 5.17/c 21.06 6.42 R.04 10.24 35.00 (of which project aid) (707) (1.13) (1.87) (1.78) (2.00)/c (7.25) Total (encl. fertilizer subsidies 1.79 3.11 4.67 5.12 5.01/c 19.70 6.22 7.70 35.00 /a Las and order, defense and security, government apparatus. 7i Trade and cooperatives, religium, information and science. 77 At ti.e-weighted average exchange rate for FY78/79 of US$1 - Rp 494. Source: Ministry of Finance. INDONESIA COUNTRY ECONOMIC MEMORANDUM Project Aid by Sector, 1974/75 - 1980/81 (Rp billion) Actual Budget Total 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 Repelita II Z % X X % 7% X Sector Amt. share Amt. share Amt. share Amt. share Ant. share Amt. share Amt. share Amt. share Agriculture & irrigation 26 13 43 9 116 15 145 20 135 14 155 11.8 223 15.5 465 15 Industry & mining 64 33 76 16 143 18 95 13 199 20 324 24.6 226 15.7 577 18 Electric power 39 20 90 19 171 22 164 22 208 21 240 18.2 268 18.7 672 21 Transportation & tourism 42 21 227 48 283 37 213 29 250 25 192 14.6 312 21.7 1,014 32 Manpower and transmigration . . 1 . 1 . 10 1 12 1 23 1.7 39 2.1 24 1 Regional development . . . . 2 . 8 1 8 1 18 1.4 24 1.7 18 1 Education 8 4 7 1 5 1 29 4 35 4 43 3.3 50 3.5 84 3 Health 7 4 7 1 6 1 15 2 22 2 34 2.6 36 2.6 57 2 Housing & water supply 1 . 3 1 3 . 28 4 18 2 28 2.1 32 2.2 53 2 General public services - - - - - - - - 54 5 175 13.3 154 10.7 54 2 Government capital participation 7 4 7 1 7 1 8 1 33 3 34 2.6 36 2.5 62 2 Others 1 . 11 2 37 5 23 3 13 1 50 3.8 44 3.1 86 3 Total Project Aid /a 196 100 471 100 774 100 738 100 987 100 100 100 1,436 100 3,166 100 /a Includes commercial credits for development programs/projects. Note: . = less than 1 Totals may not add due to rounding. m Sin Source: Ministry of Finance. m - 119 - ANNEX Table 6.1 INDONESIA COUNTRY ECONOMIC MEMORANDUM Money Supply, 1971-80 (Rp billion) End of Currency Demand deposits period Total Change (%) Position (%) Position (%) 1971 320.8 +70.5 +28.2 199.4 62 121.4 38 1972 474.6 +153.8 +48.0 271.8 57 202.8 43 1973 669.0 +194.4 +41.0 375.0 56 294.0 44 1974 937.5 +268.5 +40.1 494.2 53 443.3 47 1975 1,250.1 +312.6 +33.3 625.3 50 624.8 50 1976 1,603.0 +407.9 +32.6 781.0 49 822.0 51 1977 +403.4 +25.2 Qtr I 1,815.4 +212.4 +12.3 853.4 47 962.0 53 Qtr II 1,960.8 +145.4 +8.0 924.4 47 1,036.4 53 Qtr III 2,014.3 +53.5 +2.7 970.9 48 1,043.4 52 Qtr IV 2,006.4 -7.9 -0.4 979.1 49 1,027.3 51 1978 +481.9 +24.0 Qtr I 2,110.9 +104.5 +5.2 1,035.8 49 1,075.1 51 Qtr II 2,240.5 +129.7 +6.1 1,110.1 50 1,130.4 50 Qtr III 2,370.7 +130.2 +5.8 1,155.9 49 1,214.8 51 Qtr IV 2,488.3 +117.6 +5.0 1,239.9 50 1,248.4 50 1979 +890.2 +35.8 Qtr I 2,799.9 +311.6 +12.5 1,368.7 49 1,431.2 51 Qtr II 3,020.7 +220.8 +7.9 1,508.7 50 1,512.0 50 Qtr III 3,180.0 +159.3 +5.3 1,499.7 47 1,680.3 53 Qtr IV 3,378.5 +198.5 +6.2 1,545.4 46 1,833.1 54 1980 1632.8 48.3 Qtr I 3,759.4 +380.8 +11.3 1,736.2 46 2,023.2 54 Qtr II 4,171.4 +412.0 +11.0 1,947.5 47 2,223.9 53 Qtr III 4,695.3 +523.9 +12.6 2,143.4 46 2,551.9 54 Qtr IV 5,011.3 +316.0 + 6.7 2,169.5 43 2,841.8 57 Source: Bank Indonesia. - 120 - INDONESIA ANNEX Table r.1 COUNTRY ECONOMIC MEMORANDUM Changes in Factors Affecting Money Supply, 1972-80 (Rp billion) Claims on official Net Net claims entities Claims on Time Net End of foreign on central & public Blocked business & & savings other period assets government enterprises account individuals deposits /a items 1972 212.3 -50.8 -3.0 - 183.4 -72.2 -115.9 1973 75.3 -33.4 -57.8 - 407.6 -98.1 -214.8 1974 364.0 -131.9 294.7 - 146.9 -196.3 -208.9 1975 -588.5 162.0 926.4 -415.0 298.4 -213.3 142.6 1976 345.0 -333.4 449.8 -51.4 356.8 -300.3 -113.7 1977 568.5 -275.0 34.8 67.3 284.2 -96.5 -179.9 Qtr I 135.5 5.0 74.4 - 75.0 -1.1 -76.2 Qtr II 215.1 -138.8 30.3 29.3 87.7 -35.7 -42.7 Qtr III 165.2 -116.7 16.4 -16.3 68.0 -43.6 -19.6 Qtr IV 52.7 -24.5 -86.3 54.2 53.5 -16.1 -41.4 1978 718.3 -264.8 973.2 -76.9 587.4 -195.6 -1,259.7 Qtr I 8.1 -12.9 -18.0 81.7 156.0 -39.7 -70.7 Qtr II -40.4 -99.4 189.9 6.7 115.4 -76.6 34.1 Qtr III 134.4 -88.7 134.5 -12.2 82.3 -26.9 -93.3 Qtr IV /b 616.2 -63.8 666.8 -153.1 233.7 -52.4 -1,129.8 1979 1P779.2 -832.6 371.5 84.8 555.5 -516.4 -551.8 Qtr I 245.9 -39.5 55.3 4.1 201.1 -120.5 Qtr II 340.0 -208.2 87.5 8.8 202.4 -116.3 -93.5 Qtr III 341.3 -290.9 53.9 42.0 275.6 -234.2 -28.4 Qtr IV 852.0 -294.0 174.7 29.9 -123.6 -131.1 -209.4 1980 3,055.4 -1,891.9 487.8 -5.2 1,178.8 -858.6 -333.6 Qtr I 1,009.3 -424.8 -66.0 - 203.5 -168.8 -172.2 Qtr II 1,126.7 -841.9 198.5 -2.1 243.4 -302.7 -9.9 Qtr III 687.9 -266.8 210.4 -1.0 388.4 -303.1 -191.9 Qtr IV 231.5 -358.4 144.9 -2.1 343.5 -83.9 40.4 /a Includes foreign currencies deposits held by residents. T7 Includes foreign exchange valuation adjustment. Source: Bank Indonesia. - 121 - ANNEX Table 6.3 INDONESIA COUNTRY ECONOMIC MEMORANDUM Consolidated Balance Sheet of Monetary System, 1973-80 (Rp billion) End of period 1973 1974 1975 1976 1977 1978/a 1979 1980 Assets Foreign Assets (net) 296 660 72 417 985 1,703 (650) 3,483 6,538 Domestic Credit 1,085 1,395 2,366 2,789 2,900 4,046 (474) 3995 Claims on Public Sector 154 317 991 1,056 883 1,441 433 1,065 -344 Central Government -35 -167 -5 -338 -613 -878 (46) -1,711 -3,603 Official entities and public enterprises 189 484 1,411 1,861 1,895 2,795 (551) 3,167 3,655 Government-blocked account - - -415 -466 -399 -476 (-164) -391 -396 Claims on Private Sector 931 1,078 1,376 1,732 2,017 2,605 (41) 3,160 4,339 Loans 808 1,032 1,321 1,655 1,939 2,494 (34) 2,993 4,107 Other claims 123 46 55 78 78 111 (7) 167 232 Total Assets/ Liabilities 1,381 2,055 2,438 3,205 3,885 5,749 1,124 7,708 10,533 Liabilities Import deposits 116 283 79 88 146 174 (58) 213 365 Other items (net) 278 320 381 486 608 1,766 (983) 2,279 2,461 Money and Quasi Money 987 1,452 1,978 2,631 3,131 3,809 (83) 5,216 7,707 Money 669 937 1,250 1,603 2,006 2,488 (-) 3,379 5,011 Currency 375 494 625 781 979 1,240 (-) 1,546 2,169 Demand deposits 294 443 625 822 1,027 1,248 (-) 1,833 2,842 Quasi money 318 515 728 1,028 1,125 1,320 (83) 1,837 2,697 /a Includes revaluation of foreign exchange on account of November 15, 1978 devaluation. Amount of adjustments is shown in brackets. Source: Bank Indonesia. - 122 - ANNEX Table 6.4 INDONESIA COUNTRY ECONOMIC MEMORANDUM Consolidated Balance Sheet of Monetary Authorities, 1974-80 (Rp billion) End of period 1974 1975 1976 1977 1978/a 1979 1980 Assets Foreign assets 619 253 628 1,057 1,652 (561) 2,626 4,216 Claims on Public Sector 349 1,254 1,537 2,434 (543) 3,018 Central Government 122 368 239 312 509 (62) 580 604 Official entities and public sector enterprises 227 886 1,209 1,225 1,925 (481) 2,143 2,414 Claims on deposit money banks 294 565 640 682 846 (-) 1,129 1,722 Other assets 46 80 84 33 74 (2) 158 289 Total Assets/Liabilities 1,230 2, 801 3,301 5,002 (1,106) 6,636 9,245 Liabilities Reserve Money 773 1,038 1,333 1,670 1847 (-) 2,421 3,274 Currency outside banks and government 494 625 781 979 1,240 (-) 1,545 2,169 Currency and deposits of banks 250 382 523 623 551 (-) 780 1,058 Other deposits 29 31 29 68 56 (-) 96 47 Government deposits 242 704 950 1,154 1,646 (180) 2,362 3,896 Other liabilities 215 403 518 477 1,509 (926) 1,853 2,075 /a Includes revaluation of foreign exchange on account of November 15, 1978 devaluation. Amount of adjustments is shown in brackets. Source: Bank Indonesia. - 123 - ANNEX Table 6.5 INDONESIA COUNTRY ECONOMIC MEMORANDUM Banking System Credits by Economic Sector, 1973-80 /a (Rp billion) Sectors 1973 1974 1975 1976 1977 1978 /b 1979 /c 1980 Agriculture /d 87.0 116.4 220.2 265.6 270.0 344.8 438.8 526.0 In rupiah 87.0 116.4 211.9 255.4 264.4 344.3 436.7 525.9 In foreign exchange - - 8.3 10.2 5.6 0.5 1.4 0.1 Mining 8.1 10.7 741.3 1,035.9 1,061.7 1,699.4 1,892.6 1,865.9 In rupiah 8.1 10.7 88.4 175.6 197.2 230.3 1,892.6 1,865.9 In foreign exchange /e - - 652.9 860.3 864.5 1,469.1 - - Manufacturing Industry /d 277.6 358.9 718.8 990.4 1,156.2 1,624.3 1,933.2 2,563.2 In rupiah 277.6 358.9 508.1 739.4 904.3 1,264.8 1,525.7 2,175.9 In foreign exchange - - 210.7 251.0 251.7 359.5 397.5 387.3 Trade /f 428.3 626.8 766.3 858.1 911.2 1,113.8 1,377.9 1,976.7 In rupiah 391.0 604.5 741.1 836.7 897.7 1,105.3 1,333.5 1,970.9 In foreign exchange 37.3 22.3 25.2 21.4 13.5 8.5 4.4 5.8 Service Rendering Industry 78.9 121.7 171.7 260.5 319.1 388.6 422.0 482.4 In rupiah 78.9 121.7 166.2 253.4 310.9 384.9 417.8 475.8 In foreign exchange - - 5.5 - 7.1 8.2 3.7 4.2 6.6 Others 178.5 338.2 132.2 156.0 218.3 223.3 244.0 466.1 In rupiah 126.5 173.5 127.3 154.3 217.8 220.4 241.5 464.1 In foreign exchange 52.0/g 164.7/g 4.9 1.7 0.5 2.9 2.5 3.0 Total 1,058.4 1,572.7 2,750.5 3,566.5 3,936.5 5,394.2 6,267.8 7,880.3 In rupiah /h 969.1 1,385.7 1,843.0 2,414.8 2,792.5 3,550.0 5,857.3 7,478.5 In foreign exchange 89.3 187.0 907.5 1,151.7 1,144.0 1,844.2 410.0 401.8 /a Credits outstanding end of period. Includes unpaid interest. Excludes interbank credits, credits to Government and to nonresidents, special liquidity credits, special credit and foreign exchange component of project aid. /b Includes foreign exchange revaluation (Rp 681.8 billion). 7T Includes foreign exchange revaluation (Rp 698.0 billion). Id Processing of agricultural products is classified into manufacturing industry according to International Standard Industrial Classification (ISIC) 1968. /e Includes credits to Pertamina for repayment of foreign borrowing. Since March 1979 credit in foreign exchange to Pertmina has been converted to credits in Rupiah. /f Includes credits for food procurement and hotel projects. /g Includes credits in foreign exchange for all sectors. 7Ih Includes investment crdits, small-scale investment credits (KIK) and permanent working capital credits (KMKP). Source: Bank Indonesia. - 124 - ANNEX Table 6.6 INDONESIA COUNTRY ECONOMIC MEMORANDUM Banking System Credits by Type of Bank, 1973-80 /a (Rp billion) Sectors 1974 1975 1976 1977 1978 /b 1979/b 1980 Bank Indonesia (Direct Credits) /d 230.7 893.6 1.211.6 1,229.3 1,934.9 2,163.1 2,454.1 In rupiah 230.7 244.8 351.3 364.8 465.8 2,163.1 2,454.1 In foreign exchange /e - 648.9 860.3 864.5 1,469.1 - - State Commercial Banks /f 1,135.8 1,601.9 2,007.5 2,266.7 2,831.8 3,269.8 4,300.6 In rupiah 1,003.8 1,397.2 1,774.7 2,058.2 2,548.5 2,957.3 3,959.5 In foreign exchange 132.0 204.7 232.8 208.5 283.3 312.5 341.1 National Private Banks 89.1 132.7 197.4 257.0 365.4 493.7 711.2 In rupiah 88.9 131.2 195.8 254.1 359.9 466.2 705.1 In foreign exchange 0.2 1.5 1.6 2.9 5.5 26.9 6.1 Foreign Banks 117.1 122.3 150.0 183.5 262.0 341.8 414.4 In rupiah 62.3 69.8 93.0 115.4 175.7 271.2 359.8 In foreign exchange 54.8 52.5 57.0 68.1 86.3 70.6 54.6 Total 1,572.7 2,750.5 3,566.5 5,394.2 5,467.3 6,267.8 7,880.3 In rupiah /g 1,385.7 1,843.0 2,214.8 3,550.0 3,623.0 5,857.8 7,478.5 In foreign exchange 187.0 907.5 1,151.7 1,144.0 1,844.2 410.0 401.8 /a Credits outstanding end of period. Includes unpaid interest. Excludes interbank credits, credits to Government and to nonresidents, special liquidity credits, special credit and foreign exchange component of project aid. /b Includes foreign exchange revaluation (Rp 681.8 billion). Ic Includes foreign exchange revaluation (Rp 698.0 billion). Th Excludes Bank Indonesia credits to banks. /e Includes credits to Pertamina for repayment of foreign borrowing. Since March 1979 credit in foreign exchange to Pertamina has been converted to credits in Rupiah. /f Includes BAPINDO. /g Includes investment credits, small investment credits (KIK) and permanent working capital credits. (KMKP). Source: Bank Indonesia. - 125 - ANNEX Table 6.7 INDONESIA COUNTRY ECONOMIC MEMORANDUM Small-Scale Investment Credits and Permanent Working Capital Credits, 1974-80 (Rp million) Small-scale Permanent working investment credits /a capital credits /a Number of Approved Out- Number of Approved Out- End of applications value standing applications value standing quarter approved --- Rp million --- approved --- Rp million --- 1974 Qtr I 4,611 5,667 3,966 3,303 4,488 2,913 Qtr II 7,759 11,573 9,756 8,811 11,069 9,021 Qtr III 8,750 13,368 11,421 10,550 13,072 11,006 Qtr IV 9,554 15,253 13,039 14,524 15,502 12,513 1975 Qtr I 11,324 18,768 15,533 15,769 17,914 13,578 Qtr II 12,836 21,657 17,294 17,626 20,693 14,681 Qtr III 14,734 24,186 18,716 21,355 24,702 17,001 Qtr IV 16,646 28,091 21,644 24,141 28,689 19,233 1976 Qtr I 19,804 34,090 25,553 83,281 40,756 26,671 Qtr II 22,697 39,025 29,310 102,193 49,210 31,786 Qtr III 25,026 43,889 32,564 148,896 57,993 37,277 Qtr IV 27,827 49,602 36,086 166,149 67,080 41,446 1977 Qtr I 30,741 55,269 39,605 183,877 74,786 46,342 Qtr II 33,573 61,453 43,425 217,927 88,935 52,624 Qtr III 36,347 67,797 46,600 282,775 101,771 59,047 Qtr IV 39,737 74,186 50,462 322,391 114,990 61,839 1978 Qtr I 42,163 79,249 52,704 335,366 124,496 65,415 Qtr II 47,180 86,375 56,435 365,776 135,547 70,703 Qtr III 50,895 97,701 61,923 406,518 158,369 81,204 Qtr IV 54,970 105,801 64,711 420,495 177,239 83,748 1979 Qtr I 57,378 112,809 67,951 438,027 188,289 93,157 Qtr II 60,176 122,302 73,979 511,684 214,094 108,656 Qtr III 65,801 139,705 85,568 610,881 262,522 129,570 Qtr IV 72,097 163,110 99,380 644,003 304,501 154,317 1980 Qtr I 79,359 190,175 118,265 664,363 348,901 181,096 Qtr II 87,553 223,915 142,334 782,344 415,397 228,543 Qtr III......... Qtr IV/b 114,504 313,973 209,747 889,761 569,150 320,583 = Not available /a Cumulative as of end of period. 7E Preliminary. Source: bank lndonesia. INDONESIA COUNTRY ECONOMIC MEMORANDUM Medium-Term Investment Credits by Economic Sector, 1973-80 /a (Rp million) 1973 1974 1975 1976 1977 1978/c 1979/c 1980/c November Credit Approved /b 162,329 196,617 255,066 320,002 352,324 438,353 566,233 874,400 Agriculture 16,291 19,739 34,354 44,434 61,824 80,601 108,750 158,413 Manufacturing industry 80,952 96,637 108,658 130,264 143,782 154,174 189,132 257,014 Mining 495 221 154 5,296 5,296 5,142 5,277 5,277 Communication & tourism 56,812 67,312 96,763 125,465 125,920 177,271 248,320 414,811 Others 7,779 12,708 15,137 14,543 15,502 21,149 14,754 38,885 Credit Outstanding 111,083 136,997 177,788 246,156 278,180 332,492 396,987 548,948 Agriculture 8,044 12,644 26,857 38,922 52,072 67,288 73,179 89,654 Manufacturing industry 59,640 69,331 78,306 94,066 105,754 115,190 140,247 173,228 Mining 161 147 143 4,278 3,277 2,122 1,222 721 Communication & tourism 38,501 45,758 62,222 99,985 106,556 133,630 172,420 257,032 Others 4,737 9,117 10,260 8,905 10,521 14,262 9,919 28,313 /a Excludes small-scale investment credits and permanent working capital credits. /b Cumulative as of end of period. Excludes repayments. /c Preliminary figures. Source: Bank Indonesia. INDONESIA COUNTRY ECONOMIC MEMORANDUM Time Deposits With State Banks, 1471-80 (Rp million) 24 18 12 6 3 Less than Interbank Nonresident End of: months months months months months 3 months Total /a time deposits time deposits 1971 - - 75,291 15,552 12,598 993 104,627 14,843 9,308 1472 _ - 107,576, 28,699 8,819 731 145,R25 23,898 20,050 1973 - - 129,382 14,162 4,000 1,371 148,215 8,998 7,385 1974 179,934 8,090 37,226 8,298 3,708 1,385 238,641 6,983 82 1975 335,476 10,281 27,372 9,212 3,630 341 386,312 5,065 469 1976 517,568 3,987 48,500 25,082 14,031 2,544 611,712 14,466 862 1977 Qtr I 541,283 3,596 48,540 24,433 9,144 1,534 630,530 14,975 1,403 Qtr II 554,612 2,645 42,123 31,588 11,785 1,002 643,755 17,356 910 - Qtr III 577,807 2,349 33,933 43,486 8,490 592 666,657 15,377 859 Qtr IV 604,825 1,896 33,559 40,967 10,041 828 691,846 13,480 974 1978 Qtr I 615,913 599 34,621 34,308 1,425 52 686,918 13,997 486 Qtr II 622,049 45 39,000 44,632 1,849 16 707,591 13,615 451 Qtr III 623,876 - 39,491 55,700 2,187 39 721,293 13,306 216 Qtr IV 608,971 - 42,115 51,718 3,756 52 706,612 12,840 190 1979 Qtr I 608,194 - 36,259 58,304 5,056 65 707,878 14,479 170 Qtr II 616,609 - 30,191 55,489 5,720 91 708,101 15,441 156 Qtr III 615,288 - 28,939 64,927 2 737 31 711,922 15,915 161 Qtr IV 607,017 - 29,871 74,693 3,769 53 715,403 16,230 1,104 1980 Qtr I 610,360 - 31,726 75,312 7,049 57 724,504 19,589 1,012 Qtr II 616,849 - 34,086 72,020 2,586 53 725,594 19,379 628 Otr III 646,050 - 36,248 64,826 3,622 102 750,848 20,600 526 Qtr IV 656,215 - 34,447 38,747 4,914 74 734,447 19,888 559 Xx /a Up to 1974, includes interbank time deposits and nonresident time deposits. Since 1975, based on the a decree of the Board of Directors of Bank Indonesia No. 5/16/Kep/DIR, September 20, 1972, excludes interbank time deposits and nonresident time deposits. Source: Bank Indonesia. - 128 - ANNEX Table 7.1 INDONESIA COUNTRY ECONOMIC MEMORANDUM Principal Agriculture Products by Subsectors, 1968-79 ( 000 tons) Product 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979/a Food Crops Rice 11,667 12,249 13,140 13,724 13,183 14,607 15,276 15,185 15,845 15,876 17,525 17,918 Corn 3,166 2,292 2,825 2,606 2,254 3,690 3,011 2,909 2,572 3,143 4,029 3,305 Cassava 11,356 10,917 10,478 10,690 10,385 1,186 13,031 12,546 12,191 12,488 12,902 13,330 Sweet potato 2,364 2,260 2,175 2,211 2,066 2,387 2,469 2,433 2,381 2,460 2,083 2,043 Soya beans (shelled) 420 389 498 516 518 541 589 590 522 523 617 674 Groundnuts (shelled) 287 267 281 284 282 290 307 380 341 414 446 418 Fishery Saltwater fish 723 785 807 820 836 889 949 997 1,082 1,154 1,227 1,305 Freshwater fish 423 429 421 424 433 389 388 393 401 414 420 432 Meat and Dairy Meat 305 309 314 332 366 379 403 435 449 468 475 495 Eggs 51 58 59 68 78 81 98 112 116 131 151 164 Milk (in mil.) 29 29 29 36 38 35 57 51 57 61 62 67 Cash Crops Rubber 735 777 802 804 804 844 817 782 857 837 884 893 Palm oil 181 189 217 248 269 290 348 397 431 483 519 623 Coconut/copra 1,133 1,221 1,208 1,149 1,311 1,237 1,341 1,375 1,532 1,518 1,467 1,559 Coffee 150 175 186 196 214 150 149 160 193 198 222 223 Tea 73 62 64 71 51 67 64 69 73 77 88 91 Cloves 17 11 15 14 15 22 15 15 20 39 22 22 Pepper 47 17 17 26 18 29 27 23 37 43 46 46 Tobacco 54 84 78 76 79 80 79 82 89 85 81 82 Cane sugar 752 922 873 1,041 1,133 1,009 1,237 1,227 1,321 1,438 1,616 1,686 Cotton - 3 3 2 1 1 3 2 1 .. .. Forestry Teakwood (-000 cu m) 468 520 568 770 597 676 620 595 480 573 475 552 Other timber ('000 cu m) 4,783 7,587 11,856 12,968 17,120 25,124 22,660 15,701 20,947 22,366 30,619 25,875 . = Not available. /a Preliminary figures. Source: Supplement to the President's Report to Parliament, August 1974 and 1979. ANNEX - 129 - Table 7.2 INDONESIA COUNTRY ECONOMIC MEMORANDUM Agricultural Production of Major Crops by Type of Product, 1969-79 ('000 tons) Product 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 19791a Smnallholders Rubber 558 571 572 559 599 571 536 610 584 612 613 Coconut/copra 1,220 1,198 1,147 1,308 1,233 1,335 1,370 1,527 1,513 1,461 1,554 Coffee 162 170 178 196 140 132 144 178 181 206 206 Cloves 11 15 14 13 22 15 15 17 37 21 21 Tea 22 21 24 7 14 15 14 13 14 17 18 Sugar 220 196 211 247 199 250 223 267 352 485 485 Tobacco 75 69 69 74 69 69 74 76 72 68 68 Pepper 17 17 24 18 29 27 23 37 43 46 46 Cotton 2 3 2 2 3 3 2 3 2 1 1 Palm oil - - - - - - - - - - - Palm kernel - - - - - - - - - - - Private Estates Rubber 110 113 114 128 109 108 109 104 107 110 110 Coconut/copra 1 2 2 3 4 6 5 5 6 6 5 Coffee 5 6 7 6 4 7 6 6 6 6 6 Cloves 1I . . . . . . 3 2 1 1 Tea 9 9 10 7' 10 11 10 11 11 12 II Sugar 72 74 122 130 118 127 126 152 162 171 171 Tobacco - - - - - - - - - - - Pepper- - - - - - - - -- Cotton- - - - ----- - Palm oil 60 70 79 81 82 104 126 145 147 150 149 Palm kernel 13 15 18 17 18 21 24 27 29 30 30 Government Estates Rubber 110 118 118 121 137 138 137 142 147 162 170 coconut/copra - - - - - - - - - - - Coffee 8 9 11 12 6 10 10 10 10 10 11 Cloves - - - - - - - - - - - Tea 31 34 37 37 43 40 46 49 51 59 62 Sugar 630 603 708 756 693 860 878 902 924 960 1,030 Tobacco 9 9 7 5 11 8 8 11 12 13 14 Pepper - - - - - - - - - - - Cotton - - - - - - - - - - - Palm oil 129 147 170 189 207 244 271 286 338 369 474 Palm kernel 28 33 39 42 46 52 57 56 64 72 85 TOTAL Rubber 778 802 804 808 845 818 782 856 838 884 893 Coconut/copra 1,221 1,200 1,149 1,311 1,237 1,341 1,375 1,532 1,518 1,467 1,559 Coffee 175 185 196 214 150 149 160 194 197 222 223 Cloves 12 15 14 13 22 15 15 20 39 22 22 Tea 62 64 71 51 67 65 70 73 76 88 91 Sugar 922 873 1,041 1,133 1,009 1,237 1,227 1,321 1,438 1,616 1,686 Tobacco 84 78 76 79 80 77 82 87 84 81 82 Pepper 17 17 24 18 29 27 23 37 43 46 46 Cotton 2 3 2 2 3 3 2 3 2 1 1 Palm oil 189 217 249 270 289 348 397 431 483 519 623 Palm kernel 41 48 57 59 64 73 81 83 93 102 115 - Not available. /a Preliminary figures. Source: Department of Agriculture. - 130 - ANNEX Table 7.3 INDONESIA COUNTRY ECONOMIC MEMORANDUM Rice - Area Harvested, Production and Yield, 1968-79 Area Average Paddy /a Rice harvested yield output output Year ('000 ha) (tons/ha) ('000 tons) ( 000 tons) 1968 8,021 2.80 22,435 11,667 1969 8,014 2.94 23,556 12,249 1970 8,135 3.11 25,269 13,140 1971 8,324 3.17 26,392 13,724 1972 7,987 3.17 25,351 13,183 1973 8,403 3.34 28,091 14,607 1974 8,509 3.45 29,376 15,276 1975 8,495 3.44 29,202 15,185 1976 8,368 3.64 30,470 15,845 1977 8,360 3.65 30,531 15,876 1978 8,929 3.77 33,702 17,525 1979/b 8,850 3.89 34,457 17,918 /a Dry stalk paddy. /b Preliminary figures. Source: Supplement to the President's Report to Parliament, August 1974 and 1980. - 131 - ANNEX Table 7.4 INDONESIA COUNTRY ECONOMIC MEMORANDUM Rice Production, Imports, Procurement and Consumption, 1960-79 Per Less seed, Total capita Produc- feed and Procure- BULOG avail- Popu- avail- Year tion losses /a Imports ment stocks able lation ability ------------------ (Million tons) -------------------- (Mlns) (kg) 1960 10.17 0.92 0.89 0.28 - 10.14 94.79 107 1961 9.58 0.86 1.01 0.26 -0.03 9.70 97.02 100 1962 10.28 0.93 1.01 0.52 0.02 10.34 99.05 104 1963 9.16 0.82 1.07 0.44 -0.12 9.29 101.04 92 1964 9.61 0.86 1.02 0.34 0.00 9.77 103.16 95 1965 10.24 0.92 0.14 0.32 0.10 9.56 105.33 91 1966 10.75 0.97 0.24 0.64 -0.10 9.92 107.54 92 1967 10.40 0.94 0.35 0.52 0.03 9.84 109.80 90 1968 11.67 1.05 0.63 0.60 -0.35 10.90 112.10 97 1969 12.25 1.10 0.60 0.20 0.30 12.05 114.46 105 1970 13.14 1.18 0.96 0.49 -0.28 12.64 116.86 108 1971 13.72 1.23 0.49 0.62 0.00 12.99 119.23 109 1972 13.18 1.19 0.74 0.16 0.36 13.09 121.61 108 1973 14.61 1.32 1.66 0.26 -0.42 14.53 124.05 117 1974 15.28 1.38 1.07 0.53 -0.29 14.68 126.53 116 1975 15.18 1.37 0.68 0.54 0.10 14.59 129.06 113 1976 15.84 1.42 1.28 0.39 0.20 15.90 131.33 121 1977 15.88 1.43 1.96 0.42 0.08 16.49 133.96 123 1978 17.53 1.58 1.84 0.88 - 17.86 136.63 131 1979 17.918 1.61 1.85 0.33 - 18.16 139.44 130 /a Assumes seed (1.5%), feed (1.5%) and losses (6.0%). Sources: Production: Department of Agriculture and BPS Imports, stocks and procurement: BULOG Population: BPS. - 132 - ANNEX Table 7.5 INDONESIA COUNTRY ECONOMIC MEMORANDUM Area Covered Under Rice Intensification Programs, 1967-79 ('000 ha) Year Bimas Inmas Total 1969 1,309 821 2,130 1970 1,248 845 2,093 1971 1,396 1,393 2,789 1972 1,203 1,966 3,169 1973 1,832 2,156 3,988 1974 2,676 1,048 3,724 1975 2,683 1,957 3,640 1976 2,424 1,189 3,613 1977 2,059 2,181 4,240 1978 1,960 2,888 4,240 1979 /a 1,584 3,442 5,026 /a Preliminary figures. Source: Supplement to the President's Report to Parliament, August 1974 and 1980. INDONESIA COUNTRY ECONOMIC MEMORANDUM Production of Selected Industrial Goods, 1969/70 - 1979/80 Product Unit 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 /a /a Vegetable oil 000 tons 290 284 287 293 293 294 299 309 308 357 499 Cigarettes bln pieces 30 34 36 41 51 52 57 61 64 69 66 Textile yarn 000 bales 182 217 239 262 316 364 445 623 678 837 950 Fabrics mln meters 450 598 732 852 927 974 1,017 1,247 1,333 1,576 1,700 Paper 000 tons 17 22 30 40 47 43 47 54 84 155 214 Urea 000 tons 85 103 108 120 116 209 387 406 990 1,437 1,827 Salt 000 tons 153 58 41 183 86 70 147/b 560/b 786/b 262/b 686 Caustic soda 000 tons 1 1 2 3 3 4 9 9 10 9 18 Al-sulphate 000 tons - 3 7 12 17 14 14 15 19 19 13 Sulphuric acid 000 tons - 4 9 11 18 9 15 19 20 25 51 Oxygen mln cu m 2 3 4 4 5 5 5 6 7 7 6 Acetylene 000 cu m - - - 12 99 124 241 289 305 335 247 Matches mln boxes 269 322 349 475 556 707 780 772 506 540 553 Soap 000 tons 133 132 132 132 131 149 165 176 195 219 203 Toothpaste mln tubes 15 25 26 30 32 46 108 104 104 109 100 I Car tires 000 pieces 366 401 507 858 1,361 1,704 1,796 1,883 2,339 2,540 2,898 w Bicycle tires '000 pieces 2,205 2,164 1,850 2,632 5,880 6,279 7,129 7,297 7,382 7,763 7,375 w Glass sheets sq ft - - - - 50 60 62 69 78 - - Glass bottles 000 tons 12 11 7 17 37 35 32 36 60 64 68 Reinforcing iron 000 tons 5 10 74 75 120 115 202 296 240 300 500 Zinc plates 000 tons 9 34 67 70 70 70 145 156 185 185 250 Steel pipes 000 tons 2 3 6 34 80 94 97 107 120 118 130 Steel cables '000 tons - - - 15 30 30 43 85 98 100 108 Car batteries '000 pieces 32 56 262 130 140 180 220 480 575 690 1,747 Dry-cell batteries mln pieces 54 55 72 72 132 144 240 420 443 420 462 Radio sets 000 pieces 364 393 416 700 900 1,000 1,101 1,100 1,000 1,536 1,019 Television sets 000 pieces 5 5 65 60 60 135 166 213 482 733 660 Sewing machines 000 pieces 14 14 262 340 500 400 520 400 484 600 478 Automobiles 000 units 5 3 16 23 37 66 79 75 84 109 70 Motorcycles 000 units 21 31 50 100 150 251 300 268 272 331/c 266 Cement 000 tons 530 562 536 628 740 829 1,241 1,979 2,879 3,629 4,705/c /a Preliminary figures. /b Includes smallscale industry production. Source: Supplement to the President-s Report to Parliament, August 1974 and 979. - 134 - ANNEX Table 8.2 INDONESIA 'UNTRY ECONOMIC MEMORANDUM Production, lmports and Estimated Consumption of Cement, 1967-79 Consumption /a Year Production Imports Total Per capita …__------------- ('000 tons) - …-------------- -- (kg) - 1967 322.0 197.1 519.1 4.7 1968 410.0 249.8 659.8 5.9 1969 477.1 477.1 954.2 8.3 1970 515.0 639.1 1,154.1 9.8 1971 486.6 898.6 1,385.2 11.5 1972 595.8 1,200.4 1,796.2 14.6 1973 740.4 1,496.8 2,237.2 17.7 1974 830.9 1,737.8 2,568.7 19.9 1975 1,077.2 1,609.2 2,686.4 20.3 1976 1,809.7 1,433.5 3,243.2 24.7 1977 2,548.5 589.8 3,138.3 23.4 1978 3,648.9 420.0 4,032.4/b 29.5 1979 4,431.5 148.1 4,091.4/b 29.3 /a Consumption = Production + Imports 7b Consumption = Production + Imports - Exports (Exports in 1978 = 36.7 thousand tons) (Exports in 1979 = 488.2 thousand tons) Source: BPS. INDONESIA COUNTRY ECONOMIC MEMORANDUM Production of Minerals, 1973-79 Tin Copper ore Nickel Iron sand Natural Year Petroleum concentrate concentrate ore Bauxite Coal concentrate Gold Silver gas (mln bbls) ------------------------ ('000 tons) ----------------------- (kg) (kg) (mcf) 1973 489 22.6 125.9 867.3 1,229.4 148.8 280.9 352.1 9,371.9 186.1 1 1974 502 25.7 212.6 878.9 1,290.1 156.2 365.2 265.3 6,464.6 202.2 w 1975 477 25.3 201.3 801.0r 992.6 206.4 353.0 330.7 4,754.7 222.2 1976 550 23.4 223.3 1,102.Or 940.3 182.9 292.3 355.2 3,397.5 312.1 1977 615 25.9 189.1 1,302.5 1,301.4 230.6 311.5 255.9 2,831.9 542.8 1978 597 27.4 180.9 1,256.5r 1,007.7 264.2 233.3r 253.9 2,506.4 820.1 1979/a 589 29.8 188.8 1,552.7 1,051.9 278.6 79.9 170.0 1,644.6 998.4 Source: Department of Mines and Energy. l-At INDONESIA COUNTRY ECONOMIC MEMORANDUM Crude Oil Production 1973-79 (In 000 bbl) 1978 1979 1973 1974 1975 1976 1977 Qtr I Qtr II Qtr III Qtr IV Total Qtr I Qtr II Qtr III Qtr IV Total Onshore Pertamina 37,687 40,143 32,590 31,332 30,721 7,668 8,104 7,854 7,858 31,484 7,446 7,786 7,593 7,490 30,315 Lemigas 431 362 306 269 285 63 51 39 43 196 51 50 50 56 207 Caltex /a 351,528 329,907 300,879 307,616 292,950 70,763 69,838 67,066 67,724 275,539 67,335 66,537 67,289 65,864 267,227 C & T /a 1,035 1,959 1,944 1,804 2,460 654 610 553 466 2,283 520 470 452 413 1,855 Stanvac /a 22,768 16,626 13,888 12,786 11,973 3,050 2,962 2,973 2,869 11,854 2,790 2,695 2,594 2,731 10,810 PT S.1. (Corr. Block) /b 594 492 306 244 185 32 34 41 58 165 49 198 179 166 592 Asamera 6,470 7,047 6,115 4,771 3,249 639 667 750 722 2,778 671 608 514 449 2,242 Tesoro 554 2,572 3,091 4,857 4,142 907 873 802 818 3,400 799 772 766 724 3,061 A.A.R. 468 518 428 426 360 81 93 95 88 357 84 83 80 81 328 Petromer Trend 3,425 11,089 23,017 27,710 28,656 6,401 6,584 6,763 6,362 26,110 5,841 5,720 5,567 5,534 22,662 C & T /c - - 464 796 8,796 2,594 2,611 2,612 2,441 10,258 2,571 2,803 2,767 2,538 10,679 Phillips - - 27 - 2,278 4,383 4,103 2,849 1,654 12,989 855 744 690 815 3,104 Roy Huffco - 916 3,874 4,799 5,725 2,041 2,061 2,31R 1,932 8,352 1,949 1,928 1,958 1,827 7,662 A.R.C.O. (East Kalimantan) - - - - 1,836 788 713 624 554 2,679 531 511 503 483 2,078 Mobil Oil - - - - 1,766 1,606 2,101 2,025 3,873 9,605 4,793 5,052 5,449 5,493 20,787 Total Onshore 424,961 411,551 386,929 394,410 395,388 101,672 101,405 97,364 97,462 397,901 96,285 96,958 96,451 94,664 383,609 Offshore P.T.I.A.P.C.O. 13,649 19,785 15,254 34,402 41,471 8,688 7,295 7,168 7,588 30,739 8,854 8,565 8,036 7,276 32,731 A.R.C.O. (Java Sea) 23,357 32,661 28,582 44,432 43,849 9,436 9,659 10,128 10,329 39,552 9,873 9,265 9,584 10,576 39,298 Union Oil 13,292 18,508 20,942 27,989 29,429 7,306 7,152 6,797 6,640 27,895 6,105 6,006 5,998 5,839 23,965 Japex /d 13,292 18,508 18,128 19,425 45,347 15,426 15,318 14,829 14,661 60,234 14,303 14,368 14,431 14,096 57,198 Total Indonesia - 825 6,909 28,784 58,879 10,311 10,274 9,920 9,789 40,294 9,609 9,808 9,750 9,524 38,691 Cities Service - - 111 914 789 164 154 173 - 491 - - - - - Conoco - - - - - - - - - - 485 1,294 2,085 2,314 6,178 Total Offshore 63,590 90,287 89,926 155,946 219,764 51,331 49,852 49,015 49,007 199,205 49,229 40,306 49,884 49,615 198,064 Crude Oil Production 488,551 501,838 476,855 550,356 615,152 153,003 151,257 146,379 146,471 597,108 145,536 145,354 146,335 144,309 581,673 Percentage 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Pertamina/Lenigas 7.8 8.1 6.9 5.7 5.0 5.3 5.4 5.2 5.2 5.3 Contracts of work 76.8 69.4 66.4 58.5 50.0 48.5 48.0 48.1 47.8 48.1 Production sharing 23.2 22.5 26.7 35.8 45.0 46.2 46.6 46.7 47.0 46.6 Average Daily Production 1,338 1,375 1,306 1,508 1,685 1,700 1,6f62 1,591 1,592 1,636 1,617 1,596 1,591 1,569 1,594 /a Contracts of work. b Since January 1977: Redco; since May 1978: Asnmera (S. Sumatera). 7 Since January 1979: two fields. . 7- Since June 1977: Inpex (includes 50% of Total Indonesia production). Source: Ministry of Mines and Energy. INDONESIA COUNTRY ECONOMIC MEMORANDUM Petroleum Products - Supply and Demand, 1969-79 (In million bbl) 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 Production of crude 270.9 311.6 325.6 395.6 488.5 501.8 476.9 550.3 615.1 596.8 580.4 Crude imports 0.2 0.8 2.8 2.7 1.9 2.7 2.6 7.7 25.5 24.1 30.5 Subtotal 271.1 312.4 328.4 398.3 490.4 504.5 479.5 558.0 640.6 620.9 610.9 Crude exports 195.7 228.1 239.6 299.1 369.5 378.9 363.1 449.1 484.2 461.9 410.7 Crude available for refineries 75.4 84.3 88.8 96.2 120.9 125.6 116.4 108.9 156.4 159.0 200.2 Changes in crude stocks (decrease = -) -0.7 0.6 -1.2 -4.3 1.6 0.7 2.9 -4.8 3.1 -2.4 14.2 Refinery Inputs 76.1 83.7 90.0 100.5 119.3 124.9 113.4 113.7 153.3 161.4 186.0 Refinery consumption 3.7 4.9 7.6 7.7 8.1 5.8 4.3 3.9 3.7 3.1 - Refinery Output 72.4 78.8 82.4 92.8 111.2 119.1 109.1 109.8 149.6 158.3 186.0 Export of Refined Products 19.0 25.3 34.0 41.2 58.3 67.4 62.2 60.6 66.1 97.4 117.4 Processing deals - - - - 3.4 26.4 29.7 28.9 12.1 56.0 65.5 Waxy residues 17.0 23.8 32.5 39.7 53.4 39.3 30.7 29.7 51.4 38.6 48.9 Bunker fuel, avtur, etc. 1.5 1.5 1.5 1.5 1.5 1.7 1.8 2.0 2.6 2.8 3.0 Available for Domestic Consumption 53.4 53.5 48.4 51.6 52.9 51.7 46.9 49.2 83.5 60.9 68.6 Total Supply 56.4 55.6 52.6 60.2 65.7 64.3 61.9 75.6 102.5 84.9 111.9 Domestic Consumption 36.9 39.3 43.9 50.1 60.3 69.6 78.8 88.9 101.6 112.3 127.0 Changes in refined stocks 19.5 16.3 8.7 10.1 5.4 -5.3 -16.9 -13.3 0.9 -27.4 -15.1 Source: Migas. ?O INDONESIA COUNTRY ECONOMIC MEMORANDUM Domestic Sales of Petroleum Products, 1971-79 (In '000 bbl) 1971 1972 1973 1974 1975 1976 1977 1978 1979 Aviation gas 144 118 123 139 139 143 128 134 134 1 Aviation turbo 961 1,200 1,658 2,150 2,579 2,758 2,913 3,494 3,656 X Premium gasoline 100 201 359 496 661 706 710 728 618 Regular gasoline 10,409 10,779 11,757 12,787 14,284 15,606 17,356 19,608 21,295 Kerosene 18,927 20,697 23,146 26,769 30,623 33,259 36,880 41,717 45,458 Motor diesel 6,895 9,027 11,838 14,524 18,023 22,749 27,041 31,709 34,595 Industrial diesel 2,364 2,676 3,488 4,022 4,673 5,429 6,239 6,744 7,580 Fuel oil 4,095 5,379 7,924 8,755 7,844 8,222 10,296 11,061 13,626 Total 43,895 50,077 60,293 69,642 78,826 88,872 101,563 115,195 126,962 Source: Department of Mines and Energy. (D >4 o all< - 139 - ANNEX Table 9.1 INDONESIA COUNTRY ECONOMIC MEMORANDUM Cost of Living Index in Jakarta, 1970-79 (Index: April 1977/March 1978 = 100) Period average End of Food- Change Hous- Cloth- Other Gene- Change General Change period stuffs (x) ing ing ral (Y.) index (X) 1970 26.2 +1.3 38.5 43.3 38.5 30.8 +8.9 30.1 +12.3 1971 26.8 +2.2 38.9 44.4 39.9 31.6 +2.6 31.4 +4.4 1972 38.7 +44.6 39.4 44.2 41.3 39.7 +25.7 33.4 +6.4 1973 49.7 +28.4 45.3 58.3 52.4 50.6 +27.4 43.8 +31.0 1974 65.7 +32.2 55.6 77.7 74.0 67.4 +33.3 61.6 +40.6 1975 81.1 +23.4 73.6 84.9 80.1 80.6 +19.7 73.4 +19.1 1976 91.8 +13.2 90.9 94.9 92.3 92.1 +14.2 87.9 +19.8 1977 +12.4 +11.8 97.6 +11.0 Qtr I 94.1 +2.5 94.8 95.9 93.7 94.2 +2.3 Qtr II 96.3 +2.3 96.4 97.4 97.0 96.5 +2.4 Qtr III 100.2 +4.0 99.3 101.3 100.5 100.3 +3.9 Qtr IV 103.2 +3.0 102.8 101.8 102.6 103.0 +2.7 1978 +4.4 +6.7 105.5 +8.1 Qtr I 104.1 +0.8 104.1 102.1 103.0 103.7 +0.7 Qtr II 103.5 -0.6 105.3 103.3 104.0 103.7 - Qtr III 104.3 +0.8 105.3 105.2 109.7 105.4 +1.7 Qtr IV 107.8 +3.4 105.7 110.4 118.8 109.9 +0.7 1979 +27.1 +24.6 127.0 +20.4 Qtr I 114.7 +6.4 107.3 118.4 123.2 116.0 +5.6 Qtr II /a 127.2 +10.9 122.2 125.9 131.3 127.8 +10.2 Qtr III 137.8 +8.3 124.8 140.4 137.8 135.7 +6.2 Qtr IV 137.0 -0.6 125.1 147.0 139.1 136.9 +0.9 /a As of April 1979 the Cost of Living Index was replaced by the Jakarta Consumer Price Index (Table 9.2). - 140 - ANNEX Table 9.2 INDONESIA COUNTRY ECONOMIC MEMORANDUM Consumer Price Index - Jakarta and Indonesia, 1979 - February 1981 (Index: April 1977/March 1978 - 100) Index % change Food Housing Clothing Other General Food Housing Clothing Other General Jakarta Weight (40) (28) (10) (22) (100) 1979 March 114.8 118.5 135.7 117.0 118.4 - - - - - April 117.3 122.5 136.7 122.6 121.9 2.1 3.4 0.7 4.8 2.0 May 122.4 134.1 139.9 123.0 127.6 4.3 9.4 2.3 0.4 4.7 June 127.3 135.0 144.3 124.7 130.6 4.0 0.6 3.2 1.4 2.4 July 130.0 134.8 151.2 127.7 133.0 2.1 (0.1) 4.8 2.4 1.8 August 137.6 135.1 155.9 129.5 136.9 5.8 0.3 3.1 1.4 3.0 September 137.9 137.8 160.9 130.9 138.6 0.2 2.0 3.2 1.1 1.2 October 136.4 138.3 163.4 131.5 138.6 (2.4) 0.4 1.9 0.5 - November 136.7 138.6 163.0 132.1 138.8 0.2 0.2 (0.6) 0.4 0.1 December 137.2 138.1 168.5 132.1 139.9 0.4 (0.3) 3.4 0.7 0.7 1980 January 138.2 141.2 169.8 131.2 140.6 0.7 2.2 0.8 0.7 0.6 February 141.1 142.0 176.1 131.3 142.7 2.2 0.6 3.7 0.1 1.5 March 139.2 144.0 178.1 132.8 143.0 (1.4) 1.4 1.1 1.2 0.2 April 138.1 147.3 176.1 133.5 143.8 (0.8) 2.3 (1.1) 0.5 0.6 May 141.7 154.0 178.2 141.1 148.7 2.6 4.6 1.1 5.7 3.4 June 144.1 158.8 178.8 142.7 151.4 1.7 3.1 0.4 1.1 1.8 July 144.2 158.7 180.2 143.6 151.7 0.1 (0.1) 0.8 0.6 0.2 August 148.4 157.4 183.4 144.7 153.6 2.9 (0.8) 1.7 0.8 1.2 September 145.5 160.2 184.0 144.8 153.3 (2.0) 1.8 0.3 0.1 (0.2) October 148.7 160.9 184.2 144.9 154.8 2.2 0.4 0.1 0.1 1.0 November 154.0 161.5 184.5 144.4 157.0 3.6 0.4 0.2 (0.3) 1.4 December 152.7 160.8 184.5 144.9 156.4 (0.8) (0.4) 0 0 0.3 (O 6) 1981 January 155.1 162.4 184.7 145.2 157.9 1.6 1.0 0.1 0.2 1.0 February 157.6 162.6 184.9 145.8 159.1 1.6 0.1 0.1 0.4 0.8 Indonesia (17 cities) 26 Weight /a (46) (24) (11) (19) (100) 1979 March 120.5 120.9 134.7 119.1 121.8 - - - - - April 122.5 125.0 137.4 126.1 125.5 1.7 3.4 2.0 5.9 3.0 May 126.4 131.6 140.0 126.7 129.3 3.2 5.3 1.9 0.5 3.0 June 130.7 133.4 144.6 127.9 132.3 3.4 1.4 3.3 0.9 2.3 July 134.2 134.5 150.4 132.2 135.6 2.7 0.8 4.0 3.4 2.5 August 139.1 135.7 155.1 134.2 138.8 3.6 0.9 3.1 1.5 2.3 September 138.9 137.4 159.1 135.3 139.8 (0.1) 1.1 2 6 0.9 0.7 October 138.5 139.9 163.4 137.0 141.0 (0.3) 1.8 2.7 1.2 0.9 November 139.9 140.2 163.5 137.6 141.8 1.0 0.2 - 0.4 0.6 December 141.1 140.9 168.2 137.7 143.1 0.9 0.5 2.9 0.1 0.9 1980 January 143.0 143.4 169.8 137.9 144.8 1.3 1.8 1.0 0.1 1.2 February 146.0 144.8 173.3 138.4 146.8 2.1 0.9 2.1 0.3 1.4 March 144.8 146.7 173.8 139.6 147.1 (0.8) 1.3 0.3 0.9 0.2 April 144.9 149.9 174.1 142.5 148.7 0.1 2.2 0.1 2.1 1 0 May 149.3 157.4 176.4 150.1 154.3 3.0 4.9 1.3 5.3 3.8 June 151.3 161.1 178.8 151.3 156.6 1.3 2.4 1.4 0.8 1.5 July 152.6 162.1 180.8 154.5 158.3 0.9 0.6 1.1 2.1 1.1 August 155.9 162.0 184.9 155.1 160.2 2.2 (0.1) 2.3 0.4 1 2 September 155.1 164.2 185.5 156.2 160.8 (0.5) 1.4 0.3 0 7 0.4 October 159.2 165.6 188.4 158.0 163.5 2.6 0.9 1.6 1.2 1.7 November 165.6 167.7 190.3 158.7 167.1 4.0 1.3 1.0 0.4 2.2 December 165.7 168.7 190.8 159.1 167.6 0.1 0.6 0.3 0.3 0.3 1981 January 169 1 169.6 191.8 160.8 169.8 2.1 0.5 0.5 1.1 1.3 February 171.0 170.4 192.4 161.5 170.9 1 1 0.5 0.3 0.4 0.6 /a Arithmetic average of weights for 17 cities. - 141 - ANNEX Table 9.3 INDONESIA COUNTRY ECONOMIC MEMORANDUM Wholesale Price Indices in Indonesia, 1971-80 /a (1971 = 100) 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 October Agriculture 100 118 159 218 256 321 392 430 571 751 Food crops 100 126 162 194 230 296 343 368 488 656 Commercial crops 100 91 148 225 182 265 411 451 604 624 Livestock 100 118 156 218 255 293 349 394 522 753 Mining & quarrying 100 113 125 164 195 210 237 262 343 467 Manufacturing 100 110 154 189 202 238 265 294 388 492 Imports 100 110 140 184 200 215 225 244 346 416 Exports 100 119 179 377 368 393 447 488 969 1,460 Nonoil exports 100 105 166 219 182 226 290 329 653 762 General index excluding exports 100 112 151 196 217 256 292 320 430 548 General index 100 114 157 232 247 283 323 354 538 731 /a Average index for each year. Source: Indikator Ekonomi (BPS). - 142 - ANNEX Table 9.4 INDONESIA COUNTRY ECONOMIC MEMORANDUM Domestic Price of Petroleum Products, 1972-80 (Rp/Liter) 1972 1973 1974 1975 1976 1977 1978 1979 1980 Aviation gas 35 40 50 62 70 70 70 100 150 Aviation turbo 30 40 50 62 70 70 70 100 150 Premium gasoline 40 45 55 67 90 90 90 140 220 Regular gasoline 35 41 46 57 70 70 70 100 150 Kerosene 10 11.50 13 16 18 18 18 25 37.5 Motor diesel (solar) 14 16 19 22 25 25 25 35 52.5 Industrial diesel 8.50 9 13 19 22 22 22 30 45 Fuel oil 6.50 7.50 12 19 22 22 22 30 45 Source: Migas ANNEX - 143 - Table 10.1 INDONESIA COUNTRY ECONOMIC MEMORANDUM Approved Foreign Investment /a by Sector, 1967-80 (US$ million) Total Sector 1967-74 1975 1976 1977 1978 1979 1980/b 1967-80 Agriculture 101.9 1.0 8.2 41.1 2.2 18.7 23.7 196.8 Forestry 447.8 5.3 34.1 30.5 35.6 27.7 72.9 653.9 Fishery 44.8 13.7 5.8 4.9 24.5 36.1 1.0 130.8 Mining & quarrying 546.5 507.2 3.6 200.0 44.9 150.0 - 1,452.2 Manufacturing 1,954.4 1,148.2 354.2 362.1 287.9 1,457.2 440.6 6,004.6 Food 123.3 19.8 74.9 7.7 13.3 70.9 1.7 311.6 Textiles & leather 891.1 29.2 24.2 72.6 110.9 86.6 48.2 1,262.8 Wood & wood products 16.5 21.9 5.5 - 1.0 6.0 11.2 62.1 Paper & paper products 15.9 7.2 66.2 9.7 0.5 5.5 - 105.0 Chemical & rubber 246.9 66.6 33.3 78.2 22.9 368.3 147.1 963.3 Nonmetallic minerals 233.0 99.6 72.0 99.0 18.4 30.3 194.9 747.2 Ferrous metals 232.9 875.6 11.9 18.4 10.0 846.3 -0.2 1,994.9 Metal products 189.2 18.3 66.0 76.5 104.0 43.3 37.3 545.0 Others 5.6 - 0.2 - 6.9 - - 12.7 Construction 57.8 8.6 1.3 3.4 5.2 0.5 5.2 82.0 Trade & Hotels 133.8 21.3 14 1 5.5 9.7 3.0 31.6 219.0 Wholesale trade 10.9 - 0.7 - - - - 11.6 Hotels 122.9 21.3 13.4 5.5 9.7 3.0 31.6 207.4 Transport & Communication 32.5 20.3 4.0 5.0 36.5 0.1 31.4 129.8 Transport 26.4 16.9 4.0 - - 0.1 31.4 78.8 Communication 6.1 3.4 - 5.0 36.5 - - 51.0 Real estate & business services 179.6 9.5 27.3 - 22.7 45.7 11.1 295.9 Other services 15.7 - - - 2.0 - - 17.7 Total 3,514.8 1,735.1 452.6 652.5 471.2 1,739.0 617.5 9,182.7 /a Intended Capital Investment. Amounts represent original approval plus approved expansion minus cancellation. /b Up to June. Source: Investment Board. ANNEX - 144 - Table 10.2 INDONESIA COUNTRY ECONOMIC MEMORANDUM Implementation of Foreign Investment by Sector, 1967-79 (US$ million) Total Sector 1967-74 1975 1976 1977 1978 1979 1967-79 Agriculture 29.0 3.2 8.0 12.5 10.1 4.3 67.1 Forestry 203.2 34.3 22.7 22.1 15.0 19.2 316.6 Fishery 48.0 11.3 8.5 2.8 13.5 10.5 94.6 Mining & quarrying 216.4 40.4 42.4 20.1 57.3 47.5 424.1 Manufacturing 1,033.0 392.4 301.2 186.2 267.0 192.0 2,371.8 Food 111.7 13.9 10.8 11.9 14.9 7.1 170.3 Textiles & leather 443.3 181.8 91.8 27.9 31.4 41.7 817.9 Wood & wood products 5.5 10.6 4.6 1.4 0.4 0.1 22.6 Paper & paper products 13.9 0.7 3.3 9.6 11.8 1.4 40.7 Chemical & rubber 146.3 45.9 45.7 28.0 71.7 44.8 382.4 Nonmetallic minerals 85.3 54.2 71.3 42.9 9.0 3.2 265.9 Ferrous metals 37.8 43.3 30.7 27.8 37.8 47.5 224.9 Metal products 179.9 41.1 42.4 35.4 89.9 36.0 424.7 Others 9.3 0.9 0.6 1.3 0.1 10.2 22.4 Construction 22.1 7.9 4.5 3.0 1.4 12.0 50.9 Trade & Hotels 54.0 8.2 17.6 6.2 17.2 4.3 107.5 Wholesale trade 9.8 0.1 0.2 - 0.7 - 10.8 Hotels 44.2 8.1 17.4 6.2 16.5 4.3 96.7 Transport & Communication 54.0 2.2 4.4 2.0 4.7 21.9 44.9 Transport 9.8 1.2 4.2 1.8 1.3 0.1 12.9 Communication 44.2 1.0 0.2 0.2 3.4 21.8 32.0 Real estate & business services 40.5 23.7 12.3 3.8 14.0 6.9 101.2 Others 82.2 23 4 3.9 0.1 5.0 - 114.6 Total 1,738.1 547.1 425.5 258.8 405.2 318.6 3,693.3 Source: Bank Indonesia. ANNEX - 145 - Table 10.3 INDONESIA COUNTRY ECONOMIC MEMORANDUM Approved Domestic Investment /a by Sector, 1967-79 (Rp billion) Total Sector 1967-73 1974 1975 1976 1977 1978 1979 1967-79 Agriculture, fisheries & livestock 61.8 8.6 18.0 43.5 50.0 100.4 36.4 318.7 Forestry 139.3 32.1 6.1 6.3 64.0 58.5 81.8 388.1 Mining 47.6 2.4 - - - 18.3 32.9 101.3 Manufacturing 755.5 170.4 186.0 192.8 396.6 531.2 502.3 2,734.8 Textile 301.5 65.3 38.8 43.1 74.5 167.6 41.8 732.6 Chemicals 106.4 21.0 38.0 14.0 95.9 103.0 140.2 520.3 Electric manu- facturing 19.9 2.1 2.2 - - - - 24.2 Other manufac- turing 327.7 82.0 107.0 135.7 226.2 260.6 318.5 1,457.7 Construction 14.2 - - 1.2 - 2.6 2.1 17.7 Hotel 76.1 2.3 1.4 6.8 4.1 11.6 12.4 114.6 Real estate 77.2 - 15.2 37.6 38.8 15.1 3.8 187.7 Others 88.9 14.5 8.3 7.4 19.9 24.2 16.9 180.1 Total 1,260.6 230.3 235.0 293.2 573.4 761.9 688.6 4,043.0 /a Intended capital investment. Figures represent original approvals plus approved expansions minus cancellations. 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