BACKGROUND
It has been almost 66 years of Indonesian independence . However, the Indonesian economy had not improved . Still there is economic inequality , poverty and unemployment levels are still high , and income per capita is still low . In order to improve the system in the Indonesian economy , we need to learn about the history of the Indonesian economy from the time of the old order to the reform period . By studying history , we can know what economic policies are already taken by the government and how it impacts on the Indonesian economy and can contribute to overcome the economic problems that exist . Indonesia's economic system is divided into 3 Government during the old order , new order , and reform .
MADA GOVERNMENT ORDER LONG PERIOD
Government during the old order is divided into three
a. Post- Independence Period (1945-1950)
In the early days of independence , Indonesia's economic situation is very bad , which is caused by :
1 . Inflation is very high , it is due to the release of more than one currency uncontrollably . At that time , the Indonesian government temporarily claimed three prevailing currency in the region of Indonesia , namely De Javashe Bank's currency , the currency of the Netherlands East Indies , and the Japanese occupation currency . On March 6, 1946 , Commander AFNEI ( Allied Forces Netherlands East Indies for / allied forces ) announced the entry into force of the NICA money in areas controlled by allies . In October 1946 , the Indonesian government also issued new banknotes , the ORI ( Oeang Republic of Indonesia ) as a substitute for the Japanese currency . Based on monetary theory , the amount of money in circulation affect the increase in the price level .
2 . Existence of economic blockade by the Netherlands since November 1945 to close the door Indonesian foreign trade .
3 . Treasury empty
4 . The massive exploitation during the colonial period
Efforts are being made to overcome the economic difficulties , among others :
1 . The National Loan Program implemented by the finance minister IR . Surachman in July 1946 .
2 . Efforts to penetrate the blockade with rice diplomacy to India ( India is a country that suffered the same fate as Indonesia is equally colonized , Indonesia offers assistance in the form of rice and 500,000 tons of India submitted a number of drugs to Indonesia ) , made contact with corporate America , and penetrated the Dutch blockade in Sumatra with the aim to Singapore and Malaysia .
3 . Economics Conference in February 1946 in order to obtain unanimous agreement in tackling economic problems are urgent , namely : the problem of production and distribution of food , clothing issues , as well as the status and administration of estates .
4 .. Formation Planning Board ( Board Designer Economics ) January 19, 1947Reconstruction and Rationalization of the Armed Forces ( Rera ) , 1948, former army personnel transferred into productive fields .
5 . Kasimo Plan is essentially about self-sufficiency efforts by some practical guidelines . With self-sufficiency , it is expected the economy will improve ( follows the school of Physiocrats : the agricultural sector is a source of wealth ) .
b . Future of Liberal Democracy (1950-1957)
Economic problems that dihadai by the Indonesian people are still the same as before . Efforts are being made to address the economic problems , among others :
1 . Program Fortress ( Natsir Cabinet ) , which is an effort to foster and encourage indigenous entrepreneurs nationwide importers in order to compete with foreign imports by restricting the importation of certain goods and import license only on indigenous importers and give credit to the indigenous companies that will be able to participate in the development of the national economy . However, this attempt failed , due to the nature of indigenous entrepreneurs who tend to be consumptive and can not compete with non - native entrepreneurs .
In this cabinet for the first time formulated a development plan that called for Economic Urgency Plan ( RUP )
2 . Nationalization De Javasche Bank to Bank Indonesia on December 15, 1951 through Act no.24 th 1951 as a function of the central bank and the bank circulation . ( Cabinet Sukiman )
3 . Economic system Ali ( Ali cabinet Sastroamijoyo I) Mr. Isaac Cokrohadisuryo initiated , namely raising the cooperation between Chinese entrepreneurs and indigenous entrepreneurs . Employers are required to provide a non - native exercises on indigenous entrepreneurs , and the government provides credits and licenses for private businesses nationwide . This program is not going well , because indigenous entrepreneurs less experienced , so it's only used as a tool to obtain credit from government assistance . ( This cabinet is very protective of the indigenous importers , very eager to change the structure of the economy from colonial to a national )
4 . The unilateral cancellation of the results of the Round Table, including the dissolution of the Netherlands-Indonesian Union . As a result, many Dutch businessman who sold his company while indigenous entrepreneurs have not been able to take over these companies . ( Cabinet Burnahudin )
c . Guided Democracy (1959-1967)
As a result of the presidential decree July 5, 1959 , the Indonesian runs guided democracy system and the structure of the Indonesian economy leads to etatisme system ( everything is set by the government ) . With this system , expected to lead to shared prosperity and equality in the social , political , and economic . However , the economic policies taken by the government in the past has not been able to improve the economic conditions of Indonesia, among others :
1 . Devaluation announced on August 25, 1959 lowers the value of money as follows : Currency bill of Rp 500 to Rp 50 , Rp 1,000 bills to Rp 100 , and all bank deposits in excess of 25,000 frozen .
2 . Formation Declaration Economics ( Economic Declaration ) to reach the stage of socialist economy by means of guided Indonesia . In practice it resulted in the stagnation of the Indonesian economy . Even at 1961-1962 prices of baranga up 400 % .
3 . Devaluation is done on December 13, 1965 to make the money worth Rp 1,000 to Rp 1 . So the new rupiah should be rewarded 1000 fold rupiah old , but new people rupiah appreciated only 10-fold higher . So the government action to suppress the inflation rate actually increases the rate of inflation .
GOVERNMENT DURING THE NEW ORDER
Priority is done is to control inflation and high economic growth . Foreign capital started to go so that industrialization began working and Five-Year Development Plan ( Repelita ) first made in 1968 . In the 1970s and early 1980s, soaring oil prices on world markets so that New Order were able to establish and control the inflation and to make high economic growth .
High economic growth does not make people free from poverty due to economic growth enjoyed by the few. The negative impact of economic conditions in the New Order Indonesia , among others :
a. Dependence on Oil and Gas ( Oil and Gas )
Oil and Gas is one of the main sources of income for the state budget . So the price of oil and gas is very influential for the state revenue that falling oil prices led to declining state revenues .
b . Dependence on Foreign Aid
Due to reduced revenue from oil and gas , the government rescheduling projects - existing development projects , especially the use of foreign exchange . Seek an increase in non-oil commodity exports and the last requested an increase in foreign loans to countries - developed countries . By 1983 , Indonesia seventh largest country in debt and in 1987 the number rose to fourth place . Ironically , in the years 1986/87 , as many as 81 % debt obtained to pay old debts plus interest .
The late 1970s , the development process in Indonesia has " non market failure " so a lot of hassles in the process of development , for example, the outbreak of widespread poverty and income inequality , mainly due to the " market failure " .
Approaching the mid-1980s , there was a failure of government ( non market ) in the mechanism adjusts its performance to market dynamics . Indonesian economy faces severe challenges due to the deterioration of foreign exchange earnings from petroleum exports in the early 1980s . Indonesia's development policies are taken , known as " structural adjustment " in which there are four types of policy adjustments as follows :
a. Short -term stabilization programs or policies of demand management in the form of fiscal policy , monetary and exchange rate with the aim of lowering the level of aggregate demand . In this case the government policies reduce the budget deficit by cutting or removing subsidies , raising interest rates money ( tight monetary policy ) to control inflation , maintain a realistic exchange rate ( mainly through the devaluation of September 1986 ) .
b . Structural policies in order to improve output through increased efficiency and resource allocation by reducing the distortion caused by price controls , taxes , subsidies and trade barriers , tariff and non tariff . Policy " Paknov 1988 " that removes the import monopoly for some steel products and other essential raw materials , has pushed the market mechanism to function effectively at the time .
c . Policy of increasing the productive capacity of the economy through the promotion of savings and investment . Improvements government savings through fiscal reforms , improve public savings through financial sector reforms and encourage investment by providing incentives and loosening restrictions .
d . Policy creates a legal environment that can encourage the effective operation of market mechanisms including guarantees property rights and various supporting measures such as reform of laws and regulations , rules guaranteeing free competition and a variety of programs that allow such an environment .
The impact of these policies on macroeconomic convincing enough , as foreign investment continues to rise , the source of increased income tax system improvements , industrial productivity which supports non-oil exports also increased . However, Indonesia's debt ballooned to U.S. $ 70.9 billion in debt this as one of the factors causing the collapse of the New Order government . New Order administration build -oriented economy only high economic growth and inflation control regardless of the economic foundation the following impact :
Quality of Human Resources ( HR ) of Indonesia , as one of the factors of production , is not prepared to support the industrialization process .
Goods - goods imports ( foreign origin ) is more widely used as raw materials in industrial processes so that the Indonesian industry relies heavily on imported goods .
Development is not evenly distributed throughout Indonesia and to all the people of Indonesia that few political elites and bureaucrats and businessmen - Chinese businessmen close to power are enjoying the fruits of development .
GOVERNMENT REFORM
Government reforms initiated in 1998 . Event was spearheaded by thousands of students rallied demanding President Suharto to step down due to Mr Soerhato government has been widely regarded adverse state and many who do Corruption , Collusion and Nepotism ( KKN ) . Year 1998 was the toughest year for economic development in Indonesia as a result of the Asian financial crisis whose impact is felt in Indonesia . Originally rupiah Rp 1 U.S. $ . 2.000 , - to Rp . 10.000 , - even reaching Rp . 12.000 , - ( 5-fold decrease in the value of the rupiah against the dollar ) . That is , the value of Rp . 1.000.000 , - prior to 1998 valued at U.S. $ 500 but after 1998 to only 100 U.S. $ . Indonesian state debt when it matures and must be paid in the form of dollars , swelled to five times as much as the money held in the form of dollars and must be paid in U.S. dollars . Coupled with the private debt which would then be paid the State of Indonesia as a condition to obtain a loan from the International Monetary Fund ( IMF ) . Noted Indonesian debt ballooned to U.S. $ 70.9 billion ( U.S. $ 20 billion is a private commercial debt ) . Government reform from 1998 to the present has experienced several changes of presidents , among others,
1 . Mr. BJ Habibie (May 21, 1998-20 Oktober 1999)
At the time of presdiden BJ Habibie, who started the reform period has not made enough changes mean in economics . Preferred policies to stabilize the political situation in Indonesia . President BJ Habibie fall of his government for releasing the territory of Timor - Indonesia region polled
2 . Mr. Abdurrahman Wahid (October 20, 1999-23 July 2001 )
During the leadership of president Abdurrahman Wahid has been no means sufficient action to save Indonesia from adversity . Leadership Abdurraman Wahid ended because of his administration to confront the problem of conflict between ethnic and inter-religious .
3 . Mrs. Megawati ( 23 July 2001-20 October 2004 )
The leadership of Megawati experiencing urgent problems to be solved , namely economic recovery and law enforcement . The policies adopted for handling his economic problems , among others :
a. Requesting postponement of debt repayment of U.S. $ 5.8 billion in Paris Club meetings 3rd and allocate foreign debt amounting to Rp 116.3 trillion
b . Privatization policy . Privatization is selling companies in the country in the period of crisis with the aim of protecting the company's state of the intervention of political forces and reduce the burden on the state . Proceeds successfully raised Indonesia's economic growth to 4.1 % . However, this policy sparked a lot of controversy , because SOEs are privatized sold to foreign companies . Megawati intend to take the middle ground by selling some state assets to pay the foreign debt . However , the national debt ballooned anyway because state revenues from a variety of assets have been lost and state revenues to be greatly reduced .
4 . Mr. Susilo Bambang Yudhoyono ( October 20, 2004 - present )
The leadership there SBY controversial policy stance is
a. reduce fuel subsidies , or in other words to increase fuel prices . This policy is motivated by the rise in world oil prices . Budget subsidies transferred to the education and health sectors , as well as areas that support the well-being of society .
b . The first controversial policy raises two controversial policies , which direct cash assistance ( BLT ) for the poor . Most BLT did not get to have the right hand , and the division caused various social problems .
c . Relying on bulk infrastructure development to encourage economic growth as well as inviting foreign investors with the promise of improving the investment climate . One of them is holding Indonesian Infrastructure Summit in November 2006 , which brought together investors with head - kepaladaerah . Investment is a key factor to determine employment . This may underlie the government's policy has always aimed to provide convenience for investors , especially foreign investors , one of which is a revision of labor laws . If more and more foreign investment in Indonesia , the expected number of employment opportunities will also increase .
d . State institutions KPK ( Corruption Eradication Commission ) that run on the SBY able to eradicate the corrupt but still lags far out of reach before because SBY implement systems Hard Soft Law is not Law . That is SBY not crack down on the people who did so much corruption going on money politics and the corruptors will not be a deterrent and many are repeat . Judging from all the country could be harmed massively and to date the State's economy is unstable .
e . Fuel conversion program to gas fuel because fuel supplies are running low and the high market price .
f . Rice import policy , but this policy makes the farmers because grain prices become screaming dropped or fall dramatically
In 2006 Indonesia pay off the entire remaining debt to the IMF ( International Monetary Fund ) . With this , it is expected that Indonesia does not follow the agenda of the IMF in determining domestic policy . But discourse to owe more on overseas again emerged , after the release of a report that the economic gap between the rich and poor narrowed , and the number of poor people increased from 35.10 soul in February 2005 to 39.05 million in March 2006 . Thing this is due to several things , such as bank lending to the real sector is still lacking ( banks prefer to deposit funds in SBI ) , so that the performance of the real sector and the lack of impact on the decline in investment . State spending was also more swollen due to the frequent occurrence of natural disasters that struck the country .
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