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Indonesia Main Page

 

Indonesia's Economy

Economy - overview:
Indonesia, a vast polyglot nation, has weathered the global financial crisis relatively smoothly because of its heavy reliance on domestic consumption as the driver of economic growth. Although the economy slowed significantly in 2009 from the 6%-plus growth rate recorded in 2007 and 2008, by 2010 growth returned to a 6% rate. During the recession, Indonesia outperformed its regional neighbors and joined China and India as the only G20 members posting growth. The government made economic advances under the first administration of President YUDHOYONO, introducing significant reforms in the financial sector, including tax and customs reforms, the use of Treasury bills, and capital market development and supervision. Indonesia's debt-to-GDP ratio in recent years has declined steadily because of increasingly robust GDP growth and sound fiscal stewardship. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. YUDHOYONO's reelection, with respected economist BOEDIONO as his vice president, suggests broad continuity of economic policy, although the start of their term has been marred by corruption scandals and the departure of an internationally respected finance minister. The government in 2010 faces the ongoing challenge of improving Indonesia's insufficient infrastructure to remove impediments to economic growth, while addressing climate change mitigation and adaptation needs, particularly with regard to conserving Indonesia's forests and peatlands, the focus of a potentially trailblazing $1 billion REDD+ pilot project.
GDP (purchasing power parity):
$1.033 trillion (2010 est.)
country comparison to the world: 16
$974.6 billion (2009 est.)
$932.6 billion (2008 est.)
note: data are in 2010 US dollars
GDP (official exchange rate):
$695.1 billion (2009 est.)
GDP - real growth rate:
6% (2010 est.)
country comparison to the world: 39
4.5% (2009 est.)
6% (2008 est.)
GDP - per capita (PPP):
$4,300 (2010 est.)
country comparison to the world: 157
$4,100 (2009 est.)
$3,900 (2008 est.)
note: data are in 2010 US dollars
GDP - composition by sector:
agriculture: 14.9%
industry: 46.8%
services: 38.3% (2009 est.)
Labor force:
114.9 million (2009 est.)
country comparison to the world: 5
Labor force - by occupation:
agriculture: 42.1%
industry: 18.6%
services: 39.3% (2005 est.)
Unemployment rate:
7.1% (2010 est.)
country comparison to the world: 74
8.1% (2009 est.)
Population below poverty line:
13.3% (2006)
Household income or consumption by percentage share:
lowest 10%: 3%
highest 10%: 32.3% (2006)
Distribution of family income - Gini index:
39.4 (2005)
country comparison to the world: 66
37 (2001)
Investment (gross fixed):
30.8% of GDP (2009 est.)
country comparison to the world: 14
Budget:
revenues: $117.2 billion
expenditures: $127.4 billion (2009 est.)
Public debt:
26.4% of GDP (2010 est.)
country comparison to the world: 91
27.4% of GDP (2009 est.)
Inflation rate (consumer prices):
5.2% (2010 est.)
country comparison to the world: 148
4.8% (2009 est.)
Central bank discount rate:
6.46% (31 December 2009)
country comparison to the world: 40
10.83% (31 December 2008)
Commercial bank prime lending rate:
14.5% (31 December 2009 est.)
country comparison to the world: 57
13.6% (31 December 2008 est.)
Stock of narrow money:
$65.47 billion (31 December 2010 est)
$49.63 billion (31 December 2009 est)
Stock of broad money:
$276.8 billion (31 December 2010 est.)
$205.8 billion (31 December 2009 est.)
Stock of domestic credit:
$253.1 billion (31 December 2010 est.)
country comparison to the world: 37
$192.3 billion (31 December 2009 est.)
Market value of publicly traded shares:
$178.2 billion (31 December 2009)
country comparison to the world: 36
$98.76 billion (31 December 2008)
$211.7 billion (31 December 2007)
Agriculture - products:
rice, cassava (tapioca), peanuts, rubber, cocoa, coffee, palm oil, copra; poultry, beef, pork, eggs
Industries:
petroleum and natural gas, textiles, apparel, footwear, mining, cement, chemical fertilizers, plywood, rubber, food, tourism
Industrial production growth rate:
4% (2009 est.)
country comparison to the world: 85
Electricity - production:
134.4 billion kWh (2007 est.)
country comparison to the world: 27
Electricity - consumption:
119.3 billion kWh (2007 est.)
country comparison to the world: 28
Electricity - exports:
0 kWh (2008 est.)
Electricity - imports:
0 kWh (2008 est.)
Oil - production:
1.023 million bbl/day (2009 est.)
country comparison to the world: 22
Oil - consumption:
1.115 million bbl/day (2009 est.)
country comparison to the world: 18
Oil - exports:
85,000 bbl/day (2008 est.)
country comparison to the world: 69
Oil - imports:
671,000 bbl/day (2007 est.)
country comparison to the world: 20
Oil - proved reserves:
4.05 billion bbl (1 January 2010 est.)
country comparison to the world: 28
Natural gas - production:
70 billion cu m (2008 est.)
country comparison to the world: 12
Natural gas - consumption:
36.5 billion cu m (2008 est.)
country comparison to the world: 23
Natural gas - exports:
33.5 billion cu m (2008 est.)
country comparison to the world: 7
Natural gas - imports:
0 cu m (2008 est.)
country comparison to the world: 174
Natural gas - proved reserves:
3.001 trillion cu m (1 January 2010 est.)
country comparison to the world: 14
Current account balance:
$8.532 billion (2010 est.)
country comparison to the world: 25
$10.75 billion (2009 est.)
Exports:
$146.3 billion (2010 est.)
country comparison to the world: 30
$119.5 billion (2009 est.)
Exports - commodities:
oil and gas, electrical appliances, plywood, textiles, rubber
Exports - partners:
Japan 17.28%, Singapore 11.29%, US 10.81%, China 7.62%, South Korea 5.53%, India 4.35%, Taiwan 4.11%, Malaysia 4.07% (2009)
Imports:
$111.1 billion (2010 est.)
country comparison to the world: 30
$84.35 billion (2009 est.)
Imports - commodities:
machinery and equipment, chemicals, fuels, foodstuffs
Imports - partners:
Singapore 24.96%, China 12.52%, Japan 8.92%, Malaysia 5.88%, South Korea 5.64%, US 4.88%, Thailand 4.45% (2009)
Reserves of foreign exchange and gold:
$83.58 billion (31 December 2010 est.)
country comparison to the world: 16
$66.12 billion (31 December 2009 est.)
Debt - external:
$155.9 billion (31 December 2010 est.)
country comparison to the world: 30
$156.7 billion (31 December 2009 est.)
Stock of direct foreign investment - at home:
$81.21 billion (31 December 2010 est.)
country comparison to the world: 41
$72.84 billion (31 December 2009 est.)
Stock of direct foreign investment - abroad:
$33.71 billion (31 December 2010 est.)
country comparison to the world: 36
$30.18 billion (31 December 2009 est.)
Exchange rates:
Indonesian rupiah (IDR) per US dollar - 9,169.5 (2010), 10,389.9 (2009), 9,698.9 (2008), 9,143 (2007), 9,159.3 (2006)
 

ECONOMIC GROWTH AND STATE FINANCE

 

After an average annual rate of between 5% and 7% during a long-term growth in the last two decades, Indonesia has been hard hit during the recent wave of the Asian monetary crisis. With an economic growth of 4.7% in 1997, the 1998/99 State Budget envisages a minus 12% economic growth with an inflation of 66%, which gradually developed into an economic crisis. The country's economic order and national financial institutions proved unable to with-stand the violent tremors against the nation's economic foundations. It is no exaggeration to say that the achievements of the national development of the last three decades have been wiped out by a crisis that took place for only several months, and worsened when the local currency lost its value. The Government was, in fact, caught by surprise with the unbelievable large private sector debts which had accumulated in the last five years.

The Central Bureau of Statistics predicted that the country's GDP would shrink by 10.1% this year based on 1993 constant prices. The construction sector was the worst hit by the recession, contracting by 27.16%. The manufacturing sector followed with 18.58%, hotels and restaurants 14.38%, financial services 11.1%, mining 9.65%, other services 3.7% and transportation and communication 2.5%. Only agriculture and utilities (electricity, gas and clean water) booked a positive growth during the first quarter of 1998, respectively by 28.47% and 7.1%.

It is also reported that the country's month-by-month inflation rate rose 05.24% in May, bringing the total increase in the consumer price index to 40.06% in the first five months of 1998. Inflation is predicted to reach 80% to 85% this year. The main driver of inflation during the first five months of this year was the prolonged monetary crisis, compounded by bad farm harvests and increasing fuel prices.

Food prices rose by 3.90%, processed food and cigarette prices 4.00%, housing prices increased 4.14%, clothing 4.53%, health 2.4%, education and recreation 1.41%, transportation and communication 17.25%.

In international trade Indonesia noted a surplus of US$5.09 billion during the first quarter of this year, with exports reaching US$12.29 billion and imports US$7.2 billion. Exports declined by 0.9% during the same period to US$12.19 billion, with non-oil exports rising 9.5% to US$10.02 billion and oil and gas exports falling 30.17% to US$2.27 billion. In 1997/98 the country's total exports reached US$56.2 billion with non-oil exports accounting for US$45.9 billion and oil and gas exports US$10.2 billion. At the same time imports accounted for US$38.6 billion and oil and gas imports US$4.1 billion.

To recover the deteriorating economic situation the Indonesian Government has launched and implemented all economic reform programs, including a 50-point program of reforms and its extended arrangement as agreed with the International Monetary Fund (IMF) that offered US$43 billion in loans. In addition, it also adopted a strategy to: (1) stabilize the rupiah at a level more in line with the underlying strength of the Indonesian economy, including a tight monetary policy, (II) strengthen and accelerate its strategy for restructuring the banking system; (III) strengthen implementation of the structural reforms that will create the foundations for a more efficient and competitive economy; (IV) provide a framework for comprehensively addressing the debt problems of private corporations; and (V) restore trade financing to a normal basis, allowing domestic production and especially the export sector to recover.

It is expected that the Government's bold policy program will be reinforced by financial support from the international community, including trade financing and the provision of food and medical aid.

Furthermore, another agreement was signed with the IMF, the fourth in nine months of 1998, promising yet more reforms in a bid to arrest the country's economic turmoil. The latest letter of intent is far less restrictive than previous ones, allowing the government to maintain subsidies for food, fuel, electricity and other spending on "social safety net" programs to help the poor cope with the crisis.

The high interest rate policy will be continued to ensure the quick reduction of inflation and the strengthening of the rupiah.


BALANCE OF PAYMENTS

The balance of payments in fiscal year 1997/98 was heavily affected by the outflow of net capital and the increase of debt-service requirements.

Indonesia's total exports in fiscal year 1997/98 was US$ 56.2 billion, growing only 7.9% compared to that of the previous fiscal year. Non-oil and gas exports accounted for $45.9 billion, or an increase of 17.0%; and oil and gas exports Rp 10.2 billion, down by 19.8% due to the decreasing world demand and oil prices on the international market. The contribution of non-oil and gas to the country's total export rose by 81.8% in fiscal year 1997/98 from 75.5% in fiscal year 1997/98.

At the same time, its total imports was US$42.7 billion, or down by 6.8%. The decrease was chiefly caused by the slowing down of demand for imported goods during the current economic crisis. Non-oil and gas imports decreased by 6.1% to US$38.6 billion, and oil and gas imports by 13.0% to US$4.1 billion.

Net foreign exchange spending for services increased slightly to US$15.2 billion in fiscal year 1997/98 from US$14.3 billion in fiscal year 1996/97. The growing transaction deficit for services was attributed to transaction deficit for oil and gas services which increased by US$1.1 billion.

Meanwhile, inflow of net capital noted a substantial deficit of US$7.6 billion in 1997/98. It was chiefly caused by the outflow of private net capital that noted a deficit of US$11.8 billion in 1997/98 along with the slowing down of the country's economic performance. Encouragingly, the inflow of government net capital noted a surplus of US$ 4.2 billion.

All developments mentioned above have caused the country's foreign exchange reserves to decrease sharply to US$16.6 billion (account based on Gross Foreign Assets), making it capable of financing imports for 4.6 months.

 

Foreign Reserves (in million dollars)

 

 

 July 24 

 July 31 

 August 7

 

Gross foreign assets  

    19,536.6 

    19,527.4  

    19,403.3

 

Liquid reserves*

----

----

----

 

Other reserves ** 

----

----

----

 

Gross foreign liabilities

      4,896.4

      4,896.4

      4,896.4

 

Net forward positions    

             0.0

             0,0

            0.0

 

Reserve against foreign
      currency deposits 

        422.2

        433.3 

        425.4

 

Net international reserves

   14,218.0

   14,197.7 

   14,081.5

 

 

 

 

 


* Liquid gross foreign assets include gold, foreign securities, offshore deposits and special drawing rights.
** Other gross foreign assets include export drafts, deposits in the branches of domestic banks in offshore and deposits parked at foreign banks to guarantee letters of credit.


GOVERNMENT BUDGET

Due to the sharp depreciation of the rupiah, rising inflation and lower international oil price that caused the weakening of the country's economic performance, the Indonesian Government had to revise its budget twice from the original budget issued early January. The final revised version of the 1998/99 State Budget is expected to accommodate further economic deterioration and a huge subsidy commitment.

Finalized after consultations with the IMF, the new budget estimates an average exchange rate for the rupiah at Rp 10,600 to the dollar over the fiscal year. The oil price assumption is set at US$13 per barrel.

The total budget for 1998/99 is enlarged to Rp 227.1 trillion, an 88.2% increase from the January version of Rp142.7 trillion. The bulk of the budget is aimed at financing the social safety net to help the poor in surviving the crisis and debt repayment.


REVENUES

Revenues from the non-oil and gas sector is envisaged at Rp 99.6 trillion, primarily on the back of larger tax revenues from the export of crude palm oil (CPO).

Revenue from oil and gas is expected at Rp 49.71 trillion. It is worth noting that Indonesia is a major oil exporter.

Meanwhile foreign aid revenue is envisaged at Rp 127.8 billion.


EXPENDITURES

Government spending is divided into two broad categories in the budget; routine expenditures and development expenditures.

Routine expenditure is envisaged at Rp 61.6 trillion, up from the previous Rp 12.3 trillion due to a rise in the fuel subsidy and to anticipate increasing subsidies for basic food items. In fiscal year 1997/98 routine expenditure was earmarked for Rp 84,606.2 billion.

Development expenditure, meanwhile, is allocated Rp 92.68 trillion, up from the earlier amount of Rp 71.6 trillion.


DEBT

Indonesia's total external debt outstanding at the end of March 1998 was US$138.018 billion up from US$108.7 billion at the end of March 1997.

The total amount of government external debt outstanding, at the same time, amounted to US$54.159 billion and private debt outstanding US$83.859 billion.

The decline in the rupiah's value by almost 80% since July 1997 had caused the value of the country's overseas private-sector debt, in particular, to sky-rocket. To deal with the debt problems the Government established the Indonesia Debt Restructuring Agency (INDRA).

In the 1998/99 budget, the Government allocated Rp 94.5 trillion for government debt repayment and Rp 77.55 trillion for foreign debt servicing, including about Rp 46.51 trillion for principal repayment and more than Rp 31 trillion for interest payment.

Revised Balanceof Payments Projections 1998/1999
(in billion US Dollars)

 

 

 OLD

NEW

 

Merchandise exports             

 60.6  

    56.5

 

Merchandise imports          

  - 42.4   

  - 37.9

 

Trade balance                    

18.2     

    18.6

 

Services                        

15.5     

    17.2

 

Current Account balance            

   2.6    

      1.4

 

Capital flow Government receipts                        

   9.1

    19.4

 

Government debt payments      

- 4.9     

  -   4.2

 

Other                           

- 5.6  

     11.3

 

Capital Account balance  

- 1.4     

        3.9

 

Overall balance                  

   1.1      

      5.3


Note: Some figures don't add up due to rounding up.
Source: From Minister of Finance's Statement at the House of Representatives, July 16, 1998


CURRENCY AND FOREIGN EXCHANGE

Indonesia's currency is the rupiah. Notes come in denominations of 50,000, 20,000, 5,000 1,000, 500, and 100 while coins come in denominations of 1,000, 500, 100, 50, 25, 10 and 5.

The system of liberal foreign exchange based on the price flow of foreign exchange controls is continuously maintained. However, regulations have an impact on the exchange system, say, for example, only foreign exchange banks are authorized to execute foreign exchange transaction related to the import and export goods.

Money in supply or narrow money (MI) grew at an annual average of 26.9%, from Rp 37.9 trillion in March 1994 to Rp 98.3 trillion in March 1998. During fiscal year 1997/98 alone it increased sharply by 54.6%. Meanwhile, liquidity or broad money (M2) swelled by 31.9% on average per year. In fiscal year 1997/98 broad money grew by 52.7% due largely to the decrease of rupiah exchange rate.


BANKING AND OTHER FINANCIAL INSTITUTIONS

The Indonesian banking sector has been badly hit by the rupiah's sharp plunge against the US dollar. The rupiah's fall has multiplied the value of the banks' foreign debts as well as the value of their dollar loans, which mostly fall under the non-performing category due to the real sector's bleak performance and their failure to make the necessary credit risk assessments.

The banking crisis has seen a drying out in overseas credit for local exporters to import their raw materials, while domestic financing is virtually nonexistent since local banks are now unable to risk more non-performing debts. The national banking industry has also worsened because of massive outflows and worsening corporate woes.

In a bid to revive the lackluster banking industry the Government has subsequently taken the necessary steps, including the liquidation of 16 ailing banks out of 237 banks (in fiscal year 1996/97).

Such a bold step was followed by a move to restructure the ailing banking sector, and for that purpose the government established the Indonesian Bank Restructuring Agency (IBRA).

Charged with restructuring and speeding up the recovery of Bank Indonesia's liquidity credits already injected into problem banks, IBRA has intervened in the 54 banks whose emergency borrowings from Bank Indonesia surpassed 200% of their capital. Another important move taken by IBRA was to suspend the rights of owners and management of seven banks having borrowed more than Rp 2 trillion from Bank Indonesia (BI), comprising 75% of the total of BI lending. IBRA also took control of seven banks that have borrowed more than 500% of their total assets from BI with a right to immediately transfer their assets and abilities to other banks, while intensifying its control over the remaining IBRA banks by issuing government contracts through these banks and preparing to remove their foreign exchange licenses.

In another concerted effort to speed up the restructuring process of the country's ailing banking industry, the government set a minimum paid-up capital of Rp 250 billion (US$16.2 million) by the end of 1998 for newly established banks, lower than the previous tough minimum paid-up capital adequacy ratio (CAR) for banks respectively to 4% by the end of 1998, 8% by the end of 1999 and 10% by the end of 2000. The previous CAR requirements were 8% by the end of 1998, 10% by the end of 1999 and 12% by the end of 2000.

More sweeping taken by the Government was to suspend the operation of seven ailing banks, take over the management of seven additional banks deemed to be unsound under the IBRA, and placing 40 banks (including three state-owned banks and 11 provincial development banks) under its supervision.

It is expected that by consolidating more banks under IBRA, the government could merge their operations under its control and reduce them to a manageable number.

The last positive move taken by the government to freeze, merge and nationalize 11 of the country's weakest banks was lauded by the IMF. The move, which included nationalizing the country's highest private bank, Bank Central Asia (BCA)- has been the clearest sign so far that the government through IBRA is ready to take tough measures. Meanwhile, four state banks merged into Bank Mandiri, were Bank Exim, Bank Bumi Daya, Bank Dagang Negara and Bapindo.

The government would also submit to parliament a law eliminating existing restrictions on foreign ownership of banks.


BANK INDONESIA

Bank Indonesia is the country's central bank. Pursuant to the Central Bank Act of 1968, its major functions are to issue currency, devise and implement the monetary policy, act as the government's banker, and supervise and regulate financial institutions. Thus, it is the sole issuer of the country's currency, i.e. the rupiah. It holds the official international reserves of the economy.

It regulates the liquidity position of banks by adjusting the minimum liquidity ratio and the minimum reserve requirements that all deposit-money banks are required to maintain. It is the banker of last resort in the domestic banking system.

Bank Indonesia is also in charge of preparing and implementing the monetary policy under the direction of the Economic Stabilization Council, a government advisory body presided over by the President.

Directly responsible to the Government, BI is supervised by a commissioner appointed by the president, and is required to submit annual and supplemental budgets to the government for approval. The governor of the banks and his seven managing directors are appointed by the President for a five year tenure.


STATE OWNED BANKS

The number of state-owned banks shrank from the previous five (5) banks authorized to handle foreign exchange to only two (2) BNI (Bank Negara Indonesia), the largest of the banks in terms of assistance, and BRI (Bank Rakyat Indonesia), since BDN (Bank Dagang Negara), BBD (Bank Bumi Daya) and Bank Exim (Bank Eskpor and Import) have been merged into Bank Mandiri. In addition the country has also a savings bank, Bank Tabungan Negara (BTN) and Bapindo (also merged into Bank Mandiri) and 27 Regional Development Banks, with thousands of bank offices.


NATIONAL AND FOREIGN PRIVATE BANKS

As mentioned earlier a number of private ailing banks have been liquidated, nationalized and/or put under the supervision or management of IBRA.

There are also several foreign banks operating in Indonesia, including Bank of America, Hong Kong and Shanghai Bank, Bank of Tokyo, Bangkok Bank, Chase Manhattan Bank, Swiss Bank, ABN-AMRO Bank etc.


THE INVESTMENT COORDINATING BOARD

The Investment Coordinating Board (BKPM) is a non-department government agency serving under and directly responsible to the President of the Republic of Indonesia. It is led by a chairman who is also minister of state for investment promotion and coordination.

Its function is to formulate government policies with respect to investment, excluding those of oil, gas, banking, insurance, non-bank financial institutions and leasing, in processing investment implementation.

The agency is responsible not only for the planning and administration of investment but also for assisting the investors to find feasible projects and suitable local partners, as well as overcoming problems that might occur during implementation stages.

BKPM is the central point of investment authority and has since the end of 1977 been truly a one-stop investment agency. In the bid for approvals, licenses and permits required to establish and expand production facilities in the country, receiving fiscal facilities, grants and other incentives, the investors deal with this agency, except for forestry and mining projects. It has its main office in Jakarta and 27 regional offices in the provinces, each under the direction of the provincial governor to coordinate local investment in their respective area. The agency has representative offices in Paris, Frankfurt and New York.


FOREIGN AND DOMESTIC INVESTMENT

Foreign investment is known in Indonesia as Penanaman Modal Asing (PMA), and domestic investment is known as Penanaman Modal Dalam Negeri (PMDN).

The modern era of investment in the country was introduced with the enactment of the Foreign Investment Act of 1967 amended by Act No. 11 of 1970), and the passage of Domestic Investment Act of 1968 (amended by Act No. 12 of 1970).

In accordance with the economic reform and restructure the Government issued Regulation No. 16, 1998 (amended Regulation No. 2, 1996) concerning Foreign Investment Companies in Export and Import activities. This act gives more opportunities to foreign investment companies to take part as distributor or retailer in national import-export.

Higher production, improved industrial structure, new employment opportunities, equitable distribution of income, utilization of human and natural resources, promotion of exports, and environmental conservation are set to be the country's basic investment goals. Parallel with these, policies on investments put more emphasis on industries that produce capital goods, intermediate products and raw materials needed to establish a strong foundation for accelerating the industrial growth.

Special priority has been given to investments outside Java, particularly the country's eastern part which includes Kalimantan, Sulawesi, Nusatenggara, East Timor, Maluku and Irian Jaya in efforts to promote a more even distribution of investments and simultaneously to boost economic activities in those less-developed regions.

Keen interest on investment in Indonesia can be seen from the high growth of investment realization. In 1995, for instance, the formation of gross domestic product permanent capital was 13.8 percent, while it was 14.5 percent in 1996. Nevertheless, due to the economic crisis, investment value in 1998 is estimated to decrease sharply.

The approved projects of foreign and domestic investment in fiscal year 1997/98 were expected to create jobs for 682,000 people.


FOREIGN INVESTMENT

To invest in Indonesia, foreign investors should first look at the so-called "Negative List of Investment" (DNI) that contains the business sectors absolutely closed and still regulated for investment entries. The regulated sectors in this case can be entered by investors if certain requirements are satisfied, such as export-oriented projects, partnership with state owned companies, technology transfer, cooperation with small-scale business holders, etc.

Foreign companies can invest and operate in Indonesia either independently or in joint-ventures with local partners with the approval of the government for a maximum period of 30 years (extendable).

In fiscal year 1997/98 approved foreign investments from Asia and Europe accounted for 4.3 percent and 35 percent respectively.

Some 59.1 percent of the total foreign investment value went to the processing industry sector such as chemicals, food, and non-steel minerals.

In fiscal year 1997/98 the province of West Java, Jakarta, Riau, and East Java dominated investments by 28.5 percent, 21 percent, 18.9 percent, and 12.4 percent respectively.


DOMESTIC INVESTMENT

By sector, the processing industry was still dominant by accounting for some 59.0 percent of the total approved domestic investment in fiscal year 1997/98. Meanwhile by location, West and East Java accounted for some 31.9 percent and 11.0 percent respectively of the total domestic investment value during fiscal year 1997/1998.


COOPERATIVES

Cooperatives which developed in almost all regions of Indonesia have become business institutions which strengthen the people's economy and increased the welfare of the members and the surrounding area. About 4,700 cooperatives have developed middle and big-scale businesses with a value of over Rp1 billion per year.

Development policies of cooperatives are realized through the following programs:


EDUCATION TRAINING AND INFORMATION OF COOPERATIVES

The main program is aimed at increasing the quality of entrepreneurship, professionalism, creativity and the capability of the members, organizers, employees and consultants of cooperatives. The capability of managers in applying, utilizing and developing science and technology is also enhanced.

To support the development of professional cooperatives, in 1997/98 (the fourth year of Repelita VI), 7,169 organizers, managers, employees and cadres, and field consultants (PKL) of cooperatives were trained. The program also trained 10,900 KUDs (Village Unit Cooperatives) managers and paid for comparative studies of 9,400 KUD organizers. The GNMMK (National Movement to Socialize and Culturize Entrepreneurs) program trained 707,000 people including cooperatives members and the public.

Until 1997/98, increasing business productivity had involved 266,200 groups of cooperatives.


IMPROVING FINANCIAL FUNDING INSTITUTIONS

This program is to increase the capability of cooperatives in utilizing the funds to develop a healthy capital structure; therefore, self funding especially from the members' mortgage and other sources, including banking credit should be sought.

In 1997, the mortgages of cooperative members amounted to Rp4.1 trillion or 27.6% higher compared to that in the previous year. The amount of the mortgages was 72.9% of the cooperatives working capital or an increase of 70.7% compared to that of the previous year. Meanwhile, in 1997 the cooperatives working capital increased 23.7% compared to that of the previous year.

In 1997, the distribution of credit for members of premier cooperatives (KKPA) amounted to Rp1,488.1 billion or an increase of 41.4% compared to that in 1996. To support business activities of cooperatives which are unable to provide collateral or credit guaranty, the cooperatives finance development institution (PKK) grants aid.

In an effort to support small business especially in villages, cooperatives channel credit as working capital under the simple condition of small vendor credits (KCK) amounting to Rp296,999.4 million. Until 1997, 6,478 cooperatives channeled KCK credits worth Rp297.0 billion, while 17,906,800 clients received KCK credits.

The Cooperatives Unit Savings/Cooperative Savings (USP/KSP) as finance institutions have grown and in 1997 the 39,700 units were worth Rp5.4 trillion.


EXPANSION OF COOPERATIVES

This program promotes services to members, such as business promotion, information on business opportunities and marketing, develop a marketing network, trade missions, provide marketing facilities and infrastructure, give guidance and market consultation, as well as intensification of the distribution system.

Until 1997/98, marketing facilities and infrastructure, especially in the least developed areas, in the form of small shop selling complete daily necessities (waserba) grew to 21,000 units. In 1997/98, the number of cooperatives which manage waserba and cooperative savings was 20,952 units.

In cooperation with PLN (the State-owned Electricity Company), in 1997/98, 4,001 cooperatives were active in marketing electricity services in the villages or an increase of 9.4% compared to that in the previous year to 15,534,000 houses in 36,006 villages or an increase of 17.2% and 25.8% compared to that in 1996/97.


COOPERATION AND EXPANSION OF COOPERATIVE UNDERTAKINGS

This program is aimed at enhancing the activities of cooperatives effectively and efficiently, both in the institution and business aspects. The program covers the cooperative undertaking network (JUK) which is developed through distribution and marketing, partnership between cooperatives with the private sector and with state-owned companies (BUMN), as well as through the sale of shares in private companies to cooperatives.

In the framework of enhancing participation of big regional entrepreneurs, the national partnership program began to extend their scope into some districts. Until 1997, the number of cooperatives and small entrepreneurs which participated in this program was 15,900 units, and 27,900 people respectively with a value of Rp1.6 trillion. In 1997/98, some 221 private companies had sold 168.1 million of their shares with a value of Rp135.5 billion to 3,506 cooperatives.


INTENSIFICATION OF COOPERATIVE INSTITUTION

The program aims to organize and strengthen cooperatives institutions in order to make the movement comply with the dynamic environment. In 1997/98, there were 52,100 cooperatives consisting of 8,500 KUDs and 43,600 non-KUDs. In 1997/98, the number of cooperatives increased by 3,000 units or about 6.1% followed by an increase of 1,760 members or 6.4% compared to that in the previous year.


COOPERATIVES DEVELOPMENT IN LEAST DEVELOPED AREAS

This program is meant to increase the quality of services to cooperative members and the community in the least developed areas.

Until 1997/98, 1,636 TPK-KUDs (Place of Cooperatives Services-Village Unit Cooperatives) have been built, 2,353 shops selling complete daily necessities (waserba) managed by KUDs and supported by professional self-supporting workers (TKMP).


INFORMATION AND RESEARCH

In 1997/98, improvement of the cooperatives information system on cooperative institution and undertakings covered the basic data system of cooperatives and small entrepreneurs.

In 1997/98 various researches were done on the policy and strategy to develop cooperative and small and medium-scale entrepreneurs and to strengthen the people's economy. Research also covered cooperation with other cooperatives and small-scale business at home and abroad, the role of cooperatives in developing an integrated economic growing area (KAPET), development of the rural industry pattern through cooperatives and small-scale business in facing GATT and APEC.


YOUTH AND WOMEN IN COOPERATIVES

In 1997/98, youths were trained and imbued with the pioneering spirit and business skill as managers and members of youth cooperatives, including cooperatives of Islamic Boarding Schools and encouraged to become businessmen at youth and college cooperates.

Improving of knowledge and skill, as well as the broadest possible opportunities are provided for women to participate actively in cooperatives. During four years of Repelita VI, 11,200 managers and members of women cooperatives in 27 provinces received training.

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Information provided by the Directorate of Foreign Information Services, Department of Information, Republic of Indonesia.

 


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