A. Revised National Accounts Statistics

In early 1995, the Indonesian Central Bureau of Statistics (BPS) released new national accounts statistics for 1993 and 1994. These revisions involved three significant changes: (i) a rebasing of the constant price series from 1983 prices to 1993 prices; (ii) an upward revision in the estimates of nominal GDP as a result of improved estimates of production, and (iii) the sectoral classifications were made more detailed and some subsectors were reclassified. Some of the practical implications of these revisions are: (i) real growth rates in 1994 were higher than previous estimates owing to the revised sectoral weights derived from 1993 prices; (ii) estimates of nominal and per capita income were higher by about 9 percent than previously estimated; and (iii) the classification by expenditure category has been revised with consumption receiving a higher weight than previously. At the present time, the revised statistics are only available for 1993 and 1994. BPS plans to issue revised estimates of data prior to 1993 on the basis of the new methodology later this year.⁵

B. Aggregate Demand

After declining from its previous peak in 1990 to 4 percent growth in 1992, real domestic demand growth strengthened to 6 percent in 1993 and to an estimated 9 percent in 1994 (Chart 2). Growth in both consumption and investment expenditure picked up. Consumption expenditure increased by an estimated 5 1/2 percent in 1994 with most of this growth accounted for by increases in private consumption. Investment expenditure increased more dramatically, with real fixed capital investment growing by 13 percent in 1994, compared with 6 percent in 1993. Most of the investment expenditure was concentrated in the manufacturing and construction sectors.

INDONESIA: CONTRIBUTION TO GDP GROWTH, 1989-94 ^1/

(In percent)

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Sources: Data provided by the Indonesian authorities; and staff estimates.^1/ Data for 1989-93 are based on 1983 prices, and beginning in 1994 are based on 1993 prices.2/ Includes mining and quarrying, utilities, and construction.

• Download Figure
• Download figure as PowerPoint slide

View Full Size

INDONESIA: CONTRIBUTION TO GDP GROWTH, 1989-94 ^1/

(In percent)

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Sources: Data provided by the Indonesian authorities; and staff estimates.^1/ Data for 1989-93 are based on 1983 prices, and beginning in 1994 are based on 1993 prices.2/ Includes mining and quarrying, utilities, and construction.

• Download Figure
• Download figure as PowerPoint slide

INDONESIA: CONTRIBUTION TO GDP GROWTH, 1989-94 ^1/

(In percent)

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Sources: Data provided by the Indonesian authorities; and staff estimates.^1/ Data for 1989-93 are based on 1983 prices, and beginning in 1994 are based on 1993 prices.2/ Includes mining and quarrying, utilities, and construction.

• Download Figure
• Download figure as PowerPoint slide

Following the deregulation packages of June 1994, which liberalized investment activities and lowered import tariffs, there has been a substantial increase in approvals for both domestic and foreign investment projects. For 1994 as a whole, investment approvals increased by 35 percent for domestic projects and by 191 percent for foreign projects. This high rate of investment approvals continued in the early part of 1995. The bulk of the domestic and foreign investment approvals in 1994 were in the manufacturing sector, particularly for paper and paper products, chemicals, metals and metal products, and food processing.

Overall export growth slowed in the later part of 1993 and into 1994 owing to the rising domestic demand, which redirected some output to the domestic market. Increased foreign competition and specific problems in textiles and several other important export sectors were also factors. However, the growth in non-oil gas exports began to pick up again in the second half of 1994 (see section VI below). On a national accounts basis, real exports of goods and non-factor services are estimated to have grown by about 7 percent in both 1993 and 1994. While import growth remained relatively low for most of 1993, it began to pick up considerably near the end of 1993 and grew by an estimated 13 percent in 1994. Demand for imports appeared to have been affected by both an acceleration in fixed investment and consumption.

C. Sectoral Developments

Growth in agricultural production slowed further in 1994 to 0.3 percent. Production of food crops declined by 3 percent as the result of a long dry season in 1994 and the impact of switches made to the planting season because of the previous dry season in 1993. Overall, rice production decreased by 4 percent and fell below domestic requirements, necessitating a sharp increase in imports. Production of other food crops, such as cassava and sweet potatoes, also declined by 6 percent and 5 percent, respectively. In contrast, nonfood crops generally increased, but at lower rates than previous years, with overall production increasing by about 5 percent. Growth in the forestry sector was relatively flat, while value added in the livestock and fisheries sectors increased by 5 percent and 4 percent, respectively.

The shortfall in rice production in 1994 led to a depletion of rice stocks held by the National Logistics Agency (BULOG) to only about 600,000 tons by the end of the calendar year, below the targeted stockpile of 1 million tons. Despite sales from BULOG stockpiles, the production shortfall contributed to upward pressure on the market price for rice at the end of 1994, which increased by 20 percent compared with the price at end-1993. As a result, BULOG made large-scale imports of rice during the first quarter of 1995 which were sufficient to help prevent any further increases in market prices. For the fiscal year 1994/95, BULOG imported 1.8 million tons of rice and increased their stock to 760,000 tons.

The mining sector grew by 5 percent in 1994 as oil and gas output both increased. While still relatively small in overall importance, non-oil/gas mining increased dramatically in 1994 (14 percent) owing to increases in the production of nickel, coal, and tin. Strong growth in the manufacturing sector also continued in 1994. Overall growth was 11 percent, with particularly strong growth in cement and automobile production, which were boosted by high demand. Other sectors that posted higher-than-average growth in 1994 were utilities (13 percent); construction (15 percent); trade, hotels, and restaurants (9 percent); transportation and communications (8 percent), and banks and financial institutions (12 percent).

The sectoral shares in nominal GDP continue to change in favor of the rapidly growing manufacturing and services sectors, with a trend decline in the relative importance of mining and agriculture. The change has been most dramatic over the last decade with respect to mining and manufacturing which have reversed their relative shares. During 1983-1994, mining has fallen from 21 percent to 8 percent, while manufacturing increased from 13 percent to 24 percent during the same period.

A. Prices

The average rate of consumer price inflation declined slightly from 9.7 percent in 1993 to 8.5 percent in 1994. Consumer price inflation in 1994 was driven primarily by food prices which increased by 15 percent, while nonfood price inflation was 7 percent. The increase in food prices was largest for rice, but there were also price increases for cooking oil, wheat flour, and nonalcoholic beverages (which were related to increases in sugar prices). The largest increase in the nonfood category was for housing (9 percent) on account of the increased cost of construction materials, especially cement, and increases in rent. Wholesale price inflation increased dramatically in 1994 to 11 percent from 3 percent in 1993. While wholesale prices in the agricultural sector increased by 23 percent, there were also increases in wholesale prices in mining (10 percent), manufacturing (9 percent), and exports (16 percent).

Inflationary pressures continued in early 1995. For the first five months of the year, prices increased at an annual rate of 13 percent. While the increase in food prices continues to be high, the rate of nonfood price inflation also increased to an annual rate of 8 percent. The relatively large increase in the CPI in the early part of 1995 may in part reflect the impact of increases in minimum wages and civil service salaries.

B. Wages

The Government sets minimum wages for 27 provinces on the basis of periodic surveys. Over the last several years, increases have been well above the rate of inflation as the Government has aimed to bring minimum wages to a level commensurate with meeting a minimum level of basic physical needs. In 1994, minimum wages were increased by 40 percent in January for Jakarta and West Java, and by 15-50 percent in April for 16 other provinces. In the remaining nine provinces the minimum wage was raised by 21-38 percent in August. Effective April 1, 1995, the Government increased minimum wages by a further 10-35 percent. Minimum wages are applied differentially across provinces but not differentially across sectors. With the recent increase, the authorities consider that minimum wages are now adequate to meet the minimum level of basic needs. Market minimum wages are usually higher than the actual legislated minimum wages. However, increases in the legislated wages usually have a signaling effect that puts upward pressure on market wages.

Data on average wages in the private sector are not available, but the minimum and maximum wages as reported have increased markedly in real terms during the last several years. While real wages have been rising, labor productivity has also been rising especially following the deregulation measures introduced in the early 1980s. Labor productivity growth in the early 1990s appears to have slowed down somewhat, contributing to increases in estimated unit labor costs in 1991-93. However, preliminary estimates indicate that productivity gains may have exceeded wage increases in 1994.⁷

C. Employment and Human Resource Development

Since 1986, the labor force participation rate has remained at about 57 percent (about 70 percent for males and 44 percent for females). During the last two years, the labor force and employment each grew by about 2 percent implying no real change in the official unemployment rate which is estimated at about 3 percent. For the official employment figures, a person is considered to be employed if he or she has worked during the last week, even if only for a few hours. However, taking into account those who are not fully employed, underemployment in Indonesia is considered to be widespread. Beginning in 1995, the Government intends to announce both the core unemployment rate and an estimated underemployment rate. The rapid growth of the manufacturing and service sectors continues to influence the composition of employment. The share of employment in the agricultural sector fell to 47 percent in 1994 (compared with 56 percent in 1990), while the share in the manufacturing and other sectors increased to 13 percent (from 10 percent), and 24 percent (from 19 percent), respectively, during the same period.

An important dimension of Indonesia’s human development strategy is the recognition of the need to upgrade labor quality to meet the needs of a more complex economy. Repelita VI (the national development plan, covering the period 1994/95-1998/99) incorporates increases in expenditure for all categories of human resource development in real per capita terms including a gradual increase in compulsory education from six to nine years over a 15-year period, enhanced quality of education at all levels, and an expansion of education to poorer groups and remote regions. The Government is also shifting its role in education from the direct provision of tertiary education and employee training toward a more regulatory role. It is now estimated that about 70 percent of students undergoing tertiary education are enrolled in private institutions, while private sector training institutes and firm-level training are becoming predominant.

A. Introduction

Indonesia’s public sector consists of the central government, 27 provincial governments, 368 municipal and local governments, and 181 public enterprises. Transfers from the central government account for more than half of provincial governments’ revenues and a large share of public enterprise investment is funded by loans from the central government, mainly in the form of on-lending of foreign borrowing undertaken specifically to finance capital projects of public enterprises.

The conduct of fiscal policy in Indonesia follows a balanced budget principle. Total budgeted expenditure in any given fiscal year must be equal to projected revenue as defined in the budget (including net receipts from foreign loans); no domestic borrowing to finance the budget is permitted. The balanced budget rule has, in the past, precluded any sustained domestic financing of government operations. However, a more conventional measure of the budget deficit (treating foreign loans as financing) has shown substantial year-to-year fluctuations in the overall fiscal balance, with large cumulative effects on the stock of public debt. For example, the ratio of external public debt to GDP rose from less that 20 percent in the early 1980s to 50 percent in 1986/87, before declining gradually to 38 percent in 1994/95. Moreover, extrabudgetary funds, which consist of government accounts held with the banking system, also play a significant role in fiscal policy. As the Government has been able to accumulate a significant stock of deposits with the domestic banking system, there is some short-run flexibility with respect to fiscal policy.⁹

Following a weakening of oil revenues in the early 1980s, a strong program of fiscal adjustment was initiated. Development expenditure was reduced and the tax system reformed with a view toward improving non-oil/gas revenue collections. These reforms were generally successful, and contributed to a reduction in the overall fiscal deficit from 5 percent of GDP in 1982/83 to broad budget balance in 1994/95. During the same period, the non-oil/gas deficit declined from 17 percent of GDP to about 3 percent of GDP.¹⁰

On the revenue side, reforms have included the broadening of the revenue base through reform of the personal and corporate income tax systems in 1984, the introduction of a VAT in 1985, and the introduction of a new property tax in 1986. In addition, there have also been substantial improvements in the system of tax administration. The number of registered taxpayers has increased, tax compliance improved, the use of tax withholding broadened, and law enforcement strengthened. As a result, the composition of tax revenue has changed dramatically over the last few years. Oil and gas revenue continues to decline relative to GDP, and now represents only 25 percent of total tax revenue compared with 47 percent in 1990/91 (Chart 3). At the same time, income taxes and taxes on goods and services have, in general, been increasing relative to GDP.

INDONESIA: FISCAL INDICATORS, 1989/90-1994/95

(In percent of GDP)

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Sources: Data provided by the Indonesian authorities; and staff estimates.1/ Derived from the sum of the current balance and net financing.2/ Derived from the balance of payments.3/ Change in net government deposits with the domestic banking system.

• Download Figure
• Download figure as PowerPoint slide

View Full Size

INDONESIA: FISCAL INDICATORS, 1989/90-1994/95

(In percent of GDP)

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Sources: Data provided by the Indonesian authorities; and staff estimates.1/ Derived from the sum of the current balance and net financing.2/ Derived from the balance of payments.3/ Change in net government deposits with the domestic banking system.

• Download Figure
• Download figure as PowerPoint slide

INDONESIA: FISCAL INDICATORS, 1989/90-1994/95

(In percent of GDP)

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Sources: Data provided by the Indonesian authorities; and staff estimates.1/ Derived from the sum of the current balance and net financing.2/ Derived from the balance of payments.3/ Change in net government deposits with the domestic banking system.

• Download Figure
• Download figure as PowerPoint slide

At the same time, total expenditure had declined substantially relative to GDP. Development expenditure fell from 11 1/2 percent of GDP in 1985/86 to about 7 percent of GDP in 1994/95 owing to improved selection of investment projects as well as a slowing in the pace of project implementation. Noninterest current expenditure has also made a substantial contribution to the adjustment effort, declining from 10 percent of GDP in 1985/86 to 7 percent of GDP currently. In particular, petroleum subsidies (previously representing about 2 percent of GDP) were eliminated through adjustment in domestic petroleum prices in 1991-93, and domestic oil operations recorded a surplus for the first time in 1993/94.

B. Central Government Finances

C. Public Enterprises

The public enterprise sector in Indonesia consists of some 180 enterprises.¹⁷ They represent an estimated 15 percent of GDP, with a book value of total assets of about Rp 295 trillion ($140 billion) in 1994 and employment of about 1.4 percent of the labor force. Public enterprises are active across all economic sectors with relatively heavy concentration in agriculture, finance, industry, public works, and transportation. For example, in the financial sector, public enterprises account for about one half of outstanding credit, and about 75 percent of the classified loans, while about one half of public enterprise employment is accounted for by 27 public estates under the direction of the Ministry of Agriculture. Since 1989, there have been several privatizations, liquidations, and mergers involving public enterprises. During this time, however, 12 new public enterprises were formed so that the total number of enterprises has only declined from 187 to 182. Despite the fact that the number and size of public enterprises has remained broadly stable in recent years, their relative importance has declined owing to strong growth in the private sector in response to the deregulation of the financial sector and the liberalization of the investment regime. Since 1989, the vast majority of public enterprises have been converted to Persero status. In addition to 160 Perseros, there are another 18 wholly state-owned companies with a public utility function (Perums), and two special status public enterprises, including the state oil and gas company, Pertamina.¹⁸

Comprehensive data on the financial performance of public enterprises remain limited, but most available data point to a decline in the financial performance of public enterprises in recent years. However, this comparison is affected by artificially high profits in the earlier years arising from the extensive loans made by state banks that were later declared nonperforming, while Pertamina’s profitability has been affected by the declining trend in the oil sector. However, even excluding the state banks and Pertamina, the pretax return on assets still declined from 5.6 percent in 1989 to 4.1 percent in 1994, and return on equity from 10.4 percent to 7.8 percent during the same period.

The Ministry of Finance classifies public enterprises by their level of financial and operational soundness, based on an assessment of profitability, liquidity, solvency, and of technical indicators specific to subsectors in which they operate. According to this assessment, the share of “less sound” and “unsound” public enterprises increased from 46 percent in 1990 to 54 percent in 1994. At the same time, the share of “very sound” firms dropped from 32 percent to 22 percent. The number of enterprises reporting losses fell to 15 in 1994 from 24 in 1993. Overall, losses have not been very significant—representing about 0.1-0.2 percent of total assets.

Based on a Presidential decree in 1988, an assessment was made of the financial soundness of each public enterprise, and a restructuring program was initiated. Enterprises were classified into four broad performance categories and these were used to determine restructuring strategies for individual enterprises. The proposed measures included changes in legal status and management contracts, as well as mergers, joint ventures, public share issues, and liquidations. To encourage greater managerial autonomy, enterprises were also required to prepare five-year corporate plans and annual work programs, and link managerial salaries to enterprise performance. The restructuring programs launched in 1989 called for 52 public share issues by end-1994. However, progress has been slow. Only two of these public share issues have been made so far, including the partial privatization of PT Indosat. In addition, seven additional public enterprises were sold fully or in major part to the private sector including mostly through public offerings; four public enterprises were liquidated; and there were a few other liquidations that took the form of mergers. The Government intends to continue with the privatization program with several additional share offerings expected to be made in coming years, including PT Telekomunikasi Indonesia in 1995.

Other initiatives that have been launched with a view to improving the efficiency of enterprises remaining in the public sector include the reorganization in 1994 of 32 state plantation companies into 9 groups, with the objective of enhancing economies of scale and improving integration with processing units. In addition, to enhance performance in the industrial sector, several state-owned companies under the direction of the Ministries of Industry and Trade are being consolidated. For example, in March 1995, it was announced that state-owned enterprises in the fertilizer and cement industries would be merged into holding companies with a view to improving their performance.

The Government also plans to rely to a significant degree on private investment in infrastructure during the remainder of Repelita VI. Envisaged private investment is concentrated in power, telecommunications and, to a lesser extent, in roads and water and is expected to involve build-own-operate and build-own-transfer schemes, as well as joint ventures.

A. Monetary Developments

Broad money growth which had slowed from its exceptionally high levels at the outset of the 1990s-from 46 percent in 1989/90 to 22 percent in 1992/93—registered strong growth during 1993/94-1994/95. In 1994/95, broad money grew by 21 1/2 percent, similar to the growth recorded in the year before. As in the previous year, the expansion in domestic assets was the main source of broad money growth while the contribution from net foreign assets remained negative (Chart 4). The growth of narrow money, which picked up in 1993/94 to 26 percent in response to the reduction in interest rates in that year, slowed in 1994/95 to about 17 1/2 percent as interest rates were gradually increased. Correspondingly, the growth of quasimoney—which includes rupiah time and savings deposits as well as foreign currency deposits—increased to 23 percent in 1994/95 compared with 20 percent the year before.

INDONESIA: MONETARY INDICATORS, 1989/90-1994/95

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Sources: Data provided by the Indonesian authorities; and staff estimates.1/ Changes as a percent of reserve money at the beginning of the period.2/ Including special SBIs.3/ Changes as a percent of broad money at the beginning of the period.

• Download Figure
• Download figure as PowerPoint slide

View Full Size

INDONESIA: MONETARY INDICATORS, 1989/90-1994/95

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Sources: Data provided by the Indonesian authorities; and staff estimates.1/ Changes as a percent of reserve money at the beginning of the period.2/ Including special SBIs.3/ Changes as a percent of broad money at the beginning of the period.

• Download Figure
• Download figure as PowerPoint slide

INDONESIA: MONETARY INDICATORS, 1989/90-1994/95

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Sources: Data provided by the Indonesian authorities; and staff estimates.1/ Changes as a percent of reserve money at the beginning of the period.2/ Including special SBIs.3/ Changes as a percent of broad money at the beginning of the period.

• Download Figure
• Download figure as PowerPoint slide

Reserve money continued to grow rapidly in 1994/95-increasing by 22 percent in the 12 months ending in March 1995—after having increased by 21 percent the year before. The developments in reserve money were subject to various influences. In early 1994 (March-May) capital flows turned sharply negative owing to devaluation rumors sparked by the sharp decline in world oil prices and the slowdown in the growth of non-oil/gas exports. In addition, labor unrest in Medan at the time led to some negative investor reactions. In the face of these developments, Bank Indonesia adjusted its interest rates only gradually and, thus, accommodated the capital outflows. The net foreign assets of Bank Indonesia declined sharply in the first quarter of 1994/95 at the same time that the stock of SBIs held by Bank Indonesia was reduced. In the remainder of 1994/95, Bank Indonesia continued to raise its interest rates broadly in line with increases in international rates (following the increases in U.S. Federal Reserve rates). During the second and third quarters of 1994/95, the seasonal decline in the government deposits held with Bank Indonesia and a buildup in the net foreign assets of Bank Indonesia led to an expansion in reserve money. In the fourth quarter, there was a decline in the net foreign assets of Bank Indonesia owing to capital outflows—albeit limited—reflecting the adverse impact on emerging markets of the financial crisis in Mexico. Reserve money continued to expand strongly in the fourth quarter, notwithstanding a buildup in government deposits at the end of the fiscal year, as Bank Indonesia sharply reduced its holdings of SBIs.

Domestic credit growth, which had slowed considerably from its exceptionally high levels averaging about 48 percent per annum during 1988/89-1990/91 to 11 1/2 percent in 1992/93, picked up sharply in 1993/94 and continued its strong growth in 1994/95. Reflecting the strong growth in credit to the private sector, domestic credit rose by 24 1/2 percent in 1994/95 following an increase of 26 1/2 percent in 1993/94. Although the increase in bank credit was generally evident in all sectors, the increases were particularly sharp to the housing/real estate and the services sectors. Credit to the housing/real estate sector which had doubled in 1993/94, albeit on a small base, rose by an estimated 75 percent in 1994/95 (with its share in total bank credit rising to about 6 percent). The pickup in private credit which began in 1993/94, was induced by the relaxation of some prudential regulations in May 1993 (see below) and the easing of lending rates during that year. Interest rates began to rise in 1994/95 but the increase was inadequate to significantly dampen the growth in private sector credit.

There were several developments in the area of monetary management during 1994/95. First, open market operations using SBIs continued to be the main instrument of reserve money management of Bank Indonesia, and SBI interest rates were gradually increased. Second, although certain sectors continue to be eligible for subsidized liquidity credits from Bank Indonesia, the outstanding stock of these credits at end-1994/95 remained essentially unchanged from the level at end-1993/94. Third, owing to concern about the rapid growth in credit to the private sector—in particular, to the housing/real estate sector—Bank Indonesia applied moral suasion to the banks both for prudential reasons and to contain the rapid growth in private credit. Fourth, with a view to facilitating monetary management, Bank Indonesia further widened the spread between its buying and selling rates in the foreign exchange market in September 1994 (see section VI below). Fifth, with the progressive increase since May 1993 in the rediscount rate on Bank Indonesia’s purchases of export drafts from commercial banks to a level currently 2 1/2 percentage points above the U.S. dollar SIBOR rate,²⁰ Bank Indonesia’s holdings of export drafts declined in 1994/95 by $1 1/2 billion, following a decline of about $1/2 billion in 1993/94. Finally, in contrast to the last three years, the stock of outstanding forward foreign exchange swaps held by Bank Indonesia vis-à-vis banks—in particular, investment swaps—increased by about $1 billion in 1994/95. In the face of market expectations of an accelerated depreciation in early 1994/95, Bank Indonesia was reluctant to adjust its swap premium in line with these expectations and accommodated an increase in forward swaps.

B. Interest Rates

Interest rates on SBIs, which had declined rapidly in the previous two years, rose steadily during 1994/95. The one-month SBI rate increased from 9 percent at end-1993/94 to 11 3/4 percent in mid-1994/95 and further to 14 1/4 percent in March 1995. With these increases, the differential between the one-month SBI rate and the one-month SIBOR increased from 5 1/4 percentage points at end-1993/94 to 6 3/8 percentage points in mid-1994/95, and further to 8 percentage points in March 1995. The interest rate on one-month SBPU was increased from 12 percent at end-1993/94 to 15 percent at end-1994/95, and that on one-week SBPU from 11 percent to 15 3/4 percent during the same period.

Commercial banks’ deposit rates, which had also fallen sharply in the previous two years, rose broadly in line with money market rates during 1994/95. The weighted average three-month deposit rate rose from 11 1/2 percent in March 1994 to 16 percent in March 1995, thus increasing the differential between domestic and overseas (three-month U.S. dollar SIBOR) deposit rates from about 7 1/2 percentage points to 9 3/4 percentage points.

In sharp contrast, recorded lending rates of commercial banks remained essentially unchanged on average during 1994/95. The weighted average rate on working capital loans stood at 17 1/2 percent at end-1994/95 while that on investment credits stood at 15 1/3 percent, similar to the levels prevailing at end-1993/94. Only in the private foreign exchange banks were there increases in recorded lending rates during 1994/95 of about 1 1/2 percentage points. With recorded lending rates remaining flat in the face of rising deposit rates, bank spreads during 1994/95 appear to have been reduced substantially. The behavior in recorded lending rates during 1994/95 could reflect a combination of factors. On the one hand, the reduction in banks’ spreads could be more apparent than real as actual interest costs to customers could deviate significantly from the recorded lending rates; reportedly, actual lending rates have indeed risen although not as much as deposit rates. On the other hand, banks’ spreads that had increased significantly during the earlier period of generally declining interest rates—with lending rates having remained rigidly high at the time—may have been reduced in the face of increased public scrutiny of banks’ spreads.

C. Bank Regulation and Supervision

The doubling of the number of commercial banks in the wake of the 1988 financial liberalization, together with the weaknesses in bank portfolios that surfaced in the aftermath of the 1989-90 credit and investment boom, highlighted the need to strengthen bank regulation and supervision. In February 1991, new prudential regulations were introduced that included capital adequacy targets in line with standards recommended by the Bank for International Settlements (BIS), as well as rules for the maintenance of adequate liquidity, mandatory provisioning for nonperforming assets, and detailed bank reports to Bank Indonesia. The supervisory authority of Bank Indonesia was further enhanced by a new banking law enacted in March 1992, which provided for the elimination of all specialized categories of financial institutions, the phased reduction of banks’ equity participation in nonfinancial enterprises, the opening of bank ownership to foreigners, and the conversion of state banks into limited liability companies with up to 49 percent private ownership. With regard to the state banks, an action plan was also established in 1992 to meet the prudential standards with the support of a World Bank Financial Sector Loan.

In May 1993, Bank Indonesia introduced a package of measures aimed at both relaxing some of the prudential controls that were restraining bank lending—as concern had developed over a credit slowdown—as well as improving some of the other banking regulations.²¹ At about the same time, the Government established a supervision team consisting of senior officials from Bank Indonesia and the Ministry of Finance to closely monitor and analyze the portfolio problems of the state banks. In addition, the authorities took firm action—including through the courts—in 1994 against fraudulent behavior at one of the state banks (Bapindo). To ensure an early identification and resolution of any potential problems among private banks, a systematic audit of the accounts of a large sample of private banks was carried out at the end of 1993. Bank Indonesia also established special supervision teams to monitor the problem loans in the private banks. More recently in January 1995, Bank Indonesia issued new regulations aimed at: (a) strengthening commercial bank management by providing character guidelines for shareholders and members of Board of Directors; (b) extending Bank Indonesia’s supervisory authority to include banks’ credit plans and progress reports; (c) improving the quality of credit information and encouraging a better exchange of information among banks; and (d) standardizing certain reporting and accounting systems.

In the recent past, there appears to have been some improvement in the portfolio of the Indonesian banking system. The ratio of classified loans (comprising the categories “substandard,” “doubtful,” and “bad”) to total credit for all banks, which had increased steadily during 1990-91 to reach 13.7 percent at end-1992, edged up further to 14.2 percent at end-1993, before declining somewhat to 12.1 percent at end-1994. This gradual improvement was recorded both in the state banks—which accounts for the major share of the classified loans—and the private banks. At end-1994, the ratio of the classified loans to total credit for the state banks stood at 18.6 percent, while that for the private banks stood at 6 percent. However, given the existing problems of nonperforming loans in the banking system, bank rehabilitation will continue to remain an important task for the period ahead.

D. Capital Market Developments

In recent years, various steps have been taken to improve the operation of the capital market in Indonesia. With the privatization of the Jakarta Stock Exchange in July 1992, increasing efforts have been undertaken to modernize its operations and foster market development. The transfer of the daily operation of the stock exchange to the private sector also enabled the Capital Market Supervisory Agency (Bapepam) to enforce stricter supervision (previously, it had played a dual role as both operator of the market and supervisor). Other measures introduced since then to facilitate the development of the stock market include: enhanced investor protection; equalized tax treatment of deposits and stocks; a new trust fund law; the establishment of an institution for settlement and clearing; revision of the pension law enabling pension funds to invest in the stock market; investment guidelines for pension funds and insurance companies; allowing listed shares to be used as collateral for bank credit; and establishing a credit-rating agency (PT Pefindo).

More recently, in March 1995, a new capital market law was introduced in Parliament (to replace the previous law of 1952) to further strengthen the legal basis, enhance investor protection and increase the efficiency of the stock exchanges. The draft new law establishes rules for clearing houses, underwriters, and custodian institutions; mandates strong legal provisions against insider trading and inaccurate or misleading information; strengthens the oversight powers of Bapepam; and allows for the establishment of open-ended investment funds. In addition, computerized trading was introduced on the Jakarta Stock Exchange in May 1995. The authorities also plan to streamline the stock exchanges²² by merging the Surabaya Stock Exchange with the over-the-counter capital market in Jakarta.

The growth of the Jakarta stock market slowed during 1994 following the boom recorded in 1993 (Chart 5). The developments in the Jakarta stock market were broadly similar to those in other East Asian markets. The Jakarta Stock Exchange price index, which rose sharply by 117 percent in 1993, fell somewhat—by 20 percent—in 1994. Market capitalization, which had risen markedly to Rp 69 trillion at end-1993, from Rp 25 trillion at end-1992, rose at a less rapid pace to Rp 104 trillion at end-1994. Additionally, the number of companies listed on the Jakarta Stock Exchange rose from 181 at end-1993 to 231 at end-1994. On the international front, these developments reflected some market realignment during 1994, following the significant global portfolio shift in favor of East Asian markets that had taken place in 1993, and were induced by the steady increase in U.S. interest rates. The financial crisis in Mexico had only a very limited impact in late 1994 and early 1995 on the Jakarta stock market. On the domestic front, the recovery of bank deposit rates in 1994 acted to dampen the incentive for investors to move funds to the capital market.

INDONESIA: STOCK MARKET DEVELOPMENTS, 1990-95

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Source: IFC, Emerging Markets Database.

• Download Figure
• Download figure as PowerPoint slide

View Full Size

INDONESIA: STOCK MARKET DEVELOPMENTS, 1990-95

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Source: IFC, Emerging Markets Database.

• Download Figure
• Download figure as PowerPoint slide

INDONESIA: STOCK MARKET DEVELOPMENTS, 1990-95

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Source: IFC, Emerging Markets Database.

• Download Figure
• Download figure as PowerPoint slide

A. Current Account

Following a strong performance in 1991/92 and 1992/93 (growth rates of 24 percent and 31 percent, respectively) growth in non-oil/gas exports slowed to less than 10 percent in 1993/94 but picked up to 17 percent in 1994/95. The deceleration in growth in 1993/94 was related, in part, to the slowdown in foreign demand which strengthened in the following year. The increase in the value of non-oil/gas exports in 1994/95 and the rebound in the value of agricultural and mineral exports also reflected strong international commodity prices. Thus, exports of coffee and shrimp are estimated to have grown sharply in 1994/95 together with mining products, including copper, aluminum, and nickel. Manufactured goods, which represent a significant share of non-oil exports, grew by 11 percent, a slight decline in growth from the previous year. Sectoral performance within manufacturing was uneven, however, with disappointing performance in some important sectors. Thus, textiles and garments, representing one third of manufacturing, having declined in 1993/94, picked up only slightly in 1994/95, and the value of exports of wood products declined in value in 1994/95 despite a surge in timber prices. Given strong foreign demand, it would appear that the weakness in both these areas, had been influenced by competition from other new suppliers. Domestic demand pressures may have also played a role by diverting goods into the home market. There was encouraging performance, on the other hand, from some other manufacturing categories. Certain traditional items such as footwear, rubber products, and furniture continued to grow, and new items—handicrafts, jewelry, and electronic products—appear to be making inroads in exports. The pickup in these items, however, is from a relatively small base and they do not as yet represent a significant share of exports.

Non-oil/gas imports are estimated to have grown sharply at 20 percent in 1994/95, in part representing a temporary increase in imports of foodstuffs, owing to shortfalls in domestic production and continued strong domestic demand growth. Government imports doubled in value with significant increases in imports of rice, sugar, and wheat. Capital goods increased at a steady pace while general imports (including consumer goods) are estimated to have surged by over 20 percent. While supporting data suggests that the growth in the general imports category was in large part related to imports of raw materials, it is unclear whether these were imported for consumer goods or capital goods production.

In 1994/95, the deficit in the non-oil/gas services account is estimated to have increased, reflecting a rise in interest payments on private sector debt, with both the stock and the average interest rate on private sector debt showing increases from 1993/94. (Private sector debt is estimated to have increased by about $1 billion while the increases in interest rates reflect the sharp rise in LIBOR-based rates in 1994.) Travel receipts registered an above average improvement in 1994/95 which were in part offset by increases in travel abroad by Indonesians Payments and receipts on other categories were at levels roughly comparable with 1993/94.

The oil/gas current account registered a surplus of $3.8 billion in 1994/95 relative to $2.5 billion in the year earlier. The surplus in the oil account rose from $0.3 billion to $1.4 billion reflecting both higher oil prices and higher volumes of exports as foreign demand rose. Gas exports also increased reflecting higher prices as well as higher export volumes.

The direction of trade remained little changed. The bulk of exports (65 percent) and imports (about 55 percent) continued to be with other Asian countries (especially Japan, Korea, and Singapore). The share of exports accounted for by European countries remained stable at about 16 percent, while their share of imports appears to have edged down slightly with a corresponding increase in the share of North America. The changes, however, are marginal, and may reflect a different product mix in recent years rather than any underlying trend. Japan and the United States continue to be the first and second largest trading partners.

B. Capital Account and Official Reserves

The surplus of the capital account strengthened in 1994/95 owing to increases in private sector related inflows. Net borrowing by the public sector, which had already slowed in the last two years, showed a decline in 1994/95; even after including receipts from the sale of PT Indosat shares in official capital receipts, net official capital inflows were down by almost $1 billion from the year earlier. Gross borrowing by the Government declined by about a $0.6 billion, while that by the public enterprises declined by $0.5 billion. In addition, the authorities accelerated amortization payments by making early repayment on some expensive external debt with the privatization receipts from PT Indosat. The public sector as a whole is estimated to have made a net repayment of $140 million in 1994/95 relative to a net drawing of $1.6 billion in 1993/94.

With respect to private sector inflows, realized foreign direct investment is estimated to have increased by $0.5 billion to $2.5 billion in 1994/95. Foreign investment approvals have been running high in the 1990s; they fell in 1993, but surged in 1994. (The realized investment for that year, however, largely reflects earlier approvals.) The dramatic increase in approvals in 1994 (from $8 billion to $24 billion), which was most likely in response to the earlier deregulation packages, was fairly widespread among industrial sectors in terms of the number of approvals, but concentrated in certain sectors (paper, chemical, and basic metallic industries) in terms of value. This is probably a reflection of the nature of these sectors where large investments are required. The increases were largely from other Asian countries, with the increases concentrated in investments from Japan, Korea, Singapore, and Taiwan Province of China.

The surplus from other identified/recorded private capital transactions including net monetary movements of the commercial banks is estimated to have fallen from $3 billion in 1993/94 to $2.5 billion in 1994/95. This represents the net effect of offsetting movements in the three different categories. Portfolio investment flows slowed, responding to the weaker stock market conditions while net new bank borrowing by nonbanks, which declined in 1993/94, is estimated to have picked up in 1994/95 to about $0.9 billion. Commercial bank monetary movements weakened as well; underlying the small positive inflow was an estimated sharp decline in foreign assets in the last quarter, a period that was associated with outflows from Indonesia.

The overall balance of payments (the change in net foreign assets of Bank Indonesia) registered a deficit. Most of the decline in net foreign assets occurred early in the fiscal year, on concerns of low oil prices and a slowdown in non-oil/gas exports; these contributed to demand pressures on the exchange rate. Since then, international reserves have remained steady at about $13 billion and gross foreign assets (which include official assets held as contingency reserves) at around $17 billion.

C. External Debt²⁵

The stock of external debt is estimated to have risen in 1994/95 by about $8.5 billion to $97.6 billion with private sector debt accounting for about $1 billion of the increase. The increase in public sector was entirely due to valuation effects as net borrowing by the public sector actually declined during the year. While the level of external debt continues to increase, it has fallen slightly in recent years relative to GDP, and at the end of 1994/95, is estimated at 55 percent of GDP for total external debt and 38 percent of GDP for public sector debt.

The proportion of public sector debt on concessional terms edged up gradually from about 41 percent in 1987/88 to 48 percent in 1994/95. The stock of external commercial debt has risen rapidly—from $18 billion in 1989 to about $32 billion in 1994; the entire increase has been in the private sector, as commercial debt of the public sector declined sharply. Several stand-by credit lines are maintained by Bank Indonesia for balance of payments support and also for purposes of securing export financing. These have been normally valued at about $2 billion.

Public sector debt service payments rose sharply from $8.6 billion in 1993/94 to $9.5 billion in 1994/95, in large part, reflecting higher amortizations and repayments of government debt made from the privatization receipts from the sale of PT Indosat shares. Interest payments on public debt were up slightly from $3.1 billion to $3.4 billion. The public sector debt service ratio has declined steadily in recent years, falling from 27 percent in 1989/90 to 20 percent in 1994/95.

The Foreign Commercial Borrowing Coordinating Team that was established in 1991 to monitor foreign loans from commercial sources and set annual ceilings on new commitments. Public sector ceilings were set at $2.5 billion and commitments were running below this level in 1994/95.

D. Exchange Rate Developments

While exchange rate policy continues to be formulated with a view towards maintaining competitiveness and avoiding undue fluctuations in the rupiah, policy has in the last two years been oriented toward gradually increasing the flexibility of the exchange rate. In the spot foreign exchange market, Bank Indonesia continued to widen the spread between its buying and selling rates from Rp 20 per U.S. dollar at end-1993/94 (which had been widened from Rp 6 per U.S. dollar at the beginning of 1993/94) to Rp 30 per U.S. dollar in September 1994, i.e., a spread of about 1 1/2 percent.²⁶ In addition, to further encourage more foreign exchange trading among market participants other than Bank Indonesia, the limit on the net open external position of financial institutions was relaxed from 20 percent to 25 percent of capital.

During 1994, the rupiah depreciated 4 percent against the U.S. dollar (on a December-over-December basis) and by about 9 percent in nominal effective terms. As the latter change was greater than the increase in relative prices, the real effective exchange rate depreciated slightly. The gradual depreciation of the rupiah against the U.S. dollar continued in the first quarter of 1995, which, given the depreciation of the U.S. dollar, led to an acceleration in the depreciation of the rupiah in nominal effective terms (Chart 7). For the fiscal year 1994/95, the nominal effective exchange rate depreciated by 13 percent, while the real effective rate depreciated by 7 percent.

INDONESIA: EXCHANGE RATES AND OIL PRICE INDICES

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Sources: International Monetary Fund, Information Notice System; International Financial Statistics: and staff estimates.1/ Deflated by consumer price index as measured in U.S. dollars.

• Download Figure
• Download figure as PowerPoint slide

View Full Size

INDONESIA: EXCHANGE RATES AND OIL PRICE INDICES

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Sources: International Monetary Fund, Information Notice System; International Financial Statistics: and staff estimates.1/ Deflated by consumer price index as measured in U.S. dollars.

• Download Figure
• Download figure as PowerPoint slide

INDONESIA: EXCHANGE RATES AND OIL PRICE INDICES

Citation: IMF Staff Country Reports 1995, 083; 10.5089/9781451818185.002.A001

Sources: International Monetary Fund, Information Notice System; International Financial Statistics: and staff estimates.1/ Deflated by consumer price index as measured in U.S. dollars.

• Download Figure
• Download figure as PowerPoint slide

E. Trade Reforms

Indonesia’s trade regime witnessed some important changes in the last few years as a result of a series of reform packages. The net effect of these measures has been to liberalize the market, with the ASEAN and the Uruguay Round negotiations having the most important effects. These effects will cut across many sectors as opposed to the efforts of the trade packages announced in more recent years, where the effects were often sector specific.

The ASEAN meeting in 1994 accelerated the commitments of the Common Effective Preferential Tariff (CEPT) scheme to 2003. There was a commitment that all agricultural products would eventually be included in the CEPT scheme. For goods that are included in the CEPT scheme there was also a commitment to eliminate quantitative restrictions and other nontariff barriers. The ultimate objective of the CEPT scheme is to have tariffs at a low of 5 percent. The tariff reduction scheme is as follows: products that are classified as fast track with a tariff rate above 20 percent are reduced to 0 to 5 percent by the year 2000; while those with tariffs equal to or less than 20 percent are reduced to 0 to 5 percent by 1998. For products on the normal track, with tariffs less than or equal to 20 percent, tariffs of 0-5 percent will be reached by the year 2000. Products with tariffs of 20 percent or above will have tariffs reduced to 20 percent by 1998, and will reach the 5 percent tariff goal by the year 2003.

In November 1994, there were pronouncements of commitments toward APEC²⁷ and a resolve to achieve free trade and investment no later than the year 2020 (Bogor Declaration). The pace of implementation was to take into account the differing levels of economic development among the various APEC economies, with the developed economies achieving the goal of free trade no later than 2010, and the developing economies achieving the goal no later than 2020.

In the Uruguay Round agreements, Indonesia made binding commitments for 8,877 tariff lines (7,536 industrial and 1,341 agricultural). About 505 lines are declared exempt. Import duty on most lines has been limited to 40 percent and in addition, nontariff barriers are to be removed within 10 years from the effective date of the establishment of the World Trade Organization (WTO). Within this period, surcharges are also to be eliminated. In addition, Indonesia has made commitments to liberalize five services subsectors; industrial services; tourism; telecommunications; banking services; and financial services.

In May 1995, the Government introduced a package of reforms that are across the board and based more on rules rather than discretion. They have been accompanied by a clear timetable for future reductions, tied to other reforms under the AFTA. As such, despite the exemptions that prevail (for example, automotive items, and a number of chemicals and metal products are not included), the package sends a clearer signal of commitment to trade reform than has previously been the case. The package also includes the opening up of some previously restricted sectors to foreign investment²⁸, the reduction of surcharges and import restrictions, and the simplification of some licensing procedures.

The thrust of the package is in the schedule of tariff reductions which run until 2003, the year that AFTA is expected to be completed. Import tariffs of less than 20 percent will be gradually lowered to a maximum of 5 percent by 2000 while those above 20 percent will be gradually lowered to 20 percent by 1998 and to 10 percent by 2003. Tariffs of between 10 percent and 35 percent are to be lowered by 5 percentage points while those of 40 percent are to be cut by 10 percentage points to 30 percent. As a result of the package only 110 items (of the current number of 1,112) will eventually remain with tariffs higher than 40 percent. In addition while automotive items are exempt from the above schedule, duties are to be cut, and, nontariff barriers on some 81 categories are to be removed.²⁹ In addition, 10 industries previously in the negative list were opened to foreign investment although, as indicated earlier, the need for joint ventures was established for some other industries³⁰

A. Development Plan

In the Sixth Five-Year Development Plan (Repelita VI; 1994/95-1998/99), the Government has set targets for growth, inflation, employment, and the external position. The general thrust of the plan is to maintain appropriate financial policies, accompanied by the continuation of reforms aimed at further improving the structure of the economy and its openness to external competition. The main macroeconomic objectives are to sustain GDP growth at 6.2 percent per annum; to hold inflation at an annual—rate of 5 percent; to contain the external current account deficit to 1.7 percent of GDP; and to maintain gross international reserves equivalent to six months of imports. The Plan calls for a further expansion of the non-oil/gas sector in production, exports, and revenues. Fiscal policy has been assigned a crucial role as higher non-oil/gas revenues are needed to provide for an increase in public savings to finance the continued need for large capital outlays in the areas of infrastructure and human resource development.³¹

B. Poverty

The rapid growth in income and employment over the last two decades has been accompanied by a broad improvement in most social indicators of development. With per capita income rising rapidly, the proportion of the population living below the poverty line fell from 60 percent in 1970 to 29 percent in 1980 and further to 15 percent in the early 1990s. Moreover, some indicators of income distribution suggest that lower income groups had relatively higher rates of income growth. Over the same period, average life expectancy at birth rose from 49 to 63 years; infant mortality fell from 114 to 56 per thousand live births; and the literacy rate rose from 57 percent in 1971 to about 77 percent in the early 1990s.

The broad-based improvement in living standards is attributable not only to rapid economic growth and the creation of employment opportunities, but also the Government’s strong commitment to poverty reduction through increased provision of social services, investment in infrastructure, and policies supportive of the expansion of labor-intensive industries. The Government’s efforts were initially concentrated in the agricultural sector, on which the livelihood of a vast majority of the population depended, through extension of technical assistance, provision of credit, and procurement policies that reflected market conditions. The results were sustained increases in rural incomes, employment, and consumption. In recent years, government expenditure has been increasingly geared toward investment in social and physical infrastructure, with a larger share of development resources being allocated to education, sanitation and health facilities, roads, and rural electrification. The Government has also sought to alleviate large regional disparities through decentralization programs, increasing transfers to regional and local areas. Moreover, the government’s efforts in deregulating and liberalizing the economy have spurred increased investment in labor-intensive and export-oriented industries, thereby fostering large increases in employment and incomes throughout the economy.

In Repelita VI, the Government plans to reduce poverty further from 14 percent of the population in 1993/94 to 6 percent by 1998/99 through rapid economic growth and continued programs to assist the poor. To achieve the target, the Government is extending compulsory education and enhancing poverty alleviation programs for the poor regions. A program targeting specific poor villages (Backward Village Inpres/IDT) was launched in 1994. The main objectives of the IDT program include increasing the welfare of the poor through human resource development, strengthening institutional groups of the poor, and developing job opportunities. The IDT program also provides a revolving capital fund of Rp 20 million per poor village to support poverty alleviation programs.

C. Environmental Policies

Indonesia’s economic growth has been heavily dependent on its natural resources. Aware of this link, the Government has been committed to environmental management, as evidenced by the legal framework and regulatory procedures established to protect the environment. In recent years, the Government has given increased importance to ensuring that economic policies are consistent with the objective of maintaining the quality of the environment. In addition to its strategy of reducing the country’s dependence on resource extraction, the Government has sought to address long-standing problems associated with rapid population growth, urbanization, and industrialization. Policies have focused on improving water resource allocation and quality control, particularly in Java where the discharge of sewage and industrial waste into the river system has become a major problem; abatement of urban pollution; and the conservation and management of land and forestry resources. The Clean River Program, introduced in 1980, has set limits on industrial waste flows into 24 rivers in 11 regions and so far more than 1,000 companies have signed agreements with local governments, making commitments to reduce pollution loading. As regards forest resources, the reforestation program has been expanded, while the Industrial Plantation Forest Program and Private Forest Program have been put in place to supplement the natural forest supplies.

The Government has also, in recent years, sought to strengthen the necessary institutional capability to develop and administer a system of environmental standards and controls. A system was established in 1986 that requires annual reports (Regional Balance of Population and Environment) from 27 regions on environmental issues. In 1990, a national Environmental Impact Management Agency (Bapedal) was established, responsible for the implementation of programs related to pollution controls, waste management, and environmental impact assessment. To further strengthen Bapedal’s institutional and oversight capacity, a decision was taken in 1994 to open three regional Bapedal agencies; in Sumatra, Bali, and Sulawesi. In addition, a decree was passed enabling provincial and local governments to establish local Bapedal offices.

The Government plans to continue its efforts to preserve the quality of the environment during Repelita VI. The priorities will include the control of water pollution and water shortages, land degradation, and deforestation. This will be accomplished through further improvements in human resource development, a strengthening of the regulatory framework, and the increasing use of market-based incentives through proper pricing and taxation. The strategy to protect the environment will be consistent with the overall objectives of the national development plan and will also be incorporated in regional and sectoral economic plans. The effort to integrate environmental concerns into development was intensified by launching in November 1994 a National Coordination Meeting on Environmental Management and Sustainable Development (Rakornas), together with technical level working meetings. It identified four areas/mechanisms for increased coordination: (i) at the national level, in the formulation of environmental management policy within the scope of sustainable development; (ii) in formulating environmental targets through interdisciplinary and cross-sectoral approaches for environmental management planning; (iii) in encouraging and enhancing national as well as international partnerships between relevant government agencies, private sector, and the public in planning and implementing sustainable development; and (iv) in monitoring and evaluating environmental management activities.

Table 1.

Indonesia: Developments in Gross Domestic Product by Sector of Origin and by Expenditure, 1989-94 ^1/

(Annual percentage change; in constant prices)

Sources: Data provided by the Indonesian authorities; and staff estimates.

^1/Reflects revised national accounts statistics beginning with 1994 growth rates.

^2/Excludes oil refining and gas processing.

^3/Percentage contribution to real GDP growth.

Table 1.

Indonesia: Developments in Gross Domestic Product by Sector of Origin and by Expenditure, 1989-94 ^1/

(Annual percentage change; in constant prices)

				1989	1990	1991	1992	1993	1994
GDP				7.5	7.2	6.9	6.5	6.5	7.3
Oil/gas GDP				4.1	5.7	8.8	-2.2	0.1	3.1
Non-oil/gas GDP				8.2	7.6	6.5	8.4	7.8	7.8
Gross domestic product
	by sector of origin
		Agriculture		3.3	2.0	1.6	6.7	1.4	0.3
		Mining and quarrying		4.9	5.2	10.2	-1.9	2.2	5.3
		Manufacturing 2/		9.2	12.5	10.1	9.7	9.4	11.1
		Utilities		12.2	17.9	16.1	10.1	10.4	12.7
		Construction		11.8	13.5	11.3	10.8	12.2	14.7
		Trade, hotel, and restaurants		10.7	7.1	5.4	7.3	8.8	9.2
		Transport and communications		11.5	9.6	7.9	10.0	9.9	7.6
		Banks and finance		14.4	14.1	13.1	13.0	13.0	12.3
		Dwellings and real estate		4.2	4.2	4.0	4.1	5.0	4.0
		Other services		6.0	4.7	3.7	4.4	4.3	4.0
	By expenditure
		Consumption		5.1	8.8	7.3	3.3	4.9	5.4
			Private	4.2	9.9	7.3	2.9	5.8	5.8
			Public	10.5	3.2	7.0	5.8	0.9	2.9
		Fixed investment		13.4	14.6	6.5	4.9	5.7	12.6
		Domestic demand		7.7	12.3	5.6	4.0	6.0	8.8
		Net exports 3/		0.5	-3.9	1.6	2.7	1.0	-1.2

Sources: Data provided by the Indonesian authorities; and staff estimates.

^1/Reflects revised national accounts statistics beginning with 1994 growth rates.

^2/Excludes oil refining and gas processing.

^3/Percentage contribution to real GDP growth.

View Table

Table 1.

Indonesia: Developments in Gross Domestic Product by Sector of Origin and by Expenditure, 1989-94 ^1/

(Annual percentage change; in constant prices)

				1989	1990	1991	1992	1993	1994
GDP				7.5	7.2	6.9	6.5	6.5	7.3
Oil/gas GDP				4.1	5.7	8.8	-2.2	0.1	3.1
Non-oil/gas GDP				8.2	7.6	6.5	8.4	7.8	7.8
Gross domestic product
	by sector of origin
		Agriculture		3.3	2.0	1.6	6.7	1.4	0.3
		Mining and quarrying		4.9	5.2	10.2	-1.9	2.2	5.3
		Manufacturing 2/		9.2	12.5	10.1	9.7	9.4	11.1
		Utilities		12.2	17.9	16.1	10.1	10.4	12.7
		Construction		11.8	13.5	11.3	10.8	12.2	14.7
		Trade, hotel, and restaurants		10.7	7.1	5.4	7.3	8.8	9.2
		Transport and communications		11.5	9.6	7.9	10.0	9.9	7.6
		Banks and finance		14.4	14.1	13.1	13.0	13.0	12.3
		Dwellings and real estate		4.2	4.2	4.0	4.1	5.0	4.0
		Other services		6.0	4.7	3.7	4.4	4.3	4.0
	By expenditure
		Consumption		5.1	8.8	7.3	3.3	4.9	5.4
			Private	4.2	9.9	7.3	2.9	5.8	5.8
			Public	10.5	3.2	7.0	5.8	0.9	2.9
		Fixed investment		13.4	14.6	6.5	4.9	5.7	12.6
		Domestic demand		7.7	12.3	5.6	4.0	6.0	8.8
		Net exports 3/		0.5	-3.9	1.6	2.7	1.0	-1.2

Sources: Data provided by the Indonesian authorities; and staff estimates.

^1/Reflects revised national accounts statistics beginning with 1994 growth rates.

^2/Excludes oil refining and gas processing.

^3/Percentage contribution to real GDP growth.

Table 2.

Indonesia: Gross Domestic Product by Sector of Origin at Current Market Prices, 1989-94 ^1/

Source: Data provided by the Indonesian authorities.

^1/In 1995, the Government released revised national accounts data only for 1993 and 1994. The new data are based on 1993 prices as well as on information derived from the 1990 Input-Output Table. As a result, estimates for some subsectors have been significantly revised.

^2/Includes textiles, consumer goods, steel, fertilizers, and chemicals.

^3/Includes business services.

^4/Comprises oil and natural gas mining, oil refining, and gas processing.

Table 2.

Indonesia: Gross Domestic Product by Sector of Origin at Current Market Prices, 1989-94 ^1/

		1983 Prices					1993 Prices
		1989	1990	1991	1992	1993	1993	1994
		(In billions of Rupiah)
Agriculture		39,164	42,149	44,721	50,733	55,746	58,963	65,821
	Farm food crops	24,492	25,908	26,149	29,443	31,404	32,093	34,740
	Nonfood crops	6,196	6,667	7,604	8,717	9,422	9,015	10,135
	Livestock	3,814	4,368	5,126	6,041	7,026	6,203	7,211
	Forestry	1,635	1,855	2,018	2,180	2,541	6,268	7,452
	Fishery	3,027	3,352	3,824	4,352	5,353	5,385	6,284
Mining and quarrying		21,823	26,119	31,403	29,907	30,750	31,497	31,381
	Oil/gas mining	19,283	21,789	26,126	23,384	23,169	23,121	21,223
	Other	2,540	4,330	5,277	6,523	7,581	8,377	10,158
Manufacturing		30,323	38,911	47,665	56,542	67,441	73,556	90,207
	Oil refining	2,148	3,575	3,806	4,322	5,211	5,541	5,743
	Gas	3,299	3,715	4,714	4,384	4,253	4,253	4,484
	Other 2/	24,876	31,621	39,145	47,836	57,977	63,763	79,980
Utilities		1,008	1,258	1,750	2,148	2,714	3,290	3,913
Construction		8,884	10,749	12,902	15,305	18,140	22,513	27,942
Trade, hotel, and restaurants		28,856	33,000	36,954	42,731	49,789	55,298	62,562
Transport and communications		9,306	11,000	13,908	17,099	20,728	23,249	26,927
Banks and finance		6,667	8,287	10,158	12,500	15,257	14,005	16,871
Dwellings and real estate		4,151	4,891	5,925	6,596	7,611	9,695	11,239
Other services		17,004	19,235	22,065	26,323	33,842	37,709	40,492
	Government	11,174	12,801	14,622	17,309	22,458	22,458	22,818
	Other 3/	5,830	6,434	7,443	9,014	11,384	15,251	17,674
GDP		167,185	195,599	227,451	259,884	302,017	329,775	377,353
	Oil/gas 4/	24,730	29,079	34,646	32,090	32,633	32,914	31,450
	Non-oil/gas	142,456	166,520	192,805	227,794	269,385	296,861	345,905
		(Share in GDP)
Agriculture		23.4	21.5	19.7	19.5	18.5	17.9	17.4
Mining and quarrying		13.1	13.4	13.8	11.5	10.2	9.6	8.3
Manufacturing		18.1	19.9	21.0	21.8	22.3	22.3	23.9
Utilities		0.6	0.6	0.8	0.8	0.9	1.0	1.0
Construction		5.3	5.5	5.7	5.9	6.0	6.8	7.4
Trade, Hotel, and Restaurant		17.3	16.9	16.2	16.4	16.5	16.8	16.6
Transport and Communications		5.6	5.6	6.1	6.6	6.9	7.0	7.1
Banks and Finance		4.0	4.2	4.5	4.8	5.1	4.2	4.5
Ownership of Dwellings and Real Estat		2.5	2.5	2.6	2.5	2.5	2.9	3.0
Services		10.2	9.8	9.7	10.1	11.2	11.4	10.7

Source: Data provided by the Indonesian authorities.

^1/In 1995, the Government released revised national accounts data only for 1993 and 1994. The new data are based on 1993 prices as well as on information derived from the 1990 Input-Output Table. As a result, estimates for some subsectors have been significantly revised.

^2/Includes textiles, consumer goods, steel, fertilizers, and chemicals.

^3/Includes business services.

^4/Comprises oil and natural gas mining, oil refining, and gas processing.

View Table

Table 2.

Indonesia: Gross Domestic Product by Sector of Origin at Current Market Prices, 1989-94 ^1/

		1983 Prices					1993 Prices
		1989	1990	1991	1992	1993	1993	1994
		(In billions of Rupiah)
Agriculture		39,164	42,149	44,721	50,733	55,746	58,963	65,821
	Farm food crops	24,492	25,908	26,149	29,443	31,404	32,093	34,740
	Nonfood crops	6,196	6,667	7,604	8,717	9,422	9,015	10,135
	Livestock	3,814	4,368	5,126	6,041	7,026	6,203	7,211
	Forestry	1,635	1,855	2,018	2,180	2,541	6,268	7,452
	Fishery	3,027	3,352	3,824	4,352	5,353	5,385	6,284
Mining and quarrying		21,823	26,119	31,403	29,907	30,750	31,497	31,381
	Oil/gas mining	19,283	21,789	26,126	23,384	23,169	23,121	21,223
	Other	2,540	4,330	5,277	6,523	7,581	8,377	10,158
Manufacturing		30,323	38,911	47,665	56,542	67,441	73,556	90,207
	Oil refining	2,148	3,575	3,806	4,322	5,211	5,541	5,743
	Gas	3,299	3,715	4,714	4,384	4,253	4,253	4,484
	Other 2/	24,876	31,621	39,145	47,836	57,977	63,763	79,980
Utilities		1,008	1,258	1,750	2,148	2,714	3,290	3,913
Construction		8,884	10,749	12,902	15,305	18,140	22,513	27,942
Trade, hotel, and restaurants		28,856	33,000	36,954	42,731	49,789	55,298	62,562
Transport and communications		9,306	11,000	13,908	17,099	20,728	23,249	26,927
Banks and finance		6,667	8,287	10,158	12,500	15,257	14,005	16,871
Dwellings and real estate		4,151	4,891	5,925	6,596	7,611	9,695	11,239
Other services		17,004	19,235	22,065	26,323	33,842	37,709	40,492
	Government	11,174	12,801	14,622	17,309	22,458	22,458	22,818
	Other 3/	5,830	6,434	7,443	9,014	11,384	15,251	17,674
GDP		167,185	195,599	227,451	259,884	302,017	329,775	377,353
	Oil/gas 4/	24,730	29,079	34,646	32,090	32,633	32,914	31,450
	Non-oil/gas	142,456	166,520	192,805	227,794	269,385	296,861	345,905
		(Share in GDP)
Agriculture		23.4	21.5	19.7	19.5	18.5	17.9	17.4
Mining and quarrying		13.1	13.4	13.8	11.5	10.2	9.6	8.3
Manufacturing		18.1	19.9	21.0	21.8	22.3	22.3	23.9
Utilities		0.6	0.6	0.8	0.8	0.9	1.0	1.0
Construction		5.3	5.5	5.7	5.9	6.0	6.8	7.4
Trade, Hotel, and Restaurant		17.3	16.9	16.2	16.4	16.5	16.8	16.6
Transport and Communications		5.6	5.6	6.1	6.6	6.9	7.0	7.1
Banks and Finance		4.0	4.2	4.5	4.8	5.1	4.2	4.5
Ownership of Dwellings and Real Estat		2.5	2.5	2.6	2.5	2.5	2.9	3.0
Services		10.2	9.8	9.7	10.1	11.2	11.4	10.7

Source: Data provided by the Indonesian authorities.

^1/In 1995, the Government released revised national accounts data only for 1993 and 1994. The new data are based on 1993 prices as well as on information derived from the 1990 Input-Output Table. As a result, estimates for some subsectors have been significantly revised.

^2/Includes textiles, consumer goods, steel, fertilizers, and chemicals.

^3/Includes business services.

^4/Comprises oil and natural gas mining, oil refining, and gas processing.

Table 3.

Indonesia: Gross Domestic Product by Sector of Origin at Constant Prices, 1989-94 ^1/

(In billions of rupiah)

Source: Data provided by the Indonesian authorities.

^1/In 1995, the Government released revised national accounts data only for 1993 and 1994. The new data are based on 1993 prices as well as on information derived from the 1990 Input-Output Table. As a result, estimates for some subsectors have been significantly revised.

^2/Includes textiles, consumer goods, steel, fertilizers, and chemicals.

^3/Includes business services.

^4/Comprises oil and natural gas mining, oil refining, and gas processing.

Table 3.

Indonesia: Gross Domestic Product by Sector of Origin at Constant Prices, 1989-94 ^1/

(In billions of rupiah)

		1983 Prices					1993 Prices
		1989	1990	1991	1992	1993	1993	1994
Agriculture		21,918	22,358	22,714	24,225	24,569	58,963	59,154
	Farm food crops	13,489	13,558	13,484	14,527	14,356	32,093	31,227
	Nonfood crops	3,549	3,724	3,924	4,111	4,351	9,015	9,481
	Livestock	2,244	2,328	2,468	2,664	2,814	6,203	6,515
	Forestry	974	1,003	1,003	980	997	6,268	6,310
	Fishery	1,662	1,745	1,835	1,943	2,053	5,385	5,622
Mining and quarrying		16,664	17,532	19,317	18,958	19,370	31,497	33,172
	Oil/gas mining	15,391	16,030	17,513	16,719	16,667	23,121	23,652
	Other	1,273	1,502	1,804	2,239	2,704	8,377	9,521
Manufacturing		19,856	22,337	24,585	26,964	29,484	73,556	81,690
	Oil refining	990	1,094	1,137	1,202	1,187	5,541	5,686
	Gas	3,685	4,093	4,433	4,663	4,753	4,253	4,600
	Other 2/	15,181	17,150	19,015	21,099	23,544	63,763	71,404
Utilities		616	726	843	928	1,022	3,290	3,707
Construction		5,878	6,673	7,424	8,224	9,223	22,513	25,825
Trade, hotel, and restaurants		17,338	18,569	19,577	21,009	22,850	55,298	60,381
Transportation and communications		5,812	6,368	6,869	7,555	8,302	23,249	25,014
Banks and finance		4,291	4,894	5,535	6,256	7,070	14,005	15,733
Dwellings and real estate		2,878	2,999	3,120	3,249	3,411	9,695	10,087
Other services		12,188	12,764	13,241	13,817	14,405	37,709	39,210
	Government	8,397	8,783	9,052	9,320	9,509	22,458	22,904
	Other 3/	3,791	3,981	4,189	4,497	4,897	15,251	16,307
GDP		107,439	115,220	123,224	131,185	139,707	329,776	353,973
	Oil/gas 4/	20,066	21,217	23,083	22,584	22,607	32,915	33,938
	Non-oil/gas	87,373	94,003	100,141	108,601	117,101	296,861	320,036

Source: Data provided by the Indonesian authorities.

^1/In 1995, the Government released revised national accounts data only for 1993 and 1994. The new data are based on 1993 prices as well as on information derived from the 1990 Input-Output Table. As a result, estimates for some subsectors have been significantly revised.

^2/Includes textiles, consumer goods, steel, fertilizers, and chemicals.

^3/Includes business services.

^4/Comprises oil and natural gas mining, oil refining, and gas processing.

View Table

Table 3.

Indonesia: Gross Domestic Product by Sector of Origin at Constant Prices, 1989-94 ^1/

(In billions of rupiah)

		1983 Prices					1993 Prices
		1989	1990	1991	1992	1993	1993	1994
Agriculture		21,918	22,358	22,714	24,225	24,569	58,963	59,154
	Farm food crops	13,489	13,558	13,484	14,527	14,356	32,093	31,227
	Nonfood crops	3,549	3,724	3,924	4,111	4,351	9,015	9,481
	Livestock	2,244	2,328	2,468	2,664	2,814	6,203	6,515
	Forestry	974	1,003	1,003	980	997	6,268	6,310
	Fishery	1,662	1,745	1,835	1,943	2,053	5,385	5,622
Mining and quarrying		16,664	17,532	19,317	18,958	19,370	31,497	33,172
	Oil/gas mining	15,391	16,030	17,513	16,719	16,667	23,121	23,652
	Other	1,273	1,502	1,804	2,239	2,704	8,377	9,521
Manufacturing		19,856	22,337	24,585	26,964	29,484	73,556	81,690
	Oil refining	990	1,094	1,137	1,202	1,187	5,541	5,686
	Gas	3,685	4,093	4,433	4,663	4,753	4,253	4,600
	Other 2/	15,181	17,150	19,015	21,099	23,544	63,763	71,404
Utilities		616	726	843	928	1,022	3,290	3,707
Construction		5,878	6,673	7,424	8,224	9,223	22,513	25,825
Trade, hotel, and restaurants		17,338	18,569	19,577	21,009	22,850	55,298	60,381
Transportation and communications		5,812	6,368	6,869	7,555	8,302	23,249	25,014
Banks and finance		4,291	4,894	5,535	6,256	7,070	14,005	15,733
Dwellings and real estate		2,878	2,999	3,120	3,249	3,411	9,695	10,087
Other services		12,188	12,764	13,241	13,817	14,405	37,709	39,210
	Government	8,397	8,783	9,052	9,320	9,509	22,458	22,904
	Other 3/	3,791	3,981	4,189	4,497	4,897	15,251	16,307
GDP		107,439	115,220	123,224	131,185	139,707	329,776	353,973
	Oil/gas 4/	20,066	21,217	23,083	22,584	22,607	32,915	33,938
	Non-oil/gas	87,373	94,003	100,141	108,601	117,101	296,861	320,036

Source: Data provided by the Indonesian authorities.

^1/In 1995, the Government released revised national accounts data only for 1993 and 1994. The new data are based on 1993 prices as well as on information derived from the 1990 Input-Output Table. As a result, estimates for some subsectors have been significantly revised.

^2/Includes textiles, consumer goods, steel, fertilizers, and chemicals.

^3/Includes business services.

^4/Comprises oil and natural gas mining, oil refining, and gas processing.