Indonesia’s economy was oriented to providing raw materials to The Netherlands. Subsistence agriculture, primarily the production of rice, was the mainstay of most of the population, but the economy also relied on plantation agriculture, including the production of sugar and rubber. Industry was not promoted so as to avoid competing with The Netherlands. The first few decades after independence were marked by economic mismanagement. The government of President Sukarno focused on unifying the country politically, not on rebuilding Indonesia’s crumbling infrastructure or improving the economy. In contrast, President Suharto’s “New Order” government gave much more priority to the economy, instituting a series of five-year plans (Repelita) starting in 1969. The aims of Suharto’s economic policy were to expand foreign investment and increase trade. When export revenues from oil declined in the early and mid-1980s, Indonesia was forced to expand other exports. To make these exports more competitive internationally, the government deregulated parts of the economy such as coastal transportation, finance, and banking.
Indonesia has played a modest role in the world economy since independence, and its importance has been considerably less than its size, resources, and geographic position would seem to warrant. The country is a major exporter of petroleum, natural gas, and tin. In addition, Indonesia is one of the world's main suppliers of rubber and a less significant producer of a wide range of other commodities, such as coffee, tea, tobacco, copra, spices (cloves and nutmeg), and oil-palm products. Nearly all commodity production comes from large estates. Widespread exploration for deposits of oil and other minerals has resulted in a number of large-scale projects that have contributed substantially to general development funds. The projects have, however, tended to reinforce the general position of Indonesia as a supplier of raw materials to world markets.
Indonesia, a vast polyglot nation, faces severe economic problems, stemming from secessionist movements and the low level of security in the regions, the lack of reliable legal recourse in contract disputes, corruption, weaknesses in the banking system, and strained relations with the IMF. Investor confidence will remain low and few new jobs will be created under these circumstances. Growth of 4.8% in 2000 is not sustainable, being attributable to favorable short-term factors, including high world oil prices, a surge in nonoil exports, and increased domestic demand for consumer durables.
