Editing Economy of Indonesia (section)

===New Order===
Following President Sukarno's downfall, the New Order administration brought [[Austerity|a degree of discipline]] to economic policy that quickly brought inflation down, stabilized the currency, rescheduled foreign debt, and attracted foreign aid and investment. (See [[Inter-Governmental Group on Indonesia]] and [[Berkeley Mafia]]). Indonesia was for many years Southeast Asia's only member of OPEC, and the 1970s [[price of oil|oil price]] rise provided an export revenue windfall that contributed to sustained high economic growth rates, averaging over 7% from 1968 to 1981.<ref name="SCHWARZ">Schwarz (1994), pp. 52–7.</ref>

With high levels of state regulation and dependence on declining oil prices, growth slowed to an average of 4.5% per annum between 1981 and 1988. A range of economic reforms was introduced in the late 1980s, including a managed devaluation of the rupiah to improve export competitiveness, and deregulation of the financial sector.<ref name="SCHWARZ"/> Foreign investment flowed into Indonesia, particularly into the rapidly developing export-oriented manufacturing sector, and from 1989 to 1997, the Indonesian economy grew by an average of over 7%.<ref name="SCHWARZ"/><ref>{{cite web|title=Indonesia: Country Brief|work=Indonesia: Key Development Data & Statistics|publisher=The World Bank|date=September 2006|url=http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/INDONESIAEXTN/0,,contentMDK:20095968~pagePK:141137~piPK:141127~theSitePK:226309,00.html}}</ref> GDP per capita grew 545% from 1970 to 1980 as a result of the sudden increase in oil export revenues from 1973 to 1979.<ref>{{cite web|url=http://earthtrends.wri.org/text/economics-business/variable-638.html|title=GDP info|publisher=Earthtrends.wri.org|access-date=29 August 2011|url-status=dead|archive-url=https://web.archive.org/web/20090220134324/http://earthtrends.wri.org/text/economics-business/variable-638.html|archive-date=20 February 2009|df=dmy }}</ref> High levels of economic growth masked several structural weaknesses in the economy. It came at a high cost in terms of weak and corrupt governmental institutions, severe public indebtedness through mismanagement of the financial sector, rapid depletion of natural resources, and a culture of favors and corruption among politicians and the business elite.<ref>{{cite web|url=http://siteresources.worldbank.org/INTINDONESIA/Resources/Publication/03-Publication/Combating+Corruption+in+Indonesia-Oct15.pdf|title=Combating Corruption in Indonesia, World Bank 2003|access-date=29 August 2011|archive-url=https://web.archive.org/web/20050121162752/http://siteresources.worldbank.org/INTINDONESIA/Resources/Publication/03-Publication/Combating+Corruption+in+Indonesia-Oct15.pdf|archive-date=21 January 2005|url-status=dead}}</ref>

Corruption particularly gained momentum in the 1990s, reaching the highest levels of the political hierarchy as [[Suharto]] became a highly corrupt leader according to [[Transparency International]].<ref>{{cite web|url=http://www.transparency.org/publications/gcr/gcr_2004|title=Transparency International Global Corruption Report 2004|publisher=Transparency.org|access-date=29 August 2011|url-status=dead|archive-url=https://web.archive.org/web/20110902223424/http://www.transparency.org/publications/gcr/gcr_2004|archive-date=2 September 2011}}</ref><ref>{{cite news|url=https://news.bbc.co.uk/2/hi/3567745.stm|title=Suharto tops corruption rankings|work=BBC News|date=25 March 2004|access-date=29 August 2011}}</ref> As a result, the legal system was weak, and there was no effective way to enforce contracts, collect debts, or sue for bankruptcy. Banking practices were very unsophisticated, with collateral-based lending the norm and widespread violation of prudential regulations, including limits on connected lending. Non-tariff barriers, rent-seeking by state-owned enterprises, domestic subsidies, barriers to domestic trade and export restrictions all created economic distortions.

The [[1997 Asian financial crisis]] that began to affect Indonesia became an economic and political crisis. The initial response was to float the rupiah, raise key domestic interest rates, and tighten fiscal policy. In October 1997, Indonesia and the [[International Monetary Fund]] (IMF) reached an agreement on an economic reform program aimed at macroeconomic stabilization and the elimination of some of the country's most damaging economic policies, such as the National Car Program and the [[clove]] monopoly, both involving family members of Suharto. The rupiah remained weak, however, and Suharto was forced to resign in May 1998 after [[May 1998 riots of Indonesia|massive riots erupted]]. In August 1998, Indonesia and the IMF agreed on an Extended Fund Facility (EFF) under President [[B. J. Habibie]] that included significant structural reform targets. President [[Abdurrahman Wahid]] took office in October 1999, and Indonesia and the IMF signed another EFF in January 2000. The new program also has a range of economic, structural reform, and governance targets.

The effects of the crisis were severe. By November 1997, rapid currency depreciation had seen public debt reach US$60 billion, imposing severe strains on the government's budget.<ref>{{cite news|last=Robison|first=Richard|title=A Slow Metamorphosis to Liberal Markets|newspaper=Australian Financial Review|date=17 November 2009}}</ref> In 1998, real GDP contracted by 13.1%, and the economy reached its low point in mid-1999 with 0.8% real GDP growth. Inflation reached 72% in 1998 but slowed to 2% in 1999. The rupiah, which had been in the RP 2,600/USD1 range at the start of August 1997 fell to 11,000/USD1 by January 1998, with spot rates around 15,000 for brief periods during the first half of 1998.<ref>{{cite web|url=http://www.oanda.com/convert/fxhistory|title=Historical Exchange Rates|publisher=OANDA|date=16 April 2011|access-date=29 August 2011|archive-date=20 July 2006|archive-url=https://web.archive.org/web/20060720101840/http://oanda.com/convert/fxhistory|url-status=dead}}</ref> It returned to the 8,000/USD1 range at the end of 1998 and has generally traded in the Rp 8,000–10,000/USD1 range ever since, with fluctuations that are relatively predictable and gradual. However, the rupiah began devaluing past 11,000 in 2013, and as of November 2016 is around 13,000 Rp/USD1.<ref>{{Cite web|title=XE: USD / IDR Currency Chart. US Dollar to Indonesian Rupiah Rates|url=https://www.xe.com/currencycharts/?from=USD&to=IDR&view=10Y|website=xe.com|access-date=2020-05-06}}</ref>