An Overview of Economic Development Since 1966

This chapter provides an overview of the Indonesian economy since 1966. In the broad sweep of economic development, it examines, in turn, the dimensions of rapid economic growth, episodes in economic policy and development, the issue of investment and efficiency, and the nature and extent of structural and technological change. A final section considers some of the major criticisms of the development record. The exposition in this chapter is necessarily brief. The purpose is to set the scene for the more detailed analyses to follow in subsequent chapters. RAPID GROWTH The economy recovered surprisingly quickly from the dislocation of the first half of the 1960s, recording double-digit growth for the first time in 1968. Thereafter, rapid annual growth, of at least 5 per cent, was maintained until 1982, when softening international oil markets induced a sharp slowdown (Figure 2.1). This subdued expansion continued until 1986 (except for 1984, as massive oil and gas investments came on stream, boosting industrial expansion to 10 per cent), when policy reforms which commenced in the mid-1980s began to take effect. By the end of the decade, the economy had recovered and growth rates in the 6–7 per cent range were again being recorded, not too far short of those of the high-growth oil boom period. Figure 2.2 charts the course of expanding per capita GDP over this period, as measured in constant price rupiah and dollars.