Information about Asia and the Pacific Asia y el Pacífico
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Indonesia

Author(s):
International Monetary Fund
Published Date:
September 1996
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Indonesia: Basic Data
Fincal Year Beginning April 1
1990/911991/921992/931993/941994/95Est.

1995/96
(Percentage change)
Growth and inflation 1/
Real GDP growth9.08.97.27.37.58.1
Of which: Non-oil/gas GDP9.49.08.38.17.99.0
Real domestic demand13.88.05.67.98.812.9
Contribution of net exports to growth-4.21.01.7-0.4-1.1-4.7
GDP deflator7.78.85.48.97.09.2
CPI inflation (average)7.89.47.59.78.59.4
CPI inflation (end-period)9.910.05.010.29.69.0
(Percent share in GDP)
Agriculture19.418.318.717.917.417.9
Manufacturing20.721.422.022.323.524.4
Mining and quarrying12.212.810.89.68.89.1
Construction and utilities6.36.36.97.88.48.8
Services41.541.341.742.441.939.9
Non-oil exports13.014.517.316.717.517.6
Non-oil imports18.318.418.317.318.719.8
(Percentage change)
Money and credit (end-period)
Domestic credit37.821.614.127.823.320.8
Credit to the private sector44.419.310.925.323.821.6
Broad money26.024.222.220.822.128.0
Reserve money 2/5.433.07.321.022.034.0
Three-month time deposit rate (percent per annum)24.221.315.711.515.917.3
One-month SBI rate (percent per annum)21.517.012.58.514.214.0
(In percent of GDP)
Savings and investment 1/
Foreign savings2.83.32.21.81.83.0
National savings27.928.730.231.432.435.4
Domestic investment30.732.032.433.234.338.4
Central government operations
Revenue and grants18.116.316.315.415.215.1
Oil/gas revenue8.05.85.23.73.43.2
Non-oil/gas revenue9.910.310.911.611.711.8
Expenditure and net lending16.216.817.615.915.013.8
Current10.69.08.98.68.18.9
Capital (development expenditure and net lending)5.57.78.77.36.95.2
Current balance7.57.37.46.87.06.2
Overall balance1.9-0.5-1.3-0.50.21.0
Overall balance excluding oil revenue-6.1-6.3-6.5-4.2-3.2-2.2
Borrowing from the banking system 3/-2.6-0.40.9-0.0-0.6-1.2
Foreign borrowing (net)0.61.00.50.6-0.0-0.2
(In billions of U.S. dollars)
Balance of payments, reserves and debt
Exports f.o.b.28.129.735.336.542.246.2
Non-oil/gas exports15.419.024.827.231.736.1
Imports c.i.f-25.5-27.5-30.3-32.3-37.9-44.5
Non-oil/gas imports-21.6-24.1-26.4-28.1-33.9-40.6
Current account balance-3.8-4.4-Z6-3.0-3.3-6.9
(as percent of GDP)-3.2-3.3-1.8-1.8-1.8-3.4
Oil/gas sector (net)6.04.63.52.53.83.4
Non-oil/gas sector (net)-9.8-8.9-6.1-5.5-7.1-10.3
Capital account 4/8.67.27.43.31.810.3
Overall balance4.82.84.80.3-1.43.4
Gross official reserves9.610.512.012.713.316.0
Gross official foreign assets11.113.618.318.617.120.6
(In months of imports) 5/5.56.27.86.65.15.2
Total external debt68.672383.789.3101.2108.4
(in percent of GDP)60.156.458.955.956.754.5
Public sector48.048.355.560.267.663.0
(In percent of exports of goods and n.f. services)158.2149.3143.7149.4143.8121.6
Private sector20.624.028.229.133.745.4
Public sector debt service 6/24.523.421.621.420.219.9
(Percentage change; unless other specified)
Terms of trade7.6-6.50.1-0.23.00.8
Average oil export unit value (USS/bbl)22.417.918.215.616.216.9
Exchange rate (Rp/USS; end period)193220172071214322192344
(Annual percentage change)-6.0-4.4-2.7-3.5-3.5-5.6
Nominal effective exchange rate (end period) 7/-10.5-4.8-5.4-5.0-12.51.7
Real effective exchange rate (end period) 7/-6.21.31.5-1.1-6.78.6
Population growth0.41.71.71.71.61.6
Sources: Data provided by the Indonesian authorities; and staff estimates.

National accounts and CPI data are on a calendar-year basis (e.g., 1992/93 corresponds to 1992).

Reserve requirement was increased from February 1996, boosting reserve money growth.

Excludes financing receipts from asset sales of 0.4 percent of GDP in 1994/95 and 1995/96.

Inclusive of monetary movements of commercial banks and errors and omissions.

In months of the following year’s non-oil/gas imports.

In percent of exports of goods and nonfactor services.

1995/96 figure is for eleven months to February 1996.

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

National accounts and CPI data are on a calendar-year basis (e.g., 1992/93 corresponds to 1992).

Reserve requirement was increased from February 1996, boosting reserve money growth.

Excludes financing receipts from asset sales of 0.4 percent of GDP in 1994/95 and 1995/96.

Inclusive of monetary movements of commercial banks and errors and omissions.

In months of the following year’s non-oil/gas imports.

In percent of exports of goods and nonfactor services.

1995/96 figure is for eleven months to February 1996.

Indonesia: Social and Demographic Indicators
Unit of MeasureFifteen to

Twenty Years

Ago
Most Recent

Estimate
Natural resources
AreaThousand sq. km.1,9051,905
Agricultural landPercent of land area1719
Forests and woodlandThousand sq. km.1,2221,095
Access to safe waterPercent of population1142
RuralPercent of population4132
UrbanPercent of population465
Human resources
Total population 1/In millions133195
Urban populationPercent of population1934
Population growthPercent per annum21.7
Urban population growthPercent per annum54.6
Life expectancy at birthYears5163
Infant mortality ratePer thousand live births10956
Labor force (ages 15-64)Millions5186
Health and education
Population per physicianPersons26,9887,033
Population per hospital bedPersons1,2221,502
Primary school enrollmentPercent of school-age group86115
Secondary school enrollmentPercent of school-age group2045
Pupil-teacher ratio: PrimaryPupils per teacher2923
PrimaryPupils per teacher1616
Illiteracy rate 2/Percent of population (age 15+)4323
Income, and poverty
GDP per capital 1/U.S. dollars2101,020
Share to top 20 percentPercent of income5242
Share to bottom 20 percentPercent of income79
Population in poverty 3/Percent of population2915
Source: The World Bank, Social Indicators of Development 1995; and staff estimates.

Staff estimate for 1995.

Proportion of the population 15 years of age or older who cannot both read and write a short simple statement

Percent of population below lower poverty line. Earlier estimate is for 1980-85.

Source: The World Bank, Social Indicators of Development 1995; and staff estimates.

Staff estimate for 1995.

Proportion of the population 15 years of age or older who cannot both read and write a short simple statement

Percent of population below lower poverty line. Earlier estimate is for 1980-85.

Indonesia: Indicators of Structural Reform, 1985/86-1995/96(In percent)
1985/861995/96
Non-oil/gas sector
Share of:
Non-oil/gas manufacturing in GDP11.522.1
Non-oil/gas revenue in non-oil/gas GDP 1/9.512.8
Non-oil/gas exports in total exports33.578.8
Financial sector
Share of:
Broad money in GDP 1/20.150.2
Financial savings in GDP 1/10.738.7
Gross assets of financial institutions in GDP 2/63.885.13/
Number of financial institutions 4/8,0299,5283/
Value of shares issued in the Jakarta
Stock Exchange (Rp billion)1335/35,3953/
Trade reform
Number of items subject to nontariff barriers1,7002926/
Average tariff rate3715
Number of tariff rates2511
Investment deregulation
Number of business fields closed to foreign
investment2085/67/
Sources: Data provided by the Indonesian authorities, the World Bank, and staff estimates.

Share in fiscal year GDP.

Rupiah and foreign currency time and savings deposits.

As of end-1995.

Comprises Bank Indonesia, deposit money banks, and nonbank financial institutions.

End-1987.

As of October 1993.

Number of sectors completely closed to foreign investment. In addition, the number of sectors in which foreign investment is somewhat restricted (negative list) is 17, while a further 11 sectors are closed to both domestic and foreign investment.

Sources: Data provided by the Indonesian authorities, the World Bank, and staff estimates.

Share in fiscal year GDP.

Rupiah and foreign currency time and savings deposits.

As of end-1995.

Comprises Bank Indonesia, deposit money banks, and nonbank financial institutions.

End-1987.

As of October 1993.

Number of sectors completely closed to foreign investment. In addition, the number of sectors in which foreign investment is somewhat restricted (negative list) is 17, while a further 11 sectors are closed to both domestic and foreign investment.

I. Introduction and Overview1, 2

Indonesia’s impressive record of economic development, well established in the 1970s and 1980s, was sustained through the first half of the 1990s. With the help of market-oriented reform initiated in the 1980s, including significant liberalization of trade and investment and of the financial system, competition and efficiency were enhanced, private sector activity was substantially expanded and diversified, and there was broad-based improvement in most social indicators of development. During the period 1989/90-1995/96,3 average GDP growth exceeded 8 percent, inflation averaged less than 10 percent, real per capita income increased by almost half, the workforce expanded substantially, and the number of people living in absolute poverty fell to 15 percent of the population (Chart 1). All of this was accomplished at the same time that the economy’s dependence on the oil/gas sector was sharply reduced.

CHART 1INDONESIA: DEVELOPEMENT AND STRUCTURAL INDICATORS, 1969-96

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

1/ GDP and inflation data refer to the calendar year.

2/ Poverty is defined as the share of the population living below the lower poverty line.

3/ Fiscal year begins April 1.

A. Developments Through 1994/95

Indonesia’s economic achievements have been greatly facilitated by the sustained pursuit of macro economic stability, even when this has required sizable adjustments in fiscal and monetary policy. The authorities’ balanced budget rule, although it has not prevented fluctuations in the fiscal policy stance, has in general helped to avoid significant recourse to domestic deficit financing. With the declining importance of oil/gas revenue, substantial fiscal adjustment has been undertaken. External borrowing has also been managed prudently in recent years—external debt peaked at 65 percent of GDP in 1987/88—so as to safeguard access to international credit markets. Following major devaluations in 1983 and 1986, the rupiah/U.S. dollar exchange rate has been managed to offset broadly the inflation differential vis-à-vis trade partners, thereby supporting a strong export performance. These policies, together with significant structural reforms, allowed Indonesia to weather the severe losses in its terms of trade following the collapse of oil prices in the mid-1980s, without any sustained deterioration in real economic performance.

Toward the end of the 1980s, new policy challenges arose. Following the 1988 financial sector and investment liberalization, economic growth accelerated owing to a boom in investment, both foreign and domestic. Initially, the quickening pace of activity did not produce strains on domestic resources, but broad money and credit growth soared during 1989/90-1990/91—increasing at an average rate of 36 percent and 53 percent, respectively—and demand pressures rapidly intensified, despite a fiscal tightening (Chart 2). Thus, in 1990, the growth of real domestic demand accelerated markedly to 14 percent, inflation rose to 10 percent, the external current account deficit in 1990/91 almost doubled to 3¼ percent of GDP, and external debt increased sharply. To counter this overheating, an adjustment effort was undertaken beginning in the second half of 1990, marked by a tightening of monetary policy and measures to curb new external borrowing. Interest rates rose sharply, as large amounts of central bank debt certificates (SBIs) were placed with the domestic banking system and Bank Indonesia (BI) sharply curtailed its foreign exchange swap operations. To redress weaknesses in commercial banks’ portfolios that had surfaced in the aftermath of the credit boom, new prudential standards were imposed. At the same time, controls were strengthened to contain offshore commercial borrowing by the public sector, including banks. After significant tightening in 1988/89-1990/91, fiscal policy provided little support to demand management during 1991/92-1992/93 and the overall deficit, excluding oil/gas revenue, remained broadly unchanged.

CHART 2INDONESIA: SELECTED ECONOMIC INDICATORS, 1985/86-1995/96

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

With the tightening of the monetary stance, credit growth to the private sector dropped rapidly to 11 percent in 1992/93 and the growth in real domestic demand fell sharply. As a result, inflation fell to 5 percent and the external current account deficit narrowed to 2 percent of GDP. However, with non-oil/gas exports increasing by some 30 percent, real GDP grew by 7¼ percent. Although demand pressures abated in 1992/93, maintaining control over liquidity growth remained difficult. Despite an easing of interest rates, the differential with offshore rates—some 12 percentage points—remained well in excess of the expected downward crawl of the rupiah. Thus, as surging capital inflows led to a large increase in official reserves—close to $5 billion—containing money growth required sizable and costly sterilization operations.

Following the easing of domestic demand pressures, the focus of monetary policy shifted in early 1993/94 to supporting economic growth, as concerns developed over an incipient weakening of export performance and output. At the same time, the fiscal position was strengthened. Reflecting the strong growth in non-oil/gas revenue, the overall central government deficit, excluding oil/gas revenue, declined by 2 percentage points of GDP. With the shift in monetary policy, interest rates declined rapidly and there was a strong pickup in credit to the private sector, while the pace of capital inflows slowed. Reserve money growth rose sharply as BI reduced its holdings of SBIs. Although there were significant fluctuations within the year, international reserves at end-March 1994 were broadly the same as a year earlier. Domestic demand strengthened, increasing in real terms by 8 percent in 1993, as both fixed investment—led by construction—and private consumption picked up. The growth of non-oil/gas exports, however, slowed, reflecting an adjustment from the very rapid growth enjoyed in 1991/92-1992/93. Despite the slowdown in exports, the strengthening in domestic demand was sufficient to keep GDP growth in 1993 at 7¼ percent. During 1993/94, inflation rose to 10 percent, although the external current account deficit remained below 2 percent of GDP.

The expansion in domestic demand gained momentum during 1994/95, rising in real terms by 9 percent. The continued rapid increase in private sector credit—which rose at an annual rate of 24 percent—contributed to this growth. A particular concern in this regard was the continuing rapid increase in private credit to the property sector. Reserve money grew strongly as BI reduced its holdings of SBIs sharply, and broad money growth, at 22 percent, was slightly higher than in 1993/94. This expansion occurred despite the gradual increase since March 1994 in BI’s interest rates (about 4-5 percentage points), which was somewhat higher than the increase in international interest rates during this period. The overall fiscal position in 1994/95 remained broadly in balance. Excluding oil/gas revenue, the overall deficit declined by almost 1 percentage point of GDP as total expenditure and net lending was reduced in relation to GDP. Based on strong growth in manufacturing and construction, real GDP grew by 7½ percent in 1994 (Chart 3). With the strong growth in domestic demand, inflation remained high (an annual rate of about 10 percent), and the current account deficit widened but remained broadly unchanged in relation to GDP.

CHART 3INDONESIA: DEVELOPMENTS IN OUTPUT AND INFLATION, 1989-96

Source: Data provided by the Indonesian authorities.

B. Summary of Developments in 1995/96

The focus of this report is on developments in 1995/96. Domestic demand grew faster than GDP for a third year, based on strong growth of both consumption and investment. Real GDP growth rose to 8 percent, above the rate of growth of potential output. These developments are described in Chapter II. Excess demand pressures were increasingly evident, with inflation remaining close to 10 percent and the external current account deficit almost doubling to 3.4 percent of GDP. With increased capital inflows during 1995/96, the wider current account deficit was financed, and foreign exchange reserves increased (Chapter III). Overall external debt indicators continued to improve. Fiscal policy (Chapter IV) exerted some dampening effect, despite the significant lowering of income tax rates in early 1995, and a central government surplus of 1 percent of GDP was achieved. Monetary policy (Chapter V) was marked by increased moral suasion to limit credit growth. The contractionary effect of the central government surpluses was offset by liquidity credits. Interest rates remained relatively unchanged, but the exchange rate intervention band was widened to 3 percent. Further measures were taken toward the end of the year, including an increase in reserve requirements from February 1996. However, both money and credit continued to expand rapidly and their growth exceeded the authorities’ targets. At year end, the overheating of the economy remained a major issue. Progress made so far toward the development goals set under Repelita VI, including those for poverty reduction, are very briefly reviewed (Chapter VI).

II. Real Sector

A. Output and Expenditure4

The Indonesian economy is estimated to have grown by 8.1 percent in 1995, an increase from 7.5 percent recorded in 1994. Non-oil/gas GDP rose by an estimated 9.0 percent, while the oil/gas sector made a small negative contribution. Domestic economic activity was particularly strong, with private consumption and investment both growing rapidly (Chart 4). Real domestic demand is estimated to have grown by almost 13 percent, the highest rate since 1990.

CHART 4INDONESIA: GDP GROWTH, 1995

(In percent)

Source: Date provided by the Indonesian authorities.

With the growth in demand exceeding the estimated rate of growth in potential output of around 7¼ percent, and limited spare capacity indicating that output was at or above potential, excess demand pressures became evident.5 Imports surged and some production normally exported was diverted to meet domestic demand. Consequently, the contribution to GDP growth from net exports was significantly negative (-4.7 percent). Food shortages brought about by supply problems exacerbated the strong import demand for all categories of goods, contributing to a sharp deterioration in the current account deficit, especially during the first half of the fiscal year.

1. Aggregate Demand

After declining from its previous peak in 1990 to 6 percent in 1992, real domestic demand growth strengthened to an average of 8.4 percent in the two years 1993-94, before sharply rising to 12.9 percent in 1995. On the basis of preliminary data, growth in private consumption and gross fixed capital investment contributed in broadly equal amounts to the expansion of domestic demand, with stock building also playing an important role.6

The easing of monetary conditions through late 1993 and a substantial part of 1994, which was only gradually and partially reversed through the second-half of 1994 and 1995 (Charts 5 and 14), was a key factor behind the pickup in demand. Real interest rates-including the working capital rate, which applies to about three-quarters of private sector credit—were low in 1994/95 relative to rates of profit and output growth, but higher on average in 1995/96. Broad money growth was rapid for most of 1995/96, while private sector credit growth accelerated to nearly 30 percent in the middle of the year. Heightened moral suasion, and the impact of earlier interest rate rises, slowed credit demand at the end of 1995 and in the first quarter of 1996. However, at end-March 1996, money and credit aggregates were still growing at rates exceeding BI targets.

Total consumption growth increased to 6½ percent in 1995, with real government consumption rising by 3 percent (about the same as 1994). Despite the increase in private consumption by 7 percent—seen, for example, in a rapid increase in automobile sales—the large increase in national disposable incomes of about 18 percent,7 based on high wage increases and reduction in tax rates in January 1995, allowed room also for private savings to increase.8

The growth of real fixed capital formation increased slightly to about 15 percent in 1995. Housing and other property investment, which had grown very rapidly in 1994 and early 1995, later eased and, for 1995 as a whole, grew relatively slowly. Rapid growth in infrastructure activity, especially roads, bridges, and ports, contributed over two thirds of the growth in construction. Foreign investment approvals jumped over 50 percent, after nearly tripling during 1994, while actual foreign investment expenditure doubled, contributing around a third of total investment growth (Chart 6). Foreign direct investment, especially in the petro-chemicals and other services sectors, was a major contributor to an investment boom in the services, industrial, and mining sectors. Foreign portfolio equity investment and private debt flows increased. Domestically financed investment also grew rapidly, and approvals surpassed the high levels recorded in 1994.

CHART 5INDONESIA: DOMESTIC GROWTH INFLUENCES, 1986-95

Source: Data provided by the Indonesian authorities.

CHART 6INDONESIA: FOREIGN DIRECT INVESTMENT, 1987-95

Source: Data provided by the Indonesian authorities.

Demand expansion was, to a very large extent, domestically based during 1995. Despite strong growth in Indonesia’s export markets (Chart 7), the external sector contributed negatively to GDP growth during the year. On a national accounts basis, exports of goods and services increased in constant prices by only 5½ percent in 1995 (a decline from 9 percent in 1994), while imports of goods and services (in constant prices) grew by 25 percent, sharply higher than the 15 percent reached in 1994. The oil/gas sector made a negative contribution, with oil/gas exports declining in nominal and volume terms in 1995. Non-oil/gas export volume growth was hampered early in the year by specific problems in the plywood sector, while strong domestic demand competed for cement and manufacturing production. The very high growth of non-oil goods imports reflected rapid rates of growth of capital and intermediate goods, and high consumer spending that spilled over into rapid growth of consumer imports in the first half year (Chart 8).

CHART 7INDONESIA: TRADE INDICATORS, 1990-95

Source: Data provided by the Indonesian authorities. IMF, World Economic Output; and staff estimates.

CHART 8INDONESIA: IMPORTS, 1988/89-1995/96

Source: Data provided by the Indonesian authorities.

1/ Non-oil imports as percent of gross national expenditure and non-oil exports.

2. Sectoral Developments

Output growth in the non-oil/gas sector accelerated during 1995 to around 9 percent, while oil/gas GDP declined slightly from its 1994 level. Primary sector production grew moderately, while growth was fastest in the manufacturing, construction and utilities sectors (Chart 4). The manufacturing sector, now accounting for one quarter of GDP, is becoming an increasingly important influence on the economy’s overall rate of growth, whereas the oil/gas sector has declined to only about 7.5 percent of GDP.

Agricultural, fishing and forestry production increased by 2½ percent, close to the trend growth rate, and a recovery from the depressed level in 1994. Food crops, particularly rice (up 4 percent on the low 1994 crop), estate crops, especially palm oil, and fisheries all showed higher production. The rise in rice production was insufficient to prevent continued domestic rice shortages in the first half of the year. Low growth in rice production in 1993 followed by a decline in 1994, coupled with rapidly rising food consumption, resulted in low stock levels. Consequently, rice imports were high in 1994 and 1995, and rice prices increased sharply. However by the end of 1995, stock levels increased to the equivalent of one month of consumption.

Mining and quarrying output increased by 6½ percent, slightly faster than in 1994. Copper and coal mining both continued to increase rapidly (at over 40 percent and 25 percent, respectively), increasing the importance of non-oil/gas mining in this category. Non-oil/gas manufacturing output grew by 14 percent, with food and beverage processing, electrical machinery and apparatus, pulp and paper, rubber, chemical products and plastics, and cement output increasing strongly (Chart 9). In contrast, the garments, footwear, and wood product industries increased little or declined, especially the significant plywood industry. Other sectors that posted higher-than-average growth in 1995 were construction (13 percent) and utilities (18 percent).

CHART 9INDONESIA: MANUFACTURING EXPORT AND PRODUCTION GROWTH, 1991-95

Source: Data provided by the Indonesian authorities.

B. Prices and Wages9

The average rate of consumer price inflation increased slightly from 8.5 percent in 1994 to 9.4 percent in 1995 reflecting a continuation of strong demand pressures, together with some supply factors. The inflation rate, while remaining in the range of 9-11 percent, rose in the first half of 1995, and moderated slightly in the September and December quarters. Nonfood price inflation, in particular housing-related prices, was highest in the first-half of 1995 (Chart 10). In the second-half of the calendar year, nonfood price inflation, including housing, moderated to around 6½ percent. The rate of increase of administered prices (5.8 percent), representing about 26 percent of the CPI basket, broadly matched nonfood price movements through most of 1995. Food price inflation, reflecting continued shortfalls in rice supply and high import prices, remained substantial throughout the year and averaged 14 percent, underpinning the overall rate of inflation.

CHART 10INDONESIA: INFLATION, 1991-96

(Annual percentage change)

Source: Data provided by the Indonesian authorities.

Inflationary pressures continued in early 1996. In the year to March 1996, the rate of consumer price inflation was 9.2 percent. Food price inflation peaked at 18 percent in the year to February 1996, reflecting flood-related shortages of red peppers, vegetables, and rice. However, with unchanged petroleum prices and delays in adjusting electricity prices (together comprising around 8 percent of the CPI), the growth of administered prices declined to around 3 percent by March 1996, substantially lower than general inflation.

Wholesale price inflation was significantly higher on average in 1995 than in recent years, and at 10 percent exceeded consumer price inflation. In particular, agriculture costs rose faster than average (up 13.5 percent), while the average level of manufacturing sector wholesale prices was nearly 11 percent above the 1994 level. Higher wholesale import prices (up to 8.2 percent in the year to December 1995)—after two years of significantly lower growth than domestic wholesale prices—raised costs in most sectors. In 1995, imported inflation accelerated, reflecting the sharp nominal effective exchange rate depreciation in the first-half of 1995.

Limited data suggest that wage growth was rapid during 1995. Government-determined wage increases contributed to the strong consumer demand and excess demand pressures in the economy. For the most part, wage movements in Indonesia reflect market outcomes, but rises in legislated minimum wages and civil service pay increases are becoming increasingly important influences on the general wage structure. The Government sets minimum wages separately for 27 provinces. Over the period 1990 to 1995, average minimum wages across all provinces increased by 150 percent as the Government sought to bring minimum wages to a level judged sufficient for meeting basic human needs (Chart 5). In 1995, minimum wages were increased by 18.6 percent on average, taking them above the defined minimum living standard. Over the same five-year period, consumer prices increased by 70 percent. While market-determined minimum wages in the formal sector are usually above the legal minima, there is increasing evidence of significant effects of large minimum wage increases on average wages, investment, and employment.10

The Government announced an average minimum wage increase of 10.6 percent for 1996/97, in excess of targeted inflation. Moreover, the actual increase would be significantly larger for those workers whose monthly minimum wages were henceforth to be calculated on the basis of 30 paid working days rather than 25 days. There was a sharp increase in the number of enterprises asking to delay introduction of the new minimum wages. Civil service salary rates were increased by 10 percent for the fiscal year 1996/97.

III. Balance of Payments and External Debt11

The balance of payments is estimated to have registered a surplus of $3.4 billion in 1995/96, a substantial turnaround from the deficit ($1.4 billion) a year earlier, and a return to the marked surpluses observed in the period 1990/91-1992/93. The current account deficit widened from $3¼ billion (1.8 percent of GDP) in 1994/95 to $6.9 billion (3.4 percent of GDP) in 1995/96, largely reflecting a sharp deterioration in the trade balance as imports increased rapidly in response to demand pressures (Charts 7 and 8). Both the oil/gas and non-oil/gas balances worsened, though the overall deterioration was largely driven by the non-oil/gas account.

  • The oil/gas current account surplus declined from $3.8 billion in 1994/95 to $3.4 billion in 1995/96, largely reflecting lower oil export volumes.
  • The non-oil/gas trade deficit is estimated to have expanded from around $2 billion in 1994/95 to $4½ billion in 1995/96. Combined with a deterioration in the services balance of around $0.75 billion, the overall non-oil/gas current account widened by over $3 billion.

The current account widening was associated with strong capital inflows—both portfolio and fixed investment—over the year as a whole, though the pattern was somewhat variable through the year. These inflows financed the expanding current account deficit without significant pressure on the exchange rate or outflow of reserves; in fact, official foreign assets increased by $3.4 billion in the year to March 1996.

A. Current Account

Analyzed from a savings-investment point of view, the current account widening in 1995/96 of 1½ percentage points of GDP reflected strong investment growth outstripping a continuing rise in national savings.

  • Total investment as a share of GDP is estimated to have risen by 4 percentage points—to 38 percent, with private investment rising by 5½ percent of GDP and public investment falling 1½ percent of GDP.
  • National savings rose from 32½ percent to 35½ percent of GDP. Public savings declined by over ½ percent of GDP, although with lower public investment the overall fiscal balance is estimated to have improved. As noted earlier, initial estimates of private savings indicate a jump by 3½ percentage points of GDP.

Total exports, in U.S. dollar terms, grew by 10 percent to $46.2 billion in 1995/96, and in volume terms rose by 6 percent. The overall outturn masked divergent trends between falling oil/gas exports, relatively flat “traditional” non-oil/gas exports, and rapid growth for some increasingly important “nontraditional” categories of exports.

Oil/gas exports fell by about 4 percent in 1995/96, with oil exports, in particular, declining quite sharply from their high 1994/95 levels. Oil exports totaled around $6 billion, 13 percent of total exports (Chart 11). Lower volumes than in 1994/95, which declined to about the average level recorded over the previous six years, accounted for the decline in oil receipts, with prices firmer than in the previous year. Despite slightly higher production, higher domestic consumption lowered export volumes. The fall was concentrated in crude oil exports, with exports of oil products marginally lower. Gas exports (largely LNG) were stable. LNG export volumes declined, while a slightly higher price maintained receipts. In contrast, the LPG price declined from a high point in 1994/95 toward the average level recorded over the previous six years. Gas exports totaled around $4.1 billion.

CHART 11INDONESIA: EXPORT SHARES, 1995

Source: Data provided by the Indonesian authorities.

In 1995/96, non-oil/gas exports grew by 14 percent in U.S. dollar terms and 10 percent in volume terms. (At $36.1 billion, non-oil/gas exports represented about 18 percent of GDP and over 75 percent of total exports.) Industry-specific factors significantly affected overall export developments. Agriculture exports increased markedly—rubber exports grew strongly (up 63 percent), but coffee exports fell as coffee prices declined from their peak recorded in 1994. Mining exports grew by nearly 20 percent, with tin and copper exports up by around 50 percent, and aluminum by about one third. In contrast, coal and nickel exports were relatively flat or declining. Manufactured exports increased by 9 percent, more slowly than other categories of non-oil/gas exports. Electrical appliance exports continued their rapid growth (up 60 percent, Chart 9), and paper exports also surged by 70 percent, with pulp/paper prices high for much of the year. Chemical-related exports rose 40 percent. These latter three categories explained more than three-quarters of the total growth in manufactured exports. By contrast, wood products and plywood exports declined by 3 percent in 1995/96.

In the first-half of the year, non-oil/gas exports were held down by supply problems in the textiles and wood product industries—the two largest industrial categories, comprising 40 percent of manufactured exports. In addition, strong domestic demand appears to have diverted sales to the domestic economy. For example, cement exports fell from $100 million in 1992/93 and $37 million in 1994/95 to only $9 million by 1995/96. However, rapid growth was maintained in a number of industries, such as electrical and chemical goods. In the second-half of the year, a resumption of textile exports and strong growth in mining exports supported overall export growth, although plywood sales remained weak and declines in some other major categories (e.g., palm oil) resulted in a similar rate of total export growth as in the first half year.

Imports jumped sharply in 1995/96, increasing by 17 percent in U.S. dollar terms to $44.5 billion. Oil and gas imports declined marginally, while non-oil/gas imports increased by 20 percent. The rate of growth was particularly strong in the first-half of the year, exceeding 30 percent. High investment and consumption growth, rice shortages, and increasing openness to trade were key factors. Import growth abated to less than 10 percent in the second-half of the year.

Consumption goods imports, which form merely 6 percent of total imports, increased by over 50 percent, with virtually all sub-categories growing rapidly (Chart 8). Exceptionally rapid growth in consumption imports was recorded in the first half year, but this mostly reflected the rice shortages. Car imports were the fastest growing sub-group, but these account for a very small fraction of imports (0.3 percent). By far the largest category of imports (approximately three-quarters) was raw materials, which increased by 19 percent in U.S. dollar terms in 1995/96, partly reflecting food shortages (processed food and beverage imports doubled), and demand for intermediate goods that are processed to the finishing stage in Indonesia (e.g., car components), which grew by 23 percent.

Selected Non-Oil/Gas Import Categories 1/(Percent change on year earlier)
April-SeptemberOctober-March1995/96Weight 2/
Consumption87.724.249.86.4
Food and beverages201.551.397.02.8
Cereals 3/74.7-4.025.83.4
Semi-durables28.73.015.00.8
Durables51.892.971.70.6
Passenger cars271.0392.4325.20.3
Intermediate goods33.37.019.471.8
Processed raw material35.28.821.337.3
Capital related14.023.018.211.0
Capital goods23.86.114.421.8
Machinery20.111.215.615.0
Total non-oil/gas imports33.57.819.8100.0

Data provided by Bank Indonesia.

Percent of total 1995/96 non-oil/gas imports.

Cereal imports include a portion classified as intermediate goods imports.

Data provided by Bank Indonesia.

Percent of total 1995/96 non-oil/gas imports.

Cereal imports include a portion classified as intermediate goods imports.

While higher demand was the dominant influence in 1995/96, gradually rising import penetration has also contributed to the rapid import growth in recent years. Import penetration (defined as the ratio of non-oil imports to domestic expenditure plus non-oil exports) increased from 16 percent in 1994/95 to 17 percent in 1995/96. Partly a cyclical phenomenon, this marked a resumption of a longer-term trend—penetration has increased since 1988/89, when it was 13 percent (Chart 7). Declining tariff and nontariff barriers and some shifts in demand in favor of foreign goods are factors in the trend increase in import growth.

B. Trade Policy

Indonesia extended trade liberalization measures during 1995/96, following important commitments under multilateral and regional trade agreements. In May 1995, the Government introduced a substantial package of rules-based, across-the-board tariff reforms, scheduled to be introduced in stages to 2003. The package lowered tariffs on 6,000 items and resulted in a significant and immediate reduction in the average tariff rate from 19½ percent to 15 percent (12.5-9.5 percent on an import-weighted basis). The dispersion of rates was also reduced. Further reductions in tariffs were also scheduled over the period to 2003, in line with the accelerated ASEAN Free Trade Area (AFTA) Common Effective Preferential Tariff (CEPT) scheme, that would reduce the average (unweighted) tariff rate to 7 percent.12 In addition, there was a minor reduction in nontariff barriers with quantitative import restrictions replaced by tariffs on some manufacturing items. However, 35 percent of agricultural production and 30 percent of manufacturing production remained protected by import licensing restrictions. Foreign investment limitations were eased and a negative list introduced.

In January 1996, the Government introduced a further deregulatory package, aimed at enhancing the competitiveness of exports. The main elements of the package were: (i) tariff reductions of between 5 percent and 15 percent (predominantly 5 percent) on 428 products, mostly capital goods, and simplification of the tariff code with the removal of 1,100 items; (ii) reductions in import licensing on 80 products, mostly steel; (iii) an extension of the import duty drawback facility to goods supplied by existing exporters to firms in export processing zones; (iv) provision for wholly-owned foreign firms to export manufacturing, forestry, farm, fish and mining goods, and for foreign firms to import capital goods and raw materials for exports from export-processing zones; and (v) removal of export taxes on processed animal leather, aluminum scrap alloy, and sandalwood.

The scope of this second package was relatively small, with the average tariff rate estimated to fall to 14.2 percent. In February 1996, there were also two measures adopted that increased protection for individual companies: additional tariff protection was granted to PT Chandra Asri through a 20 percent tariff surcharge on propylene and ethylene imports, and preferential tax and duty arrangements were established for approved national car manufacturers.

C. Capital Account and Official Reserves

Strong private capital inflows were registered in 1995/96, with foreign direct investment more than doubling and portfolio and other private capital flows also rising sharply. A small net outflow of official capital was recorded, as the Government prepaid high interest-bearing external debt. Total net capital inflows were estimated at $10.3 billion (inclusive of errors and omissions)-5 percent of GDP—generating a surplus over the current account deficit, which was reflected in the increase in gross official assets of $3.4 billion.

All categories of private sector capital flows showed strength in 1995. High levels of investment approvals in both 1994 and 1995 were reflected in a sharp increase in foreign direct investment from $2½ billion in 1994/95 (1.4 percent of GDP)—and from an average of $2½ billion (1 percent of GDP) over the previous four years—to $5½ billion of investment (2.6 percent of GDP) in 1995/96. Foreign direct investment was buoyed by the relaxation of foreign investment controls, trade liberalization, and Indonesia’s strong economic performance, and represented approximately 9 percent of fixed capital investment by 1995 (Chart 6). Large increases in investment approvals were recorded from the United Kingdom, Germany, Australia, and the United States, and industrial country investment increased sharply in the petro-chemicals, manufacturing and services sectors. Asian investment remained at high levels in 1995, with Malaysian and Japanese investment rising while approvals for investment from Hong Kong and Taiwan Province of China declined sharply.

Private foreign borrowing, including through the nonbank sector (e.g., commercial enterprise borrowing via commercial paper and nonbank financial institutions (NBFIs)), rose sharply, with a net inflow of approximately $8 billion (4 percent of GDP) recorded. Substantial increases in financing were extended to the property, industrial and service sectors. Lenders may have been attracted partly by the increased interest differential in the second-half of 1994 which was sustained through 1995, at around 8 percentage points above LIBOR.13 Portfolio equity investment inflow also increased, especially in the second-half of the year and was associated with the stock market index rising by about 20 percent from September 1995 to March 1996.

Official capital flows were maintained at similar levels to those prevailing in 1994/95. With the central government recording an overall surplus and making further asset sales, the public sector reduced its borrowing from abroad for the second consecutive year; a net official capital outflow of $0.5 billion was recorded. Outflows—resulting from the debt prepayment and rising routine amortization costs-reached $6½ billion, up $0.5 billion on 1994/95. Drawings declined in 1994/95-1995/96 relative to the early 1990s.

Gross official foreign assets (including contingent assets) stood at $20.6 billion at end-March 31, 1996 compared with $17.1 billion one year earlier. Movements in reserves can be separated into three distinct periods (Chart 12). In the period from June through mid-August 1995, the rupiah was at the appreciated limit of the rupiah/U.S. dollar band, and there was a substantial rise in official foreign assets. Reserves—including valuation effects, as the yen depreciated against the U.S. dollar—were then broadly stable until February 1996, when they again increased significantly as capital flows accelerated, and reached the equivalent of 5.2 months of imports by end-March 1996.

CHART 12INDONESIA: EXCHANGE RATE AND RESERVE MOVEMENTS, 1995-96

Source: Data provided by the Indonesian authorities and Reuters.

1/ Until January 2, 1996, when the band was increased to three percent, the upper (lower) band was also Bank Indonesia’s announced buying (selling) rate for transactions with government, as well as with commercial banks during the late afternoon squaring sessions.

2/ From January 2, 1996, these conversion rates (with two percent spread) apply only to transactions of Bank Indonesia with the government and supranational organizations, and for export drafts.

D. External Debt

The stock of external debt is estimated to have risen from $96 billion as of end-1994 to an estimated $101 billion by March 1995, and to an estimated $108 billion by end-March 1996. Although the U.S. dollar value of the debt increased by $7 billion in 1995/96, and debt levels remained high relative to some other Asian countries, the external debt burden declined further in relation to both GDP and exports. External debt as a ratio of GDP declined from 57 percent at end-March 1995 to 55 percent at end-March 1996, and from 215 percent of exports of goods services to 209 percent over the same period. Public debt servicing (amortization plus interest payments including prepayments) declined slightly as a share of exports in 1995/96 to below 20 percent, continuing the trend over the last five years. Exclusive of prepayments, the debt service/exports ratio was 18.5 percent.

Public sector external debt is estimated to have declined by $4½ billion to $63 billion (32 percent of GDP) in 1995/96, while private sector debt increased by nearly $12 billion, to $45 billion (23 percent of GDP). Since the public debt is predominantly of medium to long maturities, the increasing proportion of private debt in the total is reducing the average maturity of outstanding obligations. Two reinforcing effects were at work in 1995/96:

  • Public sector net borrowing declined during the year, acting to reduce debt. Movements in central government debt largely explain overall public sector movements, since public enterprise debt at around $4.9 billion has been broadly constant in U.S. dollar terms since 1992/93. The sale of shares in PT Telkom and PT Timah in addition to a central government surplus allowed the Government to make prepayments of some $725 million during 1995/96, in addition to routine (public sector) amortization payments of $5.9 billion.
  • Valuation effects associated with the appreciation of the U.S. dollar against the yen by 20 percent (from 89 yen/US$ at end-March 1995 to 107 yen/US$ at end-March 1996) are estimated to have reduced overall public debt by $4.3 billion in 1995/96. The debt is predominantly yen (41 percent) and U.S. dollar (40 percent) denominated, with the yen share decreasing and the U.S. dollar share correspondingly increasing during 1995/96. Valuation effects have added around $2½ billion, per year, to public debt on average since 1990.

IV. Public Finance14

A. Introduction

The conduct of fiscal policy15 in Indonesia is strongly influenced by a balanced budget rule. Since the late 1960s, the Guidelines for State Policy require that in each fiscal year total central government expenditures be equal to revenues as defined in the budget. However, some short-run flexibility in fiscal policy has been achieved in recent years, within the context of the balanced budget rule16 (Box 1). For example, since the onset of rapid economic growth in the late 1980s, fiscal policy has often acted in a counter-cyclical fashion-both through the impact of automatic stabilizers on the revenue side as well as deliberate policy decisions by the Government—with the fiscal position moving into surplus during periods of rapid economic growth and emerging overheating pressures, and weakening during periods of slower economic growth. The tightening in the fiscal position during 1995/96, when the overall balance improved by almost 1 percent of GDP, was consistent with this pattern, and helped mitigate demand pressures.

Box 1.The Balanced Budget Rule

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 The national presentation of the budget defines revenue to include foreign borrowing, and expenditure to include all debt service payments (interest and amortization). This policy also requires that domestic revenues be sufficient to cover routine expenditure (which includes amortization payments) and a portion of development expenditure. In addition, to the extent that development expenditure exceeds public savings, the gap can only be filled by foreign borrowing. The balanced budget rule aims to prevent recourse to domestic bank and nonbank financing. Deficits and surpluses on the national presentation can exist, but generally only on an ex-post basis.

In practice, however, there are leakages from the balanced budget rule. Deficits and surpluses can exist according to standard Fund classification of fiscal accounts depending, for example, on the level of net foreign financing. Moreover, the rule gives some incentive to record transactions outside the formal budget, including through the use of “nonbudgetaiy” government deposit accounts. Net spending from these accounts has been limited in the last several years, but in earlier years movements in the nonbudgetary accounts were substantial.

The fiscal outturn in 1995/96 was substantially stronger than originally budgeted. The overall central government balance improved to a surplus of 1 percent of GDP, while the balance excluding oil/gas revenue improved to a deficit of 2 percent of GDP. Both oil/gas revenue as well as non-oil/gas revenue exceeded budget estimates, with total revenue and grants remaining at about 15 percent of GDP. Current expenditure in 1995/96 also exceeded budget estimates and increased to an estimated 9 percent of GDP. Accordingly, the improvement in the overall central government position reflected a reduction in estimated development expenditure and net lending to 5¼ percent of GDP.17

Fiscal Policy Stance, 1988/89-1995/96 1/(Percent of GDP)
1988/891989/901990/911991/921992/931993/941994/951995/96
Revenue14.815.518.116.316.315.415.115.2
Expenditure17.516.316.216.817.615.915.014.2
Overall balance-2.7-0.81.9-0.5-1.3-0.50.21.0
Cyclically neutral
balance 2/-1.1-0.8-0.6-0.4-0.4-0.4-0.3-0.2
Revenue stance 3/0.70.0-2.6-0.8-0.80.10.30.4
Expenditure stance 3/0.90.00.10.91.80.1-0.8-1.5
Fiscal stance 3/, 4/1.60.0-2.50.11.00.2-0.5-1.2
Fiscal impulse 5/1.0-1.6-2.52.60.8-0.7-0.6-0.8

Staff estimates.

Calculated from the ratio of revalue and expenditure relative to GDP in 1989 applied to actual GDP and potential GDP, respectively, in the current year.

Difference between actual and cyclically neutral position (negative value implies contractionary outturn or surplus).

Difference between the cyclically neutral balance and the actual overall balance.

Change in fiscal stance (negative value implies a contractionary impulse).

Staff estimates.

Calculated from the ratio of revalue and expenditure relative to GDP in 1989 applied to actual GDP and potential GDP, respectively, in the current year.

Difference between actual and cyclically neutral position (negative value implies contractionary outturn or surplus).

Difference between the cyclically neutral balance and the actual overall balance.

Change in fiscal stance (negative value implies a contractionary impulse).

Following a weakening of oil revenues in the early 1980s, the strong program of fiscal adjustment that was initiated involved significant changes in the structure of the fiscal accounts. Reductions in development expenditure (relative to GDP), tax system reform, and improvements in tax administration contributed to an improvement in the overall balance relative to GDP by around 6 percentage points, and by 15 percentage points in the non-oil/gas balance between 1982/83 and 1995/96 (Chart 15). While oil revenues have declined substantially relative to GDP, non-oil/gas revenues have increased and, as a result, total revenue and grants have been maintained at about 15 percent of GDP. Even in 1995/96, a year of higher-than-expected prices, oil/gas revenue accounted for only 23 percent of total tax revenue (3 percent of GDP). At the same time, income taxes and taxes on goods and services have continued to increase in importance as revenue sources, although income taxes fell slightly relative to GDP in 1995/96 owing to the full-year impact of a reduction in income tax rates that took effect in January 1995. Substantial changes in expenditure patterns have also occurred since the mid-1980s. Current expenditure has trended down, but increased slightly to nearly 9 percent of GDP in 1995/96. The level of development expenditure and net lending has varied in relation to GDP, but has declined steadily in recent years, a trend which continued in 1995/96.

CHART 13INDONESIA: EXCHANGE RATES AND OIL PRICE INDICES, 1980-96

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.

CHART 14INDONESIA: MONETARY CONDITIONS, 1992-96

Sources: Data profited by the Indonesian authorities; and IMF. Information Notice System.

1/ SBI minus LIBOR.

2/ 3-month rate less 12-month rate.

CHART 15INDONESIA: FISCAL INDICATORS, 1980/81-1995/96

(In percent of GDP)

Source: Data provided by the Indonesian authorities.

1/ Derived from the sum of the current balance end net financing.

B. Central Government Finances

1. Developments in 1995/96

The overall central government budget recorded a surplus of Rp 4.5 trillion (1 percent of GDP), owing to higher-than budgeted revenue collections and expenditure restraint (especially with respect to development expenditure and net lending). This outturn, together with the funds raised from the sale of shares in PT Telkom and PT Tambang Timah, allowed for a further significant buildup in government deposits with the banking system, and a reduction in external public sector debt (Chart 15).

Total revenue collections (including grants) in 1995/96 amounted to Rp 70.3 trillion (15 percent of GDP), exceeding the original budget estimates by about Rp 3.6 trillion (½ percent of GDP). Both oil/gas and non-oil/gas revenues were stronger than expected, but most of the increase in revenues came from higher non-oil/gas taxes that was partially offset by a shortfall in nontax revenue. Income tax collections from the oil/gas sector were Rp 14.8 trillion (3 percent of GDP) as the average oil price was $17.30 per barrel compared to the original budget assumption of $16.50, and production volumes were slightly higher than assumed in the budget. Revenue from natural gas also benefited from slightly higher prices and volumes than expected. Against the background of an estimated 17½ percent growth in nominal GDP, total non-oil/gas tax revenue increased by 19 percent in 1995/96 to Rp 48 trillion (10½ percent of GDP), and was Rp 3.5 trillion above original budget estimates. All categories of taxes, except taxes on international trade, were significantly higher than original budget estimates, reflecting higher-than-projected economic growth, relatively conservative estimates in the original budget, and some ongoing improvements in tax administration (see below).

  • Non-oil/gas income tax collections increased by 12 percent to Rp 20.5 trillion (4½ percent of GDP)18 and accounted for about one-third of total tax revenue. Income tax collections fell slightly relative to GDP owing to the full-year impact of income tax reductions that took place with effect from January 1,1995.
  • Taxes on goods and services increased very rapidly, reflecting robust economic growth, as well as some impact from improvements in tax administration. Revenue from value-added taxes grew by 30 percent in 1995/96 to Rp 18.4 trillion (4 percent of GDP), 29 percent of total tax revenue.
  • Excise taxes and property taxes (about ¾ percent and ¼ percent of GDP, respectively) grew strongly in 1995/96. While property tax revenues increased, their contribution to federal revenue continued to be limited by weaknesses in administration at the local government level, where the tax is collected. (Moreover, the fact that 91 percent of property tax collections is shared with local governments means that the net impact on the overall fiscal position is limited.)
  • Taxes on international trade amounted to Rp 3.4 trillion (¾ percent of GDP), and 5 percent of total taxes, slightly lower than the budget projection and below the amount recorded in 1994/95. Import duty collections declined, despite the large increase in import volumes during the year, owing to reductions in import tariffs and the fact that a large share of imports was in categories that carried low duty rates (e.g., food, capital, and intermediate goods).

Nontax revenue amounted to Rp 6.6 trillion (1½ percent of GDP), an increase of 18 percent over 1994/95, but lower than budget estimates. Profit receipts (including from BI) totaled only Rp 1.5 trillion. Dividends received were below budget forecast, and significantly lower in relation to projected public enterprise after-tax profits than in 1994/95, as some large public enterprises retained more of their profits to finance investment expenditure. Other nontax revenue (including revenue from the reforestation fund, repayments associated with two-step loans, self-financing generated from education and hospitals, and other fees) remained constant at about Rp 4.6 trillion.19 The surplus on domestic oil operations declined in 1995/96 to Rp 490 billion, substantially below budget estimates. Revenue from this item has declined since the last retail price adjustment in January 1993, despite large increases in the volume of domestic sales, owing to increases in international prices (measured in rupiah).20 Taking into account the repayment made to Pertamina following the audit of their 1993/94 accounts (which is treated as an expenditure item), the impact on the budget of domestic oil operations was negative in 1995/96 for the first time since 1992/93.

Tax measures introduced in 1995/96 included a reduction in income tax rates and a widening of tax brackets, an expansion in the coverage of the VAT to include intangible goods and self-constructed homes, increased tax withholding, higher luxury taxes on some items, and taxes on property and stock transactions.21 Despite efforts to broaden the tax base there remain major exemptions. Exemptions from the VAT include agricultural and mining products, essential commodities such as rice and salt, some utility services, and other services (e.g., medical, education, art, banking). For the income tax, major exemptions that still exist include: (i) profits earned on contracts awarded from foreign aid funds; and (ii) longer periods of loss carry forward and accelerated depreciation for foreign investments in certain sectors or geographical areas. Efforts to improve tax administration also continued in 1995/96. The monitoring of VAT compliance improved with the introduction of a negative list, so that all sectors are subject to the VAT except those specially mentioned in the negative list. In addition, efforts to improve tax reporting, tax collections, and tax enforcement that were initiated in earlier years were continued.

Total expenditure and net lending in 1995/96 increased by 8 percent to Rp 65.8 trillion (14 percent of GDP), and was less than the budget estimates (by Rp 2.3 trillion) owing to shortfalls in estimated development expenditure and net lending which more than offset higher-than-budgeted current expenditure. Development expenditure and net lending declined by about 3½ percent of GDP during the period 1992/93-1995/96, and was the main factor behind the decline in total expenditure and net lending from 17½ percent of GDP to 14 percent of GDP during this period.

  • Current expenditure exceeded budget estimates owing to two main factors: (i) the original budget projections for materials expenditure were underestimated by Rp 1.1 trillion, partly reflecting a move to bring on budget spending formerly financed by own-revenue of some government agencies, as well as some expenditure that was previously classified as development expenditure; and (ii) there was an unbudgeted repayment of Rp 1.5 trillion to Pertamina, the national oil company. The payment of Pertamina followed the audit of Pertamina’s accounts for 1993/94 which showed higher than assumed costs, requiring a reimbursement from the Government. As a result, current expenditure reached Rp 41.6 trillion (9 percent of GDP).
  • Development expenditure and net lending in 1995/96, estimated at Bp 24.2 trillion (5¼ percent of GDP) was substantially below budgeted levels owing to lower-than-expected development expenditure, as well as an increase in the balances in government deposit accounts, which are reflected in the IMF presentation as part of estimated development expenditure and net lending.22

Net foreign financing of the budget in 1995/96 was negative for the second consecutive year (¼ percent of GDP) and reflected the use of privatization receipts to repay relatively expensive external debt to multinational regional institutions. Total domestic financing was also negative (¾ percent of GDP), as overall central government operations provided room for a further buildup of government deposits in the banking system.

2. The Budget for 1996/97

While the 1996/97 budget conformed to the tradition of presenting a balanced budget, the President’s budget speech on January 7,1996 recognized the role that fiscal policy can play (especially through the mobilization of additional revenue) in reducing overheating pressure and containing import demand. It was also stated that any fiscal surplus generated would be used to continue the process of repaying expensive external debt.

The budget for 1996/97 included an increase of 19 percent in both revenue and expenditure from the 1995/96 budget. However, in IMF format—and against the background of an increase in nominal GDP of 17 percent—the budget implied only an 11 percent increase in revenue, but a 19 percent increase in total expenditure and net lending from the estimated 1995/96 outturn, moving the overall fiscal position into a small deficit (0.1 percent of GDP). The loosening of the budgetary position relative to 1995/96 could be avoided as in both 1994/95 and 1995/96, the outturn proves better than budgeted.23 No new specific revenue measures were introduced with the 1996/97 budget. Efforts at improving tax administration are to continue, especially to improve VAT and income tax collections. Total revenue and grants were budgeted to fall to about 14½ percent of GDP in 1996/97 from 15 percent in 1995/96. Oil/gas revenue was expected to continue its trend decline and fall to 2½ percent of GDP (assuming an average oil price of $16.5/barrel for 1996/97), while non-oil/gas revenue was budgeted to remain at about 12 percent of GDP.

Current expenditure was programmed to increase by 10 percent (above the 1995/96 outturn), but after adjusting for the unbudgeted payment to Pertamina in 1995/96, the implied increase is 14 percent. The budget for current expenditure provided room for a further increase in domestic materials expenditure and a 19 percent increase in the wage and salary bill.24 Development expenditure in 1996/97 was budgeted to increase from the 1995/96 outturn by 35 percent to Rp 32.8 trillion (6 percent of GDP). Within this amount, there were no major shifts in allocation from recent years. It had been expected that budgetary allocations for telecommunications and energy could be reduced as a result of the partial privatization of PT Telkom and increased private provision of electric power. While budgetary allocations to these two sectors continued to increase in nominal terms, their share of the overall development budget declined. In addition, regional development also received a lower share of the development budget than in recent years, while shares allocated to education, health, housing, agriculture, and transportation were budgeted to increase.

C. Provincial Governments and Public Enterprises

Indonesia has a highly centralized government with central government expenditures accounting for about 90 percent of general government expenditures, with provincial governments making up most of the remainder. The central government also raises about 90 percent of general government revenue, and the largest part of provincial and local government revenue comes from transfers from the central government, with the remainder coming from shared revenue sources (property tax and natural resource royalties) and own-source revenues (user fees and profit transfers from certain state enterprises). Total provincial government expenditure for 1995/96 was budgeted at about 2 percent of GDP of which two-thirds was current expenditure. This expenditure was financed mostly by transfers from the central government (about 1¼ percent of GDP) and supplemented by own revenue sources (¾ percent of GDP), leaving the overall position of provincial finances in broad balance.

The public enterprise sector consists of some 180 enterprises. Public enterprises had a total equity value of about Rp 143 trillion ($66 billion) at end 1994, accounted for about 15 percent of GDP, and employed about 1½ percent of the labor force. While complete consolidated public sector accounts are not available, until recently the overall public sector position was largely determined by the central government and a few major public enterprises such as Pertamina and Garuda. However, with the acceleration of the program of partial divestiture, major public enterprises, including PT Indosat, PT Telkom, and Perusahaan Listrik Negara (PLN, the state owned electricity company), are retaining part of the receipts from share sales, as well as from equity and bond issues. Central government activities will therefore increasingly understate the impact of the public sector on the economy in future years.

The total external debt of public enterprises was estimated at $4.9 billion at end-March 1996, placing total public sector debt at $63 billion (30 percent of GDP). The external borrowing of state enterprises has been controlled since 1991 by the Commercial Offshore Loan Team (COLT). Regulations set ceilings on commercial foreign borrowings by BI, state banks, private banks, state-owned companies, and private companies for the five fiscal years ending in 1995/96. Ceilings, at reduced levels, were issued for 1996/97. The ceilings on private companies are only indicative and private borrowings have substantially exceeded the indicative “ceilings.” However, the regulations have restrained offshore borrowing by state banks and state-owned companies as well as improving BI’s ability to monitor external borrowing.

With a view toward reducing the scope of the public sector, the Government initiated an ambitious public enterprise restructuring and divestiture program in 1989. Progress was very slow until 1994, with only one public firm offered for divestment. However, since 1994 the public enterprise reform program has been speeded up through divestitures and increased private provision of services mainly in telecommunications, energy, and transportation. PT Indosat was partially divested in 1994 through the sale of 25 percent of its equity in New York and the parallel increase of capital by 10 percent locally that raised $1.16 billion in total. In 1995, Indonesia sold 20 percent of PT Telkom’s capital for $1.68 billion through listings in New York and London (7.5 percent) and in Jakarta and Surabaya (12.5 percent). At the same time, project-linked private investments were also undertaken in telecommunications, energy, and transportation. In addition, PT Tambang Timah (a tin mining company) was also partially divested in 1995 through the sale of 25 percent of its capital in overseas markets, and increased its capital by 10 percent through a parallel listing on the domestic market, raising about $200 million in total. The Government also announced its intention to partially divest Krakatau Steel, PLN, Bank Negara Indonesia, Jasa Marga (a toll road operator), Aneka Tambang (a mining company), and Garuda Indonesia in the near future. Plans are also under way to further consolidate the publicly owned plantations prior to their divestiture.

V. Financial Sector25

The financial system in Indonesia is dominated by the banking sector, and since the 1988 deregulation, the number of commercial banks has more than doubled to about 240. There are seven state banks, including the state development bank (BAPINDO). In recent years the role of private banks has increased rapidly and the share of total bank assets accounted for by private banks has increased from one fourth in 1988 to more than one half in 1995. There are also some 8,000 rural banks, a number of nonbank financial institutions, and a capital market that is still at a relatively early stage of development.

The growth in money and credit aggregates, which began in mid-1993 following the shift in policy focus to supporting economic growth, continued into 1995/96. Broad money growth increased in 1995/96, while growth in narrow money eased a little. The continued rapid expansion of credit to the private sector contributed to the substantial rise in domestic demand and the pressures on inflation and the external current account. Moreover, the continued development of financial markets provided additional sources of funds including lending by nonbank financial institutions, as well as commercial paper and equity markets. The rupiah/U.S. dollar exchange rate continued to depreciate steadily during 1995/96, reflecting the inflation differential with partner countries, while at the same time BI moved to increase the short-run flexibility of the exchange rate by widening the intervention band. There was improvement in some overall indicators of the financial position of banks—although important areas of risk remained—and BI moved to strengthen bank regulation and supervision in 1995 by issuing several new regulations.

A. Monetary Policy Objectives

Repelita VI established the objective of reducing the annual inflation rate to no more than 5 percent on average over the period 1994/95 to 1998/99. While no formal annual inflation target exists, policy has been geared to maintaining inflation below 10 percent, and to restraining money and credit growth accordingly. Money and credit targets were set for 1995/96 at 20 percent for broad money and 19 percent for bank credit, while for 1996/97, the targets are 17 percent and 16 percent, respectively.

Monetary policy has also been set against the background of maintaining a broadly stable real exchange rate. Although there have been fluctuations over short time periods, the authorities have succeeded in keeping the real effective exchange rate broadly constant since 1987 (Chart 13). In practice, the implementation of monetary policy has allowed a depreciation of the rupiah against the U.S. dollar by about 5 percent per year, reflecting, on average, the inflation differentials between Indonesia and partner countries.

In the face of internationally mobile capital flows, the inflation, money growth and exchange rate objectives have at times come into conflict. As a partial remedy, Indonesia has progressively widened its exchange rate band. The most recent widening was in January 1996, when the band was widened from 2 percent to 3 percent around the middle rate (Box 2). Although still narrow, the band provides some limited scope for enhancing the effectiveness of monetary policy.

Box 2.Exchange Rate Policy Developments

Indonesia instituted a managed float on November 15,1978. The initial rate established for the rupiah on that date was Rp 625 per U.S. dollar. On March 30,1983 the rupiah was devalued by 28 percent, and on September 12,1986 it was devalued by a further 31 percent BI sets a central rate for the rupiah based on a basket of foreign currencies and intervenes in the foreign exchange market to buy or sell rupiah at an intervention band around the central rate. As of end-March 1996 the central rate was Rp 2,344 per U.S. dollar and the market rate Rp 2,338 per U.S. dollar.

The rupiah/U.S. dollar exchange rate band was widened twice during 1995/96—to Rp 44 per U.S. dollar in June 1995 (about 2 percent), and then to Rp 66 per U.S. dollar (3 percent), effective January 2 1996. This followed previous widenings from Rp 6 per U.S. dollar to Rp 20 in January 1994 and to Rp 30 (about 1½ percent) in September 1994.

A distinction is now made between the “intervention band” (now at 3 percent) within which the interbank market rate fluctuates freely, and the “conversion band” (with a 2 percent spread) which BI applies to transactions with the government, supranational institutions, and to export drafts. The widening of the exchange rate band was intended to enhance the effectiveness of monetary policy.

The intervention band and conversion rates are determined daily by BI, and announced to the market BI usually intervenes in the foreign exchange market only when the market rate threatens to breach the intervention band.

B. Overall Monetary Developments

The rate of growth of broad money increased from an average of 22 percent in 1993/94 and 1994/95 to 28 percent in 1995/96. As in 1994/95, the expansion in domestic assets in 1995/96 was the main source of broad money growth, although in contrast to the previous year, the contribution of net foreign assets was also positive (Chart 16). The growth of broad money in 1995/96 exceeded the 18 percent growth in narrow money as large increases in time-deposit rates encouraged a shift out of narrow money. Correspondingly, the growth of quasi-money—which includes rupiah time and savings deposits as well as foreign currency deposits—increased by 31 percent in 1995/96, compared with 23 percent in 1994/95.

CHART 16INDONESIA: MONEY AND CREDIT GROWTH, 1990/91-1995/96

(Percent change on year earlier)

Source: Data provided by the Indonesian authorities.

Reserve money growth declined substantially in the first half of 1995/96 (falling to 12 percent in September 1995), before accelerating again at the end of the fiscal year, following the increase in the reserve requirement (see below) which substantially increased bank reserves in the central bank. The growth of currency outside banks showed a similar pattern during 1995/96. After increasing at rates in excess of 30 percent in 1994, the growth in currency declined to 11 percent in September 1995 before increasing slightly to 15 percent in March 1996. In contrast to 1994/95, the increase in reserve money in 1995/96 was fully accounted for by an increase in net foreign assets. Net domestic assets declined in 1995/96 owing to a substantial decrease in net claims on the government by Rp 4.4 trillion and an increase in the outstanding SBI/SBPU position by Rp 1.4 trillion, which was more than sufficient to offset a large expansion (by Rp 3.4 trillion) in BI liquidity credits.

Credit expansion was also rapid for most of the year, growing at rates similar to overall broad money growth until November 1995, when credit growth began to moderate. With the central government’s position in surplus during the year, the increase in government deposits helped moderate domestic credit growth. Total private sector credit grew at an annual rate of 27 percent for the first half of the year before declining to an annual growth rate of 22 percent by end-March 1996. The increase in bank credit was evident in all sectors, although the increase was especially sharp in the housing/real estate sectors (up 38 percent in the year ended December 1995). Part of the increase in domestic credit has been sustained by the issuance by banks of certificates of deposit (CDs), many of which are believed to be held by nonresidents. Given the widening interest rate differentials between onshore and offshore borrowing, CD issuance expanded rapidly during 1995-from Rp 2.5 trillion in December 1994 to Rp 7.8 trillion in December 1995, and Rp 9.2 trillion in February 1996.

C. Monetary Operations During 1995/96

Open market operations using SBIs remained the main instrument of money management for BI. Discount operations on SBPUs, and the issuance of liquidity credits, at times, also provided important monetary influences. In addition, in December 1995, the central bank announced that reserve requirements would be increased from 2 percent to 3 percent with effect from February 1996.26 In addition, the influence of fiscal policy on monetary policy and reserve money growth was particularly evident in 1995/96, as steady rises in government deposits, due to the tightening fiscal position, were the largest single influence in moderating reserve money growth.

Over the course of the fiscal year, open market operations reduced money growth—after having boosted it substantially in the first quarter of 1995. Outstanding SBIs declined very sharply during the March quarter of 1995 at a time when there were some moderate capital outflows. However, the volume of SBI purchases by BI exceeded movements in net foreign assets and contributed to an increase in reserve money growth. In response, SBI sales were increased in June-July as BI endeavored to sterilize a resumption of foreign asset growth. For the remainder of 1995/96, changes in the SBI/SBPU position (on a net basis) made only a moderate contribution to reserve money growth. Partially offsetting these SBI operations, BI increased the provision of liquidity credits significantly in the second-half of 1995/96 in order to support the banking system, and for BULOG operations. Liquidity credits outstanding were 30 percent higher in March 1996 than a year earlier, contributing substantially to reserve money growth.

In addition to market-based instruments of monetary control, owing to concern over the impact of credit growth on inflation and excess aggregate demand, BI placed greater emphasis on restraining bank credit through moral suasion. The target announced at the beginning of 1995/96 for domestic credit growth was to be met in part by asking banks to submit their credit plans to BI and to keep the growth of credit to within reasonable limits. In the event, credit growth in 1995/96 still exceeded the target range. As a result, bilateral consultations between the central bank and commercial banks were further intensified in early 1996 with a view to holding credit growth within the targeted range for 1996/97.

The combined effect of monetary operations in 1995/96—defined to include claims on government and liquidity credits—was a negative contribution to liquidity growth over the year. However, monetary conditions remained relatively unchanged from March 1995 to March 1996, as government operations were offset by net foreign asset growth. As a result, money market interest rates were broadly stable over the fiscal year. Interest rates rose in January to March 1995, before stabilizing and then softening slightly in the period December 1995 to March 1996. The discount rate on 30-day SBIs, a representative short-term money market interest rate, which had risen by 350 basis points the previous year, rose from 12½ percent in December 1994 to 14¾ percent at end-June 1995, but declined to 14 percent by the end of December 1995. Real short-term interest rates (measured by the 30-day SBI rates less consumer inflation) increased by about 1 percentage point over the second-half of 1994 and a further 2 percent in the first-half of 1995. However, at approximately 4½ percent on average during 1995, they remained well below the levels of earlier periods of monetary policy tightening. The differential with interest rates abroad increased over the 12-month period to June 1995, before easing back marginally. LIBOR fell during the year, which contributed to raising the interest rate differential between Indonesia and partner countries (Chart 14).

Long-term interest rates also rose by around 1 percentage point in 1995/96, after having declined through 1993 and 1994. The cost of credit to businesses increased less than wholesale market rates. The cost of working capital began edging up in December 1994 and rose by about 1.5 percent during 1995. On average, though, real working capital rates were very similar to 1994 levels and near their recent historical lows. Investment rates showed a similar pattern, contributing to the continued strong investment demand.

Interest Rates, 1990/91-1995/96(In percent)
1990/911991/921992/931993/941994/951995/96 1/
Nominal
Call money (end of period)27.013.011.47.613.114.0
Call money (average)17.212.911.87.811.113.7
30-day SBI rate (end of period)23.618.012.58.514.214.0
30-day SBI rate (average)17.818.614.79.511.614.1
Working capital (end of period) 2/26.724.821.718.018.419.3
Working capital (average)21.526.023.319.417.818.9
3-month deposit (end of period) 2/23.521.315.711.515.917.2
3-month deposit (average)18.422.818.313.413.516.7
12-month deposit (end of period) 2/20.022.517.713.413.916.3
12-month deposit (average)18.122.420.115.213.014.9
Real 3/
30-day rate (end of period)12.87.01.91.14.84.6
30-day rate (average)8.58.36.80.12.54.3
Working capital (end of period)15.713.210.210.08.79.4
Working capital (average)11.915.014.89.28.28.6

To December.

Commercial money banks.

Real interest rates are defined as (1 + r)/(1 + π), where r is the nominal interest rate and π is the inflation rate.

To December.

Commercial money banks.

Real interest rates are defined as (1 + r)/(1 + π), where r is the nominal interest rate and π is the inflation rate.

D. Exchange Rate Developments

While exchange rate policy continued to be formulated with a view toward maintaining competitiveness and avoiding undue fluctuations in the rupiah, policy has been oriented toward gradually increasing the short-run flexibility of the exchange rate in order to enhance the effectiveness of monetary policy. In 1995/96, BI widened the spread within which the interbank market rate may fluctuate at first to 2 percent and then, in January 1996 to 3 percent. BI generally intervenes only if necessary to maintain the market rate within the intervention band.

The nominal rupiah/U.S. dollar exchange rate depreciated steadily throughout 1995/96. At the end of March 1996, it was 5.6 percent below the March 1995 level.27, 28 However, with sharp swings in the yen/U.S. dollar rate, the nominal effective exchange rate was more volatile. In the period from May 1994 to April 1995, there was a sharp depreciation in the nominal effective rate by 15 percent. However, from April 1995 until February 1996 as the U.S. dollar strengthened, the rupiah in nominal effective terms appreciated by 6 percent.

Movements in the real exchange rate (measured by relative consumer inflation) showed a similar pattern to the nominal effective rate, at first depreciating and then appreciating later in the fiscal year largely reflecting fluctuations in the yen/U.S. dollar rate. While the traded goods sector was subject to these fluctuations, the real exchange rate for the year ended February 1996 was, on average, 1½ percent lower than one year previously.

E. Bank Regulation and Supervision

Since 1988 the financial system has grown rapidly both in terms of the number of the banks and in total assets. While the number of state-owned commercial banks has remained at seven, their share in total banks assets has declined from 70 percent in 1988 to 45 percent in February 1996. At the same time, the number of private banks expanded rapidly with close to 130 new private commercial banks being established since 1988.

The rapid expansion of the financial sector has been accompanied by the emergence of bad debts and problem banks in both the public and private sectors. Five large state banks faced a marked deterioration in the quality of their assets in the early 1990s and a restructuring scheme was initiated in August 1992 with the financial and technical support of the World Bank. In addition, the state-owned development bank, BAPINDO, was assisted in 1995 by contributions from both the Government and BI. Furthermore, the financial situation of a number of private banks also began to deteriorate in the early 1990s.

In several respects, the aggregate financial position of Indonesian banks continued to improve in 1995; the share of nonperforming loans (i.e., those classified as substandard, or doubtful), after having declined from 14.2 percent at end-1993 to 12.1 percent at end-1994, edged down to 11.6 percent by September 1995, and 10.8 percent (Rp 29 trillion or 6.5 percent of GDP) by January 1996, and the number of problem banks was reduced. Capitalization of the commercial banks was also on an upward trend since 1993. As of January 1996, the overall capital adequacy ratio (CAR) for the system was 12.5 percent. However, there is a considerable range across banks with several banks still below the minimum 8 percent. Finally, the banking system as a whole appears to be profitable with return on assets averaging 1.8 percent and return on equity of 14.2 percent at end-1995.

Despite the recent progress, there remain important areas of risk. The number of banks exceeding their legal lending limit has increased and the channeling of credit through the NBFIs may have added to the effective circumvention of the lending limit. The return on assets of the state banks was negative and continued to deteriorate in 1995, and the condition of some private banks remained fragile. Under new regulations, by the end of 1996, banks will be required to make full provisions for their classified assets, implying the need for further capitalization.

In 1995, BI continued to take steps to strengthen bank regulation and supervision (Box 3), in part in response to concerns about the growth of NBFIs, whose assets totaled 7 percent of broad money at end-1995, as well as increasing exposure by banks to the property sector. The Ministry of Finance took several initiatives in 1995 including placing limits on NBFIs outstanding indebtedness to other financial institutions (onshore or offshore), barring NBFIs from issuing CPs or negotiable promissory notes, tightening reporting requirements, and authorizing BI to assist the Ministry of Finance in the supervision of these institutions.29

Box 3.Summary of Main Regulations Issued by Bank Indonesia in 1995

In January 1995, regulations were imposed concerning the provision of financial statements and the submission of annual business plans and implementation reports to BI. In addition, criteria for precluding persons from holding positions as bank shareholders or managers were established.

In March 1995, banks were required to establish guidelines with respect to credit policy formulation and standards for the implementation of an internal credit function, and submit credit reports to BI.

In August 1995, regulations were imposed for the trading of commercial paper by banks, which were aimed at slowing an excessively rapid growth of banks’ contingent liabilities.

In September 1995, there was an increase in capital requirements for foreign exchange banks, which is expected to encourage small and less well capitalized banks to merge with stronger institutions. The application of the legal lending limit to companies trading shares on the stock exchange was also tightened.

In October 1995, regulations were issued empowering BI to take over cm a temporary basis the management of problem banks.

In December 1995, the reserve requirement was increased, restrictions were placed on banks’ activities with derivatives transactions, and the exchange rate band was widened.

Total exposure of the banks to the property sector has increased significantly in recent years. The share of total domestic bank credit to the property sector increased from 12 percent at end-1993 to 16 percent in January 1996. The annual growth rate of property credit peaked at nearly 60 percent in the first quarter of 1995 and has since been on a downward trend, but remained close to 30 percent in the year to February 1996. Among other things, this decline may reflect increased moral suasion, rising material costs, and declining demand in the upper end of the housing market.

F. Capital Market Developments

The Indonesian equity markets have developed significantly in recent years. The stock exchange capitalization value increased rapidly in the past five years from Rp 12.4 trillion in 1990 (6.4 percent of GDP) to Rp 151.9 trillion (40.1 percent of GDP) at the end of 1995 (Chart 17). During the same period, the number of listed companies increased from 144 to 270. A new development in 1995 was the rapid expansion of commercial paper—liabilities by NBFIs and business enterprises. In October 1995, the stock of commercial paper totaled Rp 5 trillion or 2.5 percent of the stock of broad money.30

CHART 17INDONESIA: STOCK MARKET DEVELOPMENTS, 1992-96

Source: IFC, Emerging Markets Database.

The Jakarta Stock Exchange price index, which fell by 20 percent in 1994, recovered in 1995, increasing by 9.4 percent. During the first-quarter of 1996, the index rose by a further 14 percent, in line with developments in many other regional markets. The stock exchange saw several important developments in 1995—the introduction of computerized trading on the Jakarta Stock Exchange; the merging of the Surabaya Stock Exchange and the over-the counter (OTC) market in order to encourage the participation of small investors in the stock market; and the enactment of a new capital market law. The new law replaces the 1952 Bourse Law and has four substantial components: (i) along with banks, securities companies are permitted to act as custodians offering full administrative services to clients; (ii) mutual funds are now allowed to be established; (iii) the capital market supervisory agency, BAPEPAM has been given criminal investigatory powers and sanctions; and (iv) simpler trading and book-entry settlement are guaranteed by the Clearing Guarantee Institution.

VI. Development Plan, Poverty, and Environmental Issues

In the Sixth Five-Year Development Plan (Repelita VI; 1994/95-1998/99), the Government specified a number of macroeconomic targets, and social and environmental objectives. The main macroeconomic objectives were: (i) GDP growth at 7.1 percent per annum (on the new national accounts basis);31 (ii) inflation averaging 5 percent per year; (iii) containing the external current account deficit below 2 percent of GDP; and (iv) maintaining gross international reserves equivalent to six months of imports. Additionally, some structural objectives were established, with further expansion of the non-oil/gas sector projected in production, exports and revenues. Higher non-oil/gas revenues were also targeted 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. Accordingly, GDP growth was expected to lead to an increase in per capita income to $1,020 by the end of the Plan (1998/99). In addition, there were also important social and environmental objectives in the development program.

In the first two years of the Plan, substantial progress was made with continued development of the non-oil/gas sector, an overall GDP growth rate that significantly exceeded the target, and per capita income that has already reached about $1,000. While, as documented in this report, in most respects overall macroeconomic performance has been good, achievements have fallen somewhat short with respect to some of the objectives. Inflation has remained at close to 10 percent; the current account deficit in 1995/96 was in excess of 3 percent of GDP; and gross international reserves have increased, but have fallen somewhat below six months of import coverage. In addition, while non-oil revenues have grown rapidly and increased their share in total financing, they have not increased substantially relative to GDP. Moreover, estimated development expenditure declined in relation to GDP during the first two years. Therefore, in order to achieve Repelita VI targets, the current role assigned under the Plan to fiscal policy will become even more important in the next three years.

The rapid growth in income and employment observed over the last 25 years has been accompanied by a broad improvement in poverty and most social indicators of development. Above all, Indonesia has been able to achieve a dramatic reduction in poverty through rapid, sustained, and labor intensive growth, initially through development of the agricultural sector and then through rapid growth of manufactured exports. Estimates of the extent of poverty have fallen sharply during this period. The proportion of the population below the poverty line fell from about 60 percent in 1970 to about 29 percent in 1980 and to about 15 percent in 1993. The rate of population growth has slowed to about 1.7 percent per year, so that the absolute number of people in poverty has also declined dramatically from 70 million in 1970 to about 26 million in 1993.

Recent work, including by the World Bank, indicates that the benefit of the growth have been widely dispersed—both demographically and regionally.32 From 1983-93, per capita income and social indicators improved and poverty was reduced in all provinces. Differences among provinces were largely in the rate of improvement. In the poorest provinces, growth in per capita incomes was faster than most of the developing world. In addition, the available evidence indicates that growth rates of per capita GDP are converging, implying that the relative gap between rich and poor provinces is narrowing, albeit slowly. However, major challenges remain, and it is increasingly recognized that the achievement of the Repelita VI target—of a further reduction in poverty to 6 percent of the population by 1998/99—will require not only continued rapid economic growth but also targeted programs to assist the poor, including by extending compulsory education and continuing poverty alleviation programs for specific regions. These will help deal with the pockets of deprivation that continue to exist. For example, dealing with the urban poor still remains a policy challenge. While poverty rates for the urban poor have improved, owing to the migration of the population to urban centers, the number of the urban poor below the poverty line has remained high and was estimated at 9.4 million as of 1990. There are substantial numbers of the poor remaining in some of the lesser developed regions. Under Repelita VI there is an emphasis on geographic targeting of resources and services. Examples of such targeting are the ambitious village mid-wives’ program, the program for providing free health to needy families, and the programs to target infrastructure to Inpres Desa Tertinggal (IOT) villages.

Indonesia’s growth has been heavily dependent on its natural resources. 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. Policies have focused on improving water resource allocation and quality control, abatement of urban pollution, and the conservation and management of land and forest resources. Policies that have been initiated include: (i) the Clean River Program introduced in 1980 that set limits on industrial waste flows into 24 rivers in 11 regions; (ii) the expansion of the reforestation program; (iii) the establishment in 1990 of a national Environmental Impact Management Agency (BAPEDAL) and the opening of three regional offices (Sumatra, Bali and Sulawesi) in 1994; and (iv) an intensification of the effort to integrate environmental concerns more directly into development policies with the launching in November 1994 of the National Coordination Meeting on Environmental Management and Sustainable Development (Rakornas).

Under Repelita VI the pursuit of environmental objectives will be continued, in particular related to the control of water pollution and water shortages, land degradation, and deforestation. This would be accomplished through further strengthening of the regulatory framework and increasing use of market-based incentives through proper pricing and taxation. Much of this agenda remains to be accomplished. Arguably, resource quality is deteriorating as air and water quality are pressured by rapid urbanization, while forestry logging remains above sustainable rates. In each of these areas much needs to be done to improve the incentives and ownership and management regimes that govern resource use.

Table 1.Indonesia: Developments in Gross Domestic Product by Sector of Origin and by Expenditure, 1990-95 1/
19901991199219931994Est.

1995
(Annual percentage change; in constant 1993 prices)
GDP9.08.97.27.37.58.1
Oil/gas GDP6.48.7-1.20.33.5-0.6
Non-oil/gas GDP9.49.08.38.17.99.0
Gross domestic product
by sector of origin
Agriculture2.01.66.73.10.52.6
Mining and quarrying7.212.61.63.45.66.5
Manufacturing 2/12.211.511.213.213.514.2
Utilities19.58.58.911.112.717.9
Construction16.914.913.713.214.912.9
Trade, hotel, and restaurants10.612.47.49.87.38.3
Transport and communications9.28.57.97.57.88.0
Banks and finance14.113.113.0-5.213.88.1
Dwellings and real estate4.24.04.126.44.05.5
Other services4.73.74.415.63.85.4
By expenditure
Consumption15.27.63.55.45.36.5
Private17.28.03.16.35.86.9
Public4.95.35.70.22.33.4
Fixed capital investment16.112.93.66.613.814.5
Domestic demand13.88.05.67.98.812.9
Exports of goods and non-factor services0.419.915.23.39.05.7
Imports of goods and non-factor services21.415.98.85.414.524.6
(Percentage contribution to GDP growth)
Consumption9.95.22.43.63.44.1
Private9.44.71.83.53.23.8
Public0.50.50.60.00.20.3
Investment3.32.73.24.15.28.7
Fixed capital investment4.03.41.01.73.64.0
Stocks-0.7-0.72.22.41.54.7
Domestic demand13.28.05.57.78.612.8
Net exports-4.21.01.7-0.4-1.1-4.7
Exports of goods and non-factor services0.14.53.80.92.31.5
Imports of goods and non-factor services-4.3-3.6-2.1-1.3-3.4-6.2
Sources: Data provided by the Indonesian authorities; and staff estimates.

Reflects revised national accounts statistics based on 1993 prices and 1990 Input-Output Tables. As a result, estimates have been significantly revised.

Excludes oil refining and gas processing.

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

Reflects revised national accounts statistics based on 1993 prices and 1990 Input-Output Tables. As a result, estimates have been significantly revised.

Excludes oil refining and gas processing.

Table 2Indonesia: Gross Domestic Product by Sector of Origin at Current Market Prices, 1990-95 1/
19901991199219931994Est.

1995
(In billions of rupiah)
Agriculture40,93045,63652,74658,96365,99379,993
Farm food crops25,74726,46129,70632,09334,93844,534
Nonfood crops5,8097,3438,3039,01510,15211,461
Livestock3,6264,4165,3406,2037,1408,216
Forestry2,9923,8964,9936,2687,3898,142
Fishery2,7563,5204,4045,3856,3747,640
Mining and quarrying25,63431,95430,58731,49733,50740,487
Oil/gas mining20,96226,17623,42823,12123,07025,788
Other4,6725,7787,1598,37710,43714,699
Manufacturing43,56953,37962,01673,55688,992109,103
Oil refining3,5804,1804,7215,5415,6065,811
Gas3,7164,7174,3834,2534,5844,462
Other 2/36,27444,48152,91163,76378,80298,830
Utilities1,4891,8982,4723,2903,9134,969
Construction11,79513,76216,87822,51328,01734,339
Trade, hotel, and restaurants35,82441,98147,14455,29862,20770,728
Transport and communications13,36216,96819,71423,24926,98928,290
Banks and finance8,40710,04211,82914,00517,81818,847
Dwellings and real estate6,2628,4268,8059,69511,23911,899
Other services23,59425,92430,20537,70940,53948,642
Government14,32215,21817,39922,45822,75526,555
Other 3/9,27210,70612,80615,25117,78422,087
GDP210,867249,968282,395329,775379,214447,297
Oil/gas 4/28,25835,07332,53232,91433,26036,061
Non-oil/gas182,609214,895249,863296,861345,954411,236
(Share in GDP; in current prices)
Agriculture19.418.318.717.917.417.9
Mining and quarrying12.212.810.89.68.89.1
Manufacturing20.721.422.022.323.524.4
Utilities0.70.80.91.01.01.1
Construction5.65.56.06.87.47.7
Trade, hotel, and restaurant17.016.816.716.816.415.8
Transport and Communications6.36.87.07.07.16.3
Banks and Finance4.04.04.24.24.74.2
Ownership of dwellings and real estate3.03.43.12.93.02.7
Services11.210.410.711.410.710.9
Source: Data provided by the Indonesian authorities.

Reflects revised national accounts statistics based on 1993 prices and 1990 Input-Output Tables. As a result, estimates have been significantly revised.

Includes textiles, consumer goods, steel, fertilizers, and chemicals.

Includes business services.

Comprises oil and natural gas mining, oil refining, and gas processing.

Source: Data provided by the Indonesian authorities.

Reflects revised national accounts statistics based on 1993 prices and 1990 Input-Output Tables. As a result, estimates have been significantly revised.

Includes textiles, consumer goods, steel, fertilizers, and chemicals.

Includes business services.

Comprises oil and natural gas mining, oil refining, and gas processing.

Table 3.Indonesia: Gross Domestic Product by Sector of Origin at Constant 1993 Prices, 1990-95 1/(In billions of rupiah)
19901991199219931994Est.

1995
Agriculture52,77653,61657,18358,96459,28760,809
Farm food crops30,19330,15232,30632,09331,40532,018
Nonfood crops6,9826,9917,6579,0159,4969,874
Livestock5,0915,5495,9216,2036,4516,728
Forestry5,9776,0666,1866,2686,2966,311
Fishery4,5334,8585,1135,3855,6395,878
Mining and quarrying26,62529,96930,46131,49733,26235,414
Oil/gas mining21,79523,92323,09723,12123,72023,750
Other4,8306,0467,3648,3779,54211,664
Manufacturing52,72658,03263,64873,55682,72692,745
Oil refining5,0875,3055,5385,5415,6255,640
Gas3,6623,9674,1724,2534,7214,456
Other 2/45,46150,66956,33263,76372,38082,649
Utilities2,5082,7202,9613,2903,7074,372
Construction15,22617,48919,88422,51325,85829,191
Trade, hotel, and restaurants41,72546,88850,34455,29859,35164,298
Transportation and communications18,47420,04021,61823,24925,06627,066
Banks and finance11,55213,06514,76714,00515,94517,237
Dwellings and real estate7,0797,3647,6699,69510,08710,643
Other services30,12931,25532,61537,70939,15541,260
Government20,73821,38022,01222,45822,75223,046
Other 3/9,3979,88810,61515,25116,40318,214
GDP263,262286,765307,472329,776354,443383,035
Oil/gas 4/30,54933,19532,80532,91434,06533,846
Non-oil/gas232,713253,570274,667296,862320,378349,189
Source: Data provided by the Indonesian authorities.

Reflects revised national accounts statistics based on 1993 prices and 1990 Input-Output Tables. As a result, estimates have been significantly revised.

Includes textiles, consumer goods, steel, fertilizers, and chemicals.

Includes business services.

Comprises oil and natural gas mining, oil refining, and gas processing.

Source: Data provided by the Indonesian authorities.

Reflects revised national accounts statistics based on 1993 prices and 1990 Input-Output Tables. As a result, estimates have been significantly revised.

Includes textiles, consumer goods, steel, fertilizers, and chemicals.

Includes business services.

Comprises oil and natural gas mining, oil refining, and gas processing.

Table 4.Indonesia: Expenditure on Gross Domestic Product, 1990-95 1/
19901991199219931994Est.

1995
(In constant 1993 prices)
Consumption181,783195,549202,342213,287224,628239,150
Private155,094167,455172,640183,531194,185207,674
Public26,68928,09429,70229,75730,44331,476
Investment80,65387,87296,924109,576126,585157,431
Fixed capital69,51978,48881,30286,66798,589112,862
Change in stocks11,1339,38415,62222,90827,99644,569
Domestic demand262,435283,420299,266322,863351,213396,581
Net exports8263,3458,2056,9133,229-13,546
Exports of goods and nonfactor services59,80871,70282,60585,29692,98198,266
Imports of goods and nonfactor services58,98168,35674,40078,38389,752111,812
GDP263,262286,765307,472329,776354,442383,035
(In current prices)
Consumption142,833166,325182,640213,287244,271284,351
Private124,184145,540157,909183,531213,257247,775
Public18,64920,78524,73129,75731,01436,576
Investment64,79080,02991,511109,576129,969171,859
Fixed capital59,75867,48872,77486,667105,381129,882
Change in stocks5,03212,54118,73722,90824,58841,977
Domestic demand207,623246,354274,151322,863374,239456,210
Net exports3,2433,6168,2426,9134,973-8,913
Exports of goods and nonfactor services53,28963,86578,72385,29696,847113,357
Imports of goods and nonfactor services50,04660,24970,48178,38391,874122,270
GDP210,866249,970282,393329,776379,212447,297
(Share in GDP; in current prices)
Consumption67.766.564.764.764.463.6
Private58.958.255.955.756.255.4
Public8.88.38.89.08.28.2
Investment30.732.032.433.234.338.4
Fixed capital28.327.025.826.327.829.0
Change in stocks2.45.06.66.96.59.4
Domestic demand98.598.697.197.998.7102.0
Net exports1.51.42.92.11.3-2.0
Exports of goods and nonfactor services25.325.527.925.925.525.3
Imports of goods and nonfactor services23.724.125.023.824.227.3
GDP100.0100.0100.0100.0100.0100.0
Source: Data provided by the Indonesian authorities.

Reflects revised national accounts statistics based on 1993 prices and 1990 Input-Output Tables. As a result, estimates have been significantly revised.

Source: Data provided by the Indonesian authorities.

Reflects revised national accounts statistics based on 1993 prices and 1990 Input-Output Tables. As a result, estimates have been significantly revised.

Table 5.Indonesia: Agricultural Production, 1990-95
19901991199219931994Est.

1995
(In thousands of metric tons; unless otherwise specified)
Farm food crops
Rice29,36629,04831,35631,31830,31331,496
Corn6,7346,2567,9956,4606,8698,223
Cassava15,83015,95416,51617,28515,72915,312
Sweet potatoes1,9712,0392,1712,0881,8452,138
Peanuts (shelled)651652739639632758
Soybeans (shelled)1,4871,5551,8701,7091,5651,689
Nonfood and estate crops
Rubber1,2751,2841,3981,4741,4991,535
Palm oil2,4132,6583,2663,4214,0084,350
Palm kernels504551559602786816
Coffee413424432439450455
Tea188209154165139155
Sugar2,1192,2532,3062,3302,4542,354
Copra2,3322,3372,4752,6062,6492,690
Tobacco156140112121130133
Pepper706365665454
Nutmeg171717231921
Cloves678873677877
Fisheries3,1633,3173,5433,7954,0184,259
Saltwater2,3702,5052,6922,8863,0563,214
Freshwater7938128519099621,045
Forestry ('000 cubic meters)26,12823,81027,46026,84622,82123,892
Meat and dairy
Meat1,0281,0991,2391,3781,4691,604
Eggs484510572573580614
Milk (millions of liters)346360367387387402
(Area cultivated, in thousands of hectares)
Rice10,50210,28211,10311,01310,73510,883
Corn3,1582,9093,6292,9403,1093,642
Cassava1,3121,3191,3511,4021,3301,319
Sweet potatoes209214230224197226
Peanuts635628720624543738
Soybeans1,3341,3681,6661,4701,4071,503
(Yield in metric tons/hectare)
Rice2.802.832.822.842.812.89
Corn2.132.152.202.202.212.26
Cassava12.0712.0912.2212.3311.7011.60
Sweet potatoes9.449.519.459.329.409.50
Peanuts (shelled)1.021.041.031.029.831.02
Soybeans (shelled)1.111.141.121.1011.101.12
Source: Data provided by the Indonesian authorities.
Source: Data provided by the Indonesian authorities.
Table 6.Indonesia: Indices of Non-Oil/Gas Manufacturing Production, 1990-94 1/(1993=100)
19901991199219931994
Total647390100118
Consumer goods
Kretek cigarettes1289494100117
White cigarettes93109128100118
Milk and butter667175100132
Cloth7978101100102
Yarn8188100100101
Batik82124108100142
Knitting107139102100155
Footwear59659110096
Radios and television sets16010298100110
Batteries1018391100104
Cooking oil377390100120
Intermediate goods
Group A
Fertilizer10310399100109
Basic chemicals9810785100108
Paper656393100114
Plastics497689100132
Rubber73919910099
Group B
Cement687281100134
Structural metal products11195104100168
Iron and basic steel477477100111
Paint484564100104
Glass619589100119
Plywood96102110100104
Other wood110878710093
Electrical goods446988100111
Transportation equipment
Motor vehicles204217118100154
Motorcycles33587810073
Tires719410210090
Sources: Data provided by the Indonesian authorities; and staff estimates.

Covering large- and medium-sized industries, accounting for about 80 percent total manufacturing production of which about 70 percent is shown in the table.

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

Covering large- and medium-sized industries, accounting for about 80 percent total manufacturing production of which about 70 percent is shown in the table.

Table 7.Indonesia: Production, Domestic Use, and Exports of Petroleum, 1990-95 1/
19901991199219931994Est.

1995
(Millions of barrels, unless otherwise specified)
Pertamina2522524.627.223.520.8
Contract-of-work companies12.110.29.67.30.00.0
Production-sharing companies495.2546516.6524564.9565.4
Total production532.5581.2550.8558.5588.4586.2
Crude468.2514.9485.5495.1523.6524.5
Condensates 1/64.366.365.363.464.861.7
Total production 2/1.4481.5921.5071.5301.6121.606
Crude1.2721.4111.3291.3571.4341.437
Condensates0.1760.1810.1780.1730.1780.169
Domestic consumption of fuel206.2225.6247.6248.9257269
Percentage change11.89.49.80.53.34.7
As percent of total production38.738.844.944.643.745.9
Domestic refining276284.8302.5303.9303.2336.1
Total exports344.5414.1360.1344.1415.6367.8
Crude and condensates288.5330.5293.1286.3324297
Refined products 3/5683.667.157.891.670.8
Memorandum items:
Average domestic prices in
rupiah per liter
Gasoline450550550700700700
Diesel245300300380380380
Kerosene190220220280280280
Average domestic prices in
U.S. dollars per U.S. gallon
Gasoline0.911.061.041.141.100.0
Diesel0.490.580.570.620.600.0
Kerosene0.380.420.420.450.440.0
Source: Data provided by the Indonesian authorities.

Natural gas condensates.

Million barrels per day.

Includes liquified petroleum gas.

Source: Data provided by the Indonesian authorities.

Natural gas condensates.

Million barrels per day.

Includes liquified petroleum gas.

Table 8.Indonesia: Production, Use, and Domestic Pricing of Natural Gas, 1990-95 1/
19901991199219931994Est.

1995
(Thousands MSCF)
Production2,1592,4622,5832,6622,9423,038
Percentage change9.3144.93.110.53.3
Pertamina/Lemigas261256243241242346
Contract of work2930303600
Production sharing1,8692,1762,3102,3852,6362,692
Asamera274044452551
ARCO6165798277193
Union oil56606162111115
Inpex1091351461511540
Huffington484502527544587540
Total Indonesia75101114118310317
Mobil oil9361,1571,2121,2511,2171,190
Caltex343335372534
Other54839395130218
Use1,9942,2592,3662,4502,7552,865
Percent of production92.491.891.692.093.694.3
Own use454516526539594657
Fuel105112114116114138
Gas lift74716467129160
Gas injection275333348356351359
Sale246262273286430525
Pusri fertilizer plants166178188196197210
PGN Cirebon city gas0.40.40.40.01.01.0
Cilamaya 2/67677479820
Small industry13171111150314
Delivered1,2931,4811,5671,6251,7311,683
Refineries343032333539
LNG exports1,2181,4161,4991,5551,6641,605
LPG/LEX plant413536373239
Flared167203217212182173
Percent of production7.78.28.48.06.25.7
Source: Data provided by the Indonesian authorities.

Components may not add to totals, owing to rounding.

Mainly for industrial use (fertilizer, steel, and cement industries); also includes some home distribution in Jakarta and Bogor.

Source: Data provided by the Indonesian authorities.

Components may not add to totals, owing to rounding.

Mainly for industrial use (fertilizer, steel, and cement industries); also includes some home distribution in Jakarta and Bogor.

Table 9.Indonesia: Indicators of Oil Exploration and Development Activity, 1990-95
199019911992199319941995
BudgetActualBudgetActualBudgetActualBudgetActualBudgetActualBudgetActual 1/2/
(Seismic activity(km))
Total86,70384,202103,448141,07577,03666,17964,240128,73644,4278,25481,12415,106
Pertamina02,3833,1282,0461,9952,5221,77319,18201,30501,250
Contracts of work4257339001,340875504200000040
Production-sharing contracts86,27881,08699,420137,68974,16663,15362,267109,55444,4276,94981,12413,816
Onshore17,40715,84313,97116,75618,49112,5137,76713,5217,9703,04119,7545,281
Offshore68,87165,24385,449120,93355,67550,64054,50096,03336,4573,90861,3708,535
(Exploration wells drilled)
Total14412321613025812519311412715010963
Pertamina081992015121107986
Contracts of work403352220000
Production-sharing contracts1401151941182331081791011277110156
Onshore594684489745593058343619
Offshore816911070136631207169376537
(Petroleum company expenditures; in millions of U.S. dollars) 3/
Total3,3253,1733,8043,4504,5313,8614,4243,4394,1353,3573,7351,463
Exploration and development1,3511,8492,2701,3421,8042,2362,6371,8152,3001,6861,264436
Production1,6519931,1461,6912,2651,2021,3001,2431,4191,3012,086842
Administrative323331389417462423487382417370385185
Source: Data provided by the Indonesian authorities.

Sesmic activity and company expenditure data up to September.

Exploration activity data to October.

Excludes Pertamina. Spending on exploration and production facilities by production-sharing contractors is technically nondirect foreign investment, since Pertamina assumes title to all equipment when it enters Indonesia; the contractor, however, possesses contractual rights to beneficial use.

Source: Data provided by the Indonesian authorities.

Sesmic activity and company expenditure data up to September.

Exploration activity data to October.

Excludes Pertamina. Spending on exploration and production facilities by production-sharing contractors is technically nondirect foreign investment, since Pertamina assumes title to all equipment when it enters Indonesia; the contractor, however, possesses contractual rights to beneficial use.

Table 10.Indonesia: Non-Oil/Gas Mining Production, 1990-95
19901991199219931994Est.

1995
(In thousands of metric tons)
Tin30.230.129.428.630.646.7
Copper437.3656.5906.7928.21,065.51,516.6
Nickel ore2,216.62,300.32,511.61,975.82,311.52,513.3
Bauxite1,205.71,406.1803.51,320.41,342.4904.5
Coal10,532.314,143.023,120.527,569.431,012.139,021.1
Iron sand concentrate145.4173.2287.8341.3334.9348.4
Gold11.017.038.042.142.662.9
Silver65.977.899.990.3107.0260.6
Total (categories above)14,644.518,804.127,797.332,296.136,246.644,674.1
(Percentage change)
Tin0.90.5-7.2-2.77.152.6
Copper34.750.138.12.414.842.3
Nickel ore12.80.99.2-21.317.08.7
Bauxite39.816.6-42.964.31.7-32.6
Coal20.934.363.519.212.525.8
Iron sand concentrate1.919.166.118.6-1.94.0
Gold80.554.2123.510.81.247.7
Silver-9.118.228.3-9.618.5148.4
Total (categories above)20.328.447.816.212.223.3
Source: Data provided by the Indonesian authorities; and staff estimates.
Source: Data provided by the Indonesian authorities; and staff estimates.
Table 11.Indonesia: Domestic Rice Prices, 1990-95(In rupiah per kilogram)
MarketMarket

Intervention
Support PriceGovernment

Purchase
Price 1/Price 2/Paddy 3/RicePrice 4/
1990
March515500270436525
June523525270436566
September527525270436566
December539525270436566
1991
March548550295480566
June552550295480614
September573560295480614
December586560295480614
1992
March593560330536614
June609620330536660
September610620330536660
December612620330536660
1993
March600620340551660
June580640340551684
September585640340551684
December598600340551684
1994
March626600380560700
June636630380560700
September707630380560700
December715650380560700
1995
March733650400657708
June738670400657788
September818700400657788
December833700400657788
Source: Data provided by the Indonesian authorities.

Monthly national average retail price for medium-quality rice.

The market intervention price is the price at which BULOG sells rice in the open market. The price shown here is for medium-quality rice in Java.

Paddy prices paid by cooperatives to farmers and rice prices paid by BULOG to cooperatives. Prices are adjusted once a year, effective February 1.

Price that the Government pays BULOG for its rice deliveries to civil servants and the military.

Source: Data provided by the Indonesian authorities.

Monthly national average retail price for medium-quality rice.

The market intervention price is the price at which BULOG sells rice in the open market. The price shown here is for medium-quality rice in Java.

Paddy prices paid by cooperatives to farmers and rice prices paid by BULOG to cooperatives. Prices are adjusted once a year, effective February 1.

Price that the Government pays BULOG for its rice deliveries to civil servants and the military.

Table 12.Indonesia: BULOG Rice Program, 1990/91-1995/96(In thousands of metric tons)
1990/911991/921992/931993/941994/951995/96
Beginning stock1,4989771,0851,851759649
Domestic procurement1,3481,7402,4001,7399631,032
Imports 1/3054826401,8012,992
Total availability2,8763,2653,7493,5903,5234,674
Distribution1,8712,1721,8712,8952,8712,345
Government1,5891,6181,5741,6651,6761,681
State enterprises948262918579
Market operations175457704131,036573
Exports00131607530
Other1315341192314
Losses plus statistical discrepancies283327330
End stock9771,0601,8516926492,312
Memorandum item:
Rice production 2/29,36629,04831,35631,31830,31331,496
Source: Data provided by the Indonesian authorities.

Includes repayment of loans in kind.

On a calendar year basis.

Source: Data provided by the Indonesian authorities.

Includes repayment of loans in kind.

On a calendar year basis.

Table 13.Indonesia: Approvals of Domestio Investment Projects by Economio Sector, 1991-95 1/(In billions of rupiah)
19911992199319941995
Number of ProjectsIntended Capital OutlayNumber of ProjectsIntended Capital OutlayNumber of ProjectsIntended Capital OutlayNumber of ProjectsIntended Capital OutlayNumber of ProjectsIntended Capital Outlay
Agriculture984,940462,485493,093867,40110610,097
Mining and quarrying131827236969611214205
Manufacturing47526,46423219,07928224,03240531,92236043,342
Food671,341401,487412,073524,045725,160
Textiles953,648392,539423,539575,518347,177
Wood and wood products551,56916638261,373281,171252,010
Paper and paper products335,640155,323192,209303,749306,033
Pharmaceuticals410623317862285281
Chemicals838,429503,322717,6891105,150878,741
Nonmetallic minerals414,054163,441245,399418,547369,089
Basio metals1985861,3216187181,66492,380
Metal products6878537905501,467601,784552,138
Other103611702243667133
Construction9275321571871173120848
Services2099,2231487,32620112,07031513,12329515,361
Hotel?633,897363,115453,051934,342583,793
Housing392,6337536283,049283,336184,659
Transportation55907808601013,8271583,1201563,965
Trade40916141,6051125337153
Other services12870111,210262,018332,322372,791
Total80441,07843629,34254839,45082353,28987569,853
Source: Data provided by the Indonesian authorities.

Includes new projects and extensions of existing projects, but excludes investment in petroleum, banking, insurance, and leasing sectors.

Source: Data provided by the Indonesian authorities.

Includes new projects and extensions of existing projects, but excludes investment in petroleum, banking, insurance, and leasing sectors.

Table 14.Indonesia: Approvals of Foreign Investment Projects by Economic Sector, 1990-95 1/(In millions of U.S.dollars)
199019911992199319941995
Agriculture192262311607301,384
Mining and quarrying11602,312000
Manufacturing5,6473,9705,6703,42318,74026,893
Food993822131411,2351,332
Textile1,094532591419396471
Wood and wood products21862345068263
Paper and paper products7308226862025,1202,541
Pharmaceuticals730.012137
Chemicals1,9919232,3431,1717,74319,368
Nonmetallic minerals12513384198632289
Basic metals825197471862,082292
Metal products4608568631,1141,4232,258
Other996052304042
Construction7726419777206
Services2,7194,7552,0694,4644,17911,432
Hotels8744,019919394344999
Electric, gas plus water0002,2762,3973,549
Other1,8457361,1511,7941,4386,884
Total8,7528,77810,3238,14423,72439,915
Source: Data provided by the Indonesian authorities.

Includes new projects and extensions of existing projects, but excludes investment in petroleum, banking, insurance, and leasing sectors. Components may not add to totals owing to rounding.

Source: Data provided by the Indonesian authorities.

Includes new projects and extensions of existing projects, but excludes investment in petroleum, banking, insurance, and leasing sectors. Components may not add to totals owing to rounding.

Table 15.Indonesia: Approvals of Foreign Investment Projects by Country of Origin, 1990-95(In millions of U.S. dollars)
199019911992199319941995
Europe1,070.41,173.61,364.6929.83,385.48,951.4
Netherlands567.3183.696.2311.4165.7360.0
Belgium87.123.021.79.90.09.2
United Kingdom57.8535.6978.2301.12,957.16,322.1
Germany 1/13.459.936.7120.6113.11,344.6
France68725.819.9158.037.1498.4
Switzerland14.3307.811.517.970.844.9
Other261.837.9200.410.9241.6372.2
North and Central America202.8388.0942.2526.51,027.02,795.1
United States153.7275.0922.5444.5977.02,770.5
Canada8.57.50.146.539.020.5
Panama40.653.01.335.55.53.7
Other0.051.918.30.05.50.4
Asia4,991.42,950.74,300.93,658.314,168.79,234.0
Hong Kong993.3277.71,020.9384.16,041.71,763.3
Japan2,240.8929.31,510.6836.11,526.53,792.0
Malaysia7.229.515.736.7421.8877.0
Philippines0.08.00.30.035.931.2
Singapore264.3346.4465.11,460.21,664.41,468.5
Thailand9.51.055.82.811.734.5
Taiwan Province of China618.31,056.5563.3131.42,487.6567.4
Korea722.9301.3618.3661.41,849.1674.7
Other135.11.050.9145.694.026.2
Australia and New Zealand186.548.484.9158.053.33,712.4
Other2,299.04,217.53,630.62,871.65,089.915,221.0
Total8,750.18,778.210,323.28,144.223,724.339,914.7
Source: Data provided by the Indonesian authorities.

Data through 1990 refer to the former Federal Republic of Germany.

Source: Data provided by the Indonesian authorities.

Data through 1990 refer to the former Federal Republic of Germany.

Table 16.Indonesia: Indices of Inflation, 1990-95(Percentage change from previous year)
199019911992199319941995
(Period average)
GDP deflator7.78.85.48.97.09.2
Consumer price index8.19.47.59.78.59.4
(End period)
Consumer price index9.910.05.010.29.69.0
Food7.110.06.25.114.714.1
Of which: Rice 1/4.38.74.4-2.319.618.0
Housing13.18.14.616.69.45.8
Clothing4.95.37.48.26.26.7
Miscellaneous12.213.83.410.35.07.2
Wholesale price index16.9-0.53.12.510.89.7
Excluding oil/gas8.46.23.96.110.29.2
Agriculture7.710.26.515.223.413.5
Mining11.98.96.29.710.111.6
Manufacturing9.58.64.56.29.07.8
Imports8.71.531.92.88.2
Exports47.8-19.20.6-11.216.112.7
Excluding oil/gas3.16.61.99.318.810.1
Source: Data provided by the Indonesian authorities; and staff estimates.

Average retail price for medium-quality rice.

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

Average retail price for medium-quality rice.

Table 17.Indonesia: Consumer Price Index, 1991-96(1977/78=100)
FoodHousingClothingMiscellaneousTotal
Weights34.727.811326.2100.0
1991
March3733405.4309.8364.2374.5
June386.0410.4318.9374.4384.0
September394.5424.7321.5404.7399.2
December403.0435.8324.2411.14073
1992
March413.5438.8327.6414.4412.9
June423.5444.9337.0417.7419.8
September423.6449.3340.7422.2422.3
December427.8456.0348.3425.2427.8
1993
March462.7486.6361.7449.9455.9
June449.0499.5370.8457.8458.3
September442.2520.1374.1464.4464.2
December449.6531.6377.0468.9471.4
1994
January461.2535.2381.6471.5477.3
February482.0537.5384.3474.1485.7
March489.7537.9389.7474.3489.1
April486.2542.7390.8477.1490.3
May491.4545.0391.1477.7492.8
June491.2546.8391.9477.8493.4
July498.9554.5393.5483.7500.2
August506.2557.9393.6487.7504.6
September507.4564.9395.1487.9507.3
October511.6572.8397.0490.0511.9
November516.2574.1399.1490.6514.2
December515.8581.9400.5492.3516.8
1995
January524.3587.7405.1496.1522.8
February540.5589.1410.4497.6529.7
March549.7589.0411.8497.8532.7
April557.1602.6415.1506.1541.7
May564.0602.5415.6507.2544.4
June561.6603.3416.2511.9545.2
July567.7606.1418.6515.0549.1
August568.1607.1419.4519.1550.9
September570.7609.9421.8520.5552.9
October574.0611.8424.3526.6556.5
November578.6613.6425.0527.5558.8
December588.6615.6427.4527.8563.3
1996
January615.3620.4434.8533.5575.4
February640.1623.7439.7534.1585.3
March625.9626.2439.9534.3581.7
Source: Data provided by the Indonesian authorities.
Source: Data provided by the Indonesian authorities.
Table 18.Indonesia: Wholesale Price Index, 1991-95(1983 = 100)
ExportsGeneral Index
AgricultureMiningManufacturingImportsIncluding

Oil/Gas
Excluding

Oil/Gas
Including

Oil/Gas
Excluding

Oil/Gas
Weights11.81.030.631.025.619.810094.2
1991
March202183189199139193181195
June205187193202145202185199
September209191197202154208189202
December216195201203160210193205
1992
March222198204207149210193208
June226202205208161212197210
September227204208208164214199211
December230207210209161214199213
1993
March245215215210161219203218
June250217217212162225205220
September256220220213156231206224
December265227223213143239204226
1994
January273228224212146233206227
February278229225213145236207229
March282230225213145241207230
April285231226213149245209231
May288234227213153248211232
June291235229214157251213234
July298237231215167258217236
August305239234216168261220239
September309243235216162266220241
October316245238218163269222244
November321246240218165275224246
December327250243219166278226249
1995
January332254246221172284230251
February342255249223179290234255
March344256251224180294235257
April351259254227183299239261
May357262255229184299241263
June350264257229179301240264
July361268258232171299240266
August360272259233173301241261
September359272260239174303242268
October360273261236173302242269
November363274262236177304244270
December371279262237187306248272
Source: Data provided by the Indonesian authorities.
Source: Data provided by the Indonesian authorities.
Table 19.Indonesia: Nominal Wages and Labor Force, 1990-95
19901991199219931994Est.

1995
(Monthly wages in thousands of rupiah) 1/
MinimumMaximumMinimumMaximumMinimumMaximumMinimumMaximumMinimumMaximumMinimumMaximum
Agriculture1011,0511351,5361501,8151701,8352401,8352721,927
Mining and quarrying2191,1693223,8703693,9504143,9984874,6695064,906
Manufacturing industry1721,9981862,2441882,7051962,9202073,1122383,453
Eleotrioity, gas, and water supply1068211311,0541511,3081552,6441732,7442673,552
Construction2211,8791762,1482542,2632902,6562962,7773273,047
Trade and banks2281,9672502,5103053,3143053,7333264,5063684,904
Transportation1341,1721692,1792232,8052232,8054674,3114944,399
Services1581,7762232,1882352,2712352,2712352,5092812,780
19901991199219931994Est.

1995
(In millions)
Labor force 2/77.878.580.782.684.385.9
Employment75.976.479.980.081.683.9
Agriculture42.441.242.638.638.338.9
Mining and quarrying0.50.60.40.90.90.9
Manufaoturing7.77.98.510.110.411.2
Trade11.111.41211.912.212.7
Other14.215.316.418.619.220.2
Sources: Data provided by the Indonesian authorities; and staff estimates.

Figures are based on periodio surveys of primarily urban-based business establishments and inolude transportation, meal, and attendance allowances.

Ages ten and over.

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

Figures are based on periodio surveys of primarily urban-based business establishments and inolude transportation, meal, and attendance allowances.

Ages ten and over.

Table 20.Indonesia: Domestic Sales and Prices of Oil Products, 1985/86-1994/95
TotalAvigasAvturSuperPremiumKeroseneAutomotive

Diesel
Industrial

Diesel
Fuel

Oil
(In millions of liters)
Domestic sales
1985/8623,823106231244,0166,9037,3551,5485,420
1986/8724,050106151704,3706,9137,7201,3742,825
1987/8825,72296832444,6996,9418,7941,3323,020
1988/8927,21296963104,9807,1649,6151,4303,008
1989/9029,033106874125,4197,56110,5221,5622,860
1990/9133,0989748606,4177,91511,9171,7134,319
1991/9235,398979306,9318,18513,1601,7324,588
1992/9338,161885307,2648,56915,0431,7864,638
1993/9440,593895307,5988,74416,6011,8104,879
1994/9541,21081,65308,5828,98016,3251,7963,866
(Rupiah per liter)
Domestic sales proceeds
1985/865,2363187501,4131,0381,509332706
1986/875,2282140711,5321,3071,407250519
1987/885,3302155981,6451,0411,600242550
1988/895,65921581241,7431,0751,750260547
1989/906,07421561651,8971,1341,915284521
1990/918,1233224242,6241,3612,657366864
1991/9210,352328903,4651,6373,593448917
1992/9313,652332504,6192,1855,1895641,011
1993/9416,302340005,3102,4486,3086621,171
1994/9517,000369406,0082,5146,203650928
(Rupiah per liter)
Average domestic price 1/
1985/86219/203300/227300/227400350150220/182220/182220/182
1986/87217227227400350150182182182
1987/88207227227400350150182182182
1988/89208227227400350150182182182
1989/90209227227400350150182182182
1990/91245300300400409172223182200
1991/92308364364500200273259200
1992/93308/363364/382364382500/6362007255300/345259/327200/218
1993/94363382382636255345327218
1994/95363382382636255345327218
Sources: Data provided by the Indonesian authorities.

Prices do not include 10 percent value-added tax.

Sources: Data provided by the Indonesian authorities.

Prices do not include 10 percent value-added tax.

Table 21.Indonesia: Summary of Central Government Operation, 1990/91-1996/97
BudgetEst.Budget
1990/911991/921992/931993/941994/951995/961996/97
(In billions of rupiah)
Tax revenue37,43139,09844,45947,34454,11058,29863,27070,107
Oil/gas17,71215,03915,33012,50813,39913,27614,84914,120
Non-oil/gas19,71924,05929,12934,83640,71145,02248,42155,987
Nontax revenue2,1152,4872,9934,9365,5877,9666,5718,095
Grants422414511421393459455
Total revenue and grants39,96841,99947,96352,70160,09066,72370,29678,202
Current expenditure23,47423,27726,27229,39232,21538,21041,63245,666
Of which:
Personnel7,0888,1709,55411,14513,06915,34715,37218,281
Subsidies3,5661,332867265457143212137
Interest on external debt5,0314,5625,3856,3446,4707,4057,1997,820
Current budget balance16,49418,72221,69223,30927,87528,51428,66432,536
Development expenditure and net lending12,22220,00025,60525,11127,27329,94524,20832,834
Total expenditure and net lending35,69643,27751,87654,50359,48868,15465,84078,500
Overall balance 1/4,272-1,278-3,913-1,802602-1,4314,456-298
Financing-4,2721,2783,9131,802-6021,431-4,456298
Domestic 2/-5,577-1,1062,553-12-2,100-5,221
Sale of government assets1,6621,730
Foreign, net 3/1,3052,3831,3601,815-1641,431-965298
Gross drawings8,93410,63411,25812,60511,93214,90312,63612,414
Amortization-7,629-8,251-9,898-10,790-12,096-13,472-13,601-12,116
(In percent of GDP)
Overall balance1.9-0.5-13-030.2-031.0-0.1
Excluding oil/gas revenue-6.1-63-6.5-4.2-3.2-3.2-2.2-2.6
Current budget balance7.57.37.46.87.06.26.16.0
Total revenue and grants18.116.316.315.415.214.515.114.4
Oil/gas8.05.85.23.73.42.93.22.6
Non-oil/gas taxes8.99.39.910.210.39.810.410.3
Total expenditure and net lending16.216.817.615.915.014.814.114.4
Current10.69.08.98.68.18.38.98.4
Development expenditure and net lending5.57.78.77.36.96.55.26.0
Source: Data provided by the Indonesian authorities; and staff estimates.

Derived as the sum of the current budget balance and net financing.

Change in net government deposits with the domestic banking system.

As derived from balance of payments accounts.

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

Derived as the sum of the current budget balance and net financing.

Change in net government deposits with the domestic banking system.

As derived from balance of payments accounts.

Table 22.Indonesia: Central Government Revenue, 1990/91-1996/97
BudgetEst.Budget
1990/911991/921992/931993/941994/951995/961996/97
(In billions of rupiah)
Tax revenue37,43139,09844,45947,34454,11058,29863,27070,107
Taxes on income and profits24,46724,61927,24327,78131,74932,51535,36937,828
Oil/gas17,71215,03915,33012,50813,39913,27614,84914,120
Non-oil/gas6,7559,58011,91315,27318,35019,23920,52023,708
Individuals1,5412,5773,4064,5914,150
Companies3,4935,0995,5447,2477,299
Interest, dividends and royalties1,7211,9042,9633,4356,901
Property taxes8118751,1011,5341,6321,9231,9242,277
Taxes on goods and services (VAT)7,4638,92610,71412,28214,08716,65518,35021,788
Excise taxes1,9172,2232,3812,5603,0013,2993,6684,033
Taxes on international trade2,5302,1522,6602,9023,3383,5873,4493,611
Import duties2,4862,1332,6522,8883,2183,5433,2483,451
Export duties441981412044201160
Other243303360285303319510570
Nontax revenue2,1152,4872,9934,9365,5877,9666,5718,095
Profit receipts 1/1,1471,3011,0001,5161,3931,6951,4781,872
Other9681,1861,9932,3792,9314,7964,6045,395
Domestic oil operations surplus1,0411,2631,475489828
Total revenue39,54641,58547,45252,28059,69766,26469,84178,202
(In percent of GDP)
Non-oil/gas revenue9.910.310.911.611.711.511.811.8
Non-oil/gas taxes8.99.39.910.210.39.810.410.3
Oil/gas revenue8.05.85.23.73.42.93.22.6
Total revenue17.916.116.115.315.114.415.014.4
Source: Data provided by the Indonesian authorities; and staff estimates.

Profits of public enterprises; includes Bank Indonesia.

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

Profits of public enterprises; includes Bank Indonesia.

Table 23.Indonesia: Details of Nontax Receipts, 1990/91-1996/97
BudgetEst.Budget
1990/911991/921992/931993/941994/95————1995/96————1996/97
(In billions of rupiah)
Total (including oil operations surplus)2,3832,4872,9934,9365,5877,9666,5718,095
Total (excluding oil operations surplus)2,3832,4872,9933,8954,3246,4916,0827,267
Profit1,1471,2701,0001,5171,3931,6951,4781,872
Bank Indonesia12335853307128201430230
Other state banks20722316011063263210342
Public enterprises8176897871,1001,2021,2318381,300
Remittances from government banks6975496371374035
Fees3464385799701,451318371328
Forest concession13868180574992114123121
Immigration (embassies abroad)2515151615162513
Education44197207254216575856
Hospital1435393460172
Passport72525668577410085
Censors65635677
Service4562621791333439
Marriage licenses241441517175
Sales of goods11131716138128
Agricultural24655666
Discarded423102141
Houses57816121
Rental from government houses1112454454
Licenses4247638116087142129
Hires854313889
Domestic oil operations surplus0.00.00.01,0411,2631,475489828
Other 1/7496271,2771,2401,2194,3344,0264,882
Source: Data provided by the Indonesian authorities; and staff estimates.

Excludes proceeds from the privatization program, which are treated as financing.

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

Excludes proceeds from the privatization program, which are treated as financing.

Table 24.Indonesia: Central Government Expenditure, 1990/91-1996/97
BudgetEst.Budget
1990/911991/921992/931993/941994/951995/961996/97
(In billions of rupiah)
Total expenditure and net lending35,69643,27751,87654,50359,48868,15465,84078,500
Current expenditure23,47423,27726,27229,39232,21538,21041,63245,666
Personnel7,0888,1709,55411,14513,06915,34715,37218,281
Of which: Pensions1,7612,7072,6982,8493,6094,546
Material1,8422,3282,9293,0324,2974,7455,2746,589
Armed forces 1/9961,0231,2041,1471,1551,3171,3351,532
Transfers to regions3,8884,3765,3846,9097,1888,4098,34410,012
Interest on foreign debt5,0314,5625,3856,3446,4707,4057,1997,820
Subsidies3,5661,332867265457143212137
Petroleum3,3011,03069200000
Fertilizer265302175265457143212137
Other1,0631,486949550-4218443,8961,296
Development expenditure and net lending 2/12,22220,00025,60525,11127,27329,94524,20832,834
(In percent of GDP)
Total expenditure and net lending16.216.817.615.915.014.814.114.4
Current expenditure10.69.08.98.68.18.38.98.4
Development expenditure and net lending 2/5.57.78.77.36.96.55.26.0
Source: Data provided by the Indonesian authorities; and staff estimates.

Recurrent spending on goods and services only.

Derived as the sum of the current budget surplus and net financing.

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

Recurrent spending on goods and services only.

Derived as the sum of the current budget surplus and net financing.

Table 25.Indonesia: Import and Export Taxation of Non-Oil/Gas Trade, 1990/91-1996/97
BudgetEst.Budget
1990/911991/921992/931993/941994/951995/961996/97
Imports and import duties
Total imports (customs data) 1/
U.S. dollars (millions)21,25825,03430,85037,42933,53333,76438,33042,546
Rupiah (billions)39,56149,16662,99678,33972,76781,48091,340101,387
Dutiable imports
U.S. dollars (millions)13,16615,40915,89319,42017,31722,30228,36431,616
Rupiah (billions)24,59130,26332,45440,64637,57838,92467,59275,340
Levies on imports (Rp bn.)4,6514,5984,6956,6813,2187,7259,91210,984
Import duties2,2632,1182,6522,8883,2183,5433,2483,451
Sales tax/VAT on imports2,3882,4802,0433,7930.04,1826,6647,534
Exports and export duties
Total exports 1/
U.S. dollars (millions)15,38020,67419,96028,16931,71636,24337,00844,224
Rupiah (billions)28,62240,60340,75858,95868,82481,76484,008105,386
Export duties (Rp bn.)422291412044201160
(In percent)
Average levy on imports11.69.47.811.19.39.611.011.0
Average levy on dutiable imports18.915.216.415.718.119.815.015.0
Average import duty rate5.64.34.44.84.43.94.03.0
Average duty rate on dutiable imports9.279.26.88.69.15.05.0
Average sales tax/VAT rate on import653.46.34.94.67.07.0
Average export duty rate0.10.10.00.00.20.10.00.0
Source: Data provided by the Indonesian authorities; and staff estimates.

As published by the Directorate of Customs and Excises.

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

As published by the Directorate of Customs and Excises.

Table 26.Indonesia: Functional Classification of Development Expenditure and Net Lending, 1990791-1996/97 1/
BudgetEst.Budget
1990/911991/921992/931993/941994/951995/961996/97
(In billions of rupiah)
General public services250321401448657803802992
Government apparatus215269327368551664676819
Law and order35527480106139126173
Education2,6072,8473,7333,7863,5694,0703,5904,776
Education, national culture, and development of youth2,0522,4173,1473,2643,0673,3592,9763,971
Science and technology, research and statistics555430586522502711614806
Health, family planning, and welfare7238919571,1461,3331,3521,1521,693
Housing and water supply6778011,0548619291,1021,1681,326
Other community and social services6217669669181,1371,3801,1851,562
Manpower and transmigration5797198888361,0061,1971,0431,308
Religion42477882131183142254
Economic services8,5009,98611,92512,54914,31014,88614,86516,482
Agriculture and irrigation 2/2,0432,4123,0652,7122,3563,0032,4663,475
Industry and mining714722861575540592533612
Electric power1,7072,2863,0423,2303,8063,8004,6193,997
Transportation and tourism3,7433,9104,5375,1926,3926,9046,7427,815
Information and communications947782121160153128183
Trade and cooperatives1995793387191,056434377402
Regional, business and environment2,8123,3283,7194,5415,6165,7315,5016,003
Regional development1,9382,4792,9203,6324,8055,1144,9945,388
Investment through banking system3344104093643541001300
Natural resources540439390545457517377616
Total (adjusted official data)16,19118,93922,75624,24927,55129,32328,26432,834
Residual 3/-3,9691,0612,849862-2780-4,0560
Total (staff estimate) 4/12,22220,00025,60525,11127,27329,94524,20832,834
(In percent of total) 5/
General public services1.51.71.81.82.42.72.83.0
Education16.115.016.415.613.013.912.714.5
Health4.54.74.24.74.84.64.15.2
Housing and other social services 6/4.44.55.03.93.84.44.64.8
Economic services73.474.172.673.976.074.475.772.5
Agriculture and irrigation 2/12.612.713.511.28.610.28.710.6
Industry and mining4.43.83.82.42.02.01.91.9
Electric power10.512.113.413313.813.016.312.2
Transportation and tourism23.120.619.921.423.223.523.923.8
Information and communications0.60.40.40.50.60.50.50.6
Trade and cooperatives1.23.11.53.03.81.51.31.2
Manpower and transmigration3.63.83.93.43.74.13.74.0
Regional development12.013.112.815.017.417.417.716.4
Other and unallocated5.44.53.53.72.92.11.81.9
Source: Data provided by the Indonesian authorities; and staff estimates.

Excludes defense and national security, and fertilizer subsidy.

Excludes fertilizer subsidy.

Derived as the difference between Fund definition and authorities’ estimates of development expenditure and net lending.

Derived as the sum of the current budget surplus and net financing (Fund definition).

Excludes the residual.

Includes water supply and religion.

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

Excludes defense and national security, and fertilizer subsidy.

Excludes fertilizer subsidy.

Derived as the difference between Fund definition and authorities’ estimates of development expenditure and net lending.

Derived as the sum of the current budget surplus and net financing (Fund definition).

Excludes the residual.

Includes water supply and religion.

Table 27.Indonesia: Summary of Provincial Finances, 1990/91-1995/96
1990/911991/921992/931993/941994/95Budget

1995/96
(In billions of rupiah)
Own revenue1,8442,1242,2342,8443,7643,781
Tax1,3181,4631,6012,0822,8552,885
Nontax526661633762909896
Total transfers3,2583,7494,5415,1355,3626,022
Current transfers from central government2,5362,8183,3793,9294,0204,550
Capital transfers from central government7229311,1621,2061,3421,472
Total revenue and grants5,1025,8736,7757,9799,1269,803
Current expenditure3,3613,8804,6715,4025,9896,779
Wages and salaries2,4132,6763,2723,8773,9914,620
Expend. on goods and services5677178078641,0771,105
Pensions3114100
Subsidies3784765886609211,054
Development expenditure1,4972,0112,2012,4132,8483,193
Capital expenditure1,3551,8001,9642,1672,5722,879
Transfers to local government142211237246276314
Total expenditure4,8585,8916,8727,8158,8379,972
Overall balance244-18-97164289-169
(In percent of GDP)
Memorandum items:
Own provincial revenue0.80.80.80.81.00.8
Central government transfers1.51.51.51.51.41.3
Current expenditure1.51.51.61.61.51.5
Development expenditure0.70.80.70.70.70.7
Overall balance0.1-0.0-0.00.00.1-0.0
Source: Data provided by the Indonesian authorities.
Source: Data provided by the Indonesian authorities.
Table 28.Indonesia: Consolidated Balance Sheet of Nonfinancial Public Enterprises, 1990-95(In billions of rupiah)
1990199119921993Est.

1994
Budget

1995
Assets66,61487,025106,003120,857134,581153,546
Noncurrent46,66757,58575,11288,53195,588108,595
Operating, net29,01943,70147,87352,05660,82670,556
Physical, net26,94940,23944,30652,05660,82670,556
Intangible2,0703,4623,567000
Nonoperating17,64813,88427,23933,47534,76238,039
Physical17,03813,58726,88433,47534,76238,039
Monetary610297355000
Current19,94729,44030,89135,32638,99344,951
Liabilities66,61487,085106,003122,228134,581153,546
Noncurrent56,09772,88891,091106,889118,625136,426
Net worth38,57349,80556,74664,43672,45383,572
Contributed capital20,87925,85927,74144,52546,75052,170
Reserves/deficits17,69423,94629,00519,91125,70331,402
Long-term17,52423,08334,34542,45346,17252,854
Current10,51714,19714,91215,33915,95617,120
Number of companies reporting163163159158158158
Source: Data provided by the Indonesian authorities.
Source: Data provided by the Indonesian authorities.
Table 29.Indonesia: Consolidated Income Accounts of Nonfinancial Public Enterprises, 1990-95(In billions of rupiah)
1990199119921993Est.

1994
Budget

1995
Operating income, net44,78634,18459,26262,67466,45580,051
Gross34,75945,45859,94162,67466,45580,051
Discount575672679000
Operating expenses30,16438,57852,62957,05260,48671,708
Direct costs of goods sold25,56032,44044,25545,66652,11759,965
Indirect costs4,6046,1388,37411,3868,36911,743
Operating profits4,0206,2086,6335,6225,9698,343
Nonoperating items131198593542565740
Profits before taxes4,1516,4067,2266,1646,5349,083
Taxes1,4532,2422,1682,9273,2323,633
Profits after taxes2,6984,1645,0583,2373,3025,450
Memorandum items:
Gross profits 1/8,62412,34615,00717,00814,33920,086
Return on total assets (percent)6.27.36.85.14.95.9
Number of companies reporting163163159158158158
Sources: Data provided by the Indonesian authorities; and staff estimates.

Operating income less the direct cost of goods sold.

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

Operating income less the direct cost of goods sold.

Table 30.Indonesia: Structure and Growth of the Organized Financial Sector, 1990-95(End of period)
Number inGross Assets
199019911992199319941995199019911992199319941995
(In billions of rupiah)
Bank Indonesia11111149,04555,22063,88568,44068,11672,880
Deposit money banks169189200234224240133,598153,255182,066218,434251,433307,037
National foreign exchange banks 1/283340576782102,699115,812138,631167,425194,393252,783
Foreign banks2829303940419,77712,07015,17518,41921,93730,181
Other commercial banks 2/85991011111069010,82312,86811,00912,67414,17414,308
Development banks28282927272710,29914,50517,25119,91620,9299,765
Nonbank financial institutions 3/1414144,7304,1804,730
Savings banks 4/222268334473
Insurance companies1291301381451536,2044,2004,60011,26714,415
Leasing companies 5/11612513517519311,6748,1929,9989,97114,874
Other credit institutions 6/8,0068,2978,5208,7178,9988,9988519351,2641,5131,752
All institutions8,4368,7589,0109,2729,5109,239206,370228,316267,016309,625350,590379,917
Source: Data provided by the Indonesian authorities.

Includes five state banks; the remainder are national private banks.

National private banks undertaking only domestic currency business. Including one state saving bank since May 1989.

Nine investment finance, three development finance, and two other finance companies.

Two private savings banks. Since May 1989 state savings banks have been excluded.

Gross assets for multi-use companies.

Village banks, rural paddy banks, and government-owned pawnshops.

Source: Data provided by the Indonesian authorities.

Includes five state banks; the remainder are national private banks.

National private banks undertaking only domestic currency business. Including one state saving bank since May 1989.

Nine investment finance, three development finance, and two other finance companies.

Two private savings banks. Since May 1989 state savings banks have been excluded.

Gross assets for multi-use companies.

Village banks, rural paddy banks, and government-owned pawnshops.

Table 31.Indonesia: Monetary Survey, 1991-96
199119921993199419951996
Mar.Mar.Mar.Mar.JuneSept.Dec.Mar.JuneSept.Dec.Mar.
(In billions of rupiah; end of period)
Net foreign assets20,16823,63033,34530,15026,05027,60625,27226,17431,75633,21232,62735,276
Bank Indonesia20,67626,69137,20938,88534,04135,73437,28236,92240,35342,32142,48347,249
Deposit money banks-508-3,061-3,864-8,735-7,991-8,128-12,010-10,748-8,597-9,109-9,856-11,973
Net domestic assets60,95677,16689,816118,679126,748135,294149,240155,527160,371172,867190,011197,219
Net domestic credit96,309115,061128,259161,942167,337177,916191,751198,718207,648222,247233,088240,110
Claims on public sector-5,391-6,286-6,295-6,626-8,315-8,394-9,308-9,909-14,835-14,309-15,345-13,488
Government (net)-12,678-15,085-15,147-16,809-17,692-18,077-18,828-19,518-23,635-24,607-26,300-24,719
Public enterprises 1/7,2878,7998,85210,1839,3779,6839,5209,6098,80010,29810,95511,231
Claims on private sector101,700121,347134,554168,568175,652186,310201,059208,627222,483236,556248,433253,598
Other items (net)-35,353-37,895-38,443-43,263-40,589-42,622-42,511-43,191-47,277-49,380-43,077-42,891
Broad money81,124100,796123,161148,829152,798162,900174,512181,701192,127206,079222,638232,495
Narrow money23,57027,31830,59237,90839,88642,19545,37444,90847,04648,98152,67753,164
Currency9,02611,02512,32415,34015,82517,55518,63418,90219,18619,56420,80721,123
Demand deposits14,54416,29318,26822,56824,06124,64026,74026,00627,86029,41731,87032,041
Quasi-money57,55473,47892,569110,921112,912120,705129,138136,793145,081157,098169,961179,331
Rupiah time and savings deposits42,01753,33167,63783,00783,99889,86398,372103,030109,670121,859130,891137,805
Rupiah time deposits32,31535,93739,56845,46046,80251,60358,11362,18568,33478,46681,38786,726
Rupiah savings deposits9,70217,39428,06937,54737,19638,26040,25940,84541,33643,39349,50451,079
Foreign currency deposits15,53720,14724,93227,91428,91430,84230,76633,76335,41135,23939,07041,526
Rupiah broad money65,58780,64998,229120,915123,884132,058143,746147,938156,716170,840183,568190,969
(Annual percentage change)
Net domestic assets31.226.616.432.132.824.029.231.026.527.827.326.8
Net domestic credit34.919.511.526.321.820.320.522.724.124.921.620.8
Claims on private sector44.419.310.925.322.823.023.223.826.727.023.621.6
Broad money26.024.222.220.822.919.420.222.125.726.527.628.0
Narrow money6.415.912.023.928.121.223.318.518.016.116.118.4
Quasi-money36.327.726.019.821.218.819.123.328.530.231.631.1
Source: Data provided by the Indonesian authorities.

Claims on public enterprises exclude claims on financial public enterprises by Bank Indonesia.

Source: Data provided by the Indonesian authorities.

Claims on public enterprises exclude claims on financial public enterprises by Bank Indonesia.

Table 32.Indonesia: Factors Affecting Reserve Money, 1991-96
199119921993199419951996
Mar.Mar.Mar.Mar.JuneSept.Dec.Mar.Jun.Sept.Dec.Mar.
(In billions of rupiah; end of period)
Autonomous factors134852167135001352983040930958327002938929726318283333039290
Net foreign assets206762669137210388853404135734372823692240353423214248347249
Net claims on Government-11090-11569-10266-11768-11496-11437-10631-12540-15675-15879-17556-16915
Claims on BULOG136513241775138514232205231913911918205827343149
Liquidity credit to banks116961244511659113871145411443108391119212040126091435914554
Other claims8629964226156156146031034103410491024965
Other items net-10024-8216-5799-5206-5628-7601-7712-8610-9944-10330-9714-9712
Policy factors-2483-7043-19888-16622-11826-10582-11175-6837-6769-8278-7478-8238
Special SBIs-9104-8846-6668-5213-5500-5500-5830-5830-6208-6208-6406-6159
SBI outstanding-311-2393-16342-14559-9738-8591-9223-5344-4799-4303-5339-4659
SBPUs rediscounted13629692610273433413373384241374128216542052580
Special SBPUs664612279200000000
Rediscount facility1500503414711363620011068620
Reserve money110021462815703189951918421007221562316723059235502585231052
Currency outside banks90261102512324154801582517555186151890219186195642146821763
Banks’ reserves180134093161319929843130319939433544366940448910
Private sector dem. dep.175194218316375322342322329317340379
(Annual percentage change)
Reserve money5.433.07.321.027.229.525.822.020.212.116.734.0
Currency outside banks16.522.111.825.629.934.029.822.121.211.415.315.1
(Percentage contribution to reserve money growth)
Autonomous factors10.374.491.11.9-7.6-8.7-36.4-31.1-3.64.12.842.7
Net foreign assets94.354.771.910.7-9.00.1-8.7-10.332.931.423.544.6
Net claims on Government-51.4-4.48.9-9.60.5-14.5-17.4-4.1-21.8-21.1-31.3-18.9
Liquidity credit to banks-40.56.8-5.4-1.70.33.82.2-1.03.15.615.914.5
Policy factors-5.0-41.4-87.820.834.937.761.651.526.411.016.7-6.0
Special SBIs-87.22.314.99.37.7-3.3-3.5-3.2-3.7-3.4-2.6-1.4
SBI outstanding18.2-18.9-95.411.415.431.551.148.525.720.417.53.0
SBPUs rediscounted-1.125.7-2.50.812.210.813.97.44.1-5.81.6-6.7
Special SBPUs63.6-49.3-8.30.0-0.10.00.00.00.00.00.00.0
Rediscount facility1.4-1.43.4-0.6-0.4-1.20.1-1.10.2-0.30.1-0.9
Memorandum items:
Reserve money multiplier7.46.97.87.88.07.87.97.88.38.88.67.5
Source: Data provided by the Indonesian authorities.
Source: Data provided by the Indonesian authorities.
Table 33.Indonesia: Bank Indonesia Liquidity Credits, 1990-96 1/(In billions of rupiah; outstanding credits at end of period)
1990199119921993199419951996
MarchMarchMarchMarchMarchJuneSept.Dec.MarchJuneSept.Dec.Feb.
Liquidity credits17,45113,06113,76914,02413,09113,47814,27913,78813,19814,06014,66717,09317,777
BULOG1,6841,5271,3242,1241,3851,4122,2052,2301,3912,0202,0582,7343,222
Other15,76711,53412,44511,90011,70612,06612,07411,55811,80712,04012,60914,35914,555
State banks12,1889,44810,8969,8729,7949,9039,9179,4218,3868,1808,5919,7759,721
Priority sectors10,1046,6246,7035,9255,7905,9496,0315,1445,072
Old programs8,4800.06,5165,8385,7315,8975,9795,0905,040
Fertilizer7022780000000
Cooperatives45544244534537561552538649
Export credits2,16800000000
Other5,1555,2266,0725,3045,1945,3365,4274,4624,391
New programs 2/1,624678187875952524532
Nonpriority sectors2,0842,8244,1933,9474,0043,9543,8863,5973,314
Large investments1,0621,8663,0162,8773,7823,7333,6823,4573,189
Krakatau Steel4100000000
Pertamina939393939393939382
Other8888651,0849771291281114743
Local development banks732561441363287271262240262211255255255
Private national banks2,6011,5251,1081,1651,1951,4551,4582,1402,7573,2123,3263,8924,142
Foreign banks and joint banks 3/24600580430437437437437437437437437
Source: Data provided by the Indonesian authorities.

Since January 1990, liquidity credit has been provided only to farmers for working capital credits, cooperatives for food procurement, BULOG for providing supplies of food and sugar stocks, development banks and nonbank financial institutions for general investment credit, and commercial banks for state investment credit.

Consists of credits for Kupedes, national contractors, KMK, and Keppres No. 29.

As of April 1993, includes commercial banks, excludes nonbank financial institutions.

Source: Data provided by the Indonesian authorities.

Since January 1990, liquidity credit has been provided only to farmers for working capital credits, cooperatives for food procurement, BULOG for providing supplies of food and sugar stocks, development banks and nonbank financial institutions for general investment credit, and commercial banks for state investment credit.

Consists of credits for Kupedes, national contractors, KMK, and Keppres No. 29.

As of April 1993, includes commercial banks, excludes nonbank financial institutions.

Table 34.Indonesia: Liquidity Credits of Bank Indonesia and Credits of Commercial Banks, 1990-96 1/(In billions of rupiah; end of period)
BICBBICBBICBBICBBICBBICBBICBBICBBICB
1990 Mar.1991 Mar.1992 Mar.1993 Mar.1994 Mar.1994 Dec.1995 March1995 Dec.1996 Feb.
A.State banks 2/13,87243,26810,80755,40312,04863,68811,99670,10911,17973,44310,96280,0109,77781,33312,50993,48012,94394,804
Rupiah credits13,87240,37910,80750,56512,04856,45511,99659,15111,17961,34810,96268,0859,77768,56712,05979,39412,94380,615
Priority sectors11,78816,5397,98316,5227,85517,6788,19915,8387,35907,06506,563
Working capital credit7,71913,2073,44912,3852,84313,6713,21111,0033,1900.03,4602,878
Investment credit4,0693,3324,5344,1375,0124,0074,9884,8354,1690.03,6053,685
Nonpriority sectors2,08423,8402,82434,04341933877737974331338206134838976808532146856779394080615
Working capital credit397125762931900745220884361258315364434429984297450430…150397
Investment credit1687112642178150363301178933027174823776249053854250873175255932896430218
Other353440409390.03939
Foreign exchange credits
(nonpriority)28894838723310958120951192512766014086014189
Working capital credit152025903932454646304227487358456083
Investment credit136922483301641274657698789382418106
B.Local development banks7321,8145612,5124412,6163632,9412873,3831604,2012274,0992555,2422555,295
Priority sectors656798471616346479272355220101171
Nonpriority sectors761,016901,896952,137912,586673,383594,201564,0995,2425,295
C.Private national banks 3/2,60122,684