IN THE STATE INDONESIAN CAPITALISM 37

JAYATIGHOSH*

Coercive Corporatism: The State in Indonesian Capitalism

The Indonesian economy is currently cited as one of the 'success stories' of developing Asia, and represented as part of a Southeast Asian economic boom that is forcing a restructuringof the international division of labour. While this in itself would be sufficient justification for an attempt to analyse the nature of this "success", a focus on Indonesia is of interest for an additional reason. It is an illuminating example of a particular model of capitalist state-directed industrialization that can be found in varying forms across Asia. The behaviour of the Indonesian state (under Suharto) has been very much a part of an identifiable pattern of authoritarian regime that has been associated with several of the more economically dynamic Asian countries. This paper seeks to address two questions relating to the Indonesian experience after 1966: (1) What was the nature of the Indonesian state, and how did it affect or determine the pattern of economic growth and industrialization? (2) To what extent can this pattern of development be judged a success, even in purely economic terms of growth and distribution?
THE NATURE THE INDONESIAN OF AND ECONOMIC POLICY STATE

The regime that came to power in Indonesia in 1966 gave early evidence of its repressive character.Originating in a period of social instability and insurrection after the coup that toppled Sukarno, this military group was closely involved in the mass executions of Communists and leftist sympathisers that decimated several hundreds of thousands of Indonesians. Since then, the country has been formally ruled by the military, which has progressively entrenched itself and centralised power. Various government-controlled or sponsored organizations, such as the state political party Golkar, and state organizations for business, labour, bureaucrats and so on, replace any more representative political institutions which a democratic process could have thrown up. Dissent of any sort is summarily dealt with, there is little pretence at democracy, and the regime actually justifies its authoritarian control on the grounds that it is necessary to achieve rapid economic development and to preserve a fragile social 'harmony' during the complex transition to
' Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. Social Scientist, Vol. 24, Nos. 11-12, November-December 1996

modernity.The Indonesian 'New Order'thus has defined itself as a modernising, developmentalist state, similar to several other regimes in Southeast Asia. While the immediate success of this regime could be attributed to the fact that it emerged in a social vacuum created by what was effectively a civil war, as well as its willingness to adopt extremely harsh repressive measures to preserve it own power, these cannot explain either its longevity or its relative stability. Rather, two crucial economic factors have been instrumental in preserving the power of this regime for such an extended period. First, its strategic position in the economy, resulting from its command over the dominant sources of wealth-oil, natural gas and minerals-as well as its tight control over most other economic activities. Second, from its very inception, this regime sought integration with international industrial and finance capital to form a broad economic and political alliance operating at the national level. This alliance, which includes the large bourgeoisie and landlord classes within the country, has been immeasurably strengthened by the continuous political and economic support it has received from international capital, and particularly the official backing from the USA and Japan. The relationship between domestic and foreign capital has of necessity been a complex one, mediated also by internal political pressures, yet the fundamental nature of the alliance cannot be denied. In fact, it could be argued that the Indonesian state is evidence of the proposition that reactionary political dictatorships are the result not only of internal political dynamics, but also of the growth of capitalist accumulation on a world scale, which involves particular demands and creates corresponding responses within developing countries. This could explain the proliferation of a relatively new type of state in third world economies, characterized by high rates of economic growth, rapid industrialization and the emergence and/ or development of a powerful national bourgeoisie. These states, which tend to have strong totalitarian tendencies, typically legitimize their power in terms of technocratic government which delivers economic growth. They tend to enforce rigid political control even while encouraging some 'decontrol' (in terms of the play of market forces) of the economy, a combination which is seen as necessary to meet the simultaneous demands of incorporation into world markets and internal political stability. Such states have been variously or describedas 'bureaucratic-authoritarian' 'corporatist'(Higgott and Robison, ed., 1985)--essentially they contain many neo-fascist elements, which are clearly evident at the first hint of crisis or dissent. Throughout the period since independence, the Indonesian state has borne the primary responsibility for capital accumulation. This has come about because the state has been the major investor and financier, as well as the creator of the policy framework within which private accumulation has occurred. The 'New Order' regime of Suharto likewise presides over a highly regulated economy, in which the public sector controls the production and sale of critical resources, and also dominates in a range of other activities including those in banking and the financial sector. Domestic investment and production

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THE STATEIN INDONESIAN CAPITALISM 39

have been and continue to be subjectto licensing,agricultural growth is critically dependentupon governmentexpenditurethroughinfrastructure or provision and subsidies, many prices are administered regulated,and foreigntradeis controlledthroughquotas,tariffs,taxes and a wide rangeof non-tariff of over regulations.The degree actualcontrolbythegovernment the everexperienced India,despitemore in economyremainsfarbeyondanything than a decadeof official 'liberalization' policy in Indonesia. of In addition, the interactionbetweenstate and domesticprivatecapital extendsbeyondthat expressedby government policy,becauseof the growth of state-sponsoredprivate businessgroups. These have emergedfrom the to the capacityof militarypoliticiansand bureaucrats appropriate rentsfrom officialcontroloverresources authority, privateuse.Thus,in theearly and for years of this regime, individualgenerals,political cliques and other such groupsestablishedor expandedbusinessgroups,usuallywith Chinesepartners who had business experiencein Indonesia. These nascent capitalist groups in effect depended upon the capacity of the 'official' partner to appropriateor provideprivilegedaccessto certainstate monopolies,public credit,government contracts,concessions,or licences.Bythe late 1970s these haddevelopedinto large-scale business consolidated The conglomerates. most blatant example of these is the Liem Sioe Liong/Suharto group, which is dominatedby membersof the President's immediatefamily,and which has becomeone of the largestregionalcorporate in groupswith interests banking and finance,industry, tradeand realestate. Thismeansthatclientelism, and patronage corruption-which areusually seenas inimicalto economicgrowth-are hereverymuchassociatedwith the growthprocess.Indeed,they haveactuallyformedan integraland necessary and aspectof the accumulation industrialization processesin Indonesia.The businessgroupswhichhaveflourished-and thereby contributed most to the the high ratesof growth-are those which have benefited from substantially access to capacityand productionlicences,importmonopolies, preferential constructionand supply contracts,public sector credit, government-controlled distributorships, forestryconcessionsand the like. As a result, the interestsof the governmentand those of large businesscannot readily be separated,and publiceconomicpolicy has not reflectedthe interestsof the economy as a whole and all its contituentsbut ratherthose of a small elite. Plan thereis no Despitethe existenceof a Five-Year framework Repelitas) (the evidence that either domestic or foreign investmenthas been promoted according to any systematic social priorities, such as the potential for employmentcreation, backwardlinkages, governmentrevenues,external economies. (Dongeset al., 1980) The relationshipof the regime with internationalcapital, while one of fromthe start,has undergone severalphases.One of the explicitdependence most notablefeaturesis that this regimefrom the starthas operatedwith an on open capitalaccount,with no restrictions the inflowor outflowof capital. This completelyfree capitalaccount in a context of a plethoraof domestic

controls in a tightly regulated economy, began essentially as a political concession to the expatriate Chinese business community which remained in Indonesia. Its maintenance over time has been possible because of the effective guarantees provided by American and Japanese financial support to the government, as well as continuously high domestic interest rates. There have been periodic episodes of capital flight, for example in 1974 and again in the mid-1980s, but no attempt has been made to impose any capital controls as a result. The Foreign Investment Law promulgated in January 1967 just after the regime came to power, offered inducements to new foreign investment in the form of tax holidays and guarantees of profit repatriation, in addition to the obvious political inducement of labour repression. The legislation also required foreign investors to take local partners, thus benefiting the nascent domestic business groups. Existing foreign debts were renegotiated, and new financial ties were sought to be developed. The constitution under which the Suharto regime functions requires the government to balance its budgetwhich in effect means that all fiscal deficits have to be met either through external loans and grants or through the drawing down of international reserves. (There is another expedient which is being increasingly resorted tothat of transferring some expenditures and subsidies to public sector banks, and thereby rendering them "non-budget" items.) This has created a tremendous dependence of the government upon foreign sources of aid and loans. In the 1970s and 1980s, around 40 per cent of the government's development budget came from borrowed funds, which had per force to be borrowed abroad. Most bilateral and multilateral aid and credit, which is highly significant in Indonesia's case, is negotiated through the credit consortium InterGovernmental Group for Indonesia (IGGI) in which the USA and Japan have been highly significant. Japanese capital in particular has played a major role in propping up the Suharto regime and in providing foreign direct investment for Indonesia's import-substituting industrialization drive. There was a high concentration of concessional aid from Japan particularly upto the mid-1970s, and massive lending by the Japanese Eximbank, amounting to $1.5 billion just between 1972 and 1976. Over the period 1967-76, investment by Japanese firms in Indonesia accounted for $1.03 billion out of the total FDI of $1.57 billion, and 162 out of 327 projects. (Robinson, 1985) By the end of the 1980s, the stock of Japanese FDI in Indonesia amounted to nearly $12 billion. (Myo Thant et al., 1994) In the early phase, Japanese investment-which was focussed upon the textile and resource extractive industries-also meant a close interaction with Pertamina (the publicly-held oil company) and other public sector enterprises. Typically, the relationship was one of unabashed quid pro quo. Thus, in one instance of the 1970s, Japan's acceptance of a higher freight charge effectively restored the financial viability of the Indonesian companies General Dynamics and Burmah Shipping. But the price was the Japanese

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THE STATEIN INDONESIAN CAPITALISM 41

demand that the Indonesian government forfeit effective control over its highly prized natural gas facilities and revenues. By the early 1970s, a significant level of extractive and manufacturing investment was occurring, fuelled by Japanese, American and expatriate Chinese capital. This proto-industrialization however involved the exclusion of the petty bourgeois groups who had supported the military takeover, and thus created a political backlash. (It should be noted that the sporadic outbursts of indigenous petty bourgeois political discontent have been characterized in general by a virulent anti-Chinese tradition, and have typically pitted Islam against the Javanism of officialdom, the outer islands against Java, and the countryside against Jakarta as well as domestic small capital against large domestic and foreign capital.) Pro-democracy protests by students and economic discontent among the middle classes and small businesses found expression in the Bandung riots of October 1973 and the Jakarta riots of January 1974. Following upon these, the government introduced a series of regulations designed to redress the imbalances between domestic, Chinese and foreign capital, including requirementsthat state bank credit go only to indigenous companies and that companies investing under the (1968) Domestic Capital Investment Law effectively be under the majority control of national (non-Chinese) investors within 10 years, and closing many profitable avenues to foreign investors. These policies led to complaints from international capitalists as well as substantial declines in FDI inflows. However, from 1975 to 1981, the government was able to use the power derived from windfall oil export earnings to impose demands upon foreign capital and to promote the growth of national capital. In 1980, oil revenues amounted to 70 per cent of total foreign exchange earnings and 62 per cent of state revenues. The downturn in oil prices from 1983 onwards dramatically changed this situation. Like many other heavily-indebted countries, Indonesia was forced into a package of stabilization and structural adjustment policies which involved cutbacks in public expenditure as well as deregulation designed to change the structure of investment and production. However, two features of this process differed notably from other countries in a similar external position. Firstly, the Indonesian government continued (possibly also for strategic reasons on the part of the creditors) to have access to concessional credit through the IGGI, which eased the adjustment process greatly. Secondly, because the adjustment occurred without the explicit tutelage of the IMF and the World Bank, many otherwise 'standard' features of such a package were simply ignored and the deregulation in particular remained minimal. The basic elements of the adjustment policy response consisted of exchange rate changes, along with some expenditure restraint, a certain amount of financial sector reform and a limited reduction in import restrictions and tariffs. The rupiah was devalued twice; by 28 per cent in March 1983, and by 31 per cent in September 1986. Thereafter it has been made more 'flexible' and

allowed to depreciate aginst a falling dollar, and this has led to continuousif relatively minor-real depreciation since 1986. There were major cutbacks in government real capital spending especially in 1983 and 1986, but subsequently this appears to have recovered, especially in infrastructure. In any case, the lack of transparency involved in moving expenditure items 'offbudget' to state-controlled banks makes the actual fiscal stance difficult to estimate, but the likelihood is that it has not diminished in real terms. Foreign investment was once again provided with new incentives through 1986 and 1987, and most recently in 1994, and Indonesia has received some of the general increase in Japanese FDI to the Southeast Asian region. The increase in portfolio capital inflows has been less marked-while total stock market capitalization in Indonesia has increased from $0.1 bn in 1985 to $33 bn in 1993, its valuation in relation to GDP remains low at 10 per cent, and foreign investor activity is less noticeable in this area. The mainstream literature on the subject-especially that emanating from he World Bank-has hailed the Indonesian reforms of the 1980s as ushering in favourable structural changes which have been instrumental in raising overall growth rates, reducing the incidence of poverty, and increasing the exports of more diversified manufactured goods. Obviously, both the changes and the factors causing them deserve more detailed analysis. The nature of the economic transformation of this period and their relationship to economic policy is considered in the next section.
RECENT PATTERNS GROWTHAND OF STRUCTURAL CHANGEIN THE INDONESIANECONOMY

Growth rates in the Indonesian economy appear at first sight to be very much a part of the general "boom" in Asian economies over the past decades. The decade of high oil prices was associated with high rates of GDP growth, as evident from Table 1, and even during the adjustment phase of the eighties the economy grew at more than 5 per cent per annum. Since then, in the nineties, total GDP has grown at around 7 per cent and even per capita income has shown very healthy increases. Manufacturing appears to be the most buoyant sector, as shown also in Table 2 by the increasing share of industry (including manufacturing) in national income. These figures suggest that in terms of macro-economic aggregates, over the past two decades, Indonesia has been one of the fastest growing economies even in the dynamic Asian region. The growth in aggregate output and in manufacturing has been fuelled by very high savings and investment ratios, which are among the highest even in relation to the generally high-saving high-investing countries of Asia. The ratio of Gross Domestic Investment to GDP was more than 30 per cent in the 1980s, and has been more than 35 per cent in the 1990s. (Table 3) Only South Korea and Thailand have shown comparable or slightly higher savings and investment rates in the Southeast Asian region, and these rates are several times those evident in developed capitalist countries. In relation to such

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IN CAPITALISM43 THE STATE INDONESIAN

high investment rates, the GDP growth appears less impressive than at first glance, and actually suggests substantial increases in the aggregate incremental capital-output ratios in the economy.1 One important indicator of structural change in the economy is usually the sectoral composition of employment. The broad data are presented in Table 4, and while it is apparent that there has been some change, particularly in terms of the increased share of manufacturingemployment, the changes in aggregate employment patterns are much less significant than those in the structure of output, and in fact the main contours have remained essentially the same. In particular, over the 1980s manufacturing appears to have drawn workers from other sectors rather than from agriculture, since the share of agriculture remains roughly the same. The decline in poverty, especially rural poverty, is said to be one remarkable aspect of economic change in the 1980s, particularly since it occurred during a period of structural adjustment which is supposed to put greater burden on poorer groups. Of course, it should be remembered that the Indonesian experience of structural adjustment was qualitatively different from that typical of the IMF-World Bank programmes in the majority of other developing countries, and in particular a range of public expenditure items remained important and the extent of deregulation was minimal. Table 5 presents four different estimates of poverty trends in rural and urban Indonesia, one official government (BPS), one from the World Bank (WB), and the other two by independent researchers. It is clear that the estimates vary quite significantly, and also that the independent estimates of proportion of population below the poverty line show much lower declines than either the official or the World Bank data.2 In fact the World Bank itself admits the possibility of underestimation of rural poverty. (World Bank, 1992b) Nonetheless, all the data do indicate a declining trend certainly for rural poverty, even if of debatable extent. Some of this results from locational shift-around 40 per cent of the decline in rural poverty is said to be the result of rural-urban migration, which has in turn increased the pressure on poverty ratios for urban areas. [World Bank, 1992b] This in itself suggests that such migration contains a large element of push rather than pull, reflecting increasing desperation in the countryside rather than very dynamic employment expansion in the cities and towns.3 The rest of the decline in ruralpoverty is generally attributed to agricultural growth and employment diversification within the rural areas. Yet the factors behind such agricultural growth are rarely elaborated. In particular, the critical role of government expenditure, in the form of investments and subsidies, deserves attention. It is true that agricultural GDP has grown faster than rural population for at least two decades (Table 6). The increases are marked and have accelerated for farm non-food crops and livestock. The growth rate of output for farm food crops, primarilyrice, has remained steady and has allowed Indonesia, which was a major rice importer, to become selfsufficient in rice production in the course of the 1980s. Much of this is the

direct result of government expenditure patterns. The major items of public expenditure in this regard are the fertiliser subsidy and irrigation. Urea and TSP, which constitute about four-fifths of total domestic fertiliser use, have been subsidised at the farmgate by about 50 per cent since the mid-1970s. While the budgetary allocation for the fertiliser subsidy has shown a decline in real terms since 1988 (and the subsidy on pesticides has been abolished), this simply reflects the fact that part of the subsidy has been financed through borrowing from state commercial banks, making it off-budget (but quasifiscal) expenditure. Farmgate prices of fertiliser still reflect a similar level of subsidy. Thus economic adjustment measures have not entailed an effective decline in subsidy to farmers as they have in other countries such as India. Further,crop prices are largely administered and ensure that estimated costs of cultivation are covered. Public irrigation expenditures have shown real increases throughout the 1980s, and are being maintained at high levels. In fact, the currentprogramme to institute efficient operation and maintenance existing of irrigation systems would requireeven more massive increases in real public expenditure. Funding for agricultural development expenditure has come increasingly from foreign assistance. Foreign aid financed 12 per cent of such expenditure in the early 1980s, and 40 per cent by 1990-91. In that year, foreign assistance paid for 55 per cent of agricultural development spending excluding the fertiliser subsidy. The decline in forestry produce in the 1980s reflects export restrictions which prohibit the export of primary forest produce in an attempt to halt the ongoing deforestation. However, some of the most dynamic manufacturing export sectors include plywood and paper, which rely on this raw material. Thus both manufacturing and export growth have been associated with the wholesale and continuous destruction of rain forests in Indonesia, mainly on the Outer Islands. It has been estimated (quoted in World Bank, 1992) that the rate of deforestation has been between 700,000 and 1.2 million hectares per year upto 1990.4 In Java, the main environmental concerns are related to overcultivation and upland degradation, which result from the great pressure of agricultural population on the island. Developments in the external sector are said to be indicative of the general dynamism of the Indonesian economy. In Table 7, the recent trends show stable increases in export growth and a healthy balance of trade. The deficit on current account despite this trade surplus reflects the large interest payments as well as profit remittance outflows. Indonesia was Asia's largest external debtor until it was overtaken by India in the late 1980s, and its debt to GNP ratio remains the highest in Asia at over 60 per cent. Thus, despite the fact that most of its debt is long-term concessional credit, the debt service to exports ratio continues to be high at well above 30 per cent. However, the major achievement on the external front is argued to be the changing composition of exports, which reflects (as Table 8 indicates) a diversification out of primary reliance upon oil and natural gas exports, and

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SOCIAL SCIENTIST

THE STATEIN INDONESIAN CAPITALISM 45

a substantial increase in manufactured exports. This occurred within a relatively short time period of six years, partly because the collapse of oil prices (reaching absolute lows in 1986) rendered such exports unprofitable. In particular,the category of 'other' manufactured exports evidenced substantial growth. Nonetheless, the basic structure of exports remains resource dependent, with forest-based exports (timber and plywood, etc.) accounting for more than one-fifth of non-oil exports, and primary products including oil accounting for 74 per cent of total exports even in 1989-90. The diversification of exports ought to be related to greater diversification in manufacturing output and employment. The behaviour of output and employment in the more important manufacturing sectors is presented in Table 9. Some sectors have registered remarkable increases in employment, such as apparel, wood and paper products and rubber products. However, these tend to be either sectors whose weights in total production and employment are rather small (e.g. apparel) or those which rely on the unsustainable denudation of natural resources (e.g. wood and paper products) or which are based on production for a shrinking world marker (e.g. rubber products). Conversely, some of the 'import-substituting' industries whose viability ought presumably to be affected by greater global integration have also experienced high rates of growth of output and employment. These include iron and steel, metal products and transport equipment. The basic structure of manufacturing industry, as determined by the 1991 production weights, does not appear to be very different from what it was in the 1970s. Rather, the change appears to be in the employment elasticities, which (if the data are to be believed) have increased quite dramatically across several sectors in the 1980s. Greater integration within ASEAN countries has been an important recent tendency in Indonesian trade and consequently also domestic production. The share of ASEAN in Indonesian trade has increased substantially over the 1980s, and this is associated with the facilitating role played by relocative Japanese investment across all of these countries. This process is particularly marked in the formation of so-called 'growth triangles', which are nodal points of trade and investment interaction between countries, actively encouraged by state policies which promote liberalized investment, production and trade. Indonesia is involved in at least three such growth triangles, the most prominent being the Singapore-Johor-Riau nexus involving Batam in the extremely poor Indonesian province of Riau. These triangles seek to exploit the advantages of geographical proximity and complementary resources to advance industrial relocation for export production (relying, of course on unprotected and cheap labour and natural resources in the Indonesian case). They essentially involve the creation of Export-Processing Zones (EPZs) which are designed to cater specifically to the other points in the triangle, making them parts of a global production chain. Wages and working conditions are therefore similar to those in other EPZs, with an emphasis on cheap labour and 'flexibility' in hiring and firing practices as well as minimal to non-

existent health and safety standards for workers. While production and employment from such triangles have not yet increased sufficiently to make a major impression on aggregate Indonesian manufacturing production or exports, they are likely to constitute a significant part of future expansions at the margin.
ASSESSMENT

The economic changes of the 1980s and after do not reflect any fundamental change in the nature of the Indonesian state, which retains its highly coercive apparatus and proto-fascist tendencies. What they do suggest is that the interplay of global economic pressures and internal political forces in the 1980s forced a change of economic strategy which has yet to work itself out in terms of all its implications. The state expenditures on agriculture which have contributed to strong output growth and (to some extent) declining rural poverty were part of what were seen as necessary populist measures to legitimise the state in the face of increasing unrest and the growing popularity of Muslim fundamentalist movements which were harnessing opposition to the government. A strategic emphasis on employment-generating policies also resulted from this need to contain potential discontent. The economic 'successes' of this period were almost entirely related to changed patterns of government intervention and expenditure, which in turn were determined by domestic political struggles. Further,the increased vulnerability of the Indonesian state to external pressure from its foreign creditors and political allies because of the collapse in oil revenues forced a limited dose of economic adjustment measures, which subsequently were encapsulated in the increased economic interactionwithin the SoutheastAsian region resultingfrom relocative international investment. While this has meant an increase in manufacturing exports and employment in the recent past, it is obvious that at least until this point in time, this process has not entailed a major transformation in production structure sufficient to herald the emergence of a new Asian 'NIC'. It is also not very clear how far this process of rapid industrialization and employment generation in certain sectors can go, or whether it will be sustained for enough time to actually cause structural transformation. Certainly, the advantages the Indonesian state earlier possessed for international capital-of geo-political subordination and the assurance of a repressed labour force-are less attractive in a world in which many other states are keen to offer the same package. For that reason alone, and even leaving out the possibilities of internal socioeconomic conflict, the coming decade may prove to be a more testing time for such authoritarian capitalist states in developing countries.

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SOCIALSCIENTIST Table 1: GrowthRatesof Real GDPand Sectors

Agg GDP Per capita GDP 7.1 Agrt 3.8 3.4 2.0 Mining* Manuf 10.1 0.4 12.2 12.8 12.5 All other 9.5 6.5 7.3 1965 Rural BPS Sajogyo Esmara WB Urban BPS Sajogyo Esmara WB

CAPITALISM 47 IN THE STATE INDONESIAN

Table 5 : Poverty Ratios (% population below poverty line) 1976 40.4 28.1 46.4 54.5 38.8 31.2 39.9 31.5 1980 28.4 17.1 43.2 44.6 29 24.4 37.3 19.7 1987 16.4 13.2 36 18.5 20.1 30.4 30.4 8.3

1969-79 1979-89 1990

8.1 5.4 7.5

1991
1992 1993 1994

7.2
6.5 6.5 7.4

4.8
4.5 4.5 5.4

1.6
6.6 1.4 1.6

9.6
9.7 7.3 11.0

6.0
7.3 8.0 6.5

49.3 51.6

Note: * Includedin "Allothersectors"from 1990.

Sources:First2 rows:WorldBank1992; Next 3 rows:WorldBankWorldTables1994; Last2 rows: ADB Asian EconomicOutlook 1995-96.

65.1 44

Table2: SectoralSharesof GDP(%)

1970 1980 1994

Note: BPS refers to the BiroPusat Statistik, which gives the official estimates. WB gives the World Bank figures, while Sajogyo and Esmara are independent estimates. Source: C. M. Firdausy, 1994, p. 72.

Agriculture Industry Services

35 28 37

24.4 41.3 34.3

16.6 43.6 39.8

Table 6: Agricultural GDP Shares and Rates of Growth Share of Gross Dom Product 1969 1980 1989 Farm foodcrops Farm non-foodcrops Estate crops Livestock Fishery Forestry 60 12.5 3 10.3 6.6 7.6 58.9 11.2 3 9.7 6.8 10.4 60.9 13.6 2.7 10.6 7.3 4.9 Av rate of growth p.a. 1969-79 1979-89 3.7 2.2 4.3 2.7 3.9 7.3 3.8 5.8 2.2 4.7 4.5
-5.5*

Source: ADB Asian Economic Outlook 1995-96.

Table3: Savingsand Investment Ratios(% of GDP)

Gross Saving Gross Dom Investment

Av 1981-90 1990
1991

31.8 36.7
35.9

30.4 36.1
35.5

1992 1993 1994

38.2 37.7 38.7

35.9 35.3 35.5

Note: * Decline related to export restrictions Source: World Bank 1992, Vol. I.

Table 7: External Sector : Recent Indicators 1989 Exports r.o.g.(%) Imports r.o.g.(%) Trade Balance ($ bn) Current account ($ bn) External Debt ($ bn) Debt Service Ratio (%) Exchange Rate Rp to $ Real Eff Exchange Rate 1990=100 17.8 17.9 6.7 -1.1 56.2 35.4 1770 101.2 1990 16.7 31.5 5.4 -3 66.8 30.9 1843 100 1991 10.5 15.7 4.8 -4.3 76.1 32 1950 97.8 1992 14 7.8 7 -2.8 83.8 30.6 2030 96.1 1993 8.3 6 8.2 -2 89.6 32.6 2087 98.9 1994 7.9 11.6 7.8 -3.1 90.5 32.9 2164 96.8

Source: ADB Asian Economic Outlook 1995-96.

Table4: Structure Aggregate of Employment

1971 1982 1989

Total (millions) which (%) of

Agri

41.3
64.2

57.8
54.6

76.7
53.9

Mining Manuf Others Source: WorldBank1992

0.2 6.5 29.1

0.7 10.4 34.3

0.7 13.7 31.7

Source: ADB Asian Economic Outlook 1995-96

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SOCIAL SCIENTIST Table 8 : Structure of Exports in the 1980s 1983-84 Oil and LNG ($ bn) Total Non-Oil ($ bn) of which (%) Agri -Timber -Rubber -Coffee -Seafood Minerals and Metals Manuf Goods -Textiles - Plywood etc Others 57.5 10.8 18.3 9.4 3.8 14.9 27.6 6.8 10.8 10 34.1 5.9 8.4 3 4.5 11.3 54.5 15.5 16.2 22.8 7,371 (57.9%) 5,368 (42.1%) 1989-90 3,065 (17.9%) 14,100 (82.1%)

THE STATE IN INDONESIAN CAPITALISM 49 NOTES 1. In this connection, it should be noted that while rates of gross domestic savings have been very high and more than investment rates, the rates of gross national savings have been substantially lower, and are typically lower than investment rates by between 1 and 4 per cent of wGDP over this period. This reflects the importance of domestic savings generated by multinationals operating in Indonesia, whose income makes up around one-fifth of GDP, and who typically export a substantial proportion of savings in the form of outflow. 2. The various measures are highly sensitive to the sample of the survey used to estimate the extent of poverty. However, the same basic methodology is used for calculation of poverty figures in all the estimates: a minimum calorie requirement is specified, and then the expenditure is estimated on the basis of costs of foodgrains which supply this minimum along with some allowance for essential non-food expenditures. 3. The regional spread of poverty also reinforces the conclusion that many rural areas, especially in the Outer Islands, remain impoverished. The largest declines in poverty, according to the official statistics, are to be found in the island of Java. Some Outer Islands, such as Kalimantan and Sumatra, actually show increases in rural poverty. 4. The rapid pace of deforestation points to the difficulties in sustaining manufacturing growth based on forestry products, especially the plywood and paper industries which are among the fastest growing sectors in terms of both output and employment. REFERENCES Bradford, Colin I. Jr., and William H. Branson (eds.) [1987], Trade and Structural Change in Pacific Asia, Chicago: University of Chicago Press. Dapice, David [1980], "An overview of the Indonesian economy", in G. Papanek (ed.), The Indonesian Economy, New York: Praeger. Donges, Juergen B., Bernd Stecher and Frank Wolter [1980], "Industrialization in Indonesia", in G. Papanek (ed.), The Indonesian Economy, New York: Praeger. Erquiaga, Philip [1987], "Improving Domestic Resource Mobilization through Financial Development: Indonesia", ADB Economic Staff Paper no. 40, Manila: Asian Development Bank. Firdausy, Carunia Mulya [1994], "Urban poverty in Indonesia: Trends, issues and policies" in Asian Development Review, Vol. 12 No. 1, pp. 68-89. Higgott, Richard and Richard Robison (eds.) [1985], Southeast Asia: Essays in the Political Economy of Structural Change, London: Routledge and Kegan Paul. Morris-Suzuki, Tessa [1991], "Reshaping the international division of labour: Japanese manufacuring investment in South-East Asia", in Jonathan Morris (ed.), Japan and the Global Economy, London: Routledge. Robinson, Wayne [1985], "Imperialism, dependency and peripheral industrialization: The case of Japan in Indonesia", in Higgott and Robison (eds.), Southeast Asia, London. Robison, Richard [1985], "Class, capital and the state in New Order Indonesia", in Higgott and Robison (eds.), Southeast Asia, London. Robison, Richard [1987], "After the gold rush: the politics of economic restructuring in Indonesia in the 1980s", in Richard Robison, Kevin Hewison and Richard Higgott (eds.), Southeast Asia in the 1980s: The Politics of Economic Crisis, Sydney: Allen and Unwin. Thorbecke, Erik et al [1992], Adjustment and Equity in Indonesia, OECD Development Centre Study, Paris: OECD. Wawn, Brian [1982], The Economies of the ASEAN Countries, London: Macmillan. World Bank [1989], Indonesia: Strategy for Growth and Structural Change, Washington, D.C. World Bank [1990a], Indonesia: Foundations for Sustained Growth, Washington D.C. World Bank [1990b], Indonesia: Poverty Assessment and Strategy Report, Washington, D.C. World Bank [1992], Indonesia: Agricultural Transformation Challenges and Opportunities, Washington, D.C.

Source: World Bank 1990.

Table 9 : Manufacturing Production and Employment Sector 1991 Prodn Weight 11.9 11.5 12.8 2.1 10.5 2.5 3.9 3.6 5.5 9.7 8.8 9.2 Production rate of growth per annum 1970-82 1982-91 11 9.1 9.6 4.7 15.6 13.6 13.9 7.1 16.6 11 46 16.1 5.9 7.3 7.7 23.9 15.2 7 7.7 6.5 8.7 10.4 21.7 7.9 Employment rate of growth per annum 1982-91 1970-82 4.4 1.6 4.1 31.1 23.8 10.3 15.3 7.7 17.2 22.3 34.7 9.6 9.2 4.9 7.5 26.8 18.1 12.5 9.4 7 14.5 15.1 15.1 6.6

Food products Tobacco Textiles Apparel Wood products Paper products Industrial chemicals Other chemicals Rubber products Transport equipment Iron and steel Metal products

Source: UNIDO Industrial Statistics.