Finance

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Bank Indonesia, the central bank, is responsible for issuing the rupiah, the national
currency. Other major government-owned institutions include the state savings bank,
banks specializing in rural and industrial development, and a large commercial
bank with overseas branches. Each bank is diversified and operates independently.
Private domestic banks and foreign banks also operate in Indonesia. Nonbanking
financial institutions are restricted. Indonesia has stock exchanges in Jakarta
and Surabaya.
Generally, the aims of the government’s credit and fiscal policies have been to
provide the conditions for private incentive within the context of financial orthodoxy.
Before the 1980s, Indonesia’s capital market had been limited to the state-dominated
banking system. Subsidized credit and interest rates were used in accordance with
general government priorities, and a credit ceiling was imposed to
ensure monetary stability. The credit ceiling, however, resulted in excess reserves held
by state banks and ultimately triggered a restructuring and deregulation of the banking
system.
In 1983 a reform package decontrolled the interest rate and abolished the credit
ceiling system. Further reforms in 1988 liberalized licensing for new banks and
lowered reserve requirements. The result was a dramatic expansion in the number of
private banks, their branches, and the banks’ share of total deposits. The Jakarta Stock
Exchange also experienced explosive growth.

The surge, however, was accompanied by a rise in interest rates (both for deposits and
for lending), which effectively stifled domestic investment. In an effort to curb
inflation, Bank Indonesia tightened the money supply, a move that further destabilized
the country’s financial sector. When the Asian monetary crisis struck in 1997,
Indonesia’s banking industry was among the first casualties.
In 1998 the government established the Indonesian Bank Restructuring Agency
(IBRA) to extricate the financial sector from its monumental debt. IBRA
accomplished this task largely through the closure and consolidation of financially
precarious banks. The remaining banks then prioritized households and small
businesses in their lending, which stimulated growth in the domestic private sphere.
By 2004 the banking sector had stabilized, the country had returned to a general
pattern of economic growth, and IBRA was dissolved—on schedule.
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Trade
A complex and reasonably well-developed commercial sector has existed in Indonesia
for many decades, if not centuries, based on the marketing and exporting of
agricultural produce and on supplying consumer goods and services to the domestic
market. Historically, trade has been dominated by Indonesian Chinese, although other
segments of the population, especially people from western Sumatra and southern
Celebes, also have made notable contributions.

Indonesia: Major import sourcesEncyclopædia Britannica, Inc.

No longer simply an exporter of agricultural produce, Indonesia has become an

established international supplier of petroleum and petroleum products; rubber
products; garments, shoes, and textiles; wood and wood products (including paper);
machinery of various sorts (including automobiles); and other commodities, such as
electronic products. Primary imports include petroleum and natural gas, machinery,
chemicals, metals, and transport equipment. Indonesia’s most important trading
partners include Japan, the United States, Singapore, China, South
Korea, Thailand, Malaysia, and Australia.
 Indonesia: Major export destinationsEncyclopædia Britannica, Inc.

Services

Services constitute a major segment of the Indonesian economy, generating more than

one-third of GDP. Tourism in particular has emerged as a major source of income,
although the industry’s growth suffered setbacks with the Asian economic crisis in
1997–98 and with multiple terrorist attacks and the outbreak of avian influenza (bird
flu) in the early 21st century.
Labour

Indonesia’s industrialization has not produced strong organized labour. This is

attributable in part to a surplus of labour in the job market; most lower-class
Indonesians work in traditional, informal, and marginal jobs. Political repression
under the Suharto presidency (1967–98) also discouraged politically motivated
associations of workers. Rather, the government sought to incorporate functional
groups such as those of farmers and fishermen into a quasi-governmental political
party.
Thomas R. LeinbachGoenawan Susatyo Mohamad
Transportation and telecommunications

Because Indonesia is an island country, sea transport plays a key role in the
movement of raw materials and agricultural products from their sources to
markets. Although the physical nature of the country has favoured the
development of strong sea links for freight and strong air links for passengers,
many parts of Indonesia have not been adequately served by the transport
network, a factor that has critically hampered economic development. The
rapid expansion of telecommunications networks, however, has
helped mitigate the insularity of some regions.