| Indonesia has a market-based economy where a | | | | import great amounts of rice. It reduced domestic |
| significant role is played by the government. There | | | | demand and caused the absence of new investment. |
| are a lot of state-owned enterprises. The | | | | Formal sector employment lowed significantly. |
| government administers prices on several basic | | | | Economic data provide evidence that the economic |
| goods: fuel, rice, electricity. After financial and | | | | turnaround of 1999 has continued. Real GDP growth |
| economic crisis that began in mid-1997, the | | | | reached 4.13% in August 2000. Results of GDP |
| government took care of a great portion of private | | | | growth are record exports, manufacturing growth, |
| sector propriety. It acquired non-performing bank | | | | and increase household consumption. Besides there |
| loans and corporate assets. Indonesia's economy | | | | has been a significant increase in corporate debt |
| grew from a per capita GDP of $70 to $1,000 by | | | | restructuring. But Indonesia's banking and corporate |
| 1996. Inflation was held in the 5%-10% range with | | | | sectors are still extremely weak. Banking sector |
| the help of effective monetary and fiscal policies. The | | | | reform has stalled. Progress on corruption cases is |
| government managed to avoid domestic financing of | | | | slow. Since the late 1980s, there have been significant |
| budget deficits, it was financed by foreign aid. | | | | changes that encouraged its economic growth. This |
| (Lindblad J. 1996)In the mid-1980s,the government | | | | growth was financed from private investment, both |
| began eliminating obstacles to economic activity. Its | | | | foreign and domestic.But new foreign investment |
| policy was aimed at the external and financial sectors. | | | | approvals fell by two-thirds between 1997-1999. The |
| The government tried to stimulate employment and | | | | crisis pointed out areas where additional reform was |
| growth in different export sectors. Annual real GDP | | | | needed. They were legal and judicial system, |
| growth averaged nearly 7% from 1987-1997. As a | | | | competitive processes, and adoption of internationally |
| result most analysts recognized Indonesia as a newly | | | | acceptable accounting.After improvements in the |
| industrializing economy and emerging major market. | | | | laws recently, Indonesia's intellectual property rights |
| But nevertheless there were some structural | | | | regime remains weak; lack of effective enforcement |
| weaknesses in Indonesia's economy during | | | | and the area of private infrastructure projects are of |
| 1987-1997, the legal system was very weak, and | | | | a great concern Indonesia. It has a large labor force, |
| there was no effective way to enforce contracts, | | | | abundant natural resources and modern |
| collect debts. Non-tariff barriers, domestic subsidies, | | | | infrastructure, but nevertheless private investment in |
| barriers to domestic trade, and export restrictions all | | | | projects ceased during the crisis. |
| created economic distortions. (Howard D.,Vincent J.H., | | | | Conclusion.So, what is happening in East Asia now? |
| Lindblad J. 2002)The regional financial problems | | | | Strictly speaking, the same, that happened before it: |
| influenced Indonesia in late 1997 and cause economic | | | | the countries of Confucian culture play formation of |
| and political crisis. But in October 1997, Indonesia and | | | | new global center of economic and political power, |
| the IMF reached agreement. It concerned an | | | | and still the leading role. Certainly, the region cannot |
| economic reform program aimed at macroeconomic | | | | equally compete with 3 main centers of world |
| stabilization and elimination of some of the most | | | | economy and policy - the USA, ЕС, |
| damaging economic policies.The effects of financial | | | | Japan. Most of the countries of the region still are |
| and economic crisis were considerable. In 1998, real | | | | poor, frequently inwardly unstable, and their |
| GDP was 13.7%, but in mid-1999 real GDP growth for | | | | development is based on the use of the adopted |
| the year was only 0.3%. Inflation reached 77% in | | | | technologies. |
| 1998. Events of 1997-1998 forced Indonesia to | | | | |