Indonesia: Preparing for the Future
by Dr. Arifin M. Siregar
Indonesia proclaimed its independence from the Dutch on August 17, 1945. We are an achipelagic state of 195 million occupying over 17,000 islands scattered some 3,500 miles along the equator, roughly the distance from New York to San Francisco.
Drawn from over 300 ethnic groups, Indonesians speaking many dialects. But we are united in purpose, determination and goals. Our motto is Bhinneka Tunggal Ika, 'Unity in Diversity.'
Our national philosophy is governed by five inseparable and interrelated principles known as Pancasila. These are belief in One God, a just and civilized society, unity, democracy guided by consensus, and social justice for all.
Under the leadership of President Soeharto, since 1967 Indonesia has placed economic development, buttressed by political stability, as a top priority. Since 1969, a series of Five Year Development Plans have been implemented. Now in the sixth plan, the results have been encouraging. From one of the world's poorest nations 30 years ago, with a per capita income of only $70, Indonesia has raised this statistic to $1000, while fostering a growing middle class of 20 million.
The number below the poverty line has plummeted from more than 60% to less than 14%. Life expectancy has increased to 63 from 45. The average citizen's purchasing power continues to strengthen. This, coupled with our enormous infrastructure requirements, led the U.S. Dept. of Commerce to designate Indonesia as one of the 10 Big Emerging Markets for American goods and services.
This rapid economic growth, averaging 7% in the past 10 years, is underpinned by a dedicated, hard working labor force and the blessings of fertile soil and abundant natural resources oil and gas, copper, gold, tin, nickel, coal, bauxite and timber. Already a significant oil and gas exporter, Indonesia and its American partners will develop the world's largest natural gas reserves in the Natuna Sea.
In the 1980's, Indonesia initiated deregulation and liberalization policies across the entire economy. The result of reforms in banking, trade, investment and taxation was an economy that expanded to a 7% growth rate rising to 8% in the last year. Import substitution policies, relying heavily on subsidies and protection of domestic production, were replaced by an export oriented strategy. Increased opportunities to the private sector, domestic and foreign, lead to a very favorable investment and business climate.
Results are apparent. Foreign direct investment applications increased, and approvals of foreign investment, some $1 billion in 1984, rose to $13.7 billion by 1994 and $39.9 billion in 1995. U.S. direct investment in the non oil sector approached $11 billion, fifth behind Japan, the U.K., Hong Kong and Singapore.
Trade between Indonesia and the U.S. rose 107% from 1989 to 1995, reaching $10.5 billion. Indonesia imports a range of U.S. products and commodities including cotton, soybeans, machinery, electric generators, dredges and platforms, telecommunications equipment, aircraft, chemical wood pulp, compressors and fans. As our income rises and infrastructure needs expand, Indonesia great promise to American exporters. Our trade is complementary. The U.S. is one of our top export destinations for non oil and gas exports, including textiles and apparel, rubber, wood and food products, footwear and machinery.
Politically, Indonesia has adopted an increasingly important international role, commensurate with our size, strategic location and contribution to the regional and global economy. These areas are also of strategic importance to the U.S. Indonesia co chaired the Cambodian peace process.
For three years President Soeharto was Chair of the Non Aligned Movement where he chartered a course that lead to more constructive and mutually beneficial cooperation between North and South. Indonesia supported the Middle East peace process and played an important role in bringing peace to Cambodia. As of 1995, Indonesia is a non permanent member of the UN Security Council. Indonesia was instrumental in founding the Association of Southeast Asian Nations (ASEAN) Free Trade Area. As Chair of Asia Pacific Economic Cooperation (APEC) in 1994, President Soeharto secured the agreement of his counterparts, including the U.S., to work towards free trade by 2010 for developed countries and 2020 for the rest of APEC. Indonesia, with the U.S. and ASEAN countries, focuses on regional security through the ASEAN Regional Forum.