A BRIEF LOOK BACKWARDS

Indonesia was characterized as the “chronic dropout” in the early 1960s. Before that it was the home of dualism and backward-sloping supply curves. In the 1970s, with the spectacular exception of oil, notions of export pessimism were pervasive. Yet over the past quarter-century Indonesia has unquestionably been one of the better performers in the Third World. Since 1966 it has experienced the first sustained period of economic development in its modern history. In one of the most decisive breaks with the past anywhere, the economic stagnation, accelerating inflation, and declining living standards of the 1960-66 period have given way to rapid growth, macroeconomic stability, and rising prosperity. Real GDP has risen almost five-fold over this period, resulting in an increase of more than 300 per cent in per capita GDP. There have been commensurate improvements in a range of socioeconomic indicators, including rising educational levels, and declining infant mortality and poverty incidence.

Structural change has been rapid, with the share of manufacturing in GDP rising almost three-fold over this period. Indeed, in the long sweep of economic development, Indonesia passed three milestones in the early 1990s: in 1991 manufacturing output exceeded that of agriculture for the first time, and notwithstanding the latter's impressive growth; by 1990 the share of the labour force in agriculture fell to 50 per cent; while manufactured exports have now overtaken those of both oil and minerals and agriculture and, depending on definitions, total more than 50 per cent by value.