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Indonesia

Indonesia. Ali Al- Thani & Mohammed Al-Kuwari. From the 7 th to the 14 th centuries, Buddhism flourished in Indonesia. Close commercial links with the Arabian Peninsula, leading to gradual Islamization by the 16h century. Dutch colonialism in the 17 th century. Historical Background.

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Indonesia

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  1. Indonesia Ali Al-Thani & Mohammed Al-Kuwari

  2. From the 7th to the 14th centuries, Buddhism flourished in Indonesia. • Close commercial links with the Arabian Peninsula, leading to gradual Islamizationby the 16h century. • Dutch colonialism in the 17th century. Historical Background

  3. In 1942, Japan invaded Indonesia and ended the Dutch rule • After Japan’s surrender, Sukarno announced Indonesia’s independence in 1945. • The Netherlands tried to regain control of Indonesia, but faced strong resistance. • Indonesia formally gained its independence in 1949. Historical Background

  4. Influential nationalist leader who became Indonesia’s first president. • Fought the Dutch, and declared Indonesian independence. • Moved Indonesia from democracy towards authoritarianism. Sukarno

  5. He had to balance the opposing powers of the military and the communist party (PKI). • He ran a communist system and cut ties with the West as he was anti-imperialist. • Indonesia passed through tough times during his rule, with inflation reaching about 650% in 1966. • He was eventually overthrown by General Suharto, the head of the Indonesian army. • Suharto marked his rule as the “New Order” to distinguish it from Sukarno’s old order. Sukarno

  6. Suharto took over and became Indonesia’s second president in 1968. • The “Berkeley Mafia” and their role. • Restored ties with the West and implemented a capitalist system (Indonesia joined the IMF, UN and WB). • He was able to secure a long-term low interest loan from a group of 20 countries. • By 1969, inflation rate dropped to 19% (from 650% in 1966). Suharto’s New Order

  7. Indonesia is abundant with natural resources (oil and gas, coal, copper, rubber, wood). • Natural resources form the backbone of Indonesia’s economy. • Indonesia, a member of OPEC, benefited from the oil crisis in the 1970s. • Average GDP growth of 6-7% per annum. • During Suharto’s reign, GDP grew from 9.8 $b in 1970 (86$ per capita) to 237 $b in 1996 (1180$ per capita). Today it is 878 $b (5200$ per capita). • He devised 5-year plans to invest in the country’s infrastructure, health, education, food security and technology. Suharto’s New Order

  8. FDI in Indonesia grew from about 100 $m in 1970 to over 6 $b in 1996 (about 19 $b today). • Poverty rate dropped from 50% to 13%. • Health: • About 2.7% of GDP • Life expectancy at birth increased from 47 to 70 years. • Infant mortality rate dropped from 220 to 40 per 1000 births. • Education: • About 2.8% of GDP • Literacy rate of about 90%. • Illiteracy among children dropped from 40% to under 10%. • Free education and high enrolment rates of 92%. Suharto’s New Order

  9. The 1980s and the decline in oil prices. • However, the country was not affected much … • High levels of FDI • Dramatic increase in domestic consumption • Moreover, Suharto deregulated the financial sector. • Movement towards manufacturing. • Indonesia has a balanced economy [ agriculture 14%, industry 47%, services 39%] Suharto’s New Order

  10. Corruption: • From 1970 to the mid 80s, he gave privileges to the Chinese ethnic minority. • From the mid 80s, he started to lean towards the Muslim majority due to riots. • During the three decades of his rule, he made himself, his family and friends extremely wealthy. • He topped Transparency International’s list of the most corrupt leaders. • In the 90s, riots continued, the end of the Cold War, and the Asian Financial Crisis. Suharto’s New Order

  11. Initially, as crisis hit neighboring Asian countries, foreign investors kept confidence in Indonesian economy. • Loans were given to Indonesian investors in enormous amounts in American dollars • Eventually, the pressure on Indonesian rupiah was very strong, thus its depreciated significantly. • Within 6 months by January 1998, Indonesian rupiah was only 30% of its value in June 1997. • By this depreciation, Indonesian companies suffered huge losses. • FDI dropped from 6 $b to – 2 $b in one year. Asian Financial Crisis

  12. Data about the Financial Crisis

  13. The country transformed from a dictatorship to a democracy. • The period 1998-2004 is marked by instability and worsening economic conditions. • Since 2004, the country’s first democratic elections, the economy started booming again. Since the Financial Crisis

  14. High levels of inequality (GINI 0.38) which leads to some uprisings. • Even though poverty rate decreased to 11%, about 50% of the population is clustered around the poverty rate. • Unemployment at 7% and increasing. • Ethnic tension and frequent terrorist attacks that harm the tourism industry (the 4th largest industry in Indonesia) • In 2002, terrorist bombings in Bali killed 202 people, most of which were tourists. Challenges

  15. Challenges

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