The economic history of Indonesia is shaped by its geographical location, natural resources, and people who inhabit the world of the archipelago that today form the modern state of the Republic of Indonesia. Foreign contacts and international trade with foreign partners have also shaped and sealed the fate of the Indonesian archipelago, such as Indians, Chinese, Arabs, and eventually European traders reached the archipelago during the Exploration Era and participated in the spice trade, war and conquest.
At the beginning of the seventeenth century, the Dutch East Indies Company, one of the earliest multinational corporations in the history of the world economy, had established their base in the Indonesian archipelago as they monopolized the spice trade of the archipelago. In 1800, the Dutch East Indies colonial state had emerged and benefited from the trading of agricultural produce, tea, quinine, rubber and palm oil from the colonies, also from the mining sector: oil, coal, tin and copper. The colonial state will be replaced by the Republic of Indonesia after World War II.
At the beginning of the 21st century, Indonesia rose to become Southeast Asia's largest economy, as one of the world's growing market economies, a member of the G-20 economies and classified as a new industrialized nation.
Video Economic history of Indonesia
Indonesia's pre-modern economy
Hindu-Buddhist kingdom period
Initially the economies of most villages and the police in the archipelago rely heavily on rice farming, as well as trade in forest products; such as tropical fruits, game animals, plant resins, rattan and hardwoods. Ancient kingdoms like Tarumanagara and Mataram depend on rice yields and taxes.
The archipelago has long been known for its abundance of natural resources; spices such as nutmeg and cloves from the Maluku Islands, pepper and cubeb from South Sumatra and West Java, rice from Java, gold, copper and tin from Sumatra, Borneo and the islands in between, camphor resin from Barus harbor, sappan, and sandalwood from the Lesser Sunda Islands, hardwood from Borneo, ivory and rhinoceros horns from Sumatra and exotic bird fur from eastern Indonesia are some of the products sought by traders around the world. This foreign contact was started by a small Indian merchant empire in the early 4th century that fostered contact with other major civilizations in mainland Asia; India and China. Benefiting from its strategic location in the emerging maritime trade path between India and China, governance in the Indonesian archipelago will soon grow into a thriving, powerful, and cosmopolitan trade empire like the emerging Sriwijaya in the 7th century.
Srivijaya
In the world of commerce, Sriwijaya quickly rose to a distant empire controlling two parts between India and China, the Sunda Strait from Palembang and the Malacca Strait from Kedah. Arab accounts state that the empire's maharaja is so large that in two years, the fastest vessels can not travel around all the islands, which produce camphor, gaharu, cloves, sandalwood, nutmeg, cardamom and cubeb, ivory, gold and lead maharaja as rich as any king in India.
In addition to establishing favorable trade relations with India and China, Sriwijaya also established trade relations with Arabs. It is possible that an envoy sent by the Emperor Sri Indravarman to deliver his letter to Caliph Umar ibn Abdul Aziz from Ummayad in 718, was returned to Sriwijaya with Zanji (the black slave of Zanj), the Caliph's gift to the emperor. Then Chinese chronicles mention about Shih-li-t-'o-pa-mo (Sri Indravarman), Emperor of Shih-li-fo-shih the emperor was ts'engchi (the spelling of Chinese Arabic Zanji ) as a gift. Sriwijaya will continue to dominate the Indonesian archipelago to decline in the 13th century.
Majapahit
In the 14th century in Java, the Majapahit kingdom will grow into a maritime kingdom that will control the trade and the economy of the archipelago over the next centuries. According to a Chinese source from the Ming Dynasty, Yingya Shenglan , Ma Huan reported the economy and the Java market. Rice is harvested twice a year, and the grain is small. They also harvest white sesame and lentils, but no wheat. This field produces sapwood (useful for producing red dye), diamond, sandalwood, incense, peppercorn, cantharides (green beetle used for medicine), steel, tortoise, turtle shell , strange and rare birds; such as a large parrot as big as a female bird, a red and green parrot, a five-color parrot that can imitate human voices, as well as guinea pigs, peacocks, 'siria' birds, pearls, and green doves. The animals here are weird: there are white deer, white monkeys, and various other animals. Pigs, goats, cows, horses, poultry, and all kinds of ducks. For fruits, there are all types of bananas, coconut, sugarcane, pomegranate, lotus, mangi-chi-shi (mangosteen), watermelon and chi ch'a > langsat or lanzones). In addition, all kinds of pumpkins and vegetables are there.
Taxes and penalties are paid in cash. Java's economy has been partially monetized since the end of the 8th century, using gold and silver coins. Previously, the 9th-century Wonoboyo stockpiling found in Central Java showed that ancient Javanese gold coins were seed-shaped, similar to maize, while silver coins were similar to buttons. In about 1300, during the reign of the first king of Majapahit, a significant change took place: the indigenous currency was completely replaced by imported Chinese copper money. Around 10,388 ancient Chinese coins weighing about 40 kg were even excavated from the backyard of a local resident in Sidoarjo in November 2008. The Ancient Indonesian Preservation Bureau (BP3) of East Java verified that the coins were dated from the Majapahit era. The reason for using foreign currency is not given in any source, but most scholars consider it because of the increasing complexity of Java economy and the desire for currency systems that use smaller denominations that are suitable for use in daily market transactions. This is an unsuitable role for gold and silver. This kepeng Chinese coin is a thin round copper coin with a square hole in the middle. The hole is meant to tie the money in a coin. Small changes - imported Chinese copper coins - allows Majapahit the further discovery, a saving method using a pottery coin pot container. This is usually found in the ruins of Majapahit, the gap is a small hole to put coins. The most popular form is the piggy bank (piggy bank).
Some ideas of internal economies of scale can be collected from scattered data on inscriptions. Canggu inscription dated 1358 mentions 78 ferry crossings in the country (mandala Java). Majapahit inscriptions mention a large number of specialties of work, ranging from gold and silver to blacksmiths to drink sellers and butchers. Although much of this work has been in the past, the proportion of people who earn from non-agricultural activities seems to have become larger during the Majapahit era.
Majapahit great prosperity may be due to two factors. Firstly, Java's northeastern lowlands are suitable for rice cultivation, and during Majapahit's major irrigation projects are undertaken, some with government assistance. Secondly, the Majapahit harbor on the north coast may be an important station along the route to get the Maluku spices, and when spices pass through Java they will provide an important source of income for Majapahit.
Nagarakertagama stated that the fame of the Majapahit ruler attracted foreign traders from far and wide, including India, Khmer, Siam, and China among others. While in the later period, Yingya Shenglan mentions that a large number of Chinese merchants and Muslim traders from the west (from Arabia and India, but mostly from Muslim countries in Sumatra and the Malay Peninsula) settled in port cities Majapahit, such as Tuban, Gresik and Hujung Galuh (Surabaya). Special taxes are levied on some foreigners, perhaps those who have taken semi-permanent residence in Java and undertaken several types of business other than foreign trade. The kingdom of Majapahit has trade relations with the Ming dynasties of China, Annam and Champa in Vietnam today, Cambodia, Siam Ayutthayan, Burmese Martaban and South Indian Empire Vijayanagara.
Distribution of Islamic and Muslim trading networks
Muslim traders have spread the Islamic faith across trade routes linking to the Islamic World, stretching from the Mediterranean, Middle East, India, Southeast Asia to China. Muslim traders from the Arabian Peninsula and Persian Gulf have sailed the Indonesian archipelago on their way to China, since at least the 9th century, as witnessed by the discovery of a Belitung shipwreck containing cargo from China, found off the coast of Belitung island. Muslim traders and proselytisers have encouraged the rise of Islamic countries in the Indonesian archipelago. In the 13th century, Islam has gained its footing in Indonesia through the establishment of Pasai Ocean in Aceh and the Sultanate of Ternate in the Maluku Islands. Spices producing the Maluku islands have got its name from the Arabic "Jazirat al Muluk" which means "peninsula or king's islands".
In the 14th century, these Muslim ports began to flourish as they welcomed Muslim traders from India and the Middle East. Among the most notorious Muslim empires are the Malacca Sultanate which controls the strategic Malaka Strait, and the Demak Sultanate which replaces Majapahit as a regional power in Java. The Sultanate in return also actively spread the Islamic faith in the archipelago, and by the end of the 15th century, Islam had overthrown Hinduism and Buddhism as the majority belief in Java and Sumatra, and also quite significant in Sulawesi and North Maluku. Islamic politics in the Indonesian archipelago forms part of a larger network of Islamic trade that stretches from Muslim Spain in the West to Muslim trading colonies in the ports of East China, as Indonesian spices such as cloves, nutmeg and pepper can finally reach the spice market in Canton, Damascus, and Cairo.
Maps Economic history of Indonesia
Economy during the colonial era
The arrival of Europeans and the trading of spices and commercial crops
The Portuguese were the first Europeans to reach the Indonesian archipelago. Their attempts to dominate the source of the lucrative spice trade in the early 16th century, and their simultaneous Roman Catholic missionary efforts, saw the establishment of trading and fortress posts, and strong Portuguese cultural elements that remained substantial in Indonesia. Beginning with the first exploratory expedition sent from the newly conquered Malacca in 1512, the Portuguese fleet began to explore much of the Indonesian archipelago, and sought to dominate the source of valuable spices. Later, the Portuguese presence in Indonesia was reduced to Solor, Flores and Timor (see Portuguese Timor) in modern Nusa Tenggara, following the defeat of 1575 in Ternate at the hands of the indigenous population of Ternate, and its defeat against the Dutch.
In the early seventeenth century the Dutch East India Company (VOC) was established, its core business profited in intra-Asia trade and built a direct spice trade between the Indonesian archipelago and Europe. One by one the Dutch began grappling with Portuguese ownership in Indonesia, beginning with the Dutch conquest in Ambon, North Maluku and Banda, and the general Portuguese failure for sustained trade controls in the region. Statistically, the VOC beat all its competitors in Asian trade. Between 1602 and 1796 the VOC sent nearly a million Europeans to work in Asian trade in 4,785 ships, and captured their efforts of over 2.5 million tonnes of Asian merchandise. The VOC enjoyed great benefits from its spice monopoly throughout the 17th century. The VOC took advantage of monopolizing the Malukan spice trade, and in 1619 the VOC established a capital in the port city of Jacatra and renamed the city to Batavia (now Jakarta). Over the next two centuries, the Company acquired additional ports as a trading base and safeguarded their interests by taking over the surrounding territory. It remains an important trade concern and pays an annual dividend of 18% for nearly 200 years.
Dutch East Indies
The Dutch East Indies was formed from nationalized colonies of the Dutch East Indies Company, which was under Dutch government in 1800. The economic history of the colony is closely linked to the economic health of the mother country. Despite the rising output of the Dutch land tax system, Dutch finance has been heavily influenced by the costs of the Java War and the Padri War, and the Dutch lost Belgium in 1830 to bring the Netherlands to the brink of bankruptcy. In 1830, a new Governor-General, Johannes van den Bosch, was appointed to make the Indies pay their way through the exploitation of Dutch resources. With the Dutch achieving political dominance throughout Java for the first time in 1830, it was possible to introduce agricultural policies from government-controlled forced cultivation. Cultivated in the Netherlands and forced cultivation in Indonesia, farmers are required to send, as a form of tax, a fixed amount of certain crops, such as sugar or coffee. Most of Java became a Dutch plantation and revenues continued to increase during the nineteenth century reinvested into the Netherlands to save him from bankruptcy. Between 1830 and 1870, 1 billion guilders were taken from Indonesia, averaging 25 percent of the annual Dutch Government budget. The Cultivation System, however, brought much economic difficulty to Javanese peasants, who suffered from hunger and epidemics in the 1840s.
Critical public opinion in the Netherlands caused many of the advantages of the Cultivation System to be abolished under the agrarian reform "Liberal Period". Dutch private capital flowed after 1850, primarily in tin mining and plantation agriculture. The Billiton tin mine off East Sumatra was funded by a Dutch businessman syndicate, including the younger brother of King William III. Mining began in 1860. In 1863 Jacob Nienhuys obtained a concession from the Deli Sultanate (East Sumatra) for a large tobacco plantation. Dutch East Indies opened for private companies and Dutch businessmen to build large profitable plantations. Sugar production doubled between 1870 and 1885; New plants like tea and cinchona flourish, and rubber is introduced, leading to a dramatic increase in Dutch profits. Change is not limited to Java, or agriculture; oil from Sumatra and Kalimantan became a valuable source for European industrialization. Dutch commercial interests flourished from Java to the outer islands with more territories under the control or direct domination of the Netherlands in the second half of the nineteenth century. However, the scarcity of land produced for rice production, combined with a dramatically increasing population, especially in Java, causes further difficulties.
Colonial exploitation of Indonesia's wealth contributed to the industrialization of the Netherlands, as well as laying the foundation for the industrialization of Indonesia. The Netherlands introduced coffee, tea, cocoa, tobacco and rubber, and a large expanse of Java into plantations cultivated by Javanese farmers, collected by Chinese intermediaries, and sold in foreign markets by European merchants. At the end of the 19th century economic growth was based on a heavy world demand for tea, coffee, and quinine. The government invests heavily in rail networks (150 miles long in 1873, 1,200 in 1900), as well as telegraph lines, and entrepreneurs open banks, stores and newspapers. The Netherlands Indies produces the bulk of the supply of quinine and pepper in the world, more than a third of its rubber, a quarter of coconut products, and a fifth of its tea, sugar, coffee and oil. The advantage of the Dutch East Indies made the Netherlands one of the most important colonial powers in the world. The Koninklijke Paketvaart-Maatschappij shipping line supports the unification of the colonial economy and brings inter-island shipping through to Batavia, rather than through Singapore, thus focusing more on economic activity in Java.
The worldwide recession of the late 1880s and early 1890s saw the prices of commodities in which colonies rely on collapse. Journalists and civil servants observed that the majority of the population of the Indies was no better than under the economics of the prearranged Cultivation System and tens of thousands of famines. Commodity prices recovered from recession, which led to an increase in investment in the colony. The trade in sugar, tin, copra and coffee in which colonies have been developed is growing rapidly, and rubber, tobacco, tea and oil are also major exports. Political reform increased the autonomy of the local colonial government, moving away from central control of the Netherlands, while power also deviated from the central government of Batavia to more localized units of government.
The world economy recovered in the late 1890s and prosperity returned. Foreign investment, especially by the UK, is encouraged. In 1900, foreign-held assets in the Indies amounted to about 750 million guilders ($ 300 million), mostly in Java.
After 1900 improvements in port and road infrastructure were a top priority for the Netherlands, with the aim of modernizing the economy, facilitating trade, and accelerating the military movement. In 1950, Dutch engineers built and upgraded road networks with 12,000 km of paved surfaces, 41,000 km of rocky roads and 16,000 km of gravel surfaces. In addition, the Netherlands built 7,500 kilometers (4,700Ã, mi) of railways, bridges, irrigation systems covering 1.4 million hectares (5,400 sq mi) of rice fields, several ports and 140 public drinking water systems. Wim Ravesteijn said that, "With this general work, Dutch engineers built the material base of the colonial and post-colonial Indonesia."
Economy during Japanese occupation
Modern Indonesian economy
The Indies fell to the invading forces of the Japanese Empire in 1942. During World War II, the Indies economy (Indonesia) was more or less destroyed, as each resource was directed at imperial war effort, as the Japanese occupation forces implemented a strict martial law. Many basic needs such as food, clothing and drugs are scarce, and some areas even suffer from hunger. In early 1945 Japanese troops began to lose the war, culminating in the US bombings in Hiroshima and Nagasaki.
Presidency of Sukarno
On August 17, 1945, Soekarno and Mohammad Hatta on behalf of the Indonesian people declared Indonesian independence. In the midst of turmoil, Indonesia issued their first rupiah paper money in 1945. Between 1945 and 1949, Indonesia was involved in the National Revolution. Economic conditions have fallen into chaos, especially in Java and Sumatra, as people struggle to survive the war.
In the 1960s, the economy deteriorated drastically due to political instability. They have a young and inexperienced government, resulting in severe poverty and hunger. At the time of Sukarno's fall in the mid-1960s, the economy suffered chaos with 1,000% annual inflation, shrinking export revenues, infrastructure collapses, factory operations with minimal capacity, and insignificant investment.
Suharto presidency
Following the fall of President Soekarno, the New Order government brought a degree of discipline to economic policy that quickly reduced inflation, stabilized currencies, rescheduled foreign debt, and attracted foreign aid and investment. (See Berkeley Mafia). Indonesia is the only member of OPEC in Southeast Asia, and the rise in oil prices in the 1970s provided unexpected export earnings that contributed to a high rate of economic growth, averaging over 7% from 1968 to 1981. Level of regulation which is high and the dependence on oil decreases. prices, growth slowed to an average of 4.3% per annum between 1981 and 1988. Various economic reforms introduced in the late 1980s included a devaluation of the rupiah managed to improve export competitiveness, and de-regulation of the financial sector, Foreign investment flowing into Indonesia, especially into the rapidly growing export-oriented manufacturing sector, and from 1989 to 1997, the Indonesian economy grew an average of more than 7%.
Per capita GDP grew 545% from 1970 to 1980 as a result of the sudden increase in oil export revenues from 1973 to 1979.
The high rate of economic growth from 1987-1997 masked a number of structural weaknesses in the Indonesian economy. Growth comes at a high cost in terms of weak and corrupt institutions, severe public debt through mismanagement of the financial sector, the depletion of Indonesia's natural resources, and a culture of aid and corruption among business elites. Corruption in particular gained momentum in the 1990s, reaching the highest levels of political hierarchy when Suharto became the most corrupt leader according to the list of corrupt leaders of Transparency International. As a result, the legal system is very weak, and there is no effective way to enforce contracts, collect debts, or demand bankruptcy. Banking practices are not very sophisticated, with collateral-based loans and widespread violations of prudential regulations, including limits on connected loans. Non-tariff barriers, rent-seeking by state-owned enterprises, domestic subsidies, barriers to domestic trade and export restrictions all create economic distortions.
Asian Financial Crisis
The Asian financial crisis that began to affect Indonesia in mid-1997 became an economic and political crisis. Indonesia's initial response was to float the rupiah, raise domestic interest rates, and tighten fiscal policy. In October 1997, Indonesia and the International Monetary Fund (IMF) reached agreement on an economic reform program aimed at macroeconomic stabilization and the abolition of some of the most destructive economic policies of the country, such as the National Car Program and clove monopoly, both involving families. members of President Soeharto. However, the rupiah remained weak, and President Soeharto was forced to resign in May 1998. In August 1998, Indonesia and the IMF agreed on the Extended Fund Facility (EFF) under President B.J Habibie which included significant structural reform targets. President Abdurrahman Wahid took office in October 1999, and Indonesia and the IMF signed another EFF in January 2000. The new program also has various targets for economic, structural and governance reform.
The effects of the financial and economic crisis are very severe. In November 1997, rapid currency depreciation has caused public debt to reach US $ 60 billion, imposing huge tensions on the government budget. In 1998, real GDP contracted by 13.1%. The economy reached its lowest point in mid-1999 and real GDP growth for this year was 0.8%. Inflation reached 72% in 1998 but slowed to 2% in 1999.
The Rupiah, which had been in the range of Rp2,600/USD1 at the beginning of August 1997, dropped to 11,000/USD1 in January 1998, with a spot rate of around 15,000 for a brief period during the first half of 1998. It returned to the 8,000/USD1 range by the end of the year 1998 and generally traded in the range of Rp 8,000-10.000/USD1 since then, with relatively predictable and incremental fluctuations.
Post Suharto's economy
In late 2004 Indonesia faced a 'small crisis' as international oil prices rose and imported. The currency reached Rp12.000/USD1 before it stabilized. The government was forced to cut its massive fuel subsidy, which it planned to cost $ 14 billion for 2005, in October. This has more than doubled in consumer fuel prices, generating double-digit inflation. The situation has stabilized, but the economy continues to struggle with inflation of 17% in 2005.
For 2006, Indonesia's economic outlook is more positive. Economic growth accelerated to 5.1% in 2004 and reached 5.6% in 2005. Real per capita income has reached the level of fiscal year 1996/1997. Growth was mainly driven by domestic consumption, which accounts for about three-quarters of Indonesia's gross domestic product. The Jakarta Stock Exchange was the best performing market in Asia in 2004 to 42%. Problems that continue to haunt growth include low levels of foreign investment, bureaucratic bureaucracy and widespread corruption that cause 51.43 trillion rupiah or 5.6573 billion US dollars or about 1.4% of GDP will be lost annually. However, there is a very strong optimism with the conclusion of the peaceful elections during 2004 and the election of reformist president Susilo Bambang Yudhoyono.
The unemployment rate (as of February 2007) was 9.75%. Despite the slowing global economy, Indonesia's economic growth accelerated to a peak of ten years 6.3% in 2007. This growth rate is enough to reduce poverty from 17.8% to 16.6% based on the Government's poverty line and reverse recent trends towards unemployment growth, with unemployment falling to 8.46% in February 2008. Unlike many of its export-dependent neighbors, it has managed to cope with the recession, helped by strong domestic demand (which makes up about two-thirds of the economy) and government fiscal packages a stimulus of about 1.4% of GDP, was announced earlier this year. After India and China, Indonesia is currently the third fastest growing economy in the Group of Twenty (G20) industrialized and developing countries. The $ 512 billion economy grew 4.4% in the first quarter from a year earlier and last month, the IMF revised its 2009 forecast for the country to 3-4% from 2.5%. Indonesia enjoys stronger fundamentals with the authorities implementing broad economic and financial reforms, including rapid reductions in public and external debt, strengthening corporate and banking sector balances and reducing bank vulnerabilities through higher capitalization and better oversight.
The current unemployment rate in Indonesia for 2012 is 6% per Vice President of Indonesia. Boediono.
See also
- Indonesian History
- The Indonesian economy
- Indonesian Rupiah History
References
Source of the article : Wikipedia
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