Indonesia, Asia's Stumbling Giant

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Submitted By dmanja
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Case Study: Indonesia, Asia’s Stumbling Giant
What political factors explain Indonesia’s poor economic performance, what were the factors and were they related? From 1967 to 1998 President Suharto used a “crony capitalism” style of government to control his country, (Hill, 2013). In this style of government, leaders such as Suharto can favor the business enterprises of his supporters and family. Instead of placing money in the country’s infrastructure or possibly better ran companies, Suharto placed the countries money in failing enterprises. When President Suharto placed enough money into the failing businesses of Indonesia he eventually ran the countries debt up to over $43 billion, (Hill, 2013). When The International Monetary Fund stepped in to assist with these debts, the people of Indonesia were realizing where the money was really going back into companies that Suharto had an interest in. There was an uprising, and a democracy quickly moved in to replace Suharto’s dictatorship. The political and economic short fallings are very much related. Instead of President Suharto supporting the best companies for his country he supported failing companies. Instead of Suharto putting money into the infrastructure of his country, he placed money in his own pocket.
Why do you think foreign firms exited Indonesia in the early 2000s, what were the implications and what is required to reverse the trend? Lack of infrastructure repairs placed 90% of the population without modern sewerage facilities,(Hill, 2013) and half of the populace had no electricity because of ageing electrical grids. Foreign investors would have been losing money because of time dealing with inadequate infrastructure including roads that were also in need of repair, further hindering companies abilities to transport their products. Once the foreign investors started leaving, Indonesia…...

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