Serving Students at Santa Ana College and Santiago Canyon College INDONESIA Government

Republic of Indonesia

National name: Republik Indonesia

Type of Government:  Indonesia is a unitary multiparty republic.  Gained independence from the Netherlands in 1949.

Constitution: 1945.  Embodies five principles of the state philosophy, called Pancasila, namely monotheism, humanitarianism, national unity, representative democracy by consensus, and social justice.

Head of State and Government:  President Abdurrahman Wahid since 1999.
The president is both head of state and head of the government.

Branches:

Executive:  President (head of government and chief of state) chosen for a 5-year term by the 700-member People's Consultative Assembly (MPR).
Legislature: 500-member House of Representatives (DPR) elected for a 5-year term.
Judicial:  Supreme Court.

Suffrage:  17 years of age universal and married persons regardless of age. 

Indonesia is a republic based on the 1945 constitution providing for a limited separation of executive, legislative, and judicial power.  Executive power is in the hands of the President, who is chosen by an electoral college, composed of the two houses of the Indonesian parliament, and serves a five-year term. 

A constitutional reform process has been underway since 1999, and has already produced several important changes.  Among these are two 5-year term limits for the President and Vice President and measures to institute checks and balances.  The highest state institution is the People's Consultative Assembly (MPR), whose functions include electing the president and vice president, establishing broad guidelines of state policy, and amending the constitution. The 695-member MPR includes all 500 members of the House of Representatives (Dewan Perwakilan Rakyat (DPR)), plus 130 "regional representatives" elected by the 26 provincial parliaments and 65 appointed members representing trades and professions.  The DPR, which is the premier legislative institution, includes 462 members elected through a mixed proportional/district representational system and 38 appointed members of the armed forces (TNI) and police (POLRI).

A general election in June 1999 produced the first freely elected national, provincial, and regional parliaments in over 40 years.  In October 1999 the MPR elected a compromise candidate, Abdurrahman Wahid (a.k.a Gus Dur), as the country's fourth president, and Megawati Sukarnoputri, a daughter of the country's first president, as the vice president. Megawati's PDI-P party had won the largest share of the vote (34%) in the general election, while Golkar, the dominant party during the Soeharto era, came in second (22%).  Several other, mostly Islamic parties won shares large enough to be seated in the DPR.

Having served as rubberstamp bodies in the past, the DPR and MPR have gained considerable power and are increasingly assertive in oversight of the executive branch.  In part, this reflects a desire to prevent the presidential excesses of the past and, in part, to restrain Wahid, who is seen as at times dangerously unpredictable.  Through his appointed cabinet, the president retains the authority to conduct the administration of the government, but some observers believe the balance of power has shifted too far in the direction of the legislature.  Trade and professional group representation  in the MPR is expected to be eliminated in 2004 through further constitutional change.  Military domination of regional administration is gradually breaking down, with new regulations prohibiting active-duty officers from holding political office. 

Principal Government Officials 

President--Abdurrahman Wahid (a.k.a. Gus Dur)
Vice President--Megawati Sukarnoputri
Foreign Affairs--Alwi Shihab
Ambassador to the United States--Dorodjatun Kuntoro-Jakti
Ambassador to the United Nations--Makarim Wibisono 

The embassy of Indonesia is at 2020 Massachusetts Avenue NW., Washington, DC 20036 (tel. 202-775-5200-5207; FAX:  202-775-5365).  Consulates General are in New York (5 East 68th Street, New York, NY 10021, tel. 212-879-0600/0615; FAX:  212-570-6206); Los Angeles(3457 Wilshire Blvd., Los Angeles, CA  90010; tel. 213-383-5126; FAX: 213-487-3971); Houston (10900 Richmond Ave., Houston, TX 77042; tel. 713-785-1691; FAX:  713-780-9644).  Consulates are in San Francisco (1111 Columbus Avenue, San Francisco, CA 94133; tel. 415-474-9571; FAX:   415-441-4320); and Chicago (2 Illinois Center, Suite 1422233 N. Michigan Avenue, Chicago, IL 60601; tel. 312-938-0101/4; 312-938-0311/0312; FAX: 312-938-3148). 

Economy

Indonesia has a market-based economy in which the government plays a significant role. It owns more than 164 state-owned enterprises and administers prices on several basic goods, including fuel, rice, and electricity.  In the aftermath of the financial and economic crisis that began in mid-1997, the government took custody of a significant portion of private sector assets through acquisition of nonperforming bank loans and corporate assets through the debt restructuring process. 

During the 30 years of Soeharto's "New Order" government, Indonesia's economy grew from a per capita GDP of $70 to more than $1,000 by 1996.  Through prudent monetary and fiscal policies, inflation was held in the 5%-10% range, the rupiah was stable and predictable, and the government avoided domestic financing of budget deficits.  Much of the development budget was financed by concessional foreign aid. 

In the mid-1980s, the government began eliminating regulatory obstacles to economic activity. The steps were aimed primarily at the external and financial sectors and were designed to stimulate employment and growth in the non-oil export sector.  Annual real GDP growth averaged nearly 7% from 1987-97, and most analysts recognized Indonesia as a newly industrializing economy and emerging major market. 

High levels of economic growth from 1987-97 masked a number of structural weaknesses in Indonesia's economy.  The legal system was very weak, and there was and is no effective way to enforce contracts, collect debts, or sue for bankruptcy.  Banking practices were very unsophisticated, with collateral-based lending the norm and widespread violation of prudential regulations, including limits on connected lending.  Non-tariff barriers, rent-seeking by state-owned enterprises, domestic subsidies, barriers to domestic trade, and export restrictions all created economic distortions. 

The regional financial problems that swept into Indonesia in late 1997 quickly became an economic and political crisis.  Indonesia's initial response was to float the rupiah, raise key 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 elimination of some of the country's most damaging economic policies, several of which involved family members of President Soeharto.  The rupiah failed to stabilize for any significant period of time, however, and President Soeharto was forced to resign in May 1998.  In August 1998, Indonesia and the IMF agreed on an Extended Fund Facility (EFF) under President Habibie that 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 a range of economic, structural reform, and governance targets. 

The effects of the financial and economic crisis were severe.  In 1998, real GDP contracted by an estimated 13.7%.  The economy bottomed out in mid-1999, and real GDP growth for the year was an anemic 0.3%. Inflation reached 77%in 1998 but slowed to 2% in 1999.   Although a severe drought in 1997-98 forced Indonesia to import record amounts of rice, overall imports dropped precipitously in the early stage of the crisis in response to the unfavorable exchange rate, reduced domestic demand, and absence of new investment.  Although reliable unemployment data are not available, formal sector employment contracted significantly.

As of September 2000, Indonesia's economic outlook is mixed.  Recently released economic data provide evidence that the economic turnaround that began in the second quarter of 1999 has continued and accelerated.  According to the Central Bureau of Statistics (BPS), year-on-year real GDP growth reached 4.13% in August 2000.  Driving this higher than expected GDP growth are record exports, solid manufacturing growth, and continued strong levels of household consumption.  At the same time, high petroleum prices are increasing the value of Indonesia's oil exports.  As the economy has picked up, there has been a significant increase in corporate debt restructuring, although questions remain about the viability of some deals. 

Less positively, foreign investment still lags far below its pre-crisis levels; the rupiah has lost more than 22% of its value since President Wahid was elected, and the stock market is in record low territory.  Indonesia's banking and corporate sectors are still extremely weak.  Asset sales by the Indonesian Bank Restructuring Agency have slowed amidst turmoil in the agency's senior leadership.  Banking sector reform has stalled.  Progress on corruption cases against is excruciatingly slow and capricious.  These developments have shaken most analysts' faith in the reform credentials of the Wahid administration. 

Indonesia's public sector external debt rose from $54.2 billion in March 1998 to about $80 billion by mid-2000.  Private sector external debt stood at approximately $82 billion. 

GDP:  1999 $142 billion.
Annual growth rate:  1999 0.2%.
Per capita income:  1999 $684.

Natural resources (8.4% of GDP):  Oil and gas, bauxite, silver, tin, copper, gold, coal.
Agriculture (17.2% of GDP):  Products--timber, rubber, rice, palm oil, coffee; land is17% cultivated.

Manufacturing (25.3% of GDP):  Garments, footwear, electronic goods, furniture, paper products.

Trade:
Exports (1999) $48.7 billion including oil, natural gas, plywood, manufactured goods. Major markets:  Japan, Singapore, Taiwan. Korea, EU, U.S. 
Imports (1999) $24 billion including food, chemicals, capital goods, consumer goods.
Major suppliers:  Japan, U.S., Thailand. 

TRAVEL WARNING (Issued on February 21, 2001)

The Department of State urges American citizens to defer nonessential travel to Indonesia and all travel to Aceh, Maluku, Papua, West Timor and Central Sulawesi.  Those who must travel to Indonesia, or who are resident there, should exercise extreme caution.  Indonesia is experiencing a major political transition, and unrest and violence can erupt with little forewarning anywhere in the country.  Bombings of religious, political and business targets have occurred throughout the country.  In addition, events in the Middle East have sparked anti-American protests in the past.

All travel by U.S. and other foreign government officials to Aceh, Papua and the Moluccas (provinces of North Maluku and Maluku) has been restricted by the Indonesian government because of security concerns.  Private Americans should adhere to these same restrictions. 

Sources:
The Library of Congress Country Studies
Government Travel Information
Central Intelligence Agency