World Bank (2000) reports the actual value of public and private external debt was substantially higher than $100 billion and was really $136 billion. Debt service payments were actually 35 percent of exports in 1997.
McKinnon (1991), for example, suggests the following sequence of deregulation in the banking industry. First, commercial banks should be tightly monitored and regulated. This may include temporary credit rationing. Second, efforts should be made to recapitalize the existing banks and their clientele. Third, during the transition period, the banking industry should be temporarily closed to new entrants, both domestic and foreign, since they are not burdened with low yield loans and can easily out-compete the preexisting banks.
Personal correspondence between one of the authors and Soedradjad confirms his strong opposition to the ideas of Professor Hanke regarding the appropriateness of a currency board system for Indonesia. A leading Japanese expert on Indonesia and its external debt, Professor Shinichi Ichimura, has also expressed reservations to the authors regarding Hanke’s views as applied to Indonesia. The reason Suharto chose to dismiss Soedradjad remains unclear, however.
Fujita and James (1997) and James and Fujita (2000) estimate the employment effects of manufactured exports in Indonesia from 1980–1990 and 1985–1995.
Krugman (1993, p. 147) points out:“…evidence suggests that protectionist economies have a less equal income distribution than those with freer trade.”
Labor markets in Indonesia appear to be quite flexible, so that increases in external demand may manifest themselves more in gains in real wages than in the volume or quantity of employment.
Data are from Badan Pusat Statistik downloaded from www.bps.go.id.
Bird (1999) estimates the four-firm concentration ratio (CR4) in Indonesian domestic industry to have declined from 64 percent in 1975 to 54 percent in 1993. The CR4, when adjusted for foreign trade, falls to 41 percent in the latter year, indicating that import competition is quite important in limiting potential for anti-competitive behavior in Indonesia.
Bird, Kelly (1999) “Concentration in Indonesian Manufacturing, 1975–93,” Bulletinof Indonesian Economic Studies, 35 (1) (April), pp. 43–73.
Blejer, Mario, Alain Ize, Alfredo Leone, and Sergio Werlang (eds.). (2000) Inflation Targeting in Practice, (International Monetary Fund, Washington, DC).
Dick, Howard (2000) “Representations of Development in 19th and 20th Century Indonesia: A Transport History Perspective,” Bulletin of Indonesian Economic Studies, 36 (1) (April), pp. 185–207.