Asia’s third giant: A survey of the Indonesian economy

This paper surveys the Indonesian economy and the drivers of socio-economic development over the past half-century. It highlights the country’s rapid economic development in the face of unfavourable ‘initial conditions’. We examine episodes in economic development, in particular comparing and contrasting the two main sub-periods, of high economic growth during the authoritarian Soeharto era, 1966-98, and moderate economic growth during the democratic era since 1999. The paper emphasizes the importance of sound macroeconomic management, economic openness, inclusive social progress and institutional development. For all the challenges that Indonesia faces, and its unfinished reform agenda, the major conclusion is one of development success, broadly defined.