Economy

For a long time most analysts recognized Indonesia as a newly industrialising economy and emerging major market. From 1987 to 1997 the annual growth of the GDP averaged nearly 7%. But Indonesia was the country most affected by the Asian crisis, which resulted in a GDP decrease of nearly 14% in 1998. Despite the world economic situation and the terrorist bombing on Bali the economy is on the rise again since then.

President Megawati Soekarnoputri has been quite successful in her attempts to reduce political instability, to strengthen Indonesia's relationship with the International Monetary Fund (IMF), and to reinvigorate the country's economic reform program. Another important factor for Indonesia's sustained economic recovery is the establishment of an efficient, dynamic private sector. At the end of 2003 the government exited the IMF's 3-year aid programme (total volume: USD 5 billion), having met or even exceeded most macroeconomic targets, including those on reducing inflation and reducing the government budget deficit. As a result of the Asian crisis the country's debt burden had increased from 27% of GDP to about 100% of GDP at the end of 2000 and amounts actually to 65%.

But not in all sectors the economic policy turned out to be that effective. Indonesia's investment climate remains troubled. Major concerns are the lack of legal certainty, the security situation and the deteriorating infrastructure. Moreover the number of unemployed and underemployed remains problematic and is currently estimated at 40 million.

After a considerable decrease in 2001 foreign trade is now slightly on the rise again and exports grew by 1.2%. Indonesia is a country rich with natural resources and one of the world's leading exporters of liquid and natural gas and second largest exporter of rubber.

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Development cooperation

Development Cooperation between Germany and Indonesia started in the 1950s. In the early years it concentrated on Western Sumatra, East Kalimantan and Java, in the meantime it extends to the eastern Indonesian underdeveloped regions. In recent years a sum of EUR 15 million was pledged respectively for new projects of financial and technical cooperation. There are about 60 ongoing projects, which focus on three priority cooperation areas:

• Health and family planning, prevention of HIV/AIDS (including the supply of drinking water/sanitation and the prevention of diseases transmitted by water);
• Economic reform and development of a market economy (including financing systems, trade policy, private sector promotion, employment, vocational training, the informal sector, small and medium-sized enterprises and industrial environmental protection);
• Transport.

In addition, as a cross-sectoral task of German-Indonesian development cooperation, efforts towards decentralisation of government structures and strengthening local government and parliaments will be continuously supported.