INDONESIA IN 1980: REGIME FATIGUE
Guy J. Pauker
IN MACRO-ECONOMIC TERMS 1980 was a good year for Indonesia. Foreign exchange reserves amounted to at least $7.2 billion. The Indonesian government could obtain commercial loans on the international market at a rate of interest only 0.5% above the London interbank rate. Following the Bali meeting of OPEC, held in mid December, the base price of Indonesia's most popular grade of oil, Minas crude, was increased to $35 a barrel, to which surcharges are being added for part of the volume sold. Ten years ago the same oil sold for $1.70 a barrel. Although Indonesia remains the world's major rice importer because per capita consumption continues to increase, in 1980 production reached a record 20 million tons of husked rice, about 10% more than in the previous year. After considerable hesitation and internal debate, the Indonesian government raised substantially the highly subsidized price of domestic fuels without suffering the adverse political effects some internal security agencies had feared.
The next few years promise to favor sustained economic development, although Resources transfers from abroad will still be needed, especially if net oil export earnings decline Rafter 1985 because of reduced production and increased domestic consumption. A World Bank mission reported in February 1980 that, according to its projections, Indonesia's foreign exchange revenue from oil and LNG will amount to $17 billion in 1985 and earnings from other exports to an additional $14 billion, estimates which are probably low in view of recent and future price increases for oil and gas.
Unlike other exporters of petroleum who have been using their unexpected affluence to finance economically unsound development schemes and to buy sophisticated weapons in excess of their security needs and their technological capabilities, the Indonesian government.........