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DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTINTERNATIONAL DEVELOPMENT ASSOCIATION

Not For Public Use

|V~~~7Y77' r, T-3 | Report No. 25-IND

DEVELOPMENT ISSUES FORD T?1(MVQT A

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Asia~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. P r ora Deatmn I,- I.

wUecember 1, 197 L Qc-0

Asia Program Department I ___

This report was prepared for official use only by the Bank Group. It may not be published, quotedor cited without Bank Group authorization. The Bank Group does not accept responsibility for theaccuracy or corr.pleeness of thie report.

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This report was prepared in cooperation with the IBRD ResidentStaff, Jakarta, by an economic mission which visited Indonesia in May-Juneand October-November 1972. The participants were:

Graeme Thompson Mission ChiefBahman K. Abadian Chief EconomistMark W. Leiserson Emplovment Specialist (ILO)Helen Hughes Industrial AdvisorNimrod Raphaeli Planning AdvisorJohn Foster Petroleum EconomistEmmerich M. Schebeck Financial EconomistTownsend S. Swayze Fiscal EconomistVinod Prakash Industrila EconomistRogelio G. David EconomistKevin Youlng ECoBnomist

Miss Titia Nasaire anrd M.rs- Placida Espin.a were misio.n secretaries.

Agriex 3 of the report, son ledibytr. is bashed w-hi f4hnaing Ifandagriculture sector mission led by Mr. S. Takahashi which was in Indonesia in

F^bterv-M-rh10972.

TABLE OF CONTENTS

Page No.

Volume I: The Main Report

BASIC DATA

MAP

SUMMARY AND CONCLUSIONS ..................... i - iii

Chapters

I. TRENDS AND PROSPECTS .......... ........................ 1

Perspectives ..................................... 1The Economy in 1972 ........ ..................... 4Prospects ....... . 8

II. DEVELOPMENT OBJECTIVES AND POLICIES ................... 12

A.2riculture... ................ ,, ........... 13

Industry ..... 19nil and the Extrat14vp Tinetripa -.. - === 26Employment ............. .......... . .... . ........ . 30'R,ai4nsn lul nelrman t=. ............. =3

T" Flscal Oulo ............... 42

The Financial System ............................. 53

IV. MANAGEMENT ISSUES ..... .. .... .... .... . 61

QIPA-"T0IfYA At nflB%TTrU?

Volume II Annex 1 The Financial Sectorannex 2 Fiscal Prospects

Volume III Aenex 3 The Agriculture SectorAnnex 4 The Industrial Outlook

Volume IV Annex 5 The Oil SectorAnmex 6 Export Trends

Volume V Annex 7 Employment Perspectives and PolicyApproaches

Annex 8 Planning and Management Issues

of 2 naves

cou RY DATA - IgLOSTA

AREA 2/ POPULATION DENSITY

cnl million (mJid-197l) 118.3 63 per 1-

19904,69 ~Rate of Growth: 2.1% (from 1961t01971 ) 745 per ik;2/of rable land

POPULATION CHARACrERISTICS 1971 HEALTH 1970Crude Birth Rate (per L,UU0) 41 P lation per physic'an----Crude Death Rate (per 1,000) 19 Population per hospital bed 1,200Infant Mortality (per 1,000 live births) 125

INCOME DISTRIBUTION DISTRIBUTION OF LAND OWNERSHIP 1963z of nati0nal in.coe, e st qu4ntile . . Xn.8ed by top 10% of wners 4%

highest quintile .. % owned by smallest 10% of owners less than 31

ACCESS TO PIPED WATER 1971 ACCESS TO ELECTRICITY% of population - urban 40% % of population - urban

- rural - - rural

NUTRITION EDUCATION 1971Calorie intake as % of requirements .. AduLt liLeracy rate 7. 56Per capita protein intake .. Primary school enrollment 7 7

1/

GNP PER CAPITA in 1970 US $ 77

GROSS NATIONAL PRODUCr IN _2 ANNUAL RATE OF GROWTH (%. constant prices)

US $ Mln. % 1960-65 1965-70 1971

GNP at Market Prices 8,619 100.0 1.6 5.1Gross Domestic Investment 1,157 13.4 -0.4 11.8Gross National Saving 767 8.9 5.8 5.1Current Account Balance -390 4.5Fxoirts of noods. NFS 1.173 13.6 0.6 8,0Imports of Goods, NFS 1,430 16.6 -3.4 13.6

OUTPUT, LABOR FORCE ANDPRODUCTIVITY IN 1971

2/Value Added Labor Force7 V. A. Per Worker

,,a9 0 . 'a Y,1,,., Z ,

Agriculture 4,840 50.9 24.9 62.3 194 81.5Industry 950 10.0 3.8 9.5 250 105.0Services 3tr10 39.1 10.9 27.2 340 142.9Unallocated 0. . OL4 1.0

Total/Average 9o500 100.0 40.0 100.0 238 lw.0

GOVERNMENT FINANCEGeneral Governiment Central Government

(Billlonw a1h) % of GDP (Billion RUpisJ) X of GDP

1971-72 i97 196 -7 1971-72 1911-729 7

Current Receipts 459 *- * 412 *- 9.4Current Expenditure 395 * 8 .0Current Surplus 004 1.4Capital Expenditures 197 .. .. 191 *- 4.4External AS4stance 1 (net) 127 127 ** 3.0

1/ The Per Capita GNP estimate is at 1970 market prices, calculated by the same conversiontechnique as the 1972 World Atlas. All other conversions to dollars in this table are

at the average exchange rate prevailing during the period covered.

2/ Total labor force; unemployed are allocated to sector of their normal occupation. "Unallocated" consists

mainly of unempioyed workers seeking their first job.

not availablenot applicable

of 2 pages

nmruNTvy nriTr - hnme-

Feb Feb

WOEY. CREMDIT and PRICES ___ i969 19;' 0 M-' -,1 -972

_(Rflion 3q2dah outstanding end period)

Imoey and Quasi Money 2.6 180.0 241.1 312.6 260 336.6hank Credit to Public SectorV 59.5 44.9 42.5DUAk C-'dt lo Private Sect___ 17..9 3In--7 h 14.6

(Percentages or Index 2umbers)

Money and Quasi Nney as % of GDP 6.9 7.5 .. 3 21 .2/General Price index (Sept. 1966 - 100) 545 626 6111 662 668

hA1x percentage changes iA:Q tral Price Index 17.? 14.9 2.4 7.8 0.9

credit to 0 tib t_ S..c ,6 1., Z3 -e -,Bank credit to Private Sector 91.9 74.9 - 48

MIANCE OF PAYhNS M31CIANDISE EXP0iiS (AVERAL 1969-71)

1969 1970 1971 US $ ln %

(Millions US C) -0S1llicm-s us s) oi 1438 37.8

Exports of Goods, NFS 995 1,173 1,307 Rubber 2334 20.2Imports of Goods, NFS 1,284 1,430 1,596 Timber 98 8.5Resource Cap (deficit = -j - z8y - Tin 58 5.0

Coffee 57 5.0Interest Payments (net) - lo7 -133 -174 All other commodities 273 23.5Workers' Remittances - Total 1,158 0Q,0Other Factor Payments (net) - I - - 1971N.et Transfers _-TRRNAT. DRBT- nveVmRME 31, 19

Balance on Current Account - 3 -390 T3US $ Mln

Direct Foreign investment 27 79 139Net MLT Borrovin& Public Debt, incl. guaranteed 4,278

Disbursements 358 403 a11 Non-Guaranteed Private Debt i9

Amortization -52 -86 -10 Total outstanding & Disbursed 427Subtotal 299 317 310 I/

Other Capital (net) _ 35 28 7Other items n.e.i - 6 fDIncrease in Reserves +) -20 f 35 -55 ublic Debt. incl. guaranteed 7.7

Son-Guaranteed Private DebtGross Reserves (end year) 119 157 144 Total outstanding & Disbursed 7.7Net Reserves (end year) -86 -52 -106

RATE OF EXCHANE IBRD/IDA LENDINGtDecesber 1971) (Killion US $):

*ILJ?0,II_ LY'. lBR 1 1DA

US $ 1.00 -P 378RPI1.00 - Us $o.oo3 Outstanding & Disbursed 31.9

Uadisbursed 195.5Since Aug. 1971 Oatitaiding ncl. tUndi8bursed 227l4US S 1.00 - Rn hi'.I4 1.00 - US $ .002

1/ Ratio of Debt Service to Exports of Goods and Non-Factor Services.

not applicable

1/ Provisional2/ Bank credit to state enterprises appears under the ¢redit to the private sector instead of the public sector:3/ First-quarter data

Of uficial capital grants are inoludeu =A u.wuisb-nrsni u arnU aiuM arw i.ong-terrnborrowing.

South China &ea PACIFIC OCEAN

AH.;~~~~~~~~~~A _

MMMA~~~~~~~~~~~~~~~

E Celebes Sea INDONESIA

titan -

RORaO>

(KALIMANT 0)Molucca Sea

SUMAT a RA

_ ~~~~~~~~~~ ~ ~~~~Flores SeaBaaSe

200 300 40009M

o no too ~~~~~~~~~ o~~~~ ~~ ~ ~~ I... Arafu ra Sera

'U-1AKZ ANI) wNU5uJUN5

i. The purpose of this report is to assess, in the perspectives ofrecent economic performance and current trends, some of the main developmentissues for Indonesia over the next c to 7 years with reference, in particular,to the period of the second five-year plan beginning in April, 1974. Duringthis period the broad tasks set by the Government are to maintain, if possibleincrease, the momentum of growth recently established and to implement, con-currently, economic and social policies emphAsizing broad participation inthe development process and in the benefits it could produce.

ii. Indonesia's economic performance lsince 1966 under new fiscal andmonetary, agricultural and industrial po01cies. following the 'disruption anddecay of the early 1960's, clearly demonstrates-the capacity of the economyfor growth in spite of low per capita income, iimited investment resourcesand inherited deficiencies in administration. The short-range objectives ofthe Government durins the recoverv period - economic stabilization, increasedproduction of food and other basic conmodities, expansion of primary exportsand rehabilitation of the economic infrastructure - have been consistentlvand, as a whole, very successfully pursued. The commitment to developmentin a flexible and open market nsvtem has st ilntlaed hbth fore'in sand domestirprivate investment and the shortage of resources has been eased by programand nronert aid supnnrt within the TIGI frmework. Althmugh th-e central

objective has been to increase aggregate outpiut and income the benefits ofthe retiiT-n ton tah4l4it-V and the ergmiAtA4. acleratin, okf g nnm4fi. act4v_ty hM1

been widespread, extending through rice programs and district and villagedevelopment schemes to man of the loves t-ince areas of "" co^'try.

444 vo,,, a".41a,1%1, Aa^* -- eo --_ ------ A_4u__ A ^*-__ * ^~&4i v_V" -_ _ U V i & CW -_, L. 66W.W"%AC L" 16A AUCLJ V ;k " W _W-6

though far from reliable or complete, suggest that economic growth prospects& 6d Mad ha^t it: wuJ3d 'dbe realist:ic to plaU Lfo,a Cel L-L owth rat e or

GDP averaging around 7 percent over the next 5 to 7 years. This would dependv-L cvL.LAAUdU U--UdU PW.Lic 7 jJfoLLA-.Uance zUd'iL L1oementasIUL iu the a5 LU LU IXULUJ5raLjve

structure and mechanisms as well as the-availability of domestic and foreign

4. _ Y . UJ ._ J .. 4V f -

1iv. T., estimamUte"d ratiWo of ALviUsien. Lo Mr,1 J peceut inU LU 1970U, Li L10W

in relation to the GDP growth rates of 6-7 percent now being secured. How-ever, wit.h t.he mark=ed acceleratiou of investment activity since tnen theinvestment ratio could reach 17 to 18 percent of GDP during the next planperiod -with the continuation ofpublic and private capitai inflows andthe attainment of what appear to be feasible fiscal and monetary savingsoujectiwsv.

v. Government revenues have grown strongly in real terms throughoutthe recovery period and are projected to increase through 1978 at an annualaverage or 13 percent. Tnis excludes the major revenues derived from theoperation of foreign oil companies in Indonesia which, on present productionforecasts, could grow less rapidly than in the recent past and stabilizearound 1976 unless new finds can be exploited. Continuing restraints on

eurrent exnenditures- uarticularly nersonnel exnpnditureas will benecessary if public savings are to continue to increase rapidly enough tof4Inc the1 areor rih14i S o Ra" n AwIniminmet progrm envisaged fnr thesecond plan period. The potential for mobilizing financial resources,both domestic ov%A fot«ijan, a.u^oldA ^Pivn*4"21 to la..f f 4 -P nl 4n #*ra4. r.-atesboth ... e - a in.. a .. wa .. a.... * .s,- -- - …-

remain strongly positive. Exports are projected to Increase at an annualOlr.n ag ra ofa. o.e: 10baIA pe,^-c ra..aI. 1078 1 -A 1- at 1 U. d 4" &rc and

timber.

vi. Growth in agriculture will be strongly influenced by the extent toWLLJ.61A FbLI %.MW J.A aI.J6LC ADUWLA UA.I r&.I..= k0J.P6A= 1 LoL=U40L C9LDL ALLVO. IJA%SLCLMM= W&L.L%.;&

helped to stimulate rice production can be applied elsewhere in the sector,espe--calJ.1y LUL UAIO-L.uU.sLU ULU Ln J5VA 5UdU LIM OULAK ilaLuds. IL ;.he

industrial sector, the prospects of expansion from-the present small base aregoou if deficiencies in hne infrastructure can be overcome adu if appropriatepolicies in relation to imports, taxation and investment incentives, creditand state industrial enterprise can be implemented.

vii. Weaknesses in the administrative structure could impede nationaldevelopment. In recognition of the increasing strains on the capacity ofthe machinery of government to formulate and administer development programsin the public sector, attention is now being given to administrative reformas well as the improvement of the mechanisms for planning, budgeting andimplementation.

viii. More complex and far-reaching than the issues of growth are thoseof employment and income distribution, particularly for Java. Steadygrowth in agriculture and other labor-intensive economic activities will berequired to expand earnings opportunities for the existing rural and urbanpopulations as well as the 5-6 million net increase in the labor force duringthe second plan period. This will occur only if special efforts are made toallocate the available resources accordingly. The mission recommends forconsideration a number of measures to enlarge the flow of resources for small-holder agriculture, for labor-intensive industries and for expanded worksand maintenance programs at the provincial, district and village levels.Increased revenues at the local level would supplement these transfersand help to provide for larger expenditures on education, health and othersocial programs which have had necessarily low priority in the economicrehabilitation phase. The transfer mechanisms, complemented by the newapproach now being adopted in the tranamigration.i.resettleument) program,would also contribute to a reduction of regional,1mbalances in resourceavailability and generally to the decentralization of development activityotherwise tending to concentrate in a few major centers.

ix. In the financial sector, the efficient allocation of resourceswould be promoted by a rationalization of the present complex and distortedinterest rate structure. Existing programs require reorientation to provideadditional funds for agriculture and smaller-scale industrial enterpriseswhich now have restricted access to credit. On balance, it appears that the

shortage of invesmentU LUUU's LUoL pLa.eVUL UUCLLLJ.DC '.L-VWeoUnW&t# oLdWWAL.. Ub

eased by renewed support to the medium-term credit program from the develop-ment budget, at least ror hne next one or two years, in addltion to presen;

plans for channelling project aid to the private sector through the bankingsystem.

x. Even with the maintenance of present efforts to mobilize fiscaland monetary resources, substantial inflows of program and project aid willcontinue to be essential if the public sector development program is to expandat the pace necessary to complete the rehabilitation of the infrastructure,including essential services, and to match thereafter the requirements of agrowing economy. If this aid remains available, Indonesia has the opportunityand potential for solid economic and social progress during its second fiveyear plan.

Table 1: GBOSS DONESTIC PRODUCTION BY INDUSTRIAL ORIGIN(In billim Rnniaha at Constant 19Q0 Priesa)

1960 1qf96 1947n LAgriculture, Forestry and Fishery 210.4 225.3 261.8

Farm food crops 134.0 142.3 168.3Farm nn-food cro-s 28.1 32 36.3Estate crops 12.7 13.1 13.7Ai6l h-% =8.7 20.5It 22.Forestry & hunting 9.3 5.2 8.6AFA.UlALL6 U 117. ".0 1

Mining & Quarrying 14.4 16.0 32.2

Manufacturing 32.6 35.6 51.1

Large establishment 20.9 22.7 36.0Medium establishmentSmall establishment 11.7 12.9 15.1

Construction 7.9 7.4 14.1

Electricitv & Gas 1.1 1.7 2.9

Transport & Comuication 14.5 15.1 17.4

Railroad transport 1.0 0.9 0.6Air trangnort 0A3 0.8 =12Comznication 0.4 0.4 0.4Other transpart 12.8 13.0 15.2

Wholesale & Retail Trade 55.8 67.4 96.8

Banking & Other Financial 3.9 4.3 3.4intermdiar ie

Banking 2.7 2.9 2.3Insurance 0.4 0.8 1.0Others 0.8 0.6 0.1

Ownership of Dwelling 7.7 8.4 10.8

Public Administration & Defense 17.6 21.3 27.0

Q^sV;=A D a .9

Personal services 15.7 17.7 20.0Community services 8.2 9.1 10.3Recreational services 0.4 0.6 0.6

Gross Domestic Product 390.2 429.9 548.4

/1 Preliminary

Source: Biro Pusat Statistik.

-3-

4. In terms of structural change. shown in Table 2, the share ofagriculture declined from over 52 to under 48 per cent of GDP, manufacturingincreAsed bv one point to 9.3 per cent and the minine and constructionsectors grew relatively rapidly from 1965 to 1970.

5. The average rate of growth of 3.5 per cent per annum was accompaniedby p^pulavi4n grow-h fr^m 97-4 to 119.2 m4ll4nn ha#wwn the 1961 and 1971

censuses, an average annual increase of 2.1 per cent, so that there was ay.. 14 .4....A 4,. s .r.

4.. A p--q dn1^Jtaf-4,,.. tf inav

ver; a 'i.-:ed .... c,einc . per capia. i. .,.f.c . A ree c.alcla4n…fe

capita income by the Bank, for 1970, using official data on GDP and exchangeCLU.c smiagh :Led cvL-er the p&LW%LL 197*a LvJ W71 I.g L in a.. c o

$77.

6. Indonesia's economic recovery from the nadir of 1965-66 is bynlow we''-dUocumented . NtUL SU eVideUnt LS Lt1n CIA eVMWUent UOf tu.Li LcL.vUvcZy

with apparently low rates of savings and investment. The incremental capitaloutput ratio derived from official statistics for 1960-70 is 2.5. Por 1967-70the ICOR was only 1.6. Though little reliance can be placed on these co-efficients there are other indications that the main increases in output sofar have been secured as much by better use of the available means of produc-tion, under more rational economic policies, as by a major increase in thecapital stock. In this process some of the main ingredients have been there-establishment of normal market conditions, a resumption of the flow ofindustrial inputs, spares and replacement equipment as the trading situationimproved, the recovery of transport services and the rehabilitation of muchof the infrastructure under government programs. The growth in agriculturaloutput may represent increases in current inputs as much as larger investment.

7. The main increases in output have occurred in sectors accordedpriority and official encouragement, including rice, textiles and oil andtimber production. The increase in investment activity, both in the publicsector and under new investment laws for domestic and foreign investment,shows most clearly in the construction and mining sectors. With theacceleration of internal and foreign trading activities the trade sector isalso experiencing substantial growth.

8. Investment levels in 1971 appear to have been around 13-14 per centof GDP in continuation of the trend which had raised the investment ratio from8.4 to 11.5 between 1965 and 1970 (Table 2). The following approximations ofthe components of gross investment expenditures show, in particular, therelatively small share of domestic private enterprise investment in the total:

ro.,IjOsit'l-o>.<n Gros;s Do-;!.eC.e 'o.lt-,cstc 'cri-inL ar.d r)<.L-:. orLn 'i)1

''/19 S196, 1970

.c t,.i: u.. *5!'@^' C i.er, 3.9 42, 7. 7:; r;i^ZU, czt'y .rt.i.nJ3.7 3,7 .5.9

:: .^.ac lev1> s R- '~~~~c!-stries 8., ~8.3 9.3>o;tLst~~~~~~uct,ion ~~~~2,0 1,, 7 :2.6

Elect.icity and Gas 3.3 o,,L o2.6

rrzQns?ort, and Gi Ot i.catwcn 3.7 3,5 3.2:o .33~'1~ arnd R.etail Trade 14..3 1.5.7 17.o

3:.uci.ng aid 0C.hxer Financial :atermediaries 1.0 1,0 o.6*T,iersh L of awellings 2e0 2.,0 220

Pub" ic Ad--,n. S traLtion 4.5 5,,C 4.96.2 6.4 5.7

Gzss Do.3.e:tstic Prcoduct, 1C 0 100,,0 100.0

c.'x. e:ndi ture

Priva3 e C ons lm,tior, Expenditire ¢9.8 82. 8 81i3Genezal CExpeen:nt Foenditur^e '1,6 6,,7 7.7

D_;a >>muiti.c CczpitLi Formation 709 8.4 u.5E.port 8tinus rinpor 0.8 2,0 (72205

Gross r,b.'13t'. ic P.-%)luct 110.0 1.00.'0 1.00.0

Source: Biro PuLs at Statl;.stik,I./ in cons-,.-nt 1960 prices,,2/ Preliminary.

-4-

$ million

Public Sector Investment 650

Central Government (including project aid) 300Prnvin^ial and Local Authorities 100Public Enterprises 250

(of which Pertamina) (175)

Private Investment 600

Foreign (including oil sector) 300D esILc .t err. 150AOther Domestic.,(including non-monetized) 150

1,250

9. With this order and compostion of investment the economy nowappears to be growing at around 6-7 per cent. Tne Bank's initial reporton investment and growth perspectives (EAP-22 of March 25, 1971) postulatedgrowth rates of 6.7-7.0 per cent per annum over tne period 1970-75 and 8per cent or more thereafter on a series of assumptions of favorable trendsin agricultural output, exports, savings and inflows of external resources,public and private. Subsequent investigations by Bank staff, particularlyin the agriculture and oil sectors, suggest that the feasible growth ratefor the latter half of the decade at least may not be as high. Moreover,the report stressed that the conclusions rested heavily on the short butimpressive record of the present government, and that no projection ofsustained growth would be tenable without the continuation of sound economicpolicies and the consolidation of present efforts to use efficiently thedomestic and external resources available for development. It is to thesepolicy, resource and management issues that the present report is addressed.

The Economy in 1972

10. Durinn the vear the broad trenda towards eoonomino arnwth inconditions of relative price stability appear to have been further consoli-dated. although the crurrent drought conditions mAke it i kn14 eUlv thnt agr-ture, particularly the foodgrains sector, will contribute significantly thisyear to increa8ad outnut or inomens. A suthstnntiAl 4ncrase in exportearnings is forecast (82 percent in net oil exports and 13 percent in othercateenr_es) in part becaAt,a of higher i.ternationl market prices but alsobecause of increased export volumes of oil, timber, hard minerals andcertain of the t"Adi4trAn agrlul A&expo:ts.-9 T"A..-#tria' p:roAucto,,…--.-- 0 -- a - ------. . J r - - a..U'a &

particularly of textiles, is also expanding and the growth of investmentactivit- *idter both fore. .Ad doA s:ic Incentive 's appears to beaccelerating.

11. Table 3, which presents some of the available indicators ofeconomic trends, suggests that price levels have increased somewhat morethan in the previous year. The Diakarta cost-of-livinAR index is heavilyweighted towards food, especially rice, consumption and is thereforeaffected by the tight supply situation which has recently occured. Theproposed new consumer price index, based on a more recent family consumptionexpenditure survev; places less emmhasis on food and more on housing, clothingand other expenditures but is likely when introduced to show essentiallynn,nI lle movement.

TAhIe 3: MAIN ECOXTNOMIC INfCATORS

% Change1969 1970 1971 1972 1972

Djakarta C.O.L. Index' / /2(Sept. 1966 - 100) 575 626 641 65& 6--

Mny.uy Supy (p bilon) 2,Qn 4A1 313 /9 Atl2

Currency 114 153 196 243 33

Demand Deposits 66 88 117 156 28

/31969/70 1970/71 1971/72 1972/73-/ x Change

Al-orts L of GOoods anud SerLv.es

($ million) 1,194 1,263 1,450 1,844 27

Export Receipts (S million)

Oil (net) 87 135 192 349 82Other 659 761 784 885 13

Internal Revenue (Rpbillion) 244 345 413 549 33

Budget Expenditures(Rp billion) 335 458 500 644 29

Routine 217 288 354 433 22Development /4 93 128 146 211 45

/1 September 1972./2 September 1972 camnared with Sentember 1971.7i Estimate./A Exrludna PrniFet- Aid.

12= The tAhle Also shown the continued strong exnansion of the moneysupply characteristic of recent years and broadly consistent so far, giventhe return to monet_4ztThn, with real growth of rhe ernnomy and withrelative price stability. The growth of time and savings deposits hasnwra4artA 4"t^ 1079 ii n:r.%av 1ak-tiam ^f th-o .av"4A 1kt41A-.9v% Iii fj-ff40 _r-~~~~~~- --~- P--- 0-~~ --- X-P 1-r ---- U-r --- ----- 01

owned rupiah deposits attracted by high real interest rates which helpedto support the credit ep ansion by banks from thei: owr rsincrease in net credit to the private sector and state enterprises istherefore beir.g ir.ntairned

4with less relliance o.n Bsank Ir.onesia and a1,w-er

growth of the medium-term credit program to which it makes the majorb.*& 4& .U LLUQ

13. Although recent estimates of the dimensions of investmentactivity under the Domestic Investment Law are unavailable, the approvalof 300 new projects in 1972, until August (to bring the total of approvalssince 1967 to 1,133), with 200 more applications in the screening process,indicates continued strong expansion particularly in industtr whichaccounts for nearly 70 percent of approved investments. In total the1,133 applications involve an estimated Rp 575 billion of investment witha foreign exchange component in the order of 60 percent. Some 480 projects,300 of them in the industrial sector are reported to have reached theproduction stage and a further 150 are under construction. The impact onthe economy and particularly on the present smali industrial sector willclearly be substantial.

14. In locatlon, the new domestic investments are mostly in Java,which accounts for 80 percent of the recent approvals in industry, andparticularly Jakarta (35 percent); and 70 percent (32 percent for Jakarta)of the total. The concentration on Java as a whole is not out of balancein terms of population, markets, industrial potential and the need fornon-agricultural emDlovment onoortunities. The net direct emplovmenteffects may not be large, however, because of the probable impact onexisting mall industrv of the grnwth of modern; though still quite labor-intensive industrial production. Opportunities still exist for theexnansinn nf the dnmientie enternrise into acritilttiro (nnArt from fnrpetrvand crumb rubber production in which there are .103 and 62 approvednrn4prta eaet4wiveln) and a ninhaer of seruida neri-ji4tfig thrnioohn,,t-Indonesia.

15. The similar acceleration of foreign private investment activityis in.dicated i Tabde 4. The figures do not 4r.^'u4e the sustn4redexploration and development operations of foreign oil companies nor certaint S , Sp. of ser4,ce .ti- .i ties, o..A4-.. bar.kng. Ir. AA4dd:o.- t-.h recording

. S & - - - A.T L.LAJ." ,.~,5

%A%A'6.* t. &U* .**

system does not capture fully the expenditures on mining exploration anddeve_1 -- z It is ze.vn-er'ue'ess - ,der.ce of con.;im-Aung gr-b r forel-uW~VW1.J FUMLA . . L LU La VW b. LA=AUU =V . U LU L A.LIIA".Lus ~ . WLE & LA 5 .L r

enterprise activity and the implementation of projects particularly in*1.a .W;tfll.5 ,..4-r a san .ae

'6. UL 4-w n cimste COn.tinubes4 Co- be, 'CPA. h rneerecognition of the importance to Indonesia of foreign investment in the

_L L A __*. . _J ] _ .UALUL _U A--1 W . U __. &_ -is.._ - -d-. __ ___ W L _ ..vL&=MD%AU16 s bCLLU& V W& XWSW L V, a-r Ithd pLidt ty bezs a%..%; vw%AU LAJ VWWL

on improvements of the procedures governing foreign investment,' are recenc' LUJ.catiOUs oft. I sLta 'UL.LLYL Uof thi L L'.t. ULt.

17. Y.L.L. .LALI pLM jub.Lc sectr program, therd 1h-S also0 bCI a steady

increase in expenditures, and deferred maintenance, rehabilitation andconstruction programs have gathered mom,entum- whil%e -work On majL projects,including those associated with project aid, has'begun to progress. Onlya small number or these projects has been compieted or can De expected tobe within the period of the first five-year plan, so that the growth ofproduction in the economy is supported mainly by rehabilitation activitiesand only to a very limited extent by an expansion of the capacity of theinfrastructure.

18. The substantial economic progress to date has also been aresponse to the rational economic policies initiated in the early stagesof rehabilitation which established the stable economic environment basicto the development process. Institutional and administrative improvementsare being increasingly recognized as an essential complement to sound poli-cies. A number of such improvements have already been made and others arein train. There nevertheless remains a series of major'tasks to becompleted, affecting the efficiency not only of the civil administrationbut also many of the state agencies and enterprises, if the public sectoras a whole is to support adequately the continued'growth of the economy.

Table 4: PRIVATE FOREIGN INVESTMENT APPROVALS AND IMPLEMENTATION1971/72

($ million)

Approvals Actual InvestmentSector 197 177 l/1 -v// vl I/- v//

Agriculture 3.4 3.8 80.2 3.4 2.2 2.0 14.7 2.8Forestry 12.0 32.0 436.7 18.3 30.6 29.6 106.5 20.3Mining 79.0 225.0 1,002.7 42.0 19.9 52.7 83.1 16.0Manufacturing 204.9 120.7 660.2 27.7 81.0 112.5 268.4 51.2Construction/Hotels 50.8 11.1 105.8 4.4 7.0 3.9 18.1 3.5All Others 17.1 20.8 100.4 4.2 9.9 5.2 33.1 6.2

Total 367. 413 A IRA6, 100A.0 1n50 . 90.9Q 594. 100. n

/1 January-September.

19. The renewed emphasis now being given to administrative reform, tothe improvement of particular institutions and to the development of newones is an important part of the broader process of preparation forIndonesia's second five-year plan. In this process efforts are also beingmade to meet the needs for increased investment and improved services ineducation, health and family planning after a period during which themajor emphasis in public sector activity had to be on the economic infrastruc-ture. In the social as well as purely economic sectors, the growth ofadministrative arid implementation capacity appears increasingly as anecessary condition for continued progress.

Prospects

20. Indonesia's economic growth prospects are good and, if presentpolicy performance is maintained, and management constraints overcome, andprovided the resource requirements discussed in Chapter III can be met. itappears realistic to plan for a real growth rate in GDP averaging around

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7 per cent per annum over the next 5 to 7 years. The implications of thisfor sectoral growth are suggested in Table 5 which compares recent ratesof expansion with some preliminary results obtained from the IBRD simulationmodel exercise last year. 1/

21. The assessment of the Bank's agricultural sector mission (seeChapter II) is that, with sound agricultural policies and expanded creditand other programs, growth rates in agriculture of 4 percent or more perannum over time could be attained. With agriculture's share in the GDPstill near 50 per cent, this would mean a growth in the non-agriculturesectors of about 10 per cent to attain overall rates of 7 per cent. Inparticular, it implies rapid growth in rminingj'-nd manufacturing, and inthe infrastructure sectors which would support'this expansion.

22. Recent trends i"n the economy are generally in line with theserequirements. The increases in foreign and domestic private enterpriseinvestment in mining, manufacturing and other production should continueunless there are basic changes in government at;i'tudes and policies. Manyof the major rehabilitation and initial expansion programs for the transport,power and communications sectors, as well as for irrigation, are in progressand their completion will support output increases throughout the economyover the next few years. The policy issues for growth in agriculture andindustry are discussed in Chapter II with reference especially to domesticenterprise, employment and regional development and the resource issuesanalyzed in Chapter III.

1/ See the Bank report EAP-22 of March 25, 1971.

-9-

Table 5: ESTIMATES OF GROWTH. 1965-1975(in percent)

Estimated Annual Sector's Share Projected Annual /2Increase. 1965-70 1Xn GDP 1970 Increase. 1970-75--

Apriculture 3.0 47 7 4=6Mining 15.0 5.9 13.6Manufacturinp 7.5 9=3 11.0Construction 13.8 2.6 13.9Pew.r 11=3 0.5 11.6Transport and Communications 2.9 3,2 11.2Trade and Fin---e 6.9 18.2Ownership of Duellings.. 5.1 2.0PN614c .&--i4stration & 1-1fe-f 4.8 1. D 7.

Services 2.4 5.7

GDP 5.0 100.0 7.2

Consumption 4.9 6.5GJross L 1ruest'Lc Capitual FOrmation 1'.8 1J.9Imports 12.4 10.0

(less) Exports 8.0 V 0.

eL rFactor Income rayments 5.2 24.0

MhP 5.0 7.0

/1 Preliminary national account series at constant 1960 prices.

/2 IBRD projections (EAP-22 of March 25, 1971).

Exports

23. Table5 represents the mission's export projections through 1978,covering the second five-year nlan period. The mai-nom onenntg of theprojected average annual growth rate of 10.4 per cent are in the extractivesectors. Timber and timber nroduitns nicke1 and enpner Arpnirnt for ahonut70 per cent of-the growth estimated in non-oil exports and good prospectsare seen for fish and maize exports. Totfl non-oil exports are pronectedto increase by 8.7 percent a year but the average annual growth in exportof the traditionnal aarirtiltiiral ctmm'tiitip- prnAodcdar,Ir1ly by smnll-

holders, is estimated at only 2.4 per cent. These projections are discussedin Aetai1 in Annex 6. It shouiil be sresaao that these pro4ectiors arebest estimates and could individually, or in aggregate, vary substantiallyin response o internal oretra ecoro..i^ te.ds.

24. Oil exports are discussed in Ar.ex 5 on. the petroleum sector.Production from existing fields and new fields already proven and expectedto be brou1htl 4of 89o0uct04bn to abouti1.8l predicted to r1ise -- i cromthe 1971 level of 892,000 b/d to about 1.8 million b/d in 1976. It could

decline thereafter to about 1.7 million b/d in 1979 unless steps are taken,as is quite likely, to reduce the decline rate in output frm existingflelds, particularly those operated under contracts of work, or unlessentirely new finds are made. Exports are projected to rise to $1,770 millionin 1976 but decline somewhat in 1977 and 1978. There is clearly a need forcontinued active exploration to find and bring new fields into production by1977 if total output and exports are to be significantly increased in theensuing years.

25. It would be premature at this stage to present balance of paymentsprojections for the period of the second five-year plan. Efforts haverecently been made by the Indonesian authorities, with rMF assistance, todevelop more reliable current import data based on customs returns, buttoo little is now known about the components of import demand to makeprojections of the eutrrent account more than speculative. Program aid levelsdepend largely on the need for and the availability of essential commodities,especially rice, which cannot be accurately forecast. Except for the oilsector in which profits transfers by foreign oil companies are determinedby contract, the present position and trends in factor income payments areunrlear. On the capital account, external debt statistics are increasinglyreliable and inflows of project aid and direct private investment can beestlfted at least some distance into the future on the basis of recenttrends and existing commitments. However, not much is yet knowXn or under-stood about other capital flows, gross or net, large enough to have affectedexternal balance until very recently. The maintenance of stability in theexternal accounts is still essentially a matter for short-range policiesand for some time at least it will be inappropriate to forecast balanceof payments developments except on a year-to-year basis.

- 11 - Vol. I

Table 6

Indonesia - Preliminary Export Projections 1970-1978-/

(In US $ Millions)

Commodity Actual Actual Projected Growth Rs)tes1970 1971 1975 1978 19

Per Annum

I Troditional Agricultural Products 434 428 442 505 2.4

Ruubber 259 223 235 276 3.1

Coffee 66 55 61 67 2.9

I ,L Lrou 4 ts 42 52 51 6 1.1

Other 2/ 67 98 95 105 1.0

Ii MInerals (excluding oil) 78 78 151 195 !4.O-[-l - 62 60 In 79 _°

Copper - - 60 60 -

Nickel 8 10 10 L7 2

Other 3 7 8 9 9 1.7

TTT Luiher 109 178 4416 517 16.4Logs qnd sawniwood 5 1 I f, 14.

Plywood & veneers _ - 25 64 -

u*her 4, 4 4 5 5

IV Other (non-oil) 59 87 131 2.

Fish 5 17 32 50 16.7

mb ize 3 i- 25 55 26.Other 5/ 51 58 74 100 7.0

Total (non-oil)-/ 739 792 1169 1421 8.7

V Oil (gross) 443 597 1607 16b4 15.4

TOTAL 1,182 1,389 2,776 3,065 10.4

1/ Totals may not add because of rounding errors.2/ Includes tobacco, copra, copra coke, pepper and tea.

3/ Includes bauxite, iron sand, and other miscellaneous minerals.1a/ Includes pulpwood and miscellaneous non-wood ftorest products.5/ Includes cassava, peanuts, soya. beans, manufactured goods and all other exports.

h/ For 1970 and 1971, totals represent actual Bursa receipts which were higher by$60 and $22 million respectively than can be .accounted for by specific commoditydats returns.

- 12 -

II. DEVELOPMENT OBJECTIVES AND POLICIES

26. The short-range development objectives of the present Governmentwere expressed in the First Five Year Plan, prepared in 1968 in crisis con-ditions before any detailed assessemnt of Indonesia's economic problems andnew possibilities, or even of direct rehabiliation needs, had been made. ThePlan nevertheless clearly stated the Government's commitment to developmentin a flexible and open market system with encouragement to both foreign anddomestic private investment. The highest priorities were attached to theproduction of food and other basic consumption aoods. primarv exports and therehabilitation of the economic infrastructure; while the rehabilitation andexpansion of industry and the service sector was to be left primarily forprivate enterprise. The objectives have been consistently, and, on the whole,very successfully rursued through stabilization nolicies. domestic marketingand export policies which have stimulated production and special investmentcredit programs for rice Droduction and for medium-term investment, mainlvin industry; the active promotion of foreign investment particularly in oil,mlnerala and t_mber: and the t-nrentratinn in the ,hVir sc'tnor Apolnnpmnt

program, including project aid, on the most urgent reconstruction needs intransport, power And 4rrIgAtr4n.

27. The central and over-riding objectives have been to increaseaggregate output and income with only secondary attention, initially, to in--_e dietstrik.t4n a-d pub_l ic ra-* Thsto of emply-

ment and income distribution issues is, however, reflected in its rice policies,its district &-d village progr= 0U the4 plr..i. fo ir.rese-tarralo

and (less positively) the concern for maintaining jobs in the state servicesand maor enterpriLses -VeL whcre - v----aL-L . .LA449 S L h .LJ efi.cy. * ±LLLL

attention to social objectives is beginning to show larger expenditures foreducation: and h_Aealth and the recogrition of the crucial Importance, especiallyfor Java, of population planning.

28. The benefits of the return to stability and the dramatic accelerationoLf- £I.V, Uha esread'. * 1ke rice programms and poancies

have helped to raise incomes in areas that include Central and East Java, thepoorest and most cr0w=U prUvince-8 while at Lthe ame time providing more oithe staple food, rice, at stable prices to urban populations and other con-sumers. Tne district and village,pevelopment programs :navenhan substantialemployment effects, as have, the central Government's infrastructure programsand the growth in otner investment activity. Tlhus an approach stressing growthhas, at least during the first phase, simultaneousLy. contributed to socialdevelopment.

29. Recently, nowever, there has been growing awareness that the policieswhich have served Indonesia so well in the past five years will not, automatical-ly, provide the same growth and distribution benefits in the longer run. Gen-erally expressed, the aims of Indonesian economic planning and policy over thenext 5 to 7 years are to expand the GNP at a sufficient pace to allow certain

- 13 -

basic social objectives to be realized - the absorption into gainful employmentof the 8-9 million new entrants to the labor force through 1978 1/, a distribu-tion of the material gains from growth in which all regions and classes willshare, and adequate provision for the education, health and other social welfareservices which have had to be neglected during the economic rehabilitation.There can be no assurance that the continuation of present fiscal and monetary,agricultural and industrial policies will secure these objectives.

30_ Tt lR argued in Chanter TIT. nn resources. that the maintenance ofrecent satisfactory growth rates will require substantially higher invest-mpfnt 1pV1R 4In fntttre than edurinc the r-renuvrv nhas:e pnf Aorlrwuuturnl anti in-dustrial activity. This implies developments in monetary and fiscal policiesrwh4rh vjll ru~*.ot nly 4np,sease total invetm^-t ren~sorces bu~t a1cwuoi all fot theo

more efficiently and appropriately to both public and private sectors.

31. Moreover, evidence is already accumulating that investment pro--_ .- AA .- Aer 0-16 17-_4- .A T%-----4, T -We -.XL..* ,4 AA thSA etAc -_ _ 4e

industries, is concentrating heavily in and around Djakarta and a few othercit- - 14Ue -du C-Uraba- -an Medar., I ---- --- region of'onsiI.J.I6 J.e AL nA MM- ""5 .J VACLWOUJC C LA& IVLW~.%4&, JW.=V .&.A L4L 56 A. ~5L~&LWO %UL LAUL1UJ1IA .C

only lightly touched by the investment program. Credit for agriculture, other…. J….& - _ . S,& 11 _ LAM. L4rice krLUu1tAW_.JLL, apJpeaJ LAo We stL.LJ. VeL7 scarce. Be.LwIeen small ar.dl

large-scale entrepreneurs there remain major differences in the access toand thle cost of capital. LUC rapiLdU growth in the demand fLor im-ported con-sumer goods, often of a type unlikely to be produced competitively within theeconomy, suggests another form of Imbalance amenable Lo LfCsal iULnuence.There is also increasing evidence in the conspicuous consumption of importedgoods, especially in Djakarta, that increases in incomes at tne upper ieveisare not being effectively taxed. For both equity and stability as well asrevenue reasons, a more balanced pattern of consumption growth may be neededin future.

32. Given Indonesia's relative poverty, its factor endowments and itsslim external resources, a set of policies which emphasizes broad participa-tion in the development process, and thus stimulates domestic demand for theproducts of agriculture and labor-intensive small to-medium industry, may proveto be the appropriate strategy, reconciling at least to some extent the twinobjectives of growth and equity. The following section discusses some ofthe relevant policy issues, including the separate role of the oil, miningand forestry sectors in economic growth.

Agriculture

33. Agriculture now accounts for about half of Indonesia's GDP, asituation consistent with the apparrent level of per capita income and stageof development. To support an aggregate growth rate of around 7 per cent,value added in agriculture would have to increase at least by 4 per cent,a target which does not seem unreasonable in the light of historical experience.

1/ The net increase in labor force is tentatively estimated at 5.75 million.

- 14 -

34. According to FAO estimates, from 1954 to 1968 agricultural productionin Malaysia increased by 4.5 per cent annually, in Thailand by 5.4 per centand in the Philippines by 3.6 per cent. The reported Indonesian figure overthe same period was 1.7 per cent, less than population growth, although a largeroutput increase, about 4 per cent, is provisionally estimated for 1970. Sus-tained output growth averaging 5 per cent per annum has not yet been experiencedin Indonesia.

35. Over the past 21 years (1951-71) rice output has grown at an annualrate of 3.4% per year with acreage expansion accounting for over half theincrease (1.8% per year). For other crops acreage has increased even morerapidly (2.5% per year) but sharp declines in yields have left total outputrelatively stagnant. The decline in both area and yield in the estate sectorhas been a major factor. However, continuous efforts of smallholders havecontinued to bring into production an additional 320,000 ha of new agriculturalland each year with relatively little organized Government support. Most ofthis new farmland is in the Outer Islands. The growth in farm output in Javahas been largely rice and has been due almost entirely to more intensive useof inputs with practically no new land development. Much of this increasehas occurred since 1968 and reflects Government's rice policies, productionprograms and input distribution arrangements.

36. Rice, however, is only half of agricultural output and performanceelsewhere in the sector has been modest. The increased availability of riceis thought to have reduced demand for and production of corn and cassava, theother staples, and high prices for other commodities not supplemented byimports, such as fish and livestock products, copra and soybeans suggest thatproduction has failed to match domestic demand. Sugar output is still farbelow the levels of the 1950's. Efforts to increase tree crop productionwill materialize only over the longer term, and investments have been con-centrated in the estate sector.

37. A comprehensive survev of agrirulture waF undertaken by a Bankmission in February-March 1972. Among its conclusions were that there hadbeen a tendency to underestimate the difficulties involved in sustainingagricultural growth; that in future rice output should not be expected toinfreAr e by mnre than A ner cent ner Annum: and that ranid nrogress had

therefore to be made in products other than rice. Fot this, two major con-straints .ar.unalA hsave to hb A - thp 4na t4fitu4hl hntf1enorck impngnonthe expansion of production in the outer islands, and the absence (exceptfor rIce) of a strong prodnct4nn th.-t in the omallholAer aetnv ichdominates agriculture and is most heavily cdncentrated in Java and Bali.Ve-r limited area expansion canbe ecteA ih these lAa so thst yIeldincreases must continue to be emphasized. In the outer islands yields butespecially avrea -U8t be~ 4nr-vreaad. W4t1kt vrwe- effect4irave thews of ct_mii-

lating smallholder production, including credit and input programs, slowgrwt h irn n tgriulreu c^uld re,t.1 -

38 C:rtl aboutn..1. .k.4 nt-a qurero the.o n.r.V s'0 in.-ete*nts4- takef place

in agriculture. Private foreign investments are primarily in logging operationsanrd the p-ubJLc sector programs, in.cluLdin. idLUdU FLLPJec, ephasLze.the r.eabi=

litation of rice irrigation systems and the Government estates. In the

- 15 -

private secto a C"f 4A erable pa: t of the Investment s4mply, represenrts the

labour of large numbers of small farmers who are creating new farmland ot:oA' the swamUps, fLoreslts a.,d gassla..ds iLU tIh JUl. .LanUds. . VV AeUUCLL

assistance has been minimal and cons4 am-d of a small nfficial transmigrationprograU I u ar.daccess us uujal.ly rUiLL for other purposes. A,;hough appro-

priate pricing policies, provisions for credit and technical services arethe major requirements for tne smal;hoider sector, larger transfer of invest-ment funds directly to this sector, and increased development expenditureson rural infrastructure, vill be essential if production is to continue toexpand.

39. The basic issue for agricultural development concerns the balanceto be established, in the medium term, between further investment in Java andBali, with most of the population and infrastructure, and the outer islandswith their very considerable unexploited land potential. Even allowing forlarge forest concessions, swamp lands and the regions such as Nusa Tenggaraand Maluku where the main development possibilities are in extensive cattleranching, it is conservatively estimated that there are 15 to 20 millionhectares with apparently good crop potential in Sumatra, Sulawesi and Kalimantan.In particular southern Sumatra and the provinces of South Sulawesi and South-east Kalimantan appear to be areas in which the process of opening up new landand developing new farming systems should be expedited, with the emphasis onrainfed agriculture and livestock production rather than irrigation for wet riceproduction.

40. The realization of the great agricultural potential of such outerregions will, however, take time. Development is proceeding now on an adhoc basis under transmigration schemes and more importantly spontaneouslyas new areas are opened up, but the regional studies which will help toidentify development priorities have begun only in southern Sumatra. Themechanisms for planning, preparing and implementing new projects are weakand the re-orientation from the traditional approach to transmiiration, i.e.from the emphasis on moving people from depressed areas in Java and Bali towet-rice schemes in other islands, is at an early stage. Extensive fieldtrials will be needed to establish the feasibility of new farming systemsbefore maior investments in land development and associated infrastructurecould be justified. Whatever the longer-term prospects, the main increasesin a2ricultural nroduction through the second nlan neriod will have to comefrom existing small holdings, in Java-as,well as the outer islands.

41. Smallholders in Indonesia are extremely hardworking and responsiveto market forcea. The recent expansion of clove nroductinn and the spontaneoustree crop development in West Sumatra and Lampung typify the initiative ofestablished fArmers An well an new settlern whenever nrpentfves exist. The

increase in rice production under official rice policies and programs suggestst,he… G h-…r…n…ntla'n …-act… to^ 92t47.…lta… M&Vgriu1t-r…l Aq*%lopenit… offoirt. It is

becoming urgent and necessary to institute similar combinations of pricing-li4c

4i -n ag:4 cu-ltral senrices - credit, input supplies, rrketlna andA

extension services and processing facilities - for other small-scale producersir.cluding those ir. livestock anA fisheries.

- 16 -

42. What are the prospects for increasing efficiency, for opening upnew lauus an ,'or shifting to MgLC value pr-UULLULI; wLI *ur .e A.

considerably among the different regions and for different crops but on balancethe outlook is good. Various studies have pointed out specific opportunitleswith regard to rice intensification; rehabilitation of sugar; use of morefertilizer; improvement and expansion of irrigation; flood coutrol anddrainage facillties; improvement of estate and/or smallholder production ofrubber, coconuts, tea, oil palms, and establishment'of 'cotton production.

43. In quantitative terms, the targets for the future imply an overallgrowth rate of the agricultural sector of 4.52 per year. This assumes agrowth rate in rice output of 4Z per year and an average rate of about 5% peryear for other crops, livestock, fisheries and fo'restry. Such a target isfeasible but will be difficult to achieve. For most tree crops, livestockand forestry, the relatively' long gestation period if' investments means thatmost of the growth in output during the second plan period will arise outof investments made in the first plan or even earlier. Similarly, in theirrigation, drainage and flood control area lags between investment andeffective use of the facilities are substantial. However, the record of thepast 20 years indicates that spontaneous development of new land has been atan average rate of 2.3% per year. Recent sharp increases in outlays forrehabilitation and expansion of transport facilities can be expected toaccelerate this rate to some extent, particularly with regard to three centersof likely rapid growth -- Southern Sumatra, South Sulawesi and SoutheasternKalimantan. Hence, it would not be unrealistic to expect spontaneous landdevelopment to provide about a 2-1/2% per year growth. A further 2% growthcan be achieved throufh various' ongoinR efforts tbrough intensification anddiversification to higher valued crops, largely in'Java but includingsubstantial areas in the Outer Islands where newly opened land is beinRconverted into permsnent -tree crops and paddy fields.

44. A growth rate of 4-1/2% per year for'agriculture would implya per canita income orrnwth of abnut 2.6! ner year; or rou#hlv doubling of

per capita farm income in the next 27 years if the trends of the past decadecontinue (i.e. about half of the increased population remains in agriculture)-/.To achieve an average annual growth in total GNP of 7X, the growth rateoutside of agriculture would have to be 9-1/2i which would imply a per capitagrowth rate of 6.5% or roughly doubling of per capita non-farm incomes in11 years. Henwever, uch an Increasinr gap between farm and non-farm Incomeswould tend to accelerate the transfer of labor-from agriculture to othersectors antd thtiS rFisa reAl ner ean4ta 4ninmpc in agorietilre whrnewhat

above the levels assumed.

45. An alternative option would be to introduce more land, capital andtechnology. ir.to a-riculture and to st4_ulatea hihrg^hrt narclture. This would involve a considerable departure from past policies offocussing G-over.ent assistance on intensification of rice productlon through

1/ Assuming a population increase of 2.4% per year over the Second Planperiod.

- 17 -

irrigation investments and BIMAS type programs and continuing to rely largelyon the spontaneous efforts of cultivators to develop new land.

46. Specific goals for agriculture in Java should continue to emphasizerice during the wet season but much greater stress should be placed on diver-sification in the dry season to achieve more effective use of water. Althoughevery effort should be made to increase water supply, for dry season cropping,a shift away from rice to corn, oilseeds, pulses and sorghums, would permita much more effective use of available water supplies. Specific programs forrehabilitating the sugar industry and establishing a viable cotton industryhave already been identified and should be given nrioritv. since the amountsof land involved are relatively small, need not significantly affect ricetargets and would nrovlde subatantial qavin-aga of foraifn exchange. Rehabili-tation of smallholder,-rubber and coconuts also-deserve high priority. In thefnosatru fieal thee nare n nuber of posa4hiblit4ien for eabihlng forestindustries based on existing teak and conifer resources and initiating a1% owa^0m fg,Tr .ff,. n - nA mani MOAMX F th^ f in 4 tsv r F.m,t v ar-og- --- t -_ o --

and denuded hillv areas. In the fisheries area, a major goal fcr Java shouldbe t^ increase b^th masire and inland producticn t*hve%itah 4mVeatentA to

exploit the resources of the Java sea and raise the productivity and acreageof brack%ish & and fresh. water Af.shl Dands.

47 * .5.I1n Lte Is.dsU LLfUU J, F-O'LJVL pas1is&LOu.l bLWU.1 up jot Un upgradigA6

the efficiency of smallholder estatD cron production and accelerating therate of new Lauu de-velopment. .Elfforts to raise efficiency will Xlvolvedeveloping a minimum package program geared to reach a large number ofsmallholders. CrItical elements in such a Package wili include marketing,improved planting materials, and introduction of better techniques (e.g.spacing, tapping, fertilizer usei weed control) and processing centers. Toaccelerate the rate of new land development capital and management shouldbe sought from all sources. In addition to a new and more vigorous transmigra-tion policy, every effort should be made to develop closer linkages betweenthe smaliholder and estate sectors in providing planting material, technicalguidance and processing and marketing facilities. Proposals from the privatesector should be encouraged to undertake new investments, management servicesand processing and marketing functions, not only for thelir own estates but forsurrounding smaliholders. PFN's and PT;s s-hould also be encouraged toexpand their own operations as they become .viarbie enterprises and begin toperform services for the smallholders. At tne same time, eftorts shouldbe made to improve the performance of spontaneous settlers who have beenthe major source of new land development during the past 20 years. Assistancein obtaining rights to ladd, credit to provide better tools and equipmentas well as additional power (draft animals and some tractors), technicalassistance in developing cropping patterns, - in short, many of the elementsof the minimum package program for smallholders plus help in acceleratingthe land clearing/crop establishment process.

48. The major new element suggested in this program for action is theproposal to step up new land development from the historical rate of 300,000hectares per year with little government assistance to an average rate ofover 500,000 ha over the second plan period. At the same time, we are

- 18 -

suggesting an ambitious program for upgrading existing smallholders throughthe development of a "minimum package program". The proposed NationalPiabation Development Body would be expected to undertake from the outsetpart of the task and to gradually build up its capabilities for handling agrowing program.

49. Benefits of the new land development program would not fully mate-rialize until the third plan period (1979-83) but substantial benefits canbe reaped quickly if the development can be closely linked to the exploitationof timber from the clearing process and if surplus crops grown or newly clearedland can be marketed efficiently. Meanwhile. the accelerated program wouldprovide substantial employment possibilities and,relieve population pressureson the land in the oLder established areas.

s0. Transnort, marketing, and c-redit will he kev constraints. PreAentefforts to improve and expand inter-island shipping must be greatly intensifiedand land 11nks batwvpn the new dAvelopnnnt arpaR and the onrts mn-et beimproved. Details of the minimum package progr*m will have to be worked outand a nl,mhar nf npecificg atudle muQt behp in4tfntPA to sae t 'rnpecific airte6

and prepare feasible projects to carry out this strategy.

51. In short, the strategy will involve continued efforts to intensifyproduction on Java arn.d other inten.sivel developed ares through new andongoing programs, rehabilitation and expansion of irrigation and drainagefa.ilities, 40 us * .A.. …of fer-tillze ar. bett-e plantir.g materisals, an

improved marketing and processing facilities and a new emphasis on land.4evelopment in t.k- frontiJe areas in the outer islands.

J5. S1ubtautlL furhe i.hprUvements iLLL LtLh VA&lLL..LI anU pCrLformanc

of state extension services, backed by the rationalization of agriculturaleducation ar,dLU traiLn'L - programUs ard-LU research actA'vitites n.cW ir. th pani

stage. The aims in extension are to re-organize the service from itspresent disparate elements into one integrated operation and to improve greatlythe quantity and quality of advice at the village and farm level, now servedby oue extLedOn -wu-rUAer Lor 1,0,000 farmers. la rel-tiOn tO tree crops 1aO

particular, smallholders could secure technical guidance, improved inputs,processing facilities and markset outlets if linkUs could be established bet-weenthem and Government and private estates and other large-scale agriculture.

53. Rural credit for Indonesian farmers amounted to about Rp. 22 billionin 1970, about 1.4 percent of the estimated value of rural production in thatyear, approximately the same as in Thailand and Malawi in 1967. Probably 1.5-2million farmers received some institutional credit, 7 to 10 per cent of theirtotal number. Most of it was for rice and less than 10,per cent was mediumterm. Both hailan.d andS ZaLawi doubled theirL PCLe;uLaes over t1he followingthree years and an improvement of this magnitude may be possible in Indonesia.The gro-wLh should be both in current production credits and in medium andlonger term loans for such purposes as draft animals, small pumps, processingand fishing equipment, replanting and farm improvement. Tne vehicle existsin the village and mobile units of the Bank Rakjat, currently being modernizedunder an ADB loan.

- 19 -

54. As in most developing countries the bulk of agricultural productionis destined for domestic consumption. Indonesia' prospects in the traditionalexport categories are modest (see Annex 3) and, although there are severalpromising lines especially among new crops, the contribution of agricultureto the balance of payments in the substitution of imoorts such as rice. sugar,cotton and cloves will be as important as in increasing exports.

55. The available information on domestic demand suggests that a readymnrept yinta for evnnp 14vetnrk anA fisheri4e nutpuit noeer a wide range of

products. In the longer run, however, production growth of around 5 per centaoar c houl 1 e ab9sorbedA rltr 4f vrur

1 4n-e v m v 4 nge4v%d. On the ^ > _~~~~~~_7 -- -- Z _ __ v_--e - On _-h-demand as well as supply side, therefore, a concentration on increased agri-

at the district and village levels appears to be the appropriate strategy. Itis ~- -*er, a prescription for steady but unspect-clsar growth and the morrapid advances would need to be made in bther areas.

56. A concentration on smallholders, in the medium term, need notaUVrse.Ly LLLec-L eitbler oreg iLUVemL.UiLn tULeestsL LL Lr C teL.iU.LLUL sector,

mainly in forestry and estates exports, or the on-going public sector projects,mostly associated with external aid, in irrigation and ior tne rehabilitationof Government estates. Scope should remain for an expansion of transmigrationprograms (also benefiting smailholders) and, in general, the development of newareas when and where appropriately high rates of return can be foreseen. Moreactive participation or the private sector should be sought particularly indeveloping and managing nucleus estates in order to step up the pace of newland development.

Industry

57. With the formulation of the 1974-78 Plan, the Government of Indonesiais embarking on a new stage of industrial development. While the rural sectormust continue to have priority there has been sufficient recovery and growthin the economy to provide a base for a strong movement forward in industryand a major contribution by this sector to:growth during the next plan period.The government, moreover, clearly desires to evolve a policy framework whichwill ensure that further industrial development contributes to a better in-dividual and.regional distribution of income as well as to economic growth.Annex 4 reviews the industrial situation, priorities and policies, and institu-tional factors in development.

58. The most recent national income estimates figures indicate that thecontribution of manufacturing industry to gross domestic product was of theorder of 10 per cent in 1970 at current market prices. In comparison withother countries, then, the share of industrial to total commodity production isstill small. Indonesia is still at the very threshold of industrial develop-ment.

59. The 1970 survey of large and medium scale manufacturing industryindicated that there were 17,900 establishments in Indonesia; 11 per cent of

these vere large (Tables 7 and 7a). On average a large establishment employedmore than 300 persons, a medium establishment only 16; and all the large scaleand medium establishments together employed 850,000 persons. Preliminaryestimates from the 1971 census of population, however suggested 2.9 millionpersons, or 7.5 per cent of the total work force, were engaged in some sortof manufacturing activity. Thus, some two million persons who reported them-selves as being engaged in "manufacturing" were working in small establishmentsor for their own consumption. There are in fact thousands of small establish-ments of the cottage and backyard type scattered throghout the countryside,engaged in very smaU scale manufacturing, or in repair and service facilities.

60. The manufacturing sector continues to be dominated by a few industriesIn terms of employment food processing and textiles predominate, rubber pro-cessing remains the only other major industry, while industries such as metalworking continue to make a negligible contribution. Reliable output, valueadded, or investment data are not yet available. Industrial investmenthas been actively promoted under the Foreign and Domestic Investment Laws.Foreign investment approvals in manufacturing industry have been increasingcontinuously since 1967 and now total $470 million, out of approvals of $1,630million through December 1971. Actual expenditures are of course much lower,though manufacturing with smaller oroiects than the extractive industries hasa higher disbursement ratio than other foreign investment. Between November1968 and Februarv 1972 the Dnmesnti TnveatTmsnt Bnard annroved 591 annliea-tions involving a proposed investment of about Rp. 220 billion (equivalentto $530 mfllfnm) 4n ma,i,tfn*twr,4no nonnaot a 4tnrn,oaFtA 4 .e^nt ofabout Rp. 400 billion.

61. A recent survey of approved domestic projects suggests that about80 er- cent are in prodctio. Al^t .aLf of t1h6e domestic i4ve4-et ,,lv4

relatively large projects of more than Rp. 100 million each, and the greatmaJori.t of projectsJ -wre to-~- employ v Fe "a . Thuz re'A-UV * w

small establishments took advantage of the incentive given.

62. Through its medium-term credit program as well as the provision ofinc4ntiveas for dmmestic and foreign. =eterporai4se ,-r,est-t. th2n has

created an industrial momentum and further substantial growth is assuredbecause . LofL t U.Lh Ai. ofaVa in-;et-ent pla.ed, .ir.O it. oS.Jr.. st l eo reach

normal output levels,. The, basic issue for Indonesian planners is whether... 4__A_ at .nA 4-ni

4an A JA_ 4 _^4-..*4-4ar

1e_____. ____A __a. 4.t __ aa-___

z^ = * er prs_n pollicfe*W X iS < [ti!= C u>3<Z -A 9%; W s_

will continue to expand rapidly, produce goods competitively and make anappropriate Contrib-tion to t.he sociOl o8as e'1 zs cn aia nof-t. tio-aldevelopment.

63. The mission's view is that Indonesia's social and growth objectivesWJuld b=e ser-&V=ed buliy A -vllc.i.Les whIcLhLJ C lug capjitaligze or. t1he counsiderable poter.tial

of small and medium-size domestic enterprises to produce at competitive costsa wide variety of Low-pricd cons-umerL goods nd light producer goods foragricultural and service activities, where labor can be complemented ratherthan displaced. Tne size and growth possibibilities of national markets, tnelarge and adaptable industrial labor force, the potential for labor-intensivetechnology and hence employment, the relative economy of capitai in sucn in-dustries and the generally quick pay-back periods all support a light industry

ATn 7

Large and !cdiuni-Sca1c. "arafacturing rduztlries 19t70

.L(egion Popu at , o Ttion

Perecnt , bii$hemt+ Perc-nt Pcrsons Per . li,

I, Ja7a and M4adura, 765, io 634, - 9. 77l5 __ -337-of whli ch

.10 Dja4Ra;rta 4267 313 8(,7 --, .^- 6c32. Weest Java 21,631- 1801 2,54h 1&) 1b%.2! 211 3. Ccntral Javay' 2L,366 20T 50,7'6 3,C0 220,830 ,6 0b& F ir4t Java 2 5 527 21.4h 4t, 40 2408, 2 fCQ, 1 9 31.6

IIo Sumnatra 20,820 17.5 1,972 1loQ 8951.5III,, K.O.imwitan 5,107 40 3 461 206 113,86^!f) l

TV, Sulav:Csj. 8,535 7.2 1 S2 3 7.2 15J 12.3 128

V0o Other islands 8620 7?2 3O -_ 17_

Total 1:9,182 100l O 17,900 100oC0 8Ž;8,1941 1C0S.

Source: 1970 Survey of Malnutacturing Industries1/ Includes Jo-Jakarta

- 22 -

4ble 7a

Emn,l=ownient in Lirr-ee and lldiun 'ScaTlp i v tactur i n"r._______ThIU(8 strj es .7___7v

AverageIndustry N rber o.f I lTLif: .nsO PC rsrons z; ;loycd

Fbod and U-E-MV.l ;t gsJ C C- Pern _ i __ r7i -r.r ~ A nA t.rC' 1 L~ 1. AG<5 .

o bia co2vU; :I L I,0 JH -L .t L/;L4 ) *)LJ*.v

le.vls 437 1v;f4S0 lQv >ur R24e

1.u er prodLacts 273 h313 7il 10°,6O^ 152,7

Othier 4i45 L,) 3 7 4 0882 1i6 O,2h4 -30i.

Total 1,975 1!,92 5 17,900 Bi 8,9L1 h7.L

Source: Coyir-ped fromn the Survey of ikuluufctu.cIr,; kLdurstries lY70,

Central Bureau of Statistics, Djakarta.

- 23 -

aporoach to complement capital-intensive domestic enterprise and foreign invest-ment. Further developments in the processing of primary products for exportwould also have a nlace in this annroach. The nronpectn for nhiust-rial exportdevelopments lie both in processing and the efficient production of consumerand mAll producter gonos. A nthTner of c-tirnt vpol liciea wnulA hvero to Ie%changed or rationalized, however, to influence the balance of industrialrrath In l-Kaa0 A4,-art4onn*

4. T, ̂ Yx 4 the a v.LewW J.L o. thMe.L FJL.L%ZO C&. l.ceL.cLLLr,g -La.LUfLa.-

turing industries are outlined - those relating to imports, taxation and invest-mer.t '-,centiLves, lice4us , LcLrU.L pUL.Lcse, labUUo l .saL.LaLi, pUb.LiC ow-ier-

ship in manufacturing and the development of infrastructure. The institutionalSAA.LL.aiVLWUD fo. LLuLurUg .ILUU5LLJ.ra4 pU.Lic.ie are alsodU dcususu. Lue main

points are summarized below.

65. Tariff, protection and exemptions. High import duty rates, imposedmore for revenue than protective reasons, characterized the Indonesian tariffin the 1950's and early 1960's. These were effective in stimulating industrialactivity and in many cases they encouraged the evasion of duties. Stepstowards rationalizing the structure of protection have been taken, includingthe reductions of a number of specific customs duties where these were clearlyexcessive. The decision to adopt the BTN-SITC trade nomenclature providesa further opportunity to lower general levels in the interest of efficiency,to minimize distortions and to limit the exemptions which tend to favorlarge over small enterprises. Limited use of import bans may continue to benecessary, in the immediate future, where they are the only form of protectionwhich is operative in practice. They should be subject to regular and openreview. An important side effect of the present tariff system is a bias againstmanufactured exports which are heavily burdened by import duties on componentsand the high cost of locally produced inputs where these enjoy protection.Offsetting measures for exporters as well as a bonded warehouse - free tradeport system are required.

66. Tariff policy implementation. A review of the legal framework fortariff formulation and variation which at present appears to give excessiveweight to Ministerial responsibility might usefully accompany the reform ofthe protective system. The establishment of a tariff review board or com-mission (backed by an economic secretariat), in which consumers as well asproducers could be heard with some public exposure, would appear to be ad-visable as an instrument of a continuing review and updating of protectivepolicies.

67. Indirect taxes and investment incentives. The present governmentinherited a complex sales tax structure which is uneven in its incidenceand heavily cumulative, thus frequently offsetting the protective advantagesintended by the tariff structure. The recent reduction of the 50 nercentsales tax is highly commendable; the remaining 5, 10 and 20 per cent ratesstill however have cascadine effects with a concomitant nressure for redtic-tion, profitably though at high cost. Equivalent sales taxes on such itemsas motor cars. electric stoves and airconditioners. whether imnorted orlocally produced, can make them expensive in relation to buses and bicycles,

- 24 -

rice cookers and fans, and hence influence the structure of production towardmass consumption goods.

68. Direct taxes and investment incentives. The Government has alreadyachieved a substantial measure of reform in corporation income taxes. Withthe introduction of these reforms, the value of tax holidays has come intoquestion. Several neighboring countries are considering whether the benefitsaccruing from income tax exemptions exceed the costs, particularly for foreigninvestments. The cumulation of stamp and similar taxes from colonial times,which can be a burden on small and medium entrepreneurs, remains. The 20per cent tax on revalued assets remains another problem area, discouraginglocal enterprises from revaluations which would facilitiate participationin joint enterprises with foreign investors and, potentially, capital marketoperations.

69. Licensing. Protection against "excessive" internal competition hasbeen as strong a tendency in Indonesian thinking as protection against imports,and although Indonesia does not have a formal licensing system, in practicelicensing plays a critical role in the structure of industry. Policy makersmoreover face what is perhaps the most difficult set of problems (not uniquelyin Indonesia) in this area, for they are expected to adiudicate betweenadvantages of technical economies of scale versus a degree of economic com-petition which ensures competitiveness in prices, quality and delivery times.In industries where economies of scale are significant, fragmentation of marketsmust be avoided. even thoueh the costs of mononolv mav be difficult to eliminate.For industries in which economies of scale are not significant and in whichthere is nn fnrpian invAetment- leine1ina and all nther restrictions on entry,except those genuinely related to zoning issues, might well be abandoned bothon a national and regional a1 to Andr existing mnnonpoly and olionpoly arrTangq-ment, improve the competitiveness of industry and give small scale entrepreneursabetter o-pportu^-it- for eas, entry into industry

70. ATnastrcture, *.,Addustriall estates and 1 nftijr. 1 ack of a e1 1developed infrastructure raises costs of production for all manufacturers, but

ybe Argiigpriclrdffio lties,a fo:- medi anA small prdces ar-tic-f-

Larly on those located outside the principal cities. The building up of anJa.equate ia. t. enfra.t54 te require ti-&e, --an ** A lt..d.elo - mr. A o ft ir.1a l est-atS

in selected locations has therefore been stressed, partly to offset the dif-fi Iculties oil acquiLr.Ln-g l'nd 'o U indLurLL.LL FUoses.

71. Credit. .LLe shortage ofL credit at all 'leve'ls has clearly b-een or.eof the important bottlenecks in the development of manufacturing industry. ItariLses frum the- lak, rtL UJ.y o.L a-Vi.LU5 bUt of an eLLectiAJv=e UbLnLLkng OJYL.te,

and, in broader terms, of a capital market which could gather savings throughinstituLtons such as inUrance a,d mUortgage ompUaarites arU turn thIeLm into 'LoIng

term loans. The absence of a vigorous banking system continues to be a brakeon industriaL uevei.opment, bearing particu±arly hard on tne meuium anu MmaL±

entrepreneurs. A more rational short term interest rate structure, as wellas a more rational relationship between short ana long term rates, wouldease the problems of industrial finance as well as being conducive to the evolu-tion of sound banking system.

72. Labor leRislation. While it is evident that current labor lawsaffect mainly large; mainly foreign, firms and state enterprises (and eventhese can frequently circumvent them), they have the potential for distort-ing industrial development by creating a dual labor system, raising thedirect and indirect costs of labor to large scale entermrises above thosepaid to labor in many medium and in small enterprises. Such relatively highcosts nule t-end t-n 4-nreasO thP alrVadV sarong trend to capiral rather thnnlabor intensiveness in the new, large enterprises, and they are likely tobe an obstacle to, the development o-f eort orienteA 4industries. In con-sidering amendments to labor legislation, the Government should seek toA ana .. - o4 a

1e 4na Ct. a.,,at,t v.,4 n,n na..A a .s

44.1 TnAna4r e4 n 4 n.woer ennned---Ve0a. leogisat4w.v r- -k. 5.& - a. __^-Aa. -_., TA^gb _4__

and does not become the source of major obstacles to the effective functioningofC the '-bur muacI.

73.1 I .L-AUsLtLr.LC&. PL - IrUomotion_ UoarU. .L.e pU.L.Lcy IcnsLL5,O W VWU.LU

largely eliminate investment incentives, except to exporters. To ensure,LIUW~V~L LL1~L Ol;.C SLALU IJIKL .L LU.Lk%L.L7, LVIL .L8LI iLLYCULLUCHL, I17L±Ue

to play a significant role in industries in which large scale operationsare essentia'l to efficiency, and ehat locawl anu foreign investors receive

equal treatment, it is suggested that the domestic and foreign investmentlaws be unified and an Industrial Promotion Board should take over the li-censing of foreign investments, the management of benefits, and, more im-portantly, engage in the active promotion of large-scale investment bothfor the local and export markets. 1/

2/74. "Small.scale" industries - and the indigenous entrepreneurs. Thepresent incentive and regulatory system appears in most of its aspects todiscriminate, often inadvertently, against most medium and the small entre-preneurs who include the vast majority of indigenous (and local) entrepre-neurs. It would seem that even if much of this bias were corrected by ap-propriate policy changes, a "'small scale" industry program, specifically tonurture the indigenous and local entrepreneurs would be required to minimizesome of the distortions currently evident, and enable medium and small in-dustries to continue to compete and grow. The detailed dimensions of theseindustries' problems are not yet clear, and field studies of various types,including one or two pilot programs in regional centers close to the prob-lems, will be necessary to evolve programs of real effectiveness.

Priorities

75. The mission recommends an approach to industrial development whichemphasizes the policy structure and certain institutional developments ratherthan physical targets for specific products or the specification of "priority"

1/ See IBRDb The Indonesian Economy: Development Trends and Foreign AidRequirements, 1970-72, pp. 18-20 for detailed proposals.

2/ The "small-scale" industry sector includes the lower section of themeu.ium scale s'E cIa551L1ca,i as -wleu as we atuh smallz. sca;e proper.

- 26 -

induRtries. The Absence of reliable data for lannniao and control reinforcesthe case for a policy approach. Where priorities are clear, and particularlyfor larre-scale enter-rise, the main efforts should be i. pro4ect ider.tlfica-tion and investment arrangements by the Industrial Promotion Board. Specialatter.tion should be given, for exmple, Ito r.ecessary- developments 'n primL-aryprocessing for exports including the improvement in logging operations and

furter imbr prcesir.. tWorkUlLthe leas""'lty o' ma'or iLnvestmenats iLnfurt.er **6. .. e rocessing. Wnul R. IJLn UlLe A. bU.L.L.LL7 .. WJ0L ueL1us,

fertilizer, steel and the engineering industries is advancing. In the oilsector with its access to substautLal inivestment resources (see Annex 5,there may be project possibilities in petrochemicals which need investigationandA -weighin.g ,nLLL reLat'or.L to alternaLive resource uses. Tne Government nowhas a number of reports on other industry possibilities. Further stepsshould be takeen to build up a team of inuonesian experts to appraise suchproposals and act on them.

76. For the most part, the growth of large-scale enterprise, foreignand domestic, is likely to keep pace with increases in demand where the in-centive structure is appropriate. The present moves to organize Indonesianresearch and development activities could help domestic entrepreneurs to sharein this growth. Small and medium sized enterprises should find ample scope,with equivalent incentives, access to credit, institutional assistance andthe advantages conferred by low labor and high capital costs to take theiropportunities for rapid expansion.

77. Any acceleration of industrial development is likely to createfurther difficulties for many of the very small manufacturing establishments.Vigorous growth in other, still labor-intensive enterprises, including re-pair and service operations, would help to some degree to offset the prob-able decline in such activities. In some regions where villages or communi-ties specialize in products which may be superseded by factory productionthe authorities are likely to require special measures to absorb such work-forces into other productive activities.

Oil And The Extractive Industries

78. One of the prime objectives of the Government has been to stimulatethe production and export of oil, hard minerals and timber. The principlethat the state owns and controls the exploitation of Indonesia's natural re-sources is most clearly expressed in the covtracts-of-work and production-sharing arrangements with foreign companies for oil exploration and produc-tion. Mineral exploration and mining operations are undertaken under au-thorization from the Minister of Mines under the Mining Law of 1967, withforeign companies obtaining exploration and development rights under "con-tract-of-work"-arfangements.

79. Recent and prospective develoDments in oil, mining and forestryconfirm the growth prospects in the sectors. It is projected that oil pro-duction will expand by at least 100 per cent from 1971 to 1976 (0.9 to 1.8million barrels per day) though it could decline somewhat thereafter, and

- 27 -

gross oil exports could increase by nearly 200 per cent (from about $600million to nearly $1,800 million) over the same period. The mission's pro-jections for other exports include growth in timber and timber products fromaround $180 million in 1971 to over $500 million in 1978; and growth innickel and copper exports from present negligible levels to perhaps $140million by 1978.

80. Developments in these and other extractive industries demonstratethe Government's success in attracting investment; mainly fnreien, intn thpeppriority areas. Exploration and development expenditures by oil contractorshave increased from less than ASO million in 196R tn oenr $200 msllin -in

1971 and an estimated $240 million in 1974. Investment approvals in miningand forentrv under the Fnreign InvestTnnt Tanw 1967, ammiultel to $9OAn 4114.i

through December 1971, 58 per cent of all registered foreign investment inintention8 eutsitd the nil sertnir and 71 no-r cent if proposal investments inDjakarta are excluded. By comparison only about 20 per cent of domesticinveptment Annpprn,l abhotn t$150 illion1 in value, are in m ining and for-estry, indicating the importance of foreign enterprise investment in Indo-n.esian. r.atural resou:ces if they_ 0- .to be- quickly d

81. T.he bas4c requirement is that wh ne this-I -i o.tiut1sbta,* **~..l'0~.l. a. ljJA. ~J.SLLL A.~ .&C WA&4-AZLV =. 1.14.40 W4..LJ. t_LAJ.IL&L UUL.%- OUL&VO 1.CL1

tially to domestic development foreign resources should continue to flowin.to the= econLmLUL VAy Lt f cLLtLhe L a.rg e-scaLe, cLaiJJ.LL f.tensive nvestmeutopportunities which Indonesia has neither the capital nor as yet theexperience to exploit. inure are aJLernaLive international uses for mostsuch resources and they will continue to be available only within a favorableinvestment climate.

82. in forestry, there is concern that developments have been toolittle supervised or controlled, and a rethinking of policies is underwayfollowing the alienation through forest concessions of nearly 50 per centof the 24 million hectares of forest thought to be suitable for permanentproduction. In August 1971 a decree was issued suspending the grant offurther concessions. At that time 75 had been granted over 11.8 millionha.; 139 further forest agreements involving a further 10.3 million ha.were pending; and applications had been made to secure rights over another35 million ha. Under the 15 wholly-owned and 40 joint venture foreign en-terprises so far approved, and some domestic enterprises timber exportshave increased dramatically from $6 million in 1967 to $178 million in1971, in a period in which supervision by the forestry services was farfrom adequate.

83. Policy revisions in this sector should aim, first, at the reorgan-ization and strengthening of the forest service in the interests of betterforest control and of adequate provision for agriculture e.g. through therehabilitation of catchment areas and the release of forest lands bettersuited to agriculture; secondly, at a major expansion of the timber proc-essing industry. Future concession agreements may make compulsory the es-tablishment of forest-based industries unless this can be shown not to beeconomically feasible. In existing agreements decisions on processing areleft, in effect, to the holders of concessions and there are few indications

- 28 -

of prospective investment. The possibilities are, however, too importantto be ignored. Bank investigations suggest that self-sufficiency in paperproduction could if desired be achieved by 1975 and sawuwood and plywoodexports, now negligible, increased to 9 million cubic meters by 1985, givingsubstantial import savings and large earnings than from log exports, providedthat an early start is made. The sector contribution to revenues and exportearnings is already large, but could be proportionally much higher if forest-based industries were established.

84. At present, the main benefits to the economy from forest operationsaccrue through taxation and licensing. Forest taxes applying to timber ex-port production, including royalties, dredging surcharges and the 10 per centexport tax amount to about $6/m3, 25-30 per cent of the average FOB price.Part of this (70 per cent of,basic royalties and license fees) accrues toregional governments and some companies are reported to pay up to $4/m3 for"other services". Official stumpages in Malaysia average $3/m3 and in BritishColumbia $4/m3, indicating that even during tax holidays the domestic earn-ings from Indonesian timber exports are substantial. It may, however, benecessary to consider increasing the export tax on loRs both to raise Cen-tral Government revenues and encourage further processing.

85. Hard minerals enterprises also attract royalties, taxes on exportsand other levies. There are no tax holidays for corporate income tax butthere are considerable reductions of tax rates for the first ten years.Each of the agreements make provision for Indonesian narticination onceproduction starts, and the Indonesian authorities are already giving somethnoght tn the way in which partininpatinn shehlA hpe nrranged. The fnreicn

enterprises also undertake to train and employ Indonesian personnel wheneverpsibh1le and utsQ lnenl goods snA sevices, nA e apparently making appro-priate efforts.

86. The mining projects are generally, however, in the nature of en-…lave o- ratin. swith fe .. itoe---An. th retl o i eConom- e

cept during the construction phase. Allowing for their relatively longgestation periods, the h4oh capital coasta to be recovered, the tA c^ncessionsand the capital-intensive nature of their operations, their impact on thenational p ,roduct, an net -rrts ad on revenu. es is likel- to be m-estduring the second Plan period.

Oil

87. The contractual arrangements for foreign participation in oil ex-pLo 0ratiL ELon, and pr^duction are a m0del for th re cliat. Of nation.al a.-.LdLU

international interests in natural resource development and, in Indonesia'sinterests, should be Waintaiuned. 1I Th.ey are not a precedenU fOr other ex-tractive industries in which the market situations are less clear and the

1/ Annex 5, on the oil sector, describes the special characteristics oftne National petroleum industry and tne relative attractions or theIndonesian oil situation compared to unce_rtainties prevailing elsewhereamong producing countries.

- 29 -

investment and growth patterns have still to be confirmed. rne issues foroil lie not in foreign but in national investment programs.

88. The investment program of Pertamina, the state oil enterprise, isdiscussed and analyzed in Annex 5. The basic questions for the new Boardof Commissioners, appointed in March 1972 to supervise and give general di-rection to Pertamina's activities 1/, is the extent to which funds generatedin the oil sector, or borrowed internationally on the strength of the enter-prise's command over oil resources, should be used for development withinthe sector, and if so for which projects or programs, or channelled intoother priority investment areas in the economy.

89. Pertamina's investment program has amounted to some $500 millionequivalent over the five years 1967-71, accelerating from year to year sothat investments in 1970 and 1971 accounted for 70 per cent of the total.About two-thirds was in exploration and production, another 20 per cent inrefining and most of the rest in inland marketing and distribution includingpipelines; builing up the inter-island tanker fleet; and providing servicesfor its own operations and for foreign oil companies. The last category in--cludes four oil sunnlv and service bases: nffire; hnonital and schonl facil-ities in Djakarta and a series of joint ventures in air transport, seismicexnloration and data nrnnessing, storage and handling fac-ilities for im-

ported fertilizer, dockyard facilities, warehouse and forwarding servicesAnd An ArAngement' forl r toh supflu nA 4iic 11t4r% n plant and equipment.Other investments Include polypropylene, asphalt and grease plants. Pertaininahas also med 4rto the steel irdustr- at T41-o", fu. sit of an 4icoplete

Russian steel project.

90. It is in relation to plans for and commitments to expansion, how-ever, thst the balance be. -ween oUj ar,d other invetmert pr'oritismtassessed. Known coammtments include orders for five 115,000 ton tankersULUoLeU LU 1971 -With LuL LLICK arrangument5 in, progress Lor three more, ea-chof 130,000 dwt; the development of the Djatibarang oil field with Japanesecovm.ercial cre WIiLts ofJ $1I40V million, anuA 8 IIaJ%L LCLJ.LrL.y (Y100 W±.LZ..LVUL) dL

Tjilatjap. A potentially large refinery-free port development scheme hasbeer, proposedU forkIUs . ta- LO.LULU, OLJ SLiUngpoUr. ThUe proposeU scorI.U LerLli1ZUL

plant is now likely to be financed under project aid but there is interest intble possibilities of otner petro-cnemrxcal aevelopment. rinally, rertaminacould if the funds were available plan a much larger exploration and develop-ment program.

91. Capital expenditures by Pertamina in 19i2 and 1973 togetner couidamount to around $280 million. The investment program for 1974-78, duringthe second Plan, could be of the order of $750 million even if:

(a) expioration and development expenditures were restricted toabout $40 million yearly and confined, as is present policy,

1/ Am r-Ae Ke r t amln.a WLaw establthlis Board was enact=ed ir. Sept.ber

1971. The members are the Ministers of Mining (Chairman), Finance andPlui-g

- 30 -

to easily accessible and geologically attractive areas, rely-ing nn enntinuing fnreign interent and axnerience in hieherrisk and higher cost exploration;

(b) only two new refineries were built, the one at Tjilatjap-an the seond which may have tn ormn on stream around 1979;

fc) fut e t--- rq mnts wore mat- …nly by hnvtair ar-

rangements;

(d) there were no major petro-chemical investments excepti,n& fertiXL.LCzerX

(e) there were ro uew large JOiflt ventures after rrakatauSteel.

92. With the addition of debt service of around $240 million, depend-ing on the terms of on-lending funds borrowed by the Gover ent for develop-ment Pertamina would require about $1,000 million to finance even this pro-gram. IU half of tnis could be internally generated, disoursements fromexisting borrowing and from the Japanese Government credit of $200 millionwould leave only about $200 mi1lfion to be obtained from new sources. Alter-natively larger borrowing by Pertamina, on appropriate terms, could releasea more substantial part of its own profits for investment activities in othersectors.

93. It may be expected that the Pertamina Board of Commissioners willweigh new oil investment project proposals and programs, especially those notcategorized in paragraph 81, against known capital investment opportunitieselsewhere in the economy. As in all other sectors, the criterion for projectapproval should be an economic justification taking into account the con-tinuing high opportunity cost of capital in Indonesia.

94. At present and for the foreseeable future, the major contributionof oil to the economy will be the taxation payments of foreign oil contractors.The revenues generated by foreign investment, aostly in oil but also in otherextractive operations could grow to $800-900 million a year over the courseof the second Plan and supply resources without which the public sector de-velopment program might not be large enough even with substantial externalaid, to achieve the major development objedtives.

Emploament

95. In general, the effects of the stabilization and rehabilitationDolicies in Indonesia during the past few years appear to have been favorablefor employment so that possible conflicts between output objectives anddistributive or emplovment effects could properly be accorded only minorimportance. In the perspective of the development prospects for the nextPlan neriod; however- there is no doubt that nroblems of emplovment and

- 31 -

inet-np ditribhtionn miut hb given greatetr attpention in the formulatinn and

implementation of development strategy.

96. Despite the lack of reliable manpower statistics preliminary resultsfr-a the 1971 censuss maske it possible to esth.Sa , both the orders of mag-

nitude and the general character of the employment problems which Indonesiafaces in the next ' to '7 yers .e ero 1961=1971 -G appar to -havebeeJ. A.L L1J. LLCAL L.J LU I UYCCA .L&&= jJ=L .LUU I 7VI -91 I I UW CLjJ,J9CaLL LI) ILaVC VC(LL

one of relatively slow growth in both the population and labor force (Table 8).

Table 8: POPULATION, LABOR FORCE AND EMPLOYMENT 1961-1971

1961 1971 Average AnnualRaEe of increase

(000's) (per cent)1961-1971

Population (10 years and above) 63,954 80,426 2.3

Labor force (10 years and above) 34,578 40,100 1.5

Employment 32,709 39,210 1.8

LF participation rate (%) 54.1 49.9

Employment rate (%) 94.6 97.8

While the 2.3 per cent average growth rate of the population in the laborforce age groups (10 years and above) exceeded the overall rate of populationincrease of 2.1 per cent, the total labor force grew at only 1.5 per cent asa consequence of sizeable declines in labor force participation rates. Thesedeclines were most significant among males aged 10-24, presumably as a resultof increasing educational opportunities. Measured unemployment declined from5.4 per cent to 2.2 per cent of the labor force. Although these figuresshould be treated only as a rough indication of the general direction ofchange, there seems little reason to doubt that the movement in the employ-ment situation has been real and substantial. Even with annual output growthrates of only 3-4 per cent over the decade, real incomes of farmers and workerswould appear to have risen significantly - particularly since much of theincrease in output is accounted for by higher agricultural production.Since the first half of the decade was characterized generally by economicstagnation and disorganization, most of the improvement was concentrated inthe last five years.

97. The circumstances of the recent Dast Drovide only an uncertain auideto the near term future. As far as employment is concerned, there is evidencethat the rate of nonulation increaae has already shown a signifirant acrAelra-tion. A tentative analysis of preliminary census sample results indicatesthat from 1971 to 1981 the annatl r*at of 4nereaas 4n the age group 10-64will be about 3 per cent compared to the 2.3 per cent rate registered forthe preceding decade. A fc of the labor f fTable O9) assumin

1971 participation rates by age group yields an acceleration in labor force

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growvth lagging t'ne population increases but reaching nearly 3'per cent by theend of the decade. In absolute numbers, during the period of the next planche labor force is estimated to expand by some 5.75 million workers or over1 million per year.

Table 9: AN ILLUSTRATIVE PROJECTION OF POPULATION AND LABOR FORCE1971-1981

1961 1971 1981(000's)

Total population 97,019 119,182 155,566

Population (age 10-64) 61,427 77,466 103,236

Labor force (age 10-64) 33,302 38,892 50,395

LF participation rate 54.2 50.2 48.8

Average Annual Rates of Increase

1961-71 1971-81

Total population 2.1 2.7

Population (age 10-64) 2.3 2.9

Labor force (age 10-64) 1.6 2.6

98. Age specific narticipation rates mav however cntintle tO declinefurther with the extension of education and continuing movement from ruralton urban area. where participantlnn ra-tes tend. to hi elweb., although not,perhaps, as rapidly as in the past. The result could easily be a rate oflabor force cgrowth -lo*er to 2 2' or 2=a3 per cnt aV ,r-ather than the 2.6per cent. Even so, it Is evident that during the next plan period theabsorption of vonthful nfw entrant. into p --uct4ve' act4i,itiea wi4l pose aincreasingly important challenge to development akd employment policies. Thenbhers wTll of tnrse greatly -eed ehe 18 la force increase proJected.The Government has already begun to addrees i^tself to the problem.

99. Employment perspectives and policy apprvaches are discussed inAnnex 7, The ' pproach. to Mpl_z . t strate,5 4. T-A.esiAA 8 t.hvn Ueg,.a

in Java, Madura and Bali which present the most obvious and the most complexproblems. Here t1.e e.ree oocefa.J . .rur a'.. populaton'a; , nUw a-veragLlngwell over 500 people per square kilometer, has already forced a unique patternof intensive landue and there i8 mounting evldelnce that the adaptationsto acute population pressures increasingly involve non-agricultural activities.

100. The largely spontaneous development of small-scale, often marginalman"ufacturing and serv'ce activities is one inuication. Even in a period ofslow growth the structural changes in rural employment have been quite markedjau.w 7a.

- 33 -

.able I *: rMCD f%%aVIJWI P'fl' fVltn 1 A I A.UA A MT. UA flTTI AJ.c3LLJ.L= 7K LVL ULe.It"fL1 1. J~I U P4. I1 LV11 JAL.)siLY£A L All. AUIJ1M A

SELECTED SECTORS, 1961-1971krercent per anuznj

urban Rural Jo.a

Agriculture, etc. -0.2 0.4 0.4

Manufacturing -i.0 7.0 4.6

Transport 1.7 3.9 2.6

Services 2.7 1.5 2.0

101. A second sign is the prevailence of "off-farm" employment asfarmers seek to use any opportunity to augment farm incomes in other activ-ities, often in urban areas. Sample surveys suggest that "off-farm" employ-ment involves nearly one-third of all Javanese farmers and, in some districts,up to 70 per cent. Apparently large numbers of the rural labor force havebecome involved in seasonal movements to and from urban economies, grossmovements large enough that relatively slight changes could substantiallyincrease net flows into the cities. One of the major objectives of economicand employment policies should be to maintain a rate of growth in economicactivity in rural areas sufficient to keep migration to the efties withinmanageable bounds.

102. In terms of domiciled populations, most Indonesian cities for whichfigures are available increased in size by only 20-40 per cent between the1961 and 1971 censuses, the main exceptions being Djakarta and Djogjakartawith annual growth rates averaping over 4 ner cent. The modest rates ofurbanizatiop may be related to the low level of industrialization and couldnuicken as the develnpment nrnoess gathers momentum-n as in other cnuntries.If so, the degree of unemployment (as conventionally defined) could riseeubsetantially above pnreent 1^w lauvP1s

103. Measurements of unempnloment are narticularly sensitive to theactivities of labor market entrants, school leavers and young workersO0nVAnl1y. About 55 per cenF of t-he me cured ,,nemp1ned in 1Q71 eFe in

the 10-24 age group, three quarters of them in urban areas. The studiesof usnemployment no wI n prno. Dea f,s,i, *hI a a 1 entlu 4uw^.*SniF grou andnn_r__Z___ __ _ r-e>- J -~__r- -- n- g-ro---

more should shortly be known about its composition and orientation in the1 es......lan r :. f1 *la: n.thlne p:olesn oyb a sho.rtage of openir.gs for huniver-

sity and high school graduates and be amenable to vocational education andtra4i"n=- %(as JIDJre bwcomes U -6.L&MW about thJnee supply ..d demand for skills) where

it is not eased by the growth in demand for the educated in an expandingeconomy. LU part alsVO, the st06A.1a6AsL.c -LCy LkprL=0WL4 anL accepaFLeCLUA. pJro

of movement into urban employment. The important point is that in itsapproach. to emp'loy.-uer.t U 'ssues the G0v=erLL1MtZnUtL rLogU.LU wUeve

measures it takes to relieve visible urban unemployment, that the bulk ofrLnuonesia's emplo-ymeut problems lie in urban snu ruraLL l areas UULt.LUd thLl

modern labor market.

- 34 -

104. S4Imilarlv it should be recoenized that mQSt of the labor for-eeoperates outside formal employment arrangements and away from wage scales.Act4nn tn rintifnnnl,4 the Vr u¶nrat tinin .vyspm1 . whiph hnmmrv the effiio4en,

of the public and private agencies and enterprises, while urgent, will not4",rnInf vnnr1r*Alv em tha alnnii~tin avataima vnP tho hi1li ^*f thea laor% v-vnvU4pinge ar.;vFl -_ -_ lo<i ytm of the bulk of the labor mrket.The same applies broadly to labor regulations such as Act No. 12 of 1964rAqU4 ,4,n 4 nF. f4 . K4n n* 4_41 na.-n4 anIa 4,a , 4 a n ._ A* t * U tO .^.s -.-- -------- r- ---- -- - .reLatively small proportion of employees is covered by such legislation andthe burden an empAloers do -not 416 pract-ice seem 09o U_pri aryoevs

1 U. OL A.Of 91J 40.J..LJLo kla& .L% L.L ts LU the &LAQuL=sLaII.L dJL L,orce iLL11971 only about one-third had the status of employees, the others beingc.laZZ*.L,Lt:u Jas LUUJV.rLULMA. p&U1LiLoL(UL% p,er ceIZL eJ ployer (4pr ct)uLJ

and family workers (24 per cent). The sectoral shares are given in Table 9.

Table 10: EMPLOYMENT BY MAJOR ECONOMIC SECTOR 1971

Urban Rural TotalX%

Agriculture, etc. 10.4 72.3 63.2

Mining and quarrying 0.8 0.1 0.2

Manufacturing 11.4 6.8 7.7

Construction 5.0 1.3 1.9

Transport, communication and utilities 9.3 1.2 2.4

Trade, banking and insurance 26.6 8.0 10.7

Services 32.0 6.2 10.0

Other and unknown 4.6 4.0 4.1

Total 100.0 100.0 100.0

Eighty-five per cent of the labor force is in rural areas. Those in agri-culture particularly are frequently employed part-time in other occupations.over 60 per cent of employment in industry is in rural areas.

106. The labor force has shown remarkable adaptive abilities in thedifficult circumstances of very slow (average) growth over the past decadeand intense competition for land and other resources where population den-sities are high. The decline in the share of agricultural employment from71 to 63 per cent over the decade, and the growth of multiple employment,are examples. Open unemployment is low.

- 35 -

107. In these circumstances, improving the employment situation isbroadly equivalent to raising incomes across the lower levels throughoutIndonesia. Employment measures, narrowly detined, will have necessarilylimited impact. A whole range of economic policies must be framed withemployment considerations in mind if the technical changes inevitable inthe development process are not to worsen, if not improve the employmentsituation during the 1970*s.

108. It would be a prescription for stagnation in Indonesia to ignore inits treatment of employment issues efficiency criteria or the need for change,whether in relation to existing enterprises and agencies or new investmentprospects. High import duties or selective bans to protect inefficiententerprises can impose costs on the economy far greater than the benefitsobtained and the net employment effects could well be negative. The existenceof a kerosene lamp industry is not a reason for limiting the distributionof electric power. But there are many possibilities consistent with a sounddevelopment strategy for promoting the labor-intensive economic activitiesconsistent with Indonesia's factor endowments.

109. A relevant illustration of the link between economic nolicies andemployment is the de facto bias in credit programs towards larger-scale,relatively canital-intensive industrial investment when there are goodprospects for small and medium-sized industrial enterprise if access toreFedit- eul he hp -rrAnaad- Tn the Aarit'ilt-tire mertnr- instriut-iona1 cr-edit-

is largely restricted to rice farmers, inhibiting the growth of incomes and

110. The dtstrict (kabupaten) progr-m described in previous 4" Lorts

is one good example of a public sector program designed primarily to rehabi-liaero-As anA Irrigatior. systuems but havnirg beneficial- emplo-me-an~.J.L~L~& CF A 4~J&6 LOL.A ~ A. ~U '.L~~ L1 ~ %.L.J -9LUF&YLU=LAL CL ILU

income effects throughout Indonesia. The program is notable also for itsco,-centration., 0hroughL thLl1e per capi' sLL.c1 L.LocatLoL LULUU.ad, iLL JaVa aLdLU ULIthL

closely populated areas where the need for additional earning opportunitiesi8 mvSt pressing; . itts usse of 0Clal ma.nprower and ateria; ar.dA Jit.- diSC0Vey

of the capacity of local administrations to plan and implement small, labor-in.tensiveA pr-AoJJects.

III. h'4at'iorLaJ. em-pJ.Loy-ment poLLciLes shouLU bUe see. as parL o. eLLI e'fectivemanagement of both capital and labor resources. A combination of agriculturala-u U iudubstria1 pPolicies and iscal and moneetary programs counducive toIndonesian economic stability and the beginning of development has provedDeneficial to employment and income aistriouLion. wiLn appropriate moadrica-tions it may be possible also to combine sound employment strategy and longer-term growth.

Transmigration

112. Estimates of net migration within Tndonesia are subiect tn larAemargins of error but Indicate the orders of magnitude Involved in an approachvo emolovment nrobleim in Java throunh transmigration to the outer islands:

An Estimate of Net Mi-gratory Movements 1961-71-('000's)

In Out

Djakarta 996et o.f Java 1,442L

Total_ 446)

Suatra 801Kalimantan 57Sulawesi 265

Other Islands 215

,' i Ba8d uon actual population growth rates versus estimated naturalrates - see Annex 7.

113. Most estimates of the net outflow from Java are in the range of35-50,000 per year. The most striking feature is the movement of people fromthe crowded regions of Central and East Java (and Bali) not to urban areas hi'tto rural areas in the outer islands and, mainly, to southern Sumatra. About200,000 of these people were settlers under official transmigration schemesin the 1960's.

Ilk. The transmigration program in 1972/73 provides for the settlementof nearly 11,000 families (about 45,000 people) not including 3,500 familiesto be relocated with Lampung, the main settlement area. The Government isplanning to enlarge the size of the program and empahaize its developmentospects. Its contribution to that objective could be substantial if theselection of settlement areas is sound and the recommended shift from irriga-ted to rain-fed agriculture occurs. In the longer-term this is an essentialelement of national development strategy.

115. Even a much expanded program, however, would contribute onlymarginally to the absorption of labor force growth in Java, although thebenefits for some of the poorest and most crowded communities could be sub-stantial. It would take outmigration averaging about 1.2 million a yearduring the second Plan over ten times the apparent annual average over thepast decade, to reduce,the population growth rate in Java to one per cent,and this would also mean average population growth in the rest of Indonesiawould have to double to 5 per cent. 1/ The labor force in Java would still

1/ Population increases in Laupuyn,g, 1961-71, did in fact average over 5 percent more than Djakarta.

- 37 -

grow Dy 2-2-1j2 million, about tne same absolute increase as is expectedduring the present plan period.

116. Apart from labor force increases, the burden of adjustment tostructural change in the agriculture, industry and the service sector islikely to be most severe in rural Java. Thus under the second five-yearplan the major employment trends and prospects will depend on developmentsthere.

Regional Development

117. To obtain a clearer understanding of Indonesian development issuesusually considered at the sectoral levels, the Bank mission's investigationswere extended to the regional, district, town and village levels in 12provinces in Java, Sumatra, Kalimantan and Sulawesi. A preliminary assessmen,of regional and local development possibilities and their relavance tonational growth objectives is then possible.

118. Indonesia has a developed regional government structure and traditixand the damaze it suffered during nast nolitical and ecnnomic unheavals nowseems to have been largely repaired. It is geared to regulation and controlother than economie and nrfA1l dalvelnpment but the iintprest at all levels inpromoting local progress, while varying from region to region, is generallystrong Planning mechan"-In, are st411 Aud4M&ntain alt,UrhVoug ewlr n

development plans, often with the support of provincial universities, isacceleratinsg.. v "4ne .*4i-h the centrally-fl."^eA Ad-is4:i A- lopmet4

.a * ~~pr- i .. s. wi. . .. - -&s ... .Ia - -

program has demonstrated, however, the existence of a broad capability in theregions to n ar.d implemer.t @an.LL rhailitat,l zr.d dV.LUFvelopLmen pF. JJcts

19 I -* . J.ere are some 28U0 D..bbupatens (Udlstricts) , over .0 1-otamadyas(cities), 1/ and about 50,000 desas (villages) in the 26 provinces. Each has

n_ .f , Of. -~. I O_ _ * - -- -- -.n i 44 - -.nnA U_4 . .C-n In.,~ ,.k l1 I ..n... 4 svm fo.0- de-Jo n p-- fir5 .z r. pjartl, often LargL bLLy allIoationfrom the central government's development budget, and the main question isthe exter.t to which ths rgaacr rsholt be1 S.- de ____A_A the, next9.flf~ ~ I9~ W&&~..fli & C F&W6L &CUM 9 %IJ& SAI"LW.J M~_ =JF " 1~ %ALLL .LLL5 169M ILM.L.

stage of Indonesian development.

120. It is clear that the employment and income distribution objectiveso. weU wv- Ment c&ULIiann. be UecUred W1AVUL coUUnLtued sLeady growLh ini agri-cultural and other labor-intensive economic activities not only to providenew e:mpy.L yU:ut oppUrtunities DUt alOo tO raise tLne lowest levels oi income

and to create the necessary broad demand for domestic production. Savingsand investment at these levels still appear to be very low and for mostagriculture and other small enterprise sectors the cost of credit is highand access is limited. Tne credit, input and extension requirements arediscussed elsewhere in the report. Particularly in Java, however, alternativ(

1/ These average nearly 300,000 inhabitants and tend to be larger in Java,where the capitals of kabupatens, averaging 55,000 people, are also otsubstantial size.

- 38 -

earnlng nopnrtunities no,d urgentlv to be develoned In this context a muchgreater emphasis on labor-intensive development, widely dispersed, financedn;irtlv hv in4r,--ARd lorn7a1 nAvlnas and nartlv bv larger tranafPirn fvrwm the

central budget, may be essential.

121. At present, investment activities are concentrated heavily inf4an-ta'fl and a fe othe.r cities. UMO-v1, 75 pemr nf fo_in4 ftiJJ a5 - n&. a. - - ._.- & - -… - -- -. -a. -4 LAV~ Il*

projects other than in oil, mining and forestry are located in the capitala..A *l's4 *e elan *ha- A-,m4n"-n* 'n~r .A. ce .~n ntn � 4- ---n. _~ . W~.ne a r~nr n..L n~a.. thisA i8 nal80 thel sa.L..nt. cer.te (~ve 30 per oert ir.L u ter ofljpprJL

for domestic enterprise investment. Local revenues are also relativelyUu y n @ _1~ _C A v 1 ssA41 I..t vA Alk -J _4 *F t_ _t

U aL. #_ *V-. LSVz WO V S^G *.J LV .11 UOa V SOLOA U7 .LLC D LJL1

were only 37 per cent of Jakarta revenues, although the total populationwas aboL. the COmM. &AUVO= smaller cities are never.L eless Lavoraluy placeu

in comparison with the kabupatens investigated, whose local revenues averagedone-th.'ru ofL the urbLaA level. 1JLS amounted to arOund URp 150J per capitaJ

in 1971/72, enough to finance minimal routine expenditures. The figure suggestsvery low levela of local goverment activity adu a potentiLal f or revernuegrowth. All development expenditures were financed, in effect, by routineand development budget transfers from the center which amounted to aroundRp 200 per capita. Kotamadya development spending appears to averageRp 750-800 per capita.

122. A major increase in local development outlays and a reduction ofthe imbalance between urban and rural programs, appears to be called for.It would seem to be feasible and probably necessary to double or triple the1972 level of allocations for provincial district and village development(Rp 39 billion), in real terms, over the course of the second five year plan,using these central subsidies to elicit greater local revenue which wouldsupplement them. This approach has already been introduced on a small scalein relation to the IPEDA (land development tax) which is already used fordevelopment and has the greatest potential.

123. The capacity of local administrations to absorb additional fundsis recognized and, in relation to the INPRES program, tentatively quantifiedat as doubling over 2 to 3 years of present outlays. This program concentrates,however, particularly on road and minor irrigation rehabilitation and thereare extensive requirements for improvements in the schools, hospitals andother elements of the social infrastructure. In addition, expenditures onmaintenance are still low and a substantial proportion of increased localrevenues should be directed to expanding priority (and labor-intensive)maintenance operations.

124. The ability to finance larger regional development allocationsthrough the application of part of the revenues derived from natural resourcedevelopment is one of Indonesia's major advantages in growth in shaping adevelopment strategy. The assured expansion of oil, mineral and timberproduction and exports will contribute strongly to GDP growth but have littledirect impact. nationally or regionally. on employment or income distribution.To the extent that fiscal mechanisms can transfer some of this income growth

- 39 -

to regional and local develooment programs the growth and social oblentivescan be better reconciled.

125. Regional imbalance. Indonesia's population is very unevenly dis-tr4ibuteA over its territor,. MnArkveA differer.e exist in prnc4ta regIonalincome levels, although the usual comparisons between population numbers andlar.d ar-eas, n--urma1 rensource endo-ents o-r ers,- priua rly as between

Java and the rest of Indonesia, probably exaggerate these income differentialsS!uchl- i,.dicators as the1- per capita availa`ility oPrc=ad ret.atdvle

.~)U~LI .LLu.LLLJ aL~ ... A. J. UL.L.L ?_ 0J.. rielandLL1 or. esiatedL~ value~

of major food crops show very considerable if not such dramatic variationsUetLwCeen ruLaJor regions. RepoLrLtU abUoLreLr Ua.L.Ly waert: LeLs o.f AV '-1 VL

Central Java and Jogjakarta and an average of Rp 250-300 in Southern Sumatraa-ad K-al'antan reflect tihe surplus labor in Java and tUe relative scarcity inthe outer islands, even though many districts outside Java have low wagesand higher costs of living wnich reduce real differentials. I; Such incomedifferentials do not appear to be large enough in themselves to induce amajor flow of population from Java to "outer" Indonesia.

126. Rural incomes are of course low throughout Indonesia. In itsdistrict and village programs to date the Government has followed the prin-ciple of equal allocations, on a per capita or lump sum basis, for areadevelopment. As mentioned, for 1972/73 a minor part of the district develop-ment allocation is to be made on the basis of local tax performance. Othermodifications are being considered, including special programs for povertyareas and additional finance for small or isolated districts otherwise unableto mount a significant work program. The transmigration schemes could helpto ameliorate some of the strongest pressures in Central and East Java,Djogjakarta and Bali. Area development planning in southern Sumatra shouldassist this process. In general, however, the system of broadly equaltreatment of Indonesia's regions seems likely to continue for both politicaland practical reasons.

127. One present exception is that development budget transfers toprovincial governments are based, for historical reasons, 2/ on each province'former contribution to non-oil exports. This strongly favors regions which,because of their export base, already have as a rule higher per capita in-comes and revenue potential. In particular, it creates severe fiscal prob-lems in Java, except for Jakarta with its broader revenue base. The alloca-tions have not changed since 1969/70, and are therefore declining in realterms. Consideration should be given both to expanding the total size of

1/ Population densities in some outer islands districts also approach thosein parts of Java.

2/ Until 1970 there existed an ADO export tax of 5 per cent accruing directlito provinciai governments in roreign exchange. Since its abolition,equivalent amounts in rupiahs have been transferred from the annualdevelopment budgets.

- 40 -

thLe tra.sflers, and, W.LrUAJ.&L&A. Lt.i&her toaLL, alJoaLting^.LU5 sb.%L OUes to

provinces now unnecessarily short of development funds.

128. The high population densities of Java, Madura and Bali, which havethe lowerst incomes, confer certain advantages in any allocation of resourceson a per capita basis. These include integrated, relatively low-cost trans-portation and marketing systems and a more highly developed pnysicai andinstitutional infrastructure. The impact of the INPRES program is alreadymore noticeable there than on the other islands. Java's non-agricuitural aswell as agricultural development is also, on the whole, more advanced and it isin a better position to take advantage of opportunities for agriculturalintensification and industrial expansion. In due course it will have toemerge as a more industrial economy than the other islands, exportingmanufactured goods to them as well as abroad, if the present imbalancesare to be reduced.

- 41 -

III. RESOURCES

129. Estimates of present levels and trends in aggregate savings,investment and output in the Indonesian economy are still highly tentativeand calculations of overall resource requirements are useful only to in-dicate the broad magnitudes of the task being faced in attempting inIndonesia's circumstances to secure satisfactory rates of economic growth.

130. Preliminary official data record GDP at market prices in 1970at approximately RD. 3,200 billion or $8,800 million at the average exchangerate calculated for that year, with an investment/GDP ratio of 13 per cent.The available indicators stronelv suggest a growth rate since then of 6-7per cent per annum and a marked acceleration in investment activity. Ifthis momentum can be maintained. investment levels could build up to 17-18per cent of GDP in the course of the next period, supporting continuedgrowth at or around 7 ner cent per anntm- The fnll1-wing GDP and investmentmagnitudes are implied:

GDP Investment(In R411i^"a of ,Ris"ima at-

1971/72 Prices)

1074 4,288 686

1975 4,588 375

1976~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~, 4'0 835

I 0, 5,233 91919-78 5,62 0 1,12r* , I %'Ii FV

10 070 'r I) 1 1* Iu .J u 'V I v S &

.L-e average ratio of investment to GDP is indicated as 17 pan cer.. a.d theimplied ICOR at about 2.5, approximately the same as that for 1960-1970but substantially higner than during the recovery period from 1967 untilnow. This may be still low. Much of the investment to be undertaken will becapital intensive. However, the economy snould continue to benefit for sometime from the opportunities for rehabilitating existing capital stock - themain irrigation rehabilitation projects, for exampie, wiii be compietedduring the second plan period - but these avenues for comparatively low-costinvestment are already diminishing and new investments in infrastructure andproduction will probably require resources more in line with past experiencein Indonesia and other developing countries. In part, production increasesin agriculture have been secure, and could continue, not so much throughinvestment as increases in labor and current inputs. Even so, the appar-ently low levels of gross national savings and still modest rates of in-vestment discussed in Chapter I will have to rise, and if the resourcegap is not to widen, a strong effort to mobilize domestic fiscal andmonetary resources will be necessary.

- 42 -

The Fincal Outlook

131. The central thrust of the Government's fiscal policy has been toholpns atnh414a nnA rehAb atn*e trhe ae.nnemv by Inereascng rev-vnues- andensuring that expenditures did not exceed the resources available. Itssuccess- -he-kin- - nfl-t-oaa ni.d _ nal l48lj4f thg e Me8s1 rlnre ____

now place the Government in a position to frame its fiscal policies anLoperations in a 'ouger=t pe.spective and to purse reve-e and expendi-ture programs that fully address the country's requirements.

Revnuflne Prospects

132. On the basis of performance in the fiscal years 1969/70 to 1971/72,during which revenue collections increased by 44 pcX ce"U ifL real term (30per cent excluding oil production revenues), good prospects are seen forfurther substantial growth. Tne mission's projections of central governmentrevenues for the period of the second Five-year Plan are summarized inTable 11 and discussed more fully in Annex 2.

133. rhe projections were developed by reviewing recent trends andperformance within each tax category over the first four years of the planperiod and also take cognizance of the forecasts of revenue for tne finalyear of this plan, 1973/74. They therefore take fully into account thestrong revenue performance during Indonesia;s recovery but do not, however,assume basic policy changes or major restructuring of tax iW8s. Basically,the higher revenues would result from further revenue gains over the presentlow levels for particular taxes, assisted, over a period, by the administra-tive reforms now beginning. Revenues from foreign oil cowmpanies operatingin Indonesia were estimated independently, and the projections of productionon which they are based say also prove conservative.

134. In the income tax categories the potential for growth appears tobe large. Apparently only about 100,000 businessmen in Indonesia aredeclaring tax liability and only about 400 are declaring taxes of Rp. 50,000per month ($120) or more. Only 300 corporations are paying Rp. 500,000 permonth or more. About 40 per cent of importers and others registered asliable for withholding tax are actually paying the tax. Gtowth is the indus-trial and services sectors, and the expiration of tax holidays for domesticand foreign investors, should make it possible to increase collections ofdirect (non-oil) taxes by 19 per cent or more annually, in real terms,without penalizing the growth of enterprise.

135. The imDortance of strong growth in direct, non-oil taxation isunderlined by the projections of less rapid growth in future in the reve-nues derived from the operations of foreign oil companies. This sourceof income, estimated at Rp. 206 billion or 38 per cent of total -revenuesin 1972/73, i8 exnprted on nresent nroiections of oil production by source,exports and domestic market requirements (see Annex 5) to increase to overP.n 1?e; 14114,in 1n 1Q76/77 btit tn lPvpl off thereafter. In 1978/79 corpo-rate tax on foreign oil companies would account for 30 per cent of total

revenues, little more than in 1971/72. Steady increases are however fore-cast in taxation on domestic oil sales, and increases in the contributionof direct taxation by Pertamina, the state oil enterprise, should alsooccur.

Tabl 1I PRXT.T1WTAR7 Ph.Nrfl.T TON3 OW On-VFJM IT R W.TTT

(in billions of rupiahs at 1971/72 prices)

Annual Ave rag-,I 9 73/7), 1 97),17C: I o75[,7 1 976 04 77 1°7? 7.t7 107R/70 rs %

T;P+ +cta te Q RAn .n. 2,0 1,1, 1 7

Go -orate t___ 230, 250' Z516

oilO+here. -0 ,0. fil n 219 nl 19 .

T n-d- rect --a es 'IeQ aQ ,j n' 2 2 ; , 1. ' O . ^7

JAJJJ1 c 1,6 15 177 20 2y£624. 0J

bcterna.1 trade 122 128 135 141 148 156 5.1

Non-tax receipts 10 11 12 14 16 18 12.0

Total 607 674 729 795 838 912 8.5

Annual increase 16 11 8 9 5 9

136. In the main indirect tax categories the largest increases areforeseen in sales taxes including revenues from the sale of oil products.In the former, collections could be greatly increased both by obtaining morefrom enterprises already paying some tax and by collections from firms notreRistered or not pavinz. Recent measures to improve collections here hadan effect - after a modest increase of 8 per cent in 1970/71 an improvementof 29 per cent occurred in 1971/72 although the tax was reduced and revisedin August 1971. The establishment of priorities that will have an impacton increPaain overAll onl1ert1nrm cnuld enntinue tn be effective even whilethe present limited administrative staff capacity in this revenue field isbeing' built Itp .

137= Tas n inrtefrnAtirJnA1 t!rAde are not Aeen Ag a growth categorv.Performance in recent years has increasingly fallen short of budget targetsand there was an absolute decline in collections 4n 1Q71172 over the nrevol.syear, in a period of strong import demand. In part this represents invest-ment and project aid -enption ad a contir- ing shift ir. the compoition ofimports. The Gover nent is especially concerned over the level of duty col-1nc*4

-fan 0 .A 4- -~4.n..c.'n 44..n,.n -------- raf4

-flw "rr.n,nrfnrmn ia'nl a.%,&W dt. is t.sire measure WC dChi&c shoa-ulk"d :-g5 s4vey -- -- -

The export revenue projections, on the other hand, are not expected to in-crease sAigni-ficant'ly. I;. i8- athz: there wall be a-dec4-. ir4rve.

after 1974/75 on the assumption of a gradual increase in exemptions, permittedby LnreasLug re-veues Lrou o-ULUer surcUs, to encourage selectivelyth

growth in exports, particularly by smallholders.

Routine Expenditures

138. The Government's policy has been to restrain routine expendituresgrowth to secure increasing surpluses of revenue over such expenditures fortransfer to the development budget. This principle will have to be pursuedduring the next several years if the rupiah development budget is to expandrapidly enough to match the increasing flow of project aid disbursements(from the present pipeline and tuture commitments) ana reacn tne minimumlevels necessary to fund an adequate development program. At the same timethe projected overall real growth In domestic revenues of 9 per cent willhave to provide for reasonable growth in essential recurrent expenditures in-cluding salaries and allowances, material and maintenance expenditures,transfers to regional governments and provision for external and internaldebt payments.

Salaries

139. A major issue for the Government is the extent to which the stilllow salaries of civil servants can be progressively raised without damagingthe public sector development effort. Higher salaries are an encouragementto more efficient administration and management and cannot be consideredseparately from the funding of development projects and construction andmaintenance programs. The development budget also complements the routinebudget salary allocations in providing extra allowances and benefits forcivil servants engaged in development work, so that holding down formalsalary levels unrealistically may only encourage an expansion of personnel

- 46 -

costs in the development budget. The structure of the budget also meansthat only those on the civil service list, fixed in size since 1967. arepaid basic salary and allowances from the routine budget. Temporary staffare paid from the develonment fund.

140. Within the routine budgt; nprsonnnel YpexnVnA4tsire by33 per cent in real terms from 1969/70 to 1971/72 with a further increaseof 28 ner cent hudgeted for 1972/73. Over the four y,ear_, vlAr4as 4 n-

creased slightly as a percentage of total routine expenditures (43 to 45npr Pont) b…t fall al…"4fl…nrtl%… frem 39 to 34 per c…t… 4"… r,….t4- to…

total domestic revenues.

141. Given the competing demands for other recurrent and developmentPurrNwes the proppos-al ton rvai_-e civil service asal-a.i-es to mt^l 4-k ver;-substantial increases recently given to the staff of the Ministry of Finance.over 2 to 3 y-, apea:s -- istic ul s -Jr i5 &ir

number of government servants is contemplated. It would incrape s,alariesasa propor-4orn of to:-- `^-t;ic revenues to an esti CA vpr eti

1975/76 and seriously impinge on the Government savings effort. An alter-nat've approac raising salari es at a steady 20 per cant a yer4J, in realterms, over the coming years would have similar, in fact slJbt4y Qnger,effects. In the mission's budget projections, s4ary incteas, UOL iazrgerthan the growth in total revenues are assumed, keeping approxiptely the1:3 ratio now obtaining. As shown below, this would imply av4rpags increagesover the period tp 1978/79 of 9 per cent a year in real terps a year fromthe base established in the preliminary 1973/74 budget:

Alternative Personnel Exp enditure Projections,±.(In billions of rupiahs at 1971T72 prices)

1973/74 1974/75 1975/76 1976/77 1977178 1978/79

Rapid initial increase 234 307 410 418 427 434

Steady 20 per cent p.a. 207 239 278 324 379 444

Increases proportionalto revenue growth 223 248 268 292 306 334

/1 Salaries and allowances for central government civil and militarypersonnel.

The difference of Rp. 100 billion or more in 1978/79 is significant in termsof both of total revenues and total national investment levels, estimatedrespectively at around Rp. 900 billion and Rp. 1,000 billion i; that year.Too rapid a salary growth could thus impinge on private savings, growth poten-tial in addition to the effects within the public sector.

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Maintenance

142. Tnadeqn,At-e ronuisinn fnr ma4ntenAna wirth4i the mA1tr4al

expenditures sector of the routine budget (only Rp. 5 billion or 1.5 percent in 1971/72) hs meant both the fi4"n" 8 f" most ynnfrtanai'm operat4^"Q

from the development budget and an inadequate provision for maintenance asa whole. Much higher pr,4ori - m -t be g4ve-. to i4-tenance -xpend- tur-s 4n

the routine budget if existing Government facilities and equipment are not

still also low though there have been useful increases over the last fewyears. In the interests also of tramsferring - lean*e expend-ltu4resfrom the development to the routine budget, as rehabilitation measures arecom-pletet, ShLe Uudget proJLect-LJ.Uo o-llows fLor expend'L.LLUeL gUhW1 'n LL hL.Lcategory averaging 15 per cent a year in real terms. This should be accom-

andL 4u uy JLU Y=U Lo JU LUC an L"5r7aLLVe aLranUemeu0 .0 CIWULc uLic

most efficient use of public facilities and equipment inventories as theyare b-ui't up.

143. Pressures on the routine budget appear to be eased by relativelylow levels and rates of increase in debt servicing costs over the nextfew years as a result mainly of the rescheduling of tne pre-1967 officialexternal debt and the favorable terms of new external aid within the IGGIframework. The pressures could also be eased if larger revenues could begenerated at the provincial and local levels to finance in part theirexpanding routine and development expenditure,programs.

144. The mission's projections of central government routineexpenditures are summarized in Table 12.

Table 12: PRELIMINARY PROJECTION OF GOVErNMENT ROUTINE EXPENDITURE(In billions of rupiahs at 1971/72 prices)

AverageAnnualIncrease

1973/74 1974/75 19"5/76 1977178 1977t78 1978/79 (Percent)

Personnel expenditure 223 248 268 292 306 334 8.5Material expenditure 95 109 126 145 166 191 15.0Allocations to local

government 92 102 110 118 124 124 6.2Debt service payment 51 45 49 54 59 64 4.6Other expenditure 8 8 9 9 10 10 5.0

Total 469 512 562 618 665 723 9.0

Annual increase(percent) 9.8 9.8 10.0 7.6 8.7

throughout Indonesia are small and substantial transfers of central funds

ADO transfer compensating for the loss of revenue from export taxes, thecenlter met approximately 17c- -e cen _f all Iugee ---- isre ofprvuccenter Le apUC.L&C.Ly la F1CL cerL of. 4.L. UUUSC&CU CAFCL1U4U.UC6L7 UL PUVA.LU&;Le.'

governments in 1971/72. At the district level subsidies and transfers financedam 55IJ per cent ofL tot Cal Cexp=enUL2;AUrLe, ,1AM KtWUaLUUUK M.I.LL6 U-J.UAly £LUUI L.Le

IPEDA tax in rural districts (kabupatens) and from a wide variety of mun'cipaX.L V.Lb -anLI~UrJU ra'e-es ir. the urbo uroom 'kotama&as')

146. The expansion of provincial and district development programsrequired to generate employment and income especially in rural areas willrequire much larger local revenue efforts and an increase in allocationsfrom the central budget. The mission's investigations in the provincesrevealed good prospects of a rapid growth in local revenues from the pre-sent low base, if determined effects are made to tap the main sources, inparticular the IPEDA tax. Increases averaging at least 20 per cent a yearappear feasible and, even allowing for a need to raise salary and.other routineexpenditures probably even greater than exists at the center, this couldmean the approach of self-sufficiency in the routine budgets at the pro-vincial and district levels in the course of the second plan period. Asindicated in Table 13 there could then be a change in emphasis in alloca-tions from the centre, away from salary support towards the financing oflarger kabupaten and other labor-intensive work programs.

Table_U3: CENTRAL GOVERNMENT ALLOCATIONS TO REGION1974/75 to 1978/79

(In billions of rupiahs at 1971/72 prices)

1973/74 1974/75 1975/76 1976]77 1977/78 1978/79

Routine Budgets 92 102 110 118 124 124

West Irian 9 10 10 11 12 12Other 83 92 100 107 112 112

Development Budget 62 71 81 95 110 129

West Irian 4 4 4 5 5 6Other provinces 19 19 19 19 19 19Districts 34 42 51 63 77 95VillaBes 5 6 7 8 8 9

Total 154 173 191 213 234 253

47. Tv. 1071/74 C c o fro *bo sidez of t he 'Gr-aernmm. t budtCet

to the regions amounted to Rp. 154 billion, a quarter of Government revenues.T,iS8 proportion. could bDe maitasined, but .i:8 U., &reatly e by

seeking to increase regional revenues and at the same time expanding the

- 49 -

al1orat1 ons for nlatr4it dpv Innmpnt nrnoramsm i4n nArtri-ular- Althnouh notshown in the projections, increases in allocations to provincial governmentswouild slAO be des4rahlo ninA -o,lti ha linkeA to eha it,-n14-oy. of 8ope4f4c

program responsibilities, e.g. feeder roads or minor irrigation works, nowrho rvoianio4h41i4 t of exi"rol g aoveI.- dprns The* per. 4-w,,

based on former export earnings, which penalizes Java in particular but alsoother provinces with a li^ted export base. Increases int size of districtworks programs would also facilitate the plans for special emphasis onpoverty areas or Jisolated districts -WiLchLL iLs part of GveLLent tlhilr.kir.gLI. e

major expansion in transfers for development should depend on further steps tobuildd up &administrative and pla.-r.ir.g capa,bLiPUL.Li'.tiLes at t.he provincial anr-.d Local.

levels. Table 12 suggests the order of allocations which may be necessaryi.4 .ALhe emplo-yment ar.dG 'Ln.ome obj e c;' iLVes Uo LLAh GoWVerLUmerULLt UV to

realized, in part, through a broad spread of development activity particu-larly in rural areas.

Central Government Development Program

148. Table 14 tentatively outlines a public sector development financingand expenditure program which would retain and consolidate the pattern of thedevelopment budgets since 1969/70, and take into account both increasinglevels of project aid utilization from existing and future commitments aswell as the trend towards greater emphasis on regional development.

TaLble 14

CENTRAJL SOVMQ=IT DEWELODPINT BUDGET PROJECTI0N(in billions of' rupiahs at 197:1/72 prices)

19737717$19 777 T 157 7 6l577619?777 1977/7 - /77779 Annual AverageGrow th

Central Government Program 173 a! 236 252 8

Local currency finance 1L43 60 72 52 79 87, 15Other 130 137 42 5C) 157 165 5

Regional Programs 62 S _81 :L10 12S 16

Provinces (ex-A.DO tax) L9 19 19 159 19 19Dis-tricts 31, 42 51 6 3 77 95 23

(Kabulpate:n) (17) (22) (27) (34) (42) (53) (25)(:[PEnk) (17) (20) (214) (25!) (35) (42) (20 )

Vil:Lages 5 6 7 8l 8 9 10West Irian 4 4 4 5 6 10

Total Rupiah Development Budget 2 3 268 ?95 . 327 346 381 10

Project aid 79 112 136 154 146 158 15

Total Development Expenditures 314 380 431 481 492. 539 12

…- _ _ '

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149. On the expenditure side, the growth in disbursements of projectaid, and in accompanying local cost financing, is evident. The mission'sprojections of project aid disbursements assume, on the basis of IGGIcommitment levels for 1972/73, an increasing inflow of project aid fromnew commitments of around $400 million annually (at 1971/72 prices) aswell as from the existing pipeline. Changes in the commitment level wouldalter the projections although the initial effects would not be large. Theoverall rate of disbursement assumes some acceleration in the present timetaken between commitments and initial disbursements and also somewhat morerapid implementation - up to the IDA world-wide average rates for eachsector - with increasing government and donor experience and growing imple-mentation capacity. The sectoral composition taken is that of the 1972/73IGGI project list. Local currency requirements are also based on informa-tion in that list.

150. The projection shows the increasing emphasis on regional develop-ment specified earlier and indicates also only moderate growth in centralgovernment works program expenditures as part of these operations aretransferred to the routine maintenance nrogram and other mAintenanceresponsibilities devolve onto lower-level administrations. It also reflectsthe completion of narts of the rehabilitation program and the growingimportance in total expenditure of aided projects.

151. The constraints on expansion of the public sector program never-theile shn partc l i.j.,n the late: yea. war on prfsent p:oAectiorn

oil revenues stabilize and the burden of revenue growth falls elsewhere.At preet, the gap reoutine anddevelopment budget expenditures is being filled with the counterpart fundsgenerated by progrm aid. L,it "MuWmpt.L.W" UJ contin-ued co-u teULpar7t I-=

support through program aid is implicit in any assessment of the balanceof resources 'or the public sectors in tne near future. WILut'uL it,substantial deficit financing could be the only alternative if an adequatedevelop mer,t pmogrWm J LU tobe mo-,;tedU. Even wiL-Lh JU&LLUCK LUL1LCLpCLLL. sUpUprL,

continued strong revenue growth and restraints in Government consumptionexpenditures are I.LUMicated.

1 52 . Thne composition of the development program has heavily and ofnecessity favored the economic infrastructure sectors which received above80 per cent of budgeted funds in 1971/72 with education, health and othersocial programs receiving about 14 per cent and general (mainly building)programs tehe remainder. Tne orientation of project aid in response to pastrequests strengthens this emphasis, increasing the balance for the economicsector to 84 per cent and reducing that of the social sector to 12 per cent.For 1972/73 the proportions are similar. Increased attention now beinggiven to education, health and family planning and, within the economicsectors, to agriculture, should alter this pattern in due course. Even so,much of the burden of financing their expansion will fall on rupiah resourcesallocated both for central and for regional programs.

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153. Allowing for a continuing element of recurrent expenditure inboth central and regional development programs, the savings generated -nthe government sector, net of debt servicing, could amount to around Rp 2C0billion in 1978/79 and by that time be financing about a fifth of theestimated investment requirements. Total Government revenues would amountto some 20 per cent of estimated GDP instead of around 13 per cent in 1971.

154. If domestic revenues are to increase by more than 9 per cent onaverage in real terms between 1971/72 and 1978/79 (13 per cent excludingoil revenues from foreign contractors), the Government will have to re-orientits tax policy from the target system still in force towards a policy empha-sizing the potential tax base. The former system has served its purpose irgenerating quick initial increases in revenues but substantial administra-tive reforms are now needed to secure adequate future growth. The author-ities are becoming concerned about tax performance and reforms are beingintroduced, a series of dismissals and new appointments has been made andsalary scales in the Ministry of Finance have been raised in anticipationof further improvements in performance. The two basic requirements are acomprehensive program for upgrading current revenue officials and trainingnew ones, and a more systematic effort to establish the potential capacityIn each tax category. Training programs. both local and overseas, havealready been introduced. In the absence of an established tat base therewill continue to be a tendencv. most noticeable in import dutv collections.for performance to fall short of potential collections. Investigationsinto the tax base are alreadv under way in some fields and. ewten in theshort run, a concentration of limited staff capacity in priority areas couldcontinue to nroduce substAntiAl revenue grewth whilA longer-term refnimsare in train. One of the clear priorities is a drive to expand the limitedrnlo now played by provlnr.cnl n.A A4adtr4.i- tAxes lm n anetng resourcesfor the public sector.

155. The resources for public sector development will be defined alsoby Government porUcy or. salary increases. There is g agrement thatsubstantial raises are necessary both at the center and in the regions.Too rapid -n increase ould, hw ever, pre-em#pt resources ale"'y r more"' vitalto the development process. The mission recommends, as a guideline, in-Cre-me8 4.. Mhe sal..ar;y component of .the budget not more t.hM. in propotior.nto the planned increase in government revenues whether at the centre br in#4- pro < nce , so 'L--at t4he grow--.h 'r, otherL pr';U,.LUY cxpehdiu:e1& VCL6&eb- e0y& V.uL~ m La.LL 6U i UUA~ JLAL.y~pUA~ %.LaJLJ.O

will not be constrained.

156. The need to restrain salary increases is emphasized by theproJections of pulblic sector resources -whU'ch ind1icate, LnL PL.L.AU.LCL, 6LhLa

reliance should not be placed on increases in corporate oil taxes to accom-moUdate expdasilonary trends in Government cUn1UMPLc;U WApCnUsUr- *JUULU

fiscal discipline will be required especially in the later years of the1970s if Indonesia is to consolidate present trends towards growth withoutinflation.

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157. The attpsto*oebdetrgproedre for ----- mntar* ***~ U~~~UAjJI~ L.W .JLLUJLJA. V1- ULLr=_.& FJI.WL=%LLLL=.. LALL %A=VC.L%JiJIU=&16 L &

discussed in Chapter IV. Better procedures would help the Government toidentifJ.y, p.LGLLI CULU eVa.LUaLt LAIC the UpULLeLLt parts of JLb UdVelopmUUL; progXML

and would, in addition, facilitate the progressive transfer of expendituresWLhic4L coud bU bU clasifieda to the routine budget. More I=pOrtant, hLw-ever, will be the physical completion of economic and social infrastructureprojects and tne development of essential services to support tne growtnof the economy as a whole.

The Financial System

158. Annex 1, in the second volume of this report, contains the mainanalysis of indonesia's financial system and the discussion ot requirementsfor institutional development and change. The following paragraphs focus onthe main financial issues arising from that discussion.

Savings

159. Savings levels in Indonesia appear to be still relatively low inrelation to savings performance in other low-income developing countriesand in particular to the other development efforts of the economy. IBRDcross-section studies indicate the expected average propensity to save ata per capita GNP of $90 at around 10 per cent. It is often higher - grossnational savings amounted to between 11.7 and 19.9 per cent of GNP at fac-tor cost in 1968 and 1969 for a number of Asian and African economies withper capita incomes in the range of $60 to $110 (see Annex 1, Table 1). The1970 provisional national accounts for Indonesia show an equivalent ratio of9.2 per cent. So far, although public savings have increased, the effecton savings performance of accelerated growth and increasing per capita in-come does not appear to have been large. There are also indications thatprivate savings in particular are not being adequately mobilized for prior-ity investments. In the recovery phase, with corporate savings probablystill low and financial institutions often weak or non-existent, Indonesianperformance could hardly be expected to be good. Rapid improvement willnevertheless be essential if domestic resource mobilization is to play itsappropriate role in supporting national 2rowth and distribution obiectives.

160. Indonesia's initial successes in raising revenues, and publicsector resources for development and the gains from growth in oil produc-tion and exports. mask some of the loneer-term issues in resource mobiliza-tion. Fiscal policy is usually the basic technique employed for improvingsavings performance in the short-run and it has been effectively used inIndonesia since 1968. There is no doubt that higher public savings willbe necessary ton asotain increasing leve1s of investment. Too heavv a re-liance on revenue efforts could have adverse effects on private savings,however, mthu pnrcessarily raisanvg total savirngsto adequate levels.The Government's8 propensity to save out of incremental revenues cannot be

- 54 -

assumed to be high while provisions for civil service salaries, mainte-nance programs and economic and social material expenditures are stillinadequate. 1/

161. Heavy emphasis on fiscal policies for savings mobilization mayalso lead to greater centralization of investment decisions by the Govern-ment. Given the administrative weaknesses of some of its agencies, andthe size and diversity of the economy, such centralization would probablynot be in the interests of efficient resource allocation. The intentionsof the Government to continue to rely substantially on the private sectorin the development process necessitate a balance in resource mobilizationbetween fiscal and financial measures. The maintenance of the balanceachieved to date will depend on improvements in financial institutions,instruments and policies.

162. The recovery of Indonesia's financial system after its virtualcollapse in the mid-1960's is a clear indication that its size, structureand resource potential can be developed through appropriate financial poli-cies. Progress towards internal price stability combined with the interestrate reform of 1968 rasulted in a dramatic exnansion in the real size ofthe system. The estimated ratio of liquid assets to GDP rose from a low of6.3 npr rent in 1967 to 1968 to 13 npr rent in 1971; above the 1960 level.With increased investment and output, real liquid assets in 1971 were overfour times their si3eI n 1966. Th.ere we,re naTn ma4or rhangeR in asset com-position. Time deposits, negligible in the first half of the decade, in-^"eooA f n 1052 t,- 1071 ,is,tlw f4or t4man fsEt mm the

r aed c n_ v. _o v v._ f o v 196 to… - - -,_I_ -

rate of growth of real money supply, reaching 4 per cent of GDP in 1971 andover N per cent of ttot'l liqu

NIL" parO thacLI t Ln tim;e teposi:sA uM beM" rbut- toprivate domestic savings mobilization, in recent years an increasing propor-. vs- . wc uc-- .. wv g vc-. a ^^ Vkae ~a-L_LULL %FL LUese depositsWL cam~ L&'oDAu foLJlagn V--ips nrewe ftri m a ,-e

constitute savings of nonresidents and a shift of deposit resources fromloreigu bgl to fftde buauu - wLiC were attract b the larg it-tereot

rate differential between the Indonesian and foreign money market. Theinadequacy of banking statistics precludes a diviiorl of time depoVIZtsbetween domestic and foreign sources, but indications from banks do suggestt'ne great importance of foreign resources which have probably acconted foras much as 50 per cent of the growth of time deposits during 1971.

164. The growth in time deposits was the ma_n factor in achieving rapidreal growth in tne financial system, permitting boh e relief of financialstringency and the expansion of the real value of credits. The initial in-crease in the demand for financial assets, both currency and depos'.;, canbe explained largely if not entirely by increasing expectations of price

1/ Experience in other developing countries shows that increases in thetax rate are often followed by more rapid growth in current expendi-tures, although this has not been true of Indonesia since 1968.

- 55 -

stability. From 1969 on, although further changes in price expectations,income growth and other factors continued to have an influence, high realrates of interest became an important, if not the most important determinantof the growth of time and savings deposits.

165. Because of the limited opportunities for saving financial assetsopen to Indonesians - private savings in the form of contractual savingsor securities are of marginal significance - the primary focus on privatesavings mobilization in the medium-term must be on time and savings deposits,the principal alternative to physical asset holding. Although measures tofnater enntrAet-nAl aAving and thepir annrnnriate alln-ation are important,as are the present efforts to develop money and capital markets, the mainsouroe of dnmpetit- finantre fnr nrivateP %ea-tnr dovolnemmnt in the next few

years will be time and savings deposits in existing financial institutions.

166. Data on household and corporate savings is fragmentary and thereis no firm basis for project±ons of priJate savings gr4wth. Neverthelessthe information on time deposits with state banks reveals a continuing stronggrowth -A.der the stronngly positive .ra

1ir44.trest rates r:wir fo-rce- Th.e

-WhCl L~L * 0P. ~L6. jJO4. U . . 1 -. S. _~ .. - -n f . -

initial success of the Tabanas small saving scheme introduced in August 1971A.ndicates t.he potCer.tiAal1 for furdwher expansior. in 1hoO odsW r h

nd ~ j!I~1.LJ J.. LL4~.~~GW.JL .LA usiJ-0h,.36- sav **. 4 **-

form of financial assets, formerly confined mainly to urban areas (in partu ~ ~ ~ ~ ~ ~ 4..~.1 .. ~ItA AfnA

because ofJ the miLUAmum deposit requ-irement.s still LJJL Alorce of Rp 10,000, or

$25 for bank time deposits).

167. The tentative projections in Annex 1 of the growth of Indonesia'srinancial system, including the growth in demand for real time and savingsdeposits, imply an increase in the ratio of quasi-money to GDP from 4 percent in 1971 to from 10 to 15 per cent in 1979 on differing assumptions ofGDP growth, degrees of inflation and level of interest rates. The analysissuggests the scope for the expansion ot savings in time and savings depositsover time under existing institutional arrangements. The analysis of recenttrends also indicates the apparent sensitivity of the demand for total realliquidity and quasi-money holdings to real interest rates and, in partictlar,that the interest rate policy pursued by the Government has had and willcontinue to have a substantial effect on the avaiiability of real resourcesover the next Plan period.

168. No guide to future requirements of investment resources tor theprivate sector can be obtained from available data. The indications arethat savings generated by the household and corporate sectors have beenless than sufficient for their investment intentions. Households, urbanand rural, may even in the future have difficulty in generating enoughsavings for their own investment purposes, especially if agricultural produc-tion is to expand, and the enterprise sector seems unlikely to be able torely on any large surplus from them to finance its own investment programs.Moreover, the majority of profitable enterprises in Indonesia are new andit may be some time before many are generating substantial amounts of re-tained earnings. Particularly in the initial stages of enterprise growth,this sector may need substantial transfusions from the savings of the publicsector, and from external sources, if it is to grow and consolidate.

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169. Tha domAnd fnr resources for Pnternrise n.vPRt-mnt led the rov4ern-ment in 1969 to institute the medium-term investment credit program andinitiallv tn nartlcipate with Ba-k Indo.nesia and te state b .anVng corpor"a-tions in its financing. No budgetary support has been given since 1970,he rfv v a Snd r1thoar nvo &v_m 4I Q ",,w,! f 4n^ n A, v^ vi% F-o" ^f an S,v A o to

**w-- ^* --- r--eoa **_. -- _ i _a s.. .. _

the central bank and 20 per cent by state banks. This program is the prim-a. source. of f4nen.ce for dom-estic en.terprise in.veste.t and - 11 1h6v- tobe expanded if the private enterprise investment is to be adequately funded.T.`he prrogrm huas e hiwited severa-l wqeCU% eS-r.ss, .wts =r--W w parenlt

failure to use appropriate lending rates to allocate resources to the mostproductlve twuers. More recently, there has beeu an CL ud inr ' eUdLUS aWyfrom both the agriculture sector and small- and mediu2r-scale enterprisegene.-tl.3y w-hi%c i s -ot: czons J 0t#r wi- Lhe voe&Lu' welr to&~ pr_ 1- 3

iavestment and growth in these sectors. Recent performance is discussed..U Ut ALJ. LAU ±IUUA I

170. vn balance and with allowance for the buoyancy in Government rev-enues provided by the growth in oil production, further substantial budgetarysupport for the medium-term credit program appears to be warranted and desir-able at least for the next one or two years. The program may require sub-stantial reorientation and the exercise of closer supervision both by theGovernment and Bank Indonesia if resources are to be allocated efficientlyand in accordance with established priorities. The Government could expandpublic sector support of the program either by renewing and increasing trans-fer from the development budget or by making available directly an appropriateproportion of the counterpart funds generated by program aid.

171. The new scheme for development loans through the banking system(DLBS), established in 1971, should also help to relieve the scarcity offunds for private enterprise investment if it receives adequate supportwithin the IGGI framework. The provision for loans of up to 12 years isespecially important - the constraints of the five-year maximum term of themediua-term program, especially for new enterprises, are already evident.The requirements for Bank Indonesia approval (and, in the case of largecredits under the Japanese commitment, by the OECF also) should ensure adequatecontrol. It remains important for Indonesia to secure the softest availableterms for external borrowing for development purposes, whether in the publicor private sector.

172. Special arrangements may be required if the flow of resourcesto small and medium-scale producers throughout indonesia is to be increased.The establishment of a development bank for rurc.. industries should be con-sidered, possibly by combined action of the state commercial banks whichhave branches throughout Indonesia and could provide some of the resourcesthrough their own deposits. The initial step could be increased lendingfor rural industries by state banks. with risk cover nrovided by a strength-ened Credit Insurance Corporation. To ensure adequate support for agricul-ture it may be necesaarv for the Bank Rakiat- the specialist in this sector.to discontinue other lending activities and concentrate wholly on agricul-titral redit operations. very roughly estimated, net credit rentairementR

- 57 -

to the agricultural sector could amount to Rp 40-50 billion for the agri-culture sector and Rp 40-60 billion for small and medium-sized industrialenterprises through 1978. Together these will provide a major challengefor the financial system.

Institutions

173. In determining an institutional approach to the mobilization offinancial resources for the next Plan the Government faces severe problemsin the non-existence, inactivity or lack of effectiveness of many of thefinancial intermedlaries availahle in other develoning countries. The"organized" financial system, apart from the monetary authorities, con-sists of the state cnmmercial and development banks< 128 national nrivatebanks and branches of 11 foreign banks; the recently established Indonesianfevelornent Finance Coimpany; and nearly 9,000 small savings banks, villageand paddy banks, cooperative and market banks, many of them dormant. Foral practical purposes there is nro securit4es varket although meures toestablish money and capital markets are under active consideration, as areproposals for investment bank anrd a private developm.ent finance cmpanv..

174, Within the financial system Ban,k Indonesia is the domirnant insti-tution in terms of total assets and deposit liabilities, but the five statecomerc:ial ba nks have expanded operations rapIdly since 1968 and in 1971their combined assets and deposit liabilities matched those of the centralb-ar'm (see Trable '15),

- s8 -

Table 15: ASSETS AND DEPOSITS LIABILITIES OF BANKS(In billion Rupiahs)

-- - ~~1968 1971Deposit Deposit

Assets Liabilities Assets Liabilities

Central Bank 267.9 130.9 59&.6 287.2

Comercial Banks 115.8 53.4 611.1 284.4State Banks (89.2) (37.1) (471.3) (227.0)Private Banks (18.3) (14.2) (52.1) (28.8)Foreign Bank ( 8.3) ( 2.1) (87.7) (28.6)

Developmenn t Bnks 11.0 6.0 47.4 10.0State Development Banks ( 7.9) ( 3.6) (32.9) ( 2.3)Regional De-Velopmen.t Ba-lks ( 31) ( 2.4) (14.5) ( 7.7)

Other Barks1 ° 5 ° 11 OState Saving Bank - - ( 2.8) ( 0.8)vn t 1. e r _,) n.2,

Other P-lr.anc.cal I.^Titution s n.a a.. n.a3 n=a.

TOAJ L 395.2 10.4 1,260.2 582.6

Source: Annex 1, Table 1.

These five banks dominate commercial banking activity and, mainly becauseof theiXr role in the muediumu-ter in.ves;,.,er.; creudit program, are the most

important institutional source of investment finance. They are the onlycommercial banks which receive deposit guaraUtees frVU the cenr.tal banks(in the absence of a general deposit insurance); are eligible for centralbank rediscounting faciiities on approved credits; and receive central banbliquidity credits under the medium-term investment program.

175. Private national commercial banks and branches of foreign banksaccount for about ii per cent of total assets of banking intermediaries(including Bank Indonesia). The foreign bank; cater primarily to overseascompanies but increasingly for Indonesians, specializing in shore-termdollar loans for private industrial and export financing. Their role inmobilizing domestic funds is hard to evaluate but tney have been effectivein attracting foreign resources.

176. The private national banks are usually small, often capablymanaged but, without deposit insurance, they have to offer high depositrates to attract funds and seek very high yields on loans. Default ratesare high and there have been some bankruptcies. Rediscounting facilities

- 59 -

are available only to three such banks and, with no call-market for state

or private banks, difficulties in meeting reserve requirements are frequent

except where excess reserves are maintained. The role of private banks is

important, especially for traders and small entrepreneurs with limited ac-cess to state banks. A few private banks have been merged and this shouldbe encouraged in the interests of banking efficiency and growth. Arrange-ments for deposit insurance and rediscounting facilities for more privatebanks would contribute to the viability of this sector of the banking sys-tem. And the establishment of a call market would improve the efficiencyof all banks.

177. Development banks at the national level consist of BAPINDO, nowin a reorganization and development process with assistance through an IDA

credit, and the Bank Indonesia-Netherlands Government IDFC established in1972 and not yet in operation. In the longer-run BAPINDO is expected tobecome the principal institutional source of long-term finance for industry,with new loan commitments of about Rp 40 billion in the period 1972-75 in-cluding lending to small and medium scale entrepreneurs for up to 15 years.The IDFC intends to lend, also up to 15 years, primarily to larger scaleindustrial operations under joint ventures. A private DFC has been pro-posed. The 26 regional development banks established for term lending tomedium and small scale enterprise appear with few exceptions to be in weakcondition and capable of rehabilitation only over an extended period.

178. The accelerated economic activity and increased monetization of

the economy has not been matched by developments in the structure of finan-cial intrm-diaries. There is now active interest in developing new finan-cial mechanisms and encouraging new financial institutions. A Money andCanita1 Market Board hAs been established to create and regulate a newsecurity market, with IFC assistance in policy formulation and the improve-ment of the financial sste-m. Several annlications to establish investmentbanks have been considered. The possibilities of housing-mortgage and hire-rnurchas-e or indt-z*trlal leasing onerations are being considered. Preliminaryconsideration is also being given to the possibility of new institutions orarrangements for lending to small-scale industry and other enterprise. Thepresent obstacles to such developments, including the interest rate struc-

ture, the apparently li.mited dem….d for ur.derwriting and lo-n-g-t--m securityservices and the existing weaknesses in financial reporting, suggest thatth.s Will 'b a protracte process allhough. 4t is important not to delayinstitutional development which would complement existing institutions,especially th6se wh.ich could mobilize long-term fu.ds or prov-de longer-term investment finance.

179. Similarly, the arrangements and institutions for contractualsavings including LfLe aru. socia.L securitty inUra.ce will need subs…antialrevision and development if the potential for this form of saving as a majorsource of long-term finance is to be realized. Such saving is not usuallya substitute for other forms and could help considerably to increase totalhousehold savings. At present the returrs to both voluntary ar.d Taspen, -_compulsory contractual savings scheme, are so low (annual bonuses under Taspenscneme are fixed at 3 per cent) as to discourage their growth, and should

- 60 -

be raised. Alsso because no long-term financial assets exist. private in-

surance companies are investing much of their income in real estate (about70 ner cent) nand TAnaPIn noW has nermission to do the same. The creation of

long-term financial assets, e.g. value-linked bonds, would encourage themtm-ards inve-stme-ts of highler -riorit-.

-… ~ ~ * -~ .. a~~.. r 7

180. The development of new inte.redlaries, and the rebhhilitation of

existing institutions, is a long-term process and the main focus in themobilization of domestic savings over the next few years will n.ecessarilybe on existing financial institutions - the state and private commercialbanks, and BAPINDO, -with fore'ign banks and t-he IDFC acting mainly as chan-nels for external finance. 'Considerable efforts are being made to strengthenBAPINwO for a major role in industrial finance, .he «DB is assisting in t emodernization of the Bank Rakjat, the main agricultural bank and the propos,association of foreign investment banks with other state commercia'l bankscould be beneficial. The allocation of available resources for enterpriseinvestment, large and small, will also be primarily the responsibility ofthese institutions and as much attention should be given to guidance, controland improvement of their operations as to the new institutions and mechanism,swhich will later complement them.

181. The major contribution which the monetary authorities could maketo improving efficiency in resource allocation within the financial systemwould be to rationalize the interest rate structure, maintaining the highreal deposit rates which continue to expand both domestic and foreign re-sources of the banking system, and adjusting and simplifying the existingmixture of lending rates. A more uniform structure, reflecting appropriatelythe scarcity of medium-term capital, would entail raising the existing lo;(for Indonesia) rates for 5 and 12 year term lending and the BIMAS produc-tion credit and reducing the still high short-term rates of interest. 1/For term lending especially to small enterprises the main problem is accessto credit rather than interest rates. More generally, the present ratestructure encourages discretionary controls and makes liquidity creditsessential for most term lending. Revised interest rates could make forimproved performance in both the state and private banking systems and thefinancial sector as a whole, providing more of the resources needed fordevelopment and encouraging their allocation to the most productive uses.

1/ For most purposes, the short-term rates were reduced in May 1972 from27-48 per cent to 24-36 ner cent annually. The BIMAS rice nroductioncredits and medium-term credit remained at 12 per cent.

- 61 -

IV. MANAGEMENT ISSUES

182j ~* A. LA.Lcient allocation of resource presents as much of a clallengefor Indonesian development as the mobilization of these resources through,LscaL anud munetary measures. Recent economic experieuce iLn InUdoesiademonstrates some of the results which can be obtained by sound generalandu sct,ora'L UeveLopment policies and the continuation ana considerationof such policies is central to success in the development effort. Effectiveresource use, especially in the public sector, will depend, however, on thecapacity of the public administration to implement the programs for support-ing the growth of the economy and helping to distribute equitably the benefitsof this growth.

Administrative Reform

183. When Indonesia embarked in 1969 on the first five year planrehabilitation and development efforts, the Government had to decide whetherto try to improve the machinery of government before launching the plan orto start the plan first and then tackle the problem of administrative reform.It opted properly for the latter more pragmatic course. Since then a numberof ad hoc improvements in the administrative structure have been introducedand certain key economic agencies strengthened. As resources have expandedthe salaries of Government servants have been substantially increased althoughthey remain, on the whole, low. In general, however, public administration inIndonesia continues to suffer from the deficiencies of the previous regimewhich, with the increased resources available for development and the increas-ing complexity of policy issues, pose progressively more serious obstacles torational decision making. There is therefore a growing interest in anddesire for administrative reform.

184. Annex 8 of this report, on planning and management issues, dis-cusses some requirements for improvement in the administrative machinery andsuggests both short and long term strategies for reform. For the short run-here is recommended the conduct of a proper inventory of the numbers.characteristics and distribution of civil servants; the establishment of acentral personnel agency able to introduce and administer consistent standardsand policies throughout the public service; and a review of personnel class-ifications and salary scales. including more adequate recognition of profes-sional (as distinct from supervisory) qualifications. Other short-termoblectives would be to improve internal control mechanisms and oroceduresfor budgeting, contracting, supervision, management and reporting for keypurposes.

185. The lonaer-term strategy for administrative reform should aim atinstitutionalizing higher standards of performance, primarily in the agenciesplaying kev rnlp_s in economc developmnt; It is recognized thnt achievementof this objective is necessarily dependent on other aspects of political,economic and social evolution in the country, which profoundly ifluen.cethe administrative climate; but certain measures for improvemetit of thegovrern".mental :ard efficiency coU ld b&Ae initiLated at once, tho4u

- 62 -

requiring considerable time to reach fruition. Specifically suggested arean intensive review of program roil and priorities of the development ageiacic!spossibly according a special status, with corresponding obligations, to thestaff of those having particularly important functions; and expanded in-service training programs making nvre effective use of technical assistancepersonnel.

186. Such measures, however, though certainly useful, are peripheralto the crucial reform issue. Of central importance to the evolution of anethical, reliable and efficient civil service is the determination of thenation's political leadership to strive consistently to that end, to overco.:the inevitable resistance from powerful interests. At best it will be alengthy process. The present leadership in Indonesia has expressed itsintention to do so and, given the vigor that it has demonstrated in theeconomic reconstruction effort, there is good hope for progress. One neces-sary condition is an increase in compensation for government personnel to ilevel that will permit them to live on the official earnings from a singlL,full-time job. Despite substantial salary increases already, and furtherones in prospects, this level is not vet in sight for the generality ofpublic employees. However, it is impracticeLble to raise salaries sufficientlyacross the board as long as so many redundant staff are carried on the rolls.There is need for a program of selective increases combined with inducements~n,nAther m-ue to retucerj DY"-ss nersnnnnis

p1 DC.. -Ai nw,aA im vl et tior. mn,.a,,Iamas

1 4 l4.^f R AVMe agcs Woo.-MgIN -. t resp -le -.*, ,e -b aSAf ear ra. ag.--- _,, .a w , yw. - - --

for plan formulation but, in present circumstances, for many of the functionsof implementE"atlior, ^ -ti.ula:l, to is.-olveA ir. p:oJect aiA. Tts staff of

A. ~~.a~ y. pa.. tiuarly a; fleO a.nvw%av- ina. project

some 80 professionals is small in comparison to its responsibilities and willnLeed ob u>etd .'o 1^-" pl--in a :-1- en*,t-on activities, withL~U Lu UC CLW=L_A LUlL UU Lii IJ.LeLU"LJA e2UA WaIe4ULJ'L .L~.

the substantial increase in the flow of resources, domestic and foreign, to'^ v A A LL 4 .A &As 4 U. 1PA.I 4JC AIIL A7. 1IL 5A AL o4 LC' &S F. -S AIle expec.ed Auring th^e nex.- plan period. Al"Ue 0-1 -16 ,a -A--_4 ^f: .

skills required and other priorities have to be observed, a vigorous recruit-…C~~..V. M~).A…d.J .1 bec s - r 4*.a -;-..

41 --ing program for I AP3^- appears essenuA.i. =bec&%ause o W &Fil e p

bilities in the development program.

188. The planning and policy units in the ministries, organized mainlyat Ute directorate-genera± level (`nere are uuveraJ. din each of the 18 ministries), appear in many cases to be understaffedand inexperienced in project preparation, their main fLuntion. Mra0Uu=have recently been taken to centralize within -ach ministry some of theplanning activities-now located in individual directorates-general, to con-centrate the available skills and encourage the determination of prioritiesand formulation of programs on a ministry-wide basis as well as to faciliwtatetechnical assistance and coordination with BAPPENAS.

189. Some of the problems of implementation under the central government'sdevelopment program were discussed in relation to project aid implementationin the IBRD Resident Staff's progress report of April, 1972 on the utilizationof project aid. In other parts of the devlelopment program reporting is still

- 63 -

mainly on the basis of financial expenditures and physical program reportingis weak. Renorting nroblenm are now under consideration on the context ofa more general review of planning, budgeting and implementation procedures.

190. The proposed new anpual planning and budgetary procedures takeinto acco"',ut the need:

(b)% to Integrate 4-an"al snd physlca -reportir.4g.

A.,Le basic approachAS. i to -SVJ. se bu. get preparation or4. - a longer4

schedules agreed between BAPPENAS, the Ministry of Finance and each depart-ment, toa aellow LLJE 5aduequaLe preparatiLon anu reIVie-w at 'Least of the maJ'orprograms and projects. The proposed 1973-74 budget exercise includes pro-vision 'or both up-to-date physical and financial reporting and projectionsbeyond 1973-74 for projects planned to extend beyond the next financial year.The reporting system is to be revised to accommdate these improvementsand provide generally for improved evaluation (see Annex 8). The consolidationwithin BAPPENAS of projects reporting has been recommended, which would pro-vide a focal point for infomation an all aspeot' of all work conaected withplan implementation and program control for both provincial and local as wellas central government programs.

Regional Administration and Planning

191. Assuming a more regional orientation is to be given to developmentactivities during the second plan period, steps will be required to buildup the capacity of provincial and local authorities to prepare and implementdecentralized works and construction programs and projects. A very encouragingstart has been made in the works program for rural administrative districts(kabupatens) and municipalities (kotamadyas) throughout Indonesia. The firststeps toward planning at the provincial level have been taken--there areplanning boards in most provincial capitals and several universities havebeen active in research and plan formulation at the regional level. However,the staff of provincial governments do not at present seem adequately equippedor trained to review provincial work programs or budgets or to exerciseoperational controls.

192. A review by BAPPENAS of provincial and district developmentprograms and potential will be necessary as a basis for greater decentralizationin the public sector development program. The work of provincial authoritiesfor the second plan is only now beginning and much research concerning regionalresources, finance, institutions and allied planning issues has still to bedone. A considerable degree of autonomy exists in the decision-makingprocess at provincial, district, and even villages levels and the aim shouldbe to use local initiative as extensively and effectively as possible subJectto general priorities and guidelines established at the center. This willinvolve a clearer definition than now exists of the functions of governmentat different levels. It will also require, as has occurred under thekabupaten program, sound administrative ptinervisian includinQ the establish-ment of rules and standards and their effective enforcement.

- 64 -

State enterprises

193. The present Government of Indonesia inherited a large stateenterprise sector which, in spite of private enterprise development inrecent years and the resumption and acceleration of foreign enterpriseactivity, still dominates or plays a major role in many sectors of theeconomy. Apart from the public works and public utilities operations, the140 state enterprises dominate mining, fertilizer, cement and paper produ: tiot.estates agriculture, spinning, and air and sea transport and are importantin pharmaceuticals, construction and trade. Estimates of employment rangefrom 1.0 to 2.7 million. There are also some 300 enterprises operated byregional Rovernments and over 1,600 owned by districts and municinalities.One of the major issues in,.planning and economic management is to ensurethat these enterprises contribute apnronriately to the national deveponm-nreffort.

194. Some of the state enterprises, notably Pertamina and Garuda, areefficiently managed ant nd pe.rated_. Mnyw howev.er, are in diffictUlties. TheGovernmenit acted in 1969 to reclassify the many state enterprise operatingLinder direct Ministerial control. intFo three-- categories: the Perd4an, agovernmental agency for such purposes as port administration; the Perum, anublic cornoration fo: providing utilit 1.0, w or essentiafl. goo-ds or ser-,cesin such fields as finance, telecommunications or particular agricultural or-- riall fie'ds; and the Plersero, a l.mted .Lab..LiLy Company ideutical ILu

form to local private companies (designated PTs) but their shares are owned.argely ny h.U riUistr-y of Finauce. Some 95 enterprises were conUs"re' 'orconversion into Persero form and by mid-1972 a total of 35 had beeti converted.

195. The new Directorate for Investment of State Wealth in the Ministryof Fi-nance is now reviewing the situation and performance of the state enter-prises subject to conversion to Persero form to determine appropriate measuresin each case. The Government's intention is to transfer ownership and manage-ment of most of these enterprises to the private sector in due course,although none have yet been transferred. A number of tnem, including agri-cultural estates groups, industrial enterprises and public utilities,are receiving or are being considered for financial and technical assistancefrom IGGI member countries, IDA or the ADB. Several others are interestedin joint ventures with foreign companies which could be attracted by theiraccess to particular markets and provide valuable technical and managerialskills. For many other enterprises, however,, substantial rehabilitationwill be required while they remain under Government control if they areto have a useful role in economic development

196. At this early stage of Indone"ia's development effort the capacityof the public sector to implement the projects and programs which will supporteconomic growth and health is still weak. Although much has been achievedwithin the present constraints, major administrative reforms are still re-quired to enable the resources available for development to be efficientlyused, policies effectively implemented and the objectives of growth andequity realized.

STATI STICAL APPENDIX

TableNumber Title

1.1 Indonesia's PopuJation, 1961-19711.2 Projection of Indonesia's Population, 1973 and 19781.3 Calculated Net Movements of Population Among Regions, 1961-19711.4 Population by Age Group and Sex, 1961 and 19711.5 Population and Labor Force Aged 10 and Above in Rural and Urban

Areas by Region, 19711.6 Fnployment by Major Economic Sector, Rural and Urban Areas, 19711.7 Labor Force Participation Ratios, Rural and Urban Areas, by

Age Group and Sex, 1961 and 19711.8 Percent Changes in Population, Labor Force and Employment by

Region, 1961-19711.9 theamnlovment Rates. Rural and Urban. by Sex and Region. 19711.10 Employment in Large and Medium Scale Manufacturing Industries,

1970 hv Tndustry

2 1 (1WP at fluvroot Wav1-rt P,.-i es by Tndustrv of Origin. 1967-19712.2 GDP at 1960 Market Prices by Industry of Origin, 1967-19712.3 ERpend%iAu+A non r1rom NAtinnal Prodnct at rurrAnt Market Prices, 167-1712.4 Expenditure on Gross National Product at 1960 Market Prices, 1967-19712.5 rnP s+ r1tr-nt Market Prinam hv Tvvininarv nf nriginj 1967-l972.6 GDP at 1960 Market Prices by Industry of Origin, 1967-1971°.7 PCow toa4 + 4 ,. o%f fros,a., fTla+4,, Ivaei nnr+itl WArmyntionr 1960-1Q702.8 An Estiaate of ICOR Based on the Official Data, 1960-1970

3.1 Balance of Payments, 1970/71-1973/743. 2 r~n"-1_ipo IT0-u .8 W-Hrv A" ,,t-_,I l, 2,

3.3 Commodity Composition of Imports, 1970-August 1972

4.1 External Public Debt Outstanding as of December 31, 1971 Afterins .l9r Roonrg aai,aagu Jtgx'm;erts

4.2 External Debt as of December 31, 1971

5.1 Consolidated Central Government Budget, 1970/71-1973/74j.2 Centrai Go0vernment Receipts, 1970/71-1973/74-.3 Central Government Expenditures, 1970/71-1973/74

6.1 Money Supply, 1964-September 19726.2 Changes in Factors Affecting money Supply, Lyo9-SepZemDer 1Y(26.3 Size of the Financial System, 1960-19716.4 Liquidity Position of Commercial Banksj6.5 Total Bank Indonesia Creditss 1966-June 19726.6 Classification of Credits by End-Uses, December iyoo-June i9726.7 Investment Creditss Cormitments by Sectors, July 1970-

March 19726.8 Investment Creditas Disbursements by Sector, June 1970-

March 19726.9 Structure of Lending Rates of State Commercial Banks6.10 Structure of Deposit Rates of State Commercial Banks

7.1 Area, Production and Yield of Selected Agrioultural Commodities,1951-1971

7.2 Production of Selected Primary Commodities, 1967-72

TableNumber Title

8.1 Production of Major Industrial Products, 1970919728.2 Regional Distribution of Large and Medium Scale Manufacturing

Industries in Indonesia, 19708.3 Large and Medium Scale Manufacturing Industries in Indonesia,

1970 by Province/Region

9.1 Consumer Price Index for Jakarta, 1970,719.2 Daily Wages of Uhnkilled Workers on INPRES Projects by Province

Indonesia, 1971/72

10.1 Percentage of Population Unable to Read or WIite in any Characters,Rural and Urban Areas, by Sex and Provinos, Indonesia,1971

10.2 Percentage of Population Age 5 and Above and Attending School beAge and Sex, Indonesia, 1971

10.3 Approvals and Implementation of Foreign Investment Projects byEconomic Sector, 1967-72

10.4 Manufacturing Industry Projects Approved by Investment Boards10.5 Some Characteristics of Projects Approved by Domestic Investmer.V,

Board (November '68-October '71)

Table 1.1

Indonesia's Population, 1961 and 1971(-n thousand]

Annual GrowthRat+-

1961-71Region-rs 1961 1971 _T_____

1. D.C.T. T ,+o ,970? 4,576 4.

2. West Java 17,673 21,631 2.03.ventral. Java &8vLt6 21,876, 1.

4. D.I. Jogjakarta 2,247 2,490 1.15. m ut -'I 2 2,7 ee

1n Y__. J_t t t a a r.TaL vva Madura- 76cu if% 1.

7. North Sumatra 4,984 6,564 2.88. -est Smamtra 2,330 2,792 1.89. Riau 1,240 1,642 2.810. Djambi. 748 1,06 J 3U11. South Sumatra ( 3,437 )12. Bengkulu 4,865 ( 519 3 3.313. Lampung ( 2,777 )

Total Sumatra 15,803 20,820 2.8

14. West Kalimantan 1,589 2,020 2.415. Central Kalimantan 499 692 3.316. South Kalimantan 1,479 1,699 1.417. East Kalimantan 553 696 2.3

Total Kalimantan 4,120 5.107 2.2

18. North Sulawesi ( 1,718 )19. Central Sulawesi 2012 914 2720. South Sulawesi( 9121. Southeast Sulawesi 0 ( 714 ) 1

Total Sulaiesi 7,109 8j535 1.9

22. Bali 1,790 2,120 1.723. West Nusa Tenggara 1,814 2,202 2.024. East Nusa Tenggara 1.971 2,291 1.525. Maluku 793 1,084 3.226. West Irian 761 923 2.0

Total Other Islands 7,129 8.620 1.9

Total 97.387 119.182 2.0

SourcA: Census f±gures Bi.ro .>sat S+.n+ 9

Table 1.2

Projection of Indonesia's Po?ulation. 1973 and 1978tIn thousand)

Annual GrowthRate

1971-78R e g_ i o n a 1971 1973 1978 (In percent)

1. D.C.I. Djakarta 4,576 4,906 5,803 3.L2. West Java 21,631 22,725 25,711 2.53. Central Java 21,876 22,798 25,284 2.14. D.I. JogJakarta 2,490 2,536 2,684 1.15. East Java 26,527 26,500 29,082 1.9

Total Java and Madura 76,100 79,467 B8.564 2.2

6. D.I. AtJeh 2,083 2,218 2,569 3.07. North Sumatra 6,564 7,037 8.312 3.48. West Sumatra 2,792 2,923 3,307 2.59. Riau 1,642 1,765 2,097 3.5

10. Djambi 1,006 1,082 1,294 2.611. South Sumatra 3.437 3.735 4,526 I.012. Benagklu 519 564 683 4.013. Lampung 2777 3 5 3.651 1.0

Total Sumatra 202820 223339 26,439 3.5

14. West Kalimnatnn _2v0 2,143 2,4R5 3.015. Central Kalimantan 692 752 911 4.016. South Kalimrnten 1,699 1j765 1,°96 2.317. East Kalimantan 696 736 848 2.8

Total KaJ.iantan 5,107 5.396 6,240 2.9

18. North Sulavesi l,718 1,845 2,217 3.8'9, Centrol Su-l' a-4 9 _ 970 1,098 2 720. South Sulas;i 5s,189 5,402 6s0Q1 2.121. So"n t i7c 1 SI n4 77S Rl.o o

'N-+n1 si1ma4 8 A55 A d IA I 7c f 8

22. Balil 2i2 2,215 2J'8 A2rl"v3 p423. West Nusa Tenggara 2,202 2,311 2,611 2.521. - ast ww%Wa T"n6ara 2,29 C,8 7," C.225. Maluku 1,084 1,164 1,402 3.826. st [Iria 9p V74*

Total Our Islands o,620 9,046, 10,250 2.5

Total i4,o182 215

Source: Census figures - Biro Pusat Statistik.

Ta.ble 1.3

Calmulated Ne-t Movements of Population Among RegionsIndoDnesia. 1961-1971

1961 F:stirnated Actual 1971. Ilplied net Regional distributionpopulation natural rate of population movements of of population

(000 Is), rate of,) in,-rease (0OOC,Is) pOpulatiol" 196 1,971rate of, increae (00e:r) ce:nt)Cu' (per cent) (per cent)increase;' (per cent)

XI Djakarta 2 907' 2.1. 4.6 ) 576 996 (4.6) (6.0)-st Jlaa- 17 615 2.2 2.1 21 631 269 (28.0) (28.b)Central JTa-;a 18 407 2.1 L.7 21 875 1 785 (29.2) (28.7)LI1 Jc<- akirta 2 241 1. b 1.:1 2 490 8'5 (3.6) (3.3)Fast Java 21 823 1.7 :1.6 25 527 303 (.h.6) (33.5)

Sub-total::Javafl and I.aCura 62 993 2.C 1.8 76 101 141 645.9 63.9

S-uatra 15 739 2.1 2.8 20 820 870 16.2 17.5Kali- ntan 41 101 2.1. 2.2 5 107 -57' 14.2 4.3Sula w;esi 7 070 2.2 1.9 8 535 265 7.3 7.2Gthnr isiands 7 1C6 2.2 2.0 8 620 215 7.3 7.2

0otal: Iridonesia 97 019 2.0' 2.0 :119 182 - - 100.0 100.0

1/ T?rived fr-cm natural rates of increase re-orted f'or 1L961 in S. Iskander, Somie Monographic Studies on theFotullatiori of i-one ia (Uni:versity of Djakarta, DRjakarta) reduced proporInately to corespondT tohe^.,sed irate of increase of 2 per cent per year,.

Source: 1.961 cefsUE aLnd prelmiLnary resu]Lts of 1971 census.

Table I.h

Ponulation by Aoe flroun and Sax. 1961 and 1971(In thoursnd)

1 Q 6 1 1 9 7 1Age Group Male Female Total Male Female Total

0 - 4 9,152 9,276 18,428 9,653 9,508 19,161

5 - 9 7,571 7,524 15,095 9,577 9,295 18,872

10 - 14 4,763 4,417 9,180 7,326 6,902 14,228

15 - 19 3,567 3,635 7,202 5,673 5,748 11,391

20 - 24 3,529 4,354 7,883 3,556 4,406 7,961

25 - 29 3,630 4,543 8,173 4,033 5,009 9,042

30 - 34 3,555 3,779 7,334 3,664 4,230 7,894

35 - 59 3,140 2,914 6,054 4,019 4,061 8,080

40 - 44 2,457 2,310 4,767 3,004 3,026 6,029

45 - 49 1,923 1,869 3,792 2,399 2,248 4,647

50 - 54 1,487 1,477 2,964 1,888 1,947 3,835

55 - 59 1,052 1,040 2,092 1,074 1,061 2,$ 135

60 - 64 820 812 1,632 1,034 1,189 2,223

65 and over 1,029 1,079 2.108 1,409 1,551 __2 960

47,675 49,029 96,704 58,279 60,181 118,460

Sources Population Census, Biro Pusat Statistic.

Table 1.5

PDpulation and Labor Force Aged 1.0 aned Above in Rualrl. jindUrban Areas X_B&o IndLoneeia 1971]

Do'T1.ation r Labor Force

Urba.n Ru.r:a1 Total Urban Raral Total LF/Pop

D;,_ DAaka-- a 3 152 3 152 1 3144 1 3hh t12.64- . 1 858 2 182 1 1 o 721 5 627 6 319

_?-':- 1 J0 a-.t 1. 7 -:L1 13 :311.17 053 789 7 523 8 312 55.27 ,.ia.arta 310. 1- 1 L? 120 907 1 036 57.5

2 715 15 :7 8_ 7 1 .203 5 118 9 321 5'2.2--t-L- > 2 538 11 2L 13 773 5980 I,, 881 6 860 h9S.8K^. I,:.^n.a n 7154 2 701 3 155 321 1 359 1 680 148.6

v;_a; __' . 9,f) 8 6019 5 63 3 :2 007 2 387 112.4C' .e- islaads 556 !; 6, 2 5 249 223 2 587 2 810 53.5

Tc a I if.i 617 65 ;%? 80D hL26 6 091 34L 009 ho 100 h19.9

Source: Preliminary' sazmple resuLlts, 1971 censwiis Blro Pusat Statistik.

Tab:Le 1.6

Employment by Major Economic Sector, Rural and I:rban_ _ _ ~Areas a IndorLesifu 7 _ _9%a zi ra

.4 r,O ovnnt (OGO0' s) PFer centFRral as

Urbar Rl-tral Total Urban Rhral Total per centof" total

i) ~;ricutc4ure, forestry, fishing, hunting 600 210 172 21 772 10.4 72.3 63.2 97.6- Jrun; and ouarryirg 44 46 90 0o.8 0.1 Cl.2 51.1-, ~:a l-rc aIturin6 2 270 2 932 I1l1, 6.8 7.5 77.4.7; £.eclicity, g,as an,d w.ater 27 11 38 0,.5 0.1 28.9

, } O':; , ~ction E ,, ...28' U48 731 5''0 1.3 1.9 60. 86)5 .- : ,:?-ne cr.-'- retaal tra:de, rasta.urants,

eI~-'< :L,1.53 2 660 4 113 25,.1 8.0 10.5 6L. 77) Tra-.^-ot. storag.e, ccrz-v.n-ication 514 4O02 916 81.9 1.2 2.3 43.94 ) 's,.r;:,1: .eal es a,e {: bus ness serv-4.cu Q6 10 95 1.5 0.2 lO.52)' C-''.r:2it:y, soci5e] F- pcrsonl' Eervices ] 856 2 067 3 923 32,0 6.2 10.0 52.7

Activities r.ot- adequately described 266 1 327 1 593 h4,6 L.Q a.i 83.3-' 1 W'~7 5 t- _ 796 33 h14 39 210 100,.0 1100.0 lOCi.0 85.2

Source: Preliminary saople zsultw,, 1971 censrusj, Blro Nesat Statistik.

Table 1.7

Labor Force Participation Ratios, Rural saod Ulrbani Areasp ByAe Group and sex. Indonesia. 1963 sacLmi1,_

UrYban 'a-les Rr: I':ales Urbian 'Females azral Females16 L 1571 l6S1 15'71 19161 1°71 1S'61 ]L971

'G-1 i 7.65 8.6 25 5 20. 4 6.8 7.7 17'.5 ]-5.9_:7-5° L5_ 32.) 71.6 5321 17.4 32.0 31.62> 7L. !, c7.~ 7?.7 7S9.5 25.3 23.6 27.8 :3 4.O2>-3i: 93.1 :p1.3 9.3 91.3 25.2 2(,. 27.6 :37.7

'5-'69>.1 i Sl9I X 6.9 93.3 29.9 32.3 313.8 143.1u'v-o 3 e3.3 $6. 4 9-.9 9Co.8 33.1 32.0 0.8 Il5.5

5- 7 t ! .19 66507 10.7 8& .o 26.9 27.1 1.0 37.9

Tot-C 10C 70.6 61.2 81. 70.CQ 23.8 22.4 30AL :31.2

Source: 1961 oensuw and. prelivinary saeLple results 1971 cenus.

Tabile 1..8

Porcent Changes: in Population ,Labor Force andi %hploymnent by Region

Fer cent change 1961-19711 Aniual AV. per' Cent Change 1961-71 )Briployed La'bor Force Population Eirployad Labor Force! Population

TXl D)Jakarta and `iY~bt java 18.o 13.9 31.078 'L. 7 1.3 42.7DI *jog.jakarta aad Central Java 31.6269231 2.2.2.:Za st Java 11. 8 8.3 159.503 .L. 1. 0.8E 1. 8

Su~~~~~~atr~~~~~~ ~22.7 21.0 36 .052 :2.1 1.9 3.1.- Ka T -. a: -. t a - i(-1.8) 26.0911 0.1 0.21 2.-3~~~ -~~~~i i441 .~~~~~~~~~9.8 2.121. 1:t4 0.9 g 2.0

Othe,r i,3ands 207223 2L1 4 27.02. 2I 19. 16.0O 25;.756 1L.8 1.-5 12.3

L73A; ~~~~ ~ ~~~~~3L.9* 29.6S 46. h48 :2.8 2.6 3.9

If-clR--, 761. 2-3- 16I- .32.

il/ Age~ 10 Sand ovm:r*

souircmi 1L961 cenisus 8W :pr&Limin-ary sample redui.t.s flrom 1971. census,.

Tabl]e 1,,9

UmBmployment Rates, Rural and Urban, IVr Sex ard Region_ _ _ I-3ndom-82A. 1-971 .

-T;* v brc5 l'~~~~~~~otal

* - *le i & Iale Female 1-v'ale &femal e

a ~~~~ ~~~~0.0 0.0 0.053- t. J'.ra 6...h 3.1 1.C) 2.7 3.2

C,:kiJ-a . 3. . Li.5 3 1.7 1.1 1.8_-S- 'Ivwra "I.A 2. 5 3eR 5 .6 1.8 1.6 1.9

5.; vr- t:*,>/ g;: 5.3 2.5 1.0 1.9 2L2,' ] . 1.9 1.0 1.6 1.5

C.7 1.6 7. 1.6 1., 1.8 2.7

"'l: 5'.0 ,h cW '' .!. L.8 1.9 1.b 1.7 2.2

Source: Pre)ijninary sample resultas 1971 census, Biro Pusat Statistik.

Table 1 a1D

E>Dlznet1nLrsC and Medium Scale ManufacturinhL&1stries iin Indonesia. 1t92iy Ind u3tr

Numrber of PeLr sonsNumber of INumber of Employed Per

Establishments Persons Employed Establishnent

'ODE I N D U S T R Y Total Lazrg_ Medium Total Large Medium Tctal Larg- Medium

11/2 Food Products 6,0(48 ;0o0 5,548 285,0514 215,265 69,789 47.1 430-5 1:2.6'13 beverage 178 16 162 5,298 3,050 2,248 29.8 190.6 13.911i Tc'bacco 1,175 'P04 871 1314,600 107,129 27,471 1114.6 352.4 31.5

321 Textiles 4,906 1437 4,469 168,560 94,363 74,197 34-3 215.9 16.622 Wearing Apparel, except footwear 1144 1 4 130 5,8759 3,713 2,166 40.8 265.2 16 .7

,23 Leattrer & Leather & Fur Products 77 11 66 2,247 1,115 1,132 29.2 101.4 1i7.2'21J Footwear 66 12 514 3,7295 2,910 819 56.5 2142.5 1'j.231 Wood Products, except furniture 7 66 25 741 13,477 3,091 10,386 17.6 123.6 114.0

,32 F'irniture & Fixtures,, except metal 236 7 229 4,076, 900 3,176 17.3 128.6 13.9414 Paper & Paper Products 95 22 73 6,755: 5,217 1,538 71.1 23'7.1 211.1142 Printing & Publishing 533 52 481 13,975 6,656 7,319 26.2 128.0 1',.2,51 Industrial Chemicals 80 11 69 14,269 2,702 1,567 53-14 2145.6 22.-752 Otheler Chemical Products 1433 59 3714 21,581 15,286 6,295 149.8 259.1 16.!3,53 Petroleum Refineries 3 1 2 5147 532 15 182.3 532-0 7.554 Misc. rroduc-ts of Petroleum & Coal 1 - 1 10 - 10 10.0 - 10.055 Rubber Products 711 2'73 1438 1013,605 98,292 10,313 152.7 360.0 23-.556 Plastic Products 198 22 176 5,950 3,031 2,919 30.0 137.8 16.661 Pottery, China and Earthenware 10 2 8 1,144 956 188 1114.4 4713.0 2:3.562 Glass & Glass Products 49 214 25 3,803 3,0150 743 77.7 127.5 29.7,69 Other N'on-Metallic iineral Products 783 29 754 113,281 6, 274 12,007 23-3 216.3 15.9,71 Iron & SteeL Basic Industries 52 5 47 '1,1452 772 680 27.9 1514.L, 4l.-5,72 Non-Ferrous Metal Batsic Industries 33 5 28 '1,184 739 445 35-9 11'7.8 15.981 Metal PFroducts, except machinery 530 149 481 12,566 6,190 6J,376 23.7 126.3 13-3

,82 Machinery, except electrical '123 16 107- 14,829 3,350 1,479 39.3 209.14 13.8,83 Electrical Machinery,, apparatus, etc. 67 15 52 2,923 2,1'91 732 43.6 1146.1 1L4.I1&4 Transport Equipment 1407 34 373. 10,253 5,290 4,963 25.2 155.6 13.3185 Professional Photographic Goods, etc. 6 1 5 589 538 51 98.2 538.0 10.2190 Other Manufacturing Industry 190 29 161 7,305 3,9143 3,362 38.84 136.0 20).9

T 0 T A ]. 10 D ,975 1925 841.3. 1 9 ;96256 5 252 14 302 .t 15.8

ourcei: Survey of Fianufacturinp Industries, 127Q, Central Bureau of Statistics, Djakarta,

Table 2.1

GD]? at Current MarAet :Prices by Industr of Ck

1967 1968 196,921" 39 7 0 / l9,7l/1. Agriculture., forestry,

fishery, etc. 4-57.3 1037.7 1287 .B 1522.0 1595.5

2. Mining and quarrying 22.9 75.2 129.2 172.6 323.8

3. Manufacturing 62.0C 178.6 250.7 311.8 337.9

4. Construction 14.1 41L.o 64.9 90.4 L14.4

5. JELectricity and gas 3.5 9.0 12.65 14.6 15.8

6. Transport anid cormmnunication 18.5' 45.0 60.0 81.7 96.7

1. iwhlesale anid retail trade 148.9 345.0 459.3 593.1 710.3

8. Bankcing and other financialinteirmediaries- 4.0 9-9 11.6 13.0 20.0

9. mOnership of dwo1liings 16.6, 39.1 50.9 62.7 69.9

10. Public aldmizLstration and defense 40.6 88.0 1l9.7 163.0 188.8

11. ServLces 59.4 125.4 147. 2 17L.3 181.8

12. Gtross DomestLc Product 847.8 1993.9 2593.9 31. 96.2 3563.9

Z, Preliminary f'Lgures.

Source: t'entral Bureau of Statistics.

ITable 2.2

GP at 1960 Market Ericeis Industry of Origin(in, b£lUonr*-xiahf

2/ 21967 1968 1969;. 1970 1971-1. AgricuJlture, forestry,,

fialhe ury, eo. 232.1 248.2 2il.0 261.8 275.7

2 . Miring and quaurrying 16.7 19.7 27.7 32.2 3LI.O

3. Marmfacturing 37.5 40.8 116.6 51.1 56.4

4. Construction 7.3 8.8 11.5 14.1 :16.4

5. Electri.city andc gas 2.2 2.3 2.6 2.9 3.0

6. Transpxrt zand conmnimioation 15.6 15.9 16.5 17.4 :18.4

7. IAcilesrale asn retail trade 70.8 76.2 E87.0 96.8 107.7

8. Barlcing and otIer financialilnt,ermediaries :3.5 3.4 3.4 3.4 5.0

9. OwneirsIU.p of dtrel1lius 8.8 9.4 1.0.0 10,.8 1I.5

10. Public adMAnstration id tfdefense 21i.7 214.7 26o6 27.,0 27.0

11. Services 213.8 29..4 310.1 30,-9 31.7:12. GroaS Dlomdetio Product 448.o L478.8 513.0 548. 4 5136.8

1/ R4isd-rFF r s.T/ Prblindnry figurae.

Sourcet Central Bureau of Statistic3.

Table 2.3

I3iditure on Gross National Product at Current; Market Prices

267 1968 19692/ 1970? L9712/

1. Private consumplion expenditurely 786.0 1771.2 2301.8 2630A8 2859.6

2. Genetral government consumptionexpemdi.ture 652.5 1h3.5 179.0 251.7 290.9

3. Gross Dcuestic capital formition 6S7.9 177.9 270.5 422. 4 526.7

4. Exports of goods and. nozn-fator servioe,- 7I74.4 227.9 2h5.2 427.,6 506.7

5. Less:s 3paots of goods and non-factorasermces 143.0 326.6 41c2.6 536J3 6:20.0

6. GroEIs Dcnestic Prodict 8147.8 1993.9 2593.9 1964.2 35653.9

7. Net fact,or incois to abroad - 9.6 -288 --349 - 5043 - 67.7

8. Gross National Prodcet 838.2 1965.1 2559.o0 3145,~9 34!p6.2

9. Less:s Neit indirect taxes 31.0 94.0 134.8 1884,3 228.5

10. Less: Depreciation '54.7 124.6 168.2 209,.4 233.4

11. National Income 752.5 1746.5 2256.0 2!748,.2 3034.4

V( ReUd_u7-;/ Revised figureks.

7/ Preliwdnary figurels.

Cources Central Bureau cf Statistica.

Table 2.4

EzBnditure on laross National ProduLct at 15960 Market Prices

m~ ~~~~~~~~19 biVr 9Lpiah0 ? 1967 8 ]96 1970 1971-

1. Private consuwpti±on expenditure 381.8 396.3 4L26.4 4460 471.4

2. Gemeral government consunptione.penclituwe 35.8 37.2 38.0 42.2 44.o

3. Gross Dwmmsti4, calpitaL forma-tion 33.2 46.3 53.1 63.2 73.8

4. &porte of goods and -Aon-factorsfervic:es 55.5 61.3 69.9 82.3 91.7

5. IAess: Iuqzxrts of goods and non-factorserrices 58.3 62.3 74-4 85.3 94.1

6. Gross D3wbstic Product 448.0 478.8 513.0 548.4 586.0

7., Net factor incaoe to abroad - 3.7 - 4.0 - 4.1 - 4.5 - 4.8

8. Gross NatiLonal Product 444.3 474.8 508.9 543.9 582.0'

9., TABBI Net #*4Lrect twcop 27.3 29.2 31.3 33.3 35.8

10., LAges Depreciat±iq 26.4 28.2 30.2 32.2 34.6,

11., Nationia Uncome 390.6 417 ,,4 4147.4 478.4 511.6

a/ ReaiEdua1.I/ RevLased figlres.7/ Preli#Wmiry figlars.

Source,: Central Burealu of Statistics.

Table 2.5

GD'P at Current Mar'ket Prices b Indust,ry of 0xigrpercentage)

1967 1P68 1969-/ 1970:- 197--

1. AgricultuIre, forestry.,fishery, etc. 53.9 52.0 49.6 4.7.6 44.8

2. Mining and quarTying 2.iR 3.8 5.0 5.4 65

3. Manufacturing 7.3 9.O 9.7 9.8 9.,5

4. Construction 1.7i ;2.0 2.5 2.8 3.2

5. Electricity and gas 0.4 0.4 0.5 0.5 0.,4

6. Transport and. communication 2.2 2.2 2.3 2.3 2.,7

7. Wholesale and retail tradlo 17.6 1'7.3 17.7 18.6 19.9

8. Banking and other financi,alintermediaries 0.5 0.5 o.4 0.4 o.6

9. Oiinership of dwellings 2.0 2.1 2.0 2.0 2.,0

10. Pablicz administration anddefense 4.8 4.4 4.15 5.1 5.3

11. Services 7.0 6.3 5.7 5.5 5.1

12,. Gross Domestic Product 100.0 100.0 100.0 - 100.0 100,,0

1/ Revised fiigures,T/ Prelin3nary figures.

Sourcei; Centr,al Bureau of Statist,ics.

Table 2.6

GDP at 1960 Market, Prices by Idustry of Orgin

1967 1968 196w' L9761/ 1971/

1. AgricuLture, forestry,fiLshery, 13tc. 51.8 51. 49,,0 47.7 47.0

2., Mining andl quarrying 3.7 4.1 5.14 5.9 5.8

3., Manufacturing 8.4 8.5 9,.1 9.3 S'.5

4., Cmnstruction 1.6 1.8 2.2 2.6 2.8

5., SLectricity and gas 0.5 0.5 0,,5 0.5 Cl.5

6, fransport and canmmication 3.5 3.4 3.2 3.2 3.1

7, iWholesale and retail trade 15.8 15.9 17,.0 17.7 18.E4

8, Banking- and other financialintennediries 0.8 0.7 o.6 0.6 C0.9

9,, Ownership of -drweflings 2.0 2.0 1.9 2.0 2.0

10. Public administration and def'ense 5.5 5.2 5.2 4.9 4.6

11 . Servies 6.4 6.1 5.9 5.6 c;.4

12. Gross Domestic Product 100.0 1(0.0 100l 0 100.0 100.0

17 Rev:llg-res.'7/ Pre'Liminary figures

Sources Central Bureau of Statistics.

7'abli 2.7

Composition of Gross Domesl:ic Fixed Capital Formtation Indonesia 1960.1970-

19(60 1961, 1962 1i63 1964 1965 1966 196L 1968 1969 1970

(In 'C000 current Rupiahs)

1. Construction and Worlks 19,405 26,104 44,752 140,225 360,476 1,083,4518 9,080,794 34,843,878 101,368,514 159,889,047 223,,027,7232. Machinery and Equipments 11,260 22,033 30,054 122,775 501,554 503,1i74 5,241,699 33,053,521 76,556,79:2 110,595,421 199.40i,3483. Gross Domestic Fixed

Capital Formation 30,665 48,137 74,806 26:3,000 862,030 1,586,672 14,322,493 67,897,399 177,925,306 270,484,468 422,435 )71

(In '000 constant 1960 Rupiah)

1. Construct.on and Wor'ks 19,405 25,038 21,303 16,250 16,423 18,557 20,951 18,379 21,791 28,302 34',3'8

2. Machinery and Equipments 11,263 19,0S5 18,774 14,384 113,382 17,599 19,791 14,789 24,4771 24,757 28,,6313. Gross Domcstic Fixed

Capital Formation 30,1665 44,113 40,077 3D,634 34,805 36,156 40,742 33,168 46,262 53,059 63,209

Annual Rate of Increase(+)- (In Percent) 43.9 (-)9.2 (-.)23.6 3.9 12.7 (-)18.6 39. 5 14.7 ]9.1

ImDlLcit Price IndBc:es. 960=100

1. Construction and Works 100 104 210 863 2,195 5,839 43,343 189,585 465,186 564,939 649,,318

2. Machinery and Equipments 100 1LS 160 853 2,728 2,859 26,485 223,500 312,847 446,724 690,923

3. Grossi Domestic FixedCapital Formation 100 1l9 187 858 2,47/ 4,388 35,154 204,708 384,603 509,781 668,315

Source: Biro Pusat Statistik.

4a o% tf\ ry o r- c4 Cr- C\ 6 A - CQy

aC, at ^ Co .4 r _ .O

H r-i t ,4 r- e- 0D C4 u c.e-4 ri L' C- C' Cr C V' ('H 0 H r C\u - I n

o 'i i! a a 4Ci 1 cx UN \r 0. c) C 0 0 trri '.0 c- s'I Ic- C r C) 0 9 H C

m Co Zc 0% 0 %t H t 0% t 4 j cH cu Oa r-; tr \i C4 r- s

.4~~~~~~~~~~~I H4 14 \4'

. 8 " ; ¢4 rX ~§ Ch cA C: C\lC i r L0 0 .. 5 4' II S 5 S 6 *~~~~~~~~~~~~~~~~~~~~~r4 C

C.)~~~~~~~ H 010 N,O Os 0 L%! 0 5 0h 0h 0q CY0

0sl , 44l

a L% ,d-\ t'L- N1S P 3 e a ^ | |~~~~~~~~~~~~~~~~~~0 r h rR| S l |

HA~~~~~~~I I J J I'~~~~~iN IK IL 1

o * 4)' 11 \Cj c4 0r ON tC co Cf% _t 1 I

A 4D t .t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~''CI ) u\cO Dc0N~~~~~~~~~~~~~~~~~~~.

ri o Om =t \co -It 14) r-I OD 0~~~~~~~~~~~~~~~~~~~~~~~~.4

('.1 (' t U 0 C 0

'0 ~ ~ ~ ~ ~ A '.0 '0 '0 '0' .0' 0 0

° 0% O 0'. 0% 0 Cl ' 0% c$ 01 C,

H H r-I ~~~~-O r-I Hv- .H Hr H3 r-If\ i- 54

Table 3.1

Balance off Pay,ecnts, 1970171-lp73f7Iti9'

l7r~~~~~~~/72q / ,971/72 ± ±±1IH l '

I II roviion1al n Haalf 19V7iQO,/tf Wnlt Unlf 'N n1 Actual W.+ innt s Tt-' PrnIrt-,-

A. GC-cds and serrices1. hepor-ts, ,f.oh 1 O9L+ 5h 720 'I 887L3 ooR ! 2

Oil 3251 39 559 993Ntn-oil 761 403 381 784 448 437 885 1,015

2 -.,!s, n,wi.b -1 102 -642 -bAb -,w' uri -Ala _4 1,in Oil -55 -77 -15 -1Non-o0i -i,Oo8 -587 -565 -1,152 -725 -753 -i,468 -1,7o6',S es (net) -45 It 4 -30 -52 =S o-o8 1,'seri ~ io ov52a C5 ~ ~ loOil -197 -lOd 6 T=254 -202 -291Non-oil -255 -139 -159 -293 -182 -208 -390 -489

_, ,%.&ift (m} 3 ) r o>c oo = 2 . a, 7 - 2-213J64-Oil 152 b6 -133 -- I4 16 -3Fi 3W9 Non-oil -502 -323 -343 -666 -449 -524 -973 -i,i8o

B. 1vziellaneous capital 115 8i 109 190 127 119 246 320_rect investment 88 72 101 f- 116 216 232 315

__^S {i .... vestr,ert' ..... 1-6 6 7 13 2 8 10 1 20-3pgliers' credit -30 -- -- _ - _ _

..±er (trade credits,repatriation, etc.' .1 3 ; 4 9 -5 -5

C. .:e t serrice paytens -85 -41 -66 -107 -33 -76 -109 -120'-. JfLut co.,tracte' W.-Ur.

July 1, 19&6 -56 -25 -45 -70 -12 -50 -62 -70Rescheduled debts 1B -15 -31 1S -5 -37 745cShrt-tern crea-t -- -- -- -- -- -- -- --roa-uararnteed -2 -2 -2 -4 -1 -2 -3 -2MICS -16 -5 -8 -13 -2 -8 -10 -10ee.l nan.-ea cests -± -- -- -- -- -- -- --Oil debts -17 -- -- _- __ __ __ =Other -2 -3 -4 -7 -4 -3 -7 -13

^. @t•s¾uorQLY42 si--e Ji2 l 1, ;96 -29 -16 -21 -3 -f -26 -50

r -: er=zOr 2 - izs'ors -75 -53 10 -43 189 12 -1_

E. Offic: transfers ewd capital 369 c18 199 9 238 2671. ?'-graa loans a-d grants 2Fj 1UT 122 'i7 SF -7a=

Aid exchar-se loea-si/sants 139 Th i 7T 155 Izg ) 210PL 430 (nonfood) 22 33 14 47. 17 19 36PL 480 (rice) 53 17 26 4 216 24 ,PL 480 (wheat end bulgur) 25 1 2 21 14 21 5 160Cther food a'd 39 34 6 40 13 39 52

2. ProJect loLns a-nd grants 86 34 77 111 70 AO 150 2nOProJect loams, pre-1957 5 1 -- 1 -- -- -- --

Project lotns a-nd grants,1968-73 78 33 77 no '7n 80 KAE o

P. Total A through 3 -26 -30 25 -5 240 99 339 50

G. Allocation of eDRs 28 30 30 --

E. Total A through G 2 -3o 0 5 25 ol2n 30 9°,9 5°

I. MIbtetary rovements (increase inassets -) -2 'n / .oc2/ oLr3/ _,, i.,3

1

SDRs _~~~~-2 - 6 -Use Of RLnd credit 29 -8 -9 -17 -9 . .. *..Other short-term liabilities -R1 23 17 40 -1Short-term assets 2 15 -27 -12 -231 , ... *.

1/ April/Mach .iy Includes an increase in not assets of approximately $5 milliondue to revaluation followin- the currency reali.nmont ofDecember 1971.

3/ Includes an incruase in liabilities of $1o mlllion due tothe adJustmnt of Fund holdiz-s or rupiahs in flay 1572.

'Sourceg Data supplied by the Indonesian authorities.

Principal Non-Oil EU2rtsI.A.f 1M LL. U.30 U'L.Lal '

1971/72 1972/73First Second Apr.-Sept

1970/71 Half Half Total QuarterlY

Rubber 256 119 97 216 49

,offee 62 29 25 5h 19

Tin 61 30 28 58 19

Timber 130 84 86 170 4s9

Palm products 46 25 26 51 10Oil (41) (22) (23) (45) (9)Kernel (5) (3) (3) (6) (1)

Coconut products 41 9 11 20 3Copra (33) (5) (3) (8) (--)Copra cake (8) (4) (8) (12) (3)

Tobacco 14 12 7 19 15

Pepper 10 10 10 20 5

Tea 23 16 14 30 10

OtherS~ 118 69 77 1h6 )12

1'nt.nl 781 403 3&i 781± 221

1/ Provisional.37/ -ncldes a stati stical iscrapancy between data on total exDorts

derived from the record of exchange transactions and data derivedfrom the E 3 forms that axporters are requsired to emrAlete and frnmwhich thecommodity breakdown of exports is compiled.

Source: Data supplied by the Indonesian authorities.

Table 3.3

Commodity ComPosit ion of Imports(in million U1.. Sdolla rs)

1970 __ _l Jaruary-A-ust 197_.2P'inanced by- Financed by

General General Generalforeign Program foreign Program foreign Programexchange J aid OtberY' Total exchang4i aid OtherY Total exchange r aiog r thera Total

Foodc and beveragesw/ 95.0 136.5 6.2 237.7 86.9 101.4 0.2 1388.5 48.9 70.4 0.5 119.8

Chemical products 93.2 26.4 3.7 123.3 105.1 45.4 2!1.9 172.4 77.3 35.1 14.8 327.2

Paper ancd prinited matter 24.5 8.3 1.0 33.l3 25.0 2.8 0.5 28.3 10.1 4.9 o.8 15.8

Textiles and clothifLn&/ 91.8 33.3 8.4 133.5 103.2 50.6 2.0 155.8 82.1 9.4 10.2 101.7

ineral products 24.8 4.7 1.6 31.1 32.2 3.0 4.9 40.1 19.8 2.9 1.8 214.5

Base metaLLs S9L.7 18.7 5.4 LL5.8 83.0 17.7 6.5 107.2 54.B 10.4 6.1 '71.3

Yachiner:r 120.3 46.6 7.9 174.13 109.3 44.0 14.2 167.5 66.8 24.4 L8.8 ilLo.o

Vehicles C1.8 44.7 12.5 160.0 94.3. 25.6 5.1 125.0 46.6 15.7 3.7 IS6 .0

Other 39.8 2.6 4.6 472!9 27.2 2.' _. 31.1 17.9 1.8 0.7 20.4

Total 683.9 321.8 51.3 1,057.0) 666.2 293.0 56.7 1,015.9 424.3 175.0 57.4 65 6.7

aE cludes iTmports financed by oil companies, project aid and foreign private irrestment; aLL data, except those on "free" inports, are 'based onletters of credit opened.

2/ Includes imports tmder merchant letters of credit, the pre-import financing facilitir and former BE imports.3/' Coprises forser DP and "free" irports.

Includes following amounts fcr freigl-.c payments on aid-financed im:ports 1970: $33.7 miollion; 1971: 426.5 million; 1972: $14.8 million.2/ Includes following amotunts for freight payments on aid-financed irqorts: 1970: $1.8 million; 1971: $5.4 million; 1972: $1.4 mill4on.


NON- STANl D1TUDTable 4.1

Table 1: INDONESIA - Etemal Public Debt Outstanding as of Docenber 31, 1971After the '970 Rmeorgan zati or. A - - -ei - L---

t fl..i W a - . to - I - -%

kin aUOUbanCLU O u.S. QO.arsj rage

Debt Outstanding Decemiber 31, ,,Source DiEbursed Includiq;.

Onl,y Undh,-b-xrS,M

TOTAL EXTERNAL PUBLIC DEBT/2 3,3l0168O 6

Pre July 1, 1566 Debts 43,702 0,3.702

Debts subject to reorganization 21 7 21,n,7iDebts not subject to reorganization 22 131 22,1J31

Reorganized Debts 1.853.739 1,853,739Western Countries 6 5_____

%n-- ce lintv, v131, 11Germany (Fed. Rep. of) 136,065 136,c6 ,

Japan 87,462 87,.,62Netiherlands 2 99 51IhUited Kingdom 26,172 26,112'u.S.A. i706, o23 17, u, I

Eastern Countries and Yugoslavia ____,.L-L i,i57,i __,

Bulgaria 1,541 1,China, Peoples Rep. of 23,797Czechoslovakia 64,331 641,33-1Germanw (East) 54,652 54,6X,2Hungary 17,154 17,154Poland 93,344 93,3A:1Rumania 13,385 13,3L5U.S.S.R. 78 43795 784,755Yugoslavia 104,116 104,1'16

Post June 30, 1966 Debts 1,413,239 2,257,6(<

Airwn-r4 l_A RR ... RR _

Canadaa 6OJ *~~~~~~~~~~~17,117 47,117

Netherlands 1,208 1,208m i ted Kingdom 23,200 23,M2C0U.S.A. 10,966 10,966

Lons from International Organizations 33,461 _ 276,cooRaman Dove'. 3ment, fl.%, 1_55 3u, VIDA 31,916 ?37,400

See. footnotes at end of table.

O-SVMT/LN,D )

Table 1: INDC?JEHA -->lcternal Public Debt Outstanding as of Decenber 31, 1971-Attr the 1970 Roorgani2ation Agreements/l

Debt Repayable in Foreign Currency

(In thousands of U.S. dollara) Patze 2

Dlebt Ontstainding Dece~mber -, - ISource Disbursed Irhc ring

Ar I v Lndi!3^ra r&

T10ns fr-mm Gove?-enta 1oQR30 L7O23637Belgiuam 9S,

D am 2,00J1 1,2,9. ^ .__ s ' ~~~~33625 36,95_

Germany (Fed. Rep. o) 100,638 127,h68Y.-AA - II 1r7 CC

Japan 338,669 511,1J'1a L-.LeLuu .7U,248 93.?,,h4J1

New Zealand 667 1,i216tMD ated Kigdonm i9, 81j8 L4.L4, ('4

U.S.A. 557,375 826,365

Nationalization 120t0977 150 9771

1I Debt, with rAn origncal or extended mratuRity of ever oine yelri/2 Includes arrears of principal and excludes arrears of intotcst up to

December 31, 1971 as shotn below:(In thousands ot U.S. DoX±{;1S)

Pr± nc i T lntsrnvt

TOMA __4 _ 6L83

Pre hllv l, 1966 Debts 17A8t4 IL 7

Reorgey- 4zed Debt -s +ste .r.a.. Cm.4triLes ,&a1ouvgrofaaia '42 9 Rns4Bulgaria 122

n LLa, Poo p W P,ep. o@ Hungary 6,679 751Yugoslavia 16,893 3,314

I) .LJ1V.LUU~~~0 A tm % .. ~ I~ I IF L uji, to rMar ch 3 570iu-/3 vcludes %Pat4-na debtw con.t--ltup 'w LAu AX'S70

Notes: Bilateral agreoments relevant to the 1970 Debt Reorganization have beenconc3=1ed wixn Ceecboslov -rance, :ed. zwp. of Ge-iwu", Edat e 1 na aItaly, Japan, Nletherlands, Poland, Acania, U.S.A., and U.S.S.R. Hiowever,DWbt Reorganization still have to be concluded wEith ulgaria, China(Peoples Rep. of), Hangary, Yugoslavia and the U.K.

Beonomic and Soel Data DivisionEconomic frogram. Depart,ient

September 29, 1972

Table 4.2

TABILE 2 ' INDONESIA 09/20/72

EXTCIRNAL PUBLIC DEBT AS 0V OECEMBER 31#t1971

OEBlr REP'AYABLC IN rtOREION CURRENCY

III THOUSANDS Or U.Si OOLLARS .

TOT AL

DEB'r OUTrSTANDING TRANSACTIINS OURINS PER1009EOGINN1"I oF' PtRIIDD CA1NCEL''

L AT IONSPCISSURSEO INCLUDING COMMITO DISBURSES SERVICE PA'YME-NIrS ADOJUST''

YEAIR ONLY UNIISOUiRSEO RENTS MENTS PRINCIPAL INTEREST TCTAL IWENTS(1) (2) (3) (4) CS) (6) (7) iCs)

1967 10852#977 2#060,058 154P535 1700336 37#891 3,221 41.112 6 9,891968 26055#660 2#246,491 312,537 257s965 39#564 9.651 49#215. 52,-7631969 2#325#081 2.572,227 490.602 24387`3 42,071 14520 56.591 024o 2601970 2,545,p131 2#996P498 504#521 368.542 60. 686 22,144 a2#833 37,p1761971 2,951.P435 3#478209, 5175,800 295.666 83, 438 28,701 112,19s 134 4684

1972 3,#260.P689 4.105.055 A a 311.P273 113P081 42,1?? 155,2581973 345888pset 3,991,974 a 249271 96.363 46,837 143j.7011974 3#611.788 3.s95.610 a t24 586 92,1361 51,427 144,2881975 3,643#514 308020750 a 64,365 100*545 52,596 153.1421976 3,607,334 3,702,205 s 33.453 96,199 51,45? 147o,6561977 3,544#587 3P606.005 a 22810O 10581513 50.016 155,8291978 3*461#564 3*500,192 17.611 133,481 48.569 182,050 -

1979 3#345,715 3lp366.7ll - 12,6091 144.041 46.979 191i'0201980 31,214,283 3.222.670 - 6,o06 132.384 44,026 176,410 U

1981 3,088,705 3,090,286 1#220 1440r746 44,206 50409521982 2. 949,178 2!p949.540 362 146.095 42,716 188,612198 3 2,803,445 238030445 , 15201)19 4O753 192.,7731984 2.651.425 2.651#*225 147#634 38P605 106,2391985 2,503,791 4.50391 * 148,145 49,626 19771*7 e1986 29355,646 2*355*646 ' 148,185 47,0CS 195.2701967 3,207,461 2.o207.461 ' 145s310 44,542 189j,6521988 2,062,152 2.#062.152 D 139.533 42.193 181,726 e1989 I1.922*618 IL.9229618 - ' 132,757 40.045 1726802 U

1990 11,789S862 11#789.S62 OD 125.93S 3,8 140 164jP0751991 1,663,926 1.6063926 OD 122.23? 36,527 158jP764

tl lic lwea principal in arreAtrs.SSE NOTE AT EnD OF TALE.

Table 5.1

Consolidated Central Governmant BuCeg It970/j -1 974(in billion RupiahA)

1972/731972/73 Revised 1 973/74

1970/71 1971/72 Original Estimates PreliminaryActuals Actuals Estimates (Oat. 1972) £.nlBates

Routine budgetReceipts 344.7 413.4 573.6 549.3 668.1Expenditures 287.7 353. 437.5 433.4 517.3

Surplus 57.0 5 136.T 115.9 150.8

Development budgetExpenditure 160.6 186.8 314.1 293.9 373.3General 126.3 146.2 231-3 .10.9 259.2Project aid 34.3 40.6 83.0 83.0 114.1

Receipts 109.7 133.3 178.0 178.0 222.5Counterpart funds 108.4Project aid 34.3 40.6 83.0 83.0 114.1

Total budletReceipts 454.4 546.7 751.6 727.3 890.6R=enditures 448.3 5140.6 751.6 727.3 890.6

Overall surDlusor deficit (-) 6.1 6.1

S.ourea: Data t upmlied by the TndneAian authoritiea.

Table S. 2

Central Government Receipts, 1970/71-1973/74

.1972/731070/7& DR.i MId 19Q7 717

1970/71 1971/72 Orignal Estimates PreliminarJA4 1 u- A ^4 1A. I Aw(0 10'9& W*4)Jmn gce

.a% W, && .10 J W qMM.m a V A.%.3= * I _ _ __ _ _ _ _ _

,,, I,,,1 IQ 21.8 18 '. 2917.2 2090 A37AiALJ WA &J 1LieW IIJO &?US. f IJ a-z,,.W .,

Inc1 ard corporation tax 52.7 68.4 76.9 79.1 98.6p - ---- 'w^ ( i fl -'.0 t )I -(v22.7) (29,)o

Corporate tax_/ (20.7) (26.8) (29.5) (29.7) (37.-'-"izinO; x/ (18.6) (23.6) (26.O) (6' .7) " ;

Corporatiom tax, foreigoii, oapanies 68.8 112.7 206.ij4 202.4 252

IPE:DA-u __ 12.0 15.0 18.5Other 0.3 1.5 2.0 2.5 3.7

Domestic taxes on oonsumption y2.0 101.5 113.7 115.9 149.7

Sales taxes T7E 125.1 26.9 490.5Excises 38.9 41.0 45.8 45.4 51-iRevenue from domestic sale5

of oil products 30.4 28.3 34.8 31.6 51.3Migcellaneous levies 4.4 6.9 5.7 6.0 6.8

Taxes on international trade 117.8 117.7 154.4 124.6 1337-Import duties 66.4 93.9 67.4 75.bSales tax on imports 22.1 22.9 29.6 25.8 28.7Rzport tax 25.0 28.4 30.9 31.4 29.4

Non-tax receipts 13.1 12.0 8.8 9.8 11.5

Total routine budget 344.7 413.4 573.6 549.3 668.1

Aid counterpart funds 75.4 92.7 95.0 95.0 108.4

Project aid 34.3 40.6 U.0 83.0 114.1

Total receipts 454.4 546.7 751.6 727.3 890.6

2 'Includes receipts from the MPS advance payamnt sch e.2YIncludes only revenue from the MPO advmaco payment cheme.3/mL rura- land tax (A- DA) e-.ard for- regial d-', lo programs has

been included in the 1972/73 central government budget for the first timesince 19067.

Source: Data supp.led by the LUWndsiUU au-r.bi.ta

Table 5.3

Central Govers3ent Expenditures1 1970/71-1 93/74(in billion Rumiah)

1972/731972/73 Revi-ed 1973/74

1970/71 1971/72 Original Latimates PreliminaryActa.inl s Acntulal a Urat+niatan Oct.- 10 721 FRtiANt-

R 'tine hitni4+ +-^+-Al sR7 7 'Ac-3 R.7 -1 I.AI. CN 7-Personal expenditures TZi 214 2 20Jt;2 24;1

IJi1c,gi niiA aftlft.4,aa 01M-n V1W-es- - *i *4e .70. 54l 13, 1,7, *

Rice allowances 33.5 31.3 33.6 33.6 35.6Foo A'ce 11.7 12.1/ IiI 15 . 4 15 . 4 I 15.4

Other 10.8 17.0 20.9 20.9 20.9W-D.LI . 4.8 5.2 6.9 6.9 7.2

Material expenditures 74.1 1 87.1 14.7DCuestic 6.8 u7 [2Jo I.( 7) .External 6.3 11.2 10.4 10.4 11.6

West Irian TW.0 TET TU.7 10b 03vwier r-i.on 42 O.Q 5872 '972 90.90>

Debt service payments 28.4 46.8 4 56>4aT*&roZa4 1.0 >.o 9.0 eVw o.External 27.4 41.0 38.7 44.9 47.8

Other expenditures 12.1 8o.7 o8.8

Developwet budget, total 160.6 186.8 239, 333General Th30/ TB/ 79B.WW T7.JWi/ 2T9.Wor regLona1 govsrnmentDA/ 20.8 20.o 20.8 20.* 20.8

-_ __ 12.0 15.0 18.5Project aid 34.3 83.0 83.0 114.1

Total expenditures 448.3 540.6 751.6 727.3 890.6

1; :ncludes additionaI rice distributed to mllitary Dersonnel.3 Includes payments of Rp 4.7 billion for DGR losses incurred in 1969..dExcludes Rp 11.8 billion spent by departments in 1971/72 fro funds

released to them in 1970/71.

WIncludes Rp 2.5 billion for payment of DUR losses.

eJ Includes Rp 24.7 billion in the original estimates and Rp 11 .4 billion inthe revised estimates as transfers to Bank Indonesia for financing theextension of investment credits to the enterprise sector._T__-l_.eam Tn 926.0 h4l14 , non 4v%wdba.+....+- __wm. +e ar+-"AghA +kw"rWa 4% nh 8.a

!/Financed by central government transfer payments to the regions tocompensate for the loss of ADO receipts.

g -The rural land tax (fTPA) eaA - r-k-ed for regional deolorent programs hoa beenincluded in the 1972/73 central government budget for the first time since 1967.


Table 6.1

(in bil1ion RuDiahs)

Total Annual and (Quarterly)money Dmand - Percentage ChangesSupilay Currency Deposits in Money Suply

1964 0.7 0.4 0.3 1611965 2.6 1.8 0.8 2711966 22.2 144.4 7.8 7541967 5;1 .14 31.0 17-14 1311968 113.9 74.7 39.2 1221969 - - - 58

March 130.9 80.9 50.0 (15)June 1RA6.14 88,6 57.8 (12)September 169.5 101.9 67.6 (16)

1 An ¶n 1 I 1. 2 f,I 7_ _ _.- __ _ ., S *~J _o *

March 210.7 126.3 84.4 (17)Irm 2t6.4 1. I '131.7 Co81I7I 4. (3)

U~~~~~AW C U*LS'J*I B.)5Ief UA4.I5 _ 1

September 226.9 135.9 91.0 (5)r'L.c-Uer f3I.i i 4 e a oa -I

1 J co &40 9.7co

January 254.1 157.2 96.9February 26.e4 10.4 1.0March 270.2 166.8 103.14 (12)April 273.2 169.5 103.7May 279.1 171.1 108.0June 291l .5 178.5 113.0 (8)July 290.6 181.6 109.0August 295.5 180.9 11i4.6September 304.0 182.3 121.7 (4)October 3u7.9 107.7 120.2November 314.4 195.5 118.8 -December 312.6 i95.5 117.1 (3)

i1972Ja92 arnyi( 192.5 125.4 317.9FebrlB4S 202.1 136.4 338.5

208.4 142.7 351.1 (12)Apr7S# 21097 145.9 356.6KW-/,} ,212.1 142.1 354.2June$& 219.4 158.0 377.4 (7)Juijv/, 229.2 176.0 405.2Augustlt 237.7 182,0 419.7Septembera/ 245.1 185.0 430.1 (14)

"/Revised.

/ Provisional.


Table 6.2

Eh!eq in Fa&ctors Af'fectin Morm3y SM;-

1969 1970 I IV ~ITotal Total S er Q ter Quarter Qruarter Total Qurter qmErter ZLarto!r

Net official international 2/reserves -7.2 12.5?= 2.&- -1k.0 14.7 -.14.2 24.7 36.82/ 142.8 56.8

Net c:laimns on Goiveriwient -TI - : s I3 -T, - -1Y 7T M' 77. - IT; -M Gross credit -7 -14.1i -1 , -r-7 -57rGoveriment cash and deposits-

(inicrease *-) -61.9 2.5 9.8 2.,2 -i14.4 22.1 19.7 5.8 -114.8 1.14Net credit to BU'L 29.3 -7.8 5.3 8.,7 2.0 1.6 17.6 -4.7 --2.2 2.8

GroSs crediLt 77 7-7 7 MV 'v. 1 7 8 -3 -'PL. 480 deposits (increase -) -5.9 7.7 11.5; 348 -5.7 -6.7 2.9 4.1 1.2 3.0

DICS 5.4 6.3 1.2 1,,2 0.8 1.0 4.2 2.1 -- 0.8Nlet claims oni state ienterprises

and the private sector 82.8 131.3 41i0 31-.5 4L.3 22.6 136.4 44.4 5.7 60.2Gross crediit ./ 6 .26. IT MTDIporlwt deposits (increase -) 0.5 -2.9 8.51 -1.,5 -.12.1 -3.6 -8.3 11.8 -'9.7 7.5

Net other items 1i/ 6.1 42.5N/ -6.6 3.,6 -3.7 -24.6 -31.3 -16.231 5.0 -25.9Total money 6Fr rr 2.1 2I: .5 -n7 7MT _777 2m 37;r

Doman deposits 26.5 22.6 15.1 9.6 8.7 -4.7 28.7 24.8 15.3 27.0l'ime and savings deposits 35.3 26.8 10.8 8,.5 18.7 6.o 44.0 17.3 314.9 8.9

17;7/--Me-ipT"rTrn-lo :rted to t,hoT17 `=l ocaj, on -o MRsE9.'Y/ ID'cluldes :Rp 10.5 billion related to the slecond allocation of SDR,.I7 Includes Rp 11.4 billion related to the third. allocation of SDRs.lIZ Includes deposits of regional governments and other official ent:Lties.15/ Includes credit denominated-in foreign exchange.7/ Inicludes commercial banks' net foreign exchange position (other -than credit denominated in foreign exchange),

for whlich adequate data are not available.

Sourcle: Data supplied by the Indonesian authorities.

Table 6.3

Si s ofth Fnlncial )Sytesn 1960-1971

: mvin !1i ze meel 'izc Size irn Relation to rlmP(irn Wi1io7 olUlu5inls) (lni bil Oiol of lxJ7l Rupialhs)

Curriency De::: !nd T i me TotE01 Price Currency Demw.rd Money Time Totel Moneyr Time TotalDeposits Supply Depo;its Li uidity I:lIcx Deposits Supplj. Deposits Liquidity Supply/ Deposits/ Lir1 ul6iLt.s/

(Dec 071 GDP GDP GDP=1,00)

1, P;-) O. o 0 0.013 0,.047 0.0001 0.0471 0.017 200,0 76.5 276.5 .6 277.1 .1204 .0002 .L)I

I,N1l O. 0.048 0.019 0,067 o.ocl4; O.O67t4 0.020 24+0,0 95.0 335.0 2.0 337.0 .1425 .0008 .1L433

I *, l 0,10? 0.034 0,136 0.002 0.133 0.057 173,,9 59.6 238.5 3.5 242.0 .1018 .0014 . L03'

1)g;3 0.175 0.037 0,262 0.002 0. 't4 0.12 145,,a3 2.5 218.3 1.7 220.0 .0816 .O06 opR?1 J n.4ir2 0.2'30 0,732 0.004 0.736 0.24 18,,3 116.7 305.0 1.7 306.7 .1026, .0005 .L031

] l'5 1. j O.I 2,,6 - 0.08 1.6' 1.09 l/:5.1 73.4 233.5 7.3 245.8 .1096 .0033 .11YJ

] v.(. 14.i; /7.- " 0.4 22.6 20.74 69,4 37.6 107.0 1.9 108.9 .0702 .0012 .07111

1 ;7 314.0 1-.4 51.4 2.2 '53.6 44.14 77,0 39.4 116.4 5.0 121.4 .0606P .0025 X(,1.

2]" 7Y .4;7 39.2 113.,9 12.0 175.9 31.59 91, 43.0 .39.6 1i4.7 154.3 .0570 .0o60 .o 6o

1 ' ll,3 (f5. " 1:1t).0 4).'! " '. f ).7' 1YI,,17 73.2 200.6 'i55.4 256.o .069o9 .0191 00;

:4 ,.i I .1 3.1, Y ,'.(5 1l(,,5 jo.4 246.9 82.0 328.9 .0754 .0250

_I_ l ;1, r *.l{e ',.~ j 4.fK171 ) 1 '. ) 1 *',' l] .7 311 1145.3 457.9 .o8q93 .0415 .13o(i

1/ Sin-e at the titme of the mission data an interbank deposits were not available, time deposits are inclusiv,reof :interbbak deposits.

Source t Bnk Indonesia.

Table 6.4

Liouddi tPoeitorn of C~er?il Banica-yu - So6,,-inCLu;&T

(in bUllion Rupiaho)

NI.niuzm ~~BankReaerve Indonesia

Currat u de Free CreditsAsset./ tv Re1 ervek/ to Banka

196s Xarch 1.5 0.7 0.5 0.2 0.0

June 2.7 1.1 0.8 0.3 1.0September 4.2 1.7 1.3 0.4 1.5December 6.4 2.6 1.9 0.7 1.5

1967i Xarch 7.5 3.9 2.3 1.6 2.4Jne 11.6 5.1 3.5 1.6 3.3September 11.1 5.6 3.3 2.3 4.4Doebar 19.6 8.1 5.9 2.2 5.0

1968t March 23.6 7.2 7.1 0.1 7.7jLne 47h4 1 lh.2 0.2 12.3Septmsber 35.9 12.6 10.8 1.8 17.8Decmber 49.1 20.6 14.7 5.9 30.2

1969s March 56.7 35.4 17.1 18.3 47.3

June 79.4 41.1 23.8 17.3 52.5S wtssbtr 91.5 38.9 27.1 11.5 62.1

Decmber 97.8 48.5 29.4 19.1 79.5

1970: Januars 104.3 46.9 31.3 15.6 83.5February 113.8 48.8 34.2 14.6 91.8March 125.3 53.0 37.0 15.4 95.8April 129.1 48.2 38.7 9.5 101.8May 128.8 52.1 38.7 13.4 99.3June 133.1 50.6 39.9 10.7 98.1July 135.8 56.0 40.7 15.3 97.2Auguot 125.6 57.6 37.7 19.9 96-7Septaber 137.7 57.7 41.3 16.4 101.9October 141.3 60.8 42.4 18.4 104.9Novaeber 137.0 52.5 41.1 11.4 110.4DecemberW 139.6 54.2 41.9 12.3 112.9

1971: Januar4 152.5 58.2 45.8 12.4 111.4159.7 63.0 47.9 15.1 114.8

llarc1@' 153.2 58.9 46.0 12.9 114.5Ap5;t 154.5 63.8 46.4 17.4 118.2153.7 614.3 _)A1 18.2 125.8

June 141.5 56.4 42.5 13.9 127.0July 144.1 57.2 43.2 14.0 128.8August 150.5 61.1 45.2 15-S 10.0Sept.ber 156.9 50.6 47.1 3.5 132.9Oetober 163.5 53.5 49.0 4.5 134.7Noveaber 161.4 58.5 4.&4 10.1 1.6.9December 158.0 54.4 47.4 7.0 142.5

1972: auuar I *;97-.1 67.0 591i 7I h.AI

Februpryf 206.7 76.9 62.0 14.9 147.4223.4 85.1 67.0 18.1 150.0

4>twj 226.2 86.8 67.9 18.9 145.1239.5 101.1 71.9 29.2 135.7

June4.< 255.4 105.7 76.6 29.1 135.7Julyw 272.2 104.7 81.7 23.0 133.2AuguotY 277.0 97.0 83.1 13.9 133.8SWita ~6 284.3 94.1 85.3 8.8 136.0

Vincludna state, private, forV_ ci rcial banks, lo-,l dvelop,entbanks and the state development bank (Bapindo).

£/Position on last Wednesday of lonth.

-I/qqual to 30 percaUt of carront liAbillti.a.wR.,iII@d.

VI,n NW 1971 the basia of oeapu tati of tbe liquiAdty pcdtiaa oS baitamm obaso.

WProvisional.

/Ia January 1972 the portion of tine and savings deposite to be includedin current liabilities was increased fram one tenta to one third in thecase of state banks and branches of foreign banks and to one sixth in thecase of private banks.


Table 6.5

Total Bank Indnesia Cdedita8I im raJI.Ii ons or lhupiahs)

1966 1967 1966 1969 :970 1971 971L

Credit to Bank 1.5 5-. 30.1 79.5 132.8 143.5 13J.7

Sugar 0.7 3.1 6.5 9.1 12.0 11.5 3.3

Production 0.7 3.1 6.5 7.0 7.8 11.0 3.1Dist,ribution - - - 2.1 L.3 0. 0.2

Estates 0.7 i.0 i.7 3.6 3.i 42 .4 2.Agricul.ture _ 0.3 3.0 26.3 28.4 27.7 25.2

Fertilizer 0.3 1.4 17.9 17.1 12.6 12.8Bisias - - 1.6 2.6 4.6 8.2 U .9Other _- - 5.8 6.8 6.7 0.5

iDcrort.s _ 0.3 2.9 7.9 9.4 6.4 5.5Cotten Ill)EO - - 10.6 )13.2 12.3 18.3 14.3F.lvur MI460G - - - 1.9 2.2 .2 1.4BE Im.port.v _ 3.6 5.8 3.4 3.1 2.4Yediumt Tcerr _ _ - 5.5 26.4 56.7 64.7Yanuf.Kcturing - - 1.0 3.3 5.5 2.7 2.1Transrortation - - 1. 1.2 1.6 2.3W;est Irian - - _ - 2.8 2.6 -Other 0.1 0.3 0-Q 1 6 6.1 10.1 10,5

I+ 9 I.. A-,; A R7 OA A 5 1 A 7 GoR 7

v~~~~~~~~~ 1. \ ,Iv., ., -. 1 -, *

£ti L -L - 2.4 1.6. - - -V

Fcood Frocurereret - - 37.2 72.4 61.7 59.7 55.0.j.. .zjA)U.~i - V.3 v. 4 V.14 O .4

Flour FI4CO - - 3.2 2.1 7.3 7.8 5.0.1 * _ . :_ ^ - '^ ' -7z.t.S LX dIx1 - - L*V 4.U - - C'.

1cediur. Term - - 1.3 0.7 0.5 0.4E:anufacturing - - 1.2 1.4 .3 1.4 0.iEDports _ 0.3 0.4 0.4 0.4 0.4 -Bjiras Gotong

Rojcn3 (Pertani) - - - 1.2 13.9 17.6 17.5Sugar Izrports - - - 1.0 - - -

Other 1.5 1.2 3.5 3.1 11.1 15.9 11.9

TOTAL 3.0 17.1 92.0 166.9 209.6 247.2 226.4

~ource: inBatic incondsia

Table 6.6

Classification of Credits by E d-Uses, Odacen0l§ ne 1972

1968 ., I 6't_ - . 1970 - 1___ 1972Dec. N_r. J\mse a2Zt. Dec. Mar,, JJure Scnt. Dec. Srar. 3ert J'.Ciy ADc. T; Feb Av.

Bank 111lonesia and atCrm'rcial banks 18,L 125.j 2 1 6 . 20. 0 12.6 129.7 311.8 3.', 3;r;C! ZQ * 42L2 ; bL6.8 L4&8 4Z4 472.3 473.8 464. 470.4)roduction

Food 28.2 :31.6 34.7 39.6 45.2 53,,1 61,6 74.6 72.6 79.8 83.' 85-7 d5.8 77-5 71.7 74.8 86.6 90.5 92.6 96.5 101.3 102.2 99.0Exports 5.2 7.8 11.0 10.9 13.3 14,.2 17.5 16.9 19.8 21.6 21.3 21.2 21.0 22.4 22.5 22.5 23.5 23.1 22.7 24.3 23.8 23.0 22.7Textiles 12.5 '14.6 15.6 14.5 17.3 20.1 20.8 19.8 19.7 16.7 Z'.1 25.0C 26.1 27.8 28.3 28.9 30.5 32.6 33.4 33.4 33.2 32.9 32.7Indu-stry 5.0 6.4 813. 12.2 12.' 14.41 20.8 26.9 33.3 36.7 45.5, 47.3 44.4 47.7 49.9 51.3 54.4 55.5 50.4 54.1 54.1 53.-3 56'.1Other 2.3 2.1 1.8 2.4 2.1t 2,8 2.5 3.4 6.5 15.3 23.3 23.1 24. 1 24.9 26.8 27.6 28.8 30.7 32.8 34.7 34.7 32.5 35.4

TradeExports 9.4 '10.1 11.5 15.3 17.9 20,8 20.8 25.4 26.7 Z7.9 27.9 21 .1 28.7 30.5 29.6 29.3 29.8 29.2 29.4 28.3 29.0 30.9 30.9Dom,stic trade 5.8 7.6 11.0 15.4 17.1 16,,3 20.4 i!4.1 27.7 29.3 36. 31'.CI 42.7 75.'4 83.4 84.0 76.9 74.5 73.7 77.3 66.8 616,s 70.2Aid im.ports 3.5 3.0 1.3 7.6 6.6 10.7 12.7 14.3 13.7 141.4 10.'? 10.M 9.4 9.9 11.0 11.0 7.U 8.0 8.5 8.4 9.6 8.6 9.4

OtherBIlL 37.2 32.1 41.2 58.2 72.4 59.35/ 62.6 71.2 61.7 40,.0 55.5 57.91 62.7 63.2 54.6 57.5 59.7 52.0 62.7 62.9 63.7 542.5 0.0Othor 9.1 10.2 12.5 15.3 19.6 25.0 23.3 3l6.0 43.0 52.1 /6.7' 50.9 55.8 52.2 50.4 1.5.9 48.8 49.7 41.7 52.4 57.6 64.13 54.0

Other c'nuercial banks 8.6 .10.9 1 ,I 19.6o 21 U 2 a22 ~107 32,?I L.e2 6L. ,n ;7;5 4F -5 5Q.0 6 9 50.2 50.2 51.2 5/.0Production 2.5 3.3 5.0 6.2 7.2 9.4 10.2 10.9 11. 12.2 14./, 1L .7 15.7 15.5 15 .1 7. 6.1 14.6 I5.1 TSExpotrts 0.8 1.0 2.0 1.4 1.4 1,7 1.7 1.8 1.6 1.9 2.3 2.3 2.4 2.3 2.2 2.3 2.2 2.1 2.1 2.1 2.1 2.0I 1.8Other 5.3 6.6 8.3 1G.6 11.0 13,1 16.3 18.0 19.5 24.7 27.6 27.4 27.8 26.8 29.8 29.4 30.7 31.8 31.7 33.5 33.0 34.8 35,4

_ -.- . - 2 2 - -1-TOTAL 121.8 13i.4 1 9.7 20.6 244.3 0.8 291.2 34,3.3 ib2.4 3&0.6 419.7 432.3 445.6 47Z 475.7 460.1 495.3 495.8 497.7 522.5 524.0 515.5 522.4

P Excliing c;redit to Govvarnment/2 RevizE dD rrovis3iofl

From Sapteciber 1971, crodits for asiNr prodiuctLm have been reol3aeaifiod as trade credits az a zesut of Bank Bia Daya' aacnuiiettion of the stocks of the state sugar.anterprises.ln ISarch 19'70, Rp 11.2 li LiUam of gross ciredit aoutstanding, vhich vas reaated to subasidies on imtported rice was writtenoff-ailainet aCleuvalated couterpartft fund balseas.

Sourcei Data supplied by the Ia6doueai. authorities

able 6. 7

1NWESThENT 65W])TS: COIC'UTMIcT'S BY SF.CYORS, JUJLY 1970.MAZIC 1952(In~ billions of Ru~piahs)

AULY-Im R=,,ba____ 1 a M- 19'l .fw. 19,1l flatmber 1971 De"e 1971 XaO 1"?2

Public Private Public Pr!iedt Public Pritte public Private Publ B Pri vate Public Private Publitc Fr! atSector Sector Total Sector Sector 'total1 S~ec to r Sector T~tl Sco eLr Tt% etr B , otalSetr S,.r Toel fc et-

I. Agricla t.r__ __ _ __ ___ __ _ __ __ _Se to __ _Ti-7 --= ho er .0el 01.1 0 19____0__1_0_0______11 0__20_O.____ Sec12 0________ ___0_ 20_0___ 0 3 0 3 0 0 G.3(b) Est teCIA 1 23 .09 2.4, .3 3.9_2 6___6______722_5__.7 ______2_08____3_ Sectu2.0______S. ___2_0(c)Foesty .0. 0 72 0.7 023 1.01____________.1 0.3 .1 ____ _2_ _0_ 2ta 1__ 28_ ___0_3_18 21 19(d) Lshe y - a 4 0 14 _____________12 0 1 _____0__13_0 _13_0__13__ ____ _ Tota

1. K5in7it I rT(a) m CIA 0.0 0.220 0 0. 0.06 0.20 0.20 0.0 0.12 i3.5 0.0 0.12 .2 0.0 8 0.12 .2 0.0 6 0.30 0 0. 0.05 o.05bU) lZrtaOe 0.6 12 .9 26t 13 .9 26 .5-87 .0 07 .3 20 12 .0 206 62 .4 20

Mc flonretrms 0.wt.2 07a01 .1 11 01 .9 11 02 .9 14 0.23 1.280:0 1.56 0.2, .88 o.06 0.2 1.90(d) Non-htry - 0,4 0.1 - ,2 01 - 01 .2022 01 - 0.3 .1 0.3 013 -01(e) 'Lhersoc 02 O, 0.23 ON 0,3o6 0.35 0-2 0.42 0.260. 2 0.46 0.46 0:2 0.46 0.46 0 2 0.46 0.46 02 0.01

64f-Toteal 010, o.06 01.18 0.231 0.26 0.18 0.10 0.08L 0.18 0.10 0.08 0.18 0.10 0.08 0.18 0:2 0.08 0.18 0.13 0.07

2. ctrn

(a) 011r aO d liaz -087 0,20 0.20 MC 0,20 0.820 08 0.05 08 9 05 7 0.025 08 9 05 7 0.05 0.05 *:5 0.05 0.05 1.- 0.05

(d) n-terToa1 0.ta2 0.2. - 0 0,31 0.. - - .6 0.7 -o 0.76 o.o6 .o 0.06 0.06 1-0 o.o6 1.o2 -.1` 0.0

Ce) Othaer. t 0.22 0.06 0.08 0.2 0,06 0.28 0.2 0.06 0.2 0.2 0.065 0 0. 0.22 0.06 0 0. 0.23 0.06 10.2 0.2 0.06Sg ub-Tota 0.23 0,26 5.76 0.235 0,26 50.4 0.23 0.11 0.34 0.23 0.27 0. a) 0.23 0.17 0.91 0.23 0.17 1,8 0.40 0? .0.1

(a) Constpruto.eng 1.72 4.75 6.46 1.71 6.52 8.5 .23 1.71 .4 15.42 1.71 10.3 12.04 1.71 10.55 12.26 3.80 12.6o 14.61 3.0 -126(1) COthers 0.19 25,77 5.98 0.22s 8.73 8.96 0.21 10.36 10.57 0.21 11.54 11.75 0.21 11.72 11.932 0.21 1-353 13.74 0.20 13.61

S6 'labrf)9a 3 20.24 0.240 02.0, O,,31 0.39 02.77 01.62 0.70 15.065 04.74 10.51 35.065 05.742 71.807 17.57 02.85 19.62 1.0 02.65

(. Cahspotaiati. n1.36 0.178 12.537 23.80 0236 25.03 24.81 03.99 25.60 249 0.99 25.02 94.81 0.99 25.80 3.59 1,03P 27.12 63.5 2.10(b) SPeoraceutc1- 0.58 0.58 - 0.68 0.68 0.- 0.68 0.68 0.1 0.75, 0.575 - 0.475 0.575 -1 01.5 1.067 . 0 0.06(c) Pubbelrm mrv 0.5 5.218 2.76 0.5 3,63 5.05 0.5 5. .121.6 0 .55 56.558 0 .55 5.36 5.9 5.79 6.02 101,8 6.66 9.51(d) Rctoreation 0.34tls 0.94 1.28 4.5 .09 5.35 4.2 1.17 0.4z 6.1 01.2 7.36 6.1 o.25 7.39 3.0 .16.6 3.06 .162

()Other. .w .9 .8 02 3.2 349 .2 3.2 .6 0.2 3.94 4.23 0.2 O.4.o .03 .3 0.7533 5106 0.4 5.66

Bub-Teortt,l n 2.29 20,38 12.71 3.91, 16,36 20.336 8.82; 13.82 2.69 9.66 15.6o 325.02 9.70 16.19 25.89 6.27A 20,86 27.13 7.13i 22.08

5. Others 0.6a . 0.43 1.11 O. .fl 0,,43 0.92. 0.48 5.190 6.38 0.40 5.92 6.40 0.50 s.92 6.4.2 2.09 0.-55 2.6*. 2.07 0.55

52Th!. 9.9 s,.79 1.6.36 40. 33 145.,22 85.55 45.35. 59.53 2,04.88 55.26 67.57 2,2.83 55.74 69.10 324.84 31.64 78.67 110.31 33.6.2 61.42

Source; B&AInd 0onesiaa

Table 6.8

IRVESTMENT CREDITS: DrseUJRSE03I BY SR1TOR. JUNE3 1910.ACt1 197(in billiocs of Rupiahe)

JU1' 1970 2LOem3ber 197,O March 1971 Jun.. 1971 Septemnber 9I I00Decbr 1971 March 1972

Public Pri'ate, Public Pri'ate PublIce Pri,ate public Priv,ate P0blic Private Publi1C Private Public Pl, Iat aAU2 to oa Dector Sector Total Sector Sector Total Sectocr Sector TotsA3 Secor e3tor Total Secto, inct-r Total Sect.r S,c~t.r Tctai

1. AgricultureTa-F&-MT1oiaer 0.07 0.10 0.18 0.08 el. 1 0.19 0.0 0.12 0.20 0.081 0.13 0.31 0.08 0.13 0.21 0.083 0.14 0.22 0.07 0. 16 0.23(b4) Lattete 0.1.6 01.80 0.96 0.4.2 1..26 1.68 1.0 1.57 2.63 1. 57 1.89 3.1.6 2.0~ 2.13 4.16 2. 53 1.59 4.12 2.76 3.7 4.53(c) Forestry 0.01 0. 39 0.40 0.01 0.55 0.56 0.59 0.59 - 0,:54 0.51. 0.06! 0.70 0.76 0.07r 0.69 0.76 0.07 el. 81 0.88(4) Fil.hery - 0.07 0.07 0.10 0.10 - 0.1.2 0.12 - 0.10 0.10 - 0.10 0.10 - 0.08 0.08 . .09 0.09(a) Llvesaock - 01.18 0.18 - 0.24 0.24 - 02 0.90,41 0.41 - 0.42 0.42 - 0.41 0.41 D .42 0.4?(f 1Ohers CI * 0.07 0.0? 00 0.04 0.0 0.0:4 0,3 .0 - 0.303 3 - 0.0 .3 -0.3 00Suab-Total 0.23 1.62 1.85 0.51 2'.31 2.82 1.141 2.72 3.86 1.65; 3,10 4.75 2.18f 3.50 5.68 2.69 2.93 5.62 2.91 31.27 6.18

2. a)T i1 an i'0.19 0l.13 0.32 - 0.05 0.05 . 0.05 0.05 6 005 0.05 - 0.05 0.05 - 0.05 0.05 - Cl..05 0.05lb) liran Ors, - . .-. 1. * *. . -c) Non-ferroa metaa 0.0 0.05 0.05 0.05 - 0.05 0.05 C 0.05 0.05(e) Others - - 0.22 0'.06 0.28 0.22 0.06 0.25 0. 2 2 o.o6 0.219 0.22 0.06 0.28 0.20 0.0 0.26 0.210 C.0 0.26Stal-Total 0.19 Cl.13 0.32 0.22 0.1.1 0.33 0.23) 0.11 0.34 0. 22 0l,16 0.38 0.251 o.16 0.33 0.20 o.i6 0.36 0.207 0.36 0.36

3. yanuftur-ing(a) Food proceaaio 1.55 2.9 4.34 16 4.3 5.86 1.4 5.90 7.4 15 ,7 90 .5 9.09 10.54 1.6 9.94 11.30 1.37 106 1.9(1b) C J.o t hi 0.16 2. a" 47 2.3 01 .5 5.81 01 7.8 7.34 0.3 .3 8.41 0.1 10 i.65 10.64 0.19 1.2 11.42 0.113 1.1 11.49(c) Paper and paper ;-roazot 0.61 0.02 0.63 0.63 0.02 0.65 0.79, 0.02 0.81 Mel38 ... 88 0.95O 0.11 1.06 1.33. 0.01 1.32 1.383 1.01 1.39Cd) Pi,M.Hng 0.01 C1.20 0.21 0.0.1 0.23 0.24 0.05, 0.23 0.23 0.01 0.,36 0.43 0.19, 0.37 0.56 0. 20 0.70 0.90 0. 24 0.73 0.97(e) Chemtcall, 0.77 0'.06 0.83 1.31 0.16 I. 46 1.16? 0.86 2.28 1.83 0.96 2.78 1.96l 0.98 2.9)6 2.27? 0. 9 3.25 2.609 0.93 3.67i f) Phsrmacautieale . 0.54 0.54 . 0..6 1 61 0.02 0.70 0.71 0. M 0,:84 0.86 0.02 0.35 0.87 0. 02 0.36 0.5q 0.02 0.19 0.91g) Rubber 0.42 3i.81 4.23 0.57 4.05 11.62 0.55 4.66 5.21 0.57' 5-,13 5.70 0.57, 5.1 48 6.05 1. 22 5.75 6.97 2.598 5.61 8.17h) CconstructLon 0.18 O. 46 0.64 0.25 0.72 0.94 0.80) 0.86 1.66 1.13 0.,95 2.08 1.74 1.00 2.74 0.69? 1.03 1.72 0.716 1.10 1.il6(1) Others 0.19 0.79 0.99 0.2.5 1.95 2.20 0.26 2.34 2.60 0.30, 2,,92 3.22 0.35 3,26 3.61 0. 35 3.53 3.98 0.35 4.13 4.49Sub-Totsa 3.90 13.13 15.05 4.75a 17.60 22.38 s.6q 22.74 28.43 6.51 26.86 33.37 7.144. 31. 7 8 39.22 7.61 34.04 41.65 9.55 35.39 44.94

4. Servlc es(a)TrTasportation 1.93 7.10 9.03 2.714 8.47 1.1. 21 3.235 9.26 12.49 3.46, 12.,00 15.48 3.55. 13,52 17.07 3. 06 13.76 16.92 2.90) 14.319 17.79(b4) Storage - -.04 0.04 - 009 00 - 0.27 0.27 - 03 0.9 - O.45 0.45 - 0.44 0.44 .0.53 0.53(c) &,tele waS louriam - ~~~~~ ~~~0.91 0.91 - 244 24 2.89 2.89 . 3.16 03. 16 0. 47' 35 4.04 0. 55 4.51 5.06 0.N0 5.4,4 6.L~Cd)) Recreation fatitiea - - . 0.07 0.07 0.08 0.08 - 0.09 0.09 - 0,,12 0.12 - 0.13 0.13 0.14 0.14(a) Ot-her, - - - - * 0.02 0.02 - . - - 0.05 0.05 - 0.06 0.o06 - 0.06S 0.06Saab-Total 1.93 (1.05 9.98 2.74 11.07 13.81 3.24, 12.51 15.75 3.4WI 15.,,65 19.13 4.02! 17.,71 21.73 3.63, 18.91 22.52 3.70) 21.07 214.77

5. Other4! 0.52 0.29 0.81 0.17 0.20 0.37 03.16; 0.29 0.45 o.45 0,.28 0.73 0.45, 0.31 0.76 0. 46 0.10 0.56 0. 41 0.09 0.50TOTIAL 6.78 21.24 28.02 8.42 31.29 .39.71' IL4s 38.38 48.84 12. 32 46.0C5 58.37 14.31 53.47 67.78 145' 56.15 70.72 16.77 59.917 76.74

&rUrc: ]IeAik Izadoeala

Table 6.9

Structure of Lending Rates of State Comercial Bank

Annual Interest Rate

Before AffectiveCategory and Purpose 1Yay 31/72 ]:ay 31/72

I. Food irpcrts under PL 4LO 6 6

Irncrts and distributicn of ferti'izer)..I.A+'ccJ .PL Or WLUMIe PL. 8 ) 12 12Bir.as !iaticna3 rice program )lXediur-ter7. credit for investrent )

II. Bir.as Foultry 5 15

Production and co'lection of crurb )rubber f?r excprt ) 18 18

Prcducticn c-f Java tobacco for export )

Prcduct' cn .mnd ccjlection of a.l other)exocrt cc,-rodities by producers; ) 24 21

Prcdcz_icn ard distribution of nine )essent4a- gccds: rice, sugar, ccok- )in-- oi;, sa.t, salted fish, kerosene,laun.rry scap, se:ected textiles and ,batik ) 27 24

Azricultvre. wanir-n h's b"-4 -J-d'is ,rty

Prcdicticn credits to the textile in-ciu5trv )

_ 'L. .Cc_ectiC'n land exrcrt of ccrcdiities s 27 24

Pr c, .tra.zcrtaticn (sea, air and 3rcafi; )

FPcik^: cn c:' e:rrcn' 'or publc )

s on c: ...... are r-lrts) )30 24Frc&ucticn c- rharraceu;ica:s, paper, )

: n.- rraft s an, builIin: r ateria s ):. n,:n inwt.itrr J

1 T "nrJ.r4 ,n*t , ,n na 4r. cthAe , eF,.d st , ;_ n t_

c;ude ; in cate&ories I - II 3

V'. Trade an:i diistributcn (cther tian of nine esse:,_a._ goods) and other ser-) C tovices nct. included in Categories ) . 3i - IV

/1 :lC5 rovo5 ...ic inOdi.Vx oiC |. prc~1.b ofC1J':'1.cn p-r ainwu, e",,: tre excep-r..cr. of cre4its for akcd ,.r:ortls .nie-r K U6, in w.;hich cas- r;- - crrissicnir r -e-^ent -er .ni-r. Cc-izrricn.s tre ne-' at he ccncr:v-1 :f a. cr^-..ta re3-.x:lIm an eacii tire n rene. cr arena.c!nt and are ccrrL-.3d cn the basis

5curc.: Sarn Ln sia.

Structure of Deosit Rates of State Cienrcial Banks

May 31/72 May 31/72

Interest Inu nte57t A ana~~ LLbu.4rs _Lt s A,uwa

nXw ~~.LWCUU6 AaAolm AILLUrts Rat_ / Rate-'

Time Depositas :/

1 month and less than 3 months 1 % 12.68 9 ).383 months 1-1/2> 19.>6 12 12o;)

6 months 1-3/4% 23.00 15 16.0812 months 2 5 26.80 18 i..56

Tabanas (National Deve-opaent up to Rp I00,GD - ,Savings Scheme)W - 18.00 balance above

Rp 100,000 I-

Taska (Insurance Savings Scheme) - 15.00 15 15

Demand Deposits:

Kinimm balance: up to Rp 10 million 1/2 % - n.a. n.a.Rp 10 - 50 million 3/4 5 - n.a. n.a.more than

Rp 50 million 1 % _ n.a. n.a.

Interest on all time deposits i8 paid mont Ly. The corresponaing annualinterest rate is, therefore, the ocopounded monthly rate of interest.

ig/Since May 31, 1972, interest rates are announced on an annus.l basis, although4ntsrest is still paid_ innth1v-

J/Before May 31, 1972, the penalty rate for premature withoraval of time depositswas about half of the full term interest rate.Since May 31, 1972, the penalty rate for withdrawal before maturity is fortim deposits oft(a) les than 1 mouth - no interest rate and Rp 250 administration fee(b) more than 1 month, but less than 3 months - 6 percent p.a.(c) more than 3 months, but leas than 6 months - 9 percent p.a.(d) more than 6 months, but less than 12 months - 12 percent p.a.

W Tau u axe n, BUUbJeCGTto a maturty aand C be withdram after 1 monthwithout penalty.

Source: Bank indonesia.

Talole 7.1rea., Production and Yield off Sel.eattod Ai ricultural. flomzodities, 1951-l971

~~c~aodity ?k.lt a 1951 a .2952 a ~~~?53 1951 a 1955 1956 a1957 a1958 a19 160 96 12 153 156.2 a 1Y,5 1956 a 297 19'8 19'9 7C r

pue., ;-Addy I ar'-a :l,o'xl Ma. 5,815 OS,114 6,465 6,613 6,570 6,702 6,9 6,99% 7,1531 7,285 6,858 7,285 6,7?31 6,980 7,,618 7,781 7.515 7,961. 8.on6 A,16I&2; .Dorduetion #1,603 III. 9,575 10.22.8 11,251. I2,049 11,566 11,695 11,6 122,275 322760 13,488 12,720 13;689 12,P221 12,9153 13,657 14.368 1:1,9118 .5 640 1L6., I I8,41 s .9 3%,6 yieldi aQct:ait&1 a 16.5 16.7 17.4 18.2 17.6 17.5 17. 3 17.6 17.8 18.5 18,5 18. 8 Ili.2 38.6 ;L7.9 18.5 18.5 1.9.6 70.4 22.5 23.1

arrIa,0C6t Pca.t 1,798* 2,232 1,9G9 2,518 2,02.2 2,232 2,087 2702 2,290 2,640 2,462 3,175 2,559 3,644 2,507 3,778 .2,54.7 3,?26l 2,322. 3,018 V,Q27Prvo1uction aI,000 N1.: 1,390 1,658 1,815 2,720 1,971 1,965 1,860 2,I631, 2,092 2.4.60 2,2813 3,243 2,358 3,769 2,365 3,7 21,369 3,1(6 2,293 2.80 8, 117 eld ai1zaq,A1 a 7.8 7.3 9.2 10.8 9.7 8.8 8.9 9.7 9.2. 9.3 9, 3 10.2 .2 10.3 9.4 9.8 9.3 11.8 9.6 9.6 10.5

I., l.100 Ms. 1 666 927 1,042 1,071 1,077 1,125 1,221 1,341 1,1456 1,1.17 1,52.1 1,400 1,598B 1.579 1,5541 1,523 1,523 1,526. 1,41t3 2,1,34 4,6STIPrr4,eaion 31.00p UT. I 7 1341 7,535 B 953 9 569 9 3.17 9 131 10 118 11 '7 12 698i 11,376 1.1,190 30,975 11,572 12,223 10,271, 13,350 10,747 11,r56 11,.034 10,4l 9 1,85yie3~~ aQul,ai.a1 a 42.4 81.3 45.9 49.3 £~~~~69.5 41.2 42. £4.I 67.2 80,3 74. 1 78.4 72,4 77.4 6. 877 70.5 74,4 771 72.9 55.0

-',a,, t l,oOIts.a 1 148 la1 369 182 197 21.1 240 246 256 278 21A 290 272 254 295 280 329 338 333 328 2C5credaict1oo al,0QXI MT. 51 so 62 58 63 63 75 67 89o 91 137 ill 114 96 138 13 129 220 157 148 142ytQlc AIdntal a 3.4 3.0 3.7 .3.2 3.2 S.0 3.1. 2.7 3.5-, 3.3 4,1 3.8 14.2 3.8 4.0 4.6 3.9 3.6 4.11 3.3 11,8

ezr a ,00 PA,: 1,041 1,237 1,284 1,496 1,514 1,545 1,597 1,651 1,669o 1,649 1,665 1,460 1,533. 1,823 1,870 1,936 1,955 1,59 1,625 1,600 1,60071.ttc :1,000 XT., 739 1,135 966 1,221 1,050 1,018 1,113 1,085 1,10 1,365 1,2147 1,186 1,71I9 1,193 1,2149 1,12 1,09 1,131 1,097 1,06 1,03lIel.1 aIu1nIA. I 7.1 9.2 7.5 8.2 7.0 6.6 7,0 6.6 6. 6 7. 1 7.5 8.1 il. 9 86.5 6.7 s.8 5.6 7.1 160.6 6.6 .6.4

eroh al,O0D Re..: 59 93 116 155 157 1 9212 220 17vI 139 12.6 153 150 133 156 159 1.12 352 253 115 115errr4..eldam ~1,000 M a 9 13.32 17 15 11129 29 R, 23 22 27 21 22 25 26 2T 23 2.8 25 28yleul aQUAIA4Le a 1.5 1.2 1.0 1.1 1.0 .7 1.4 1.3 1.5 1,7I 1.15 1.8 1. 4 1.7 1.6 1.6 2.4 1.5 1.8 2.4 2.1.

ii. l.OOa. 90 93. 96 100 101 103 103 104 2031 106 105 105 I06 w10 108 11. 110 93 i22 132 i1169r4.1c l1,OaI O2.t 30 39 42 2.3 42 LI1 40 35 31 33 Ilk 33 33 34 33 35 35 40 1.2 48 52%lina1l.e 3.3 14.1 4.4 4.3 4.2 14.0 3.9 3.4 3.2 3.2 3.2 3,1: 3.1I 3.1 3.1 3.2 3.2 3.5 3.5 4,.0 L.il

aIa 1,000h Ba.: 90 94 96 100 101 103 103 1014 223 186i 105 105 1,06 L08 108 Ill 1.1 93 129 132 126I 1,00(2 307. 221 146 150 369 I"6 165 160 148 3137 141 146 12.2 AB, .i61 157 . I'f 1714 168 IO9 211. 2ŽL671,142 iilmIal :a ~~~13.4 i5,5 16.7 16.9 16.4 16,0 115.5 114.2 I3.3 %3.16 28 9 13.5 114.0 1.4.9 14,5 15.7 1!:8 20.2 155 16.2 17,9

dr:1,000, Ma.: 304r 278 292 324 298 317 341 331 364 377 365 371 3152 373 372 383 351. 395 365 402 2.75pr*..et1n :1,000l 1142.2 M 253 309 376 314 350 352 352 388I 368 382 366 350 396 422 400 365 287 23? 293 475y1e3.1 sQ.4.101,3. s 9.7 9.1 lo.6 n..6 10. 5 10.4 20.3 10.6 10.1' 20.3 10.5 3.0.14 1..9 10.6 11.3 1.0.2. 10.1 7.3 7.0 7.3 10.0?-tber a a1

aeae :1,000 PA.: 1,183 1,137 I,05 1,130 1,140 1,140 1,163 1,200 1,400O 1,35D 1,300 1,5210 1,30 1,500 1,575 1,570 21,069 2,100 2,150 1,96w 1,972pro1dict1m i1,0XI 47.j 828 762 705 757 79 698 695 696 705 62D 683 682 582 649 717 736 762 752 73 78 810yle.d4 s841ztAI a 7.0 6.7 6.9 6.7 .6 6,1 6.0 5.8 5.0 4.6 5. 3 4.5 la.5 4.3 14.6 4.6 3.7 3.6 3.4 * .0 4.1

1, o00 Ho., 404 417 457 525 515 502 525 594 61 651 62.5 599 539 574 598 661 589 677 593 681 700tr±.t1u :,000 KT.3 276 286f 306 1400 346 357 339 418 43C. 1443 4.~6, 389 3153 392 356 1417 41i6 420 389 1.8 397yLeU ~ :lqota1 a 6.8 6,9 6.7 7.6 6.7 7.1 6.5 7,0 7. 6.8 6.8s 6.5 6.5 6.8 6.0 6.3 7.1 6.2 6.6 7.1 5.71

ara 100011M., 61. 714 7* 85 98 94 90 95 99C 201 99 95 l08 100 119 us5 112 114 U19 I25 215pr&d.ctic z1,00I ACT. s 4,877 6,200 7,5914 5,918 7,093 9.106 7 790 7.58 7 603 8,289 6,11,0 8,096 71228 7,720 '8,360 9, 170 8,880 9,19D 7,327 7 080 8,917yel :(ZAiztt.1 a 799.5 8137.8 1,026.2 696.2 723.8 968.7 849. 871. 2 7W8.6 810.8 620.2 852.2 6£6,0 772.0 70)2.5 797.4 790.-9 806.1i 61'1 .1 416.4 713.1.

area ;11. "XIHat. 210 335 325 285 279 3814 4014 ,449 3914 393 366 527 2.82. 62o 1420 41i2 360 390 3~22 36 13pr.idtxti jil,000 14T.: 1,303 2,292 2,176 2,111 1.8917 2 638 2 652 3 103 2,877 2,670 2,4614 3 623 3.2315 3,931 2 1724 2,27r4 2,12.4 2,l. 3,0-?1 3i0:9 t'3ylou8 :Quu1l1 i iS2. 0 68,3 67.0 74.1i 66,0 f6.7 4s6 49.1 73.0 67.-9 673 48. 7 62, 3 63.4 614.9' 55.2 59-.6 6.2..6 93.8 65.1 '77.5ma 95 95a

are. :1,000 ;21..: 146 143 11.2 145 145 13 135 134 136; 137 137 137 :120 125 133 122. 122 95 95 5pro-taction al,OOC,i V.1 60 57 56 68 66 65 70 72 76 83 61 814 78 67 89 99 78 87 86 81 96I li.fal a 4. 4.0 3.9 4.7 4.6 4.7 5.2 5.2. 5.6i 6.1 5.9 6.1. 5.6 6.7 6.7 7.1. 6.3 9.2 9.1 8.5 30.1

area :1,C~~~W X.. I'. 126 171. 126 1.57 135 178 190 I86 145j 1'aZ 209 200 :195 164 171 183 197 21-0 31.4 209 709)1ecd&ction- :1,=00 R7.a 16 73 57 67 50 el 77 67 59 59 64 69 66 52 77 98 102 110 130 33) 13~57' t-'4 :4w ax 141. L, 4.3 4.5~ 4.3 3,7 3.14 14.0 3.6 4,1 4.2 2.0, 3.5 14.4 3.2 14.5 5,14 5.1 5.2 9., . 51

Source i Baseed on dlata provided by Cen-tral Statistical. Bureau,, Indoniesia.

Table 7.2

Production of Selected Primary Commodities, 1967-72~dM WS' umL&IA WVL46 .& % I'JU

Half Fore-I e~~~L., ,~~tO 4- e%'f' 4PI 4 ^7,.17V 170U 17U7 1711 17(1 172t cast

FiNhnrj . .1...io 1,1824 1,16% 4 4 1, 24 *,22^l 1,2 . 2/ .:J.L.UU91rO'Uuuc(O.uuA .9 I,lI UV I se. L4 I Cy-- Ise -7

Inland fisheries (502) (437) (429) (421/ (417)14 *26 (Sea fisheries (680) (123 (7) (8uo)- (810)_/ ... (83;,

,Al ../ - ~- - - - -Logs and san-woo6w 2 ,O85 3 , 828 J,.52 I 110,u,fUJ1 .I.

Tin and tin- n-concentrates&/'. 13.8 16.9 17.4 19.1 19.8i/ 11.0

Bauxite 912 879 927 1,229 1,238 711

Coal 208 176 190 172 198 82 198

Nickel ore 172 262 256 600 900 344 700

Iron sands -- -- -- -- 271 152 300

Crade petroleum&' 186 220 271 312 326 192 403

9/Preliminary estimates.

Y/Production from export concessions only; expressed in thousands ofcubic meters of roundwood equivalent.

VEqual to the tin metal content of tin concentrates.

Z"Long tons.

miU MiViozas of British barrels.

Source: Data supplied by the Indonesian authorit.es.

Table 8.1

Production of Major Industrial Products

Ata tRtEst. 21&!LutProduclts Units 1370 19711 1972

Paper t000 tons 22 27 36Cement 1000 tons 561 544 601Fert-i i er OO' tne 98 105 125Oxygen ' 0003 2,650 3,50a 3,617Sal-t '000 tons 63 142 120Automobile tires '000 pcs 390 464 644x-+f.^mobile +tbes ,000 M4s 237 260 34

Bicycle tires '000 pcs 2,012 1,856 2,621icyCie tulbes '°°° r 18 3

Soap t000 tons 131 131 101Cocor.ut o''A ! VU 46.; sr 21 2r-60 266

Cooking oil 1000 tons 27 27 29tC0'garettes m..n pcs L1394f8 L I. L4s^e7 I L p -

Kretek cigarettes mln pCs 19,103 20,102 20,115Ma'ches ^1~~~~~~mn b0xaes 29035333

Dental cream mln tubes 25 30 31Yarn '000 bales 205 240 310Textile (incl. knitting) mln meters 575 732 775Batteries `000 units 56 262 300Light bulbs '000 pCs 5,090 6,o000 l,oooElectrical & telephone wires ;000 tons - 123 *Galvanized iron sh '000 tons 34 35 57Iron sheets & concrete iron i000 tons - 741Pipes, incl. water pipes '000 tons 3 3Dry batteries '000 pcos 4502 6,ooo 120,000Sewing machines '000 units 14 292 300Automobiles '000 units 3 16 lbeMotorcycles '000 units 31 33 50Radio sets '000 uni.ts 393 416 1,000Television sets '000 units 5 30 30

Sourcet Department of Industry.

Tablh 1 -a

Regional Distribution of IArge an! l:ediwun Scale Nnlnafacturing Industries in Thdonnsia, 1970

Number of Number of Nunbil ,sEstablish-r' nts Persons ihnDOoyed ____ fr;tc'vcd Prw

Total r.C ,-,. .I 1. ; c i T. Ue Wit

?rovince/Re.0il - PercerL&"ae Distirutit-± i Tot3l i.

1. D.I. Atjeh 0.53 0.50 0.53 0.63 C.72 0.42 56.6 431. 72. North Sunatra 3.89 4.89 3.77 4.45 5.05 3.o4 54.1 p13.2 r3. West Sumatra 0.85 11? 083 I -75 o83 81A7 7 2.14. Riau 1.92 0.146 2.10 0.55 0.12 1.57 13.6 76.5 -; -5. DnJ-bi 0.51 0.71 0.149 o.46 o.L48 0.42 42.6 20'.76. LaInung 1.00 1.07 0.99 0.70 0.66 0.80 33.3 167.37. South Sumtra 2.23 1.43 2.33 1 .21 1.05 1.59 25.8 ,^-.c8. Benzktllu 0.08 - 0.09 0.02 - o.0o !

Sumatra 11.02 10.88 11.13 9.50 9.83 8.73 40 ")

1. D.C. Djakarta 8.65 11.30 8.33 6.34 5.25 8.53 34.7 1i06o

2. West Java 13.99 25.36 12.59 21.88 25.63 13.05 7L.1 39{.1.3. Jogiakarta 3.58 1.48 3.84 2.09 1.40 3.72 2Y.3 JjL.2 L C. Oentral Java 26.44 13.48 27.43 23.82 21.37 29.62 42-7 350.55. East Java 24.86 28.62 24.40 31.87 33.66 27.65 60.7 356.6

Java and iladura 77.I 8V.23 76.5u. 86.0 87.30 82.97 52.6 310.5 17.L

1. West Kalimantan 1.50 0.71 1.60 0.62 0.32 1.33 19.7 i 1L.7J2. Central Kal;rmntan 0.08 0.10 0.08 o.o6 0.05 0.07 35.1 159.0 1,,.-3. South Kalimantan 0.89 o.46 0.94 0.69 0.57 0.98 36.9 377.6 16. 'I. - 0.0,, v, 12.5 - - v z>12.-14. East Ka]imantan 0.1 1 - 01.12 0.3 .0 1.5 -2

Kalimantan 2.58 1.27 2.74 1.39 0.94 2.47 25.7 223.9 1!.R

1. North Sulawasi 0.59 0.46 0.61 0.27 0.18 0.48 21.5 11^.9 12.1t2. Central Sulawesi 0.20 - 0.23 0.03 - 0.11 8.0 8.-

3.South Aq 4^s;s 6.3 ? A1 6.95 1 .4S 0.5 3.5 11. KA.6

4. Southeast Sulawesi 0.06 0.05 0.06 0.02 0.01 0.04 16.14 Sh.o a, .Sulawesi 7.17 1.68 7-84 1.78 0.76 4.20 11.8 137.2 _8-5

1. Bai .60 1.22 0.52 0.69 0.80 0.44 55.0 199.0 13.ui2. West Nusa Te07gara 0.74 0.20 0.80 o.146 0.29 085 29.5 1 37 .3 ;,C,

3. East Nusa Tenggara 0.09 0.15 0.09 0.03 0.03 0.05 17.4 56. -'

4. South Mialuku o.06 0.05 0.06 0.02 0.01 0.05 20.0 80.0 1 .s5. -Wst Irian 0.22 0.10 0.23 0.10 0.04 0.02 21.2 109.0 16.14

Other Islarns 1.70 1.73 1.70 1 .31 1.17 1.63 36.4 .^f-? 6 15.'

Total 100.00 .2i2 2 100.00 100.00 47.4 :

t S4'e: Table 3.

laule 0.3

- A -= A-1- vLA ^ T. e .e.4 aAP& P J45" AW% L ^'J..AAlM £k~4d.M . ,LL UIL . LAI6 hM&"W & U.;

In Indonesia. 1970 by Provinoe/iagion

Nnrhwr nf' F-stabhl i sh mAnts Number of Persons EmD1v8d

Province/Region Total Lae Medium Total Iare Medium

1.D.I. Atjeh 95 10 85 5,380 4,317 1,0631%% LL C%.-- . O(I ~Ani 790 flo nA# 7 6.AMla Noriih vuAZActir 697 ..... ;61 37q2 I00o 7s63. West Sumatra 153 20 133 12,503 10,402 2,1011 . 1 --- 1. J t. n 1. 1. A cc If n O OA).Li.U-iau 7 J4 4 9 'J, .,_. ',.

5. Djambi 92 14 78 3,923 2,852 1,0710. 1_Lmpung A.17 21. J.7U y7)-J -J 3 2,023

7. South Suratra 399 28 371 10,277 6,270 41,017

8. Bengkulu -4 - _i ' --v'

1.4 - LLL~~~-- - /i - 1-^ nr 1..) LJ.

Sumatra 1Z972 198 i.774 0,56h 58,530 22 03h

1. D.C. Djakarta i>49 222 1,327 53,793 31,267 22,5262. W4est Java 2,504 498 2,006 185,521 152,588 32,9333. Jogjakarta 644 31 613 18,867 9,431 9,.4364. Central Java 4p732 362 h.,370 201,963 127,224 74,7395. East Java 4.45° 562 32.888 270,193 200 ,409 69,78b

Java and 1Madura 13,879 1,675 12.204 730,337 520,919 209,418

_.lest Kalimantan 269 14 255 5,229 1,'882 3,3472. Central Kalimantan 14 2 12 492 318 1743. South Kalimantan 159 9 150 5,868 3,398 2,4704. East Kalinantan 19 _ 19 237 - 237

Kalimantan 461 25 436 11,826 _5,_598 6,228

1. North Sulawsesi 106 9 97 2,282 1,079 1,2032. Central Sulawesi 36 - 36 288 - 2883. South Salawesi 1.131 23 1,108 12,389 3.394 8,9954. Southeast Sulawesi 10 1 9 164 54 110

Sulawesi 1,283 13 1.250 15,123 4,527 10,596

1. Bali 107 24 83 5,884 4,775 1,1092= Wp.et Nua Tepngara 1i2 1it 18 3.896 l17h9 2.1X?3. East Nusa Tenggara 17 3 14 295 169 126L_ SRaith in1,i-ei . 10 1 9 200 80 120

5. West Irian 39 2 37 826 218 608

Other Islands. 305 44 261 11.101 6991 4,110

Total 17,900 1,975 15,925 848,951 596,560"'52,336

a!__The reported all-Indonesia total in Table 1 is 596,555.

Source: Survey of 2anufacturing Industries, Indonesia 1970, Central Bureau ofStatistics, Djakarta.

Table_,.1

Consumer Price Index For Dakarta. 1970-71(Se ptaber 1966 * 100)

learly

andKiscel- General Quatorly K4onthl

Food Housing Clothing laneous Index Change Change(638) (11%) (9%) (17%) (100%) (W(

1970 + 8.9

JB*Aia . 64A3 776 361 70 617 + 7.3February 636 766 377 715 617 --MRrr4,h __ 769 379 711h 611 + __L -_.5

April 612 769 379 719 605 - 1.5,My 61 2 769 385 723 607 + 0.3June 603 838 394 740 611 - 0.5 + 0.7

rr @5 Ac:. 39) 736 A1 3 + . 'A

August 602 834 396 744 611 - 0.3Q+~4 ~nh cOfQ a Al 1 7ho _ .f t-A R _ i R

October 582 815 396 746 599 - 0.2Ant 7IA 10

Decmber 612 871 426 750 626 + 4.3 + o.6

1971 + 2.4_

January 639 883 4s26 760 644 + 2.9" -1- zzl_ LL,% 74e LL-2_ % (-February VV4 UUw &KU fI7 '' I uu2.

March 667 883 426 770 662 + 5.8 + 0.2April 653 863 426 771 - B.L

May 632 825 424 771 638 -2.3June OUL4 019)' 424 77; 0 >).4 - ;.9July 604 879 424 771 626 __August 595 871 424 773 620 - 0.9September 592 866 427 770 618 1 1.3 - 0.3October 605 848 431 770 625 + 1.1November 632 879 456 772 647 + 3.6i ember 626 879 437 777 641 + 3.7 - 0.9

1972 + 2.4

January 644 872 436 778 652 -- + 2.0February 668 875 436 787 667 -- + 2.0March 669 875 436 788 66 -_ 4.0 --

April 665 875 436 788 666 -- --May 655 875 436 788 660 -- - 1.0June 640 860 436 788 650 - 3.0 - 2.0July 639 860 410 788 645 -- --August 642 869 413 788 648 -- --September 656 883 413 792 658 - 1.0 + 2.0October 691 892 434 794 683 -- + 4.0

a' ~

- Based on end-year figures.

Source: Central Bureau of Statistica.

Table 9.2

Daily Wages of Uhsldlled 'Workeirs on INPRES Projects by Pr,vinceIxndonei sia;j'/< L. ___J

. of L owest Highest MMedian Ratio.fiTtrdict+s 6isttri^ct di2 trict Higchest/lowTest

~..e!S' Jva r D j?kXa:f,a 23 250 150 1.3r,_,-5-., 100 1.-3

7•~~ ,o > at-->s-r -~ ''O G85 '.3- 7J 17' 125 2.3:- > 1:_ 1';0 2'10I 150 1. 3

.16 20)0 300 250 1.5''I.-r 150Y: ,l;a l.i_ lE>O 30,0 150 2.0C

6 200 4l00 325 2.C)_ ' :; 10 200 5.0- 2.5

_ !. L: t .ra -to 1-_ 'D 3;C2251.,_{2%.- ,'allu .' cC, 0 30(0 2C0 1.5'T I-':Ur 4 1,50 200 200 1.3

._, 1i., 1; r - ,an 73; 350 300 1. IC-n K. tl i'.nit 6 35- b)jO 350 i. 1.\ ,>.th }<--.1:Var:<-rtar. 10 1'0 250 200 1.7

-__ _ + 7{aln 1-'''-.+:.lo 6 250 500 375 1.1..;,.-u. aU;;22:S 6 200 300 250 1.5

^- ith 5u1<?- e -i 21 1 C!0 2,0 150 2.,. t~~~ S t ~ ~ ~ ~ 6 203 ~~~~1 00 2 .57{.'Yi48^t ,' b_';'-t.r'-As+ 'lla~~~~~~~~''esl < (') <2'J>' 1 u- c 2. 'P

n~1 i 3 1(0 150 127 1. ,.> , ,tc ̂ :, ? -a 6 ............ LOG 125 2.,

_'..'7- ' -;^ra _2 75 150 1200 2.0

Source: RLegional Planing, Divrision, BAPRERAS, Djakarta,, hay 1971.

Table 10.1

pNroentago of Popula.tion Unable To iRead Or Write' In Any Characters,H,rau . And Urban Areas. SCex And Province,Inddonesill8, 1L2-

::>. e Fc'-:ale . le ;RFemale Yale Female ]Male &f era:L1e

-- I D.iakar a 19. 3L 1 c i9. 8 31.9 27.3;.'t, ll- C~ I17.5 29.0 39.6 5h.7 36.8 51 3

C-<-L.-F i Ja-. a 18.7 34. 7 36.9 60.3 36.7 57.6 47 .5-!_ Jz,iaka:-'a 18.2 360,C' 143.5 63.9 39,2 5°94 49106__ Ja. N 18.7 36.5 L1' *- 62.0 38.2 $8.5 h18.7

'- * alvrF 15.2l 27.2 27.6 146.9 26.9 436 35.2^. _. £ v- 23.2 38.o 7 143.29 62.14 39e3 57.14 148.3

,_; | ?. _Si 20.1I 3lh.! 2.2 $1.2 37.9 148.3 143.5C't-er i.s1az dc 18.6 32.7 L6.6 60.1 43.5 57. 3 50.1

Tdc^nesia '13.6 33,7 39 .0 56.9 35.1L 52.9? 443

Source: PreimInaxy aample results, 1971 cenoaw, 33iro Pusat Statistik.

Table 1C).2

Percentage of Population A,ge 5 and Above AttendingSchool B I o aId Sexa Indoneaia 1971_

FIT FiAL ~ ~ ~ TTAL

' : le :-:sie Ferl t:ale Ferale Nale & Female

5- 9 . L,.0 LI.6. 33.6 32.6 33.2 Jh.4 31 .8i- i4 79 72.2 6 .:1 53.L 64.6. 56;9 60r.71_,2 21>. 13.0 30.1 il?. 213b2 _ , 1 21 . 7.6 1 . 2 11.0 2.$2 -cs er 2.D C.-' 0.3) 0.1 0. 7 0.2 0.L C

TOva_ 2514; -d 1 7 14eCq 21-1g¢l1Rt

_j/ I.c: rwr z3 975' stuCentz %Phose age i.s U!'cnow

Source: Pre1liminary sample results, 15171 censU8s, BLro Pusat Statistik.

Table 10.3.

Approvals and Imlemfentatiorn Of Forei n Investment

*v *~o & Se 71 - _(In mmi I lons ol U.5. dolLars)

Annnval A 2/ ta or

Sector 1967-69 1970 1971 1972 TOtal 1967-69 1970 1971 1972 Total

i r. c i 1t 20.3 52.7 3.4 3.8 80.2 9.2 1.3 2.2 2.0 1h.7

:0o-estir, 359.9- 32.8 12.0 32.0 436.7 14.1 32.2 , 30.6 2o.6 1i.e.3

F i 3,:,j L. 1-- 12.2 7.8 3.4 -- 23.4 3.1 3.8 6.7 3.2 16.8

a:d a- i c.rrying 623;7 75.0 79.0 225.0 1,002.7 3.4 7.7 19.9 52.7 83.7

1'76.1 IV3.5 2Q4.9 120.7 4-?.2 31.4 Q 81.0 112.5 ?6 rL4

FC-i ^3.0 11.1 10.2 12.14 71.7 7.4 12.7 15.1 13.0 43.2Tcxtil:.s a-! liather 37.6 38.2 107.1 76.2 259.1 2.4 9.0 34.9 L3.5 89 3W'^:r' n-d arol iroducts -- 0.5 1.4 0.5 2.4 -- -- -- -- --

?4zr and .. pcr pro_,ucts 0.8 2.1 6.o 2.9 11.8 0.3 0.8 3.1 2.4 r .6C'.c-.ic_ls a-i rubber 45.2 32.6 19.9 12.7 110.4 6.6 8.9 12.6 20.5 L.6 ;.c:..eXil!c minerals 3.8 31.2 30.5 2.9 C3.4 0.6 0.8 1.3 13.5 i6.2Fasic cret'ls 3.4 6.8 14.6 0.4 25.2 -- 0.1 1.8 L.1 6.0Pete.l products 41.14 35.7 13.0 11.2 101.3 11.8 8.R 11.0 15.4 -7.00ther 5.9 0.3 2.2 1.5 9.9 2.3 2.L 1.2 0.1 t.0

Cz...truction 1.1 9.4 6.4 5.1 22.0 0.3 1.14 1.2 0.3 .2

.- .: z 33)4 inz-zl A^. 3.6 44.4 6.o 6 o7.4. 1.5 _4 . 6.3 L.L 16.5

l-o'es .. e t._de- .... .. -- 3.6 -3_ _36 -- 0. 0.5 O.S 1.6

Y.ste1s 33.4 -- 44.4 6.o 83.8 1.5 4.0 5.8 3.6 14.9

: .9 0 a t.... c . r ;. I,.. tio r. *-.o . 0 .5 4 .2 _ _ 1 3 1Ž-3 l' f 0 .9 'A

*r_-s ' :n~t-cn 14.5 0.5 4.2 - 9.2 0.3 1.2 0.7 0.4 . 2.6

Zz~ s;ica.ion .1, -- -- _ 6.1 4.0 0.4 0.2 0.1 4.7

S-cx.1 1 a. e scrvices ' 5.5 12.3 9.5 20.8 58.1 2.6 2.3 1.8 0.7 7.h

Tut l 1,252.8 352.6 367.2 413.4 2,386.0 69.9 98.1 150.6 2C5.9 521:.5

Ir lr-s-,-ts -rrrz o ; tt-e -o.-ei -n Tnv,St.7ert i'aard. ,/ =-_le-z:->tion is c'.e recorited ds rserSC-nt on -rojects apOroved by tl. Foreign Investnert B:ard, bascz u-r,r. cash

::2.z.:-., .1,:^.< r tra cn .=-3rte1 cap.ti'. qut:zrPt, ar.a tne conv.evoton oF forelr, cLmm.i3 -.undr tF.- DICS scsc'e.3/ C1

nsirc..tin a'co.ii ts "'nt .:tiot".1 S' rde.r'. 1r.Iustri'.liv tion C7mZ ietcation oe all Ec3nouic Act';.ties",(.-:-isttca' CMi_e of'e t- United Katiars, Statistirz. '-, ser.es iM, leo. 14). Ex:lules Invcs>.et in the p:n.-u-s

an.i bsn'.l-., s-ctcrs.g/ T:z-n ,T,, ' '.: thret.u bi entcr.ber 19722.. rcu 2m-vs or a Philivoir.c ir.vestient in 19.9 oc-.:nting to $235 million which w.as *zo ' reraize, S-r ar r of yo-irs ani inctiees reinve5tr,ei;t or p.osptect-ve proZits.

Sc, ce: Data supplied by the Indonesian authoritia.

Table 10.4

atfactur)l Induo m I..ots Aropro.d bZflUt!i uA 88l(Total M 'atnt. Tomigin oxcha6e rquirtment an %p COu r ta)

lbolrn atMnt DOWr __ _ eatic Imes -nt Boarl. POm. '68- 0t.L;_

_I ped A P P It 0 V E D A .._ _ L_JL _ IS11 T£D _ _ Nrcerintagm Dt&Lbatio

;ulktr J 67 l -- Tr bhe I nt ober in T In n _toS I,ws*t..t rI. '71 of Reqir-ent EAqP1lrAt of Rooreent 8Op1qfO nt Approm,edFtects (nililOn S) 1 nUi ln IL 'r~ (alllinnL t, Ro. b ( .no.) Pro~ 'b C 3j~) . . ADJ b- (thjua.no.) ?roreIM D Rometic joe!nj cv ie;nt.d

Food and Bera 39 60.13 30.5 75 27.6 38.1 15.8 1!i.5 7b(57) 6.1 2S.2 12.1 31.8 51.5 76.9 10.1 11l.? 27.2

TextJles and ltebtr 38 230.? 36.5 90 35.9 8b.0 3..9 35.8 95(71) 14..6 27.6 11.5 8.3 20.0 32.9 38.0 32.h 25.8

wood and iood Prodocta 2.0 0.0 2 0.9 1.5 o.6 0.3 1(1) 1.5 '1.3 0.5 0.3 0.0 87.0 0.:1 0.6 1.2

Paper and Paper Products 10 9.1 3.5 20 10.5 13.3 5.4 1.3 2D(16) 5.El 111.3 6.D 1.4 38.9 109.2 1.6 5.0 13.4

lrd:'vrl.l Qe,Cleelas s 101.3 25.2 55 69.4 78.3 32.5 9.1 Sb(45) 6.2' tb,.b 6.0 5.3 25.8 18.3 16.7' Y3.1 133.

brcn-p.,*Uile Mineral Products 13 66.' 2.3 3 7.0 8.7 3.6 11.9 3(3) 2.0 3-8 1.6 1.0 3.5 43.4 11.1 31.4 3.5

Basic Metals iS 25.1 1.5 12 9.5 18.2 7.5 11.7 12(9) 0.21 15.0 6.2 0.5 6.1 82.4 4.i 7.0 14.0

PIet.i Proeta 71 10.0) 2S.1 30 8.l I5.9 6.6 .1.8 3D(25) ... ... ... 2.5 32.3 ... 16.5 6. I ...

Othrr Po.tractrlng e 9.3 5.9 9 0.7 1.B 0.8 11.5 R(S) 0.1' 1.5 0.6 0.8 71.8 84.3 1.5 0.7 1.4CrO

,i., n --u In M - - 304 169.6 259.7 107.8 74..0 299(236) 37.5; 107.1 4.,5 51.9 - 01.3 - 100.0 99.9

toitl V'.nafact.r1na 283 605.1 131.5 591 399.2 528.9 219.5 1111.4 356(244) - 24.9 - 100.0 - -

___ - -- et - 3.68 282.6 O33.7 182.4 170.5 468(373) 82.5 219.8 91S. 87.3 - 50.4 - -

2r.! !61 (eacl.dtnw oll) -2

-2

282.5 0 707.9 0 28.0 2 8r- - -

M.n.faoturlng/?ot.l 18) 57.7 26.1 3.7.6 65.1 56.4 .54.6 - 51.6 . / k8.7Lg 59.5 - - _ __

..ot. u .llable

a! Dat for total respm*a tin oiy and total unufacturlng refare to iDoeber 1968-February 1R72.ZD ?1.ozes in ( ) reprareot tht number et projscts In production.

I75. cep.-able *. IZrred inest,.ont data for Jone '67-Decab.er '71 are used here.Zd Refare to the total reapons f,as li1 memyd projets.

Sourres Pr-O.le-l R r'ort of tUs ';nJeclal Sur Domestie Imelient Board, Dja)larta, Janu&17 1972 I,doanasia Financial Statistce Benh Indlnseuia, Djakarta £ lapublished tables wealved fro. the Det1c Inovetment bord and thebuRh Indisaia.

*uai ~"i-"a*u p~ 11* v I '1: mttvm nO -I P f $7Ei va iP gm .IlAu".o mS * W (I ODA) Pt"o Pui 104Mdad .91 qI5 TINItP ' -' 0O 9 %i

*Sn > wt aXPW sv t n, '1 -r,'0' D (i *q£ *p l}sth3i

L d9 g q l 6Sa L'q s- ' o t~ f n 0 9 0- i e 2 6 t- q 6- t ; r L ra Ss 7'ds ° 9 s * ' £ .n CI.'s5 Il W C., got' 9-g o'er I-s 1.4 6-0 6* Ca UL 910. LI, I ID, ~ ern&st D. s.oq19 VS1 996t SW, ot o0 AS 1-(9 9-C el t 1-S S-6 £LS LI Cs Ca 9*9L sr S, "' C'

(r 9 ie C'S, tw I U.0 ... I (w~~~* 4I 01 1VII*0

VaS * -f9 045S oo'I'l 5-09 1.19 2-t 9-aS 11.C *- 9 o6S 21 9S 91. S-9 l1-s,r4 -i6 91qd-59 6-St I'9 - gtt 5.1. t-St 9-29 2-6q 2-l0S q-92 2-2t 19 04 000 a-V91 tS48 *0 69S n55kjflft11

FT .r o T ;d 6; r a

i-Sai 6-g2 11g'I £91.1. aSl6-Cs 15 6-6 644 9- 9 *- S * .* 69r 6 ' 1 919 aS a a9 C' a-eta G e OS-TM (q2-cs t 25 41o01 916 1-96 f -q6 6-9 -05 -'9 o091 0-99 Ngl 01 2 rgi Nt .g S'191 t .e - .-. d OS (w

1 a -. 'r -.seI V d 2 7- 0 V t F-7

£7 2 fS 1LL £ Z 960 1 901 !6 'gt , 6 6-6 (99 91 8Z qqt 0-6 C ai It Il t-6 95S Ss 6enStt00N

7 t[1 L: 919 07 oU 6f2'1 * 5-2 991 0ct1 9RZL 9Is i OL I-SI C O 9golg H 9-t, ct-r 19 *v0t-I du ' '1.9 'P69 LtoI get1 zi 9:91 190z 9U I-I E Ella 9-Cl 9 La 1ot I*Lq 900ol olCOl' 0-0 I ~q C

46 95 1 6t 6t6 0 9 ' 9 29S S 9q I tS 6 S 4*d% *99q 129C 9-" t IC ctl 9.P9 06st C60t t all S --° -AOl lq-, u *U I * *- * sj

a 925 966 Cf9 0 Li SCfI S-C LI" G19a 21 9 9t 21 a St IS 65s *'t 7 S * S' (Sr f -a, Y 2 01 '1 0t 1 o 'q q21. 9-IS 6-(C 9-5 .-gC oS 2. 961 7 6Lt L1 SI 17 6:9 9I' .ll.W<-o L

i7 'Il ii7 19 61 60'1 7 596 0.1.9 1tl9 1H 9 Cef 6'1t 40.0 9 ii 611 060 g11'I 1Piq gIj 591 S0S1P C'TTIs@u e "

015 aS S1( 560'1 0011l o.l0 1(03 A3 - COL 5a, S-t9 6L COC 50& 9-.9 S'Mrl °99 _. l P. 0 T

t UeA VX141 uzSA 111 u - *DtpiiBSddrrp#bdaq :r lne rt4 _q _jo -0t 41 -

t'IS 0,05 ft 1-%4S t lw r.^lw .lUook oot C t 51 , d g L ct SOIgm)bsW --. -

TUN-IMWAM -P---Ts T-mT -- iagla WMtZ-4 T---ra-PW W-u-111 IMT rypywa2vl;5Tzei0t{ijizn W IlT. 6'rXPN --jftq ,D.-W UUjh; T3 Vqbii = f-irm js,

1--;.b. -1%~p g iu .

|v~~~7y77' r, t-3 report 25-ind -...

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