Indonesias Economic Performance under Soehartos New Order

Abstract

This paper describes the rapid and sustained economic

growth which Indonesia achieved during the three decades of

President Soehartos New Order rule. Rapid economic growth

was accompanied by rapid social development and a steep

reduction in absolute poverty. From being the chronic

underperformer in Southeast Asia in the early 1960s, Indonesia

by the early 1990s had become one of the high-performing

Asian economies (HPAEs). However, by the late 1980s the New

Orders political legitimacy had eroded as the regime became

more blatantly corrupt and self-serving. In economic policy this

was reflected by an erosion in fiscal discipline as off-budget

expenditures outside the control of the Department of Finance

were spent on ambitious development projects the economic

viability of which were questionable. The New Order collapsed

when it was unable to deal effectively with the Asian economic

crisis.