The rapid growth of manufactured exports in Indonesia

Abstract

Before the oil price increase in 1973, Indonesia n exports were mainly based on primary products such as tree crops and natural resources, which accounted for more than fifty percent of Indonesia's export revenue (World Bank,1986). However, after the first leap in world oil prices in 1973, export shares altered remarkably and the export of oil became a prominent source of Indonesia's export income. "Between 1972 and 1981 the value of Indonesian oil exports increased thirteen times in nominal terms and more than three times in real terms. Government oil revenue increased forty three times in nominal terms and ten times in real terms. In 1981 oil export earnings accounted for 78 percent of the total value of exports and 70 percent of the government revenue" (Arndt and Hill, 1988: 107). Although the rise in export income was primarily owing to price increases, it was also, to some extent, brought about by rising crude oil production and the export of Liquified Natural Gas (LNG) since 1977. During this period, Indonesia's economy depended heavily on the oil sector to provide the foreign exchange and government revenues required to stimulate development.