Is Indonesia trapped in the middle?

Abstract

Few countries have experienced such dramatic changes in economic fortunes and political governance as Indonesia. The world’s fourth most populous nation and the tenth largest economy – in purchasing power parity (PPP) terms – it experienced more or less continuous economic decline for at least half a century before the mid-1960s (van der Eng, 2002). By then it was one of the world’s poorest countries, characterized in the leading development economics text of the time as ‘a chronic economic dropout’ (Higgins, 1968), and one with little prospect of development in the leading socio-economic survey of the period (Myrdal, 1968). Then, in a remarkable turnaround, from 1966, the country achieved rapid economic development for the next three decades, such that it was classified as one of the ‘East Asian miracle economies’ in the World Bank’s (1993) major comparative study. Indonesia’s per capita GDP more than quadrupled over this period.