Indonesia’s development challenges, 2001-2009

The period under review presented Indonesia with a number of serious development challenges, arising from political, social and economic problems. The Asian financial crisis that started in 1997, combined with an unseasonal drought, affected the Indonesian economy more severely than other regional economies. Production and incomes fell by almost 14 percent, and the number of people in poverty doubled when 36 million more were pushed into absolute poverty. This temporarily raised the poverty rate from 15 percent to 33 percent in 1998-1999.8 Political uncertainties after the fall of the Soeharto regime combined with sudden deprivation led to communal tensions that exploded in ethnic violence, particularly in Sulawesi. This led to further impoverishment and displacement of people. Although the economy recovered rapidly from 1999 onwards and falling food prices helped poverty rates return to pre-crisis levels, the economy did not stabilize for several years, and the collapse of an authoritarian regime left a political vacuum. Indonesia entered the new millennium under signs of great uncertainty.

Sustainable Development Goals:

Decent Work and Economic Growth

Industry, Innovation and Infrastructure

Peace, Justice and Strong Institutions