The economic scorecard for the year 2000 may be just a passing grade for the two most important macroeconomic indicators. The inflation rate, at 9.35% for 2000, just stopped short of the psychological barrier of 10%. The fall of the rupiah just fell short of the Rp10,000 per US dollar mark. The interest rate, which was lowering before, of course had to go up a bit.

On the other hand, performance indicators of the real sector were encouraging. The economy grew by some 4.5% for the year, from almost flat in 1999 and minus 13.5 % in 1998. This growth figure is far from sufficient to mop up the massive unemployment during the crisis, but in the absence of a strong investment climate, it is still gratifying. The overall rate of about 4.5% for 2000 conceals a strong rebound of the manufacturing and construction sectors, while agriculture showed a small negative growth on account of two sub-sectors, i.e., forestry and plantations, for some still unexplained reasons. The food sector performed normally well.

The growth of the economy in the year 2000 was supported by a strong rebound of consumption and of exports. There was the beginning of investments, as reflected by an increasing volume of imports. During the crisis monthly imports were at best $2 billion. This figure has reached $3 billion in recent months, indicating that it has almost reached normal, pre-crisis, level. Exports have scored $5 billion a month, which is a record level. The high oil prices have helped. But non-oil exports have been doing remarkably well, especially from small-and-medium scale enterprises.

During 2000 the banking sector has not finished its restructuring, especially the large banks, and certainly the large state banks. The flow of credits to the real sector was still hampered. Some flow has been returning but still a trickle compared to pre-crisis levels. On the other hand, there has been a number of small banks which were not too badly affected by the crisis, because they were not foreign exchange banks. These have engaged in normal lending to the real sector. Moreover, foreign banks have filled the gap. On the other hand, a lot of the revival of production and exports have relied on self-financing and from sources provided by the overseas buyers. It is a significant phenomenon that despite so much political, security and financial uncertainties, the real sector has started to recover, pulled by domestic and foreign demand.

But towards the end of 2000, dark clouds began to loom over the horizon. Oil prices have come down from levels over $30 per barrel. They are now about $5 cheaper, and the prospects for 2001 is uncertain.

More ominous is the expected slow down of the US economy and its repercussions on Asian exports. The consolation for Indonesia is that its exports to the US are not as big in the Philippines and Thailand. Non-oil exports of Indonesia are more diversified towards Europe, Asia and the Middle East. Exports of electronics, for instance, although increasing, have not been as important as in the Philippines, Malaysia and Thailand.

But the growth of exports for 2001 cannot match the figures of 2000 (over 20 and 30 percent). At best it might be in the lower double digit. Hence, it is of utmost importance that in 2001 the investment climate will improve. This is still an uphill battle for the government. It is trying to do the utmost to prop up exports and investments, but what can it do against the odds of still looming political uncertainty and not much improvements as yet with respect to security on the ground?

The future of the presidency of Abdurrahman Wahid is still very uncertain. Its prospects are not getting better, but the fall of Gus Dur and replacement by Megawati Sukarnoputri is not even seen as a lesser evil.

Security on the ground for investors, because of unpredictable industrial actions, work stoppages because of harassments by locals, pilferages, etc., are still reported and recently complained by officials of the Indonesian Chamber of Commerce and Industry (Kadin Indonesia) and some of its trade and industrial associations. It is not affecting only foreign investors.

During 2000 the government budget was at least not expansionary, matter of fact, it was somewhat contractionary. Monetary policy was slipping a bit, resulting in 9,35% inflation, but under the circumstances of strong recovery of the economy, perhaps unavoidable. The 2001 government budget may not have the same effect as that of 2000. There may be some important shortfalls. On the other hand, contractionary monetary policies will be very difficult and unpopular. Hence the foreboding is not for monetary stability.