- Population – 238.5m (2004)
- Total labour force – 104.0m (2004)
- % of labour force in agriculture, forestry, hunting & fishery – 39% (2004)
- % change in consumer prices – 10.5% (2005)
- GDP at constant 2000 prices – Rp1,749,547bn (2005)
During the 1980s the banking sector was deregulated by the removal of direct controls on lending and interest rates by Bank Indonesia (BI, the central bank). To replace them, BI created an institutional framework that allowed it to exercise more indirect and market-oriented forms of monetary management. This involved the introduction of a lender-of-last-resort facility, as well as the creation of discount instruments known as Bank Indonesia Certificates (Sertifikat Bank Indonesia, SBIs) and a new set of money market securities (Surat Berharga Pasar Uang, SBPUs), which could be traded within the banking system to help regulate liquidity.
Further reforms in 1988 removed barriers to the establishment and expansion of privately owned domestic banks and foreign banks, setting off an explosion in the number of new banks, so that there were a total of 238 banks by October 1997. The scale of the banking sector's problems was exposed by the onset of Indonesia's economic crisis in the second half of 1997. Most banks had violated prudential regulations covering lending to related parties, capital adequacy ratios, loan/deposit ratios, and limits on their net open position (access to offshore sources of funds).
Since 2002 there have been clear signs of recovery in the banking system. IBRA has successfully restructured and sold the bulk of its banking sector assets, and both foreign and domestic interest in the sales has been high. The number of banks has almost halved from pre-crisis levels, to stand at 131 at end-2005. Although the banking system has grown steadily healthier, 2005 saw a marked increase in non-performing loans (NPLs), which rose in gross terms from 5.9% of total lending at the start of the year to 8.3% at year-end (the corresponding rise in net NPLs was from 1.7% to 5.1% of total lending). This deterioration stems from serious problems at the state-owned Bank Mandiri and Bank Negara Indonesia (BNI), which together account for 27% of the Indonesian banking sector. NPLs have accumulated owing to a legacy of unresolved debts and higher interest rates. The 2003 law on state finance also places restrictions on the ability of state banks to restructure bad debt or sell it at a discount, complicating efforts to clean up their books.
Source: The Economist Intelligence Unit