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Indonesia - Asia's Stumbling Giant

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1. What political factors explain Indonesia’s poor economic performance? What economic factors? Are these two related?
President Suharto, in his term, used a “crony capitalism” style of political system to control his country. This type and style of government aid Suharto in his command of the political system to favour the business enterprises of his supporters and family. Suharto placed the country’s money into declining and failing companies rather than placing the money in developing and further improving the country’s infrastructure or possibly putting the money into better companies to economically improve Indonesia.
In the end, Suharto was overtaken by a massive debt up to over $43 billion due to placing money into the failing businesses of Indonesia. Eventually, The International Monetary Fund stepped in with a rescue package enough to cover the entire debt of Indonesia. Suharto, being who he truly is, was then revealed that much of the money found its way into his personal coffers and his cronies. There was an uprising, people took to the streets and protest, a democracy quickly moved in, and Suharto was forced to resign.
The two factors, political and economic short failings, are very much related. Suharto supported failing companies instead of the best companies for his country. Instead of further improving and developing the country’s infrastructure, he personally benefitted and favoured from the country’s money.

2. Why do you think foreign firms exited Indonesia in the early 2000s? What are the implications for the country? What is required to reverse this trend?
Foreign firms exited Indonesia due to the country experiencing a significant drop in foreign direct investments. Probably, foreign companies pulled out of the country to avoid its red tape, corruption, and an uncertain economic and political future. Also, the country’s poor

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