Indonesia's Economic Performance under Soeharto's New Order

This paper describes the rapid and sustained economic growth which Indonesia achieved during the three decades of President Soeharto's New Order rule. Rapid economic growth was accompanied by rapid social development and a steep reduction in absolute poverty. From being the 'chronic underperformer' in Southeast Asia in the early 1960s, Indonesia by the early 1990s had become one of the high-performing Asian economies (HPAEs). However, by the late 1980s the New Order's political legitimacy had eroded as the regime became more blatantly corrupt and self-serving. In economic policy this was reflected by an erosion in fiscal discipline as off-budget expenditures outside the control of the Department of Finance were spent on ambitious development projects the economic viability of which were questionable. The New Order collapsed when it was unable to deal effectively with the Asian economic crisis.