Ensar Nişancı (Namık Kemal University, Turkey), Durmuş Çağrı Yıldırım (Namık Kemal University, Turkey), Nüket Kırcı Çevik (Namık Kemal University, Turkey) and Veli Sırım (Namık Kemal University, Turkey)
DOI: 10.4018/978-1-5225-2939-2.ch017


This chapter examines Indonesia, the fourth most populous country in the world, politically, culturally, socially, and economically. The main purpose of this chapter is to reveal the obstacles to the economic development of Indonesia and to develop policy recommendations for them. The chapter begins with three of the major political and cultural issues of a country's general structure: socio-political structure, socio-cultural properties and political-administrative structure and institutions. The fourth and fifth parts of this chapter analyze the country's economic situation and economic potential. The following parts continue with handling other significant points which are the political, social, cultural and economic factors affecting the country's international relations. The author concludes this chapter with the leading obstacles to the economic development of Indonesia and some policy recommendations which have the potential to pave the way to country's growth in terms of economy. This section is not supported by empirical findings.
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Socio-Political Structure

Indonesia whose official name is the Republic of Indonesia is located in Southeast Asia and Oceania, consists of 17 508 islands.

Indonesia, before gained fully economic independence was a raw material supplier to the Netherlands, has hardly gained its independence in 1945. After the big economic problems of the 1950s and 1960s, its economic targets have been set with 5-year development plans. The determined economic management has helped the country to keep a stable growth rate. This growth rate has exceeded 6% annually in the period 1970-96, Indonesia which was in the poor countries class in the 1960s, has entered middle-income countries class with $ 1,150 income per person in 1996. With Rich natural resources and the growth performance in the last 25 years, Indonesia which is counted among the tigers in the Far East, has gathered the attention of the financial environment with the Asian Crisis aroused in the middle of 1997(İGEME, 2008).

Asian economic crisis emerged in Thailand in early July 1997, and then spread to Malaysia; also showed its effects in Indonesia and caused both economic and political crisis. Indonesia has been the most adversely affected country in the region from the financial crisis in 1997. In 1998, the economy shrank at 13% level. Against the crisis, Indonesia firstly raised domestic interest rates, tightened fiscal policy and did not intervene to fluctuations in the rupee. In October 1997 the Indonesian government reached an agreement on the implementation of an economic reform program aimed at removing economic policies which caused damage to macroeconomic stability and state with the IMF. After the financial crisis of 1997 until 2004, the country, facing with the effects of the financial and political problems; in the last 25 years with its growth performance it began to be counted among the Far Eastern tigers. Since 2002, the country’s economy has entered the recovery process and with the measures taken by the government of President Yudhoyono came to power in 2004; the average growth rate of 6% was kept between the years 2006-2011. In 2004, Susilo Bambang Yudhoyono’s administration directly elected by public vote for the first time, both economic and political stability has been partially successful.

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