Indonesian Economic

The Indonesian Economy and the Role of Forestry

Indonesian forestry plays an important role in increasing economic development partly through foreign exchange earnings, job and business opportunities, as well as acceleration of development for remote regions. In the 1980's decade, forest-related employment accounted for about 5.4% of the total labour force (MoF, 1991). In this period, the forestry sector contributed an average 16% of total foreign exchange earnings annually and 27% of non-oil export earnings. These figures were relatively sustained at least until 1994, when foreign exchange from forestry sector was about US$4.2 billion.
During the last two years (1995-1996) the forestry sector contributed an average 3.85% of total gross domestic product (GDP) which in 1995 was about Rp. 454,514.1 billion, and in 1996 had increased to Rp, 532,630.8 billion. Both these GDP figures decrease slightly when calculated on non-oil basis, namely Rp. 417,705.8 billion (1995) and Rp. 490,316.6 billion (1996). In this two-year period, the growth rate of the total GDP is about 18.91% (1995) and 17.19% (1996), while for non-oil-based, the GDP growth rate is respectively 19.79% and 17.38%¹. In the same period, the corresponding GDP growth rate for the forestry sector was about 7.15% (1995) and 6.67% (1996).²

¹ The basis for GDP growth estimation reported here appears to differ from that generally used by the Asian Development Bank, the estimates of which suggest GDP growth at 8.1 % in 1995 and 7.9% in 1996. ² 1996 Statistical Year Book of Indonesia. Central Bureau of Statistic (data was recalculated).

Indonesia's population growth rate is decreasing; in 1992 the population was about 184.49 million and it just reached 196.81 million in 1996. A study by Capricorn Consult Inc. projected that the population will become 211.20 million by the year 2000. The average annual growth rate of population during this period (1992-1996) is around 1.6% (Table 1). Compared to the 1980's decade rate of around 2.12%, this reduced figure shows a good achievement by Indonesia in managing her population, mainly through success of family planning programmes. Average per capita income of Indonesian has grown from US$80 in 1967 to US$650 in 1990 and to US$1,155 in 1996³ although following recent turmoil, the latest data (1998) indicate that average per capita income has decreased to US$610⁴ based on assumptions that economic growth is zero, inflation rate is 20%, population growth rate is 1.6%, while exchange rate is US$1.00 to Rp. 5000.

³ Calculated on the basis of 1 US$=Rp. 2400, before monetary crisis of 1997-98.
⁴ KOMPAS Daily, Tuesday February 17, 1998 p. 2.

Table 1 - Indonesian Population 1992-1996 (million)

Year	1992	1993	1994	1995	1996	2000*
Population	184.49	187.60	190.68	193.75	196.81	211.20

Source: Central Bureau of Statistic, 1996 except for the year 2000 cited from Capricorn Indonesia Consult Inc.

MoF believes that sustainable development of wood and non-wood forest products can provide 6 millions to 8 millions job opportunities by the year 2000. Should industrial growth be uncontrolled, however, resource sustainability would be seriously affected in the longer-term. Hence, it is also realised to be extremely important to Indonesia to manage its forest resource in such way as to ensure resource sustainability over time. To accommodate this idea, MoF has also committed itself to implementing sustainable forest management (SFM) scheme encouraged by International Tropical Timber Organisation (ITTO), under which Indonesia intends to attain sustainability in terms of economic, ecological and social functions of forests. The recent economic turmoil, however, will result in more and more uncertainty in predicting the achievement of all goals and commitments in the future. The turmoil also requires that Indonesians work harder and harder for a better future.