THE ROLE OF OIL AND GAS AND OTHER RESOURCES IN THE ECONOMIC DEVELOPMENT OF INDONESIA: PROBLEMS AND PROSPECTS

The objectives of the study are (a) to explain and evaluate the planning policy and performance of the Indonesian Government since 1966, (b) to investigate the absorptive capacity of the Indonesian economy through the year 2000, (c) to ascertain the role of oil and gas in the Indonesian economy until the 1990s, and (d) to analyze the possibility of developing other sectors of the economy as bases for further development of the Indonesian economy.;If there is little to suggest major changes in the future in the agricultural sector and if there are prospects of slower expansion in minerals (non-oil and oil), then it may become all the more important to stimulate industrial development as one of the main hopes for future employment and export growth since the manufacturing sector still has low base and is capable of sustained high growth rate for a long period of time.;Some strategies of development involving the use of labor-intensive methods and techniques, labor force education and training, the increase of activities in rural developments, the promotion of small-scale manufacturing and industrial zones, the promotion of export drives, and improvement of taxation systems and procedures are necessary to achieve growth and equity at the same time.;The approach of the study is as follows: (1) By analyzing the First and Second Five-Year Development Plans, an overview of the successes and failures of the Plans are revealed. The following are some interesting findings: (a) The strategy of development achieved high growth rates. However, the distribution of income became more unequal. (b) The strategy of development suffered from inadequate private investments, and relied too much on public investment. It suffered also from unsound population and regional development policies. (c) The performance of the economy from 1969 to 1978 was relatively poor. Real income increased by 7.6 percent. Population growth was 2.3 percent. Thus, the growth rate in real per capita income was only 5.3 percent. (2) By investigating the prospects and problems of oil and gas and other resources with which Indonesia is endowed the writer tries to reveal the economic strengths and weaknesses of the economy. Some findings are stated as follows: (a) The nation is dependent upon oil and gas, which have limited availability and durability. (b) Other available resources may be utilized further to free the country from its dependency on oil and gas so that in the future oil and gas alone will not determine Indonesia's development. (3) Modeling the absorptive capacity of the Indonesian economy will result in the determination of the real need for development funds. However, this should be matched against the outlook of the resource availability. The model suggests that the role of oil in the Indonesian economy would be replaced by the manufacturing sector in the future.