Indonesia

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A country in Southeast Asia. Indonesia is the largest archipelago of the world, between Asia and Australia, and between the Indian Ocean and the Pacific Ocean. Indonesia achieved independence from the Netherlands in 1949. Indonesia is the fourth largest country in population after China, India, and the United States. The capital is Jakarta. Indonesia has the largest Muslim population of the world.

Current issues include: implementing IMF-mandated reforms of the banking sector, effecting a transition to a popularly elected government after years of rule by dictators, addressing charges of cronyism and corruption among the Chinese-dominated business class, dealing with alleged human rights violations by the military, and resolving growing pressures for some form of autonomy or independence in certain regions such as Aceh and Irian Jaya. On 30 August 1999 a provincial referendum for independence was overwhelmingly approved by the people of Timor Timur. Concurrence followed by Indonesia's national legislature, and the name East Timor was provisionally adopted. The independent status of East Timor has yet to be formally established. Indonesia has a long history of unofficial persecution of Chinese and Christans.

The Indonesian economy stabilized in 1999, following the sharp contraction and high inflation of 1998. By following tight monetary policy, the government reduced inflation from over 70% in 1998 to 2% in 1999. Although interest rates spiked as high as 70% in response to the monetary contraction, they fell rapidly to the 10% to 15% range. The economy stopped its free-fall as GDP showed some growth in the second half of 1999, although GDP for the year as a whole showed no growth. The government managed to recapitalize a handful of private banks and has begun recapitalizing the state-owned banking sector. New lending, however, remains almost unavailable as banks continue to be wary of issuing new debt in an environment where little progress has been made in restructuring the huge burden of outstanding debts. IMF payments were suspended late in 1999 as the result of evidence that a private bank had illegally funneled payments it received from the government to one of the political parties. The government has forecast growth of 3.8% for FY00/01. The spread of sectarian violence and continuing dissatisfaction with the pace of bank and debt restructuring will make it difficult for Indonesia to attract the private investment necessary to achieve this goal.

From the CIA World Factbook 2000.