The Indonesian Financial Crisis

The current economic paradigm in Indonesia has been set after the financial crisis 1997-1998 deeply hit the social, political and economic structures of the country. Indonesia was affected by the economic crisis, and consequently many people suffered from that. The IMF and the US stepped in to support the Indonesian economy. The IMF promise to help Indonesia only that it had to adjust its economy according to the Washington Consensus criteria . However the aid from IMF is not enough and economic condition were getting worse.

There are several push factors that scared Foreign Direct Investments (FDI), but there are more pull factors for FDI to invest in Jakarta. Several push factors are usually about; natural disasters which don’t happen often,

It affects most economies of the south East Asian Nation. But the main focus is the big crisis that deeply affected the Indonesian economy and political system. The main problem that emerged in Indonesia was the drastic fall in their currency exchange rates. The national currency, the Rupiah, fell by 12% in the beginning of August, the rapid depreciation created a strong panic among people, companies, and particularly among international investors. These investors feared that the trend of exchange rate of the Rupiah to US dollar might continue depreciate leading to a fall of their value of their assets. The Indonesian Central Bank was not really aware of this situation and underestimated the negative side

Jusuf Habibie steps up as the next president. He handled the ongoing crisis and chaos and had some agreements with the IMF.

Consequently the Rupiah strongly appreciated against the USD and it is going right on track, from 16 000 rupiah for 1 USD to 8000 rupiah. The Indonesian Stock exchange started to rise, inflation has decreased constantly . In the end of 1998 until early 2000s, Indonesia has quickly improved its economy. After this recovery stage, real estate companies began to expand their business and dominate the main commercial areas in Jakarta.

The real estate business slowly emerged as a central and important driver for the Indonesian economic growth after the financial crisis. Domestic as well as international factors have been pushing and pulling this industry to its current importance. The capital Jakarta becoming the focal point of these investments. The following study will focus on studying the internal dynamics of the sectors and its interdependence with the Indonesian economy.

The real estate industry in Jakarta is booming, could this eventually have also negative impacts on the Indonesian economy? What are the solutions to avoid that? These are essentially the main questions that will be addressed by the