Another major reason is the widespread corruption existing there. Rise in public expenditure and widespread reforms in judicial systems and police service can be suggested as the major policy options for alleviating the current situation. More focus needs to be given to the health and education needs of poor. These need assistance from international organizations like World Bank.
According to (Seers 1989, 485), development cannot be measured in terms of economic development alone. This is because for economic development Gross Domestic Product is used as the main indicator. This indicator is only an aggregation and hence in a country with significant poverty, a luxury item like car will be counted more than an essential commodity like food items. Hence, GDP can overestimate the level of development in a country (Seers 1989 486). Further, economic development need not always lead to human development. It involves development in terms of combination of social, economic and political development rather than economic development alone. Therefore, development needs to be measured in terms of a combination of economic and social terms.
Based on the above definition of development, the current level of development in Indonesia is assessed. The major indicators of development used are economic and social indicators. For indicating economic development, the growth rate of GDP, inflation, money supply, foreign exports and imports and foreign investments are used. The main social indicators used are population growth rate, infant mortality rate, life expectancy, school participation rate, adult literacy rate and unemployment rate.Further, the reasons for the current level of development are also examined. Finally, the main policies to be adopted for improving the current level of development are suggested. How to implement these policies and what assistance is needed for the country to improve the situation are also examined.
2. Current Level of Indonesia's Development and its Reasons
In terms of economic development, Indonesia achieved considerable growth since 1966 (Hill 2000, 11).From 1969 to 1997, there has been a rapid rise of about 150 percent rise in GDP in Indonesia. In this period, service sector has been following the economy's overall growth very closely (Hill 2000, 11).The main reasons for the sustained economic growth in this period have been suggested as high investment rates and thereby rapid technological transfer (Dick and Vincent 2002,354).Money supply growth and Inflation were all under control in this period(Hill 2000,30). At present, Indonesia has an economic growth of 4.2 percent, which is the highest in South East Asia though this was less than the GDP growth of 6.2 percent in 2008(Asian Development Outlook 2009,136). This decline might be due to the global financial crisis of 2008. Private and government consumption grew by 5.4 percent and 18.0 percent while investment declined slightly in 2009. Service sector has been the major contributor to GDP growth followed by industrial and agricultural sector in 2009.Inflation declined to 2.7 percent in 2009 from 12.7 percent and poverty incidence measured by the national poverty line declined to 14.7 percent in 2009 from 15.4 percent. Net foreign investment inflows are $3.5 trillion in 2009 and balance of payments recorded a surplus. The trends in foreign trade show that the