The Indonesian economy was dominated by the government in the decades of the 1970s and 1980s through its control of major mining, manufacturing and agricultural activities. Hill (2000) estimates that as much as 40% of non-agricultural GDP was accounted for by government entities in the late 1980s There were still a lot of government corporations up until the late 1980s and early 1990s and governmental control over the banking system was still substantial.
Monetary policy was ineffective in dealing with the 1997 Asian macroeconomic crisis. Fiscal policy might have been more effective but was not considered for a variety of reasons.
With emphasis on the importance of public policy, this article reviews and assesses the reasons for rapid economic growth in the developing economies of Asia during the past five decades and discusses challenges for the future.
The Central Asian Republics (CARs) occupy a strategic position straddling East and West and have a significant development potential. In the aftermath of transition, however, the CARs witnessed a period of prolonged slow and negative growth and a rising incidence of poverty. Many factors have been put forward to explain the difficult transition experience, including the disruption in production and economic relations existing in the former Soviet Union, the collapse of aid as it was in the former Soviet Union, the nascent private sector, the lack of capital markets, the limited number of institutions required for a market economy, and the gaps in infrastructure. Nevertheless, Central Asia seems to have turned the corner during the last few years. Economic growth, which accelerated to historically unprecedented levels, has been driven by high commodity prices-particularly for oil and natural gas-and buyout demand, increasing inward investment, improved macroeconomic management, and development of infrastructure. There are signs that oil-and-gas-sector-led growth has stimulated the development of the services sector (construction and banking), as well as some manufacturing activities. There are also indications that economic prosperity has been accompanied by job creation and some reduction in poverty. There is optimism in Central Asia's political circles with some even predicting that the region will join the ranks of middle income countries within a decade or so. Against this backdrop, this paper reviews the characteristics of the boom that has evolved since 1997, with particular reference to macroeconomic developments and poverty. Distinctions are drawn between the economic structure and performance of resource-rich (oil and natural gas) economies and other CARs which have fewer resources. Drawing on this analysis, the outlook for the CARs for the next ten years is projected against a background of global prospects. The paper also seeks to guide CARs' policymakers by suggesting the direction of future economic performance, as well as indicating key policy issues. As long-run forecasts can change in response to external events, the risks for the CARs' outlook are also highlighted.
