Indonesia - Business Cycle The current business cycle in...

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Business Cycle The current business cycle in Indonesia has developed much from the history of the nation and where they stand today. Indonesia has been striving for a strong economic foundation and security since it has declared its independence from the Netherlands in 1945. It took four years for the agreement to be reached by the Dutch and accept Indonesia as its own country. Even more recently in 1997, Indonesia faced one of the most severe financial crisis. The business market crashed and the economy fell to extreme low. In these next three years, Indonesia was constantly recovering from their past because it had placed the country in great debt with the government. Indonesia began getting much of its money on loans from the World Bank. The deficit was decreasing as the country improved on their Gross Domestic Product. These are main implications and the challenges everyone should be aware of if when examining the current business cycle. All of the information will pertain to anyone enacting or considering doing international business in Indonesia. One of the biggest implications for international business with Indonesia was the crisis known as the East Asian financial crisis of 1997-98. The Indonesian currency, the rupiah, dropped significantly against the United States dollar. Investors began to panic, debts enlarged, and the banking system collapsed. The crash reveals weak banks, bankrupt conglomerates, and a corrupt judiciary system. At this point, the country needed to be bailed out by their government working in the International Monetary Fund (IMF). The country was funded with enormous loans that they are going to be seen paying off for years to come. As far as International trade theory goes, I like to use the expression that many of us are familiar with, “Money makes the world go ‘round.” Well in the case of Indonesia, it was very difficult to spend their money when it has become so much cheaper than the US dollar. It is as if the value of their rupiah was diminishing by halves. The reductions in value did not stop until 200. The IMF influenced policies aim to encourage foreign investment and strengthen the banking and corporate sectors. Furthermore, on-going violence, corruption, the problem of reforming the political role of military, and battles
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This note was uploaded on 09/08/2010 for the course BUS 187 at San Jose State.

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Indonesia - Business Cycle The current business cycle in...

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