Building a Modern Financial System: The Indonesian Experience

Building A Modern Financial System provides penetrating insights into the recent upheavals in Indonesia, and explains the kinds of policies that can lead to the development of a modern financial system in a large, relatively underdeveloped country. The study covers all facets of the financial system, emphasising the role of the monetary authorities, the transition from government-dominated to a predominantly private banking system, and the recent rapid expansion of the capital market. Indonesia is a particularly interesting case because its economy and financial system was in shambles in the mid-1960s owing to political adventurism and economic mismanagement. Until recently sensible economic policies and growth-promoting reforms provided a sound financial system and a balanced expansion of agriculture and industry. However since the mid-1990's the stability of the Indonesian system has once again been called into question.

David C. Cole retired from Harvard University in 1994 after nearly three decades of teaching in the economics faculty and advising governments and institutions on policies for promoting development. He played an instrumental role in the Korean economic policy reforms of the 1960s, the establishment of the Korean Development Institute in the 1970s and the Indonesian financial reforms of the 1980s. He has published extensively on economic and financial development in the Republic of Korea and Indonesia, and is the co-editor of Asian money markets (Oxford University Press, 1995). Betty F. Slade is a private consultant on financial sector development with experience in several countries in Asia, Africa and Latin America. She worked as an economist in Turkey in the 1960s and 1970s and has taught in universities in Ankara, London and the US. She joined the Harvard Institute for International Development in 1987 and served as a coordinator with David Cole of a financial sector development project within the Indonesian Ministry of Finance until the end of 1994. She has authored a book and several articles on Turkey, as well as on Indonesian financial development.