B A N K I N D O N E S I A REPORT FOR THE YEAR 1960 - 1965 * Printed by P.N. Pertjetakan GITA KARYA R E P O R T OF BANK INDONESIA*) FOR THE FINANCIAL YEARS 1960 — 1965 *) The name “Bank Indonesia” became “Bank Negara Indonesia Unit I” by Presidential Decision No. 17/1965 and Decision of the Minister for Central Bank Affairs No. Kep. 65/UBS/65. B A N K I N D O N E S I A Head Office: DJAKARTA Representatives: LONDON NEW YORK TOKYO Agencies: AMBON, AMPENAN, BANDA ,ATJEH, BANDJARMASIN, BANDUNG, BIAK, DJEMBER, JOGJAKARTA, KEDIRI, KUPANG, MAKASSAR, MALANG, MANOKWARI, MEDAN, MENADO, MERAUKE, PADANG, PAKANBARU, PALEMBANG, PONTIANAK, SABANG, SAMARINDA, SEMARANG, SOLO, SORONG, SUKARNAPURA, SURABAJA, TELUKBETUNG, TJIREBON. The above represents the number of offices as per the endof 1965. INTRODUCTORY The last Bank Indonesia Annual Report issued covered the book-year 1959-1960. The next Annual Report covering the year 1960—1961 was not published because of the Decision of the Minister of Finance No. 1/M/61 of January 6, 1961 which prohibited the Bank Indonesia from publishing any monetary/ banking statistics or annual reports. The above prohibition to publish or issue data and reports was effective during the following years and only at the end of 1966 it was revoked by the Decision of the Minister of Finance No. D. 15. 1. 1. 37 of December 28, 1966. Now the time has come to resume publication of the Annual Reports with the aim of furnishing the public with the necessary data in order to enable it to follow developments and activities in the economic and monetary field. Besides, by the publication of the Reports the public will have a source of valuable information in considering and judging the economic and mon- etary policy of the Government. This report in full, covering the period of 6 bookyears (1960 — 1965) has been published in order to enable a continual observance of the Indonesian economic and monetary situation during those years at once. Other Reports will follow hereafter, covering subsequent years. The period of 1960— 1965 was one in which the country was governed according to the principle of the Political Manifesto, laid down in Presiden- tial Decision No. 1/1960 of January 29, 1960. During this time the economic iv was purposefully handled to implement the principles of guided economy and guided democracy, which finally resulted in “etatism” by gradually permeat- ing the entire economic activity by the maxim of state enterprise and state control. In relation to the above the years 1960 — 1965 may be seen as the period of the guided economy, thus giving rise to covering all of those six years by one Report. It should also be noted that the former book-year of Bank Indonesia was from April 1st to March 31st (Act No. 11/1953) while since August 19, 1965 the book-year has been altered as to conform with the calendar year. In relation to the above the present Report on the years 1960— 1965 covers the period from April 1,1960 to December 31, 1965, this being the reason for the use of the name “Bank Indonesia Report”, although on August 19, 1965 the name Bank Indonesia was changed into Bank Negara Indonesia. During the years under review many changes occurred in the political, economic, social and cultural field. As for the banking sector many structural alterations were effected as well as changes in names and in the division of duties among the state banks in consequence of Presidential Decision No. 17/ 1965 concerning the establishment of one single Bank, i.e. Bank Negara In- donesia into which all state banks including Bank Indonesia had been inte- grated. On account of the many changes no data on the staff of the Central Bank have been included. A report on its operations is under preparation and will be published in the near future. Although the present Report covers only the period 1960—1965, efforts have been made to supply information on certain developments in 1966. Reports on subsequent years are to follow after the publication of this one, while the Report reviewing the year 1966 — 1967 is in a preparatory state. v Finally, I must express my sincere gratitude to the Departments, banking circles as well as individuals for their cooperation with the Central Bank in the preparation of this Report. Djakarta, 1 May 1968. GOVERNOR BANK NEGARA INDONESIA RADIUS PRAWIRO vi R E P O R T I. NATIONAL INCOME Based on figures compiled by the Central Bureau of Statistics cooperation with the National Income Committee and provisional estimates of the Bappenas (National Planning Council) of the 1963 - 1965 period, net national product In 1958 - 1965 was as follows : Although national income figures at prices of the years concerned for 1963, 1964 and 1965 have not as yet been produced—based on rising index figures of the cost of living—it can nevertheless be concluded that developments indicate a swift rising trend. On the other hand, national income at 1960 prices, or real na- tional income, showed a slow development. This means that the nominal increase in national income was primarily caused by the rise of prices or inflation in prac- tically all sectors, as can be seen in the above table where nominal national in- come in 1962 noted an increase if compared with the aforegoing year. Real na- tional income, however, marked a drop. Under these circumstances, those most hard hit were groups having fixed salaries, such as civil servants, and the majority of workers. Disparity between income and soaring prices among other things af- fect productivity. Census figures in 1961 said Indonesia’s total population was about 96.4 million people. On the assumption that the rise of population goes by 2.3% annually, real national income per capita at 1960 prices is as follows : 2 1958 - Rp 4,289 1962 - Rp 4,091 1959 - Rp 4,212 1963 - Rp 3,929 1960 - Rp 4,145 1964 - Rp 3,940 1961 - Rp 4,217 1965 - Rp 4,065 The above figures showed that there was a declining trend in the real income per capita during the 1958—1965 period. This was attributed to the fact that the rise of national income composed at 1960 prices could not balance the rise of population. Specification of national product at 1960 prices in the various sectors of op- eration were as follows (in percentage). From the above figures it is evident that during the 1958—1965 period agri- cultural proceeds yielded an average 51.8%, industries 12.6%, trade (wholesale and retail) 15,9%, services 5.8%, transport and communications 3.4% and other sectors about 10%. Agricultural operations indicated an up—and—down devel- opment, industries a slight decline, trade a slight increase caused by the process of inflation, where there was a redivision of income profitable for the trade sector. Although the volume of merchandise did not increase and even showed a decline, 3 the profit margin was invariably going up. Income obtained through the Govern- ment during the 8 years concerned experienced a fall from 6.6% to 2.1%. As is known, contributions made by the Government to national income only comprise services of civil servants. Other fields did not undergo significant changes. In the period of inflation the trade sector drew the income of that of the other sectors. Sectors with seriously affected income were those whose percentage calculated from the total national production experienced a decline, especially, the Govern- ment. If a review was made of the development of all sectors during the period concerned made on the basis of 1960 prices, agricultural production recorded a real increase of about 17% in 1965 against that in 1958, mining sector a rise of about 40%, industries a fall of about 1%, buildings a rise of about 15%, electricity and gas a rise of about 75%, transport and communications a rise of about 52%, trade a rise of above 26%, banks and other financial agencies a rise of about 25% house rent an increase of about 9%, government activities a fall of about 65%, and services a rise of about 17%. In its entirety the 8-year period under report presented a picture where net national product only indicated a rise of only about 11%. 4 II. MONETARY DEVELOPMENT Introduction The monetary analysis in this report, as in the report for the financial year 1959 — 1960, was drawn up on the basis of figures obtained from institutions considered as money creating bodies such as the Central Government, the Bank Negara Indonesia Units I - IV, the Bank Dagang Negara, and Private Foreign-Exchange Banks. On account of technical difficulties, the activities of private commercial non-foreign exchange banks have not yet been included in the monetary analysis contained in this report. 5 Table I shows the movements in the volume of money in circulation specified into currency and deposit money, and their percentages with regard to the total money volume. The causes which explain the increase in money supply are to be found in the movements in the economic sectors as mentioned in table 2, i.e. the Public Sector, the Private Sector, the Foreign Sector and Miscellaneous. In addition, table 3 set out the movements in the volume of money in circula- tion in the form of a balance sheet; the factors which caused the money volume to change are listed under the economic sectors as on the assets side, which almost resembles the sectorization of the causes leading to the movements in the volume of money mentioned in table 2.