Dutch Disease, Resource Curse and Development*

Indonesia – Successfully Escaping Dutch
Disease and Resource Curse
• The economy managed to grow quickly and achieved a
thorough diversification of its economy towards robust and
diversified industrialization
• It seems that the early exhaustion of oil reserves triggered
diversification of the economy (peak in 1977), but gas extraction
was partly a substitute
• Windfalls crowded out agricultural employment, not
manufacturing, triggering strong productivity increases in
agriculture
• Overall, Indonesia managed to avoid debt-led industrialisation
with windfall inflows that were – despite high corruption –
successfully used for the modernisation of agriculture and for
fostering manufacturing, while keeping the real exchange rate in
the long run fairly stable, despite longer periods of overvaluation
• Perhaps it is better to have some natural resources, but not too
UNCTAD Division on Technology and Logistics - Knowledge Sharing, Training and Capacity Development Branch
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