Indonesia achieved impressive economic growth and progress during the development period of the New Order regime in 1966-1998. However, this achievement is more miraculous that what was achieved by South Korea during the years of development from 1961 to the end of 1980s. From several indicators, Indonesia and South Korea have several similarities when starting the development period, such as being classified as the poorest country in the world, having relatively the same GDP size, and implementing a state-developmentalism model under an authoritarian regime.
The differences in the economic performance of these two countries can be compared using Acemoglu's economic institutions hypothesis consisting of property right institutions, contracting institutions, and coordination institutions. First, both countries have poor property rights institutions, they are not capable enough to be a driving factor for economic achievement. Second, even though Indonesia has a long history of contracting institutions and plays a role in national economic progress, these institutions particularly for banking industries have vulnerabilities that ultimately collapsed during the 1997-1998 Asian financial crisis which also hit Indonesia.
Third, that main factor that makes Indonesia's economic achievements different from the miracle achieved by South Korea lies in the coordination institutions. South Korea has a government that is an influential coordination institutions, at least as reflected in the leadership of President Park Chung-hee, the functioning of Economic Planning Board and a competent bureaucracy. Meanwhile, Indonesia has an ineffective coordination institutions, where President Suharto could not create a clean government system and competent bureaucracy. As a result, the significant economic benefits were only enjoyed by the elite and President Suharto's cronies. On the other hand, National Planning Agency (Bappenas) also does not have strong enough power to direct development that can achieve better economic advancement.
Reference:
Acemoglu, D., Johnson, S., & Robinson, J. A. (2002, November). Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution. The Quarterly Journal of Economics, 117(4), 1231-1294.
Acemoglu, D., & Johnson, S. (2005, October). Unbundling Institutions. Journal of Political Economy, 113(5), 949-995.
Acemoglu, D. (2009). Introduction to Modern Economic Growth. Princeton: Princeton University Press.
Asryad, L., & Detajanna, A. (1997). Pola Pengembangan Industri Manufaktur di Indonesia 1976-1993. Jurnal Ekonomi dan Bisnis Indonesia, 12(1).
Aspinall, E., & Fealy, G. (2010). Soeharto's New Order Legacy: Essays in honour of Harold Crouch. Canberra: ANU Press.
Budiman, A. (1991). Negara dan Pembangunan: Studi tentang Indonesia dan Korea Selatan. Salatiga: Yayasan Padi dan Kapas.
Constraints on the executive score, 1960 to 1998. (2021). Retrieved December 2023, from Our World in Data: https://ourworldindata.org/grapher/constraints-on-the-executive-score?tab=chart&time=1965..1998&country=~IDN
