ABSTRACT
Large outstanding debts owed by private conglomerates currently constitute a major obstacle to the rapid recovery of the Indonesian economy. Companies that depend heavily on forest products and palm oil for their revenues account for a significant portion of that debt. Weak government regulation of the banking sector allowed banks to engage in risky business practices that proved unsustainable once the Indonesian rupiah depreciated in 1997. 1 Unless the government stringently regulates such risky practices in the future, the current crisis will be prolonged and financial crises will inevitably recur. The forest and estate crops sector presents particular risks because the long-term availability of raw materials is uncertain, high potential exists for social conflict, and the industry relies heavily on inherently unstable political connections to obtain access to raw materials and subsidies (see Chapters 9, 10, and 16).
