The Devastating Impact of The 1997 Financial Crisis Lives on Four Years Later

A new report by the United Nations Children’s Fund (UNICEF), released March 14, 2001, depicts in startling details the state of pain and sorrow inflicted on Indonesia as a result of the of the 1997 Asian financial crisis.  The report, entitled “Beyond Krismon: the social legacy of Indonesia’s financial crisis,” says that millions of Indonesians were pushed into poverty and that the number of children still suffer from malnourishment is much larger than the early estimates. “Millions of people still live on the brink of survival. A similar fragility is evident in other areas é nutrition, health and education;” the report says.

The financial crisis has literally wiped out two decades of hard work to alleviate the overall conditions of ordinary Indonesians by reducing poverty and improving health services and education facilities. The report notes the government’s efforts to reorganize and improve the formerly centrally controlled social services. “Even before the crisis people had been deserting the public clinics,” the report says, mainly due to declining quality and the cost of treatment in the clinics. The current Indonesian government is instigating a new form of revenue sharing between central and local governments that is designed to provide more autonomy and responsibility at the local level as well as more equitable revenue sharing throughout the country.

The report, however, warns of more pending difficulties, as the government is forced to cut deep into health and education spending, as it sunk into staggering debts. Since 1998, the government’s health budget has shrunk by 20% while the education budget has fallen by 4%. It is worth noting that the government will spend around 25% of its 2001 and 2002 budget to service its foreign debt. The taking away of this large chunck of public money will undoubtedly add to the misery and hardship experienced by Indonesians.

“A crisis that erupted within the financial sector has thus had severe social consequences. Unless there is a major effort to protect social spending Indonesia’s children will be paying for the folly of bankers for years to come,” the report concludes.

The report outlines, in particular, the human misery in the areas of health, education, and nutrition. Bellow are some of the report’s findings.


300,000 of the 4 million children born each year in Indonesia die before their fifth birthday. Infant mortality was reduced by more than 50% between 1967 and 1997, falling from 124 to 47 deaths per one thousand live births. This was accompanied by an even steeper fall in child mortality é from 172 to 60 per one thousand live births. However, the report notes that these reductions in mortality rates have not been as impressive as the achievements in some of the region’s other countries. In Thailand, for example, the infant mortality rate is 30, while in Malaysia it is only nine. There are also wide regional discrepancies in Indonesia’s infant mortality rate. While the infant mortality rate is 28 in Jakarta, it rises to 67 in South Kalimantan and 81 in West Nusa Tenggara.

Although Indonesia has made gains in the area of immunizing its children against childhood diseases, the progress has been overstated, according to the report. Instead of the 80% immunization coverage widely reported in the 1990s, the actual level of coverage is probably closer to 60%.


The report notes that although Indonesia was able to greatly expand the availability of schooling for children, this was not matched by improvements in the quality of education. Between 1973 and 1991, the number of children in primary school increased by around one-third and the government more than doubled the number of primary schools. By 1999, Indonesia had achieved a net primary enrolment ratio of 93 per cent, a notable feature of which was that enrolment levels were the same for both boys and girls.

However, the report says that the standards of teaching are poor due to inadequate teacher training and low salaries. Due to inadequate funding for education, many schools, particularly in rural areas, lack textbooks and basic equipment. In addition, the enrolment ratio at the junior secondary level is only 30 per cent, much lower than at primary level. The report notes that many children not attending school are engaged in hazardous jobs, working as scavengers or on plantations and construction sites.


In the mid-1980s, Indonesia became self-sufficient in the production of rice. However, today it is the world’s largest importer of rice, and heavy government subsidies are needed to make it affordable for the poorer segments of the population. These subsidies are now being threatened by the government’s need to trim expenditures.

The report describes high levels of malnutrition in Indonesia, especially among the young children, and it calls for more effective child feeding and nutrition education programs. The report says the proportion of severely malnourished children é around 8 per cent in 1990 é remains “stubbornly high.” This means that of Indonesia’s 23 million children under five years of age, some 1.8 million are severely malnourished.

This report is adapted from the UNICEF release. For more details on the impact of 1997 financial crisis on Indonesia, please visit UNICEF’s innocenti Research Center.

* Center for Balanced Development (CBD)

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