Home  > Indonesia - Overview
 Share  Print Version  Email

Other Translations

Indonesia - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Jakarta
Area:: 1.905 km2
Total Population:: 246.864
Annual growth rate:: 1.00%
Density:: 136.00/km2
Urban population:: 51%
Population of Jakarta (24.100), Bandung (3.829), Surabaya (3.700), Medan (2.390), Palembang (1.600), Tangerang (1.545), Semarang (1.400), Ujung Pandang (1.254)
Official language: Indonesian (Bahasa Indonesia)
Other languages spoken: There are more than 660 languages. The most important ones are Javanese (70 million), Sundanese (20 million), Madurese (9 million) and Malay (15 million). English is also spoken.
Business language: English
Ethnic Origins:: In Indonesia there are more than 300 ethnic groups, the main ones being the Javanese, the Sundanese, the Madurese, the Minangkabau, the Betawi, the Bugis, the Papuans. Amongst the minorities of non-Indonesian origin are the Chinese, Indians and Arabs.
Beliefs: Muslims 87%, Protestants 6%, Catholics 3%, Hindus 2%, Others 2%.
Telephone codes:
To make a call from: 00 or 008
To make a call to: +62
Internet suffix:: .id
Type of State::
Unitary Republic  made up of 440 administrative districts, based on parliamentary democracy with a Presidential form of government.
Type of economy::
Lower-middle-income economy, Emerging Financial Market
Leading economy in South East Asia

Economic overview

The Indonesian economy has been experiencing a slight slowing down since 2012, especially due to the reduction in global demand (especially from China), however, the country still has the best economic results among the ASEAN-6 countries. The key driver of the economy remains private domestic consumptions. After reaching 5.8% in 2013, growth should slow down further in 2014 (5.4%) and remain dependent on the Chinese economic recovery and the stability of the prices of raw materials.

Despite the good results from the main economic indicators, structural reforms are needed. The drop in the value of the local currency has negatively affected public finances, although the level of debt reamins stable. The government has decided to maintain a policy of fiscal caution in order to prevent the deficit from deepening. Despite the planned election, the budget for 2014 remains conservative and puts more emphasis on economic stability than on stimulating growth. Inflation should reach 5.5%, expenditure growth should be limited to 6.7% and cuts have been planned in the area of subsidy programmes nad social welfare. The 2014 budget, which was revised in February, aims to contain the current account deficit to no more than 2.5% of the GDP through restrictive fiscal and monetary posicy. The fight against corruption, which increases production costs and acts as an impediment to FDI, as well as the protection of the mining sector are among the priorities. The protection of the environment is a major challenge in Indonesia.

Although it has been decreasing since 2008, the unemployment rate remains high (6%) and many people work in vulnerable conditions. A large part of the population lives below the poverty line and the gap between the very rich and the very poor does not seem to be diminishing.

Main industries

The agricultural sector contributes to nearly 15% of the country’s GDP and employs nearly 40% of the active population. Indonesia is one of the largest rubber producers in the world. Other major crops are rice, sugar cane, coffee, tea, tobacco, palm oil, coconuts and spices. Indonesia is the only Asian country to be a member of the OPEC and contributes to 5% of its production. However, it is still a net importer of oil. The country has great exploitable timber lands and mainly exports timber. 

Industries contribute to around half of the GDP. The industrial sector includes manufacturing of textiles, cement, chemical fertilizers, electronic products, rubber tires, clothing and shoes (most of these are for the American market). Wood processing is also a major activity.

The tertiary sector (financial institutions, transportation and communications) contributes to around a third of the GDP. The banking sector is well-developed. The Islamic bank Syaria has expanded rapidly during these recent years. Tourism is a major source of revenue, however, the sector has suffered from terrorist threats and natural catastrophes.

Foreign trade overview

Indonesia's economy is very open to foreign trade, which represents 48% of its GDP (WTO, 2010-2012).

The country's positive trade balance diminished in 2009 under the effect of the global recession and the fall of the price in raw materials. In 2012, Indonesia registered a trade deficit for the very first time and this trend has now lasted for three years. Despite the trade surplus obtained during the last quarter of 2013, the overall trade balance for 2013 was negative, with a deficit of more than 4 billion USD. The improvement of the trade balance at the end of the year was largely connected to a rise in exports before the expected coming into force of the export ban on non-processed minerals. The negative trend should continue in 2014. 

The three main export partners of Indonesia are Japan, the United States and Southeast Asia. The commodities that are mainly exported are mineral fuels and hydrocarbons, electrical equipment, animal and vegetable fats & oils, nuclear reactors & boilers, and rubber. Its main import partners are Southeast Asia, Japan and China. The commodities that are mainly imported are mineral fuels & oils, nuclear reactors & boilers, iron & steel, electric & electronic equipment, and organic chemicals.

FDI

Having suffered from the global recession of 2009, FDI flux into Indonesia have experienced marked growth in 2011 and their base expanded. In 2013, FDIs grew at a record pace, by 22.4% compared to 2012 and the country expects a 15% increase in 2014 as well.  However, the recently adopted protectionist measures (restriction of employment for foreigners, restriction of foreign stakes in local banks) could have negative impact on FDI inflows. According to the UNCTAD 2013 World Investment Report, Indonesia is one of the five most attractive destinations for multinational companies of 2013-2015, ranking 4th before Brazil. In terms of FDI influx, Indonesia ranks 4th among East-Asian countries, after China, Hong Kong and Singapore.

Strengthening the political and economic stability has removed some investment risk and improved the overall atmosphere on the market. However, some obstacles remain, such as the rising cost of credit, poor investment climate, excessive and the unpredictable nature of regulation, poor infrastructure, the control of the risk of terrorism and a high level of corruption. The entity responsible for investment licenses is the Investment Coordinator Board (BKPM).

Copyright © 2014 Export Entreprises SA, Inc. All Rights Reserved.
 Share  Print Version  Email
Ratings (0)
If you are a human, do not fill in this field.
Click stars to rate.
  

 

Discussion