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Indonesia - Overview

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

Introduction

Capital:: Jakarta
Area:: 1.905 km2
Total Population:: 229.965
Annual growth rate:: 1.00%
Density:: 127.00/km2
Urban population:: 53%
Population of Jakarta (8.200), Surabaya (2.400), Bandung (2.000), Medan (1.600), Palembang (1.000)
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; high level of corruption; lack of infrastructures

Economic overview

Due to the unfavorable international economic situation, the Indonesian growth rate has evidently slowed down in 2009 (4.5%).  However, it has shown more resistance than its neighboring countries due to the low amount of exports on its economy and the importance of private consumption since the country has a significant domestic market.  The country adopted a stimulus plan which lowered taxes, increased subsidies and commitments for supplemental expenditures, which have allowed to soften the effects of the crisis.  The growth, estimated at 6% of the GDP, has accelerated in 2010, under the effects of the revival of investments and the continuous growth of private consumption.

 

Despite the good results from the main economic indicators, structural reforms are required.  A large program of development of infrastructures has been issued.  The country suffers from sub-investment, the authorities are strongly promoting public-private partnerships.  The government has also re-confirmed its priority to the fight against corruption.  In addition, the protection of the environment is a major challenge in Indonesia.

The unemployment level remains high and many workers are in a precarious condition.  A large part of the population lives below the poverty line and the gap between the very rich and the very poor does not diminish.

Main industries

The agricultural sector contributes to nearly 14% 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 an member of the OPEC to which it assures 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 40% of the GDP. The banking sector is well-developed. The Islamic bank  Syariah  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 is a member of the WTO and ASEAN (Association of South-East Asian nations).  Indonesia is open to foreign trade, which represented more than 40% of the GDP in 2009. 

The trade balance of the country is structurally positive.  However, this balance was degraded under the effect of the global recession and the fall of the price in raw materials; but,  it still remained on a surplus due to a small contraction of exports in relation to imports.  The revival of exports as well as imports in 2010 did not change this positive trend. 

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 export 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

Foreign direct investment (FDI) in Indonesia, which had collapsed due to the Asian economic crisis in 1997-1998, was evidently increasing since 2007, the country had become attractive to investors again thanks to the progress of the business regulation framework.  The flows of FDI have, nevertheless, suffered from the global recession in 2009 and even if they have started to increase again in 2010, they still remain insufficient  considering the size and the potential of the country's economy.  The reinforcement of political and economic stability has suppressed certain investment risks and has improved the market tone.  But some restraints still persist, such as the high cost of credit, the poor investment climate, the excessive weight and unpredictability of regulations, the poor condition of the infrastructures, the control of terrorist risk and the high level of corruption.

 

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