Indonesia Economy

7/30/2009

 
Since the Asian Economic Crises, Indonesia has experienced major transition in political and economic sectors. Today, with an improved business environment and a stable political structure, Indonesia is witnessing a tremendous growth in both trade and industry output, and foreign investment. Strong commitment in easing bureaucratic procedures will enable the trend to continue forward.
 
In macro economy, Indonesia has enjoyed a high growth in recent years. Acceleration of economic growth is notable during the 2004 and 2008 period, and private consumption continues to play a key role in the economy. The Government has given special focus on such key areas as investment, macro economic stability, trade, energy, and agriculture which in turn allow Indonesia to enjoy its most rapid growth since the Crises.
 
In 2007 Indonesia was listed as the 20th largest economy with a nominal GDP of USD 432.8 billion (World Bank). In 2005-2008 Indonesia posted an average GDP growth of 6.0%. In 2009, amid the global crisis, Indonesia expects to reach a 4.7% growth. The growth will continue to stabilise in 2010, predicted at 5.5% - 6.0%.
 
Such a promising picture has allowed Indonesia to be invited in 2008 - along with China, India, South Africa, and Brazil - to join the club of Enhanced Engagement Countries of OECD. As an initial step, Indonesia has become a full member of OECD Development Center.
 
Investment
 
Improved macro economic environment and continued pro-growth policy has increased the attractiveness of Indonesia, among other countries in the region, as a place for investment. In 2007, Indonesia attracted USD 10.34 billion in Foreign Direct Investment, while in 2008 the figure reached USD 14.87 billion.
 
It was predicted in 2004 that Indonesia needs a USD 426 billion new investment in 2004-2009. Investors are welcome to tap into the following sectors:
  1. agribusiness : soybean, corn, rubber, palm oil, cocoa, coffee, cashew nut, sugar cane;
  2. fisheries : marine and brackish water fisheries;
  3. manufactures : chemicals and pharmaceuticals, food, wood and furniture, pulp and paper, electronics, automotives, textiles and garment;
  4. infrastructures : power plants, toll roads, airports, harbours, water plants;
  5. services : trading, hotels, warehouses, technical and engineering services
 
Indonesia offers several competitive advantages for investors, including:
  1. Large domestic market and competitive work force arising from its economy and population;
  2. Market-based macro economic policy and free foreign currency exchange regime;
  3. Potential outsourcing partners stemming from the large pool of small and medium enterprises throughout the country;
  4. Abundance of diversified natural resources including agriculture, plantations, fisheries, mining, oil and gas;
  5. Strategic location spanning across several vital international sea transportation routes;
  6. A democratically elected government committed to reforming and promoting a conducive climate for investment.

 
Indonesia is a host to a large Canadian Foreign Direct Investment. Most Canadian companies operating in Indonesia are in the fields of mining, manufacture, consulting service, and finance.
 
Trade
 
The Government of Indonesia has identified 10 products which it believes the country enjoys a comparative advantage. Those are 'hot' items around the world, and are deemed potential for substantial growth. Recognised officially as 'Ten Priority Export Products', those items have been exported globally and have enjoyed distinction for their qualities. Those are shrimps, coffee, palm oil, cocoa, rubber and rubber products, textiles, footwear, electronic equipment, motorcycle component, and furniture.
 
In addition to those, Indonesia has designated 10 other products, recognised as 'Ten Potential Export Products', to further support the country's international trade, which are handicraft, fish and fish products, medicinal herbs, leather and leather products, processed foods, jewellery, essential oils, spices, non paper stationary, and medical instrument and appliances.
 
The Asian Crises has taught Indonesia to shift its dependence on oil and gas sector. In 2006, for example, oil and gas represented only 21% of all Indonesian exports. The main contributors for non oil and gas products are industrial products with a share of 64.5% of total exports. Top destinations for Indonesia's exports are Asia Pacific countries, EU countries, and the United States.
 
Human Resources
 
Indonesians are known for their hard-working but friendly attitude. This suits them to work in an environment where they have to interact with other peoples, such as in hospitality industry and health service. In 2008 Indonesia sent almost half a million workers overseas, of whom 40% were higher education graduates. Traditionally, Indonesian workers go to Asia Pacific countries, Middle East, and Europe, where they work in hospitality and health industries, and in informal sectors. However, there are also thousands of Indonesians working in cruise ships around the world, where they have gained reputation for efficiency and caring.