Country Factsheets Indonesia

Indonesia is the largest economy in the ASEAN States, and a thriving democracy with significant regional autonomy. It is located on one of the world’s major trade routes and has extensive natural resource wealth distributed over an area the size of the United States and comprised of over 17,000 islands. With its almost 260 million inhabitants, Indonesia is the fourth largest country in the world in terms of population. Indonesia is also the world's third most populous democracy, the world's largest archipelagic state, and the world's largest Muslim-majority nation. Since becoming a G20 member in 2003, Indonesia has enjoyed steady economic growth, pulling the country into middle-income status: Sound macroeconomic policies, combined with growing domestic demand and high commodity prices, have helped economic expansion from 2003-2013. President Joko Widowo - elected in July 2014 - has committed to improving infrastructure and reducing barriers to business in Indonesia as a means to increase the country’s GDP growth rate to 7% by 2017. He has also committed to developing Indonesia’s infrastructure, including significantly increasing Indonesia’s power generation capacity. Widowow reduced fuel subsidies in early 2015, an important but unpopular move which has helped the government redirect its spending to other priorities.

 Though markets initially responded positively to Widowo’s measures, there are many urgent issues that need to be tackled to ensure Indonesia’s continued growith: Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among its regions. Protectionist policies, corruption at all levels of government, poor infrastructure, a weak rule of law, and labour rigidity have all taken their toll. Other current issues include: improving education, preventing terrorism, consolidating democracy after four decades of authoritarianism, implementing economic and financial reforms, reforming the criminal justice system, holding the military and police accountable for human rights violations, addressing climate change, and controlling infectious diseases, particularly those of global and regional importance. Indonesia, with the nine other ASEAN members, will continue to move towards participation in the ASEAN Economic Community, though full implementation of economic integration has not yet materialized.

Key economic data

Population258.31 million
GDP (Current US$)US$ 940.95 billion / EUR 888.78 billion
GDP (Current US$, per capita)US$ 3,636.00 / EUR 3434.00
GDP (PPP)US$ 3.028 trillion / EUR 2.86 trillion
GDP (PPP, per capita)US$ 11,699.00 / EUR 11,050.00
Real GDP Growth4.9% year-on-year
Consumer Price Index (CPI)3.7%
Labour Force123.7 million
Unemployment Rate5.6%
Main IndustriesPetroleum and natural gas, textiles, automotive, electrical appliances, apparel, footwear, mining, cement, medical instruments and appliances, handicrafts, chemical fertilisers, plywood, rubber, processed food, jewellery, and tourism
Main ExportsMineral fuels, animal or vegetable fats (includes palm oil), electrical machinery, rubber, machinery and mechanical appliance parts
Exports PartnersJapan 12%, US 10.8%, China 10%, Singapore 8.4%, India 7.8%, South Korea 5.1%, Malaysia 5.1% (2015)
Main ImportsMineral fuels, boilers, machinery, and mechanical parts, electric machinery, iron and steel, foodstuffs
Imports PartnersChina 20.6%, Singapore 12.6%, Japan 9.3%, Malaysia 6%, South Korea 5.9%, Thailand 5.7%, US 5.3% (2015)
CurrencyIndonesian rupiah (IDR)
Ethnic groupsJavanese 40.1%, Sundanese 15.5%, Malay 3.7%, Batak 3.6%, Madurese 3%, Betawi 2.9%, Minangkabau 2.7%, Buginese 2.7%, Bantenese 2%, Banjarese 1.7%, Balinese 1.7%, Acehnese 1.4%, Dayak 1.4%, Sasak 1.3%, Chinese 1.2%, other 15%
ReligionsMuslim 87.2%, Protestant 7%, Roman Catholic 2.9%, Hindu 1.7%, other 0.9% (includes Buddhist and Confucian), unspecified 0.4%
LanguagesBahasa Indonesia (official, modified form of Malay), English, Dutch, local dialects (of which the most widely spoken is Javanese)
Literacy Rate93.9%

Business environment

Despite challenges, Indonesia continues to attract foreign investment. Private consumption is the backbone of the economy and the middle class is growing, making Indonesia a promising place for consumer product companies. Indonesia has ambitious plans to improve its infrastructure with a focus on expanding access to energy, strengthening its maritime transport corridors, which includes building roads, ports, railways and airports, as well as improving agricultural production, telecommunications, and broadband networks throughout the country. Indonesia continues to attract foreign franchises and consumer product manufacturers. Since October 2014, the Indonesian government has prioritised boosting investment, including foreign investment, to support Indonesia’s economic growth goals, and has committed to reducing bureaucratic barriers to investment, including announcing the creation of a “one-stop-shop” for permits and licenses at the Investment Coordination Board.

However, factors such as a decentralised decision-making process, legal uncertainty, economic nationalism, and powerful domestic vested interests create a complex and difficult investment climate. The Indonesian government’s requirements, both formal and informal, to partner with Indonesian companies and purchase goods and services locally, restrictions on some imports and exports, and pressure to make substantial, long-term investment commitments, also factor into foreign investors’ plans. Investors continue to cite corruption as an obstacle to pursuing opportunities in Indonesia. Other barriers include poor government coordination, the slow rate of land acquisition for infrastructure projects, poor enforcement of contracts, an uncertain regulatory environment, and lack of transparency in the development of laws and regulations. New regulations are at times difficult to decipher and often lack sufficient notice and socialisation for those impacted. The lack of coordination among ministries creates redundant and slow processes, such as for securing business licenses and import permits and, at times, conflicting regulations. Indonesia restricts foreign investment in some sectors through a Negative Investment List. The latest version, issued in 2014, details the sectors in which foreign investment is restricted and outlines the foreign equity limits in a number of sectors. In February, 2016 the Indonesian government announced a major revision to the Negative Investment List; however the revised regulation with details of this potential liberalization had not been issued as of May 2016. So, for the time being, telecommunications, pharmaceuticals, e-commerce, film and creative industries, construction and other sectors remain closed to foreign investment. Energy and mining also face significant investment barriers. Indonesia began to abrogate its more than 60 existing Bilateral Investment Treaty agreements (BITs) in February 2014, allowing the agreements to expire.

Sources

Country Introduction & Key Economic Data:

The World Factbook:

https://www.cia.gov/library/publications/the-world-factbook/geos/id.html

Statistical information - UNCTAD Stat:

http://unctadstat.unctad.org/CountryProfile/GeneralProfile/en-GB/360/index.html

Economist Intelligence Unit Country Reports:

http://country.eiu.com/indonesia

Knoema “World Data Atlas”:

https://knoema.com/atlas/indonesia

 Business Environment & Market Opportunities:

Indonesia Doing Business Guide:

https://www.export.gov/article?id=Indonesia-Market-Overview

 Rankings:

IFC/World Bank “Doing Business” Report 2017 - Ranked 91 / 191:

http://www.doingbusiness.org/~/media/wbg/doingbusiness/documents/profiles/country/idn.pdf

Transparency International “Corruption Perception Index” - Ranked 90 / 176:

http://www.transparency.org/country/idn

World Economic Form – Global Competitiveness Report (2016/2017) - Ranked 41 / 138:

http://reports.weforum.org/global-competitiveness-index/country-profiles/#economy=IDN