7 Facts of Indonesia
1.
Sound economy
With the GDP expected to reach US$ 1trillion this year, Indonesia is the largest economy in Southeast Asia.
Much less affected by the global financial crisis compared to its neighboring countries, Indonesia’s economy grew
by 6.3% in the first semester of 2012, making it the fastest growing G20 economy after China. Indonesia grew by
6.5% in 2011and is expected to grow by 6.3% this year, providing a case for the country’s inclusion in the socalled BRIC economies. Future economic expansion is expected to include more inclusive growth as nominal
per-capita GDP is expected to quadruple by 2020, according to a Standard Chartered report.
A large part of our economic success is a result of prudent fiscal stewardship that focused on reducing the debt
burden. Indonesia’s debt to GDP ratio has steadily declined from 83% in 2001 to less than 25% by the end of
2011, the lowest among ASEAN countries, aside from Singapore which has no government debt.
As a result, by early this year, Moody’s and Fitch had uplifted Indonesia’s credit rating to investment grade status.
The rating reflects Indonesia’s resilience to the global financial crisis, improving government and external creditmetrics, and an ability to manage domestic political challenges to the reform agenda.
Economically strong, politically stable and reform minded, Indonesia is an emerging global powerhouse in Asia.
Real GDP Growth
source : CEIC
Total Debt / GDP
source : IMF
Realized Foreign Direct Investment (FDI)
source : BKPM
2.
Political stability
Underlying Indonesia’s vibrant economy is political stability. A decade ago, many analysts envisaged that certain
break-away provinces would bring about Indonesia’s “balkanization”. In 2001, Indonesia embarked on an
ambitious and challenging decentralization effort. While it has been challenging journey, today Indonesia is one
of the most decentralized countries in the world with substantial funds and authorities devolved to the regions.
Significantly, Indonesia is the only country in Southeast Asia that has bucked the trend of a democracy in trouble.
Democracy is blossoming in a country that was once ruled with an iron hand for 30 years. Indonesia has
gracefully transformed from an authoritarian state to a regional role model.
Recently, and for a third time in a row, Indonesia completed another round of peaceful and successful legislative
and presidential elections. The election confirmed the people’s confidence in President Susilo Bambang
Yudhoyono’s leadership, who won more than 60% votes from 176 million registered voters. President
Yudhoyono’s party, Partai Demokrat, controls over 25% of plenary votes, providing him with a stronger mandate
to lead Indonesia in the next five years.
3.
Stronger Investment Climate
Indonesia’s economic policies are on a firm footing. So are its measures to attract foreign investment. Below are
a few of Indonesia’s latest improvements to our investment climate:
Investment Law No. 25/2007:
This updated investment law redefines “capital investment” as all investments, whether by domestic or foreign
investors, for the first time offering equal treatment to all investors. There is no longer a limit of 30 years on
foreign investment permits, and gone is the provision in Law 1/1967 for there to be divestment. Additionally, the
new law allows for the unimpeded reparation of capital.
One-stop-shop (PTSP) and National Single Window (SPIPISE)
BKPM has launched a one-door integrated service (PTSP) and an electronic automation platform for investment
licenses and non-licensing services (NSWi) to not only reduce the number of procedures and amount of
documentation needed to invest in Indonesia, but also to bypass the need to physically come to our offices to
apply for certain services. The new system has revamped internal processes and rectified human resource
constraints to increase the speed and improve the quality of investor services.
The system was first launched in January 2010 in the Free Trade Zone and Free Port of Batam.
Global Profile
All the improvements that have been and continue to be applied have placed Indonesia as #1 country for
entrepreneurship in the recent 2011 BBC survey. It has also managed to jump 10 places to 44 th from a total of
139 ranked countries in the World Economic Forum’s Global Competitiveness Report in 2011.
Moreover, Indonesia has also been listed as one of the top 10 most attractive destinations for FDI in UNCTAD’s
World Investment Prospects Survey in 2010.
4.
Abundant natural resources
Indonesia is a renowned market for resource extraction, seen as even more attractive than for instance, South
Africa, Australia and Canada in terms of mineral prospectivity, as per Pricewaterhouse Coopers.
The country is home to a biodiversity that is only second to Brazil. Rich with natural reserves, Indonesia has
become a commodities powerhouse and a leading commodities exporter in a number of resources, including:
Key
Metrics
Crude
Oil
Natural
Gas
Thermal
Coal
Geothermal
Palm Oil
Cocoa
Tin
Over 3.5
bn
barrels
of
proven
reserves
About
112 tn
cubic
feet of
reserves
World’s
second
largest
exporter
Home to
40% of
world’s
resources
World’s
largest
exporter,
producing
about 19
mn tons
At 770
thousand
tons per
year,
world’s
second
largest
At 65
thousand
tons per
year,
world’s
second
largest
Rubber
World’s
largest
producer,
at 2.4 mn
tons
per year
producer
producer
Source: Ministry of Energy and Mineral
Resources and Ministry of Agriculture
5.
Dynamic demographic base
Indonesia is the 4th most populous nation in the world. Apart from its remarkable fiscal and political
transformations during the last decade, Indonesia is also undergoing a major structural shift in terms of
demographics. Of the 240 million people, over 50% of the population is under 29 years old, and 60% of the
population is under the age of 39, with around 52% of the population living in urban areas. This provides for
dynamic labor market participation, growing at 2.3 million per year. A rapidly urbanizing population also provides
for strategic pools of labor force in centers of investment.
Indonesia’s Demographic Dividend
Coupled with this demographic bonus is Indonesia’s commitment to improve productivity and the education level
of its youth, with 20% of total government expenditure on education. This expenditure is higher than any other
sector. Currently, the majority of university graduates are trained in technical fields such as finance and
economics (28%) or engineering and sciences (27.5%).
Labor costs in Indonesia are the lowest among the 10 ASEAN countries, and even compared to urban centers of
investment magnets, China and India.
6.
Burgeoning domestic markets
Having the 4th largest population in the world, Indonesia has a large domestic market to offer, over 53% of which
lives in urban areas and adopts a modern lifestyle. A growing and affluent middle class supports GDP growth
with approximately 56.7% of GDP accounting for private consumption in 2010; while Consumer Confidence in
Indonesia is at an all-time high, consistently reaching over 110 points until May 2011.
The service sector in Indonesia has also grown over 16% points from 1998 to 2009 and continued to grow at a
pace of 6% in 2010 from the previous year.
These statistics fare well for many industries, including retail and consumer products, food processing, as well as
the automotive industry.
7.
Strategic Location and Expanding Global Influence
Indonesia lies at the intersection of the Pacific Ocean, along the Malacca Straits and the Indian Ocean. Over half
of all international shipping goes through Indonesian waters. Increasingly, Indonesia is playing a more dominant
role in global affairs. It is Southeast Asia’s only member of the G-20 and an active voice for developing world’s
concerns. Standard Chartered sees Indonesia’s inclusion in the G-7 by 2030, projecting that Indonesia’s
economy could be the 10th largest in 2020 and the 5th largest in 2030.
Indonesia has also become part of a new grouping called “Growth Markets” by Goldman Sachs’ Jim O’Neill, the
man who coined the term BRIC. The Growth Markets grouping includes four countries (Indonesia, South Korea,
Mexico and Turkey) each representing 1% of the total world’s GDP.
Being the current chair and a leading member of ASEAN, Indonesia shapes integrative approaches in the region
for security, trade and commerce, and will be the integral part of the ASEAN Economic Community in 2015.
Finally, Indonesia is emerging as a key player on cross-cutting international policy issues as climate change and
the global financial architecture, which will have direct and indirect impacts on business and investment
decisions.