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Business and Market Overview on Indonesia

ECONOMY. Indonesia is a market-based economy but the government plays a significant role in the country’s economy with 160 government-owned enterprises. Indonesia’s GDP per capita ranks fifth after Singapore, Brunei, Malaysia and Thailand. The Asian economic crisis of 1997 adversely affected the country economy and businesses and caused spiralling prices of necessities resulting in social unrest. Future prospects of Indonesia’s economy are bright with economic structural reforms in placed since the Asian economic crisis.

Indonesia’s GDP was US$258.3 billion with a GDP per capita of US$1,193 in 2004. Indonesia’s real GDP grew at an average of 4.6% annually from 2000 to 2004 driven by domestic consumption accounting for nearly three-quarters of Indonesia’s GDP. Inflation rose from 3.8% in 2000 to 11.9% in 2002 but eventually declined to 6.1% by 2004. GDP per capita increased from US$801 in 2000 to US$1,193 in 2004 but unemployment also increased from 6.1% to 9.9% during the period.

The manufacturing sector contributed towards 43.7% of Indonesia’s GDP in 2004 while the service sector contributed 40.9%. Though nearly 45.0% of the country’s workforce is involved in agriculture, this sector contributed only 15.4% of the country’s GDP during the period. Major industries include petroleum and natural gas, textiles, apparel, footwear, mining, cement, chemical fertilisers, plywood, rubber, food and tourism. Major agriculture products include rice, palm oil, rubber, cacao, peanuts, copra and cloves.

DEMOGRAPHY. Indonesia comprises nearly 18,000 islands and has the largest population among the Southeast Asian countries with 217 million people in 2004. Main islands are Java accounting for 55% of the population followed by Sumatra (18%), Kalimatan (5%) and Sulawesi (6%). Other less populated islands include Irian Jaya, Bali and Nusa Tenggara.

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