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INTERNATIONAL BUSINESS
Shubham Gurung
MBA 3
O191MBA197
Country Overview
INDONESIA
Indonesia is located off the coast of mainland Southeast Asia in the Indian and Pacific oceans.
It is an archipelago that lies across the Equator and spans a distance equivalent to one-eighth
of Earth’s circumference. The capital of the country is Jakarta. Indonesia was formerly known
as the Dutch East Indies. After a period of occupation by the Japanese (1942–45) during World
War II, Indonesia declared its independence from the Netherlands in 1945. Although Indonesia
did not become the country’s official name until the time of independence, the name was used
as early as 1884 by a German geographer; it is thought to derive from the Greek indos, meaning
“India,” and nesos, meaning “island.”
Its islands can be grouped into the Greater Sunda Islands of Sumatra, Java, the southern extent
of Borneo (Kalimantan), and Celebes; the Lesser Sunda Islands of Bali and a chain of islands
that runs eastward through Timor; the Moluccas between Celebes and the island of New
Guinea; and the western extent of New Guinea (generally known as Papua).
Indonesia is the largest country in Southeast Asia, with a maximum dimension from east to
west of about 3,200 miles and an extent from north to south of 1,100 miles. It shares a border
with Malaysia in the northern part of Borneo and with Papua New Guinea in the centre of New
Guinea.
The climate of Indonesia is determined partly by its island structure and its position astride the
Equator, which assure high, even temperatures. Temperatures are highest along the coast,
where mean annual readings range from the mid-70s to the upper 80s °F (low 20s to low 30s
°C). Regions above 2,000 feet are significantly cooler.
Indonesia has played a modest role in the world economy since the mid-20th century, and its
importance has been considerably less than its size, resources, and geographic position would
seem to warrant. The country is a major exporter of crude petroleum and natural gas. In
addition, Indonesia is one of the world’s main suppliers of rubber, coffee, cocoa, and palm oil;
it also produces a wide range of other commodities, such as sugar, tea, tobacco, copra, and
spices (e.g., cloves).
A centralized government and a common language have provided Indonesia with some sense
of unity. Furthermore, in keeping with its role as an economic and cultural crossroads, the
country is active in numerous international trade and security organizations, such as ASEAN,
OPEC, and the UN.
Indonesia has a mixed economy in which both the private sector and government play vital
roles. As the only G20 member state in Southeast Asia, the country has the largest economy in
the region and is classified as a newly industrialised country. As of 2019, it is the world's 16th
largest economy by nominal GDP and 7th in terms of GDP at PPP, estimated to be US$1.100
trillion and US$3.740 trillion respectively. Per capita GDP in PPP is US$14,020, while nominal
per capita GDP is US$4,120. The debt ratio to GDP is 29.2%. The services are the economy's
largest sector and account for 43.4% of GDP (2018), followed by industry (39.7%) and
agriculture (12.8%). Since 2009, it has employed more people than other sectors, accounting
for 47.7% of the total labour force, followed by agriculture (30.2%) and industry (21.9%).
Indonesia is a republic with a presidential system. The President of Indonesia is the head of
state and head of government, commander-in-chief of the Indonesian National Armed Forces
(Tentara Nasional Indonesia, TNI), and the director of domestic governance, policy-making,
and foreign affairs. The president may serve a maximum of two consecutive five-year terms.
Joko Widodo also known as Jokowi, is the 7th and current president of Indonesia. Elected in
July 2014 as the first president not to come from an elite political or military background, he
was previously the Mayor of Surakarta from 2005 to 2012, and the Governor of Jakarta from
2012 to 2014.
Population of Indonesia (2000) is estimated at 273,523,615 people at midyear according to UN
data. Indonesia population is equivalent to 3.51% of the total world population.
• Literacy Rate -
• GDP - $1.09 trillion (nominal, 2020 est.) $3.33 trillion (PPP, 2020 est.)
• GDP Rank - 15th (nominal, 2020 est.) 7th (PPP, 2020 est.
Since independence, Indonesian foreign relations have adhered to a "free and active" foreign
policy, seeking to play a role in regional affairs commensurate with its size and location but
avoiding involvement in conflicts among major powers. Indonesia is very open to foreign trade,
which represents 43% of its GDP (World Bank, 2018). The main exports are mineral fuels
(23.3%%), animal and vegetable fats and oils (11.3%), electrical machinery (4.9%), vehicles
(4.2%), and rubber (3.5%) rubber (4.6%). Indonesia mostly imports mineral fuels and oil
(16.7%), machinery and computers (14.4%), electronic apparatus (11.4%%) and iron and steel
(5.4%). Indonesia is the second world's largest exporter of thermal coal used in power stations
and has two major customers, China and India, the planet's two largest coal importers.
China remained Indonesia's largest trading partner in 2018, buying up 15.1% of exports,
followed by Japan (10.8%), United States (10.2%), and India (7.6%). The main suppliers are
China (24.1%), Singapore (11.4%); Japan (9.5%), and Thailand (5.8%). China and Indonesia
are forging closer economic ties as the two countries face threats to their trade relations with
the United States due to protectionist actions taken by President Donal Trump.
In 2018, Indonesia recorded a trade deficit of USD 8.4 billion caused by rapidly rising imports
and a slowdown in automobile parts and vegetable oil shipments. According to WTO data, in
2018 exports of goods grew to USD 180.2 billion while imports grew to USD 188.7 billion. As
regards to services, the country exported USD 27.2 billion and imported USD 34.9 billion
worth of services. Despite the government's efforts to mitigate the widening trade gap, the
current account deficit in the second quarter of 2019 hit USD 8.4 billion (3% of GDP, Bank
Indonesia). The country is betting on bilateral and multilateral trade agreements to revive the
sluggish non-oil exports within the next five years. President Widodo insists on the need to
export less raw materials and more processed goods to create more added value and jobs at
home.
Volume of exports of goods and services -10.6 18.4 5.1 8.3 9.6
(Annual % change)
Volume of imports of goods and services -15.0 23.5 4.6 6.4 7.6
(Annual % change)
Main Trading Countries
In the above table we can see that, China is at the top of both the list of top 10 exporter and
importer with the exports of 16.7% and the imports of 26.3% in year 2019. In the list of
exporters, China is followed by US (10.6%), Japan (9.5%), Singapore (7.7%), India (7.1%),
Malaysia (5.4%), South Korea (4.3%), Philippines (4.0%), Thailand (3.7%) and Vietnam
(3.1%). Where in the top 10 importers list, China is followed by Singapore (10.1%), Japan
(9.2%), Thailand (5.5%), US (5.5%), South Korea (4.9%), Malaysia (4.5%), Australia (3.2%),
India (2.5%) and Vietnam (2.3%).
Trade Relation with India
India and Indonesia have shared two millennia of close cultural and commercial contacts. The
Hindu, Buddhist and later Muslim faith travelled to Indonesia from the shores of India. The
shared culture, colonial history and post-independence goals of political sovereignty, economic
self-sufficiency and independent foreign policy have unifying effect on the bilateral relations.
Indonesia has emerged as the second largest trading partner of India in the ASEAN region.
Bilateral trade has increased from US$ 4.3 billion in 2005-06 to US$ 21 billion in 2018-19.
India is the second largest buyer of coal and crude palm oil from Indonesia and imports
minerals, rubber, pulp and paper and hydrocarbons reserves. India exports refined petroleum
products, commercial vehicles, telecommunication equipment, agriculture commodities,
bovine meat, steel products and plastics to Indonesia.
There are about 30 Indian investments / Joint Ventures in Indonesia. As per Indonesian
authorities, Indian investment in Indonesia is 995.18 million in 2215 projects during 2000-
2018. In comparison, Indonesia’s investment in India is limited to about US$ 629.16 million
(April 2000-March 2019).
India and Indonesia set an ambitious $50 billion target for bilateral trade over the next six years
to deepen cooperation in a number of key areas including economy, defence and maritime
security. The two leaders discussed ways to boost bilateral ties and enhance cooperation in
trade and investment during the G20 Summit in Osaka, Japan in 2019.
Trade between the two countries in 2016 was $12.9 billion. It rose 28.7 per cent to $18.13
billion in 2017 with Indonesia's exports to India reaching $14.08 billion and its imports from
India standing at $4.05 billion, according to Indonesia's Central Statistics Agency.
Indonesia is keen on enhancing trade and investment ties with India in the areas of information
technology (IT), health and pharmaceuticals, agro products, automotive components and
tourism. A release from FTCCI said Indonesian exports to India consists of textiles, electronic
goods, footwear and sawn timber, while chemicals, pharmaceuticals, machines and motor
vehicles are the major imports from India to Indonesia.
Plastics $122.68M
Exports
Rubbers $313.12M
Fertilizers $209.04M
FDI Inflows
FDI flows into Indonesia have grown and their base has been expanding thanks to resilient
economic growth, low government debt and prudent fiscal management. According to
UNCTAD's World Investment Report 2020, FDI investment in Indonesia increased by 14%
between 2018 and 2019, achieving USD 23,4 billion; while FDI stock reached USD 232 billion
in 2019
Indonesia Investment Coordinating Board (BKPM) announce the first quarter (January-March)
of investment realization data in 2020 reached Rp 210.7 trillion or equivalent to 8.0% increase
compared to the same period in 2019. Investment realization of first quarter contributed 23.8%
to the 2020 target investment realization of Rp 886.1 trillion. DDI realization reached Rp 112.7
trillion dan FDI realization reached Rp 98.0 trillion
1. Singapore
In first quarter 2020 with US$ 6.5 2.7 billion, amounting to 23.1% 40% of the total FDI
realization in Indonesia, Singapore is highly optimistic about the business prospects in
Indonesia. However, Singapore went third place during the fourth quarter of 2019, investing
US$ 1.1 billion in business ventures.
2. China
China has become a strong player in Indonesia’s FDI. Surpassing Singapore, China rose to the
first place as the top country with the largest foreign investment in Indonesia during the fourth
quarter of 2019 with US$ 1.4 billion. In first quarter 2020, China placed second with a total of
US$ 1.3 billion of foreign investment. Most notably, China’s investment in Indonesia’s
transportation, industry, and tourism.
3. Hong Kong
Hong Kong, along with China, boosted the total of foreign investment in the last quarter of
2019 by US$ 1.1 billion, effectively placing Hong Kong into the list of leading countries of
FDI in Indonesia. Moreover, Hong Kong has invested US$ 2.9 billion throughout 2019 US$
0.6 billion throughout first quarter 2020, amounting to 10.2% 9.3% from the total of FDI
realization.
4. Japan
Another top largest foreign investment comes from Japan. The strong ties between Indonesia
and Japan have resulted in Japan consistently ranked in the top five foreign investors. In first
quarter 2020, Japan has invested US$ 0.6 billion. Some of the sectors that Japan has invested
in are electricity, real estate, gas, and industry.
5. Malaysia
In first quarter 2020, the foreign investment that Indonesia gained from the Malaysia reached
US$ 0.5 billion. This put Malaysia among the other contenders of largest FDI in Indonesia,
removing Netherlands from the list in which investment reached US$ 0.5 billion in the fourth
quarter 2019
In 2019, net FDI outflows (% of GDP) for Indonesia was 0.4 %. Though Indonesia net FDI
outflows (% of GDP) fluctuated substantially in recent years, it tended to decrease through
1970 - 2019 period ending at 0.4 % in 2019. The FDI outflows of Indonesia in 2019 was
recorded $3,380.37 million.
China $27,876,747,411
Japan $15,927,685,124
Singapore $12,929,196,536
India $11,774,323,038
Malaysia $8,941,616,456
Philippines $6,757,972,042
Thailand $6,213,388,879
Vietnam $5,150,366,460
Top 10 Import Countries
China $44,907,914,086
Singapore $17,305,366,372
Japan $15,623,212,256
Thailand $9,462,989,586
Malaysia $7,736,953,726
Australia $5,514,944,439
India $4,295,680,982
Vietnam $3,842,188,002