The Indonesia has a market economy in which widely involved the government . There are more than 164 state -owned companies and the government controls the prices of several commodities such as oil , rice and electricity . Indonesia has many assets with large areas of agriculture, forestry and fisheries.
In the 1970s, major oil discoveries made Indonesia a major oil producer and exporter. Falling oil price in 1986 forced Indonesia to implement World Bank and IMFrecommendations : development of export industries, reduction of state expenditure, deregulation of the financial sector, privatization. The government is encouraging private investment in export industries through a new law and opening them up for foreign investment. A series of measures is deregulating the banking sector and ending many monopolies. This liberalization produces a boom in foreign investment, especially in export industries. The share of manufactured goods in Indonesia’s export earnings jumped from 18% in 1986 to 52% in 1994. Inversely, oil, which in 1980 accounted for 80% of exports, now represents only 15% in 1998. The country became a net importer of oil in 2005.
The Asian financial crisis of 1997 led to a severe economic crisis in Indonesia, which resulted in a 13.1% drop in GDP in 1998. In 1999, the year of the first democratic elections since 1955, the economy regains slightly positive growth of 0.9%. Between 1999 and 2003, the average annual GDP growth is 3.3%, compared to 4.8% in Malaysia , 4.7% in Thailand and 4% in the Philippines . Susilo Bambang Yudhoyono was elected in 2004. That year, the economy grew by 5.1%. The estimate for 2005 is 5.4%. Indonesia seems to have returned to some growth but has not yet recovered the rates of the 1990s.
In 2005, the Indonesian per capita gross domestic product (GDP), expressed in Purchasing Power Parity (PPP) , which took into account local purchasing power for $ 1 , was 3,700 $ , which places Indonesia in the category of middle-income countries. The GDP broke down as follows: agriculture 14.7%, industry 30.6%, services 54.6%. The comparison, on the one hand with Malaysia , a country in the process of industrialization where agriculture contributes 7.2% of GDP, industry 33.3% and services 59.5%, on the other hand with the South Korea, a member of the OECD where agriculture accounts for 3.8%, industry 41.4% and services 54.8%, shows that Indonesia belongs to the category of countries in the process of industrialization.
The China , which since its economic liberalization initiated in the 1980s by Deng Xiaoping experiencing an extraordinary economic boom, is now a direct competitor for several large exports from Indonesia such as textiles and clothing. The country has lost competitiveness in the exports of labor-intensive industries such as clothing and footwear. The government of President Susilo Bambang Yudhoyono says he wants to support exporters, make regulations clearer and increase the competitiveness of Indonesian industries.
Indonesia’s main trading partners are Japan , the United States and Singapore . However, taken as a whole, the European Union is Indonesia’s second largest trading partner. We must also note the rise of China . Indonesia is part of the Asia-Pacific Economic Cooperation (APEC).
The tourism is also an important source of income for the country. As for GDP, 1998 resulted in an 11.2% drop in arrivals of foreign visitors to Indonesia. From 1999 to 2001, Indonesian tourism returned with a slow growth in the number of arrivals by just under 4% per year. The attacks of Bali in 2002 and Jakarta in 2003 have a catastrophic consequence expected: the number of arrivals fell respectively 2.3% for 2002 and 11.3% for 2003. 2004 saw a growth of more than 19%. Natural disasters and bird flu have somewhat affected the 2005 results. In 2009, Indonesia received 6,452,259 tourists, which generated US $ 6.302.50 million in receipts.
Networks and Transport
Roads, ports, airports, electricity, water suffer from under-investment and reach their limit. Fifty million Indonesians still do not have access to treated water, 90 million to electricity, 200 million do not have landline phones, 210 million are not connected to a sewer system, on a population of 225 million. Transportation includes bus, taxi, train, airlines, waterways. There is not much public transport, but it is easily available. Public transportation includes trains, buses and taxis. The train is one of the most used and least expensive modes of transport. All major cities and islands of Indonesia are connected by trains.
President Yudhoyono has made the fight against corruption and terrorism its two priorities. Since 2004, a number of former ministers and senior officials have been on trial or have been sentenced to prison for corruption, but the administration and the police remain undermined by corruption.
For the moment, Indonesian economic growth is mainly due to consumption. Investment, especially foreign investment, is lagging behind. The main challenge for Indonesia is to convince foreign investors to return to the country. A joint survey conducted by the Asian Development Bank and the World Bank in 2003 identified three main areas of concern for foreign firms:
- macroeconomic instability;
- uncertainty in economic policy and regulation;
In early 2006, US-ASEAN Business Council businessmen in the United States said the investment climate in Indonesia had improved, that the Indonesian government had made important decisions and that the timing was right. to invest in Indonesia.