ECONOMY. Indonesia is a market-based economy, but the government plays an important role in the country’s economy with 160 state-owned companies. Indonesia’s GDP per capita ranks fifth after Singapore, Brunei, Malaysia and Thailand. The 1997 Asian economic crisis negatively affected the country’s economy and businesses, causing skyrocketing prices for daily necessities, leading to social unrest. The future prospects for the Indonesian economy are bright with the economic structural reforms implemented 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 annual average of 4.6% between 2000 and 2004 driven by domestic consumption, which it accounts for almost three quarters of Indonesia’s GDP. Inflation increased from 3.8% in 2000 to 11.9% in 2002, but finally declined to 6.1% in 2004. GDP per capita increased from US$801 in 2000 to US$1,193 in 2004, but unemployment it also increased from 6.1% to 9.9% during the period.
The manufacturing sector contributed 43.7% of Indonesia’s GDP in 2004, while the service sector contributed 40.9%. Although almost 45.0% of the country’s labor force is involved in agriculture, this sector contributed only 15.4% of the country’s GDP during the period. Major industries include oil and natural gas, textiles, clothing, footwear, mining, cement, chemical fertilizers, plywood, rubber, food, and tourism. The main agricultural products include rice, palm oil, rubber, cocoa, peanuts, copra, and cloves.
DEMOGRAPHY. Indonesia comprises almost 18,000 islands and has the largest population among Southeast Asian countries with 217 million people in 2004. The main islands are Java, which accounts 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.
Indonesia is a country of diverse ethnic and sub-ethnic communities with different languages and dialects, cultures, and foods. Javanese make up 45% of the population, followed by Sundanese (14%) and Madurese (8%) and Coastal Malays (8%). Chinese who immigrated to Indonesia during the Dutch colonial period make up almost 5% of the population. Islam is the predominant religion followed by Christianity and minority religions include Buddhism and Hinduism. The national language is Bahasa Indonesia (similar to the Malay used in Malaysia, Singapore, and Brunei). English is not widely used, but many companies and government officials who deal with foreign companies and foreigners are fluent in the language.
More than half of the population lives in rural areas, but the share of the urban population is increasing from 36.0% in 1995 to 45.0% in 2004. Major cities include Jakarta, with a population of 10 million, followed from Surabaya, Bandung, Semarang, Yogyakarta. , Surakarta, Medan and Padang.
Almost 25% of the population lives below the poverty level, while another 60% belongs to the lowest income group. The remaining 10% belong to the middle income group and 5% to the high income group. Although Indonesia has a relatively small proportion of upper-middle income consumers, this equates to almost 33 million consumers. This is more than Singapore’s 4.3 million people with a GDP per capita on a par with many advanced economies in the European Union.
INFRASTRUCTURE. Indonesia’s national telecommunication system is generally fair, while its international services can be classified as good. Broadband Internet services are mainly concentrated in major cities. Road systems are most developed on the populated island of Java in Indonesia, fairly developed on Sumatra and Sulawesi but underdeveloped on the island of Kalimantan. In addition to seaports that serve international shipping lines, Indonesia also has smaller seaports that serve coastal shipping. All major cities and towns are connected by airline services.
INTERNATIONAL TRADE. Indonesia’s main trading partners are Japan, the United States, Singapore, South Korea and China. Much of Singapore’s imports are re-exports from Singapore from other countries, and exports to Singapore are re-exports to other countries. Indonesia’s main exports include oil and gas, household appliances, plywood, textiles, and rubber products. Major imports include machinery and equipment, transportation equipment, chemicals, fuels, and food.
CONSUMER USE OF TECHNOLOGY. Mobile phone penetration is only 13% of the population, below Singapore (93%), Malaysia (67%) and Thailand (45%). Also, there are only 10 million landline phones serving the entire country. Computer penetration is less than 2% of households and the country has only 1.2 million Internet subscribers with an estimated 12 million Internet users, that is, a penetration of only 0.5% of the population. Most middle- and upper-income households would have televisions, but penetration in lower-income households is lower. Thus, the penetration of television in households in Java is almost 60% and in Sumatra 52%. A similar scenario exists for refrigerators.
RETAIL MARKET. Retail sales of food and non-food items totaled an estimated US$32 billion in 2004. Many Indonesians continue to shop in traditional markets or “mom and pop” stores, but shop in modern shopping malls. shopping malls, hypermarkets, supermarkets, convenience stores and supermarkets is becoming more and more popular. There are about 5,000 modern stores of this type in Indonesia, representing retail sales of US$4.5 billion in 2004. Most of these stores are concentrated on the island of Java, followed by Sumatra. Since 1998, the government has opened the retail industry to foreign investment and participation.
FOOD CULTURE. Indonesia’s food culture is diverse due to the various ethnic and sub-ethnic communities that make up the country’s population. Typical meals eaten are rice-based dishes and occasionally noodles. However, there are many Western franchise fast food outlets located mainly in major cities such as Jakarta, Surabaya, Bandung, Semarang, and Yogyakarta. Mid to high end bakery outlets serving both western and local bakeries are also found in major cities.