The Dutch began to colonize Indonesia in the early 17th century; Japan occupied the islands from 1942 to 1945. Indonesia declared its independence shortly before Japan's surrender, but it required four years of sometimes brutal fighting, intermittent negotiations, and UN mediation before the Netherlands agreed to transfer sovereignty in 1949. A period of sometimes unruly parliamentary democracy ended in 1957 when President SOEKARNO declared martial law and instituted "Guided Democracy." After an abortive coup in 1965 by alleged communist sympathizers, SOEKARNO was gradually eased from power. From 1967 until 1998, President SUHARTO ruled Indonesia with his "New Order" government. After street protests toppled SUHARTO in 1998, free and fair legislative elections took place in 1999. Indonesia is now the world's third most populous democracy, the world's largest archipelagic state, and the world's largest Muslim-majority nation. Current issues include: alleviating poverty, improving education, preventing terrorism, consolidating democracy after four decades of authoritarianism, implementing economic and financial reforms, stemming corruption, reforming the criminal justice system, addressing climate change, and controlling infectious diseases, particularly those of global and regional importance. In 2005, Indonesia reached a historic peace agreement with armed separatists in Aceh, which led to democratic elections in Aceh in December 2006. Indonesia continues to face low intensity armed resistance in Papua by the separatist Free Papua Movement.
Location
Southeastern Asia, archipelago between the Indian Ocean and the Pacific Ocean
Natural Resources
petroleum, tin, natural gas, nickel, timber, bauxite, copper, fertile soils, coal, gold, silver
Population - distribution
major concentration on the island of Java, which is considered one of the most densely populated places on earth; of the outer islands (those surrounding Java and Bali), Sumatra contains some of the most significant clusters, particularly in the south near the Selat Sunda, and along the northeastern coast near Medan; the cities of Makasar (Sulawesi), Banjarmasin (Kalimantan) are also heavily populated
Bahasa Indonesia (official, modified form of Malay), English, Dutch, local dialects (of which the most widely spoken is Javanese)
JAKARTA (capital) 10.323 million; Surabaya 2.853 million; Bandung 2.544 million; Medan 2.204 million; Semarang 1.63 million; Makassar 1.489 million (2015)
- Conventional long form
- Republic of Indonesia
- Conventional short form
- Indonesia
- Local long form
- Republik Indonesia
- Local short form
- Indonesia
- Name
- Jakarta
- Geographic coordinates
- 6 10 S, 106 49 E
- Time difference
- UTC+7 (12 hours ahead of Washington, DC, during Standard Time)
has not submitted an ICJ jurisdiction declaration; non-party state to the ICCt
Indonesia, the largest economy in Southeast Asia, has seen a slowdown in growth since 2012, mostly due to the end of the commodities export boom. During the global financial crisis, Indonesia outperformed its regional neighbors and joined China and India as the only G20 members posting growth. Indonesia’s annual budget deficit is capped at 3% of GDP, and the Government of Indonesia lowered its debt-to-GDP ratio from a peak of 100% shortly after the Asian financial crisis in 1999 to less than 27 percent today. While Fitch and Moody's Investors upgraded Indonesia's credit rating to investment grade in December 2011, Standard & Poor’s has yet to raise Indonesia’s rating to this status amid several constraints to foreign direct investment in the country, such as a high level of protectionism.
- Inflation
- 3.526%
- External debt stocks
- US$ 308,539,944,000
- Total tax rate (% of commercial profits)
- 30.6%
- Real Interest Rate
- 9.212%
- Manufacturing, value added (% of GDP)
- 20.51%
- Current Account Balance
- US$ -16,346,916,094
- Labor Force, Total
- 127,198,979
- Employment in Agriculture
- 32.88%
- Employment in Industry
- 22.24%
- Employment in Services
- 44.89%
- Unemployment Rate
- 5.60%
- Imports of goods and services
- US$ 170,658,407,563
- Exports of goods and services
- US$ 177,883,502,082
- Total Merchandise Trade
- 30.05%
- FDI, net inflows
- US$ 3,761,972,281
- Commercial Service Exports
- US$ 23,472,663,457
rubber and similar products, palm oil, poultry, beef, forest products, shrimp, cocoa, coffee, medicinal herbs, essential oil, fish and its similar products, and spices
petroleum and natural gas, textiles, automotive, electrical appliances, apparel, footwear, mining, cement, medical instruments and appliances, handicrafts, chemical fertilizers, plywood, rubber, processed food, jewelry, and tourism
- Commodities
- mineral fuels, animal or vegetable fats (includes palm oil), electrical machinery, rubber, machinery and mechanical appliance parts
- Partners
- Japan 12%, US 10.8%, China 10%, Singapore 8.4%, India 7.8%, South Korea 5.1%, Malaysia 5.1% (2015)
- Commodities
- mineral fuels, boilers, machinery, and mechanical parts, electric machinery, iron and steel, foodstuffs
- Partners
- China 20.6%, Singapore 12.6%, Japan 9.3%, Malaysia 6%, South Korea 5.9%, Thailand 5.7%, US 5.3% (2015)
- Country Risk Rating
- A4
- A somewhat shaky political and economic outlook and a relatively volatile business environment can affect corporate payment behavior. Corporate default probability is still acceptable on average.
- Business Climate Rating
- B
- The business environment is mediocre. The availability and the reliability of corporate financial information vary widely. Debt collection can sometimes be difficult. The institutional framework has a few troublesome weaknesses. Intercompany transactions run appreciable risks in the unstable, largely inefficient environments rated B.
- Diversity of natural resources (agriculture, energy, mining)
- Highly competitive thanks to low labor costs
- Dynamic tourism industry
- Lively domestic market
- Strengthened banking sector
- Low investment rate
- Raw materials exports are increasingly dependent on Chinese demand
- Lack of infrastructures
- Persistent corruption and lack of transparency
- High levels of unemployment and poverty accentuating inter-ethnic tensions
For the first time in four years, activity accelerated in 2016, with growth momentum expected to remain strong in 2017. Household consumption is projected to continue to rise, sustained by the emergence of a middle class with low debt levels, while the central bank is expected to continue its cycle of monetary easing embarked on in 2016 (-275 basis points in 2016). Meanwhile, despite edging up slightly because of modest commodity price increases, inflation is expected to remain contained, which will help support private demand. Private investment is likely to continue to feel the benefits of structural reforms implemented by the Widodo administration. Public spending will remain robust, thanks to infrastructure development and house building for the lowest income households. Furthermore, the construction sector is expected to benefit from the cut in property taxes. Nevertheless, investor confidence is likely to remain constrained by uncertainties over possible changes in the Federal Reserve's monetary policy and further downward pressure on the rupiah. Meanwhile, the country, abundantly endowed with natural resources (oil, coal, natural gas, palm oil, rubber, ores) is expected to continue to be hit by sluggish commodity prices. Weakening demand from China, the second largest recipient of Indonesian exports, will continue to affect the country's external trade.
Despite rising slightly, the public debt will remain moderate in 2017. The removal of energy subsidies in 2015 and 2016, which weighed heavily on the State budget, has enabled expenditure to be reallocated to public infrastructure investment. Despite the cut in corporation tax and lower revenues from hydrocarbons, the public deficit is projected to remain contained through the broadening of the tax base and a partial fiscal amnesty for taxpayers repatriating their offshore funds.
The July 2014 presidential elections resulted in the victory of Joko Widodo (Indonesian Democratic Party of Struggle), former governor of Jakarta and the first president not from the army. Although the opposition (led by Prabawo Subianto, losing candidate in the presidential elections) controls 60% of the parliament, the president has managed to strengthen his power since summer 2015 thanks to new alliances and a major ministerial reshuffle. A poll carried out in September 2016 underlines the popularity of the President, who has approval ratings of 66.5%. So, after being hampered by the opposition and dissension within his own party in his attempts to introduce reforms, Widodo's administration has succeeded in initiating some ambitious programmes aimed particularly at reducing red tape. In the space of one year, Indonesia has jumped 15 places on the World Bank's Ease of doing business rankings. However, the country continues to suffer from substantial governance shortcomings.