3 Oct 2012

At a glance: Indonesia

Greater freedoms and economic advances have put the archipelago on the business map in recent years – but it still has to tackle poverty, poor infrastructure and the effects of natural disasters says Penelope Rance


The world’s largest archipelagic state, Indonesia gained independence from the Dutch in 1945 but suffered repressive rule for 50-plus years. Free elections in 1999 made Indonesia the world’s third most populous democracy. It has embraced new freedoms and is focused on consolidating the political system, fighting poverty, improving education and defeating terrorism and corruption. It also faces big natural challenges including flooding, droughts, tsunamis and volcanoes.


Money matters

Financial reforms in the early noughties resulted in low inflation, capital market development and a tighter tax and customs system. With natural resources including coal, gold, tin and copper, mining is a big industry, as are petroleum and natural gas extraction, rubber and textile production and agriculture. Despite recent robust results, overcomplex regulation, corruption and inadequate infrastructure are still holding the country back, while rising oil prices are putting pressure on the government’s fuel subsidy programme.



Indonesia’s diverse geography is reflected in its population – 40% Javanese, 15% Sundanese and the rest from its smaller islands. The country has the largest Muslim population in the world (86%). Bahasa Indonesia, a form of Malay, is the official language and English, Dutch, Javanese and indigenous dialects are also spoken. Just under half the population is urbanised, with 9.12m living in the capital, Jakarta. The World Bank reports that more than 32m live below the poverty line.



With a labour pool of 117.4m, Indonesia ranks fifth in the world in terms of available workforce. Dramatic economic growth at the end of the last century led to a big change for the largely agricultural working population. Now nearly half work in the services industry, 38.3% remain in agriculture (rice, cassava, cocoa, palm oil, coffee, beef and poultry) and 12.8% work in industry. Unemployment was a moderate 6.6% in 2011 but labour unrest due to low wages is an ongoing problem.



Despite stable finances, poor infrastructure has held back development in indonesia. In 2011, 15m households had no electricity and four out of the five international airports were functioning above capacity. But strong public finances mean the government can now invest in infrastructure – it aims to add 15,000MW of power generation and build 20,000km of roads by 2014. Invitations for foreign investment in power plants, steel factories, ports and mass transport systems should also bolster industry.



ICAEW has a Memorandum of Understanding (MoU) with the Indonesian Institute of Certified Public Accountants (IAPI) as part of its global strategy to work with national accounting bodies. The MoU, signed in July, sets out how ICAEW and IAPI will work together to share knowledge in areas such as IFRS and audit quality. They will also collaborate to advance the interests of their members and contribute to developing the profession across Southeast Asia.


Vital statistics 
Population: 248,216,193 (July 2011 est.)
Capital: Jakarta
Full name: Republic of Indonesia

Economic strength
GDP Per CaPita: $4,700 (2011 est.)
Exports: $208.9bn (2011 est.)
Imports: $172.1bn (2011 est.)
Echange rate: £1= 15,030.49Dr (Indonesian rupiah) (28 Aug 2012)
Indonesia was one of just three G20 countries, with India and China, to record economic growth in 2009, followed by 6.1% growth in 2010 and 6.4% in 2011. Fiscal conservatism has led to a sub-25% debt-to-GDP ratio and a fiscal deficit below 2%. Its credit rating was raised to investment grade in December 2011.

Penelope Rance