Country Report on Indonesia

Introduction

Indonesia is officially known as the Republic of Indonesia is a nation in Southeast Asia between the Pacific and Indian ocean. Indonesia is made up of hundreds of native linguistic and ethnic groups. The largest and politically dominant group is Javanese. The country has a shared identity which is defined by ethnic diversity, the national language, religious pluralism within the Muslim-majority populace, as well as the history of rebellion and colonialism. Indonesia's motto is Unity in Diversity, which express the diversity that shapes the country. Indonesia is the sixteenth largest country in the world by GDP, additionally, it is the 7th largest in terms of GDP at PPP (BBC News, 2019). Indonesia invests much of their resources towards economic development, as a result, it often engages in different multilateral organizations, including World Trade Organization, United Nations, International Monetary Fund and the G20 (World Bank, 2019). Indonesia is also the founding member of the Association of Southeast Asia, Non-Aligned Movement, East Asia Summit, and the Organization of the Islamic Cooperation.

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Indonesia's Demographics

Indonesia is the fourth largest country in the world in terms of population size, with over two hundred and sixty million, people, there are different ethnic groups that exhibit different cultures. However, over fifty percent of the total population belong to two specific ethnic groups. 41% of Indonesia's population is from the Javanese ethnic group while fifteen percent is from Sudanese ethnic group. Both the above ethnic groups originate from Java Island which is regarded as the most populous island in Indonesia. With the inclusion of Sumatra Island, the above figure rises to over eighty percent of the total of Indonesia's population. The above scenario, therefore, means that Indonesia's population is concentrated in the western part of the country. The province with the highest number of people in West Java, consisting of over forty-three million people. Besides, the least populated province is West Papua located in the far eastern region of Indonesia with a total population of seven hundred and sixty-one thousand people. The diversity in the population makes it a better place to conduct businesses and also launch the organization platforms that enhance economic activities. With the growing population of the young population and the middle class, with the largest levels of disposable income, the country has the largest consumer base in the entire Asian region. The country is thus suitable for doing business due to the availability of labor and the existence of many customers for the produced goods. The largest population of the country also means that there is a large number of customers that businesses may befit from. Organizations planning to put up businesses in the country should consider locating their ventures in the western part of the country due to a high population which would mean availability of labor and customers. With the highest population in Java Island, there are also large volumes of waste products that require recycling, composting business will theretofore be ideal for this part of the Indonesian country.

Indonesia's Economy

The country's economic freedom score is 65.8, the overall score has increased from 64.2 due to the strident increase in the freedom for doing businesses, judicial effectiveness, investment freedoms, labor and monetary freedoms (Global Business Policy Council, 2019). The above scenario indicates that there is a lot of freedom of doing business in Indonesia, with the strong judicial systems and strident economic policies, organizations benefit from the businesses that they undertake. The effort of the country's government to improve the business environment is one of the factors that attracts many investors from different parts of the globe. The government understands that upgrading infrastructure and power is one way of attracting foreign investors. As a result, there is always an attempt to improve the economy through construction of roads, railway lines and airports to improve the movement of people and goods from one place to the other. Indonesia's government is also committed to fighting corruption more aggressively, this means that investors are more protected. There is also the environmental sustainability that is aimed at sustaining economic development as well as diversification. Some of the economic constraints include inflexible labor, protectionist rules governing foreign investments and trade specifically in extractive sectors and subsidies to the enterprises owned by the state. To ensure a stable economy, the government is committed to improving the regulatory and legal framework in order to strengthen the rule of law.

Indonesia is a market economy whereby the large private business groups and the state-owned businesses play significant roles in terms of profit-making. There are numerous diversified and privately-held businesses in Indonesia. These businesses dominate the economy and they contribute benefits both to the population and the government. In other words, they provide employment opportunities that enhance the growth of the domestic economy. In the country, wealth is concentrated at the top of the society, therefore, in many cases, there exist close links between political and corporate aspects of the society. Indonesia's small, micro and medium-sized enterprises, in combination, account for 99% of the total amount of enterprises that are operational in the country (World Bank, 2019). The enterprises account for sixty percent of Indonesia's GDP, additionally, they create employment to over one million Indonesians. The above scenario means that small, micro, and medium-sized companies or businesses are the backbone of the Indonesian economy.

In Indonesia, the combined values of imports and exports are equivalent to 39.5% of the Gross Domestic Product (GDP). On the other hand, the average applied tariff rate is 2.6%. In the year 2018, according to the World Trade Organization, Indonesia had 110 nontariff measures in force (World Bank, 2019). The government, focus on the reforms, has moved to eradicate some of the barriers to foreign investments, as a result, the financial efficiency has risen, the government or the state still own many financial institutions and banks. Setting up the composting business in Indonesia is, therefore, a viable decision according to the market analysis. Being a private and a foreign company the organization is guaranteed of financial and legal protection (World Bank, 2019). Being a market economy whereby the large private business groups and the state-owned businesses play significant roles in the economic growth, setting up composting businesses is practical so long as there are corporation and adherence to the economic laws and regulations.

Political Climate in Indonesia

The current security, political as well as socioeconomic paradigms capture uncertainties and risks that negatively impact the investment climate of Indonesia. The country has a history of elitism and authoritarianism politics. The country often experiences extreme political atmosphere during political elections, this is due to the diversity and existence of different ethnic groups. These political systems often cause interference with the investors (World Economic Forum, 2019). However, the country usually remains peaceful during the times when there are no political campaigns. Indonesia has a slogan of Unity in Diversity because it consists of different religions and ethnic groups. Indonesia has a long history of separatist movements. Recently, there was a Papua political movement that is part of the separatist movement (Central Intelligence Agency, 2019). When it comes to the economic activities, diversity is beneficial to the Indonesian economy while on the political front, the diversity has led to the fractured identities that have led to conflicts and rise of different political movements.

After the decentralization reforms were enacted due to ethnic and geographical issues, governance was relegated to the individual provinces. Since the time of Suharto rule, the involvement of the military in the political matters has been the major challenge to the political system and to the population at large. In other words, the military alignment with the political actors and policies has led to the dismay for the population (World Economic Forum, 2019). In Indonesia, the military has for a long time been engaged in fighting separatist movements in Makaum and Papua. Additionally, there is also the politics of independence where some regions want splits perhaps due to a stiff political system dominated by the major communities. Recently, West Papua advocated for their independence by gathering over 1.8 million signatures on the petition that aimed at the vote for independence (World Economic Forum, 2019). The continuous clashes between the government and the separatist groups are one of the greatest risks for the country. Additionally, there are ethnic conflicts in major cities; all these are brought by the hostile political environment specifically during elections. Therefore, before setting up business in Indonesia, there is the need to monitor the political system as well as the ethnic diversity to be able to run the business successfully.

References

BBC News (2019). World News.Business News.https://www.bbc.com/news/business BIBLIOGRAPHY Central Intelligence Agency (2019). The Work of A Nation. Retrieved from The Center of Intelligence.

https://www.cia.gov/library/publications/the-world-factbook/

Global Business Policy Council (2019). The 2018 A.T. Kearney Foreign Direct Investment Confidence Index. Retrieved from Investing in a Localized World.

https://www.atkearney.com/foreign-direct-investment-confidence-indexWorld Bank (2019). Doing Business. Doing Business 2019, training for reform.

http://www.doingbusiness.org/World Economic Forum (2019). Regional Risks for Doing Business.

https://www.weforum.org/reports/regional-risks-for-doing-business