INDONESIAN ECONOMIC OUTLOOK

 

 

ECONOMIC INDICATORS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recent Economic Development of Indonesia

 

Indonesia took nine years to recover from its economic crises of 1998.  During the East Asian financial crises, Indonesia suffered the greatest devastation among all the affected East Asian economies.  Indonesia endured not only economic chaos but also political tumult.  To survive, Indonesia launched massive and sustained reforms, good governance and anti-corruption programs in both the public and private sectors.  At the same time, Indonesia took strong measures to achieve macroeconomic stability, overhaul the financial system—especially the banking sector—and strengthened our economic institutions.

In the economic field, Indonesia succeeded to reach stability and which eventually brought years of modest growth.  During the past three years, growth has been quite robust, reaching 5.1 percent in 2004, 5.6 percent in 2005 and 5.5 percent in 2006.  Our per capita income is now above pre crisis levels at $1.283 in 2005 and $1.377 in 2006.

 

Three basic economic objectives:

 

1. accelerate sustainable economic growth through accelerated growth in investment and exports;

2. support the real sector to create jobs; and

3. promote economic development in rural and agricultural area where majority of Indonesian still rely on agriculture.

 

 

Growth Projection

 

Indonesia projects its economic growth from 4.5 percent in 2003 to 7.2 percent in 2009 so that in the next five years, economic growth will average 6.6 percent every year.  The government introduced the “infrastructure roadmap,” which entails building 1,600 kilometers of toll-roads, power plants and ports, in the next four years. The whole infrastructure effort is expected to cost US$146 billion, out of which US$72 billion or around a third of GDP, will come from the private sector.

 

 

Investment

 

Indonesia also improves its investment climate by issuing new regulations favoring the public private partnership in further development of the national infrastructure.  Indonesia carries out a comprehensive economic and institutional reform program to create a favorable overall investment climate. The objectives of the reforms are to provide legal certainty, policy consistency and reduce the costs of doing business.  Indonesia has a new investment law which was drafted together with the business sector.  New tax and customs reform program have been introduced to remove distortions, improve tax and customs administration and to reduce corporate tax rates. 

New labor law has also been introduced to remove the rigidities of the labor market to the satisfaction of all concerned, including the labor sector and investors.  New licensing process and procedures has been also introduced to bring down the cost of doing business.   Most importantly, the government is making substantial gains in the fight against corruption.

 

 

Indonesia – South Africa Economic Relation

 

Indonesia’s strategic importance as the largest country in the Southeast Asia region and one rich in resources in obvious.  Indonesia has a domestic market of 230 million people with growing purchasing power is a good match for South Africa the biggest economy in the African continent.  South Africa has a steady economic growth of 5 percent, population of 47 million and per capita income of $ 4.870 also with substantial purchasing power. 

 

Indonesia – South Africa bilateral trade relation maintains a sustainable growth during the last seven years.  South Africa’s sustainable economic growth in the last eight years has also led to rapid growth of bilateral trade between the two countries.

 

In 2006 total trade between Indonesia and South Africa reach 4.492bn Rand ($641 million) an increase of 16.5 percent compared to the previous year.  Indonesia exports to South Africa reached 3.005bn Rand ($429 million) an increase of 32.5 percent.   South Africa exports to Indonesia has also enjoyed a significant increase of 87.1 percent from 2000-2006, that is from 794,5 million Rand to 1.486bn Rand.

 

 

Main South Africa exports to Indonesia:

 

1. chemical wood pulp

2. synthetic filament yarn

3. fruits

4. copper

5. ferrous scrap

6. ferrous alloys

7. cotton

8. phenol alcohol, and

9. military equipments.  

 

 

Main Indonesia exports to South Africa:

 

1. palm oil

2. natural rubber

3. motor vehicles

4. spare parts

5. paper

6. building materials

7. ceramics

8. textile and apparel

9. foot wear

10. electronics

11. wood products, and

12. furniture.

 

 

Government Cooperation in Economic and Trade

 

Indonesia and South Africa has established the Indonesia-South Africa Joint Trade Committee in Pretoria in May 2006.  The Joint Trade Committee (JTC) facilitates the effective implementation of the Trade Agreement between Indonesia and South Africa which was signed in Cape Town in November 1997.  The JTC is an important vehicle to deepen and broaden cooperation between the two countries.

 

 

Doing Business in Indonesia

 

1. frequent commercial flight connection from Johannesburg to Jakarta by Malaysian Airlines (via Kuala Lumpur), Singapore Airlines (via Singapore), Thai Airlines (via Bangkok), Emirates (via Dubai), Etihad (via Muscat) and Cathay Pacific (via Hong Kong), return-air-fare starts around 7.000 Rand excl. tax;

2. International hotel standards with average price range from $30-$90;

3. halal food in very restaurant;

4. English widely spoken and understood in Indonesian cities by most business people;

5. taxis are metered, airconditioned, inexpensive and widely available;

6. plenty of international food and restaurant-chains available in big cities such as Jakarta, Bandung, Medan, Surabaya, Semarang, Yogyakarta, Bali and Palembang;

7. handshaking is common practice;

8. normal business attire is a business suit or white shirt, tie and slacks for men, business suit or dress for women, batik shirt is also commonly worn and considered proper business attire;

9. business card are commonly used;

10. Climate,  between 27-33 Celsius and humid, October to March enters the ‘rainy season’ and April to September enters the ‘dry season;’

11. international and well known credit cards widely accepted.