A.

INTRO
A.1.NATURE
Indonesia is an archipelago country a republic and has about 17,000 islands with a
land area of 1,922,570 km2 and 3,257,!3 km2 "ast waters# the so"ereignty of
Indonesia in the area of $outheast %sia, bordered by &alaysia, $ingapore, the
'hilippines to the north, the south border with %ustralia, ad(acent to the eastern
border with 'apua )ew *uinea, +imor ,este, the west bordering the Indian -cean#
Location of Indonesia:
Location of astronomical
%stronomical is the location of a region "iewed from the position of latitude and
longitude# ,ocation of the Indonesian territory of astronomical terms is between . /
)011 / latitude and between 95 / / 1+011 1+# 1ased on the location, Indonesia has
a tropical climate# 2ith the position of Indonesia located between latitude and
longitude, then Indonesian territory crossed by the e3uator# +he e3uator is an
imaginary line around the earth, lies crosswise at 4ero degrees that di"ides the
earth into two hemispheres of the same, namely the )orthern 5emisphere and the
$outhern 5emisphere# $ome places or areas of Indonesia that is passed by the
e3uator, among others 1on(ol 62est $umatra7, 'ontianak 62est 8alimantan7,
+ambu 69entral $ulawesi7, and 5almahera 6&oluccas7#
Geographical Location
+he geographical position is defined as the location of a region in relation to other
parts of the world# *eographically# Indonesia is located between %sia and %ustralia
continent and between the Indian -cean and the 'acific -cean# +he geographical
position of Indonesia as put Indonesia in the cross, so that Indonesia was a bustling
trade transport# +he impact of cross position led to Indonesia is rich in cultural and
ethnic di"ersity#
+he combination of the geographical location of astronomical Indonesia raises the
following conditions:
+he sun shone continuously throughout the year#
5igh e"aporation, so the humidity is high#
It has a relati"ely high rainfall#
It has a tropical rain forest is 3uite dense#
5as two seasons, rainy and dry season caused by mo"ement of the
monsoons#
1
Indonesia lies between latitudes 11;$ and .;), and longitudes 95;< and
11;<# It consists of 17,50! islands, about .,000 of which are inhabited#
+hese are scattered o"er both sides of the e3uator# +he largest are =a"a,
$umatra, 1orneo 6shared with 1runei and &alaysia7, )ew *uinea 6shared
with 'apua )ew *uinea7, and $ulawesi# Indonesia shares land borders with
&alaysia on 1orneo, 'apua )ew *uinea on the island of )ew *uinea, and
<ast +imor on the island of +imor# Indonesia shares maritime borders across
narrow straits with $ingapore, &alaysia, the 'hilippines, and 'alau to the
north, and with %ustralia to the south# +he capital, =akarta, is on =a"a and is
the nation>s largest city, followed by $urabaya, 1andung, &edan, and
$emarang#
%t 1,919,0 s3uare kilometers 671,050 s3 mi7, Indonesia is the world>s
15th0largest country in terms of land area and world>s 7th0largest country in
terms of combined sea and land area# Its a"erage population density is
13 people per s3uare kilometer 637 per s3 mi7, 79th in the world, although
=a"a, the world>s most populous island, has a population density of
90 people per s3uare kilometer 62,35 per s3 mi7# %t ,!! metres
61.,02 ft7, 'uncak =aya in 'apua is Indonesia>s highest peak, and ,ake
+oba in $umatra its largest lake, with an area of 1,15 s3uare kilometers
62 s3 mi7# +he country>s largest ri"ers are in 8alimantan, and include the
&ahakam and 1arito? such ri"ers are communication and transport links
between the island>s ri"er settlements#
&ount $emeru and &ount 1romo in <ast =a"a# Indonesia>s seismic and
"olcanic acti"ity is among the world>s highest#
Indonesia>s location on the edges of the 'acific, <urasian, and %ustralian
tectonic plates makes it the site of numerous "olcanoes and fre3uent
earth3uakes# Indonesia has at least 150 acti"e "olcanoes,
@
including
8rakatoa and +ambora, both famous for their de"astating eruptions in the
19th century# +he eruption of the +oba super"olcano, approAimately 70,000
years ago, was one of the largest eruptions e"er, and a global catastrophe#
Becent disasters due to seismic acti"ity include the 200 tsunami that killed
an estimated 1.7,73. in northern $umatra, and the Cogyakarta earth3uake
in 200.# 5owe"er, "olcanic ash is a ma(or contributor to the high agricultural
fertility that has historically sustained the high population densities of =a"a
and 1ali#
,ying along the e3uator, Indonesia has a tropical climate, with two distinct
monsoonal wet and dry seasons# %"erage annual rainfall in the lowlands
2
"aries from 1,7!0D3,175 millimeters 670D125 in7, and up to .,100 millimeters
620 in7 in mountainous regions# &ountainous areas D particularly in the west
coast of $umatra, 2est =a"a, 8alimantan, $ulawesi, and 'apua D recei"e
the highest rainfall# 5umidity is generally high, a"eraging about !0E#
+emperatures "ary little throughout the year? the a"erage daily temperature
range of =akarta is 2.D30 ;9 679D!. ;F7#
A.2.U!AN
"#lt#re
2e got a writing from <Aecuti"e -rientation $er"ices. This company provides
cross-cultural training that teaches people to understand the differences that exist
between Western and Indonesian business cultures.
$imensions of $ifference: %h& '#siness m#st 'e approached differentl& in
Indonesia
Indonesia has often been described as a shining chain of emerald islands scattered
across the e3uator from %sia to %ustralia# Few other countries in the world are
comprised of more distinct cultures and languages than Indonesia# Its di"ersity of
peoples and belief systems makes it certain that the foreign professional working in
Indonesia encounters situations that are confusing and uneApected# %dd to this miA
a struggling economy, a nascent democracy with a co0opted bureaucracy, and the
worldGs largest &uslim population, and the result is a fascinating conglomerate
culture in one of the largest and most important countries in the world# 1usiness
must be approached differently in Indonesia than in most 2estern countries#
9ultural background, education, and upbringing make a difference on how
managers approach work#
9ulture affects people and, therefore, business in fi"e primary areas# +o assess
these differences, we ask the following 3uestions:
1. (hat is the c#lt#res 'elief in h#man nat#re) Hoes the culture belie"e that
people are basically good, basically e"il, or a combination of bothI
2. (hat is the relationship 'et%een h#mans and nat#re) %re humans
sub(ugated to natureI Hoes nature control your lifeI Ho people li"e in harmony with
nature, or does the culture belie"e that humans should ha"e mastery o"er natureI
*. (hat is the c#lt#re+s sense of time) Is the culture past oriented where people
look to the past as a guide for todayI Hoes the culture li"e for the presentI Is it
perhaps situationalI -r does the culture look towards the future with a belief that
planning, deadlines, and goal setting make it possible for people to succeedI
3
,. (hat is the proper aspect of h#man acti-it&) Is it enough (ust to Be, meaning
that it is not necessary to accomplish great things in your life to feel that it has been
worthwhile# Hoes the culture belie"e in 1eing in 1ecoming, where people are on the
earth for their own inner de"elopment# Hoes the culture belie"e in +aking %ctionI
+his means that it is action0oriented with the belief that if people work hard, they will
be rewarded#
.. (hat is the nat#re of social relationships in the c#lt#re) Is the culture
authoritarian with clearly defined relationships like natural0born leaders and natural0
born followersI Hoes the culture belie"e in the collecti"e meaning that people are
defined as part of a groupI Hoes the culture belie"e in indi"idualism and e3ual
rightsI +his would mean that all people are e3ual and ha"e control o"er their own
destiny#
+he differences between 2estern cultural styles and Indonesian cultural norms
become "ery apparent in the business en"ironment# &ost 2estern cultures belie"e
that humanity is basically good# &ost 2estern cultures belie"e that the human0
nature relationship is one of &astery o"er )ature meaning that if nature gets in the
way you change it# &ost 2estern cultures ha"e a "ery strong future0time sense with
the belief that planning and scheduling today make it possible to succeed tomorrow#
Finally, most 2estern cultures ha"e a strong belief in indi"idualism and e3ual rights
meaning that if you work hard, you will be rewarded#
Indonesian standard business culture is 3uite different# First of all, it should be
understood that there is no single Indonesian culture# Indonesia with its 17,000
islands and hundreds of different ethnic groups is a "ast collection of different
peoples and cultures# +hus, you must always know who you are dealing with#
5owe"er, =a"anese culture has long dominated the archipelago and is the standard
for Indonesian business culture today#
Indonesians generally belie"e that people are a miAture of good and e"il# 'eople
are usually good especially when constrained by responsibilities to the group#
5owe"er, there is the potential for e"il in all people# )ormally constrained
indi"iduals can perform irrational acts belie"ed to be outside that personGs control#
+here is a strong belief in sub(ugation to nature, meaning that nature controls your
life and there is little you can do as an indi"idual to mo"e yourself ahead# -ne
should accept oneGs position in life#
&ost Indonesians tend to look toward the past as an eAample for today# +here is a
strong belief in tradition but also in rules and regulations that need to be followed
regardless of practicality#
In Indonesia the proper aspect of humanity is to be eApressi"e and emotional
although that eApressi"eness and emotionalism li"es (ust under the surface# +his
means that it can be difficult to determine the emotional state of most Indonesian
coworkers, but that strong emotions can surface in ways that may be confusing to a
2estern super"isor#

$ocial relationships tend to be twofold in Indonesian culture# First there is a strong

authoritarian framework with natural born leaders and natural born followers# +hese
relationships are clearly defined# 5owe"er, within each particular group there is a
strong belief that the community makes decisions in order to a"oid indi"idual
responsibility#
% change in management becomes a particularly difficult situation in Indonesia#
-ften the corporate home office will not accept common practices and procedures
found in Indonesia as a best practice and re3uires Indonesian managers and staff
to adapt to the international corporate culture# % deep understanding of the cultural
traits found in Indonesian business is re3uired before an action plan can be
completed to implement change# +he home corporate office usually has little
understanding of the profound cultural compleAity of implementing change in
Indonesian offices, factories, and businesses#
For these reasons and many others, it becomes critical that foreign professionals
working in Indonesia look past the elaborate subterfuge found in Indonesian
business and incorporate the correct cultural traits to manage Indonesian
personnel# $imultaneously, Indonesian managers must be instructed in the
eApectations of their foreign superiors and coworkers# 2ithout an understanding of
the cultural eApectations of the other group, frustration and confusion are the norm#
Jnderstanding the best techni3ues for intercultural business management is the
o"erarching goal of <Aecuti"e -rientation $er"ices 6<-$7 and its cross0cultural
training programs# <-$ will help you learn to understand that cultural patterns
influence our own and othersG words and actions# 1y understanding cultural
differences and similarities, you can de"elop ways to communicate and collaborate
more effecti"ely across cultures#
<-$ pro"ides you "aluable tools for dialogue with your colleagues and friends, to
begin to know them both as uni3ue indi"iduals and also as members of their
cultures# Cou will soon learn to look at culture as a way to capitali4e on differences
to promote satisfaction and effecti"eness in your business, your organi4ation, your
team, and your community# <-$ brings a special and uni3ue understanding of
Indonesian business customs and practices, and how they effect multi0cultural work
relationships#
/OLITI"
Indonesia>s political system is a constitutional democracy# +he current system is the
result of "arious constitutional amendments after the fall of the authoritarian
'resident $oeharto in 199!# +he president is now elected in a general election
e"ery fi"e years 6until 200 the president was elected by the &'B7# +he legislature
is made up of two bodies: the 5ouse of Bepresentati"es 6H'B7 and the Begional
Bepresentati"es> %ssembly 6H'H7, mandated to deal with regional affairs# +he
supreme constitutional body is the 'eople>s 9onsultati"e %ssembly 6&'B7,
consisting of both the H'B and H'H sitting together# +he &'B is the final arbiter 0
after 'arliament and the 9onstitutional 9ourt 0 of constitutional amendments and
impeachment proceedings# It sat fre3uently until 200, but is now eApected to sit
5
only once during a presidential term unless the nation is confronted by a ma(or
political crisis#
+he main ideological strands in Indonesian politics are secularKnationalist and
religious# +he former has always been in the ascendancy and is for the most part
supported by the main &uslim organisations, who guardedly accept the principle of
a state that does not pri"ilege one particular religion# Indonesia>s own "ersion of a
secular0oriented ideology is L'ancasilaL 6designed by the nation>s first president,
$oekarno7 which among other things re3uires belief in a single god but pointedly
does not tie that belief to a specific religion# $ince independence, 'ancasila has
been a sore point for the Islamist minority, who seek at the "ery least some form of
constitutional re3uirement for the state to enforce Islamic principles on its &uslim
population#
+he post0independence political landscape has been dominated by 'residents
$oekarno 61990..7 and $oeharto 619.709!7# +he $oekarno years were marked by
political instability, economic decline and the dismantling of Indonesia>s first
parliamentary democracy# $oekarno>s leadership ended in an armed coup in
$eptember 19.5 in which &a(or *eneral $oeharto rose to power and formally
assumed the 'residency in &arch 19.7#
'resident $oeharto>s rule from 19.709! was marked by economic de"elopment,
political stability and close relations with the 2est# It was, howe"er, marred by
human rights abuses, centralised authoritarian rule, weakening of the non0eAecuti"e
branches of go"ernment and increased military in"ol"ement in politics and
business# +he final years of the $oeharto era were marked by growing public
disenchantment and rising street protests, fuelled by the se"ere impact of the 1997
%sian financial crisis and the collapse of the rupiah# 5a"ing lost public, military and
9abinet support, $oeharto resigned on 21 &ay 199!#
+he siA years from $oeharto>s downfall to 'resident Cudhoyono>s election saw
three transitional presidents# $oeharto was succeeded by his Mice0'resident, 1=
5abibie, who responded to public eApectations by introducing political reforms, the
most significant being the genuinely open and pluralistic national parliamentary
elections held in =une 1999# +he &'B 6'eople>s 9onsultati"e %ssembly7 elected
moderate &uslim leader %bdurrahman 2ahid as 'resident in late 1999# 5is
go"ernment made limited progress towards addressing the longer0term problems
faced by Indonesia# In =uly 2001 the &'B "oted o"erwhelmingly to re"oke
'resident 2ahid>s mandate and replaced him with his Mice0'resident, &egawati
$oekarnoputri#
Huring 'resident &egawati>s term, macro0economic indicators impro"ed 6although
foreign direct in"estment 6FHI7 remained sluggish and unemployment "ery high7
and there was enhanced political stability# 5er go"ernment put in place the
mechanism for the first direct 'residential election# In the play0off round of that
election on 20 $eptember 200, $usilo 1ambang Cudhoyono won the popular "ote
by .1E to &egawati>s 39E#
9urrent 'resident Cudhoyono faces similar challenges to those that confronted his
predecessors in the post0$oeharto era# +he need to address corruption, inade3uate
.
FHI flows, unemploymentKunderemployment and legal reform are priorities for his
*o"ernment# % defining achie"ement of his presidency so far has been the peace
agreement and subse3uent peaceful elections in %ceh, ending years of armed
conflict# Cudhoyono has also indicated that he places importance on consolidating
the $pecial %utonomy ,aw for 'apua and 2est 'apua# +he military 6+)I7 remains
an influential player in Indonesia 0 principally as a conse3uence of its territorial
command structure 0 although it no longer has a direct role in political affairs, ha"ing
lost its reser"ed seats in parliament after -ctober 200#
E"ONO!0
+he economy of Indonesia was buffeted as inflation accelerated, the current
account deficit widened, and the rupiah depreciated# *rowth in gross domestic
product slowed to 5#9E in =anuary0=une# *rowth in in"estment moderated, but
pri"ate consumption remained buoyant# <"en as economic growth slowed, the
economy generated 1#2 million new (obs, outnumbering new entrants into the labor
force#
1elected Economic Indicators 234 5 Indonesia
261* 261,
A$O
261*
Updat
e
A$O
261*
Updat
e
*H' *rowth .# ..7 .#. 8.6
Inflation 5#2 7.2 #7 ...
9urrent %ccount 1alance 6share of *H'7 02#3 9*., 01#! 92.7
Source: %sian He"elopment -utlook 6%H-7 2013 Jpdate? %H1 estimates#
Inflation surged to !#!E year on year in %ugust after the go"ernment sharply raised
administered fuel prices in =une to reduce the cost of subsidies# +he prices of some
food items also rose, owing to restrictions on imports# 2eak eAport markets and
declining prices for eAport commodities cut the "alue of eAports by 5#2E in the first
half# Imports fell only slightly# 9onse3uently, the current account deficit widened to
N15#7 billion, or 3#5E of *H'#
Homestic financial markets were rattled by the global pullback in portfolio
in"estment from emerging markets, coupled with the spike in domestic inflation and
deterioration in eAternal accounts# $tock and bond markets weakened, and the
rupiah depreciated by 11E against the J$ dollar through late $eptember#
1ank Indonesia raised its policy interest rate three times from =une to $eptember,
and the go"ernment un"eiled a package of measures in %ugust aimed at curbing
inflation and containing the current account deficit# Fiscal and monetary policies
being implemented to support stability will dampen economic growth in the short
term#
7
Forecasts of *H' growth are re"ised down from %sian He"elopment -utlook
6%H-7 2013 for 2013 and 201, with slightly higher growth eApected neAt year on
eApectations that inflation will ease and global trade strengthen# Inflation will be
higher than pre"iously eApected through the forecast period, owing mainly to the
hike in fuel prices# +he forecast for the current account deficit in 2013 is widened to
3#E, with the gap eApected to narrow again in 201 on stronger world trade, the
rupiahGs depreciation, and measures being taken to dampen imports and support
eAports#
$ource: %H1# 2013# %sian He"elopment -utlook 2013 Jpdate# &anila#
:.RE;;
:.2.1 :U1INE11 /RO1/E"T IN IN$ONE1IA
!ar<et O-er-ie%
Indonesia is $outheast %siaGs largest economy and has deli"ered
consistently high annual growth eAceeding .E in both 2007 and 200!#
*rowth of between 2E and #5E is eApected in 2009#
+he consumer market continues to grow in the worldGs fourth0largest country#
+here are more than 237 million citi4ens, 50E of whom are under the age of
30#
*H' per person eAceeds its %$<%) neighbors such the 'hilippines and
Indonesia has a *H' per person three times that of Mietnam# Indonesia is a
thri"ing democracy with significant regional autonomy# It is located on the
worldGs ma(or trade routes and has eAtensi"e natural resources#
It is a top0ten market for J#$# agricultural products and within the top 30
o"erall markets for J#$# eAports# Indonesia has ratified the 9ape +own
+reaty, which gi"es J#$# aircraft eAporters access to financing through
international protection and registration of financial interests#
!ar<et "hallenges
+he business en"ironment in Indonesia is challenging# J#$ firms often find it
difficult and time consuming to enter the market#
%lthough impro"ing, rule0of0law issues persist# Hispute settlement
mechanisms are not highly de"eloped# ,ocal and foreign businesses cite
corruption and ineffecti"e courts as serious problems# 1usiness and
regulatory disputes, which would be generally considered administrati"e or
!
ci"il matters in the Jnited $tates, may be treated as criminal cases in
Indonesia#
9ompetition from companies from $ingapore, 9hina, =apan, &alaysia and
other regional players is intense#
Heregulation has been successful in reducing some barriers by creating
more transparent trade and in"estment regimes, but the bureaucracy can be
cumbersome#
+he Bupiah has depreciated by approAimately 20E against the J#$# dollar
since =anuary 200!, making J#$# eAports relati"ely more eApensi"e#
+he public trade statistics may significantly understate market opportunities
and trends due to the large numbers of shipments that are recorded as J#$#
eAports to $ingapore but which ultimately enter Indonesia "ia $ingapore#
!ar<et Opport#nities
Important opportunities eAist in mining and agribusiness e3uipment and
ser"ices#
+he aircraft market fa"ors J#$# products# %ircraft, replacement parts and
ser"ice are "aluable and significant markets#
+elecommunications technology and satellites remain eAcellent areas for
%merican products and ser"ices#
+he eApansion of banking to pre"iously underser"ed customers offers
software and systems opportunities#
<ducation and professional training, research, medical e3uipment and high0
3uality %merican agricultural commodities all retain their market edge e"en
with premium prices#
<merging opportunities include palm oil biofuel processing and refining#
J#$# franchises continue to attract Indonesian demand#
*rowing markets include: reno"ation and construction of regional and
municipal infrastructure and water systems, military upgrading, safety and
security systems and protection of sea0borne traffic#
!ar<et Entr& 1trateg&
%lthough it may be possible in some cases to sell directly to the *o"ernment
or state0owned companies, local ser"ices of agents, local offices or
distributors are often critical to successful pro(ect de"elopment and to assure
timely deli"ery, installation and follow up ser"ice needs# &ost go"ernment
procurement decisions fa"or pro"en pro"iders or assurance of ser"ice based
on long0established relationships#
$mall0 and medium0si4ed J#$# firms entering the Indonesian market increase
their likelihood of success with strong local agents or distributors# +he J#$#
9ommercial $er"ice =akarta helps J#$# companies identify and 3ualify
potential Indonesian representati"es#
9
J#$# companies must "isit the Indonesian market in order to properly choose
an appropriate agent or distributor# %ppointment of a representati"e re3uires
care, since it is difficult to get out of a bad relationship# Oualified
representati"es will not take J#$# principals seriously unless they make a
commitment to "isiting the market on a regular basis# 'atience and presence
are key success factors#
8ey factors affecting purchasing decisions in Indonesia are pricing,
financing, technical skills, and after0sales ser"ice# Firms should be prepared
to in"est capital and manpower into making their local representati"e a first0
class ser"ice pro"ider#
Indonesian non0financial firms obtain nearly 50E of their financing from
abroad "ia loans, bonds, and other credit thus Indonesian eAports often
depend on trade financing#
:.2.2 =IN$ O; :U1INE11 $E1ER>E
O/ERATE$ IN IN$ONE1IA
1tr#ct#re of the econom&
1tr#ct#re of the Indonesian econom&? 2668 data
1ector 1#'sector O#tp#t
2668
2Rp
trillion4
Increase since
266*
234
Agric#lt#re? etc.
Food crops 213 35
<state crops .3 3
,i"estock, etc# 51 27
Forestry 30 .3
Fisheries 73 .0
!ining
-il and gas 1!! 97
)on oil and gas 131 15
Ouarrying 3. !7
!an#fact#ring
10
Oil and gas
manufacturing
'etroleum refining 120 139
)atural gas 5 9
Ouarrying 213 35
Non oil and gas
Food, tobacco, be"erages 213 3!
+eAtiles, footwear, etc# 91 3
2ood, wood products !
'aper, printing 0 3
Fertilisers, chemicals, rubber 9. .!
9ement, non0metallic 3uarry 29 50
Iron, steel, basic metals 20 52
+ransport e3uipment,
machinery
222 !7
-ther manufacturing 7 .7
Electricit&? gas? %ater
<lectricity 21 51
*as 5 119
2ater supply 3
"onstr#ction
9onstruction, building 29 9!
Trade? hotels?
resta#rants
+rade, wholesale and retail 3!7 !
5otels 17 52
Bestaurants 92 5
Transport?
comm#nication
11
Transport
Boad !1 10.
$ea 1. 3
Bi"ers, ferries 5 5
%ir 15 9.
-ther 2 9
Communication
9ommunications !! 123
;inance? real estate?
'#siness
1anking 9! 31
)on0bank finance 27 !7
%ssociated ser"ices 2 !2
Beal estate 9! 72
1usiness ser"ices 7 71
Other ser-ices
Public sector
*o"ernment, defence 10 .3
Private sector
$ocial, community ser"ices .0 92
%musement, recreation 10 .
/ersonal? ho#sehold
ser-ices
166 8@
$ource: Indonesian $tatistics 1ureau 61iro 'usat $tatistik7, annual production data#
Agric#lt#re? li-estoc<? forestr& and fisher&
&ain statistics on output in 200. are pro"ided in the table abo"e#
12
&drocar'ons
Indonesia was the only %sian member of the -rgani4ation of 'etroleum <Aporting
9ountries 6-'<97 outside of the &iddle <ast until 200! and is currently a net oil
importer# In 1999, 9rude and condensate output a"eraged 1#5 million barrels
620,000 m
3
7 per day, and in the 199! calendar year the oil and gas sector,
including refining, contributed approAimately 9E to *H'# %s of 2005, Indonesian
crude oil and condensate output was 1#07 million barrels 6170,000 m
3
7 per day# +his
is a substantial decline from the 1990s, due primarily to aging oil fields and a lack of
in"estment in oil production e3uipment# +his decline in production has been
accompanied by a substantial increase in domestic consumption, about 5#E per
year, leading to an estimated J$N1#2 billion cost for importing oil in 2005#
+he state owns all petroleum and mineral rights# Foreign firms participate through
production0sharing and work contracts# -il and gas contractors are re3uired to
finance all eAploration, production, and de"elopment costs in their contract areas?
they are entitled to reco"er operating, eAploration, and de"elopment costs out of the
oil and gas produced#
Indonesia>s fuel production has declined significantly o"er the years, owing to aging
oil fields and lack of in"estment in new e3uipment# %s a result, despite being an
eAporter of crude oil, Indonesia is now a net importer of oil products# It had
pre"iously subsidi4ed fuel prices to keep prices low, costing J$N 7 billion in 200 #
+he current president has mandated a significant reduction of go"ernment subsidy
of fuel prices in se"eral stages +he go"ernment has stated the cuts in subsidies
are aimed at reducing the budget deficit to 1E of gross domestic product 6*H'7 this
year, down from around 1#.E last year# %t the same time, in order to alle"iate
economic hardships, the go"ernment has offered one0time subsidies to 3ualified
citi4ens#
-re trucks in the mining area in 2est $umbawa, )+1#
Non-oil and gas mining
Indonesia is the world>s largest tin market# %lthough mineral production traditionally
centered on bauAite, sil"er, and tin, Indonesia is eApanding its copper, nickel, gold,
and coal output for eAport markets#
13
In mid01993, the Department of ines and !nergy reopened the coal sector to
foreign in"estment, with the result that the leading Indonesian coal producer now is
a (oint "enture between J8 firms 0 1' and Bio +into# +otal coal production reached
7 million metric tons in 1999, including eAports of 55 million tons# From =anuary to
%ugust 2011, the coal production was 235 million tons and targeted 2011 coal
production between 30 to 370 million tons# )ot all of the productions can be
eAported due to there are Homestic &arket -bligation 6H&-7 regulation which
should fulfill the domestic market# In 2012, the H&- is 2#72E# %nd starting 201,
there are no low0grade coal eAports allowed, so the upgraded brown coal process
which crank up the calorie "alue of coal from ,500 kcalKkg to .,100 kcalKkg will be
built in $outh 8alimantan and $outh $umatra#
+wo J$ firms operate three copperKgold mines in Indonesia, with a 9anadian and
1ritish firm holding significant other in"estments in nickel and gold, respecti"ely# In
199!, the "alue of Indonesian gold production was N1 billion and copper, N!3
million# Beceipts from gold, copper, and coal comprised !E of the N3 billion#
<arned in 199! by the mineral mining sector# India fortune groups like Medanta
Besources and +ata *roup ha"e significant mining operations in Indonesia#
%pril 2011: 2ith additional of +ayan, 2est 8alimantan %lumina pro(ect which
produce 5E of the world>s alumina production, Indonesia will be the world>s second
largest %lumina producer# +he pro(ect will not make the ores to become %luminium
due to there are 100 types of %lumina deri"ati"es which can be de"eloped further
by other companies in Indonesia#
Quarrying
&ain statistics on output in 200. are pro"ided in the table abo"e#
!an#fact#ring
Oil and gas manufacturing
&ain statistics on output in 200. are pro"ided in the table abo"e#
Non-oil and gas manufacturing
&ain statistics on output in 200. are pro"ided in the table abo"e#
In 2010, Indonesia sales 7#. million motorcycles, which mainly produce in Indonesia
with almost 100E local components# 5onda led the market with a 50#95E market
share, followed by Camaha with 1#37E market share#
In 2011, the retail car sales total was !!!,335 units, a 19#2.E increase from last
year# +oyota dominated the domestic car market by 35#3E, followed by Haihatsu
and &itsubishi with 15#E and 1#5.E, respecti"ely# $ince 2011, some origin
local car makers ha"e introduced some Indonesian national cars which can be
categori4ed as ,ow 9ost *reen 9ar 6,9*97# In 2012, significant increased by 2#!
percent made automobile sales broke 1 million units with 1#11. million units#
1
Indonesian +eAtile %ssociation has reported that in 2013, the teAtile sector is likely
to attract in"estment of around N175 million# In 2012, the in"estment in this sector
was N27 million, of which only N51 million was for new teAtile machinery# <Aports
from the teAtile sector in 2012 was N13#7 billion#
Electricit&? gas and %ater s#ppl&
)uclear power in Indonesia
&ain statistics on output in 200. are pro"ided in the table abo"e#
Indonesia has eApressed interest recently in possible use of nuclear plants#
Indonesia has ran 3 research reactors#
"onstr#ction
&ain statistics on output in 200. are pro"ided in the table abo"e#
Trade? hotel and resta#rant
Wholesale and retail trade
*aruda Indonesia airline at %disut(ipto International %irport, Cogyakarta#
&ain statistics on output in 200. are pro"ided in the table abo"e#
Hotels, estaurants
&ain statistics on output in 200. are pro"ided in the table abo"e#
Transportation and comm#nication
&ain article: +ransport in Indonesia
&ain statistics on output in 200. are pro"ided in the table abo"e#
%ccording to Heloitte, in 2011 Internet0related acti"ities in Indonesia ha"e
generated 1#.E of the nation>s gross domestic product 6*H'7# +his is bigger than
electronic and electrical e3uipment eAports and li3uified natural gas at 1#51E and
1#5E respecti"ely#
15
;inance? real estate and '#siness ser-ices
!ebt "ervice atio
%t end of =une 2011, Indonesia>s debt ser"ice ratio was 21#.E, well below the
dangerous threshold of 30E#
#an$ing, Non-ban$ finance institutions, %inancial services
&ain statistics on output in 200. are pro"ided in the table abo"e#
eal estate, #usiness services
&ain statistics on output in 200. are pro"ided in the table abo"e#
1mall '#sinesses
+here are 50 million small businesses in Indonesia with online usage growth of !E
in 2010, so *oogle will open a local office in Indonesia before 2012#
P51@
Other ser-ices
&eneral government, Private services
&ain statistics on output in 200. are pro"ided in the table abo"e#
Jp to end of =une 2011, the fiAed state assets was Bp 1,2.5 trillion 6N12! billion7,
while the "alue of state stocks was Bp 50 trillion 6N5#0 billion7 and other state assets
was Bp 2 trillion 6N2# billion7# #
Indonesian migrant %or<ers
+he most common destination of Indonesian migrant workers is &alaysia 6including
illegal workers7# In 2010, according to a 2orld 1ank report, Indonesia was among
the world>s top ten remittance recei"ing countries with "alue of totalling N7 billion#
&ay 2011: +here are . million Indonesian citi4ens working o"erseas, 2#2 million of
whom reside in &alaysia and another 1#5 million in $audi %rabia#
EApatriate %or<ers
In 2011, Indonesia released 55,010 foreigners working "isas, increased by 10E
compared to 2010, while the number of foreign residents in Indonesia, eAcluding
tourists and foreign emissaries was 111,752 persons, rose by .E to last year# 2ho
got "isas for . months to one year were mostly 9hinese, =apanese, $outh 8orean,
Indian, %merican and %ustralian# % few of them were entrepreneur who made a
new businesses in Indonesia and all of the foreigners caused restaurants, bars,
clubs, hotels, and apartments catering to eApatriates de"eloping well#
1.
:.2.* /OLITI"AL 1TA:ILIT0
Indonesia has undergone a political transformation since the uphea"al of 199! which saw
the fall of *eneral $uharto after 30 years of authoritarian rule and a collapse of the Bupiah#
+he country is now a "ibrant democracy that is continuing to strengthen its political
structures and deepen the enfranchisement of the population# -"er past decade, "aried
eAperiments with democracy has seen the rise and fall of eAtreme religious parties and an
e3uilibrium found in the direction of secular, reform minded nationalism# +he 2009 election
results signalled a maturity among the electorate through the re0election of the incumbent
president, $usilo 1ambang Cudhoyono who became the first Indonesian president to be
democratically elected for two consecuti"e terms which hugely boosted global in"estor
confidence# 5is firm stance on terrorism and national security is another welcome
continuation of his tenure# -ther political reforms such as decentralisation of political power
to regional and pro"incial leaders, while still at an eAperimental stage, is ser"ing to unleash
the potential of IndonesiaGs less de"eloped regions outside =a"a and fostering more e"en
participation in the countryGs growth#
+he political situation is not without its risks? the speed of economic and political reform
under 'resident CudhoyonoGs coalition has come under fierce criticism for its inertia and
pandering to "ested interests of coalition members# 'olitical noises towards greater
protectionism are regular occurrences that often result in o"erlapping regulations which
creates in"estor uncertainty# In the run up to the 201 elections, party interests are coming
to pre"ail o"er that of political progression with a stalemate o"er many proposed new bills#
+he gap between the rich and the poor is also widening while corruption continues to be a
persistent issue#
5owe"er, despite the "arious push and pull forces to "eer of course? the country remains
on a stable track while fully acknowledging its political flaws# +he deepening politicisation of
the electorate is seeing greater demands and eApectations being placed upon their
politicians# +he relati"ely free media is pro"iding the space for open debate and discussion
as well as bringing into 3uestion accepted cultural and political norms# +his is a healthy
en"ironment for the future de"elopment of democracy and the gradual stamping out of
detrimental and corrupt practices# +he political system therefore continues to be a work in
progress but not without its concerns# Cet, the e"ents of the %rab $pring and the political
turmoil that has ensued show that seemingly stable authoritarian regimes all ha"e an eApiry
date which is brought about by the ine"itable peaks and troughs of economic cycles# +he
o"er centralisation of authority is also a ma(or flashpoint, as witnessed in countries such as
+hailand# +he immediate impact of IndonesiaGs decentralisation has been eAcessi"e waste
and bureaucracy# 5owe"er, this is part of the process of political maturation that will
e"entually yield a series of coordinated regions that ha"e adopted policies which
compliment their particular attributes and commercial strengths# From this long term
perspecti"e, in"estors can ha"e confidence in IndonesiaGs stability and its political system
will continue to strengthen in the decades to come#
IndonesiaGs ad"antages as a business and in"estment destination are defined by the
current global and political en"ironment that is highlighting se"eral key parameters to be
considered in emerging markets# +he countryGs natural resources, potential in renewable
energy and food security offer a sustainable buffer to the climbing prices being seen in oil
and foodstuffs which is fuelling social discontent in other markets# +heir potential as
feedstock for "alue added manufacturing will also be "ital in steering the country through its
transition to a middle income and de"eloped economy# +he "ast population that is set to
grow to 2!! million by 2050 will ser"e in both a highly skilled producti"e capacity as well as
17
consumer market as the country reaches its predicted position of being the worldGs .th
largest economy 6'ricewaterhouse9oopers7#
:.2.,. :ARRIER $OING :U1INE11 IN
IN$ONE1IA
Economic challenges
It was only until changes in go"ernment in 19.5 that triggered off essential progress
in lowering the countryGs po"erty rate# From a steep recession in 19.5 with an !E
decline in *H', the country began to de"elop economically in the 1970s, earning
much benefit from the oil shock# +his de"elopment continued throughout the 19!0s
and into the 1990s despite the oil counter0shocks# Huring these periods, *H' le"el
rose at an a"erage rate of 7#1E# Indonesia saw consistent growth, with the official
po"erty rate falling from .0E to 15E#Hespite this de"elopment, an estimated
13#33E of the population 62010 estimate7 remains below the po"erty line#
La'or #nrest
%s of 2011 labor militancy was increasing in Indonesia with a ma(or strike at the
*rasberg mine and numerous strikes elsewhere# % common issue was attempts by
foreign0owned enterprises to e"ade Indonesia>s strict labor laws by calling their
employees contract workers# The "ew #or$ Times eApressed concern that
Indonesia>s cheap labor ad"antage might be lost# 5owe"er, a large pool of
unemployed who will accept substandard wages and conditions remains a"ailable#
-ne factor in the increase of militancy is increased awareness "ia the internet of
pre"ailing wages in other countries and the generous profits foreign companies are
making in Indonesia#
IneB#alit&
<conomic disparity and the flow of natural resource profits to =akarta has led to
discontent and e"en contributed to separatist mo"ements in areas such as %ceh
and Irian =aya# *eographically, the poorest fifth regions account for (ust !E of
consumption, while the richest fifth account for 5E# 2hile there are new laws on
decentrali4ation that may address the problem of une"en growth and satisfaction
partially, there are many hindrances in putting this new policy into practice#
%t the Indonesian 9hamber of 9ommerce and Industry 68adin7 meeting at
&akassar on %pril 2011, Hisad"antaged Begions &inister said there are 1!
regencies classified as disad"antaged areas in Indonesia with around 120
regencies were located in the eastern part of Indonesia#
Inflation
Inflation has long been another problem in Indonesia# 1ecause of political turmoil,
the country had once suffered hyperinflation, with 1,000E annual inflation between
19. and 19.7, and this had been enough to create se"ere po"erty and hunger#
<"en though the economy reco"ered "ery 3uickly during the first decade of )ew
1!
-rder administration 61970D19!17, ne"er once was the inflation less than 10E
annually# +he inflation slowed during mid019!0s, howe"er, the economy was also
languid due to the decrease of oil price that reduced its eAport re"enue
dramatically# +he economy was again eAperiencing rapid growth between 19!90
1997 due to the impro"ing eAport0oriented manufacturing sector, still the inflation
rate was higher than economic growth, and this caused widening gap among
se"eral Indonesians# +he inflation peaked in 199! during the %sian financial crisis,
with o"er 5!E, causing the raise in po"erty le"el as bad as the 19.0s crisis#

Huring
the economic reco"ery and growth in recent years, the go"ernment has been trying
to decline the inflation rate# 5owe"er, it seems that Indonesian inflation has been
affected by the global fluctuation and domestic market competition#%s of 2010, the
inflation rate was approAimately 7E, when its economic growth was .E# +o date,
inflation is affecting Indonesian lower middle class, especially those who can>t afford
food after price hikes#
:.2.. A$>ANTAGE $OING :U1INE11 IN
IN$ONE1IA
%s a country of some 20 million people and growing, the si4e of the Indonesian domestic
consumer market is an alluring attribute for many in"estor# +he countryGs resilience o"er the
course of the global financial crisis illustrated the merits of its immense population and
economic self reliance# 1ucking the trend of most other *20 economies, in 2009 the
country recorded #5E *H' growth and achie"ed higher than eApected growth of .#1E in
2010# +his can be attributed to strong pri"ate consumption which accounts for o"er .0E of
total *H'# +his placed the country in good stead as demand for eAports from de"eloped
markets tailed off with the financial crisis lea"ing many other emerging economies in a state
of fluA#
IndonesiaGs lower middle income population continue to realise their consumer aspirations
off the back of eApanding consumer credit and rising incomes bringing *H' per capita to
N,200 at ''' at the end of 2010# % growing middle class that is poised to reach 150
million people by 201 6)omura7 is opening up the scale and scope of the consumer
market# 2hat lays ahead to take full ad"antage of the consumer boom is ensuring that
IndonesiaGs manufacturing sector plays a greater role in the production of the goods being
purchased# Imports are still largely responsible for meeting the countryGs insatiable appetite
for gadgets such as smart phones and other high tech goods that the country as yet does
not produce#
In terms of future outlook, Indonesia is entering a Qsweet spotG as a con"ergence of its
young, working population with that of relati"ely stable inflation and sustained economic
growth is fuelling consumer spending# +here is much to be said for IndonesiaGs
demographics as a key component of its future growth potential# -"er 50E of the
population is below the age of 30, is highly adapti"e to new technology and has a low
dependency ratio among its workforce gi"ing rise to a so called Qtransitional demographic
di"idendG# +his is in marked contrast to countries such as 9hina where an ageing
population and a high dependency ratio due to the one child policy is taking its toll# For
Indonesia, this optimal en"ironment is pro(ected to continue for another decade to 2020,
according to the 2orld 1ank, after which the population will begin to age faster and modern
lifestyles reduce the birth rate#
19
+o fully reap the benefits of this transitional period, Indonesia must a"oid the Qmiddle
income trapG of failing to transcend its income le"el to become a fully de"eloped nation# %s
witnessed in countries such as $outh 8orea, in"estment in higher education, research and
inno"ation to create a skilled workforce that produce high technology goods is the way to
do this# -n paper at least, this is the direction that Indonesia is headed according to the
<conomic &asterplan to 2030 that would see a transition to a knowledge based economy#
5owe"er, realising this goal will be dependent on realisation of pri"ate sector and foreign
direct in"estment# +his represents a pi"otal stage as in"estors ha"e an opportunity to come
into the market during eAciting and unfettered growth to thus play a role in this transition#
".OUTRO
1U!!ARICE
In conclussion, Indonesia is a country which has "ery big prospect in doing business# &any
aspects a"ailable in Indonesia that support for neither all people or business player to build
their each business in Indonesia# From both of natural side and humen side# Indonesia has
much both of them, and still not eAplored much and efficient yet# +o eAplore and eAploit the
natural resources, it needs the person 6humen7,and Indonesia has it too# 1ecause of it,
many in"estors from a whole of the world had like to in"est in Indonesia#
20