World Country Guide

Business Profile

Economy
‘The most dramatic economic collapse anywhere in the past five decades’ is how one World Bank official described the calamitous disintegration of the Indonesian economy in the autumn of 1997. In 1998, economic output in Indonesia declined by more than 12 per cent and the national currency, the Rupiah, lost 80 per cent of its value. The crash occurred after more than a decade of uninterrupted growth at between 8 and 10 per cent annually. In January 1998, the IMF was forced into arranging its largest-ever financial rescue package, totalling US$43 billion, in order to prevent total economic collapse. During 1999, the economy stabilised and, since 2000, has resumed steady annual growth of around 4 per cent. Inflation has now stabilised at around 7 per cent; unemployment remains relatively high at 11 per cent of the workforce. The value of the Rupiah has also settled down. Nonetheless, only limited measures have been taken to deal with the structural problems which previously blighted the economy. The Suharto era’s system of ‘crony capitalism’ still prevails, and essential reforms to the country’s financial system have yet to be effected.
30 years earlier, as Indonesia’s economic expansion began in earnest after the upheavals of the mid-60s, the country was far less developed than many of its neighbours. However, it was able to exploit its considerable mineral resources as a foundation on which to build an industrial economy. Oil and natural gas are the most important raw materials produced by Indonesia; it is still one of the largest exporters of liquefied natural gas. The country is also the second-largest producer of tin and extracts substantial quantities of other metals and metal ores (bauxite, copper, silver, gold and nickel) as well as coal and rubber. Much of the processing of these products is now done within the country. The agricultural sector (including fishing and forestry) remains important but more as a source of employment – it accounts for half the work force – than for its contribution to the economy. The service sector grew rapidly from the beginning of the 1980s onwards. Tourism has become a major industry and a vital source of foreign exchange (though likely to suffer in the wake of the Bali bomb attacks). Transport and communications, financial services and international freight traffic also made important contributions. However, it was the manufacturing industry, which developed from virtual non-existence in 1965 to its mid-90s position of providing one quarter of economic output, which received most attention from the Government (as well as outsiders) and announced Indonesia’s arrival as a fully fledged ‘Asian Tiger’ economy. Despite the high profile of the vehicle, aerospace and electronics industries, Indonesia’s manufacturing success was rooted in less glamorous areas such as textiles, food processing, tobacco and timber products.
The bulk of Indonesia’s trade is conducted within the region, especially with Japan (which accounts for approximately one-quarter of total trade), Singapore, Korea, Australia and China (including Hong Kong). Outside the region, the USA and Germany are its major trading partners.

Business
Business dealings should be conducted through an agent and tend to be slow. Visiting cards are widely used. It is conventional to shake hands and give a slight bow with the head on meeting and taking leave. Literature should be in English, but prices should be quoted in US Dollars as well as Pounds Sterling. Private office hours: Mon-Fri 0800-1600 or 0900-1700. Government office hours: Mon-Thurs 0800-1430, Fri 0800-1200.

Commercial Information
The following organisation can offer advice: Kamar Dagang dan Industri Indonesia (KADIN) (Indonesian Chamber of Commerce and Industry), 3rd-5th Floors, Chandra Building, Jalan M H Thamrin 20, Jakarta 10350 (tel: (21) 324 000; fax: (21) 315 0241).

Conferences/Conventions
The Balai Sidang Jakarta Convention Centre has the capacity for up to 5000 people. For information or assistance in organising a conference or convention in Indonesia, contact the Directorate-General of Tourism or the Indonesia Tourism Promotion Board or a representative IPTO office (see Contact Addresses section).