Analyzing Indonesia's Economy: Trade, Investment, and Future Growth

This report provides a comprehensive overview of Indonesia's economy, highlighting the significance of timber trade, its position as a major player in Southeast Asia, and its potential to become a leading global economy. It examines Indonesia's steady GDP growth, increasing per capita income, and strategic economic reforms aimed at technological advancement, human resource development, and poverty reduction. The report also emphasizes Indonesia's rich natural resources, including tin, coal, coffee, and minerals, alongside its potential for renewable thermal energy and palm oil production. Furthermore, it explores the role of Foreign Direct Investment (FDI) in driving technological advancements, infrastructure development, and export-oriented manufacturing. The analysis also touches upon the challenges faced by Indonesia, such as exchange rate depreciation, while underscoring the country's strong domestic-driven economy, fiscal discipline, and government reforms, making it an attractive destination for global and emerging market investments. Desklib provides access to this document, along with a wealth of study resources, including past papers and solved assignments, for students seeking to deepen their understanding of economics and related subjects.

Indonesia

General overview of the country or region
 The trade of timber is one of the most important trades in Indonesia.
Indonesia’s forest products such timber and other related products
comprises 10% of the country’s GDP. Indonesia used to contribute 70% of
the plywood industry in the world during the year 1980. But from then
there can be seen a declining trend in the exports. The figure came down
from $3.6 Billion to $2 billion in the year 2000. The decline is due to some
of the aggressive policies that are being taken by the government against
exports of timber. Timber or forest product industry is one of the major
revenue generators for Indonesia
 The business market of Indonesia is one amongst the biggest business
market in the world. It is projected in accordance to the economic growth
that by 2030 it will become 7th largest economy in the world.

 It is the biggest economy in south east Asia
 The gross domestic production of the country is steadily rising at a steady pace
 The gross domestic per capita of the country was $857 in the year 2000 which had
increased to $3,603 in the year 2016
 It is considered to be the 10th largest economy in consideration to the purchasing
power parity (Stenberg et al, 2014).
 The government of Indonesia has a 20 years reform planning for economic
transition
 The government has started some programme related to the education and health
care

 New and matured government
 Democratic rule
 New reforms for technological advancement
 Development of manufacturing industry (Msimanga and Sebitosi, 2014).
 Reforms for skilled human resources

 More emphasis on self sufficiency
 Reduction of poverty
 Reforms for healthcare sector to decrease maternal death
 Half of the population is under the age of 30
 Use of technology

 Largest producer and exporter of tin
 Exporter of thermal coal
 Coal found here have less sulphure
 Coal extraction is cheap as it is found close to the surface of the soil
 Exporter of coffee

 Fertile soil due to active volcano
 Cultivation of expensive commodities
 Rich in minerals such as gold and silver
 Easy availability of renewable thermal energy (Borner, Brunetti and Weder, 2016).
 Large base of human resource
 Large producer of palm oil

 FDI is said to be the major channel for advanced technologies
 Brings in investment for the country
 Brings in new technology
 Advancement in manufacturing sector

 Indonesia’s has a vide range of population and there is growing high profile people
who have huge demand and have stable political situation and the economic policy
that make it easy for foreign direct investment (FDI) to come to market
 Indonesia is one of the biggest economy is Asia and it has increased its FDI norms
and created jobs and economic spur and foreign investors are focusing on the
profit earning sector such as infrastructure development and export-oriented
manufacturing (Garnaut, 2015).
 Indonesia’s GDP growth has decreased and it is a growing economy with a
conservative policy which make the place Indonesia very attractive to foreigners
for making Foreign Direct Investment. Indonesian government make economic
growth and focus on infrastructural development and export-oriented
manufacturing.

 It is believed that East Asian economies have generally large
accumulation of foreign investment and the reserves which are
use to attempt or limit currency appreciation and maintain
export growth.
 Indonesia falls under it and the crisis Indonesia faces is that
the exchange rate has also remained at a depreciated level
with comparison to the rest of the economy or other
countries.In particular, the rupiah has remained relatively flat
against the US dollar fr the past many years and unlike the
currencies of its East Asian neighbors which have all
appreciated strongly (Papargyropoulou et al, 2015).

 The change in the government and the policy announcements which have
led to some re-rating of the overall valuations of the Indonesian equity
market.
 However, there is still value that we see from potential positive revision
ratios in earnings-per-share and reasonable price-to-book valuations in
several sectors. While volatility is there in the market there is a
constructive Indonesian market.
 With developed markets battling deflation and Chinese growth
decelerating due to past investment and leverage excesses, Indonesia
stands out as a strong economy driven by domestic factors.
 It is further blessed with constitutionally enforced fiscal discipline,
moderate inflation and a government hungry for reforms. We therefore
believe that Indonesia should be a material part of global and emerging
market investment portfolios.