Report on Indonesia

Submitted By:
Asad Ali Attarwala Roll No. 06 SyBBA Navrachana University

Submitted To:
Mr.Hitesh Bhatia

Acknowledgement

I wish to express my sincere gratitude to Prof. Hitesh Bhatia and my collegues for their kind co-operation to the completion of my project work. Last but not least I wish to avail myself of this opportunity, express a sense of gratitude and love to my friends and my beloved parents for their manual support, strength, help and for everything

Preface

This report is about the country Indonesias Trade and Economy. It includes the economic overview of Indonesia, Items that Indonesia imports and exports, Its Balance of Trade, Its Various trading partners and Its Foreingn Relations.

Table of contents

Sr. no.
1 2 3 4 5

Topic
Economic Overview Of Indonesia Items The Country Exports And Imports Trade Balance of Indonesia Trade Partners Over Last 5 Years Foreign Relations

Economic overview

GDP (2009): $539 billion; (2010): $707 billion; (2011 est.): $823 billion. Annual growth rate (2009): 4.5%; (2010 est.): 6.1%; (2011 est.): 6.2%. Inflation, end-period (2009): 2.8%; (2010 est.): 7%; (2011 est.): 7.3%. Per capita income (2010 est., PPP): $4,394. Natural resources (11.2% of GDP, 2010): Oil and gas, bauxite, silver, tin, copper, gold, coal. Agriculture (15.3% of GDP, 2010): Products--timber, rubber, rice, palm oil, coffee. Land--17% cultivated. Manufacturing (24.8% of GDP, 2010): Garments, footwear, electronic goods, furniture, paper products, automobiles. Trade: Exports (2010)--$158 billion including oil, natural gas, crude palm oil, coal, appliances, textiles, and rubber. Major export partners--Japan, U.S., China, Singapore, Malaysia, and Republic of Korea. Imports (2010)--$136 billion including oil and fuel, food, chemicals, capital goods, consumer goods, iron and steel. Major import partners--Singapore, China, Japan, U.S., Malaysia, Thailand, South Korea. Indonesia has a market-based economy in which the government plays a significant role. There are 139 state-owned enterprises, and the government administers prices on several basic goods, including fuel, rice, and electricity. In the mid-1980s, the government began eliminating regulatory obstacles to economic activity. The steps were aimed primarily at the external and financial sectors and were designed to stimulate employment and growth in the non-oil export sector. Annual real gross domestic product (GDP) growth averaged nearly 7% from 1987-97 and most analysts recognized Indonesia as a newly industrializing economy and emerging major market. The Asian financial crisis of 1997 altered the region's economic landscape. With the depreciation of the Thai currency, the foreign investment community quickly reevaluated its investments in Asia. Foreign investors dumped assets and investments in Asia, leaving Indonesia the most affected in the region. In 1998, Indonesia experienced a negative GDP growth of 13.1% and unemployment rose to 15%-20%. In the aftermath of the 1997-98 financial crisis, the government took custody of a significant portion of private sector assets via debt restructuring, but subsequently sold most of these assets, averaging a 29% return. Indonesia has since recovered, albeit more slowly than some of its neighbors, by recapitalizing its banking sector, improving oversight of capital markets, and taking steps to stimulate growth and investment, particularly in infrastructure. GDP growth steadily rose in the following decade, achieving real growth of 6.3% in 2007 and 6.1% growth in 2008. Although growth slowed to 4.5% in 2009 given reduced global demand, Indonesia was the third-fastest growing G-20 member, trailing only China and India. Growth rebounded in 2010 to 6.1% and is forecast to reach 6.2%-6.5% in 2011. Poverty and unemployment have also declined despite the global financial crisis, with the poverty rate falling to 13.3% (March 2010) from 14.2% a year earlier and the unemployment rate falling to 6.8% (February 2011) from 7.4% a year earlier.

In reaction to global financial turmoil and economic slowdown in late 2008, the government moved quickly to improve liquidity, secure alternative financing to fund an expansionary budget and secure passage of a fiscal stimulus program worth more than $6 billion. Key actions to stabilize financial markets included increasing the deposit insurance guarantee twentyfold, to IDR 2 billion (about U.S. $235,000); reducing bank reserve requirements; and introducing new foreign exchange regulations requiring documentation for foreign exchange purchases exceeding U.S. $100,000/month. As a G-20 member, Indonesia has taken an active role in the G-20 coordinated response to the global economic crisis. In the face of surging portfolio inflows in 2010 and 2011, Bank Indonesia has implemented a number of measures to encourage inflows toward less-volatile, longer-tenor instruments.

Economic Policy: After he took office on October 20, 2004, President Yudhoyono
moved quickly to implement a "pro-growth, pro-poor, pro-employment" economic program, which he has continued in his second term. The State Ministry of National Development Planning (BAPPENAS) released a Medium-Term Development Plan for 2010-2014 focused on development of a prosperous, democratic and just Indonesia. The Medium-Term Development Plan targets average economic growth of 6.3%-6.8% for the period, reaching 7% or above by 2014, unemployment of 5%-6% by the end of 2014, and a poverty rate of 8%-10% by the end of 2014.. In May 2010, President Yudhoyono established a National Economic Committee to provide strategic recommendations to accelerate national economic development and a National Innovation Committee to provide input and recommendations to increase national productivity, create a culture of innovation, and speed up economic growth. Indonesia's overall macroeconomic picture is stable. By 2004, real GDP per capita returned to pre-financial crisis levels and income levels are rising. In 2009, domestic consumption continued to account for the largest portion of GDP, at 58.6%, followed by investment at 31.0%, government consumption at 9.6%, and net exports at 2.8%%. Investment realization had climbed in each of the past several years, until the global slowdown in 2009. It resumed its rebound in 2010. Following a significant run-up in global energy prices in 2007-2008, the Indonesian Government raised fuel prices by an average of 29% on May 24, 2008 in an effort to reduce its fuel subsidy burden. Fuel subsidies had been projected to reach Rp 265 trillion ($29.4 billion) in 2008, or 5.9% of GDP. The fuel price hikes, along with rising food prices, led consumer price inflation to a peak of 12.1% in September 2008. To help its citizens cope with higher fuel and food prices, the Indonesian Government implemented a direct cash compensation package for low-income families through February 2009 and an extra range of benefits including an expanded subsidized rice program and additional subsidies aimed at increasing food production. Subsequent declines in oil and gas prices allowed the government to reduce the prices for subsidized diesel and gasoline, but with oil and gas prices recovering, the energy subsidy bill has again swelled in 2010 and 2011.

Banking Sector: Indonesia has 122 commercial banks (March 2011), of which 10 are
majority foreign-owned and 28 are foreign joint venture banks. The top 10 banks control about 63.4% of assets in the sector. Four state-owned banks (Bank Mandiri, BNI, BRI, BTN) control about 35.6% of assets (March 2011). The Indonesian central bank, Bank Indonesia (BI), announced plans in January 2005 to strengthen the banking sector by encouraging consolidation and improving prudential banking and supervision. BI hoped to encourage small banks with less than Rp 100 billion (about U.S. $11 million) in capital to either raise more capital or merge with healthier "anchor banks" before end-2010, announcing the criteria for anchor banks in July 2005. In October 2006, BI announced a single presence policy to further prompt consolidation. The policy stipulated that a single party could own a controlling interest in only one banking organization; exceptions would be granted in controlling two banks that do business under different principles, such as commercial and sharia, or one of which is a joint venture bank. Controlling interest is defined as 25% or more of total outstanding shares or having direct or indirect control of the institution. BI has started to move toward Basel II standards in 2011 and to improve operations of its credit bureau to centralize data on borrowers. Another important banking sector reform was the decision to eliminate the blanket guarantee on bank third-party liabilities. BI and the Indonesian Government completed the process of replacing the blanket guarantee with a deposit insurance scheme run by the independent Indonesian Deposit Insurance Agency (also known by its Indonesian acronym, LPS) in March 2007. The removal of the blanket guarantee did not produce significant deposit outflows from or among Indonesian banks. Sharia banking has grown in Indonesia in recent years, but represented only 3.3% of the banking sector, about $11.6 billion in assets as of March 2011.

Exports and Trade: Indonesia's exports were $158 billion in 2010, a rise of 35% from
$116.5 billion in 2009. The largest export commodities for 2010 were oil and gas (17.8%), minerals (14.9%), textile and footwear (8.9%), crude palm oil (8.54%), electrical appliances (8.2%), and rubber products (4.7%). The top destinations for exports for 2010 were Japan (16.3%), China (11.6%), the U.S. (11.1%), Singapore (8.5%), and Korea (8.3%). Meanwhile, total imports in 2010 were $136 billion, up from $96.83 billion in 2009. Indonesia is currently our 28th-largest goods trading partner with $23.4 billion in total (two-way) goods trade during 2010. The U.S. trade deficit with Indonesia totaled $9.5 billion in 2010 ($6.9 billion in exports versus $16.5 billion in imports).

Oil and Minerals Sector: Indonesia left the Organization of Petroleum Exporting
Countries (OPEC) in 2008, as it had been a net petroleum importer since 2004. Crude and condensate output averaged 944,000 barrels per day (bpd) in 2010, down slightly from 948,000 in 2009. In 2010, the oil and gas sector is estimated to have contributed $23.3 billion to government revenues, or 20.9% of the total. U.S. companies have invested heavily in the petroleum sector. Indonesia ranked third in world liquefied natural gas (LNG) exports production in 2010. Indonesia's oil, oil products, and gas trade balance was negative in 2008 with a $1.4

billion deficit, but became positive again in 2009 with a $29.4 million surplus, according to official statistics. Indonesia has a wide range of mineral deposits and production, including bauxite, silver, and tin, copper, nickel, gold, and coal. Although the coal sector was open to foreign investment in the 1990s through coal contracts of work, new investment was closed again after 2000. A new mining law, passed in December 2008, opened coal to foreign investment again, although it eliminated the difference between foreign and domestic ownership structures. Total coal production reached 255 million metric tons in 2010, including exports of 198 million tons. Two U.S. firms operate two copper/gold mines in Indonesia, with a Canadian and a U.K. firm holding significant investments in nickel and gold, respectively. Although coal production has increased dramatically over the past 10 years, the number of new metals mines has declined. This decline does not reflect Indonesia's mineral prospects, which are high; rather, the decline reflects earlier uncertainty over mining laws and regulations, low competitiveness in the tax and royalty system, and investor concerns over divestment policies and the sanctity of contracts. In early 2010, the Government of Indonesia also formally decided to become a candidate country of the Extractive Industries Transparency Initiative (EITI), which will increase accountability and transparency in energy revenue transactions between the government and oil, gas, and mining firms.

items imported And exported

Indonesia was the only G20 member to record economic growth during the global financial crises of 2008-09. Significant reforms were introduced under the first administration of President Susilo Bambang Yudhoyono to boost economic growth. Some of these included capital market development, the use of Treasury bills, and tax and customs reforms to boost trade. During 2009, Indonesia exported goods worth $115.6 billion, which was lower than the $139.3 billion worth of good exported the previous year. The value of imports decreased from $116 billion in 2008 to $86.6 billion in 2009

Indonesia Exports: Commodities

Here are the major export commodities of Indonesia Oil and gas Electrical appliances Plywood Textiles Rubber

Indonesia Exports: Partners

The following graph throws light on the major export partners of Indonesia, along with the export percentage, as of 2008.

 Indonesia Imports: Commodities

Here are the major import commodities of Indonesia Machinery and equipment Chemicals Fuels Foodstuffs

Indonesia Imports: Partners

The following graph throws light on the major import partners of Indonesia, along with import percentage, as of 2008.

IIIIIIIIIIII

Iindonesia Balance Of Trade

Indonesia had persistent balance-of-payments difficulties from the time of its independence. Typically, surpluses on merchandise trade were achieved by restricting imports, but these surpluses did not provide sufficient exchange for debt repayments or for other invisibles, such as profit remittances on foreign investment and interest payments on government loans from abroad. Indonesia's payments position brightened considerably in the late 1970s as a result of a rapid increase in oil prices mandated by OPEC. However, expansion of the non-oil export industries failed to keep pace with burgeoning import requirements for some consumer goods and machinery, equipment, and spare parts for development programs. The current account

deficit averaged -2% of GDP between 1992 and 1997, but accrued a surplus of over 4% of GDP

in 1998 due to currency devaluation and a cut in imports of one-third. Real GDP growth was expected to rise in 2004, as demand for exports of goods and services increased. The current account was forecast to remain in surplus in 2003/04, but to decline as a percentage of GDP. Indonesia's total external debt stood at approximately $135 billion in 2001; a loan with the IMF was due to expire in December 2003. The US Central Intelligence Agency (CIA) reports that in 2001 the purchasing power parity of Indonesia's exports was $56.5 billion while imports totaled $38.1 billion resulting in a trade surplus of $18.4 billion.

The International Monetary Fund (IMF) reports that in 2001 Indonesia had exports of goods totaling $57.4 billion and imports totaling $34.7 billion. The services credit totaled $5.5 billion and debit $15.9 billion. The following table summarizes Indonesia's balance of payments as reported by the IMF for 2001 in millions of US dollars. Indonesia reported a trade surplus equivalent to 2716 Million USD in September of 2011. Indonesia major exports are: plywood, textiles, rubber, tin, bauxite, silver, copper, nickel, gold, and coal. Indonesia imports machinery and equipment; chemicals, fuels and food. Its main trading partners are: Japan, European Union, The United States and Singapore. This is a chart showing Indonesias balance of trade from the period Jan09 to Nov11.

INDONESIA'S TRADE WITH MAIN PARTNERS (2010)

FOREIGN RELATIONS

Since independence in 1945, Indonesia has espoused a "free and active" foreign policy, seeking to play a role in regional affairs commensurate with its size and location but avoiding involvement in conflicts among major powers. Indonesian foreign policy under the "New Order" government of President Suharto moved away from the stridently anti-Western, anti-American posturing that characterized the latter part of the Soekarno era. Following Suharto's ouster in 1998, Indonesia's Presidents have preserved the broad outlines of Suharto's independent, moderate foreign policy. The traumatic separation of East Timor from Indonesia after an August 1999 East Timor referendum, and subsequent events in East Timor (now Timor-Leste) and West Timor, strained Indonesia's relations with the international community. A cornerstone of Indonesia's contemporary foreign policy is its participation in the Association of Southeast Asian Nations (ASEAN), of which it was a founding member in 1967 with Thailand, Malaysia, Singapore, and the Philippines. Since then, Brunei, Vietnam, Laos, Burma, and Cambodia also have joined ASEAN. While organized to promote common economic, social, and cultural goals, ASEAN acquired a security dimension after Vietnam's invasion of Cambodia in 1979. The security policy aspect of ASEAN expanded with the establishment of the ASEAN Regional Forum in 1994, in which 22 countries participate, including the United States. Indonesia has been a strong supporter of the Asia-Pacific Economic Cooperation (APEC) forum. Largely through the efforts of President Suharto at the 1994 meeting in Bogor, Indonesia, APEC members agreed to implement free trade in the region by 2010 for industrialized economies and 2020 for developing economies.

WEBLIO GRAPHY

http://www.state.gov/r/pa/ei/bgn/2748.htm http://www.economywatch.com/world_economy/indonesia/export-import.html http://www.tradingeconomics.com/indonesia/balance-of-trade http://www.nationsencyclopedia.com/Asia-and-Oceania/Indonesia-BALANCE-OFPAYMENTS.html#ixzz1dBVgc1Hy