Economy of Indonesia

Indonesia is a country that contains great economic potential; a potential that has not gone unnoticed to part of the international community. Indonesia - Southeast Asia's largest economy - is increasingly mentioned as an appropriate candidate to be included in the BRIC countries (Brazil, Russia, India and China) as the country is rapidly showing signs of similar newly advanced economic development. Recently, a new set of emerging economies has gained public attention. Members of this set are countries that contain promising markets with diverse economies, reasonably sophisticated financial systems and fast-growing populations. These countries are grouped under the acronym CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa), and its combined Gross Domestic Product is predicted to account for half the global economy by 2020.

Another important example of international recognition regarding Indonesia's economy is the recent upgrades in the country's credit ratings by international financial services companies such as Standard & Poor's, Fitch Ratings and Moody's. Resilient economic growth, low government debt and prudent fiscal management have been cited as reasons for the upgrades and are key in attracting financial inflows into Indonesia: both portfolio flows and (significant increasing) foreign direct investments (FDI). These FDI inflows, which had been relatively weak for Indonesia during the decade after the Asian Financial Crisis had seriously shaken up the foundations of the country, showed a steep increase after the global financial crisis of 2008-2009.

What are Indonesia's strong points that explain increasing foreign investments and the recent macroeconomic growth?

• Abundant and diverse natural resources
• Young, large and burgeoning population
• Political stability (relatively)
• Prudent fiscal management since the late 1990s
• Strategic location in relation to the giant economies of China and India
• Low labour costs
Indonesia, a market economy in which the state-owned enterprises (SOE) and large private business groups (conglomerates) play a significant role, thus shows a number of highly positive features at the beginning of - what can become - a period of substantial economic development. However, it should also be pointed out that Indonesia is a complex country that contains certain risks for investments and experiences difficulties within the framework of its unique dynamics and context.

source :indonesia-investments.com


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