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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 eight and ten 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 four per cent; but the legacy of the crisis is still evident in the wariness of foreign donors and investors to deal with Indonesia: under the Suharto regime, much of the economy functioned under a system of ‘crony capitalism’ and this has yet to be effectively addressed, let alone dismantled. More importantly for the Indonesian people, the sudden mass unemployment which followed the collapse of thousands of enterprises continues to cause widespread hardship.
Thirty 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: 1996 revenue was estimated at more than US$6 billion. 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. Literature should be in English, but prices should be quoted in US Dollars as well as Pounds Sterling. Private office hours: Mon-Fri 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), Third-Fifth 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).
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