INDONESIA
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WHY INDONESIA ? Economy is at constant rise while also taking a rightful position as a major destination for foreign investment World’s fourth largest country #1 for twitter user penetration #2 for Facebook users in the world behind U.S. More 3G subscribers than China GDP is growing about 6% annually Largest economy in South East Asia World’s third largest democracy 50% of its citizens are under the age of 30 GDP per person exceeds ASEAN neighbors Located on the world’s major trade routes Extensive natural resources Indonesia ratified the Cape town Treaty which gives US aircraft exporters access to financing trough international protection and registration of financial interests Telecommunications technology and satellites remain excellent areas for American products and services. Important opportunities exist in mining and agribusiness equipment and services Growing markets include the renovation and construction of regional and municipal infrastructure and water systems, military upgrading, safety and security systems and protection of sea-borne traffic.
COUNTRY TRAITS 3
Bordering the Pacific ocean to the east and Indian ocean to the west, Indonesia is the world largest archipielagic state comprised of 17,508 islands 6,000 which remain unhabited. Indonesia’s population - 248.0 million sex ratio - 1.5 male/female System of government - Indonesia is a unitary state, ruled by president (Joko Widodo) and vicepresident (Jusuf Kalla) who are elected through a five year term by popular vote.
THIRD LARGEST DEMOCRACY IN THE WORLD AFTER INDIA AND THE US
LANGUAGE - Bahasa Indonesian Besides the Bahasa Indonesian, around 300 other dialects are spoken within the different islands.
EDUCATION 6.6% of unemployment Literacy - 92.8% Age 15 and over can read and writeW. School life expectancy 13 years
CLIMATE Average temperature - 69 - 92 °F Hot and humid all year round Monsoon season wet season - November to March dry season - June to October
FLAG
RELIGION
CURRENCY
Muslim 88% Protestant 5%, Roman Catholic 3% Hindu 2% Buddhist 1% Other 1%
Indonesian Rupiah 1 IDR - 0.000079 USD Inflation - 6.4%
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POLITICAL/ECONOMIC FACTORS ECONOMIC STABILITY - The economy depends heavily on financial service, trading, and manufacturing. Financial service constituted 23% of Jakarta's GDP in 1989. The manufacturing industry is well diversified with significant electronics, automotive, chemicals, mechanical engineering and biomedical sciences manufacturing sectors.
GDP - Rank #17 - 868.3 billion USD GDP by sector Agriculture 14% Industry - 47% Services – 39% Labor force by occupation Agriculture – 39% Industry: 13.2% Services: 47.9% Inflation: 7.7% Health: expenditures – 2.7% of GDP Manufacturing contribution to GDP 25.54% Income category: Lower middle income Exports: $178.9 billion Imports : $176.6 billion Min wage: 2,700,000.00 IDR - $210 monthly
CHALLENGES Alleviating poverty, improving education, preventing terrorism, consolidating democracy after four decades of authoritarianism, economic and financial reforms, reforming criminal justice system, holding military and police accountable for human right violations, climate change, controlling diseases - Apart from the natural disasters, Indonesia faces high levels of corruption every day and violence around the country, particularly in Central Sulawesi, mainly due to the presence of the regional terrorist organization Jemaah Islamiyah (JI) How the government is dealing with it? In order to have more control over the country the government began a decentralization of political and economic authority to the districts.
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FUTURE EXPECTATIONS Although Indonesia's GDP has been increasing for the next four years there was a sudden decline at the end of 2014, according to the media there is still optimism for Indonesia’s future growth to continue increasing for the next upcoming years. Some points that will be helping with the economy's growth start mainly with the public investements in infrastructure, starting from the period of the reformation, president Joko Widodo has only been a positive addition to Indonesia. The new development of infrastructure involves roads, harbours, electricity, healthcare, law enforcement and in between others should help bring the economy back. President Widodo is eager to combat the barriers that exist with the bureaucracy, therefore a new one stop service center has been developed in order to make it easier for the investors to not have to visit many government agencies in order to obtain the necessary permits but instead only visit one place.
INDONESIAN HOLIDAYS Muhammad’s Birthday - January 14 Chinese New Year - January 31 Nyepi Saka - March 31 Good Friday - April 18 International Labor Day - May 1 Waisak - May 15 Ascension of Muhammad - May 27 Ascension of Christ - May 29 Idul Fitri 1 Syawal 1435 H - July 28 Indonesian Independence Day - August 17 Idul Adha 1434 H - October 5 Muslim New Year 1436 H - October 25 Christmas Day - December 25
Indonesia’s economic stability has been the result of the political year the country has had to go through. President Joko Widodo who took over Indonesia in October, 2014 and has been making huge changes in the country, in order to attract investors and arrange the economy. Indonesia now depends on a young democracy, where presidential and legislative elections must take place before a decision is made.
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RISKS
NATURAL HAZARDS
Earthquakes, tsunamis, volcano eruptions, occasional floods, severe droughts
More volcanoes than any other country in the world. 76 still remain active
TOP INFRASTRUCTURE SECTORS
TRANSPORTATION Airports with paved runways: 186 Heliports: 76 Railways: 5,042 km Waterways: 21,579 km Merchant marine (all ships engaged in the carriage of goods) 1,340 Indonesia presents itself as an enormous aviation opportunity and one of the fastest growing domestic air traffic markets in the world
Energy – Electrical Power Generation and Transmission; Geothermal and Biomass Aviation – Airports, Ground Support and Logistics Environmental Technology - Water Resource Management and Pollution/Disposal Technologies Architecture, Construction and Engineering – Toll Roads, Port Infrastructure and Major Projects
NATURAL RESOURCES Petroleum, Tin, Natural gas, Nickel Timber, Bautixe, Copper, Fertile soils Coal, Gold, Silver
IMPORT AND EXPORTS TOP 5 EXPORT DESTINATIONS
Japan (15%) China (12%) Singapore (9.1%) United States (8.4%) South Korea (7.2%)
TOP 5 EXPORTS
Coal Briquettes (12%) Petroleum Gas (9.3%) Palm Oil (8.3%) Crude Petroleum (5.9%) Rubber (4.1%)
Currently, Indonesia is ranked 12th in the world in textile exports, with approximately 1.6% of the world market share INDONESIA AND THE UNITED STATES Indonesia is currently United State’s 28th largest goods trading partner with $28.0 billion in total (two ways) goods trade during 2013. Indonesia was the United States’ 33rd largest goods export market in 2013. Indonesia was the United States’ 25th largest supplier of goods imports in 2013. The five largest import categories in 2013 were: Knit Apparel ($2.7 billion), Rubber ($2.3 billion), Woven Apparel ($2.3 billion), Electrical Machinery ($1.6 billion), and Footwear ($1.2 billion).
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TEXTILE MANUFACTURE The geographical distribution of the Indonesian textile industry is highly concentrated on the island of Java and in West Java. Almost 90% of the textile industry is located in Java and around 55% are concentrated in West Java alone. The textile industry is expected to remain a major contributor to Indonesias economy in the future
One of the leading reasons is that Indonesia still has a comparative advantage for labor-intensive industries and a sizable domestic market, given the nations 240 million population. In 2007, the Indonesian government introduced a revitalization programme that aims to provide government subsidies of 11% for the reimbursement of machinery and equipment.
TOP 5 MANUFACTURERS Manufacturer PT Kmk Global Sports
Top Product Footwear
Country Indonesia
PT. Ghim Li Indonesia
Cotton Knit
Indonesia
PT. Anugrah Maju Perkasa PT Sandang Asia Maju Abadi
Swim Spandex knit Denim Woven pants Cotton Woven PT Istana Garmindo Jacket Jaya Ladies suit Ladies suit polyester PT. Pou Chen Indonesia Footwear Sports
Indonesia Indonesia
Indonesia
Indonesia
Customers Nike USA Nike Mexico Nike Australia Walmart USA Macys USA Target USA Forever 21 Inc Levi Strauss co. USA Levi Strauss Co. Mexico J. Crew Inc Nordstrom Inc
Asics North America Puma Inc
FUTURE OUTLOOK The textile and textile products (TPT) industry is one of the important manufacturing sectors in Indonesia. The labor absorbing industry continues to encounter challenges with other ASEAN competitors, although the performance of the industry continues to grow significantly. With the government’s support, the textile industry is expected to continue growing for the next upcoming years.
TRADE
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AGREEMENTS APEC, ARF, AsDB, ASEAN, CCC, CP, ESCAP, FAO, G-15, G-19, G-77, IAEA, IBRD, ICAO, ICC, ICFTU, ICRM, IDA, IDB, IFAD, IFC, IFRCS, IHO, ILO, IMF, IMO, Interpol, IOC, IOM (observer), ISO, ITU, MONUC, NAM, OIC, OPCW, OPEC, UN, UNAMSIL, UNCTAD, UNESCO, UNIDO, UNIKOM, UNMIBH, UNMOP, UNMOT, UNOMIG, UPU, WCL, WFTU, WHO, WIPO, WMO, WToO, WTrO
RELATIONSHIP BETWEEN INDONESIA AND THE US
The United States and Indonesia meet regularly under the auspices of a Trade and Investment Framework Agreement (TIFA) that was signed in July 1996. Under the TIFA, Indonesia and the United States signed a Memorandum of Understanding to Combat Illegal Logging and Associated Trade in 2006 (Office of the United States Representative)
Port of departure
Port of arrival
Price
Time of Arrival
Company
Jakarta, Indonesia Long Beach, CA
$ 2,450
24 days and 16 hrs
Prisma Cargo Solutions
Jakarta, Indonesia
New York City
$ 5,197
31 days and 24 hrs
PT Multiguna International
Jakarta, Indonesia
Miami, FL
$ 6,117
33 days and 19 hrs
PT Multiguna International
REFERENCES "About Indonesia." About Indonesia. Web. 18 Feb. 2015. <http://export.gov/indonesia/doingbusinessinindonesia/aboutindoneisa/index.asp>. Better Work Indonesia. Web. 25 Feb. 2015. <http://betterwork.org/indonesia/?page_id=45>. Directorate General for National Export Development. Web. 25 Feb. 2015. <http://djpen.kemendag. go.id/app_frontend/contents/53-indonesia-in-fta>. "DOING BUSINESS IN INDONESIA." Doing Business in Indonesia – Indonesian Business Climate 2013. Web. 20 Feb. 2015. <http://www.indonesia-investments.com/business/item7>. "Doing Business with Indonesia." Web. 25 Feb. 2015. <http://www.doingbusiness.org/data/exploreeconomies/~/media/giawb/doing business/documents/profiles/country/IDN.pdf?ver=2>. "Freight Calculator." World Freight Rates -. Web. 25 Feb. 2015. <http://worldfreightrates.com/ freight>. "Indonesia | United States Trade Representative." Indonesia | United States Trade Representative. Web. 25 Feb. 2015. <https://ustr.gov/countries-regions/southeast-asia-pacific/indonesia>. "Indonesia Country Profile." BBC News. 24 Oct. 2014. Web. 25 Feb. 2015. <http://www.bbc.com/ news/world-asia-pacific-14921238>. "Indonesia GDP Growth Rate | 2005-2015 | Data | Chart | Calendar | Forecast." Indonesia GDP Growth Rate | 2005-2015 | Data | Chart | Calendar | Forecast. Web. 25 Feb. 2015. <http://www.tradingeconomics.com/indonesia/gdp-growth>. “Indonesia Manufacturing Sector and Industries | GBG.” Indonesia Manufacturing Sector and Industries | GBG. Web. 24 Feb. 2015. <http://www.gbgindonesia.com/en/manufacturing/article/2011/overview_of_the_manufacturing “Indonesia: Driving Ahead.” Textile World Asia. Web. 25 Feb. 2015. <http://www.textileworldasia.com/ Issues/2013/October-November-December/Country_Profiles/Indonesia-Driving_Ahead>. “Indonesia.” Country Brief. Web. 24 Feb. 2015. <http://www.dfat.gov.au/geo/indonesia/Pages/indonesia-country-brief.aspx>. “Indonesia.” Overview. Web. 21 Feb. 2015. <http://www.worldbank.org/en/country/indonesia/overview>. “Indonesia’s Textile and Clothing Industry | GBG.” Indonesia’s Textile and Clothing Industry | GBG. Web. 25 Feb. 2015. <http://www.gbgindonesia.com/en/manufacturing/article/2014/indonesia_s_textile_ and_clothing_industry.php>.
“Indonesia: What about Economic Growth in 2015?” INDONESIA PHARMA COMMUNITY. Web. 23 Feb. 2015. <http://indonesia-pharmacommunity.blogspot.com/2015/02/indonesia-what-about-economic-growth-in.html>. “Login to Your Panjiva Account — Panjiva.” Login to Your Panjiva Account — Panjiva. Web. 20 Feb. 2015. <https://panjiva.com/myPanjiva>. “Minimum Wages in Indonesia with Effect from 01-01-2015 to 31-12-2015.” WageIndicator.org. Web. 25 Feb. 2015. <http://www.wageindicator.org/main/salary/minimum-wage/indonesia>. “Relocating to Indonesia - Guide for Expats.” Relocating to Indonesia. Web. 21 Feb. 2015. <http://www. kwintessential.co.uk/guide/relocating-to-indonesia.html?highlight=YToxOntpOjA7czo5OiJpbmRvbmVzaWEiO30=>. “The Observatory of Economic Complexity.” OEC: Indonesia (IDN) Profile of Exports, Imports and Trade Partners. Web. 23 Feb. 2015. <http://atlas.media.mit.edu/profile/country/idn/>. “U.S.-Indonesia Trade and Investment Relationship.” U.S. Department of State. U.S. Department of State, 18 Nov. 2011. Web. 25 Feb. 2015. <http://www.state.gov/r/pa/prs/ps/2011/11/177383.htm>.
Maria Claudia Galli FASM 420 Global Sourcing Prof, Grace Canepa
Winter 2015