Indonesia is the fourth most populated country in the world; its huge national marketplace provides varieties of opportunities for investments for domestic and foreign investors. Indonesia is actually situated in the Southeast part of Asia and expanses almost 5120 km passing through the equator. The country has about 13000 islands between Asia and Australia. Because of this reason, there has been an effect on the political, social, and monetary and cultural life of the nation (Christianto Leasiwal, 2013). Amongst all 13000 islands, the nation has five largest islands namely, Java, Papua, Sulawesi, Kalimantan and Sumatra, among all five islands Java is the most populated island which has about 125 million population.
The report will analyse the various key elements like legal system as well as political system which asses the ease of investment in the markets of Indonesia. Then, this report will analyse the economic system which is the most important and significant factors that actually influences the decisions of investment. The main motive of this paper is to analyse and show the country profile of Indonesia. The paper will also summarise the environment factors of the country, along with this, it also describe the technology that the country uses in several fields.
Indonesia has the chief economy in Southeast Asia as the marketplace in the country is totally based on its economy with an important association within the country. There are a huge amount of state owned concerns and the country is basically considered as a developing economy. In the end of the year of 2009 the Gross domestic Product of Indonesia was $540.3 billion along with this, per capital Gross Domestic Product was $2717 (Allaby, 2008). Same as in the year 2010 the growth of Gross Domestic Product reached around 5.9% and in the future it shifts to an average of 6.2% in the year 2015- 2016. In respect to Gross Domestic Product, the industrial sectors in the country is the largest of about 46.9% that involves the services of about 37.2%, whereas, agriculture of about 15.9%, apart from this, Indonesia is the foremost exporter of Oil. The economy of Indonesia is on the rise and the nation takes its fair and legal position as a largest destination for FDI. Indonesia finds itself at a main point in its transitions from that of a low income to middle income economy as well as from a main manufacturer to a value added exporter and also has information based economy (Dept, 2015). The occasions for investment are on the rise that ranges from infrastructure to producing and services. Thus, this shows the great opportunity for the investors for participating in the market.
The country’s lower middle income population constantly realise the customer aspirations off the back of extending customers credit as well as increasing incomes brought Gross Domestic Product per capita to $4200 in the year 2010. Developing and imp roving middle class is actually opened up the scope and scale of the consumer markets. Apart from all these, the country’s production sectors perform a huge role in the manufacturing of commodities that are being purchased. Because of import services the country is also9 responsible for meeting its demands for gadgets like, high tech goods and smart phones which the other country does not yet produces. Indonesia is considered as the leader of the market in the manufacturing of Palm oil, coal, natural gas, robber and also cocoa (Duggan, 2011). Some of the major companies are fuel, chemical fertilizers, cement, natural gas, textiles and mining. Apart from this, there is even decrease in the deficiency of the population and the budget of the country is growing and developing. The country’s reform-minded authority has undertaken various important adjustments regarding structures that concentrate on stamping out corruption, developing the environment of the business as well as better managing public finance. The legislative government even shifted to dismantle all obstacles that have been imposed on foreign direct investment. On the basis of the fiscal report in April 2011, the price increases rate of Indonesia stood at 6.16%. From the year 1997 to 2010, the inflation rate of Indonesia reaches between 13.265. The population of Indonesia stood at 232.4 million in the year 2010 and it has quite a good population percentage. The median age of the country is about 27.2 years as well as the growth of the population is about 1.175% (Effect of Corporate Governance, Integrated Quality Management, Corporate Social Responsibility on Competitive Capabilities and Operational Performance, 2016). By analysing the age structure of the country, it is of about 28.4% is between 0-14 years, 67.5% is between 16-67 and 5.8% over 65 years. The rate of life expectation is about 70.46 years. In the year 2011, the labour force was about 116.5 million and by dividing the labour force it has been analysed that mostly the agriculture employs people which is closely followed by the services sector of about 39.3%.
Indonesia is now become the most vibrant democracy country in the Southeast Asia as the country enjoys a level of party-political rights and freedom. The current developed political scheme and policies of the country influences and inspires equality and freedom for the population of the nations (Barlinti, 2014). Indonesia mainly has three branches first one is Executive branch, Judicial Branch and Legislative Branch. Sam as other nations, Indonesia also has the Head of the state or President which comes under the top of the executive branch. The president has the power and potential to reject as well as assign the cabinet ministers. The main and significant role of the President of this country is to appoint judge of the Supreme Court (Thomas B. Pepinsky, 2013). Under the President, one representative body is the Vice- President and he is the commander-in- chief of the armed forces (Indonesia rolls out border control system, 2010). Other than vice presidents, many cabinet ministers and non- departmental assistances are also comes in executive branch.
The first most role of the President is to make policies, rules, govern his nation as well as observes the matter of foreign affairs. Apart from this, the legislature branch involves representative entities who are the people of consultative assembly (Faiz, 2016). In Indonesia, the MRP has two chambers one is People’s Representative Council and the other one is Regional representatives Council. Whereas, the judicial branch of Indonesia has judicial system under which three courts are undertaken, High Court, Supreme Court and the District Courts. Among all three courts, the Supreme Court is at the top level and has the right and power to exercise the criminal cases as well as civil cases. Indonesia has several courts for different matters and affairs such as military courts, administrative courts and religious courts (Hadiz and Robison, 2013). In Indonesia, all the civil arguments are managed in a State Court then promoted to the high court.
The legal system of Indonesia consists of three divisions of legal system that are, the notaries, advocates and legal consultants. A notary is assigned by the Department of Justice and Human Rights who are basically skilled and experienced to legal notarise deeds and bonds. A notary makes and implements the formal deed or bonds are known as the notaries’ deeds, which are even known as accurate deed (Indonesia, 2012). The permissible and lawful papers need notarised deeds. The main character of the notary is to assure the parties have the substantial amount of evidence for their deeds and then the action is implemented appropriately. The main feature of a notary is that it should be extant when any party plans to begin a business or firm. A notary is assigned by the legislative as his duty does not offers legal suggestions. These groups require getting suggestions before they met up the notary.
The key role of the notary is to make as well as verify the data and documents and the parties have the right for choosing any notary freely they desire to. Apart from this, the advocates are those representative bodies who practice privately as well as have formal training legally. The key role of the lawyers is to concentrates on the litigation as they can even offer general lawful suggestions. For the suggestions on foreign transactions skilled and talented advocates are required (Indonesia country profile, 2007, 2008). It is quite necessary and vital to choose trust worthy and talented advocates in order to do the business in Indonesia. Apart from this, many legal consultants in Indonesia have completed trendy and standard legal training overseas and at the same time prefer to specialise in offering legal suggestions as well as documentation for commercial, banking and corporate matters.
The technology system in Indonesia is developing and improving rapidly as its digital innovation sectors is smoothly evolving. It is calculated with the help of data that, almost 70 per cent of Indonesians are relatively tech savvy (The EU Dispute Settlement: Towards Legal Certainty in an Uneven International Investment System?, 2016). Moreover, about one third of the total population of Indonesia have access internet by which the rate is growing rapidly. Smart phones, Android phones are the main devices for the purpose accessing internet (Gifford, 2013). The Ministry of Indonesia has also announced that idea of E-commerce roadmap that focuses on the motive for supporting the making of 1000 new ‘technopreneurs’ by the year 2020. Currently, there has been quite a rapid and smooth development in the local commenced sectors. For the purpose of facilitating and benefiting the development and improvement of the beginners business, the co- working spaces and incubators are merging around big cities in Indonesia. Technological apps like Google, Face book, Twitter are established within the eco-systems and also allow local companies to offer services in the internet.
The new technological innovation and advanced entrepreneurs in the market of Indonesia consists GoJek- it is the first start-up of Indonesia origin to be considered as a Unicorn (Marcovitz, 2007). GoJek starts as an Uber style company and motorcycle taxis provider for delivery services and courier services. Other one is, Tokopedia, it is a largest online retail marketing place which allows owners of small businesses and individuals in Indonesia to smoothly maintain their online shops. And the last one is, Traveloka, it is an Indonesian flight booking websites that holds the motive of making travel complex (Vaisutis, 2007). All three innovations and advancement start-ups are developing and improving the standard of living of Indonesians through associating them with the value added services and offers that were earlier only executed by the rich.
The topic of FDI in Indonesia has been assessment from the last 50 years. It has been the most prominent in assessments of economic development in Indonesia. The administration of Indonesia underway its liberalisation of its capital account commands from 1967, when the government announced the Foreign Direct Investment Law No. 1/1967. After that the command adopted a free-floating exchange scheme in 1970 which was trailed by additional liberalisation of the monetary sector in 1980s. In subsequent years after implementing the foreign direct Investment law, Indonesia experienced a speedy financial growth which amounted to around 7.3% over the period of 1970-1996. But due to economic crisis in 1997-98, it occasioned in net private capital outflows from Indonesia. From the gathered data of Bank Indonesia, displays an adverse foreign direct investment, which is on usual around US$ 3 billion over the phase of 1998-2002. Indonesia faced a huge negative impact due to financial crisis in East Asia with its GDP contracting by 13% in 1998. Numbers of sub-segment of the economy had decreased intensely from the high growth rate except the agriculture department, fishing, oil and mining, energy and water and public services sectors. Transport, hotels and restaurants, finance and construction faced huge negative impact and were badly hit.
FDI flows in Indonesia in the current decade have been experiencing positivity and now are expanding noteworthy. In 2016, the FDI investment in Indonesia reached around US 29 billion. Base metal, machinery, electronics and pharmaceuticals are the sectors that get most of the benefits due to growth in FDI. Country’s biggest inflows was made from Singapore which is accounted up to USD 9.3 billion in 2016, followed by Japan which accounted by USD 5.4 billion. FDIU growth is attributed to a set of economic policies that was implemented by the Indonesian government in the period of September 2015 to November 2016. The Indonesian government was able to enhance the overall market for the country in 2016 by altering the political and economic stability and through structural reforms that have removed many of the investment risks. Though, there are still several risks present in the procedures of foreign investments like terrorism risk, poor quality of infrastructure and high corruption in government employees.
In Indonesia, as an overall rule, outsiders can only capitalize through placing up a limited liability business. From last ten years, there have been noteworthy changes in Indonesia. Most of the foreign investments are government by the foreign capital investment law of 1967 which was substituted by Law of 2007 on capital investing. Capital Investment Coordinating Board is the governmental agency in Indonesia to look after the foreign investments. Most of the investments are to be made by taking up a stake or having full ownership of a PMA business which is a limited liability firm established under the law number 40 of 2007.
In Indonesia there are 119 commercial banks and more than 2000 rural banks. The Top 10 banks of the country, holds over 60 per cent of the bank assets of the country. Bank of Indonesia, which is the central bank of the country and the financial services Authority regulate the key features of the banking and financial system which includes the bank regulation and supervision (Warnk, 2010). The country is encouraging the development of Islamic banking and hopes to increase its share of total banking assets over five per cent. The central bank of the country has kept its benchmark interest rate on 4.75 per cent. It is stated that the interest rate is in line with efforts to maintain the macroeconomic and financial stability and to support the sustainable economic growth. The simple banking law sanctioned the formation of three kinds of banks in Indonesia, namely the general banks, savings banks and development banks (Vaisutis, 2007). These three banks are distinguished on the sources from which they gather funding and type of credit they may extend. Furthermore, there are two kinds of financial institutions in the country that is grounded in the existing administrative regulations, namely the non-bank financial institutions and leasing companies. The first kind of financial institute provides investment banking services and the later one provides lease financing.
Exchange rates can be defined as the price for which the money of a nation can be swapped for the nation currency. Some of the issues that impact exchange rates include the interest rates, inflation rates, political stability, trade balance, high level of transparency and general state of economy and quality of governance (Vaisutis, 2007). It is the value of a nation’s money in terms of other nations. Exchange rates have two mechanisms, namely the domestic currency and the foreign currency and can be recited directly or indirectly. It may also be uttered as the normal amount for a stage of time or as the rate at the end of the stage. The currency of Indonesia is Indonesian Rupiah. The most popular exchange rate for Indonesian Rupiah is the IDR to AUD rate.
There is range of taxes in Indonesia that companies, investors and people have to comply with. Some of these taxes are corporate income tax, individual income tax, luxury goods sales tax, international tax agreements, VAT and land and building tax.
Indonesia is an immensely varied nation and it is made up of more than 17,500 islands and has been the home of more than 300 ethnic groups. The country’s national motto is Unity in Diversity and people of the country believes in group thinking. As the country has group oriented values, ladder plays an important role in the Indonesian nation. Hierarchical relationship is appreciated, highlighted and preserved.
Indonesian people are usually indirect talkers which means they do not always utters what they actually mean (Helpman, 2006). It is totally upon the listener to recognize the meaning amongst the lines or to pay courtesy to the body language to recognize the real message. People speak silently and with submissive tone. People with loud tome are considered aggressive. In business, Indonesians spend time through contact in order to develop a string relationship. Trading with people on face to face is the only operative way of doing commerce. They give more importance to first meeting as to know the person rather the business (Duggan, 2011). People in Indonesia don’t rush for time as they believe the whole thing has its time and place and time does not bring money but good relationships do.
The difference in this aspect among the both the countries are much altered. Most of the Australians prefer to show their unique or personal characteristics whereas people of Indonesia prefer to show the connectivity with other members in a group (Berk and DeMarzo, 2017). As for illustration, an Australian will never irritate to say word ‘no’ if they disagree on something and will make direct communication, whereas Indonesia has low individualism score and thus have a collectivism society. Bothe of these countries also has high variations in terms of power distance (Berk and DeMarzo, 2017). According to Hofstede’s dimension, Australia is flatter than Indonesia as there are few hierarchical structures in the country and Indonesia has hierarchical structures.
From the above report it has been found that Indonesia has the major economy in Southeast Asia as the market in the country is totally based on its economy with a substantial association within the country. There are a huge number of state owned companies and the country is basically considered as a developing economy. In the end of the year of 2009 the Gross domestic Product of Indonesia was $540.3 billion along with this, per capital Gross Domestic Product was $2717. In terms of political system, it has been also found that Indonesia is now become the most vibrant democracy country in the Southeast Asia as the country enjoys a level of political rights and freedom. The current developed political system and policies of the country influences and inspires equality and freedom for the population of the nations. Indonesia mainly has three branches first one is Executive branch, Judicial Branch and Legislative Branch. Same as other nations, Indonesia also has the Head of the state or President which comes under the top of the executive branch.
In respect to technology in Indonesia, it has been analysed that the Ministry of Indonesia has also announced that idea of E-commerce roadmap that focuses on the motive for supporting the making of 1000 new ‘technopreneurs’ by the year 2020. Currently, there has been quite a rapid and smooth development in the local commenced sectors. For the purpose of facilitating and benefiting the development and improvement of the beginners business, the co- working spaces and incubators are merging around big cities in Indonesia. It has been also analysed that Indonesia’s vast population is set to develop to 288 million by the year 2050 that will serve in highly advance productive capacity and also serve as a consumer markets because the nations has reaches its estimated and aimed position.
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Berk, J. and DeMarzo, P. (2017). Corporate finance. 1st ed. Harlow, England: Pearson.
Christianto Leasiwal, T. (2013). THE ANALYSIS OF INDONESIA ECONOMIC GROWTH: A STUDY IN SIX BIG ISLANDS IN INDONESIA. Journal of Economics, Business, and Accountancy | Ventura, 16(1).
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Duggan, G. (2011). INTRODUCTION. Indonesia and the Malay World, 39(113), pp.1-6.
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Faiz, P. (2016). LEGAL PROBLEMS OF DUALISM OF JUDICIAL REVIEW SYSTEM IN INDONESIA.Jurnal Dinamika Hukum, 16(2).
Gifford, C. (2013). Technology. 1st ed. New York: Scholastic.
Hadiz, V. and Robison, R. (2013). The Political Economy of Oligarchy and the Reorganization of Power in Indonesia. Indonesia, 96(1), pp.35-57.
Helpman, E. (2006). Trade, FDI, and the organization of firms. 1st ed. Cambridge, Mass.: National Bureau of Economic Research.
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Marcovitz, H. (2007). Technology. 1st ed. Broomall, PA: Mason Crest Pub.
The EU Dispute Settlement: Towards Legal Certainty in an Uneven International Investment System?. (2016). European Investment Law and Arbitration Review, 1(1), pp.33-75.
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Thomas B. Pepinsky (2013). Pluralism and Political Conflict in Indonesia. Indonesia, (96), p.81.
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Warnk, H. (2010). INTRODUCTION. Indonesia and the Malay World, 38(110), pp.1-8.
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