Economic , International Trade and Investment Situation in Indonesia
Bram Sitorus S.E. MBA (布拉姆)
Co-Founder @ SPM Consulting | Wealth & Risk Management, People Development
Introduction
a.?????Geograpichal Positions
Based on its geographical location, the Indonesian archipelago is between the Asian Continent and the Australian Continent, and between the Indian Ocean and the Pacific Ocean. Thus, the Indonesian territory is in a cross position, which has an important meaning in relation to climate and the economy.Indonesia, which is located between two continents and two oceans, makes it possible to become a crossroads of world traffic, both air and sea traffic.Indonesia as a cross point of world economic activity, between trade in industrialized countries and developing countries. For example, between Japan, Korea and China with countries in Asia, Africa and Europe.
The influence of the aforementioned seasons has made Indonesia a leading agricultural country. Agriculture in Indonesia is progressing rapidly and produces a lot of foodstuffs such as rice, corn, vegetables, fruits, rubber, coffee, sugar, tobacco, etc. which are very useful for the prosperity and sustainability of the Indonesian population, economically an opportunity. to participate in international trade.
b.????The most relevant historical facts
Indonesia was formerly known as the Dutch East Indies (or Netherlands East Indies). Although Indonesia did not become the country's official name until the time of independence, the name was used as early as 1884 by a German geographer; it is thought to derive from the Greek indos, meaning "India," and nesos, meaning "island." After a period of occupation by the Japanese (1942–45) during World War II, Indonesia declared its independence from the Netherlands in 1945. Its struggle for independence, however, continued until 1949, when the Dutch officially recognized Indonesian sovereignty. It was not until the United Nations (UN) acknowledged the western segment of New Guinea as part of Indonesia in 1969 that the country took on its present form. The former Portuguese territory of East Timor (Timor-Leste) was incorporated into Indonesia in 1976. Following a UN-organized referendum in 1999, however, East Timor declared its independence and became fully sovereign in 2002.
c.?????The Population
The distribution and density of the population in Indonesia vary considerably from region to region; the bulk of the population lives on the western islands of Java, Bali, and Madura. Overall, the population nearly doubled between the mid-20th and the early 21st century, with
a moderately high rate of growth. There have been, significant regional contrasts in this rate. In Java, for example, population growth has been significantly less than in the outer islands. A sharp decline in fertility rates also has been evident throughout Indonesia, attributable largely to an increase in the age when people marry and the widespread availability of birth control products. density of the population in Indonesia vary considerably from region to region; the bulk of the population lives on the western islands of Java, Bali, and Madura.
Overall, the population nearly doubled between the mid-20th and the early 21st century, with a moderately high rate of growth. There have been, however, significant regional contrasts in this rate. In Java, for example, population growth has been significantly less than in the outer islands. A sharp decline in fertility rates also has been evident throughout Indonesia, attributable largely to an increase in the age when people marry and the widespread availability of birth control products. Lower fertility has been especially conspicuous in central Java. Mortality rates have declined substantially since the mid-20th century, largely because of improved health care, better dietary and nutrition practices, and improvements in housing and water quality. The rates of infant and child mortality also have dropped.
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The balance of payments , FDI and Portofolio
Indonesia’s HDI value for 2018 is 0.707 . Table A reviews Indonesia’s progress in each of the HDI indicators. Between 1990 and 2018, Indonesia’s life expectancy at birth increased by 9.2 years, mean years of schooling increased by 4.7 years and expected years of schooling increased by 2.8 years. Indonesia’s GNI per capita increased by about 155.9 percent between 1990 and 2018.
Indonesia’s International Investment Position (IIP) recorded a net liability at the end of the second quarter of 2020 totalling USD 280.08 Billion (25.7% of GDP), up USD 24.3 billion from the USD 256.6 billion position (22.8% of GDP) registered at the end of the first quarter of 2020 . The increment was explained by a larger increase in the position of Foreign Financial Liabilities (FFL) than Foreign Financial Assets (FFA), which also reflected in the financial account surplus recorded in Indonesia’s Balance of Payments (BOP) in the second quarter of 2020.
Direct investment recorded a net liability position of USD 143.4 billion in the second quarter of 2020, up USD 15.6 billion (12.2% ) from USD 127.8 billion in the previous period due to an USD 18.6 billion increase on the liability side that exceeded the USD3.0 billion gain on the asset side.
Direct investment liabilities recorded a USD228.5 billion position (20.9% of GDP). At the end of the second quarter of 2020, up from USD210.0 billion (18.6% of GDP). At the end of the first quarter of 2020. The increase was dominated by the acquisition of an Indonesian financial institution by a company from Thailand together with additional capital investment in domestic non-oil and gas sector firms. Furthermore, the higher direct investment liability position was also influenced by other change factors, such as a positive revaluation of domestic financial assets for investment as well as a stronger rupiah against the US dollar compared with conditions at the end of the previous period.
The position of direct investment assets increased to USD85.2 billion in the reporting period from USD82.2 billion at the end of the first quarter of 2020, primarily on the back of positive revaluation factors in line with improvements recorded in the property and stock indexes of several asset placement countries, including Singapore.
The portfolio investment net liability position increased 10.1% in the second quarter of 2020 to a level of USD236.5 billion from USD214.9 billion in the previous period, driven by a USD22.1 billion surge of portfolio investment liabilities that exceeded the corresponding USD 0.5 billion increase in portfolio investment assets. The position of portfolio investment liabilities increased 9.4% from USD236.3 billion at the end of the first quarter of 2020 to USD258.4 billion at the end of the second quarter of 2020. Lower global financial market uncertainty spurred foreign investment inflows to domestic financial markets in the form of global bond issuances and purchases of government debt securities.
Indonesia Exchange Rate System
The Bank of Indonesia agreed on 12th and 13th October 2020 to hold the BI 7-Day Reverse Repo Rate at 4.00%, while also maintaining the Deposit Facility (DF) and Lending Facility (LF) rates at 3.25% and 4.75%. The decision is consistent with the need to maintain rupiah exchange rate stability against a backdrop of projected low inflation. Bank Indonesia is focusing on the quantity channel by providing liquidity, including support for the Government in terms of accelerating state budget realisation in 2020 to hasten the economic recovery from COVID-19. In addition, Bank Indonesia is implementing the following measures:
1.????Maintaining rupiah exchange rate stabilisation policy in line with the currency's fundamental value and market mechanisms;
2.????Strengthening the monetary operations strategy in order to reinforce the accommodative monetary policy stance;
3.????Accelerating money market and foreign exchange market deepening through infrastructure development, including Electronic Trading Platforms (ETP) as well as a Central Counterparty (CCP);
4.????Strengthening policy implementation to stimulate SMEs through corporatisation, increasing capacity, access to finance as well as digitalisation in line with the National Made in Indonesia Movement
5.????Strengthening the digital economy and finance ecosystem through the use of digital payment instruments as well as collaboration between the banking industry, FinTech and e-commerce to support the national economic recovery program;
???????????Bank Indonesia will continue to implement the follow-up policy measures required to support the national economic recovery program by carefully observing global economic and financial market dynamics as well as COVID-19 transmission and the impact on the economic outlook of Indonesia over time. Close policy coordination with the Government and Financial System Stability Committee will constantly be strengthening order to maintain macroeconomic and financial system stability, while accelerating the national economic recovery.
The global economic recovery is proceeding as expected.?Global economic growth momentum is rebounding on the back of extraordinary fiscal stimuli introduced in several advanced economies, particularly the United States. The recent gains have been boosted by economic recovery in China in response to large fiscal stimuli and a flattening of the COVID-19 curve, which have increased investment in the manufacturing industry amidst more muted economic performance in other developing economies. The global economic recovery prompted increases in several early indicators in September 2020, including public mobility, the Purchasing Managers Index (PMI) for manufacturing and services as well as consumer confidence in the United States and European Union. Moving forward, the global economic recovery will be influenced by lower COVID-19 transmission rates, increasing public mobility and ongoing policy stimuli. Furthermore, the global economic recovery will increase world trade volume and international commodity prices in line with previous projections. Meanwhile, global financial market uncertainty remains elevated in response to geopolitical issues, such as the US election and Brexit negotiations, coupled with trade tensions between the United States and China. Such dynamics will impede capital flows to developing economies and restrain currency appreciation in a number of countries, including Indonesia.
Indonesia in International Organisation
a)????Based on the form
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b)????By Region
c)????Based on Activities
d)????Based on the Cooperation Pattern
e)????By Function
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? Indonesia Most Significant Exported Goods
Indonesia Most Significant Imported Goods
Indonesia Most Import Partners
Indonesia Most Export Partners
Indonesia Preferential Trading Area
In addition to trade agreements that are already in effect, Indonesia has also signed a cooperation that is yet to be implemented, namely the Trade Preferential System of the Organisation of the Islamic Conference which has the participation of 35 countries.
Indonesia is also carrying out negotiations for the following trade agreements:
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Indonesia Most Imported Goods Tariff Barrier
As we can see. For the most relevant 5 good that imported to Indonesia there is no tariff barrier of it.
Indonesia Nature Exported Goods
Indonesia Export and Import Diversification Statistics
Conclusion
Indonesia's economic growth showing a quite stable conditions every year and it has put Indonesia into one of the world's economic powers. Indonesia's success in becoming a global economy power cannot be separated from the development capital that Indonesia has.
Indonesia is a country that has very complete development capital, starting from abundant natural resources especially steam coal , since coal resources is very rich in Indonesia and it become the main exported goods from Indonesia. In the past decade, the Indonesian economy has shown positive consistency by maintaining a good economy relationship between India, Singapore , and China. This 3 country are the biggest trading partners for Indonesia that really have a big impact t0 Indonesia economy internationally.
This high growth has made the contribution of investment to the economy gross domestic product / GDP during the last five years under the administration of Indonesia President Joko Widodo and likely continue to increase. This achievement is above the average for the lower middle income group of countries where Indonesia is perched in this group - and even compared to the group of high middle income countries.
Indonesia seems not experiencing an investment shortage, including foreign investment. But still , political stability either locally of Internationally in Indonesia need to be concerned especially in the year of general elections. Otherwise this aspect could bring an impact into the investment in Indonesia especially foreign investment. ?Therefore, the problem of investing in Indonesia is not a matter of size , what matter is how to make the economy or investment ?is not wasteful and also make sure that the wheel of economy is rotating efficiently.