Economic And Social Environment Analysis Economics Essay

Indonesia is located in Southeast Asia, lying between Indian Ocean and Pacific Ocean. Its neighbouring states are Papua New Guinea, East Timor, and Malaysia[ 1 ].

The national flag of Indonesia was officially adopted on August 17 1945, after it gained independency from the Netherlands. The flag is besides known as Sang Merah Putih in Indonesian. The ruddy portion of the flag represents bravery, and the white portion of the flag represents the pureness of the purpose of the citizens[ 2 ].

It has an estimated population size of 245, 613, 043 citizens, and is presently the 4th largest state in the universe as of July 2011[ 3 ]. It is besides the largest Moslem population in the universe[ 4 ].

It has a population denseness ( figure of dwellers per country unit ) of 128.35 people per square meter as of 2010[ 5 ]and set down country of 1, 904, 569 square kilometers[ 6 ], whereas China has a population denseness of 143.48 people per square meter as of 2010[ 7 ]and set down country of 9,596,961 square kilometers[ 8 ].

Indonesia is besides a state with many mountains. The highest mountain in the state is known as Puncak Jaya, at 5030 meters high. However, the land there is largely coastal Lowlandss. In Indonesia, the clime is normally tropical, humid and hot.

This state is besides rich in many natural resources – such as crude oil, Sn, natural gas, lumber, Ni, Cu, bauxite, fertile dirts, coal, Ag, and gold. They produce merchandises like rice, tapioca, peanuts, gum elastic, java, chocolate, palm oil, domestic fowl, beef, porc and eggs. The fertile dirt and the tropical clime in Indonesia make it favorable for many harvests to turn and boom[ 9 ]. The location of chief industries in Indonesia is in Jakarta – which is the capital of Indonesia. It is the state ‘s largest commercial centre.

Economic & A ; Social Environment Analysis


The current GDP of Indonesia is US $ 706.7 billion in 2010 ( The World Factbook 2011 ) . Its GDP growing rate for the past decennary has shown little additions with some dips in between[ 10 ]. In add-on its prognosis GDP growing will go on to increase[ 11 ]. Underliing factors that influence growing rate ( ? )


Its GDP per capital over the past 4 old ages has been increasing steady[ 12 ]. Harmonizing to the World Factbook, in 2010, Indonesia ‘s GDP based on purachasing power para is US $ 1.03 millions and GDP per capita based on buying power para is US $ 4200. The Gini index over the past 4 old ages has been increasing and it has besides been forecast to go on to increase[ 13 ]. Overall consumer outgo has been increasing over the old ages from US $ 185 billion in 2005 to US $ 404 billion and all of the 12 others classs of consumer outgo have besides increased[ 14 ]. From 2007 to 2010, unemployment rate has lessening and is forecast to go on to diminish[ 15 ]. In 2010, the one-year gross income is US $ 2197.30 and one-year disposable income is US $ 1811.50[ 16 ]. In 2011, Human Development Indicators for Indonesia is 0.617[ 17 ].

Current rising prices rate

In 2010, the rising prices rate is 5.1 % ( The World Factbook 2011 ) . Cost of life ( ? )

Social Indexs

Since 2005, Indonesia ‘s literacy rate has ever been supra 90 % of the population above age 15 and over can read and compose. In 2010, the literacy rate is 92.6 %[ 18 ]. Merely minority of the populations studied in university as shown by the crisp lessening of figure of students of 20457.4 1000s from secondary school students to 4177.3 1000s university pupils[ 19 ]. Harmonizing to the World Factbook in 2010, the life anticipation of the populations is 71.33 old ages, the life anticipation of female is 73.99 old ages and male is 68.8 old ages.

Infrastructure development


Economic policy and long-run program ( ? ) Degree of Government engagement in the economic system ( ? ) Indonesian state-owned endeavors ( SOEs ) play a major portion in the Indonesian capital markets. In September 2010, listed SOEs contributed to 29.5 % of the entire market capitalisation on the Indonesian Stock Exchange. Like Malaysia and other Southeast Asiatic states, Indonesia wants to increase denationalization to drive the development of their capital markets and diversify sectors. Hatta Rajasa, Coordinating Minister for the Economy, late said the Indonesian Government would hold programs for more state-owned endeavor initial public offerings this twelvemonth. In add-on, the Government of Indonesia is actively seeking to restrict the figure of outstanding state-owned endeavors from 142 to 72 by 2014. Like many Asian centrally planned economic systems with state-owned endeavors, many are seeking to turn profitableness and increase operational efficiency.

As of financial twelvemonth 2009, entire grosss of Indonesian state-owned endeavors exceeded Rp 986 trillion ( US $ 106 billion ) . A Besides as ofA DecemberA 31, 2009, the assets of Indonesia state-owned endeavors reached 40 % of GDP[ 20 ].

Degree of foreign trade and investing ( tendency analysis )

Foreign direct investing influx has increased about by dual while the escape has been cut by about half from 2007 to 2010. As of 2010, the foreign direct investing influx is US $ 13303.7 million and the escape is US $ 2664.2 million. ( Explain the crisp addition & A ; lessening of the influx and escape )

From 2007 to 2010, both imports and exports have increased and the prognosis has shown that it will go on to increase[ 21 ]. The chief exports trade goods are oil and gas, electrical contraptions, plyboard, fabrics, gum elastic and their chief exports spouses – Japan 16.3 % , China 9.9 % , US 9.1 % , Singapore 8.7 % , South Korea 8 % , India 6.3 % , Malaysia 5.9 % in 2010 harmonizing to the World Factbook. The chief imports trade goods consist of machinery and equipment, chemicals, fuels, groceries and their chief imports spouses – China 15.1 % , Singapore 14.9 % , Japan 12.5 % , US 6.9 % , Malaysia 6.4 % , South Korea 5.7 % , Thailand 5.5 % in 2010 harmonizing to the World Factbook.

Sector analysis of economic system

15 % of the GDP is from the agribusiness sector, 38 % is from industry sector and in conclusion 47 % is from the service sectors ( The World Factbook 2011 ) . Analysis of strong and weak industries ( i.e. those with growing possible versus those which are in diminution ) ( ? ) Identify factors ( such as resource gift, authorities inducements or historical development ) that influence the comparative strengths of these industries. For illustration, the electronics industry, the nutrient processing industry, the touristry industry, etc ( ? )

Political & A ; Legal Environment Analysis

Fiscal Environment Analysis

Government Regulations and Enterprises

To assist with the state ‘s overall fabrication end product in pecuniary footings, Indonesia implemented revenue enhancement inducements as of August 2011 which will look to give their Manufacturing Sector a lift. However, there are positive sides and negative sides to this revenue enhancement inducement.

Where positiveness of this revenue enhancement inducement ( Tax vacation ) is concerned, Indonesia ‘s Industry Minister MS Hidayat states that in an attempt to promote farther investing in Indonesia, revenue enhancement vacations ‘ can be up to 10 old ages as of when the commercial operation starts. After the revenue enhancement vacation expires, the taxpayer is allowed a 50 % decrease in income revenue enhancement for the undermentioned two fiscal old ages. Additional periods of grant may be granted by the MoF ( Ministry of Finance ) in the involvement of keeping the fight of national industry and the strategic value of certain industries.

The negative side of this revenue enhancement inducement is that although Indonesia has decided to enforce this revenue enhancement inducement, it is merely applicable to 5 Industries within the fabrication sector: basic metal industries, upstream oil refinement and petrochemical industries, machinery, industrial resources of renewable energy and telecommunications equipment industries. Besides, in Indonesia, it takes around 54[ 22 ]yearss for the legal processing of 8 documentary processs before a concern can be set up. Within these 8 documental processs, there are 5 external costs that need to be paid.

These are some of import arrows for clients who want to profit from Indonesia ‘s revenue enhancement inducements:

First, to take advantage of the revenue enhancement vacation, the investing must be in a innovator industry ( mentioned above ) ; the approved new investing program must be at least Rp1 trillion ; at least 10 % of the investing capital must be placed in the Indonesian Bank and can non be withdrawn before the beginning of the realisation of the investing ; and the taxpayer must be in the signifier of Indonesian legal entity, and it must be established within 12 months before the issue of the ordinance or after the passage of the ordinance.

Second, in order to be to the full qualified for the revenue enhancement vacation there are other analysis that needs to be performed: handiness of substructure at the location of the investing ; soaking up of local work force ( employees should be bulk Indonesian citizens ) ; reappraisal of fulfilment of the Pioneer industry standards by the bespeaking taxpayer ; and a clear and concrete step-plan for transportation of engineering.

Third, a proposal equipped with complete back uping paperss of analysis must be submitted to the MoF who will name a confirmation commission to reexamine the strategic impact of the undertaking to the national economic system and to guarantee that the above standards are met, the lower limit required investing has been made, and commercial production has begun.

Fourthly, the commission will so confer with the Coordinating Minister for the Economy before subjecting its recommendation to the MoF. The MoF will so confer with with the President before the concluding blessing is granted.

Last, a taxpayer who has received the revenue enhancement vacation must subject the periodical study to the Directorate General of Tax and the confirmation commission sing the study of the use of fund placed in the Indonesian Banking and the audited study of the realisation of investing. Failure to follow with the above mentioned standards and describing duty will do annulment of the revenue enhancement vacation.

Hazard Analysis

We have chosen Malaysia as a placeholder for Indonesia because BERI does non supply hazard evaluations for Indonesia. Malaysia is similar to Indonesia in footings of their civilization, that they are both Muslim states. In add-on, Malaysia and Indonesia are both member provinces of Association of Southeast Asiatic Nations.

Malaysia has an overall hazard evaluation of 58, while China has an overall hazard evaluation of 60. A hazard evaluation of 0 agencies that the state is highly safe and riskless, while a hazard evaluation of 100 agencies that the state is highly hazardous. The hazard evaluation is calculated based on the combination of political hazard, operations hazard, and remittal and repatriation factor. Therefore, Indonesia is somewhat less hazardous than China in footings of constructing a mill in Indonesia.

On 8 October 2010, there was a inundation in eastern Indonesia, West Papua. More than 100 were killed. Harmonizing to BBC, “ Thousands of edifices, roads and Bridgess in five small towns have been damaged or destroyed ” . While measuring whether to construct a fabrication mill in Indonesia, Blake @ International should be wary that another inundation likes this may go on once more, which would destruct the mill. However, if Blake @ International intends to sell its merchandises to Indonesian citizens, it may see fabricating floats that can be fitted under the seats, so that if there is another inundation once more, the citizens can entree the floats easy and would non submerge.

In the twelvemonth 2011 entirely, there were many natural catastrophes – such as a landslide in Nias, warning of a vent eruption in West Java, and an temblor in North Sumatra. It is best to avoid puting up a fabrication works in these high hazard countries. Should Blake @ International decide to put up in Indonesia, they should be prepared to see the mill against any natural catastrophes that may go on.