The political and economic system in Indonesia


Indonesia is located in South- East Asia and portions its boundary lines with Papua New Guinea, East Timor and Malaysia. Other neighbouring states includeA Philippines, Singapore, Australia and the Indian district of theA Andaman and Nicobar Islands. It comprises of around 17,508 islands, the 5 largest being Jakarta, Sumatra, New Guinea, Kalimantan and Sulawesi. Its capital is Jakarta which is the most populated metropolis of Indonesia.

Refer- fig 1.

Area: It has an country of around 1,919,440 km2 which makes it the 16th largest state in the universe in footings of country.

Population: It has a population of around 230 million people and is the universe ‘s 4th most thickly settled state with the largest Moslem population in the universe. The island of Java is the most populated in Indonesia. In malice of the household planning programme practiced in Indonesia, its population is expected to turn to 250 million by 2020.

Refer- fig 2.

Cultural groups: There are around 300 cultural groups in Indonesia, the largest being that of Javanese ( 41 % ) followed by Sundanese, Malay and Madurese.

Religions: Here 86.1 % people follow Islam, 8 % follow Christianity, 3 % follow Hinduism and 2 % follow Buddhism. In malice of the Muslim bulk, the State is secular. Refer- fig 3.

Important metropoliss: Jakarta, Sumatra, Bali, Sulawesi, Borneo and Kalimantan are the most of import metropoliss with regard to merchandise and economic growing.


1,919,440 km2


234,181,400 million




Rupiah ( = 0.00011 US $ )

GDP ( mention fig-4 )

1.9 %

Official linguistic communication


Political System:

Even after independency, there was political instability in the state. Its first leader, President Sukarno, implemented the philosophy of “ Pancasila ” – monotheism, humanism and societal justness. A He so reinstated the 1945 Fundamental law in 1959 and proclaimed himself president for life in 1963. Due to assorted other reforms, he started deriving popularity among the multitudes. In 1965, distrust betweenA the armed forces ( ABRI ) and the Indonesian Communist Party ( PKI ) led to confusion in the state. To reconstruct order, Sukarno gave full authorization to Major General Suharto who misused his power and replaced himself as the President seting Sukarno under practical house arrest.A

Suharto so implemented the “ New Order ” which brought fiscal stableness to the state. He besides extended the powers of the military forces that in bend helped and re-elected him for up to 7 back-to-back 5 twelvemonth footings. But Suhato did non last long. Peoples started acquiring frustrated due to Suharto ‘s dominancy. They wanted to be a portion of the full election procedure which subsequently led to the outgrowth of Democracy. When Indonesia was hit by the economic Asiatic Crisis of 1997, the people were so agitated that they forced Suharto to vacate, go forthing the presidential term to his deputy, Bucharuddin Jusuf Habibie.A

In 1991, the 1st Parliamentary elections were held which were won by the Indonesian Democratic Party of Struggle led by Megawati, the girl of Sukarno. In 2004, she lost the first direct presidential elections of all time held in Indonesia to Susilo Bambang Yudhoyono who is the current President of Indonesia.

Today, Indonesia is a Republic with a Presidential system in which the president is the caput of province, commander-in-chief of theA Indonesian National Armed Forces and the manager of domestic administration, policy-making, and foreign personal businesss. He may function a upper limit of two back-to-back five-year footings. Executive power is exercised by the authorities whereas Legislative power by the authorities and the people. The 1945 Constitution provides for limited separation of executive, legislative and judicial powers.

The highest representative organic structure at national degree is theA People ‘s Consultative Assembly. Its chief maps are back uping and amending the fundamental law, kick offing the president, and formalising wide lineations of province policy.

Peoples ‘s Consultative Assembly

Regional Representative Council with 132 members

Peoples ‘s Representative Council with 560 members


Courts are present at the territory, province and cardinal degrees with the Supreme Court holding the highest authorization. Judges of the Supreme Court are appointed by the President himself.


Indonesia was hardest hit by the East Asiatic Financial Crisis of 1997-98 when its economic system declined by 13.7 % . Since so a slow but important economic recovery has ensued. The GDP growing increased by 5 % in both 2004 and 2005 and is expected to increase farther. Indonesia was lass affected by the 2008 Global Recession compared to its neighbors.

Factor OF Production:


Indonesia ‘s entire land country is around 192 million hectares out of which the land under agribusiness is about 66 million hectares. Paddy cultivation entirely accounts for around 11 million hour angle of the entire country. Around 60 % of the sum cultivated land is in Java. Apart from this, it besides has dry land ( 57 million hour angle ) and non – irrigated countries ( 6.3 million hour angle ) which is unproductive. The dry land is normally used for paces, domestic intents, plantations and unfastened grassland,

There are 3 major types of agriculture: little graduated table agriculture, little graduated table hard currency cropping and 1,800 big foreign or private estates. Among these, the latter two produce export harvests. Small-scale agriculture is carried out on smaller secret plans.

Agribusiness was the 1 and merely driving force of the state which helped it out of the economic system crisis of 1997. Since the first 5 twelvemonth development program, the authorities decided to cut down rice dependence from imports. Due to this, Indonesia became good known as a major rice importing state since the 1960s. In 2000 its rice production increased to an extent that provided a excess of over 2 million metric tons. Agribusiness on these land resources contributed to 40 % addition in GDP in 2009 and is a major nucleus of the state ‘s economy.A

Major agricultural merchandises: thenar oil, rice, tea, java, spices and gum elastic. Sugar is the largest commercial harvest with an one-year production of 26,000,000 dozenss in 1999 along with 1,564,000 dozenss of gum elastic. In 2002, Indonesia was the 4th largest manufacturer of java in the universe with about 369,600 dozenss of java per annum. It is besides the universe ‘s 2nd largest manufacturer of palm oil with 9.1 million dozenss produced in 2002.

Furthermore, pulpwood plantations are coming up quickly for different mush Millss. Though developed on unproductive land, they are most normally found in Sumatra and Kalimantan. Thus agribusiness plays an of import function to prolong the lives of 1000000s of people by supplying them day-to-day repasts. Agriculture by and large uses domestic natural stuffs and seldom any imported 1s. Hence agribusiness here is responsible for increasing the state ‘s foreign net incomes.


The state ‘s population is around 230 million out of which 113.3 million people constitute the labour force. Peoples are engaged in agribusiness, industry and other sectors.

Labor force – by business:


42.1 %


18.6 %

Other sectors

39.3 %

In 1989, the industrial sector employed merely 6.5 million workers i.e. 9 % of the entire labour force, whereas the agricultural sector employed about 41 million workers i.e. 55 % the entire labour force. Unemployment in 2001 was recorded as 8 % but existent unemployment was much higher including half of the entire work force. Because of this the labour force increased somewhat more than the entire employed people.

The agricultural industry non merely provided the people nutrient, but besides a life. In assorted large or little industries, foreign houses aided with proficient aid and made several licensing understandings without straight take parting in these houses. For illustration, the car assembly workss manufactured about 20 international trade name name cars, including Fiat, Suzuki and Toyota, chiefly under licence understandings. This was how the car assembly industry flourished in Indonesia.

Children below 15 old ages of age are prohibited from working more than 4 hrs per twenty-four hours, but this bound is far exceeded by 1000s of them. They are besides prohibited from working in risky countries. Furthermore, a national lower limit pay has non been decided. Wagess are normally set by country pay councils which are extremely inappropriate. They decide how much wages a individual requires to gain his day-to-day life. In 2002, the minimal pay in Jakarta was merely $ 39 per month.


Labor force

% Change






6.77 %



5.49 %



-15.52 %



14.86 %



1.57 %



1.91 %



1.16 %


Indonesia was the lone G20 member which saw economic growing during the planetary economic-financial crisis of 2008-09. The state ‘s GDP as per 2008 was $ 511 billion and is expected to increase farther. The services sector is the economic system ‘s largest accounting for 45.3 % of GDP, followed by industry ( 40.7 % ) and agribusiness ( 14.0 % ) .A However, agribusiness employs more people than other sectors ( 44.3 % ) of the entire work force.


Contribution to GDP


14 %


41 %


45 %

Major industries:

Petroleum and natural gas





Major agricultural merchandises:

Palm oil


Tea and java



Indonesia ‘s chief export markets are Japan, United States, China and Singapore while the major providers of imports are Japan, China and Singapore. Indonesia has extended natural resources including rough oil, natural gas, Sn, Cu, and gold. Major beginnings of income include touristry ( 15 % ) , mining ( 20 % ) , nutrient export ( 47 % ) while the remainder comes from communicating, energy, fabric and rubber export.

Refer- fig. 5.

The location of the Indonesian archipelago has been an of import facilitator for inter-island and international trade since many old ages. To advance its trade and international dealingss Indonesia acquired rank of organisations like APEC, ASEAN, WTO and G-20. In 2008 it signed the Economic Partnership Agreement ( EPA ) with Japan. Under this understanding Indonesia can be exempted from Nipponese import responsibilities up to an extent of 90 % . In the twelvemonth 2009, Indonesia exported goods deserving $ 115.6 billion.

In 2001, the state ‘s GDP was estimated at $ 687 billion and its per capita GDP was about $ 3,000 while the mean rising prices rate was 11.5 % . At nowadays besides, Indonesia ‘s advancement consists of little graduated table concern in a rural-based economic system along with some industry, excavation and forestry.


The political system in Indonesia, being a democratic 1, has proved to be good for Indonesia merely like several other states. When the people themselves are involved in choosing their leader, the state decidedly prospers.

Looking at the past and current economic status of Indonesia, it seems that the growing form is reasonably stable with minor ups and downs. Besides, the state ‘s major beginnings of income being agribusiness, excavation and touristry, exports would go on at the same gait. Furthermore the steady rise in population may take down the GDP per capita income in instance unemployment persists. To get the better of this, it should be ensured that more and more people are educated an employed. The current 5 twelvemonth programs are concentrating on ways and means to better the literacy rate of the state. This will heighten better quality of instruction along with brighter employment chances.

Assorted national and transnational companies are developing at a really rapid gait proposing faster economic growing of the state. The current 5 twelvemonth programs besides focus on how to increase the exports of the state while at the same time diminishing its imports. This will diminish Indonesia ‘s dependance on the other states thereby assisting it to accomplish autonomy.


Political Map of Indonesia:


Graph of Population vs. twelvemonth:


Fig. 3

GDP growing rate:


























Fig- 5