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Country ProfileA rich blend of cultures spread over 17,500 islandsRising regional power and key player within ASEANBlessed with an abundance of natural resourcesGrowing opportunities for foreign investment

COUNTRY PROFILE

Almost a third of Indonesia’s population is under 15 years of age

Spread between Asia and Australia, Indonesia is com-prised of around 17,500 islands, of which over 6000are inhabited. The archipelago is on a crossroadbetween the Pacific and the Indian oceans, andbridges the Asian and Australian continents. Thisstrategic position has influenced the cultural, social,political and economic life of the country. After yearsof political upheaval and a major domestic financialcrisis, Indonesia is now positioned to be one of themore politically stable countries in the region. Inaddition, it is widely anticipated to see significanteconomic growth in coming years.EARLY HISTORY: In the sixth and seventh centuries,Srivijaya in eastern Sumatra and Mataram in centralJava became the dominant kingdoms on the archi-pelago. Majapahit, the Hindu-Buddhist empire thatlasted from the late 11th to the 16th century, wasone of the region’s most influential and powerful.

Muslim emissaries travelling to and from Chinawere the first to introduce Islam to Indonesia, butits influence in society began only in the 11th cen-tury. By the end of the 16th century Islam hadreplaced Hinduism in Java and Sumatra.COLONISATION & INDEPENDENCE: The Dutchbegan colonising Indonesia in the early 17th centu-ry, seeking to monopolise its valuable natural sources.In 1602, the Dutch East India Company was estab-lished to manage the monopoly on trade and colo-nial activity, and by the mid-18th century the Dutchwere firmly established in Java. They consolidated con-trol of the country over the next two centuries.

The Japanese occupation during the Second WorldWar ended Dutch rule. After Japan’s surrender,Soekarno – the leader of Indonesia’s resistance toJapan – proclaimed independence in 1945 and fiveyears later established a single unitary republic. In1967 Soekarno was replaced by Suharto, whoremained in power until 1998. In 2009, Susilo Bam-bang Yudhoyono, the sixth president of Indone-sia, was re-elected to office (see Politics chapter).

CREATIVE ECONOMY: With almost 50% of theIndonesian population aged under 29 years, the gov-ernment is encouraging the growth of the creativeeconomy to increase its contribution to the coun-try’s GDP. The government aims to build the imageand identity of the nation while turning innovationand creativity into one of Indonesia’s new compet-itive advantages. Creative industries such as fash-ion, handicrafts, advertising and design currentlyaccount for around 7.5% of non-oil and gas exportsand employ nearly 8m people. POPULATION: Indonesia currently is the world’s17th-largest economy, third-most-populous democ-racy, largest archipelagic state and home to thelargest population of Muslims.

With a total of 245m people, the country now alsohas the world’s fourth-largest population. Jakarta isthe most populous city in Indonesia, with 9.1m inhab-itants, followed by Surabaya with 2.1m. The islandof Java, which is roughly the size of the state of NewYork, is the most populous island on earth – hometo 129m people. Java is also one of the most dense-ly populated areas in the world, with some 945 per-sons per sq km. Despite the family planning pro-gramme in place since the 1960s, Java’s populationis expected to grow to some 254m by 2020.

There are some 300 distinct ethnic identitiesspread throughout the country, with over 700 dif-ferent languages and dialects. According to the 2000census, the ethnic composition of the population is40% Javanese, 15% Sundanese, 3.3% Madurese, 2.7%Minangkabau, 2.4% Betawi, 2.4% Bugis, 2% Banten,1.7% Banjar, with 29.9% unspecified.LANGUAGE: The country is home to numerous relat-ed but distinct cultural and linguistic groups, thelanguages of many of which are derived from a com-mon mother tongue – Malay. Since independence,Bahasa Indonesia (the national language, a form ofMalay) has spread throughout the archipelago andbecome the most common language for written

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Island life A rich and colourful archipelago, looking to raise its global standing

www.oxfordbusinessgroup.com/country/Indonesia

COUNTRY PROFILE

communication, education, government, businessand media. However, local languages and dialects arestill important in a number of areas in the country.PHILOSOPHICAL BASIS: The philosophical basis ofthe Indonesian state is known as pancasila. Pancasi-la consists of two Sanskrit words, panca meaning“five” and sila meaning “principle”. It comprises fiveinterrelated principles. They are nationalism, human-itarianism, representative democracy, social welfareand monotheism. These principles continue to havea major underlying role in Indonesia’s political cul-ture today, even though the interpretation of the prin-ciples has varied over the decades.RELIGION: The first principle of the pancasila phi-losophy is the belief in one God. A number of differ-ent religions are currently being practised in Indone-sia, however, and their collective influence has hada significant impact on the cultural, economic andpolitical life of the region during its long history. TheIndonesian constitution guarantees religious free-dom, but only six religions are recognised by thestate, namely Islam (86.1%), Protestantism (5.7%),Catholicism (3%), Hinduism (1.8%), Buddhism (about1%) and Confucianism (less than 1%).

Before the arrival of the Abrahamic faiths of Chris-tianity and Islam, the popular belief systems on thearchipelago were influenced by Hinduism and Bud-dhism. On the resort island of Bali, over 90% of thepopulation still practise Hinduism.FLAG: The flag of Indonesia is two equal horizontalbands of red and white. The colours derive from thebanner of the Majapahit empire. Red is a symbol ofcourage while white represents purity.CLIMATE: Indonesia’s climate, which is almost entire-ly tropical, incorporates average temperatures ofbetween 28°C and 34°C in coastal areas, and 23°Cin the highlands. The country is almost fully sur-rounded by warm waters and temperatures vary lit-tle from season to season. The length of daylighthours also remains fairly constant, with a differenceof only 48 minutes between the longest and short-est day, allowing for crops to be grown year-round.

The most important variable in the archipelago’s cli-mate is rainfall, and extreme variations are due tomonsoons. The dry season lasts from June to Sep-tember and the rainy season from December to March.Rainfall and humidity, ranging from 70% to 90%, varydepending on the season and region. GEOLOGY: Indonesia’s seismic and volcanic activityis among the world’s highest. Lying near the edgesof the Pacific, Eurasian and Australian tectonic plates,Indonesia is prone to frequent earthquakes and vol-canic eruptions. The archipelago has more than 150active volcanoes, including Tambora and Krakatoa,both of which erupted in the 19th century, with dev-astating consequences. However, the volcanic ashthat has resulted from such eruptions has contributedsignificantly to the high agricultural fertility that hasallowed islands like Java and Bali to support high pop-ulation densities. Recent seismic-related disastersinclude the 2004 tsunami, which killed around 167,736

people, and the Yogyakarta earthquake, which result-ed in the deaths of nearly 5800.NATURAL RESOURCES: The country is blessed withan abundance of natural resources including petro-leum, gas, tin, nickel, timber, copper, coal, gold, sil-ver and fertile soil. Oil production in 2010 reached965,000 barrels per day (bpd). Oil reserves stand at3.8bn barrels and imports about 420,000 bpd. Addi-tionally, Indonesia is ranked as the world’s top pro-ducer of gold, fourth-largest producer of nickel,third-largest of copper and the second-largest of tin.

Indonesia is the world’s number one coal exporter.The country also has more than 61bn tonnes of coalreserves, which are mainly in Kalimantan and Sumat-era. Coal production has significantly increased inrecent years, rising from 152.7m tonnes in 2005 to305.9m tonnes in 2010. In 2009, exports of coalamounted to 176.4m tonnes.

Indonesia produced more than 18m tonnes ofpalm oil in 2009. In 2010 the total area of land allo-cated for palm oil cultivation was estimated at 7.8mha by the Agricultural Department. This land is divid-ed among private and government smallholdersmostly in Kalimantan and Sumatra. With regards toillegal logging of the rainforest, by joining the Round-table for Sustainable Palm Oil, a large number ofIndonesian companies have demonstrated they aretaking the issue seriously. POWER: In 2004, in an effort to increase electrici-ty capacity, the government initiated plans to buildcoal-fired thermal power plants by 2010. However,the completion date was pushed back to 2014 as anumber of projects are still in development.

The power transmission and distribution sector inIndonesia is largely dominated by the PerusahaanListrik Negara, a state-owned energy company thatcontrols around 85% of generated power. However,a new law on energy was enacted in 2009, replac-ing the 1985 legislation and creating a wealth ofopportunities for foreign investors to meet demand.

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THE REPORT Indonesia 2012

The islands are home to a variety of religious traditions