2. 9
Country Profile
A rich blend of cultures spread over 17,500 islands
Rising regional power and key player within ASEAN
Blessed with an abundance of natural resources
Growing opportunities for foreign investment

3. 10 COUNTRY PROFILE
Almost a third of Indonesia’s population is under 15 years of age
Island life
A rich and colourful archipelago, looking to raise its global standing
Spread between Asia and Australia, Indonesia is com- CREATIVE ECONOMY: With almost 50% of the
prised of around 17,500 islands, of which over 6000 Indonesian population aged under 29 years, the gov-
are inhabited. The archipelago is on a crossroad ernment is encouraging the growth of the creative
between the Pacific and the Indian oceans, and economy to increase its contribution to the coun-
bridges the Asian and Australian continents. This try’s GDP. The government aims to build the image
strategic position has influenced the cultural, social, and identity of the nation while turning innovation
political and economic life of the country. After years and creativity into one of Indonesia’s new compet-
of political upheaval and a major domestic financial itive advantages. Creative industries such as fash-
crisis, Indonesia is now positioned to be one of the ion, handicrafts, advertising and design currently
more politically stable countries in the region. In account for around 7.5% of non-oil and gas exports
addition, it is widely anticipated to see significant and employ nearly 8m people.
economic growth in coming years. POPULATION: Indonesia currently is the world’s
EARLY HISTORY: In the sixth and seventh centuries, 17th-largest economy, third-most-populous democ-
Srivijaya in eastern Sumatra and Mataram in central racy, largest archipelagic state and home to the
Java became the dominant kingdoms on the archi- largest population of Muslims.
pelago. Majapahit, the Hindu-Buddhist empire that With a total of 245m people, the country now also
lasted from the late 11th to the 16th century, was has the world’s fourth-largest population. Jakarta is
one of the region’s most influential and powerful. the most populous city in Indonesia, with 9.1m inhab-
Muslim emissaries travelling to and from China itants, followed by Surabaya with 2.1m. The island
were the first to introduce Islam to Indonesia, but of Java, which is roughly the size of the state of New
its influence in society began only in the 11th cen- York, is the most populous island on earth – home
tury. By the end of the 16th century Islam had to 129m people. Java is also one of the most dense-
replaced Hinduism in Java and Sumatra. ly populated areas in the world, with some 945 per-
COLONISATION & INDEPENDENCE: The Dutch sons per sq km. Despite the family planning pro-
began colonising Indonesia in the early 17th centu- gramme in place since the 1960s, Java’s population
ry, seeking to monopolise its valuable natural sources. is expected to grow to some 254m by 2020.
In 1602, the Dutch East India Company was estab- There are some 300 distinct ethnic identities
lished to manage the monopoly on trade and colo- spread throughout the country, with over 700 dif-
nial activity, and by the mid-18th century the Dutch ferent languages and dialects. According to the 2000
were firmly established in Java. They consolidated con- census, the ethnic composition of the population is
trol of the country over the next two centuries. 40% Javanese, 15% Sundanese, 3.3% Madurese, 2.7%
The Japanese occupation during the Second World Minangkabau, 2.4% Betawi, 2.4% Bugis, 2% Banten,
War ended Dutch rule. After Japan’s surrender, 1.7% Banjar, with 29.9% unspecified.
Soekarno – the leader of Indonesia’s resistance to LANGUAGE: The country is home to numerous relat-
Japan – proclaimed independence in 1945 and five ed but distinct cultural and linguistic groups, the
years later established a single unitary republic. In languages of many of which are derived from a com-
1967 Soekarno was replaced by Suharto, who mon mother tongue – Malay. Since independence,
remained in power until 1998. In 2009, Susilo Bam- Bahasa Indonesia (the national language, a form of
bang Yudhoyono, the sixth president of Indone- Malay) has spread throughout the archipelago and
sia, was re-elected to office (see Politics chapter). become the most common language for written
www.oxfordbusinessgroup.com/country/Indonesia

4. COUNTRY PROFILE 11
communication, education, government, business
and media. However, local languages and dialects are
still important in a number of areas in the country.
PHILOSOPHICAL BASIS: The philosophical basis of
the Indonesian state is known as pancasila. Pancasi-
la consists of two Sanskrit words, panca meaning
“five” and sila meaning “principle”. It comprises five
interrelated principles. They are nationalism, human-
itarianism, representative democracy, social welfare
and monotheism. These principles continue to have
a 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 had
a significant impact on the cultural, economic and
political life of the region during its long history. The
Indonesian constitution guarantees religious free-
The islands are home to a variety of religious traditions
dom, but only six religions are recognised by the
state, namely Islam (86.1%), Protestantism (5.7%), people, and the Yogyakarta earthquake, which result-
Catholicism (3%), Hinduism (1.8%), Buddhism (about ed in the deaths of nearly 5800.
1%) and Confucianism (less than 1%). NATURAL RESOURCES: The country is blessed with
Before the arrival of the Abrahamic faiths of Chris- an abundance of natural resources including petro-
tianity and Islam, the popular belief systems on the leum, gas, tin, nickel, timber, copper, coal, gold, sil-
archipelago were influenced by Hinduism and Bud- ver and fertile soil. Oil production in 2010 reached
dhism. On the resort island of Bali, over 90% of the 965,000 barrels per day (bpd). Oil reserves stand at
population still practise Hinduism. 3.8bn barrels and imports about 420,000 bpd. Addi-
FLAG: The flag of Indonesia is two equal horizontal tionally, Indonesia is ranked as the world’s top pro-
bands of red and white. The colours derive from the ducer of gold, fourth-largest producer of nickel,
banner of the Majapahit empire. Red is a symbol of third-largest of copper and the second-largest of tin.
courage while white represents purity. Indonesia is the world’s number one coal exporter.
CLIMATE: Indonesia’s climate, which is almost entire- The country also has more than 61bn tonnes of coal
ly tropical, incorporates average temperatures of reserves, which are mainly in Kalimantan and Sumat-
between 28°C and 34°C in coastal areas, and 23°C era. Coal production has significantly increased in
in the highlands. The country is almost fully sur- recent years, rising from 152.7m tonnes in 2005 to
rounded by warm waters and temperatures vary lit- 305.9m tonnes in 2010. In 2009, exports of coal
tle from season to season. The length of daylight amounted to 176.4m tonnes.
hours also remains fairly constant, with a difference Indonesia produced more than 18m tonnes of
of only 48 minutes between the longest and short- palm oil in 2009. In 2010 the total area of land allo-
est day, allowing for crops to be grown year-round. cated for palm oil cultivation was estimated at 7.8m
The most important variable in the archipelago’s cli- ha by the Agricultural Department. This land is divid-
mate is rainfall, and extreme variations are due to ed among private and government smallholders
monsoons. The dry season lasts from June to Sep- mostly in Kalimantan and Sumatra. With regards to
tember and the rainy season from December to March. illegal logging of the rainforest, by joining the Round-
Rainfall and humidity, ranging from 70% to 90%, vary table for Sustainable Palm Oil, a large number of
depending on the season and region. Indonesian companies have demonstrated they are
GEOLOGY: Indonesia’s seismic and volcanic activity taking the issue seriously.
is among the world’s highest. Lying near the edges POWER: In 2004, in an effort to increase electrici-
of the Pacific, Eurasian and Australian tectonic plates, ty capacity, the government initiated plans to build
Indonesia is prone to frequent earthquakes and vol- coal-fired thermal power plants by 2010. However,
canic eruptions. The archipelago has more than 150 the completion date was pushed back to 2014 as a
active volcanoes, including Tambora and Krakatoa, number of projects are still in development.
both of which erupted in the 19th century, with dev- The power transmission and distribution sector in
astating consequences. However, the volcanic ash Indonesia is largely dominated by the Perusahaan
that has resulted from such eruptions has contributed Listrik Negara, a state-owned energy company that
significantly to the high agricultural fertility that has controls around 85% of generated power. However,
allowed islands like Java and Bali to support high pop- a new law on energy was enacted in 2009, replac-
ulation densities. Recent seismic-related disasters ing the 1985 legislation and creating a wealth of
include the 2004 tsunami, which killed around 167,736 opportunities for foreign investors to meet demand.
THE REPORT Indonesia 2012