Content and analysis
Political Factors
Indonesia has undergone a political transformation since the upheaval of 1998 which saw the fall of General Suharto after 30 years of authoritarian rule and a collapse of the Rupiah. The country is now a vibrant democracy that is continuing to strengthen its political structures and deepen the enfranchisement of the population. In Indonesia, there are parliamentary and presidential elections every five years. After every five years, election is being contested for president and vice president post by direct vote of the citizenry. In 20 October 2014, Joko Widodo has been elected as president and Jusuf Kala is the vice president.
However, corruption and slow-moving bureaucracy continues to be a persistent issue. The government faces great challenges in consolidating Indonesia's democratic transition, restoring the country's economic momentum, and in bringing the benefits of development to all Indonesia's citizens. Among the key political issues with economic implications are periodic outbreaks of communal violence around the country, particularly in Central Sulawesi; demands for greater autonomy or independence in Papua; the presence of the regional terrorist organization Jemaah Islamiyah (JI); and deep-seated weaknesses in the rule of law at all levels throughout the country.
Economical Factors
Indonesia is considered as a developing country. They have hub of natural resources such as in oil production. The top exports of Indonesia are Coal Briquettes ($22.9B), Petroleum Gas ($17.4B), Palm Oil ($16.5B), Crude Petroleum ($11.3B) and Rubber ($7.45B). Indonesia also gains benefits from Asean Free Trade Area (AFTA) tariff cuts.
Skilled Labour: Like any other countries, Indonesia also has severe shortages of skilled labour due to the out-migration of skilled workers, an ageing workforce or simply the lack of capacity to provide training.
Gross Domestic Product: The GDP of Indonesia has declined over the last few years. In 2013, GDP growth was 5.6% (910.5 billion) dropped to 5.0% (888.5 billion) in 2014. In 2014, 13.7% earning from agriculture, 42.9% earning from industry and major part 43.3% from services.
Foreign Direct Investment: It plays a vital role in Indonesia growth rate too. It is a developing country so they have good inflow of FDI. It was $25.9 billion in 2014 compare to $23.3 billion in 2013 and they are on 45th position in FDI stock.
Inflation Rate: The inflation rate is still high. It was 5.4% in 2014 compared to 4.7 in 2013 due to slower credit growth, weaker economic activity, and unchanged gasoline and diesel prices since March, inflation has accelerated in recent years.
Imports of Good and Services: The imports of goods and services was 25% in 2012 dropped slightly to 24.8% in 2013 declined further to 24.5% in 2014 due to slower economic growth as well as lower global oil prices.
Exports of Goods and Services: The same goes to the exports of goods and services because Indonesia’s economy continues to face pressures from lower global commodity prices and demand, notably including from China. In 2012, it was 24.6%, 24% in 2013 and dropped further to 23.7% in 2014.
Unemployment Rate: The unemployment rate was 6.2% in 2013 and 5.9 in 2014.
Currency: Indonesian Rupiah. The Rupiah has depreciated significantly against the US Dollar due to external factors that affect demand of US Dollar in the country, but since mid-2014 has appreciated in real trade-weighted terms.
Exchange rate: 1 USD = 13695.0084 IDR (Indonesian Rupiah)
The Fiscal and Monetary Policies: Fiscal policy in Indonesia was created based on the law (Undang-undang – UU) which has one year valid time. The policy then will be used as the guideline in Indonesian business for a year, except there is any change related to the policy. Recently, the focus of fiscal policy is related with the gasoline price estimation and the tax rate. Due to the rigidness, the business players only need to pay deep attention at the announcement of fiscal policy. Meanwhile, the monetary policy in Indonesia was reflected in the SBI rate. Thus, the business players and economic analysts have no other choice but pay attention in this rate due to the independent nature possesed by Indonesian Central Bank (BI). The rise of SBI rate will trigger the rise of credit rate as well. The volatileness of monetary policy force the government to use assumption, such as the global gasoline price, SBI and credit rate, for the decision making.
Social Factors
Population: Indonesia is the top 4 populous country in the world. As of 1 January 2015, the population of Indonesia was estimated to be 254 971 986 people which was 127 124 184 males and 127 847 802 females as of 31 December 2014 . This is an increase of 1.08 % (2 731 762 people) compared to population of 252 240 224 the year before. In 2014 the natural increase was positive, as the number of births exceeded the number of deaths by 2 986 524. Due to external migration, the population declined by 254 763. The sex ratio of the total population was 0.994 (994 males per 1 000 females) which is lower than global sex ratio. The global sex ratio in the world was approximately 1 016 males to 1 000 females as of 2014. Indonesia population density is 133.9 people per square kilometer as of November 2015.
Age Structure: As of the beginning of 2015 according to our estimations Indonesia had the following population age distribution:
27.3% of population under 15, 66.5% of population between 15 and 64 years old, 6.1% of population over 65
Life Expectancy: Total life expectancy (both sexes) at birth for Indonesia is 71.3 years.
This is above the average life expectancy at birth of the global population. Male life expectancy at birth is 68.8 years and female life expectancy at birth is 74 years.
Education Level:
Primary Education
In Indonesia, education is centrally controlled by the ministry of national education. 6 years in primary school and 3 years in junior high school are compulsory. The primary phase follows on after optional pre-school playgroups that may commence in a child’s third year. Some offer accelerated programs that compress the phase to 5 years.
Middle Education
Junior high school offers a bridge between the gentler pace of the elementary phase, and the challenges of senior high school that may follow. It also assists educators to determine a possible future direction for their students. The Islamic education system continues to provide an alternative.
Secondary Education
There are two different kinds of Indonesian high schools providing two streams of education for those who choose to optionally enrol. One of these is aimed at those who intend to go on to university. The other is for those who plan to find jobs right away.
Vocational Education
Vocational training is mainly provided by private training colleges and initiatives by donor countries. Unfortunately, this continues to occur mainly in the cities.
Tertiary Education
There are 4 kinds of tertiary education institutions in Indonesia, namely polytechnics, academies, institutes and universities. Some of these are state controlled, some are religiously affiliated and some are privately funded.
Literacy rate: If a country has good literacy rate then it has bright future. Same thing apply on Indonesia. Indonesia’s literacy rate is 93.9% in which male literacy is 96.3% and female literacy is 91.5% as of 2015.
Language: There are over 725 languages spoken in Indonesia. The main and official language however, is Bahasa Indonesia.
Religion: Indonesia is a multi-cultural and religion country where people from different religion work there. By far the majority of the Indonesian population is Muslim with more than 85% claiming to be Muslim. There are six official religions in Indonesia which are Islam, Protestant, Catholic, Hinduism, Buddhism and Confucianism.
Poverty and wealth: Indonesia’s wealth gap has widened over the years, with the nation’s Central Statistics Agency (BPS) revealing that the country’s Gini index – a ratio measuring wealth distribution on a scale of 0-1 – increased from approximately 0.36 in 2012 to 0.41 in 2014. An estimated 28 million people live below the poverty line, and half of all households are grouped at or below the poverty line, set at 292,951 rupiah (24.4 dollars) per month, according to the World Bank. In 2013, the Jakarta Smart Card initiative targeted more than 300,000 students from poor families at a cost of Rp 800 billion ($69m) to cut rising inequality in Jakarta. A typical poor family of two young children in school received vouchers of Rp 360,000 ($31) per month - about a quarter of their household budget. The vouchers must be spent on education (getting the bus to school, books, uniform and so on).
Technological Factors
Transport System
Indonesia has effective and highly developed transport system with more than 230 airports, railways with 8529 km and water ways covering 21579 km and major ports are Banjarmasin, Belawan, Ciwandan, Kotabaru, Krueg Geukueh, Palembang, Panjang, Sungai Pakning, Tanjung Perak, Tanjung Priok. It has one of the largest merchant moraine with 971 in which 114 is already registered in foreign country. Recently, Indonesia has chosen China over Japan for a lucrative high-speed rail contract. The high-speed rail line, estimated to cost from $5-6 billion, will connect Jakarta and Bandung, the capital of West Java province. It will be Indonesia’s first high-speed railway.
Communication System
Indonesia is the fastest growing mobile telephone market in the Asia-Pacific region, predicted to reach 391 million mobile accounts in 2015. The market is dominated by three major mobile telecommunication providers, Telkomsel, Indosat and Xl Axiata. The communication system in Indonesia is highly developed which maintained 17.33 millions of people use landlines where as 83.3 million of people use cellular mobiles in the same way there are 13 million of internet users which is good sign for a country. It has interisland microwave system, HF radio police net and domestic satellite communications system coverage which makes its communication system better.
Broadcasting Technology
It has 678 AM and 43 FM channels. Similarly, it has 54 local TV stations (11 national TV networks; each with its group of local transmitters).

Information Technology
In the Indonesian manufacturing industry, Computerized Data Processing take the form of Management Information System, Production Planning, and Capacity Planning. And particularly for engineering products, design and design evaluation is carried out through Computer Aided Design tools. Not only to achieve a reliable design, but also to increase design productivity. CAD allows difficult simulation and design alteration be performed within a short period. Aerospace, Ship, Land vehicle, plant construction, platform construction are notable example of CAD users, and most have integrated their design system with manufacturing system.
Information and Communications Technology
In Indonesia, 67 per cent of online consumers pay attention to online advertising and 96 per cent are affected by online advertising through friends or relatives. With substantial growth in the use of social media applications, Google, Facebook and Twitter recently decided to establish representative offices in the capital city of Jakarta. In 2014, internet penetration was 16.72 percent, accounting for over 42 million internet users.
In Sep 2014, Telstra and Telkom Indonesia formed a joint venture (JV) to provide network application and services (NAS) to Indonesian businesses, Australian firms operating in Indonesia and multi-nationals.
Indonesia has one of the slowest internet connection speeds in the Asia-Pacific. Indonesia's complex geographical island structure (over 17 000 islands) makes the build-up of cable infrastructure difficult and costly. Following Presidential Decree No 96 Year 2014, The Indonesia National Development Planning Agency (BAPENNAS) launched the Indonesian Broadband Plan (IBP) 2014 – 2019 in mid-October 2014. This IBP is defined as Internet connectivity with the ability to send voice, images and data at one time (triple-play) with a minimum speed of 2Mbps for fixed network and 1Mbps for mobile access. This goal is to be achieved through linking broadband with other priority sectors in the economy, namely e-Government, e-Health, e-Education, e-logistics and e-Procurement.
Legal Factors
Indonesia’s legal system based on Roman-Dutch law, custom and Islamic law.
Labour Law
Indonesia has one of the largest labour forces in the world which make it stand on 5th rank. So, to protect the labour rights the government has made a law called Labour lawsArticle 28D (2). According to this law 7-hour workdays and 40-hour workweeks, with one 30-minute rest period for each 4 hours of work is legal in Indonesia. One day of rest weekly alsomandatory in Indonesia. The minimum working age is 15 years.
Labor force - by occupation: Agriculture: 38.9% , Industry: 13.2% , Services: 47.9%
Company Law
The Indonesian Company Law of 1995 is the most important framework for thecurrent legislation on corporate governance in Indonesia. Under the Company Law, a company is a separate legal entity in which Directors and Commissioners represent the company. Every company must register their Memorandum of Act under this Company Law. (Incorporation of company Law in Indonesia)
Environmental Regulation
Certain business activities in Indonesia which impact the environment require an environmental licence.
Business or Individual Tax System
Companies doing business in Indonesia are subject to the following taxes: * A flat 28 percent corporate income tax rate will be reduced to 25 percent starting 2010. * A branch profit tax of 20 percent on remittances to the overseas head office on a company’s branch permanent establishment. * A public company with a minimum of 40 percent of total paid-up shares traded on the Indonesian stock exchange may enjoy a five-percent reduction in the income tax rate.
Tax system has various rules and categories for example on first 25,000,000 income rate of tax is 10% then on next 25,000,000 it is 15% and on next 50,000,000 it is 30%. In the same way, income tax on interest from Indonesian banks is fixed at a final 15% for both companies and individuals.
Environmental Factors
Geographical Location
Indonesia is an archipelagic island country situated in South-Eastern Asia between the Indian Ocean and the Pacific Ocean. It has total 1,919,440 sq km area which made up of 1,826,440 sq km land area and 93,000 sq km water area. There are total number of 17,508 islands of which about 6000 are inhabited. The territory of the Republic of Indonesia stretches from 6°08' N latitude to 11°15' S latitude, and from 94°45' E to 141°05' E longitude.
The five main islands are: Sumatra (473,606 sq. km); the most fertile and densely populated islands, Java/Madura (132,107 sq km); Kalimantan, which comprises two-thirds of the island of Borneo (539,460 sq km); Sulawesi (189,216 sq km); and Irian Jaya (421,981 sq km), which is part of the world's second largest island, New Guinea. Indonesia's other islands are smaller in size.
The country is predominantly mountainous with some 400 volcanoes, of which 100 are active. The highest mountain is the perpetually snow-capped Mandala Top (15,300 feet) in the Jaya Wijaya mountain range of Irian Jaya. Many rivers flow throughout the country. They serve as useful transportation routes on certain islands, for example, the Musi, Batanghari, Indragiri and Kampar rivers in Sumatra; the Kapuas, Barito, Mahakam and Rejang rivers in Kalimantan; and the Memberamo and Digul rivers in Irian Jaya.
Climate and Weather
The climate changes every six months. The dry season (June to September) is influenced by the Australian continental air masses; while the rainy season (December to March) is the result of the Asian and Pacific Ocean air masses. Tropical areas have rains almost the whole year through. However, the climate of Central Maluku is an exception. The rainy season is from June to September and the dry season from December to March. The transitional periods between the two seasons are April to May and October to November. Basically it is hot and humid country.
Time Zone
Indonesia's have three time zones as below: a. Western Indonesia Standard Time is seven hours in advance (UTC+7) of Greenwich Mean Time (GMT). b. Central Indonesia Standard Time is eight hours ahead (UTC+8) of GMT. c. Eastern Indonesia Standard Time is nine hours ahead (UTC+9) of GMT.
Natural or Environmental Disaster
Due to its geographic location, several times Indonesia has faced many natural disasters such as in December 26, 2004; magnitude 9.0 earthquake caused atremendously powerful tsunami in the Indian Ocean and about 155000 people died and after this in May 26, 2006, in Feb. 2007, January 27, 2008 and many times country has faced same trouble because of its location.
There are many current environmental issues facing by Indonesia such as deforestation, water pollution from industrial wastes and sewage, soil erosion, air pollution in urban areas and also smoke and haze from forest fires. The smoke and haze from forest fires almost happened every year in Indonesia. Indonesia Is the 3rd largest emitter of greenhouse gases after China and the U.S. because of deforestation. Meanwhile, major pollution is still happening from transportation, manufacture, and energy sectors.