Indonesia Enjoys Stable Economic Growth

The name Indonesia derives from the Latin Indus, meaning ``India", and the Greek nesos, meaning ``island.'' Consisting of more than 17,000 islands, the vast Indonesian archipelago spans 5,120 km across the equator, positioned between the Asian and Australian continents.

It has about a 240 million population, making it the fourth most populous country in the world after China, India, and the United States of America.

It has approximately 400 ethnic groups that have their own language and culture.

The speakers of these languages almost certainly drifted into the region in small groups over long periods of time and did not suddenly assume a common identity when they reached the coasts and rivers of the archipelago.

Some of the distinctly different languages are: Acehnese, Batak, Sundanese, Javanese, Dayak, Minahasa, Toraja, Bugis, Halmahera, Ambonese, and several Papua languages.

These languages are also spoken in different dialects, and therefore Bahasa Indonesia is chosen as the national language.

There are also ethnic Chinese, Indian, and Arabic concentrated mostly in urban areas, who came from their homelands to the regions centuries ago to trade and then live in coastal areas.

Geographically, Indonesia's landscape is greatly varied.

Java and Bali have the most fertile islands ― rice fields are concentrated in these two regions ― whereas Sumatra, Kalimantan, Sulawesi, Maluku and Papua are still largely covered with tropical rainforest.

Open savannah and grassland characterize Nusa Tenggara.

The lowland that comprises most of Indonesia has a characteristically tropical climate with abundant rainfall, high-temperatures and humidity.

The rainy Indonesian tropical climate and unique geographical character provide shelter for flora and fauna that are as diversely rich as its land and people.

The plant and animals in Indonesia's western region represent that of mainland Asia while those in the eastern region are typical of Australia.

Endemic species, which are the pride of Indonesia exist in the central region, such as orangutans, tigers, one-horned rhinos, elephants, dugongs, anoas and komodo dragons.

The warm tropical waters of the archipelago nurture a rich marine environment that holds a myriad of fish, coral species and marine mammals.

Today, the beautiful country with largest Muslim community in the world is celebrating its 64th anniversary.

As Indonesians once again celebrate the birth of the nation, it takes also the time to look into its past for inspiration on this important day in Indonesian history.

Economy

From poor and exploited people under colonial repression for over 350 years, the government and people of Indonesia have strived to put all their efforts to bring the prosperity to the nation.

Indonesia's current GDP per capita grew by an astonishing 545 percent in the seventies, which was fueled by the booming oil demand.

During 30 years of President Suharto's government, Indonesia's economy grew from a per capita GDP of $70 to more than $1,000 by 1996. On 2008, per capita GDP recorded at $2,271, a 17-percent- increase from 2007.

In the mid-1980s, the government began eliminating regulatory obstacles to economic activity.

The steps were aimed primarily at the external and financial sectors and were designed to stimulate employment and growth in the non-oil export sector.

Annual real GDP growth averaged nearly 7 percent from 1987-1997, and most analysts recognized Indonesia as a newly industrializing economy and emerging major market.

The regional financial problems swept into Indonesia in late 1997.

The effects of the financial and economic crisis were severe. In 1998, real GDP contracted by an estimated 13.7 percent.

The economy bottomed out in mid-1999, and real GDP growth for the year was 0.3 percent. Inflation reached 77 percent in 1998 but slowed to two percent in 1999.

In late 2005 Indonesia faced a ``mini-crisis'' due to international oil prices rises and imports.

The government was forced to cut its massive fuel subsidies, which were to cost $14 billion for 2005, in October. This led to a more than doubling in the price of consumer fuels, resulting in double-digit inflation.

The situation has stabilized, but the economy continues to struggle with inflation at 17 percent in January 2006.

As of early 2006 until the end of 2007, Indonesia's economic outlook was more positive.

Economic growth accelerated to five percent in 2004, 5.7 percent in 2005, 5.5 percent in 2006 and reached 6.3 percent in 2007.

In 2008 it was recorded at 6.1 percent.

Real per capita income has reached pre-crisis levels. Growth is driven primarily by domestic consumption, which accounts for roughly three-fourths of Indonesia's gross domestic product.

The Jakarta Stock Exchange was the best performing market in Asia in 2004, up some 42 percent.

At the end of 2006, the JSX Composite Index was closed at 1,803 or an increase of 55.10 percent from the 2005 closing, the third fastest growth in the world.

Economic indicators are signaling a strong increase in economic growth at the end of 2006 and into 2007, however the 2008 saw a slight tendency toward slowing down due to the pressure of the beginning of the global economic slowdown.

Exports exceeded $100 billion in 2006 for the first time, and in 2008 topped at $139 billion, growing 17 percent over 2007.

Non-oil and gas exports grew 12 percent while oil and gas exports increased topped at 34 percent, notably due to the higher international fuel prices.

The global financial crisis, which hit on the fourth quarter of 2008, has triggered global economic recession.

Indonesia enjoyed a relatively stable economic performance throughout 2008 and the world will likely to feel the crisis throughout 2009.

Despite the global crisis, Indonesian economy is considerably elastic as the economy still grew by 6.1 percent in 2008 and in 2009 the economy is forecasted to still post positive growth of 4.5 percent.

Indonesia can safely maintain reserves of $68.5 billion, which is adequate to secure 6 months of imports. The total GDP in 2008 reach around $460 billion.

In the early months of the crisis, Indonesia has managed the impact of the crisis to a minimal level compared to other countries in the region.

However, the bleak prospect of the global economy has prompted Indonesia to adjust its strategy to manage the impact of the global crisis.

With recent developments amidst the crisis, Indonesia expects that its economy in 2009 will still grow at the moderate level of 4.5 percent.

In the first quarter of 2009, Indonesian economy posted a growth of 4.4 percent, the fastest in the region and amidst negative growth experienced by the majority of major economies.

As a country with sizeable domestic market and the relatively small export-to-GDP ratio compared to other countries, the reinforcement of domestic demand is considered as a priority compared to increasing export performance.

Therefore, the government of Indonesia has prepared a 6.5-billion-collar fiscal stimulus package focused on reenergizing the real sector of the economy, in order to intensify infrastructure development and to boost domestic demand.

In the early years of his presidency, President Yudhoyono announced major new anti-poverty initiatives including a program to provide block grants to every village in Indonesia by 2009, and a pilot conditional cash transfer program.

The PNPM initiative is designed to create employment, stimulate the local economy and to build community participation.

The conditional cash transfer program is a vehicle to address lagging human development outcomes in addition to providing income support for the poorest families.

Plus, when the world was faced with severe food crisis, Indonesia, on the contrary, managed to record some surpluses on staple food.

Indonesia is now in a better position to call for global concerted efforts to deal with the food crisis.

The government continues to push forward on its economic policy packages.

The new investment law gives equal treatment between domestic and foreign investors, binding international arbitration, the elimination of forced divestiture, land use rights up to 70 years and extended residency permits for foreign investors.