Economic Overview of Indonesia

Economic system is a system of beliefs (concerning work, property and wealth), activities (extractions, production and distribution), organizations(business firms, labour unions), and relationships(ownership, management) that provide the goods and services consumed by the members of a society.(Cullen 2011, p.81) The economic system is unique in that Indonesia has a market-based economy in which the government plays a significant role. There are 141 state-owned enterprises, and the government administers prices on several basic goods, including fuel, rice, and electricity. Growth rebounded in 2010 to 6.1% and is forecast to have reached 6.2%-6.5% in 2011. Poverty and unemployment have also declined despite the global financial crisis, with the poverty rate falling to 12,5% (March 2011) from 13.3% a year earlier and the unemployment rate falling to 6.6% (February 2011) from 6.8% a year earlier. In December 2011, Fitch Ratings upgraded Indonesia’s sovereign debt rating to investment grade. . There are many potential infrastructure projects in multiple sectors including hydroelectric and solar power, palm oil, new roads including toll motorways, mining, expansion of broadband internet, and

Naturally, during an inflationary period it becomes very difficult for the government to fulfill its macroeconomic targets. Almost all targets, such as GDP growth, price inflation, bank borrowing, trade deficit, budget deficit, become difficult to achieve. This questions the credibility of the government. Costs of development project and non-development expenditure increase, due to which the government needs more funds the following year by the amount of inflation to keep economic activity at the level of the former year.

Banks responded to the pressures on them by means of building up liquidity and slowing the growth of total assets; and thus non-liquid asset growth reduced to an even further decline. They generally sustained progressive growth in lending to domestic non-financial institutes, but reduced greatly on external assets rather than abruptly. Their loans to domestic financial institutes continued to rise, but the growth was more than entirely responded for by deposits with the Euro system.

There are many companies who are still skirting lax laws and regulations in Indonesia and finding the cheapest and easiest way to do business, which often having the activity of deforestation. (Indonesia forests still dwindle despite reforms,

It is very common acknowledged that taxation plays an important role in economic growth development. In particular, taxes provide greater economic substance in order to build basic structure and the quality of life in developing countries. Indonesia is nevertheless also in the position that really depends on the collection of tax revenue as it generates almost approximately 70-80% of national income.

Moreover, Indonesia will be dependence on declining US dollar. The positive impact of reducing Indonesia 's dependence on the US dollar, if the bilateral swap effectively and cost of fund in market. Then it will give a tremendous impact of changes in economic conditions that exist in Indonesia later. So, Indonesia will be able

Besides, the legal system will help to protect the general business environment for enterprises and consumers: avoid unfair competition, protecting consumers against fraud avoided by businesses. Moreover, the political stability of the market: the main island, strikes, protests, the strength of civil society, press freedom, corruption ... also affected the operations of the business. Thus, the need to learn, master and concerned about the impact of political and legal environment to business operations of the enterprise is essential..

Barro (1996) argues that there is a connection between the health levels of a country and its economy. The connection is two-way, forming a feedback loop. Improved health outcomes allow people to be more productive. More productive people earn more, and are therefore able to pay for better health care, and this becomes a cycle in society. Thus, societies with higher levels of health care have healthier and therefore more productive workers.

Indonesia is the fourth most populous country in the world. Indonesia is also considered as largest archipelago which consists of 17,508 islands. For the reason that Indonesia is an archipelago, the diversity between each region is really high because they are also consisting of many tribes and ethnic which have different culture. In order to support the diversity, the governments state the ideology of Bhineka Tunggal Ika for uniting the

Indonesia continues its participation under investment agreements. In this period, Indonesia is less active in signing BITs, but more active in signing multilateral TIPs compare to those in previous era. Indonesia’s BITs have similarities with the previous one particularly related to the definition of investment, protection of investment, treatment of investment, expropriation, compensation for loss and transfer.

Goods and services produced in a country and being sold outside is globally known as export (Mankiw, 2004:240). Suppose that a country do an International Trade and become an exporter of some goods, domestic producers will get more benefits, while local consumers will get loss because the local price is higher. However, government policy about the opening of international trade itself will be profitable for both concerned countries (Mankiw, 2006:221).For Indonesia, the activities of the export has been encouraged since 1983. In the same year, export was getting more attention in order to spur Indonesia economy growth. Indonesia slowly changes its strategy of industrialization, from the emphasis on import substitution industries to export promotion industries. Along with this new policy, the economy of Indonesia is getting better. It was proven in 2008 that the cumulative value of export reached USD 118,430million, in other words it increased by 26.92 percent, while for non oil and natural gas sector reached USD 92,260million or increased by 21.63 percent. The other sector, for instance agricultural, industry, and mining had also increased, each by 34.65 percent, 21.04 percent, and 21.57 percent compared to the previous year.

In Indonesia, petroleum is one of the main sources of the state revenues. It is also a very important strategic commodity and often as political issue. The revenues from oil and gas have driven the economic growth and contributed significantly for the development of Indonesia. In the world, legislations which regulate oil and gas are varies from country to country. In spite of many variations, in general, the upstream oil and gas activities, based on two systems, the production-sharing contracts and the licensing systems. Indonesia was the country that introduced the concept of production-sharing contracts in 1966 (Bindemann, 1999).

Indonesia
is
a
vast
archipelago
with
a
population
of
around
240
 million,
and
has,
over
the
years,
 experienced
significant
growth.
 Local
partners
were
essential
to
manage
the
appropriate
 connections
in
a
country
that
was
 rapidly
developing
but
which
still
suffered
from
weak
 infrastructure,
law
enforcement,
and
rampant
 corruption,
making
every
aspect
of
operations,
including
obtaining
 permits,
buying
land,
hiring
personnel,
 procuring
inputs
and
distributing
products,
a
challenge.
The
 cultural
diversity
and
geography
for
example,
 with
hundreds
of
languages
and
islands,
made
it
hard
to
distribute
 products
and
effectively
market
them.
 The
low
disposable
income
compared
with
the
large
population
 meant
that
there
were

Indonesia in the fall of 2014 is in a recessionary phase. The GDP dropped from 6.48 in 2011 to a 5.78 in 2013. In addition to that, unemployment has increased from a 5.31 percent in 2011 to a 6.41 percent in 2013. This recession could be caused in part by the high rate of poverty in Indonesia. Currently about 24% of Indonesia’s population lives under the poverty line. The severity of this issue is reflected in the widening gap between the rich and the poor in Indonesia. There are two potential tools that can be used to pull Indonesia out of a recession: monetary policy is controlled by the bank and fiscal policy is determined by the government.

This article holds the ground for workers policy in Indonesia. The investment atmosphere in Indonesia is relying on this policy, to create a conducive investment climate. Indonesia has enacted Law Of The Republic Indonesia Number 25 Of 2007 Concerning Investment to regulate the investment, which the elucidation remarked that public welfare is one of the Indonesian goals that has been ordered by the constitutional mandate. Investment must become an essential part to develop country’s prosperity, indeed it will bring the economic