Republic of Indonesia

Article Outline

Introduction; Land and Resources; The People of Indonesia; Arts and Culture; Economy; Government; History

Foreign Trade

In 2004 Indonesia’s exports of goods and services totaled $64.5 billion, while imports reached $42.9 billion. In the mid-1990s Indonesian workers abroad annually sent home remittances of $449 million, reducing Indonesia’s current account deficit. This figure declined during the Asian economic crisis of the late 1990s, when Indonesian workers in neighboring countries such as Malaysia were sent home. Historically, Indonesia has had very small trade deficits, in large part because of its petroleum exports; in recent years, however, it has relied increasingly on a rise in exports of manufactured goods.

In the 1960s and 1970s state-owned trading companies had an important role in Indonesia’s import and export trade, but their influence declined in the 1980s as the government eased some trade restrictions as part of wider economic reforms. During Suharto’s rule, private companies—usually connected to the president’s family—were given exclusive control over some lucrative trading goods, such as cloves. The more notorious of these special arrangements were abolished after Suharto’s resignation. In the 1990s important exports included petroleum and petroleum products, natural and manufactured gas, wood and wood products (particularly plywood), food products, textiles, metal ores, footwear, and electrical and electronic products. Agricultural exports included rubber, palm oil, coffee, spices, tea, cocoa, tobacco, and sugar. Indonesia’s main imports included machinery, transportation and electrical equipment, chemical products, and minerals. The country’s main trading partners for exports are Japan, the United States, Singapore, South Korea, Taiwan, China, and Hong Kong. The main partners for imports were Japan, the United States, South Korea, Germany, Singapore, Australia, and Taiwan.

Indonesia has been a member of the Association of Southeast Asian Nations (ASEAN) since its formation in 1967. The country also belongs to the ASEAN Free Trade Area (AFTA), which was declared in 1992. Under the AFTA agreement, Indonesia must reduce its tariffs on many imported goods to 5 percent or less by 2003. Indonesia is also a member of the Asia-Pacific Economic Cooperation (APEC) organization, which draws together countries from both sides of the Pacific, including the United States and Japan. APEC is also working toward a reduction of trade tariffs among its members.

Currency and Banking

The rupiah is the official monetary unit of Indonesia (9,705 rupiah equal U.S.$1; 2005 average). The country’s central bank is Bank Indonesia in Jakarta. Until the late 1980s banking was dominated by 5 large, state-owned banks, 70 private banks, and a development bank. A small number of foreign-owned banks were confined to Jakarta. After a series of policy changes in the 1980s and a new banking law in 1992, banking and finance were substantially deregulated and the number of banks and bank branches grew. As a result of these and other reforms, the Jakarta Stock Exchange grew in importance. A second stock exchange operates in Surabaya.

Government

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Indonesia is a constitutional republic with an elected president, an elected legislature, and an appointed judiciary. The government operates under a 1945 constitution, which was replaced in 1950 but then reinstated in 1959. The 1945 constitution is based on the doctrine of Pancasila (Sanskrit for “five principles”), defined in the constitution as “a belief in the one supreme god; just and civilized humanity; the unity of Indonesia; democracy guided by the inner wisdom of deliberations among representatives; social justice for all the Indonesian people.”

Significant amendments to the 1945 constitution went into effect in 2004. Among other changes, the amendments provided for the direct election of the president. All citizens at least 17 years of age may vote. Married persons may vote regardless of their age.

Executive

Under the 1945 constitution the president is both head of government and head of state. The president is elected to serve a five-year term and may be reelected once. The constitution grants the president wide powers, including the power to rule by decree in emergencies. However, the president may not freeze or dissolve the legislature. The president is responsible for appointing a cabinet to carry out the administrative duties of the government. Cabinet ministers are typically chosen from the military or the ministries.

Legislature

The national legislature is the People’s Consultative Assembly (Majelis Permusyawaratan Rakyat, or MPR). The MPR has two chambers: the House of Representatives (Dewan Perwakilan Rakyat, or DPR) and the Regional Representatives Council (Dewan Perwakilan Daerah, or DPD).

The members of both chambers are directly elected to serve five-year terms. The DPR has 550 members. The number of members in the DPD may not exceed one-third the number in the DPR; as of 2004, the DPD had 128 members. Each province has an equal number of representatives in the DPD. The constitutional amendments that went into effect in 2004 created the DPD as a new chamber representing Indonesia’s provinces. Previously, the MPR was a unicameral body that included 200 members appointed by the president to represent regional and various other interests, including the country’s armed forces.

The DPR and DPD each meet at least once a year. The DPR is the more powerful chamber. It approves all laws and has the right to submit draft bills for approval by the president. The authority of the DPD is limited to regional issues. It may propose to the DPR bills relating to the relationship between national and regional government.