After a democratic election process in 2004 which has resulted a smooth outcome of the first presidential elections in its history, President Susilo Bambang Yudhoyono has some economic program frameworks.

The 2007 target for the economic growth is 6.7% while the current situation (until 3rd quarter 2007) is 6.5%. The inflation was planned to reach 7% and until Nov 2004 it had shown 6.1%.

Previous government targeted SBI up to 8.0% from the current 7.8% (11 months) 2007. Rupiah's currency to US$ was also assumed to be Rp 9,200 or Rp 100 lower than the present Rupiah condition.

The former presidency predicted that the 2004 budget deficit would be 1.3% but it turns out that the deficit is 1.5% and supposedly 1% for 2005. The existing credit growth is 24.7% and at the same, job creation until the 3rd quarter of 2004 is 1.5 million posts.

 
Indonesian Economy At-A-Glance

 
Economic Indicators

Macro Economic Indicators	2002	2003	2004	2005	2006
GDP annual growth(%)	4,4	4,9	5,0	5,7	5,5
Inflation (%)	10,03	5,06	6,40	17,11	6,60
Average Exchange Rate (IDR/US$)	9.318	8.572	8.940	9.713	9.167
Monthly Interest Rate (Central Bank of Indonesia)	12,93	8,31	7,43	12,75	9,75
Ongoing Transactions/GDP	3,9	3,4	0,6	0,1	2,6
GDP by Consumptions Consumption Gross Domestic Fixed Assets Exports of Goods & Services Imports of Goods & Sevices	4,7 4,7 -1,2 -4,3	4,6 1,0 8,2 2,7	4,9 14,7 13,5 26,7	4,3 10,8 16,4 17,1	3,9 2,9             9,2 7,6
GDP by Industrial Sectors  (%) Agriculture, Livestock, Forestry and Fishery Mining and Quarrying Manufacturing Industry Electricity, Gas, and Water Supply Construction Trade, Hotel, and Restaurant Transport & Communication Finance, Real Estate, & Business Services Services	3,2   5,3   5,5 3,9 8,4 6,4 3,8	4,3   5,3   6,7 5,3 11,6 7,0 3,9	2,8 -4,5 6,4 5,3 7,5 5,7 13,4 7,7 5,4	2,7 3,1 4,6 6,3 7,4 8,4 13,0 6,8 5,0	3,0 2,2 4,6 5,9 9,0 6,1 13,6 5,6 6,2
Unemployment Rate	9,1	9,5	9,9	11,2	10,3
Poverty Rate	18,2	17,4	16,7	16,0	17,8
GDP per Capita (in thousands Rupiah)	7.136	7.391	7,656	7.986	8.317
GDP per Capita (US$)	761,8	861,4	824,1	812,5	922,0
Monetary Aggregat M2 Growth,end period M1 Growth,end periode Base money growth, end period	4,72 7,99 5,97	8,12 16,60 14,25	8,1 13,4 19,8	16,4 11,1 20,2	14,9 28,1 23,9
Interest Rate PUAB (overnight) Deposit (one month) Credit  for  working capital Investment Credit	12,42 12,81 18,25 17,82	8,18 6,62 15,07 15,68	3,76 6,43 13,41 14,05	9,44 11,98 16,23 15,66	5,97 8,96 15,07 15,1
Balance of Payment DSR (Debt to Service Ratio) Foreign Exchange reserves (in month)	33,1 6,6	34,1 7,1	27,1 5,7	17,3 4,3	24,5 4,5

 
Economic Report

Easing Inflation from Holiday Season

The Central Bureau of Statistics (BPS) recorded 1.1% inflation in December, bringing the year-on-year (YoY) inflation rate to 6.6%. The December YoY inflation rate was slightly lower than the 6.7% recorded in November. The slowdown in price increases was attributed mainly to lower prices for foodstuffs. It was the third consecutive month that headline inflation slowed from the 2007 peak reached in September. Core inflation went up by 0.68% month-on-month (MoM), and 6.29% YoY in December, compared to November’s 0.43% and 6.25% respectively.

CPI Components

Components	November		December
	MoM	YoY	MoM	YoY
Food stuff	0.04	11.96	2.47	11.26
Food, beverages, tobacco, cigarettes	0.43	6.63	0.91	6.41
Housing, water, electricity, oil/gas	0.12	4.99	0.63	4.88
Clothing	1.66	7.50	0.99	8.42
Health	0.26	4.98	0.41	4.31
Education, recreation, and sport	0.11	8.77	0.12	8.83
Transportation, communication, financial services	-0.27	1.13	0.22	1.25
TOTAL	0.18	6.71	1.10	6.59
Core Inflation *	0.43	6.25	0.68	6.29

Source: Central Bureau of Statistics (BPS) * Core inflation is a measure of inflation which excludes certain items that face volatile price movements i.e. energy, food products.  

Indonesia Recorded Q3 Growth at 6.5%

On November 15, 2007 the Central Statistics Bureau (BPS) reported that the economy grew a faster-than-expected 6.5% YoY in 3Q 2007, on track for its fastest growth in more than a decade in 2007, mainly due to strong commodity exports and low interest rates. Compared to the second quarter, the economy expanded by 3.9% to Rp 2,901.3 trillion ($308 billion), with a pick-up in fixed investment during the three months to September. Exports and investment rose by 7.8% and 8.8% YoY respectively in the third quarter, topping overall growth, but consumer spending also showed a healthy 5.3% rise, largely driven by a sharp fall in borrowing costs. Transport and telecommunications led among industrial sectors with growth of almost 12.5% YoY in the third quarter. “The agriculture sector contributed the largest portion to economic growth in the third quarter," said Rusman Heriawan, chairman of BPS. Heriawan said the sector grew 10.2% from the previous quarter and 8.9% YoY.

In November 2007, the MOF stated that the GOI hoped to accelerate budget spending in the fourth quarter 2007 to meet its budget target of a 1.5% surplus over GDP – pushing funds into the economy in the final quarter to further boost economic activity. The GOI posted a budget surplus of Rp 17.6 trillion ($1.9 billion) in the first 10 months of 2007. As of October, the government had spent Rp 506.6 trillion ($53.8 billion) against targeted full-year spending of Rp 752.4 trillion ($79.9 billion), while revenue stood at Rp 524.3 trillion ($55.7 billion) compared to a full-year target of Rp 694.1 trillion ($73.7 billion). The MOF estimated full-year growth at around 6.2-6.3%, the country's fastest economic growth rate in 11 years. The economy expanded 5.5% in 2006. The MOF also forecast the rupiah would average 9,170 per dollar in the fourth quarter and 9,125 per dollar for the full year. The Investment Coordinating Board (BKPM) announced on December 19, 2007 that direct investment hit a 40-year record high of Rp 125.94 trillion ($13.4 billion) in the first nine months of 2007, represented a 169.02% rise compared to 2006.

Positive Forecasts for 2008

The World Bank remained strongly upbeat in its projection for Indonesia’s 2008 growth, in line with other East Asian economies. It expects Indonesia’s economy to grow steadily at least through to the end of 2008 at 6.4%, following the estimated 6.3% in 2007. The economy could grow by as much as 8% if the government managed to attract more foreign investment to improve infrastructure, World Bank economist William Wallace told reporters. The bank’s East Asia and Pacific lead economist Milan Brahmbhatt said that Indonesia would be able to weather short-term global volatility arising out of the US sub-prime mortgage crisis and the renewed surge in oil prices through increased domestic consumption and investment, which would continue to sustain growth.

In a November 21, 2007 interview with Dow Jones, Coordinating Minister for the Economy Boediono stated that the growth target range of 6.5% and 7% in 2008 is still achievable despite signs of a global slowdown, adding that growth would be driven by exports and domestic expansion. He underlined the need for more spending on infrastructure in order to maintain competitiveness. In an interview with Bloomberg, he said that “From the supply side, it is key to keeping inflation under control. I think the main issue here is how to beef up our capacity to prepare good projects.”

Finance Minister Sri Mulyani is optimistic that Indonesia could outperform its own projection for growth in 2008. "We are aiming for higher than 6.8%,” she said in an interview with Bloomberg, “ India and China will be quite strong in actually pulling growth in the region.” "But we must stay alert about a possible rise in inflation and a decline in people's purchasing power in 2008," she added. Slower global economic activity will also impact the economy, she said.

Bank Indonesia is also positive about 2008 growth. BI predicted that the balance of payments surplus would rise 15% to $15.6 billion, led by foreign direct investment. According to Agence France-Presse, BI stated that the balance of payments surplus in 2007 is estimated at $13.6 billion, with the surplus reaching $1.1 billion in the third quarter. BI estimates that the current account surplus will reach $9.3 billion in 2008, down from the $10.9 billion it estimated for 2007, due to slower growth in non-oil-and-gas exports as global demand slows, rather than faster import growth. The capital account surplus is seen rising to $6.3 billion from $5.6 billion in 2007. BI expects the investment climate to improve further so that it will also boost capital inflows, especially foreign direct investment. In line with the bigger balance of payments surplus, BI is expecting foreign exchange reserves to rise to $72.9 billion at the end of 2008 from the $57.3 billion estimated for the end of 2007.

Industrial Estates

Industrial estates are found in most of the major provinces in Indonesia . Currently, there are a total of 48 operating industrial estates and they cover a combined area of approximately 18,000 hectares.

Most of Indonesia 's industrial estates are located in West Java (e.g. Bekasi, Karawang, Purwakarta). Other large scale estates are found in Jakarta , Banten (Tangerang, Serang), Central Java ( Semarang , Cilacap), East Java ( Surabaya , Gresik, Sidoarjo, Pasuruan, Probolinggo), North Sumatra ( Medan ), West Sumatra ( Padang ), Lampung, Riau ( Batam Island , Bintan Island ), South Sulawesi (Makassar) and East Kalimantan (Bontang).

Infrastructure within the industrial estates varies, although most are equipped with adequate road networks, electricity and water facilities. While regulations pertaining to land use, conduct of tenants, pollution control, operation of factories are applied in all estates, the degree of enforcement may vary.

For profiles of the major industrial estates in various provinces, please visit the BKPM website .