Case 1 Analysis: Indonesia – Asia’s Stumbling Giant

Topics: Economy, Investment, Indonesia Pages: 6 (1438 words) Published: June 1, 2014
Case 1 Analysis: Indonesia – Asia’s Stumbling Giant

Case 1 Analysis: Indonesia – Asia’s Stumbling Giant
Indonesia as a Country
Indonesia is a country within Asia populated with nearly 220 million people. It has a strategic location astride major sea lanes and is an archipelago of 17,508 islands (globalEDGE, 2013). It is also deemed the world’s most Muslim nation where nearly 85% of the population consider themselves Muslim; while still remaining one of the most ethnically diverse countries. Indonesia is known for its natural resources such as: mining, oil and gas production, and forestry (Hill, 2013). From a political standpoint, Indonesia has a mixed economic system in which the economy includes a variety of private freedom, combined with centralized economic planning and government regulation (globalEDGE, 2013). Indonesia’s Central Issues

Indonesia has experienced many political, economic and environmental disasters. Although economic growth was prevalent prior to 1997, the actions of the historical dictator Suharto influenced the beginning of the downward spiral of the country. The country accumulated major debt by what is referred to as “crony capitalism” as Suharto used his command of the political system to favor the business enterprises of his supporters and family (Hill, 2013). As a result the current economic front, while it has gotten better, Indonesia still lags behind its Southeast Asian neighbors. Other central issues that stem from the foundation of economic destruction are: poor infrastructure, high unemployment, slow growth in labor productivity, significant foreign capital has left the country, decline in public, private and foreign investment, endemically high level of corruption, and business activity is delayed significantly by “red tape” or greater scrutinized processing procedures. While there are numerous issues that are occurring throughout Indonesia, all require attention in order to help stabilize the country. Indonesia’s Goals

Indonesia has been known to share the same common goals as the United States as both countries firmly support a vast and diverse country. The three goals shared are: democratization, sustainable economic growth, and territorial integrity (Gelbard, 2000). Democratic government and economic well-being are the most effective guarantors of domestic stability. Potentially, the success of these three goals in Indonesia could translate into greater stability in Southeast Asia and the Asia-Pacific region. Indonesia’s Constraints of the Central Issue

Indonesia’s main constraint to a successful future is the corruption that occurs throughout the country. It is said that although the dictator leadership has been removed, corruption is still very much alive throughout the entire legal system, including the police and prosecutors (Hill, 2013). Corruption occurs most commonly in Indonesia through the form of bribery. Although Indonesia does have anti-corruption policies and procedures in place, it is reported that the politically elite are included in bribery schemes so frequently that the policies and procedures lack any follow through. Additional constraints to achieving the countries goals and alleviating the central issues are: poor infrastructure, environmental disasters, and red tape for businesses. Alternatives to Alleviate the Central Issue

While there are many potential paths that can be used as alternatives to alleviate the central issues in Indonesia, the following must be addressed: eliminating corruption, bettering the country’s infrastructure, and promote internal and external investment into the country. Beginning with eliminating corruption, as an alternative to allowing it to continue and negatively affect the political and economic divisions as it does today, the ideal would be to align supporters of the anti-corruption drive to help strengthen the policies and procedures and also help push out the offenders that are still...

References: Gelbard, R. (2000). U.S. and Indonesia: Common Goals. The New York Times. Retrieved on January 12, 2014 from
globalEdge. (2014). Retrieved on January 9, 2014 from
Higgins, B. Howard. (1957). Indonesia 's economic stabilization and development. New York: Institute of Pacific Relations.
Hill, C. (2013). International business: Competing in the Global Marketplace. New York: McGraw-Hill/Irwin.
Quah, Jon S. T (2011). Curbing corruption in Asian countries: an impossible dream?. Bingley, UK: Emerald Group.
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