Geography And Culture Of Indonesia Cultural Studies Essay

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Geography / Population

The Republic of Indonesia is one of the largest archipelagos in the world that has 17,508 islands. Situated between 6 degrees northern latitude and 11 degrees southern latitude and spreading from 97 degrees to 141 degrees eastern longitude, it is located between two continents - Asia and Australia/Oceania. This strategic position greatly influences the country's culture, social life, politics and economy.

Stretching along 3,977 miles between the Indian Ocean and the Pacific Ocean, Indonesia has a total area of 1.9 million square miles including the ocean waters.

The five large islands of Indonesia are: Sumatera covering 473.606 square km, Java with 132.107 square km, Kalimantan (the third largest island in the world) with an area of 539.460 square km, Sulawesi with 189.216 square km, and Papua with an area of 421.981 square km.

Indonesia has 33 provinces (including 2 Special Territories of Nanggroe Aceh Darussalam and Yogyakarta) and one Special Capital Region of Jakarta (DKI). East Timor was once part of Indonesia, but then through a referendum in 1999, East Timor became the Democratic Republic of Timor Leste.

The country shares land borders with Papua New Guinea, East Timor, and Malaysia. Other neighbouring countries include Singapore, Philippines, Australia, and the Indian territory of the Andaman and Nicobar Islands.

With a population of around 240 million people, it is the world's fourth most populous country, and has the world's largest population of Muslims. Indonesia's national motto, "Bhinneka Tunggal Ika" ("Unity in Diversity" literally, "many, yet one"), articulates the diversity that shapes the country. Despite its large population and densely populated regions, Indonesia has vast areas of wilderness that support the world's second highest level of biodiversity.


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Society and Culture


The population of Indonesia can be divided into two major groups: in the western region, most of the people are from the Malay ethnicity while in the eastern region there are the Papuans originating from the Melanesian Islands. There are also multiple specific ethnic groups that come from a certain province/area and have a specific language for example The people of Indonesia consist of various ethnic groups, religions and faith. The various ethnic groups are for example Batak, Karo, Minangkabau, Malay in Sumatra and so forth.

In addition, there are also minority ethnicities derived from Chinese, Indian and Arabic descendents. These people travelled as merchants through trade exchange since the 8th century BC and later migrated to Indonesia.


As per the 2000 census, Islam is the major religion of 86.1% of the population, designating Indonesia as the largest Muslim country in the world. The remaining population consists of Protestants (5.7%), Roman Catholics (3%), and Hindus (1.8%), unspecified being 3.4%.


Many Indonesians speak their ethnic language as their mother tongue (the most widely spoken of which is Javanese). However, the Indonesian language, Bahasa Indonesia (official, modified form of Malay) is the official language and is taught at all schools and most Indonesians are proficient in using the language for communication.


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As in other democratic countries, Indonesia applies the Trias Politica that recognizes the separation of the legislative, executive and judicial bodies. The legislative authority is under the People's Consultative Assembly (MPR) that consists of two bodies namely the Parliament composing of members of political parties and the Regional Representative Council (DPD) composing of representatives from each province in Indonesia. Each province is represented by 4 delegates that are elected by the people in the respective region.

The People's Consultative Assembly (Majelis Permusyawaratan Rakyat or MPR) is the highest state institution, or the upper house; it consists of members of the DPR and DPD and has role in inaugurating and impeaching the president and in amending the constitution but does not formulate national policy; House of Representatives or Dewan Perwakilan Rakyat (DPR) (560 seats, members elected to serve five-year terms), formulates and passes legislation at the national level; House of Regional Representatives (Dewan Perwakilan Daerah or DPD), constitutionally mandated role includes providing legislative input to DPR on issues affecting regions (132 members, four from each of Indonesia's 30 provinces, two special regions, and one special capital city district)

Upon the Amendment of the 1945 Constitution, the membership of the MPR starting the period of 1999-2004, was amended to include not only the members of the parliament (DPR) but also the members of the DPD. Formerly the MPR consisted of the parliament members and group representatives. The parliament members and the DPD members are elected every five years. Since 2004, the MPR has become a bi-chamber parliament with the DPD as second chamber.

The executive institution is centralized under the president, vice president, and the cabinet of ministers. The cabinet is a presidential cabinet in which the ministers report to the president and do not represent the political parties.

The judicial institution -since the reform era and upon the amendment of the 1945 Constitution- is administered by the Supreme Court including the administration of the judges.

Indonesia adopts a democracy that is based on the 5 principles known as the Pancasila Democracy. These state fundamentals were proclaimed by President Soekarno (the first President of Indonesia) on the Declaration of Independence of the Republic of Indonesia on 17 August 1945.


Pancasila is the philosophic fundamentals of the state. The word "Pancasila" is derived from two Sanskrit words, "panca" which means five, and "sila" which means principle. Pancasila consists of five principles that are interrelated and inseparable, namely:

1. The belief in one God

2. A just and civilized humanism

3. Unity of Indonesia

4. Democratic citizenship lead by wise guidance born of representative consultation

5. Social just for all the people of Indonesia


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Indonesia is the 16th largest economy of the world with a GDP of $521 billion (2009) with a labour force employed largely in the Agriculture and Services sectors.

Indonesia, in the past 2 decades has seen extensive financial turmoil, with the Asian Crisis of the 90's where it was the worst effected of the Asian Tigers to the worldwide financial turmoil of 2008. It has weathered the crises relatively smoothly, especially the slowdown in 2008, because of its heavy reliance on domestic consumption as the driver of economic growth.

Although the economy slowed significantly from the 6%-plus growth rate recorded in 2007 and 2008, expanding at 4% in the first half of 2009, Indonesia outperformed its regional neighbours and joined China and India as the only G20 members posting growth during the crisis. The government used fiscal stimulus measures and monetary policy to counter the effects of the crisis and offered cash transfers to poor families; in addition, campaign spending in advance of legislative and presidential elections in April and July helped buoy consumption. The government made economic advances under the first administration of President Yudhoyono in 2004, introducing significant reforms in the financial sector, including tax and customs reforms, the use of Treasury bills, and capital market development and supervision. Indonesia's debt-to-GDP ratio in recent years has declined steadily because of increasingly robust GDP growth and sound fiscal stewardship. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. Yudhoyono, re-elected in 2010 with respected economist Boediono as his vice president, faces the ongoing challenge of improving Indonesia's insufficient infrastructure to remove impediments to economic growth, while addressing climate change mitigation and adaptation needs, particularly with regard to conserving Indonesia's forests and peat lands.

The major trade partners of Indonesia are Japan, China, South Korea, India, USA and neighbouring countries namely Malaysia, Singapore and Australia.


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Indonesia has a rich and diverse culture which has been greatly influenced by other cultures and religions, including Hinduism, Buddhism, Confucianism and Islam. The result is a complex cultural mixture very different from the original indigenous cultures. This gets reflected in the country's dance, food, and architecture.

While western culture has greatly influenced modern day Indonesian culture which gets reflected in TV, Movies, Politics, there are indigenous ethnic groups such as Mentawai, Asmat, Dani, Dayak, Toraja and many others that are still practising their ethnic rituals, customs and wear traditional clothes.

MUSIC: In the field of music, Indonesia is rich with traditional as well as modern music that extends from the city of Sabang (the west-most point of Indonesia) to the city of Merauke (the east-most point of Indonesia). Although traditional music including Javanese keroncong is commonly known, modern music is more popular followed by dangdut music. Dangdut is one type of music originating from Indonesia that has also become quite popular throughout the country. This type of music is a blend of Malay and Indian music with elements from traditional music as well. The name of "Dangdut "is derived from the sounds of "dang" and "dut" (pronounced as "doot") that come from the dominating resonances of the bongo and the flute. The Dangdut singers usually sing while dancing expressively and gracefully following the beat of the music. There are several varieties of Dangdut music namely Malay Dangdut, Modern Dangdut (using modern instruments) and Coastal Dangdut (influenced by Javanese and Sundanese traditional music). In the 1970s, Dangdut was initially recognized as a type of Malay orchestral music, but in the 1980s, this type of music became more popularly known as Dangdut music.

DANCE & DRAMA: Many of the dances also reflect some Islamic values. Several of these dances originate from the island of Sumatra, such as the Saman Meusukat dance and the Seudati dance from Nanggroe Aceh Darussalam. Randai is a folk theatre tradition of the Minangkabau people of West Sumatra, usually performed for traditional ceremonies and festivals. It incorporates music, singing, dance, drama and the silat martial art, with performances often based on semi-historical Minangkabau legends and love story.

Another form of local drama is Javanese Ludruk and Ketoprak, Sundanese Sandiwara, and Betawi Lenong. All these dramas incorporate humour and jest, often involving audiences in their performance.

POETRY: Another famous cultural item from Indonesia is the wayang kulit (a shadow puppet made from goat skin) that depicts mythological characters and stories. The art of old poetry in the form of quatrain and couplet sayings from various regions such as the Malay quatrain are often cited in special occasions or in cultural performances.

CRAFTS: One of Indonesia's cultural heritage that has been acknowledged as a world heritage is the batik cloth. Several Indonesian islands are famous for their batik, ikat and songket cloth. The prominent batik industry areas are in Yogyakarta, Solo and also Pekalongan.

SPORT: Many traditional games are still preserved and popular in Indonesia, although western culture has influenced some parts of them. Among three hundred officially recognized Indonesian cultures, there are many kinds of traditional games: cockfighting in Bali, annual bull races in Madura, and stone jumping in Nias. Stone jumping involves leaping over a stone wall about up to 1.5 m high and was originally used to train warriors. Pencak Silat is another popular form of sport, which was influenced by Asian culture as a whole. Another form of national sport is sepak takraw. The rules are similar to volleyball: to keep the rattan ball in the air with the players' feet.

MARTIAL ART: Silat and Pencak Silat: The art of silat was created and firstly developed in the islands of Java and Sumatra. It is an art for survival and practiced throughout Indonesian archipelago. Centuries of tribal wars in Indonesian history have shaped silat as it was used by the ancient warriors of Indonesia. Pencak silat is an art of self defence which is uniquely from Indonesia. This martial art is sometimes shown at certain performances accompanied by traditional music of the region.


Infrastructure: (Communication / Technology / Transportation)


Indonesia has fairly effective telecommunications and infrastructure, especially roads. Road transport is predominant, with a total system length of 437,759 km in 2008 although 179,015 km of that number was unpaved. Railway lines totaled 8529 kilometers in 2008.

There are 683 airports throughout Indonesia, but only 164 of them have paved runways. As an archipelago, Indonesia relies on a huge fleet of ships for transporting both passengers and goods. Important ports include Cirebon, Jakarta, Kupang, Palembang, Semarang, Surabaya, and Ujungpandang.

All transport modes play a role in the country's transport system and are generally complementary rather than competitive. The railway system has four unconnected networks in Java and Sumatra primarily dedicated to transport bulk commodities and long-distance passenger traffic. Sea transport is extremely important for economic integration and for domestic and foreign trade. It is well developed, with each of the major islands having at least one significant port city. The function of air transport is significant, particularly where land or water transport is deficient or non-existent. It is based on an extensive domestic airline network where all major cities can be reached by passenger plane.

Indonesia has 21,579 km of navigable waterways (As of 2008), of which about one half are on Kalimantan, and a quarter each on Sumatra and Papua. Waterways are highly needed because the rivers on these islands are not wide enough to hold medium-sized ships. In addition to this, roads and railways are not good options since Kalimantan and Papua are not like Java, which is a highly developed island. With the current length of waterways, Indonesia ranked fifth on the countries with longest waterways rant


Indonesia has made vast progress as far as connectivity to modern systems of communication. Indonesia has a vast list of printed media, in the forms of newspapers or magazines. Some, such as Kompas and Koran Tempo are circulated around Indonesia daily and are relatively simple to obtain. Others are island- or city-specific, and are usually not distributed to other regions.

The telecom coverage is extensive, with Indonesia being the 10th most penetrated country in the world with 30.378 million main lines in use and 140.578 million mobile cellular connections (2008).

Coverage throughout the country as provided by existing network has been expanded by use of over 200,000 telephone kiosks, many located in remote areas with mobile cellular subscribership growing rapidly.

Links throughout Asia, the Middle East, and Europe are through satellite earth stations - 2 Intelsat (1 Indian Ocean and 1 Pacific Ocean)

There are 54 local TV stations (11 national TV networks) as in 2006 and 30 million Internet users (2008)


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Business Culture in Indonesia

Indonesia is right now one of the world's most populous nations in which there is strong potential for growth in the economic sector. Petroleum, natural gas and textiles account for the majority of industry in Indonesia with services accounting for the majority of its gross domestic product. That is why people should have awareness of the Indonesian culture and business etiquette, which is essential for those wishing to succeed in new business ventures in this particular country.

But how is the culture in Indonesia? First of all, we have to consider the main key concepts and values that become strong requirements when meeting Indonesians.

Key Concept and Values of the Indonesian Culture

Time: This element is approached in a very relaxed and flexible way. People tend to create a relationship and don't rush through business negotiations. Most of the time, plans are not done in great detail and punctuality is not always observed, as Indonesians don't like to be hurried and avoid the sense of urgency noticeable in Western Countries. Time is definitely not money and profit is not as important as building a relationship with people. That's why business people should be aware of the importance to take their time, and be prepared to spend a lot of time with clients or partners before getting down to business. The concept of "Jam Karet" (rubber time) describes their approach to time.

Our business advice: Meetings traditionally start late, but foreigners are expected to be on time and they should never make any comment about the meeting starting late.

Communication style: Indonesians tend to communicate in a very high context, implicit and indirect way. Most of the time they speak in a subtle tone and therefore it is up to the listener to pick up on communication subtleties by paying attention to body language and gestures. Indonesians will do anything to "save face" as well. This term refers on how the people avoid at all cost the cause of shame ("malu"), and for that reason individuals should never ridicule, shout at or offend anyone. They're very careful on how they interact and speak; therefore they behave in a very polite and diplomatic way. Loud people may be perceived as aggressive and expressing anger in public is always inappropriate. Confrontation is most of the time avoided as well, and Indonesians tell people what they want to hear, rather than dealing with the problems. This can make it difficult for foreigners, especially Westerners, to ascertain exactly how business proposals are being received. Their language, Bahasa Indonesian, has actually 12 ways of saying "Yes" when the actual meaning is "No". So even though English is used as the business language, it will not convey the correct message. Therefore, since saying "No" is impolite, you should never assume that a positive answer means that you have an agreement.

Our business advice: Be aware that Indonesians will always try to avoid confrontation and therefore they might say what you want to here only because of politeness, while they hide their true feelings and emotions.

Conformity: Indonesia has been always a very collectivist society, where the group has a higher importance than the individual. Indonesian counterparts, when making business, will try to place family and community concerns above those of the businesses or individuals. Loyalty in a collectivist culture is paramount, and over-rides most other societal rules and regulations. The society fosters strong relationships where everyone takes responsibility for fellow members of their group.

Our business advice: If your counterpart is talking about his family and local problems in the community, listen and avoid jumping into the business. A relationship has to be created to have a successful transaction.

Religion: Being the world's largest Islamic nation, Muslims in Indonesia pray five times a day. In some companies they even have separate rooms for daily prayers. The degrees of influence from Islam in business culture also vary according to the individual. Ramadan is a major Islamic tradition that includes fasting for an entire month and a main reason for foreigners to avoid eating or drinking in front of people, although foreigners are really not required to fast. As of other religions, Christianity takes a smaller part in the country, but just about 10%, compared to the 85% Muslim population.

Our business advice: Be careful when eating or drinking in front of business partners during the Ramadan, because it is a great lack of respect for their Muslim tradition.

But not only do we have to focus on the culture of the country, but also on the way etiquette in business takes place. Due to the fact that the differences between Western Europe as well as the US with Indonesia are tremendous, we're going to point out the main topics that have to be taken into consideration to carry out a successful business transaction. Some of the most important aspects that involve a particular etiquette are:

Working Practices

Structure and Hierarchy in Indonesian Companies

Working Relationships

Business Practices

Gift Giving

Protocol Guidelines (Dining, Dress)

Do's and Don'ts in Etiquette

Working Practices

Business Hours in Indonesia are normally from 8am to 5pm, Monday to Friday and from 8am to 1pm on Saturdays, with always an hour set aside for lunch.

As we said before, Indonesians have a much more flexible attitude towards time, so not be surprised if business meetings or social events begin late.

Structure and Hierarchy in Indonesian Companies

Indonesia is one of the countries with a very high ranking Hofstede Dimension at 78. The high Power Distance (PDI) is indicative of a high level of inequality of power and wealth in between the social structure. It is part of the cultural heritage of the country, because in Asia is one of the highest, as the average in Asian countries is 71.

Business organizations in Indonesia are very hierarchical. Decisions and ideas are generated at the top. Status is very important for Indonesians, so respect should always be given to work supervisors and colleagues.

Because Indonesian society is very status conscious, you need to address people with the proper title. People are generally address as "Bapak" for males or "Ibu" for females, followed by his or her academic title, given name and family name, and finally his or her business title.

Well educated women are more and more entering the workforce. But it is still difficult however for a woman to do business unless she has a man by her side during negotiations. They should imperatively dress conservatively from ankle to neck.

Working Relationships

Business relationships in Indonesia are based on trust and familiarity. Personal contacts and networks are important in making business deals. That is why cultivating friendships will improve the way you make business in this country.

Indonesians give a great emphasis on age and respect. You must always show respect towards elders in Indonesian society. In Muslim tradition, older men have the highest status in families as well as in the workplace.

Business Practices

Business in Indonesia can be conducted in either English or Bahasa Indonesian. If you make business with a multinational company or you conduct it in a large city, English will be more common. It is still very important to bring an interpreter to meetings, as business in rural areas and in smaller cities will almost never be conducted in English.

Initial introductions in Indonesian business are formal. Handshakes are exchanged most of the time before and after the meetings, but the grip is generally softer than the one used in Western countries, especially the US. Greetings many times are accompanied by a slight bow, but nothing compared to Japan's greeting bow. The handshake should be accompanied by the word "Selamat", which means peace. It has to be said slowly and sincerely.

Business cards are normally exchanged after the initial handshake and greeting, and they should display your title. This will allow you to enhance your image and credibility. Even when it is not required, if you have one of the sides of the card printed in Bahasa, it will be considered respectful for Indonesians. You should always remember to give and accepts cards with your two hands or the right hand, and read it before putting it on a table next to you or in a business card case. Business card should always be treated with respect.

Negotiations are quite lengthy with Indonesians, as they like to give enough time to carefully consider the business proposal. They will never rush, and it often takes several meetings to come to an agreement with your Indonesian counterparts. Initial meetings generally serve to make acquaintances.

Gift Giving

Because gift giving in Indonesia depends heavily on the ethnicity of the receiver, there are some general guidelines that should be followed:

Chinese Indonesian:

It is considered polite to verbally refuse a gift before accepting it. It shows that the recipient is not a greedy person.

Try to avoid items like scissors, knives, or other cutting utensils as they indicate that you want to sever the relationship.

Elaborate wrapping is always expected, especially in gold and red colors, which are considered auspicious.

Gifts are not opened when received.

Malays / Muslims Indonesian:

In Islam alcohol is forbidden, so if you're giving alcohol make sure that the recipient will appreciate it.

Any kind of food should be "Halal" (The term means that the animal has been slaughtered according to Islamic principles). Things that aren't halal include anything with alcoholic ingredients or anything with pork derivates such as gelatin.

Always use the right hand to offer gifts.

Gifts should not be opened when received.

Hindu Indonesian:

Offer gifts with the right hand only.

Gifts must me wrapped in red, yellow, or green paper or other bright colors as they are considered to bring good fortune.

Do not give leather products to a Hindu.

Do not give alcohol, unless you know the recipient imbibes.

Gifts are not opened when received.


Protocol Guidelines

Now, several protocol guidelines are going to be explained, so people might be aware of the usual dining and dressing protocols, which are:


Business attire is mostly conservative

Because of the hot weather, cotton or light clothing is best.

Women are expected to dress in a very conservative way, where they can be covered from ankle to neck, as mentioned before. Tight fitting clothes should be avoided as well.

Dining Etiquette:

Dining etiquette is generally relaxed, but depends on the setting and context. The more formal the occasion the more formal the behavior.

Wait to be shown to your place. As a guest you will have a specific position.

Food is often taken from a shared dish in the middle. You will be served the food and it would not be considered rude if you help yourself after that.

If food is served buffet style, the guests are generally asked to help themselves first. It is considered polite if the guests insist on others to go before him/her, but this would never happen.

In formal situations, men are served before women.

Wait to be invited to eat before you start.

A fork and spoon are often the only utensils at the place setting. Depending on the situation some people may use their hands.

Eat or pass food with your right hand only.

Do's and Don'ts in Etiquette



Have your business cards printed in English. If you work with Chinese Indonesians, have the reverse side printed in Chinese. If you are working with ethnic Indonesians print the reverse in Bahasa Indonesian.

Have all academic qualifications and titles printed on the card, and offer it using both hands.

Arrive on time to meetings, but don't expect your Indonesian counterparts to do so.

Address your Indonesian business colleagues with the appropriate professional title and introduce yourself with a card that includes your title. People with high qualifications are considered important.

Forget to take into consideration that Muslims pray five times a day when scheduling business meetings with Indonesians. Time should be allocated for their prayers.

Be afraid of recap what you have discussed in the meeting. It is better to say you're summarizing, as Indonesians will never indicate they don't understand.

Have physical contact with woman (as a man). A man should not shake hands with an Indonesian woman, unless if she offers the handshake.

Speak loud, as it is considered offensive.


Primary Exports and Imports/Products and Services

Compared to its neighbor countries Indonesia is weathering the global financial crisis and economic downturn relatively well. With growth rates of 4.5 % in 2009 the country is one of the rare ones that successfully posted positive growth in that year and outperforms all other major Asian economies except China and India.

As domestic consumption is the main driver for economic growth, Indonesia is less exposed to external shocks due to its relatively low dependence on external trade. Its trade share (ratio of trade balance to GDP) is relatively small at about 50 percent of GDP. Imports of goods and services contracted faster than exports, thereby generating positive net exports, which contributed to GDP growth.

In 2009, exports reached $ 115.6 billion, ranking Indonesia to place 31 in worldwide exporting. Owning extensive natural resources, major export commodities are oil and gas, electric appliances, plywood, textiles and rubber, with almost two thirds of Indonesia's exports are primary products. Main export partners are Japan, US, Singapore, China, South Korea, India and Malaysia, showing that Asian economies have become the biggest export markets for Asian exports and that Indonesia's exports are increasingly directed towards emerging economies, particularly those in Asia. This structure also protects Indonesia's external sector from the current downturn. Import expenditures are at $ 86.6 billion with main import commodities being machinery and equipment, chemicals, fuels and food. Main import partners are Singapore, China, Japan, Malaysia, US, South Korea and Thailand.

The below chart illustrates Indonesia's world export shares by type of industry.

Indonesia is a member of the WTO and ASEAN and a net exporter, showing a trade surplus of $ 29 billion in 2009 due to a recovery in global demand and gains in global commodity prices. However, since 2004 the country is suffering from an oil trade balance deficit and therefore decided to leave the Organization of Petroleum Exporting Countries (OPEC) in 2008.

Below tables show development of trade balance of non- oil & gas and of oil & gas sectors from 2004 until 2009.

As an outlook for 2010, Indonesia's export volumes are expected to return to pre-crisis levels. However, as the domestic demand seems to grow faster than the external sector, imports are expected to recover faster than exports, and thus result in a decreasing trade surplus in 2010.


Indonesia as an investment destination is bubbling with opportunities. On March 31, 2010, the country's investment coordination agency announced that it will allow foreigners to own property in the country and also bigger stakes in health-care companies. This deregulation of the real estate market is just one step in the series of steps the government is planning to take in its review of investment rules. Also under consideration is the decision to allow foreign companies to own a higher stake in industries like education, logistics and agriculture, which earlier were closed to foreign investment. More good news came in April 13, 2010, with Indonesia and US signing an agreement paving the way for the latter's increased investment in the south east-Asian giant. Among other things, this means that US companies will get more incentives to invest in Indonesia. Even China is looking forward to improving trade and ties with Indonesia, as suggested by the news in the media. A huge opportunity also lies in the untapped potential of industry clusters in the country wherein fruitful collaboration between government bodies, trade associations, research & educational institutions can lead to the formation of an investment vehicle that is competitive and profitable. There is a plethora of opportunities for clusters in the forest products, tourism, coal, oil and gas industries in Indonesia. The Indonesian food and beverage processing industry is also a very lucrative area for investment as the number of players is very low and the industry valuation is increasing ever since a low in 2003. The industry is high growth as the demand for machinery is so high that it is being met by imports each year. ASEAN is another place Indonesia can play a more active role in. Till now, its involvement in ASEAN has been largely passive and companies have been slow to penetrate regional markets which have the potential of being significant sources of revenues. Going by president's Yudhoyono promise to double the investment in infrastructure by 2014, there is also a lot to look forward to for investors in the transportation industry and related sectors.

It will be only fair to say that Indonesia has a long way to go till it achieves the economic objectives it has set for itself. The reason it sailed through the economic crisis is also the biggest challenge it faces today: limited integration into the global economy. The Indonesian government's keenness to increase foreign investment in the country to newer heights will require it to face certain challenges that discourage foreign investors. Though the country has shown during the crisis that it has the potential to become an investment heaven, a lot will depend on the implementation process that is employed to carry out the development schemes. Doing away with excessive regulation is something the government is working on very aggressively. But problems of red-tapism, corruption, lack of transparency and a general tendency of businesses to disobey the law need to be addressed on a priority basis. Apart from this, the country's proneness to natural calamities like floods and earthquakes is a deterrent to foreign investors. Ample safety measures need to be put into place to assure the public of minimum damage in case of such unfortunate events. The inflation in global commodity prices has increased trade value for Indonesia on one hand, but this has also increased the financing and managing costs for setting up new projects. The Global Competitive Index ranked poor infrastructure, complex regulatory environment, corruption and lack of transparency amongst the top obstacles that investors will face when doing business in Indonesia. Apart from this, the current power production is insufficient to meet the growing needs of the industries. The country is also badly hit by terrorist activities. Anti-western extremist groups have been operating for quite some time now. Without a sense of security, investors will be hard to convince. In sum, the Indonesian government still has a lot on its hands as far as attracting foreign investment is concerned.