The objectives of this report are (a) to discuss the industrialization process in Indonesia, (b) to discuss and evaluate the role of foreign direct manufacturing investment and its consequences for industrialization and regional development, and (c) to analyse the implications of Indonesia's economic situation for business opportunities for Australian business and appropriate methods of approach to capitalize on those opportunities.
To meet these objectives the author has used secondary data from Indonesia's Central Bureau of statistics plus other relevant information and publications from many sources. A qualitative and descriptive orientation was adopted making much use of graphs and tables in the presentation.
The industrialization of Indonesia is growing rapidly. A number of economic and policy reforms have been implemented since 1984, including the reform of the taxation, finance / banking, trade and tariff systems with increased incentives for foreign investment (especially in the manufacturing industries). As a result government revenue has increased, employment has grown strongly, and per capita income has also increased. Moreover, the contribution of the manufacturing sector to the economy has increased significantly, especially in the last decade.
Foreign direct investment in manufacturing has increased every year with the improving investment climate. Most of this investment comes from the Asian countries and only a very small percentage comes from Australia. The distribution of foreign investment is concentrated in particular regions (Eg. Java) and in particular industries. However, this investment has brought valuable benefits in facilitating the industrialization process in Indonesia, for example, in the areas of capital, technology and the improvement of management skills.
This development has created many business opportunities for foreign investors especially in the manufacturing sectors. Specific areas of business opportunity for Australian business are in the mining, food industry, dairy products, and in service sectors such as finance, hotels, and consultancy. In order to benefit from those opportunities, Australian business will have to understand the uniqueness of Indonesian business culture which is very close to the government and is based on a consensus. The role of the groups and families is also very important. To be successful therefore, Australian business people will have to understand and be aware of these culture differences and the important role of the government in the business sectors. Trust and friendship with the government and business groups become a key factor.