The Southeast Asia Country Series: The Republic of Indonesia

The Pakistan Business Council (PBC) has been bringing out a Country Series since 2015 to promote business opportunities for Pakistani exporters in non-traditional markets. The Country Series concentrates on highlighting markets which are currently not major export destinations for Pakistani exporters. This is the fourth publication of the Southeast Asia Country Series and features the Republic of Indonesia (Indonesia).

World’s largest archipelago with more than 17,000 islands, Indonesia is located in Southeast Asia between the Indian and Pacific Oceans. It shares borders with Malaysia, Singapore, East Timor, Papua New Guinea, Vietnam, the Philippines, and Australia. Apart from a total land area of 1.91 million km², it has an Exclusive Economic Zone (EEZ) of 6.01 million km². The country has a total population of 263.99 million, of which 87.20% are Muslims who mostly speak Bahasa Indonesia, English and the Dutch language.

Indonesia is the 16^th largest economy of the world with a GDP of USD 1,015.54 billion. In 2017, trade contributed 39.54% to the GDP, with total exports of USD 168.81 billion versus imports of USD 156.93 billion. Indonesia’s top three export partners were China, the USA and Japan which accounted for 34.74% of total exports, whereas top three import partners were China, Singapore and Japan which shared 43.27% in total imports. Top exports included palm oil, coal, petroleum gas, crude petroleum and rubber, while top imports were refined petroleum, crude petroleum, telephone sets, and vehicle parts.

Table below compares major economic indicators for Indonesia and Pakistan, both countries have the same GDP growth rate (around 5%), unemployment (4%), and inflation (4%). However, Pakistan’s economy, with a GDP of USD 304.95 billion, is one-third Indonesia’s. In 2017, Pakistan’s foreign direct investment net inflows were around 10% of Indonesia’s net inflows of USD 22.08 billion. Indonesia had a trade surplus of USD 11.89 billion, while Pakistan’s trade deficit stood at USD 35.56 billion. In 2016, Indonesia’s high technology products accounted for 5.79% of manufactured exports while Pakistan lagged behind with 1.91% high technology exports as a percentage of manufactured exports.

Indonesia enjoys a trade surplus with Pakistan. Since 2013, exports have grown by 69.42% to USD 2.40 billion in 2017. Imports in 2017 were worth only USD 0.24 billion. Indonesia’s exports have grown on the back of increase in exports of palm oil, areca nuts, motor vehicles and coal. Top imports from Pakistan included; broken rice, fresh or dried mandarins, iron and steel products, paper and paperboard products, cotton, and textile articles.

This profile also highlights 25-high potential exports from Pakistan to Indonesia at HS-06 level. Pakistan exported USD 69.81 million of these products to Indonesia while it had a potential to export USD 1,533.25 million worth of such goods in 2017. In addition to this, Pakistan has the potential to export textile and textile articles (including cotton, t-shirts and woven fabrics) worth USD 251.12 million to Indonesia while it currently exports textile goods valued at only USD 29.30 million. Also, the study examines the impact of the recent concessions granted by Indonesia to Pakistan for twenty tariff lines.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 78) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk