This essay provides the international context for the business environment: a world view and the economy.

World View

Indonesia is the largest economy in Southeast Asia. It is a diverse archipelago that stretches over 5,120 kilometers from east to west and has three time zones.

It is strategically located at the Strait of Malacca, which connects world trade to Southeast Asia and Asia. It also borders the so-called "South China Sea," a geopolitical hot spot.

The Economy in a Global Context

Indonesia has a large economy, and it is confronting challenges that align it with countries of lower to middle economic tiers.

Today, Indonesia is the world’s fourth-most populous nation and, depending on how one measures GDP (nominal, real, PPP), is either the seventh or seventeenth-largest economy in the world.

Even though Indonesia's GDP is large because it is the fourth most populous country, the size of the ranking says little about the strength of the economy or the standard of living.

In fact, these absolute GDP numbers could be misleading. Indonesia's economic standing, when measured in terms of GDP per capita, indicates that it is still confronting challenges that align it with countries of lower to middle economic tiers and, thus, an overall low standard of living. The country's rank of 115th out of 193 nations in terms of GDP per capita (depending on the measurement method) positions it below the global average. To turn these statistics into something more tangible and relatable, have a look at how an Indonesian lives on ca. 1.000 USD a month (which is roughly GDP/capita (PPP) https://www.gapminder.org/dollar-street?countries=id.

Key Takeaway

The size of the economy matters only to a certain extent, if only for national pride. In reality, Indonesia's economy is vulnerable and faces the typical problems of lower—to middle-income countries; thus, it is still far away from a secure spot in the middle-income country range.