Analysis of Political, Economic, Legal and Technological Risks in Indonesia

Only available on StudyMode
  • Download(s) : 470
  • Published : March 30, 2013
Open Document
Text Preview
Analysis of Political, Economic, Legal and Technological Risks in Indonesia By Yohanes Randy Anggoro
Student ID: 1004536

Instructor: Mr. Bala Subramaniam N.
Module Name: International Trade and Management
Module Code: ERCBA-209
Word Counts: 2106
Due Date: 7 November 2012

Content Page

Introduction………………………………………………………………………………………………2 Brief Introduction to Indonesia……………………………………………………………………….3 Political Risk……………………………………………………………………………………………..3 Economic Risk…………………………………………………………………………………………..4 Legal Risk………………………………………………………………………………………………...6 Technological Risk……………………………………………………………………………………...6 Conclusion…………………………………………………………………………………………….....7 Reference List…………………………………………………………………………………………...8

Introduction
Doing or expanding business in Asia nowadays has become a popular trend from companies around the world, many big firms based on Europe and United States of America recently has opened a branch in Asia in order to reach the Asia Market. The main attraction of Asia is the number of population, with approximately 4 million people spread around 5 regions, consist of Northern Asia, Western Asia, South Central Asia, South East Asia, and East Asia (OneWorldNationsOnline, 2012), it is apparent that Asia has become a large growing market that attracts companies around the world. Moreover, other than the large growing market potential it offers, there are other benefits that a firm can get by expanding business in Asia. First of all the labor cost in some less developed Asia Countries, such as Indonesia, Vietnam, Thailand, is relatively lower than labor cost in Western Countries, for example, England and United States of America. Secondly, the land cost in Asia, Indonesia in particular is relatively much cheaper than in Western countries. However, despite the benefits that have been mentioned above, there are some risks that need to be known by a firm before deciding to expand business to Asia, Indonesia in particular. The risks itself can be divided by four which are, political risk, economic risk, legal risk, and technological risk. Below, there is an explanation and examination about four of the risks that may arise while expanding business in Indonesia.

Brief Introduction to Indonesia
Indonesia is a country in South East Asia which consists of approximately 17.508 islands. The official name of Indonesia is Republic of Indonesia. There are 5 main islands in Indonesia which are Sumatra, Java, Kalimantan or Borneo, Sulawesi and Papua. Geographically, Indonesia is placed between Pacific Ocean and Indian Ocean as well. Jakarta is the capital city of Indonesia and is placed in Java Island. The Legal Currency in Indonesia is Indonesia Rupiah. In term of people, Indonesia has approximately 240 million of people with various ethnicities and is the fourth most populated country in the world. The current president of Indonesia is Susilo Bambang Yudhoyono.

Political Risk
According to Deresky (2008) Political Risk is government actions or politically motivated events that can affect a firm in the long terms. Furthermore, Kobrin (1979) states that political risk covers possibility of unwanted consequences created by governmental activity that affect international business. Nationalization, Expropriation and Confiscation, Terrorism, and Macro political and Micro political risk are the example of commonly known political risk events. Nationalization is a governmental action to take over a private asset to be owned and operated by the government. Next is Expropriation, Expropriation is a term to define a process of taking away a private property for a public use. The difference between Expropriation and Nationalization may seem a bit vague, but the intentions for both terms are different. Nationalization is a process to take over a private asset by a government in order to make profits. For example is the nationalization of Netherland Enterprises by Indonesia Government after the independence...
tracking img