Inflation and Indonesia

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PESTEL analysis of Indonesia| October 3
2009
|
SUBMITTED TO: MR. SUNDERASAN SUBMITTED BY:
Hitesh GoyalNirupan ChakravarthiSainath.V MBA 12 and PGPRM-9| |

Introduction:
Indonesia is one of the largest countries in South-east Asia, between the Indian Ocean and the Pacific Ocean which contain mainly mountainous and covered with rain forests, swamps and consists over 13000 islands. Jakarta is the capital of Indonesia. Indonesia declared its independence on 17th August 1945 from Japan but Netherlands agreed to transfer sovereignty in 1949. Susilo Bambang is the President and Muhammad Yusuf Kalla is the Vice-President of Indonesia. Bahasa is the official language in Indonesia which modified form of Malay but the most widely spoken language is Javanese. 88% of Indonesians population is Muslim. It has a very large trading environment, with several countries ranging in products from gas to textiles. 22% of its population live below poverty line. (CIA- the World Fact book) PESTEL Analysis:

Political and Legal factors:
Indonesia is considered as Republic country. It declared its independence on 17th August 1945 from Japan so 17th August is the national holiday. Indonesia’s legal rules and regulations are based on Roman-Dutch law. Their constitution has abrogated by Federal Constitution in 1949 and Provisional Constitution abrogated in 1950 which restored on 5 July 1959. Political stability: In Indonesia after every five year election is being contested for president and vice president post by direct vote of the citizenry. Last time it was held on 8 July 2009 (next to be held in July 2014). Susilo Bambang has elected as president and Muhammad Yusuf Kalla is the Vice-President. Similarly, Cabinet also appointed by the president. So for next 5 years there are more chances of stability of the government. Labour laws: Indonesia has one of the largest labour forces in the world which make it stand on 5th rank. So, to protect the labour rights the government has made a law called Labour laws Article 28D (2). According to this law 7-hour workdays and 40-hour workweeks, with one 30-minute rest period for each 4 hours of work is legal in Indonesia. One day of rest weekly also mandatory in Indonesia. In April 1992, the Government of Indonesia signed a Memorandum of Understanding with the International Labour Organization under the International Program for the Elimination of Child Labour (IPEC) where the minimum working age is 14 years. (Labour & Social Protection in Indonesia, 2009) Labour force - by occupation:

Agriculture: 42.1%
Industry: 18.6%
Services: 39.3%
Company law: The Indonesian Company Law of 1995 is the most important framework for the current legislation on corporate governance in Indonesia. Under the Company Law, a company is a separate legal entity in which Directors and Commissioners represent the company. Every company must register their Memorandum of Act under this Company Law. (Incorporation of company Law in Indonesia) Prime lending rate: If we talk about their commercial Bank prime lending interest rate it is quiet decent which is 6.41% and their Central bank discount rate is 10.83% . (CIA, 2009) Environmental law: Indonesia Environmental Agency states Decree Laws. For instance, Municipal Noise Reduction Plan (MNRP) has noise limit such areas in housing occupancy, hospitals, schools, and religious buildings (Inter Noise , 2007). Business or individual tax system: Tax system has various rules and categories for example on first 25,000,000 income rate of tax is 10% then on next 25,000,000 it is 15% and on next 50,000,000 it is 30%. In the same way Income Tax on interest from Indonesian banks is fixed at a final 15% for both companies and individuals.

Economical factor:
Indonesia is considered as a developing country. Due to the government policies and treasure of national resources, their GDP growth has been increasing rapidly from last few years. They spend 23.5% of their GDP to develop...
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