Troubled Giant - Indonesia

Topics: Unemployment, Economics, Investment Pages: 1 (251 words) Published: November 2, 2009
Case #2: Indonesia-The troubled Giant
Indonesia is one of the most ethnically diverse countries and also one of the world’s most populous Muslim nations. Ethnic diversity can be good for a country but it can also cause problems such as ethnic rivalries. When they went from a dictatorship to a democracy, this led to a lot of uncertainty. Most of Indonesia’s economic problems are from 30yrs ago while they were under the dictatorship of Suharto. Some of the factors are corruption, high unemployment rate, and foreign capital is leaving the country. I think that foreign firms have been exiting Indonesia in recent years because it takes approximately 151 days on average to complete the paperwork necessary to start a business. That is the type of environment foreign investors’ refrain from entering. Another reason is the high level of corruption. In order to reverse this trend, Indonesia should provide incentives to attract foreign investors, and place no limitation on the value of investment. Corruption in Indonesia is endemic because the bureaucrats demand bribes from any company that they can get it from because their salaries are so low. This is like barriers that is preventing Indonesia from recovering and sustain growth in its economy. The risks that foreign firms face that do business in Indonesia are that they have a poor regulatory environment and lack of transparency. Also, an ineffective and corrupt legal system an increasingly militant labor force, with manpower laws heavily in favor of the workforce.
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