Indonesia Overview: Economy
Crude oil and natural gas are Indonesia's most valuable natural resources and were long its major source of export revenue, but production has declined and domestic use increased since the 1990s. Agriculture accounts for about 13% of the GDP and employs over 40% of the labor force. Indonesia is one of the world's major rubber producers; other plantation crops include cocoa, coffee, palm oil, coconuts, sugarcane, tea, tobacco, cinchona, cloves, sisal, and spices. Despite plantation cultivation, Indonesia has a wide landholding base; the majority of the people are largely self-sufficient in food. Rice is the major crop; cassava, corn, yams, soybeans, peanuts, and fruit are also grown. Horses and cattle are raised on some of the Lesser Sunda Islands. Fish are abundant, both in the ocean and in inland ponds.
In natural-resource potential, Indonesia is one of the wealthiest countries in the world. It has great timberlands; vast rain forests of giant trees (among the world's tallest) cover the mountain slopes, and teak, sandalwood, ironwood, camphor, and ebony are cut. Palm, rattan, and bamboo abound, and a great variety of forest products is produced. Indonesia is a major exporter of timber, accounting for nearly half of the world's tropical hardwood trade, but the rapid deforestation of Indonesia's hardwoods, mainly due to its expanding population's need for farmland, the clearing of land for palm oil plantations, and growing timber-related industries, has caused concern among international environmental groups and sparked ethnic conflict (particularly between immigrants and native Dyaks on Borneo). In addition, enormous out-of-control brush and peat fires, started illegally during the dry season to clear land, have caused significant health, navigation, and economic hazards in some years.
Tin, nickel, bauxite, copper, coal, manganese, gold, and silver are mined, and salt is available in large quantities from shallow enclosed seashore lagoons. Iron and uranium are believed to exist in quantity but have not yet been exploited. Primarily a supplier of raw materials, the country began to industrialize and developed rapidly in the 1990s. The industrial sector includes the manufacture of textiles and clothing, building materials, chemical fertilizers, rubber tires, and electrical and electronic goods; there is also food, mineral, and wood processing. The government also promotes tourism, and Bali is a popular tourist destination.
Indonesia has attracted increased foreign investment in recent years, but corruption is widespread. Labor unrest has been a persistent problem due to the tensions between the predominantly ethnic Chinese business owners and a workforce made up almost entirely of ethnic Malays. The country's economy was severely impacted by the 1997–98 Asian financial crisis and it continues to experience high unemployment and inflation, although the nation began to rebound in 2000. The main exports are natural gas and petroleum, electrical appliances, textiles, wood and wood products, and rubber. Imports include machinery and equipment, chemicals, fuels, and foodstuffs. Indonesia's main trading partners are Japan, Singapore, the United States, China, and South Korea.
The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.
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