Economics

The Biggest Industries In Indonesia

Palm oil, petroleum and natural gas, coal, textiles, etc., are some of Indonesia's biggest industries.

In Southeast Asia, Indonesia has the biggest economy and is among the world’s emerging market economies. On a global scale, the nation is ranked sixteenth in terms of the size of the economy by nominal gross domestic product (GDP). Despite this impressive ranking, the nation has a GDP per capita that is well below the global average. The government is one of the biggest owners of enterprises in the nation with a total of 41 enterprises. Currently, however, private citizens and foreign investors or companies control a huge section of the economy after establishing themselves in the key industries of the state.

Major Industries in Indonesia

Looking at the data from 2006, the biggest industries in the state include agriculture, oil and gas manufacturing, non-oil and gas manufacturing, mining, trade, hotels, and restaurants, and a few others making respectable contributions to the economy. The sectors that had the most improvement between 2003 and 2006 include mining, electricity, gas, and water, transport, and communication.

Agriculture, Livestock, Forestry, and Fishery

This industry, which is regulated and overseen by the Indonesia Ministry of Agriculture, is among the key ones in the economy of Indonesia. Admittedly, as is the case with most places in the world, agriculture is not as productive as it was decades ago. Despite the drop in the levels of production, the sector remains crucial in providing employment to a huge percentage of Indonesian households. In 2012, the industry was responsible for providing jobs to about 49 million citizens, which is a figure representing 41% of Indonesia’s labor force. In 2013 alone, the sector was responsible for contributing around 14.43% of the national GDP, which was a decline from the contribution of 15.19% in 2003.

As of now, only 30% of the total land in the nation is utilized for agricultural purposes. This land is used primarily in two ways namely large plantations (mostly owned by the government or private companies) and smaller modes of production (mostly owned traditionally by households). Naturally, the larger plantations produce goods that are mainly for export while the smaller ones have their focus on satisfying the food demand of the locals. The larger plantations produce things like rubber and palm oil while the smaller ones produce commodities like fruits, vegetables, rice, cassava, and other foods.

The tropical area the nation lies in is uniquely suited for agriculture due to the abundance of rain and sunshine for the most part of the year. In addition, most of the country has rich volcanic soils that are perfect for agriculture. For these reasons, the nation is among the leading global producers of commodities such as cocoa, palm oil, cassava, tea, tropical spices, natural rubber, and others.

The agriculture is so successful that Indonesia is the global leader in the production of three commodities namely palm oil, cinnamon, and cloves. The nation is the second highest global producer of nutmegs, cassava, coconut oil, vanilla, and natural rubber. In addition, Indonesia is the third largest global producer of cocoa and rice, the fourth globally in producing coffee, the fifth largest global producer of tobacco, and the sixth largest in producing tea.

In addition to being the top producer of palm oil, Indonesia is also the principal consumer. Around 50% of the world’s needs of the product are met by Indonesia alone from its massive plantations, which cover a total area of about 23,166 square miles. Plans for expansion are well underway.

Mining

There is no tin market in the world that is larger than Indonesia’s. Initially, the mining industry was focused around silver, tin, and bauxite. In recent and future plans, the government is aiming towards the expansion of copper, coal, gold, and nickel for exportation to other markets.

Coal production has grown exponentially since the coal mines were reopened in 1993. In 1999, coal production reached 74 million metric tons, which increased further to 353 million tons in 2011. As of 2014, only two countries were above Indonesia in the coal mining sector. The leading coal production firm is a partnership between two firms from the United Kingdom.

Two foreign firms from the US operate three copper/gold mines with other foreign companies from Britain and Canada also having major stakes in the mining of gold and nickel. Indians also have significant shares in the business. At some point, back in 1998, the value of gold mining hit a staggering $1 billion while copper was at $843 million.

Non-oil and Gas Manufacturing

Indonesia is a leading producer in this sector with products like motorcycles. In 2010 alone, 7.6 million motorcycles, mainly manufactured by Honda and Yamaha, were sold. Almost all of the components used in manufacturing them are acquired locally. Car sales also went up in 2011 after 888,335 units were sold mainly by Mitsubishi, Toyota, and Daihatsu.

Another subsector that hopes to improve is the textile sector after increased investments from 2013. Previously, in 2012, the sector was worth $247 million and exports were worth around $13.7 billion in the same year.

Automotive

Indonesia is one of the leading producers of automotive in Southeast Asia with several assembly plants of South Korean and Japanese vehicles. In 2014, the total exports of vehicle units were around 22.5% of the total production (which was 878,000 vehicle units). The export value is more than twice the value of imports of automotive. The predictions for the future export amounts place the sector in the top five by 2020. Recently, in 2017, a total of 1.2 million water vehicles were produced in Indonesia, which placed the nation 18th in the global ranking of vehicle producer.

Hydrocarbons

A member of OPEC, the nation produced about 1.5 million barrels of crude oil per day in 1999, which contributed about 9% of the total GDP. The amount has gone down slightly in 2015 to 1.07 million barrels per day because of aged oil fields and low investment in the latest technologies. Consequently, the country has had to import more oil to make up for the increased demand. All the rights for petroleum and minerals are owned by the state with foreign firm given contracts. The firms are expected to foot all the costs involved in the production.

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