Indonesia is, with around 250 million inhabitants , the world’s fourth most populous nation and Southeast Asia’s largest economy. The land area is approximately five times the size of Sweden, but covers over 17 000 islands. After the fall of Soeharto in 1998, Indonesia became a consolidated democracy, which has increased the international attractiveness in terms of trade and investment of the country.
Since the late 1960s and onwards, the Indonesian economy has significantly expanded. The positive economic development was however brought to an abrupt end in connection to the Asian financial crisis in 1997. The crisis, which led to the fall of president Soeharto, also initiated Indonesia’s transition to become a stable democracy. After a necessary period of recovery, the economic growth in the Indonesian economy has been around 6 percent per year during the last decade. Furthermore, in the global recession that followed the financial crisis in 2009, which then worsened in connection to the euro crisis in 2011 and 2012, Indonesia was the least affected economy in Southeast Asia. This was partly due to a stable macroeconomic policy.
Several major credit rating agencies and the OECD upgraded Indonesia in 2011 and 2012. In 2015, however, the economic growth declined to 4.8 percent, the lowest growth rate since 2009. The decline was largely due to low global commodity prices which hurt Indonesian exports and the weakened growth and demand from Indonesia’s main trade partner, China. Suboptimal public investments, in for example infrastructure, were also a contributing factor to the declined growth rate.
While the Indonesian economy is growing and foreign interest is increasing, many challenges remain. Indonesia is in great need of investments in infrastructure, education and healthcare. These topics have reached high on the new governments’ agenda. Another major issue is the widespread corruption, which President Joko Widodo has prioritized to eradicate.
Sweden, unlike most European countries, enjoys a trade surplus with Indonesia. The import to Sweden increased by 29 percent between 2014 and 2015, and amounted to almost 1.5 billion SEK. The figures, however, do not show the full extent of Swedish trade with Indonesia since they do not reflect trade via Swedish subsidiaries in other countries. The small volume of the trade balance means that even one-off transactions have a major impact on statistics and is misleading for development.
Swedish exports to Indonesia increased significantly during the 90s. At that time, the Indonesian economy was characterized by a larger demand for high technology products, a general increase in purchasing power and improved infrastructure. These were contributing factors to the rise in Swedish exports to Indonesia. However, the Asian financial crisis at the end of the 90s had both social and economic consequences for Indonesia. This significantly decreased demand for Swedish products from the Indonesian market.
The majority of Swedish exports to Indonesia consist of telecommunication equipment, paper and pulp, machinery for the paper industry, machinery for the metal industry, agricultural machinery and trucks. The import from Indonesia to Sweden mostly consists of raw materials, furniture, shoes and food.
Swedish investment in Indonesia is relatively limited, but there are a few companies that have production in the country, such as TetraPak and SKF. The number of Swedish related companies with representation in Indonesia is now around 80, and includes most of the major multinational companies. IKEA and H&M are some of the newcomers. For a full list of Swedish commercial interests in Indonesia, please see the Sweden Indonesia Business Guide 2016.
The promotion work of The Embassy of Sweden in Jakarta 2014-2016 aims to contribute to new business opportunities for Swedish companies in Indonesia and increase the knowledge among local stakeholders about Swedish expertise within the sectors of infrastructure, both physical and digital, healthcare as well as defense.
The Embassy of Sweden in Jakarta is working closely with Business Sweden - the Swedish Trade and Invest Council.