Country Report: Indonesia

It is the fourth largest population and the largest Muslim nation globally. More than half of the nation's population resides on Java, its fourth largest island, where most political and economic activities occur. The country consists of over 300 ethnic groups, with the largest being Javanese (40 percent) and Sundanese (15.5 percent). Indonesia gained independence in 1945 from the Netherlands. After World War II, Indonesia has been involved in several armed and military conflicts, such as the Konfrontasi (1962-1966), the invasion of East Timor (1975-1976), and the insurgency in Aceh (1976-2005). Indonesia is a democratic republic, where the president is both head of state and head of government. Its post-World War II political history is typically divided into three periods: the Sukarno era (1945-1967), the Suharto era (1967-1998), and the Reformation era (1998-present). The Reformation era saw the first popular elections for president. The current president, Joko Widodo, was sworn in as the seventh President of Indonesia in 2014 for a five-year term. Indonesia is the sixteenth largest economy in the world and the largest economy in the region of ASEAN (the Association of Southeast Asian Nations), with a gross domestic product (GDP) of US$ 932 billion (current US$). It has a GDP per capita of US$3570, and is classified as a "lower middle income" economy by the World Bank. The largest driver of the economy is the services industry (43.7 percent), followed by industry (27 percent), and agriculture (13.5 percent). The service industry is also the largest employer in the country (44.9 percent), followed by agriculture (32.9 percent), and industry (22.2 percent). Indonesia has enjoyed a moderately strong annual economic growth of around 5 percent in recent years. The pressing needs of the population are different between the rural and urban regions, and between Java and the rest of the Indonesian islands. On Java, youth unemployment is both a current and future issue as population growth is higher than employment growth. Rural-to-urban migration is likely to put increased pressure on food and water security on Java. On the other hand, outside of Java and in the rural regions, access to healthcare, sanitation, and electricity is more limited. Poverty, unemployment, and inequality are significant social issues in Indonesia. Despite enormous gains in poverty reduction in the past years, over 25 million Indonesians still live below the poverty line. Forty percent of the population have incomes that are only marginally above the national poverty line, and hence remain vulnerable to poverty. Poverty is more concentrated in the rural regions, with 14.2 percent of the rural population classified as poor in 2014, compared to 8.3 percent of the urban population at the national poverty line. The poverty rate is also far higher in Eastern Indonesia, though most of the poor live on the island of Java. Population growth is currently higher than employment growth, which suggests higher unemployment in the future. A recent slump in commodities prices is likely to increase upward pressure on unemployment. Youth unemployment remains a concern, with 15.3 percent of the population aged between 15 and 24 years unemployed in 2016. Economic growth has not benefitted Indonesians equally, with a Gini coefficient of 0.40, higher than in neighboring countries. Only 20 percent of Indonesians saw a rise in their economic wealth between 2005 and 2015, despite strong economic growth.