Indonesia Industry

In 1991, industry’s contribution to Indonesia’s GDP for the first time was greater than that of agriculture. Since then, the industry’s share has increased further to almost half of GDP. Many industrial companies are small or medium-sized and produce products for the domestic market.

Several industries are working on processing the country’s own natural resources and raw materials. For example, there are companies that produce palm oil as well as sawmills and plywood factories. The state runs some larger, capital-intensive companies. The state oil company Pertamina runs several oil refineries. There is also heavy industry in the form of iron and steel mills, aluminum smelters and cement industry. Manufacturing of television and radio equipment is another important industry branch.

When the Suharto regime took power in 1967, one of its most important goals was to develop the industry. The infrastructure was expanded and large state-owned companies were formed in the oil, cement and steel industries. Trade barriers sought to protect domestic companies from competition. Investments were made to replace imports with domestic production. This led to inefficiencies and high prices for domestic goods.

  • COUNTRYAAH: List of top trading partners of Indonesia. Includes countries that imported most shipments from and exported most goods to the country.


The shortcomings came in the day when oil prices fell in 1986. In the coming years, reforms were implemented to liberalize the domestic market. The export industry was encouraged and a rich supply of cheap labor led to an increase in inflow of foreign capital. An extensive production of clothing and other textiles and shoes for export was built up.

The Asian crisis of 1997–1998 (see Modern history) hit the manufacturing industry hard and corporate bankruptcies became numerous. A decade into the 2000s, the manufacturing industry had partially recovered but had problems with rising production costs and increased competition from new low-wage countries such as China and from smuggled goods.


The Indonesian tourism industry developed rapidly in the 1980s and 1990s with the encouragement of the Suharto regime. In 1987, the number of tourists exceeded one million, three years later two million and in 1995 five million.

The Asian crisis of 1997–1998 marked a severe setback for tourism and the political unrest following Suharto’s fall in 1998 had a deterrent effect on tourists. After the bombing in Bali in October 2002 (see Militant Islamism), tourism declined by 75 percent, but already three months later, tourists began to return.

In 2012, more than eight million tourists visited Indonesia. Today, tourism is of great importance to the country’s economy and an important source of foreign currency.

For foreigners, Java with its temples and volcanoes as well as Bali’s beaches and Hindu festivals are still the most popular destinations, but Lombok, Sumatra and Sulawesi are also attracting more and more tourists. The most important groups are Australians, Chinese, Japanese and tourists from neighboring Singapore and Malaysia, but Indonesia has also become popular among Europeans and North Americans.


Number of foreign visitors per year

11 519 000 (2016)

tourist revenue

12599 000 000 US dollars (2016)

The share of tourist income from exports

7.5 percent (2016)



Counter-terrorism is strengthened

December 29

Indonesia’s chief of police announces that the anti-terrorist force Densus 88 will be strengthened by 600 men, which means more than doubling to around 1,100 police. In 2017, Densus arrested 88 154 suspected terrorists and killed 16 in various attacks. Four police officers were killed on duty during the year and 14 injured. Densus 88 was formed after the terrorist attacks in Bali in 2002 and is the country’s elite counter-terrorist force. Densus 88 has received over US $ 200 million in grants from the United States and Australia. The extension of Densus 88 is part of a larger investment in counter-terrorism that the Government of Indonesia is making in the wake of an increased threat from domestic terrorist groups with links to the Islamic State (IS). For example, the government has previously imposed restrictions on social media that spread jihadistmessage, and in July 2017, the militant Islamist organization Hizb ut-Tahrir was declared illegal.

The police strike at suspected terrorists

December 10

Police arrest 13 suspected terrorists in a series of coordinated raids over a weekend. The appropriations are made, among others, in South Sumatra, East Java and West Kalimantan. Indonesian police have the right to detain people for a maximum of seven days for the purpose of prevention if suspected crime is planned. One of the arrested is linked to the notorious militant Islamist Abu Jandal, who traveled to Syria in 2013 and has been highly regarded within the Islamic State (IS) extreme terrorist organization.


New mass graves from the 1960s discovered

November 18

Another 16 mass graves with a total of about 5,000 casualties have been found on Java. People were killed during the massacres by alleged sympathizers to the now banned Indonesian Communist Party (PKI). The murders were committed during the Cold War days between 1965 and 1966 and were carried out by the military and military militia loyal to the army. Hundreds of similar tombs are believed to be scattered across Java and Bali. Only in recent years has a debate opened up about the events surrounding the mass murders. In the past, authorities and others in the community kept silent about what happened.

The President is indicted for bribery

November 15

A major corruption havoc is being eroded. Along with a host of high-ranking politicians, including dozens of MPs, Parliament’s Speaker, Setya Novanto from Golkar’s top tier, is charged with bribery in connection with the corruption scandal, which is estimated to have cost the state around $ 170 million. Novanto should have received bribes from funds for a government project where new electronic ID cards would be issued. In a search of a house against Novanto’s residence in Jakarta, the President flies and later shows up at a hospital where he claims to have suffered a traffic accident. When the doctors find no fault with him, he must leave the hospital and instead set himself up for questioning. Novanto was forced to resign in 2015 when he was suspected of extorting a mining company in connection with the extension of the company’s permit for operations in the country. He was acquitted in 2016 and then returned to the post of President of Parliament.

Soldiers and OPM rebels in posture war on villages

November 12

Hundreds of heavily armed soldiers surround two villages right next to US company McMoRan’s gold and copper mine in Papua. This happens since OPM separatists in turn made a ring around the villages. A war of positions arises when both parties accuse each other of holding hostage of around 1,300 villagers. OPM fights for an independent Papua while the authorities regard the group as criminal (for background see Papua).

WTO: Indonesia violates trade rules

November 9

The World Trade Organization WHO states that Indonesia is violating the organization’s rules by restricting imports of livestock and horticultural goods from the US and New Zealand in order to protect its own market from non-halal products (approved foods according to Muslim rules). The US has been pushing the issue for a long time within the WHO. In 2016, the Indonesian import ban was estimated to cause the US to lose about $ 170 million. A WTO panel already ruled in 2015 the US advantage in the trade dispute, but Indonesia appealed the ruling.


“The United States knew of the mass murders of the 1960s”

October 18

Formerly stamped documents from the US Embassy in Jakarta show that the United States knew of the political persecution between 1965 and 1966 that resulted in the deaths of at least half a million, perhaps up to three million people. The 39 documents are published by an agency called the US National Declassification Center, set up during President Obama’s term. In the documents, embassy officials write, among other things, that people were “taken to slaughter” by the army and high militia. The political cleansing was aimed at suspected Communist and leftist sympathizers, but in many cases affected local villagers on Java and Sumatra. The wave of violence was triggered in September 1965 following a coup attempt in which six generals were killed and whom the army accused the country’s large Communist Party of being behind (see further Modern History). The documents also show that Indonesia’s large Muslim mass movements, such as Muhammadiyah and Nahdlatul Ulama, in many cases incited Muslims against people whom they suspected had left sympathies. There has been a widespread culture of silence in Indonesia around the mass murders in the 1960s since they began. Attempts to shed light on the events, for example through seminars, have often been met by violent reactions from right-wing groups and militant Muslims.

Jakarta gets new governor

October 17

Anies Rasyid Baswedan assumes Jakarta’s governor. He defeated incumbent Governor Basuki Tjahaja Purnama in the May 2017 elections. The election campaign got the attention of the outside world when Purnama, who is a Christian and has Chinese roots, was accused by radical Islamists of denouncing Islam by misinterpreting a quote from the Quran. Later in the year, Purnama was sentenced to two years in prison for blasphemy. Subsequently, the capital was ruled by a temporary governor.


Hizb ut-Tahrir is banned

July 19

Indonesia bans the Islamist organization Hizb ut-Tahrir, which wants to create a global caliphate where Sharia law applies.

Organizations that violate Pancasila can be dissolved

July 12

President Widodo empowers the country’s authorities to dissolve organizations deemed to violate the country’s state ideology of Pancasila, whose main purpose is to unite the nation despite its ethnic, linguistic and religious diversity. Assessors believe that the law comes to curb radical Islamism, which many believe is increasing rapidly and gaining greater political influence.


Three dead in acts of terror in Jakarta

Three police officers are killed and dozens of people injured when two coordinated explosive charges detonate near a Jakarta bus station. Police suspect militant Islamists for the act.

Whip punishment for homosexuality

May 16

Two men in Aceh are sentenced to 85 whipsaws for homosexuality, which is banned in the Orthodox Muslim province.

Purnama is sentenced to prison for blasphemy

May 9

A Jakarta court sentenced the capital’s outgoing governor Basuki Tjahaja Purnama to two years in prison for blasphemy. Purnama, who is a Christian and has Chinese roots, was prosecuted during the campaign for the governorship election in April and May 2017 after radical Islamists accused him of blaspheming Islam by misinterpreting a quote from the Quran. The trial came as a test of how religiously tolerant Indonesia’s Muslim-dominated state is to the Christian minority. Earlier in May 2017, Purnama lost the governorship election against a Muslim challenger, Anies Rasyid Baswedan. The capital is ruled by an acting governor, Djarot Saiful Hidayat, until B aswedan takes office, since Purnama was taken to prison.


Muslim women priests issue fatwa against child marriage

April 27

At a congress of female, Muslim priests in Cirebon, Java, a series of fatwor (religious injunctions without legal status but with influence over many Muslims) is issued. One of the injunctions concerns raising the age limit for marriage from 16 years to 18. Today, one in four Indonesian women marry before their 18th birthday. Other injunctions apply, for example, to the prohibition of violence against women, and to environmental destruction. At the congress, hundreds of female priests from Pakistan, India and Saudi Arabia gather.

Jakarta’s disputed governor loses the election

April 19

Muslim challenger Anies Rasyid Baswedan wins Jakarta governorship over Christian, Chinese-chained incumbent governor Basuki Tjahja Purnama, with 58 percent versus 42 percent. The election round is held in relatively calm forms, compared to the first round, which was surrounded by violence and strong tensions between radical Islamists and followers of Purnama.


Visit by the King of Saudi Arabia

March 1st

Saudi King Salman visits Indonesia on an extensive tour of several Asian countries, where he seeks investment opportunities. During the visit to Jakarta, the two countries sign a series of agreements on cooperation in everything from trade to the aerospace industry as well as efforts to develop an Indonesian oil refinery.


A tie in the governor’s election in Jakarta

February 15

When local elections are held all over the country, the governorship election in Jakarta gets the most attention. Christian governor Basuki Tjahja Purnama wins the first round of elections by barely a margin over Muslim former Education Minister Anies Baswedan. The result means that a second and decisive election round will be held in April. Tensions in the capital have risen as the election approaches, as it has come to be seen as a test of how religiously tolerant Indonesia really is. Purnama stands accused of blasphemy against Islam and the demonstrations against him have been many and great. Purnama’s supporters say the trial is politically motivated to remove the Christian and Chinese-chained Purnama from the governor post, which is often a stepping stone to the highest political posts in the country.

Indonesia Industry

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