Indonesia is a country of about 17,000 islands located in Southeast Asia with a total area of approximately 1,910,931 square kilometres. The main islands include Sumatera, Java, Bali, Borneo, Sulawesi, Mollucas, Timor, and Papua. The archipelago spans over the equator and lies between the Indian Ocean and the Pacific Ocean. Malaysia, East Timor, and Papua New Guinea are the countries that share land borders with Indonesia, while other closely located countries include Singapore, the Philippines, and Australia. The capital city of Indonesia is Jakarta, located in the most populous island of Java.
Statistics show that as many as 237,641,326 people lived in Indonesia as of 2010, making the country the fourth largest country by population after China, India, and the U.S. (Statistics Indonesia, 2012, p.78; UNDESA, 2011). Indonesia has a heterogeneous and multicultural society that stems from numerous indigenous ethnicities with different customs and cultures. lthough there are countless of traditional languages spoken within particular ethnics, Bahasa Indonesia is the formal national language. Islam is the predominant religion in Indonesia and there are also followers of Catholics, Christian, Hindu, Buddhist, and Confucianism. Although being a predominantly Muslim country, Indonesia is not an Islamic state.Indonesia proclaimed its independence in 1945, after being colonised by the Dutch for about 350 years and being occupied by Japan for three and a half years.
The national economy in the first two decades after independence was marked by instability, budget deficit, and hyperinflation (Hill, 1996, pp.2-3), which subsequently led to political chaos. However, following a change in the country’s presidency in 1967, Indonesian economy started to show progressive growth and stability under the ‘new order’ regime (Booth, 1998, pp.76-77). Due to a rapid and steady economic growth, by the late 1980s Indonesia was considered as a country that would soon become a newly developed economy (Hill, 1996, p.3).
The period 1980s also saw a development in the Indonesian capital market. This started in 1977 when the government reactivated the Jakarta Stock Exchange from its hiatus. The initial phase of development has been slow as there were only 24 companies listed in the stock exchange between 1977 and 1988 (Rosser, 1999). The situation was a result of complicated securities listing procedures as well as restrictions on the fluctuation of securities prices that made the capital market less attractive than banks (Kusuma, 2005, p.352). However, following the enactment of a series of regulations in 1988 which dealt with, among other things, the simplification of listing procedures, foreign investors’ share ownership, and tax on bank deposit interest, the stock exchange gained its popularity, and by the mid-1990s there have been more than 200 companies listed in the Jakarta Stock Exchange (Rosser, 1999). To foster the growth of capital market sector, a second stock exchange, the Surabaya Stock Exchange, was opened in 1989.
The growth of Indonesian financial sector came to a halt when a severe economic catastrophe started to hit the economy in 1997. By the end of March 1999 the stock market index (in US dollar terms) had dropped sharply to 15% of its value that was in 1997 (Hill, 1999, p.33). The economic turmoil also forced the authority to close 16 commercial banks in 1997 and undertake bank restructuring programmes. A number of corrective measures, including passing stricter regulations in the financial sector, had taken place in order to save the economy (Suta and Musa, 2004, p.243). As a result, Indonesia managed to escape from the crisis, and by the year 2000 the economy had started to recover (Hill and Shiraishi, 2007).
The present Indonesian economy has shown strong foundations, and it has been only moderately affected by the global financial crisis (Basri and Raharja, 2010). Being the only member of G20 countries from Southeast Asia, Indonesia ranked third in terms of economic growth in 2009 behind China and India (Basri and Hill, 2011). The number of companies listed on the Indonesia Stock Exchange, the bourse resulted from a merger of the two former stock exchanges, has grown steadily in which 464 companies have been throughout the first quarter of 2013 (IDX, 2013, p.2).
post by : Rony Sutiyanto
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