Indonesia is a member of the ASEAN countries and the main export commodities include copper, cork, crude oil, fuel, natural gas, industrial minerals, petroleum products, plywood, raw materials, rubber and timber, while imports include cement, chemical products, crude inedible materials and fuel.

The aministration of the exchange and trade system is handled by the Bank Indonesia, the Ministry of Trade, the Ministry of Finance, foreign exchange banks and the customs authorities. Policies regarding the foreign exchange market are taken by the Bank Indonesia and there is no exchange control in Indonesia. Preferential tariff treatment is granted among the ASEAN members.

The Customs tariff in Indonesia is based on the Harmonised System and there are free trade zones in Jakarta, Batam Island, Surabaya and Sabang. Indonesia supplies warehouses at major ports and harbours.

Indonesia is a republic with a presidential system, and a unitary state with power concentrated with the national government. The President of Indonesia is directly-elected for five-year terms, and is the head of state, commander-in-chief of the Indonesian armed forces and responsible for domestic governance and policy-making and foreign affairs. The president appoints a council of ministers.

Indonesia has struggled to overcome the Asian financial crisis and still grapples with high unemployment, a fragile banking sector, endemic corruption, inadequate infrastructure, a poor investment climate and unequal resource distribution among regions.

Indonesia became a net oil importer in 2004 because of declining production and lack of new exploration investment. The cost of subsidising domestic fuel placed increasing strain on the budget in 2005, and, combined with indecisive monetary policy, contributed to a run on the currency in August, prompting the government to enact a 126% average fuel price hike in October. The resulting inflation and interest rate hikes dampened growth prospects in 2006. Keys to future growth remain internal reform, building up the confidence of international and domestic investors, and strong global economic growth.

In late December 2004, the Indian Ocean tsunami took 131,000 lives with another 37,000 missing, left some 570,000 displaced persons and caused an estimated $4.5 billion in damages and losses. Terrorist incidents in 2005 have slowed tourist arrivals. Indonesia experienced several human cases of avian influenza in late 2005, sparking concerns of a pandemic.

Indonesia was struck by another earthquake in 2006. The earthquake caused a three-metre-high tsunami which destroyed houses on the south coast of Java, killing at least 550 people and leaving at least 229 missing. This has resulted in fewer resources being reserved for development, and utilized in combating the Tsunami disasters.

After coming to power, the New Order government supervised the rapid industrialisation of the Indonesian economy. Industrial production, as a share of total GDP, grew from 13 percent in 1965 to 37 percent in 1989. The protective trade policies of the 1970s contributed to the changing composition of industry, away from light manufacturing such as food processing and toward heavy industries such as petroleum refining, steel, and cement. These industries were often dominated by government enterprises. Although these large-scale, capital-intensive firms offered few employment opportunities to the rapidly growing labor force, the surge in manufacturing exports begun in the mid-1980s promised to increase employment and the role of private investment in the 1990s. Despite its increasing significance, the industrial sector employed only about 10 percent of the work force.

A number of governments provide investment guarantees to other nationals who make overseas investment in their countries. In most cases, these guarantees cover compensation in case of nationalization or expropriation, damages or losses caused by incidents of war, revolution or insurrection and payments for any approved remittance pursuant to the investment in case of non-convertibility of currency of the host country.

To provide security for foreign investment, the Government of Indonesia concluded the Investment Guarantee Agreement (IGA) with ASEAN governments. Indonesia has signed the Investment Promotion and Protection Agreement with 55 countries. To create a favorable international investment climate, Indonesia has also signed multilateral agreements, thereby promoting foreign direct investment in Indonesia. Indonesia is now a member of the Multilateral Investment Guarantee Agency (MIGA), which will protect investment against various political risks. To deal with foreign investment disputes, Indonesia has become a signatory member of the International Center on the Settlement of Investment Disputes (ICSID).

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