Indonesia

Overview

Official name : Republic of Indonesia

Government : Constitutional changes that would dilute the powers of the presidency, hitherto by far the strongest arm of government, are under discussion.

Head of State : President Joko Widodo (since 20 October 2014 )

Capital City : Jakarta

Main towns : Jakarta , Medan , Surabaya , Semarang , Bandung , Palembang

Land area : 1,904,443 sq km

Population : 267.7m (2018 est.)

Climate : Tropical

Currency : Rupiah (ISO currency code: IDR )

Exchange rate : USD 1 = 14,764.30 (August 2020)

Measures : Metric system

Language : Indonesian (Bahasa Indonesia), as well as some 250 other regional languages and dialects. English has increasingly replaced Dutch as the main second language, and is widely spoken in government and business circles

Time : Western Zone 7 hours ahead of GMT, Central Zone 8 hours ahead, Eastern Zone 9 hours ahead

Regulatory Scheme

There are no currency transaction restrictions to or from Indonesia , however incoming foreign capital is subject to approval. The Ministry of Finance (MOF) is the primary regulatory body for Indonesian finance. The Bank of Indonesia (BI) acts as the central bank and all investments in foreign currencies must be filed with them. Banks in Indonesia are not allowed to issue foreign currency drafts for domestic use, however their customers may hold foreign currency accounts. There are no restrictions on domestic or foreign currency held locally by non- residents. The Foreign Investment Law guarantees foreign investors the right to transfer, in the currency of the original investment at the exchange rate at the time of transfer; all current after-tax profits, certain costs, depreciation of capital assets and compensation. In certain circumstances, convertibility is guaranteed for capital repatriation as well.

Banking

In 1998 the banking sector in Indonesia began serious restructuring beginning with the government guarantee of domestic bank deposits and liabilities, and the establishment of the Indonesian Bank Restructuring Agency (IBRA) to rehabilitate the banking system. Shortly thereafter, 68 banks were closed, 12 were nationalized and 14 banks were merged into two larger entities. Recapitalization and restructuring of the banking system in Indonesia cost the government an estimated Rp431.8tn. The market is currently dominated by state owned banks, including Bank Mandiri, which commands approximately 30% of the commercial banking market. The assets of privately owned domestic commercial banks have however increased rapidly in recent years. Foreign banks, which have been permitted to operate in Indonesia since February 1968 are allowed to set up joint ventures.

Stock Exchange

The Jakarta Stock Exchange (JSX) was re-launched in 1977, and privatized in April 1992. A secondary over-the-counter (OTC) market was created in February 1989 and a privately owned stock exchange in Surabaya was created in June 1989. The government has introduced a number of measures to tighten supervisory procedures and enhance public confidence in the exchange. Capital markets in Indonesia have oscillated substantially in recent years.

Insurance

Many of the Indonesian insurance companies are associated with banks or large conglomerates. The non-life sector has over 100 non-life insurers, with the top five controlling roughly 40% of the market. Fire and motor are the largest classes of non-life insurance comprising about 60% of the market for non-life premiums combined. The life insurance sector has roughly 60 insurers with the top 5 controlling approximately 55% of the market. Endowment and whole life are the top two classes of life insurance comprising about 70% of the market for life premiums combined. Corporate insurance agents may represent up to three companies at a time, and individual agents are restricted to serving one company, however one life and one non-life is allowed. Insurance brokers may be either national or foreign joint ventures, but they must be predominantly made up of local interests and at the time of establishment, the direct investment of a foreign party in an insurance company shall not exceed 80%. The minimum paid-up capital for non-life local and foreign (re)insurance brokers is IDR500mn and IDR3bn respectively. New insurance brokers must carry indemnity insurance. New life insurance and reinsurance minimum paid-up capital is IDR100bn and IDR200bn respectively.