Squawk on the Road: Indonesia

Comprising 17,508 islands, Indonesia is the world's largest archipelagic state. With a population of over 200 million people, it is the world's fourth most populous country and the most populous Muslim-majority nation, although officially it is not an Islamic state.


Indonesia's estimated 2007 gross domestic product came in at $408 billion. The services sector is the economy's largest. This is followed by industry and agriculture. Agriculture though employs more people than other sectors. Major industries include petroleum and natural gas, textiles, apparel, and mining. Major agricultural products include palm oil, rice, tea, coffee, spices, and rubber.

The East Asian financial crisis of 1997–98 hit Indonesia the hardest. Against the U.S. dollar, the local currency plunged from roughly 2,000 rupiah to 18,000 rupiah. The economy shrunk by almost 14 percent. The rupiah has since stabilized at around 10,000 against the dollar and there has been a slow but significant economic recovery.

But political instability since the resignation of President Suharto in 1998, slow economic reform, and corruption at all levels of government and business, have contributed to the patchy nature of the recovery. Indonesia has never realized its dream of becoming the next big country.

In an interview with CNBC, Jim Walker of Asianomics comments, " I'm afraid I think it is quite a long way off. It should be part of the bright universe given the size of the country and the potential of the country. But the fact is that in comparison with the early 1990s, the growth rate in Indonesia is not that impressive. And I'm afraid the economic policy-making of Indonesia over the last few years has left a lot to be desired. So they've got a long way to go before they really make a breakthrough and one of the desirable emerging markets."

Where is Indonesia heading and how will it get there?

All this week, CNBC Asia's Squawk Box goes on the road in Indonesia. We'll be looking at issues including trade and investment, energy, and tourism. And we'll talk to the country's movers and shakers, including the Minister of Energy & Mineral Resources, Purnomo Yusgiantoro and the Minister of Trade Mari Pangestu.

We'll also be at the Jakarta Stock Exchange on Wednesday when Indonesia's biggest ever initial public offering, Adaro Energy, makes it debut. Stay tuned to our special coverage all this week on CNBC Asia and CNBC.com.