The Republic of Indonesia has the world\\\'s largest Muslim population and Southeast Asia\\\'s biggest economy. It is spread across a chain of thousands of islands between Asia and Australia. Ethnically it is highly diverse, with around 300 local languages.

Indonesia was colonized by the Dutch in the early 17th century and was occupied by Japan from 1942 to 1945. Independence was proclaimed in 1945 by Sukarno, the independence movement leader, when the Japanese occupation ended. However, Indonesia needed four years of intermittent negotiations, recurring hostilities and UN mediation before the Netherlands agreed to transfer sovereignty in 1949.

In the wake of a coup in 1965, General Suharto came to power, who imposed authoritarian rule while allowing technocrats to run the economy. He fell from power after riots in 1998, and after decades of repressive ruling, fair legislative elections took place in 1999.


Indonesia is lying beside the intersection of moving tectonic plates, is prone to earthquakes and volcanic eruptions. It is in a strategic location along major sea lanes from Indian Ocean to Pacific Ocean, and consists of 17,508 islands, about 6,000 of which are inhabited. Indonesia shares seas with East Timor, Malaysia and Papua New Guinea.


Economy of Indonesia is mainly based on agriculture and oil. It is one of the emerging market economies of the world, and largest economy in South East Asia. Approximately, 90% of the population is engaged in agriculture, and Indonesia has become self-sufficient in rice which is their staple food.

Indonesia maintains a liberal foreign exchange system and has few restrictions on transfers abroad. The Rupiah, Indonesian currency is linked to a basket of currencies of its major trading partners. The unitary exchange rate allows for fluctuation.

Indonesia has undergone a re-surgence since 1997 Asian Financial Crisis, becoming one of the World\\\'s major emerging economies. Now investors are attracted by a large consumer base, rich natural resources and political stability.

With the objective of a more equitable distribution of development gains, the government gives high priority to expansion in the less developed regions of the country and the creation of employment opportunities for the country\\\'s growing labor force. To attract foreign capital, certain incentives are provided and several sectors are open to foreign investment.

Tourism has gained ground and emerged as major foreign exchange earner for the country. Indonesia is rich in natural resources, forestry products, rubber, coffee, tea, tin, nickel, copper, palm products and fish which make important contribution to export earnings. In recent years a number of steps have been taken to promote and stimulate non-oil exports which include handicrafts, textiles, precious metals, tea, tobacco, cement, fertilizers as well as manufactured goods.

People & Culture:

Indonesia is culturally rich having, approximately, 300 ethnic communities, each with cultural identities developed over centuries, mostly influenced by Indian, Arabic, Chinese and European sources. The basic principles which guide life include the concepts of mutual assistance and consultations to arrive at a consensus. This system is still very much in use in community life throughout the country.

Intertwined with religion and old-age traditions from the time of early migrants, the art and culture of Indonesia is rich in itself with Western thoughts brought by Portuguese traders and Dutch colonists. The art and culture has been shaped around its hundreds of ethnic groups, each with cultural differences that have shifted over the centuries. Modern-day Indonesian culture is a fusion of cultural aspects from Arabic, Chinese, Malay and European sources. It has also been influenced from the ancient trading routes between Far East and the Middle East.

Bilateral Relations between Indonesia and Pakistan:

Pakistan enjoys warm relations with Indonesia which are based on mutual respect, common outlook, and cooperation with each other in different fields. The bilateral cooperation between both the countries have continued to strengthen over the years, but the level of economic relations has yet to reflect the potential of the two economies. Indonesia is the world\\\'s largest Muslim country in terms of population, whereas Pakistan is the world\\\'s second largest Muslim country. Both are members of the Organization of Islamic Cooperation (OIC). Pakistan has its embassy in Jakarta whereas Indonesia has an embassy in Islamabad and a Consulate General in Karachi.

Pakistan\\\'s relations with Indonesia substantially improved during President Ayub Khan\\\'s tenure. Pakistan also signed a Memorandum of Understanding (MoU) on defense cooperation (DCA). Apart from Pakistanis living in Indonesia, there are many Indonesian students studying in various Pakistani universities. Furthermore, there are several Pakistani military personnel teaching in different Indonesian military academies. In May 2006, Pakistan had sent 30MT of relief items consisting of tents, blankets, medicines and food for survivors of earthquake in Java Island. Likewise during 2010, Pakistani floods, Indonesia had sent 15 tons of surgery and nourishment provision amounting to US$ 1 million and also dispatched medical practitioners to Pakistan..

Bilateral Trade:

The relationship between the two countries is transforming into a multi-faceted and mutually rewarding partnership. The inauguration of the Pakistan-Indonesia Business Forum (PIBF) in October, 2011 and the signing of Indonesian-Pakistan Preferential Trade Agreement (PTA) in February 2012 had opened a new chapter in the bilateral commercial relationship.

In the PTA, Indonesia has agreed to offer market access to Pakistan on 216 tariff lines on preferential rate while Pakistan offered 287 tariff lines. The Indonesian offer list includes products of export interest to Pakistan including fresh fruits, cotton yarn, cotton fabrics, ready-made garments, fans, sports goods, leather goods and other industrial products. Pakistan also agreed to provide same treatment to palm oil products from Indonesia as provided to Malaysia under Pak-Malaysia FTA.

Current balance of trade is in favor of Indonesia and there is need to enhance Pakistani exports to Indonesia, which is also Pakistan\\\'s biggest market for Kinnow. Pakistan\\\'s share was eliminated due to tariff preference available to other competitors under ASEAN – China FTA. However, through PTA, Pakistani exporters would be able to achieve a level playing field with its competitors in Indonesian market.

The PTA is to lead to Free Trade Agreement (FTA) and is in the process of finalization. As a result of FTA, Pakistan-Indonesia bilateral trade could escalate up to US$ 2 billion in coming years from the current figure of around US$ 800 million. Indonesia would be able to increase its export of crude palm oil to Pakistan whereas Pakistan can export to Indonesia its value added textiles, carpets, fabrics, leather, chemicals and surgical goods.

                                                                                                                                                   By Muhammad Arsalan