BOP analysis of Indonesia

BOP analysis of Indonesia

Subject: Finance Topic: Assignment

Introduction:

The balance of payments is a statistical statement that provides a systematic summary of economic
transactions of an economy with the rest of the world, for a specific time period. The transactions are
for the most part between residents and non-residents of the economy. The transactions included
comprise: goods, services, and income; those involving financial claims on and liabilities to the rest of
the world; and transfers. A transaction is defined as an economic flow that reflects the creation,
transformation, exchange, transfer, or extinction of economic value and involves changes in ownership,
of goods or assets, the provision of services, labor or capital.

Balance of payments data are compiled in accordance with the 5th edition of the Balance of Payments
Manual published by the IMF (BPM5), and presented according to the Standard Presentation.

Balance of payments statistics are used as a key economic indicator due to the close relationship
between domestic economic and external developments. This relationship has strengthened over the
last two decades with the growing interdependence of the world’s economies. Balance of payments and
related trade and financial statistics are used by agencies responsible for the formulation of policy on
issues such as causes of payments imbalances, adjustment measures, and merchandise trade; trade in
services, financial flows, financial stability and foreign direct investment, etc.

In principle as part of a double entry accounting system the balance of payments should balance, but as
the components are independently derived from (many) different sources, they do not in practice
balance. The residual imbalance is described by the term “net errors and omissions”.

Indonesia, officially the Republic of Indonesia, is a country in Southeast Asia and Oceania. Indonesia
comprises 17,508 islands and thirty three provinces. With over 238 million people, it is the world’s
fourth most populous country, and has the world’s largest population of Muslims. Indonesia is a
republic, with an elected legislature and president. The nation’s capital city is Jakarta. The country
shares land borders with Papua New Guinea, East Timor, and Malaysia. Other neighboring countries
include Singapore, Philippines, Australia, and the Indian territory of the Andaman and Nicobar Islands.
Indonesia is a founding member of ASEAN and a member of the G-20 major economies. The Indonesian
economy is the world’s eighteenth largest economy by nominal GDP and fifteenth largest by purchasing
power parity.
The Indonesian archipelago has been an important trade region since at least the 7th century, when
Srivijaya and then later Majapahit traded with China and India. Local rulers gradually absorbed foreign
cultural, religious and political models from the early centuries CE, and Hindu and Buddhist kingdoms
flourished. Indonesian history has been influenced by foreign powers drawn to its natural resources.
Muslim traders brought Islam, and European powers brought Christianity and fought one another to
monopolize trade in the Spice Islands of Maluku during the Age of Discovery. Following three and a half
centuries of Dutch colonialism, Indonesia secured its independence after World War II. Indonesia’s
history has since been turbulent, with challenges posed by natural disasters, corruption, separatism, a
democratization process, and periods of rapid economic change.

Across its many islands, Indonesia consists of distinct ethnic, linguistic, and religious groups. The
Javanese are the largest—and the politically dominant—ethnic group. Indonesia has developed a shared
identity defined by a national language, ethnic diversity, religious pluralism within a majority Muslim
population, and a history of colonialism including rebellion against it. Indonesia’s national motto,
“Bhinneka Tunggal Ika” (“Unity in Diversity” literally, “many, yet one”), articulates the diversity that
shapes the country. Despite its large population and densely populated regions, Indonesia has vast areas
of wilderness that support the world’s second highest level of biodiversity. The country is richly
endowed with natural resources, yet poverty remains widespread in contemporary Indonesia.

Indonesia Balance of Payments

Name of collection/source

The data are derived from a combination of customs declarations, administrative records and surveys,
and cover the entire economy.

Direct source

International Monetary Fund

Source Periodicity

Periodicity: Quarterly Timeliness: 3 months after the end of the reference quarter.
Geographic coverage

The geographic coverage corresponds to the national boundaries of Indonesia including Indonesia’s
embassies abroad and excluding foreign embassies in Indonesia.

Concepts & Classifications

Key statistical concept

Indonesia Balance of Payments

The agency responsible for compiling Indonesia’s balance of payments is Bank Indonesia (BI). BI obtains
primary data from a variety of sources, including customs data, an international transaction reporting
system (ITRS), administrative data from the ministries and other government agencies, and surveys of
banks and private sector enterprises. Data are prepared on a quarterly basis and are published in the
monthly bulletin Indonesia Financial Statistics, the Quarterly Review, and in the Annual Report of BI.
Transactions denominated in other currencies are converted to U.S. dollar equivalents at the exchange
rate prevailing on the transaction dates or the average exchange rate for the period. The balance of
payments compilation is in principle in accordance with the concepts set out in the BPM5. To take a
view on the current BOP the accounts are shown in the appendix.

Current Account Balance

Current Account Goods

Data on goods consist of general merchandise and nonmonetary gold. Data on exports and imports are
compiled by the BI on the basis of customs documents and other sources. Goods exported and imported
are valued in the customs documents on an f.o.b. and c.i.f. basis, respectively. Imports are converted to
an f.o.b. basis by subtracting freight on imports.

Non-oil
Non-oil goodes includes agricultural products like coffee, tea, spices, tobacco, cacao, shrims and prawns
etc. Manufacturing products involves textiles and textile products, processed wood products, chemicals,
metal products, electric appliances, cement, paper, rubber products etc. Mining products like copper,
nickel, coal, boaxite etc.

Oil

Palm oli, Liqiufied petrolium gas, crude oil etc.

Gas

Liquified natural gas

Services

Transportation

This category covers freight, passenger, and other by all modes of transport. Entries for the value of
freight debits are mainly estimated on the basis of information on freight furnished in customs
declaration forms. The data on passenger service credits and freight credits are collected from ITRS.
Data on passenger transportation debits are estimated based on a survey of travelers and average air
fares derived from a survey of travel agencies. Other transportation includes foreign exchange receipts
for use of seaport and airport facilities. These data are reported by the seaport and airport authorities.

Travel

Entries for travel credits and debits are derived from census and surveys conducted by the Ministry of
Tourism and the Central Bureau of Statistics. Estimates are made by combining the number of foreign
visitors and the number of Indonesian travelers abroad with estimation of their average expenditures.
Entries for travel debits are derived from information provided by other ministries. It should be noted
that part of the travel debit item is accounted for by hajj pilgrimages.

Other services

Communications.

Data cover telecommunications, postal, and courier services, which are obtained from ITRS.
Construction.

Data cover construction and installation projects that have been done either abroad or in the compiling
economy. The data are obtained from the ITRS.

Insurance.

This category covers freight insurance and reinsurance. Data are compiled on the basis of information
from the customs documents and from the annual reports of insurance companies and ITRS.

Financial.

Data include commissions and fees of financial intermediation. The data are obtained from the ITRS.

Computer and information.

Data cover hardware consultancy, software implementation, maintenance and repair of computers, and
information services, including data processing and news agency services. The data are obtained from
the ITRS.

Royalties and license fees.

Data cover receipts and payments for the use of trademarks, copyrights, patents, processes, franchise,
etc. The data are obtained from the ITRS.

Other business services.

Data cover miscellaneous business, professional, and technical services, etc. The data are obtained from
the ITRS.

Personal, cultural, and recreational.

Data include services associated with the production of motion pictures on films or video tape, radio,
and television programs, and musical recordings, etc. The data are obtained from the ITRS.

Government, n.i.e.

Data on these transactions are derived from information provided by relevant ministries, as well as
international organizations. The credit entries include expenditures of foreign embassies, foreign
diplomatic missions, international organizations in Indonesia, nontax revenue of Indonesia’s embassies,
and visa on arrival (VOA). The debit entries cover the expenditures abroad of Indonesian embassies.