| Country Risk Analysis of Indonesia Essay

Indonesia also known as the Republic of Indonesia is a country located in Southern Asia. The country comprises about 17, 508 island. It has a total population of over 238 million people living within the 34 provinces. It has an elected president and legislature. Citizens have the right to vote and choose their won leaders. Indonesia has a favorable climate which can accommodate agriculture. Despite the climate, the country faces international and local risks. Some of the risks faced include social, culture, local, national, sovereign, economic and trade risks among others. Some of those risks are spear and they need to be mitigated to avoid economic stagnation. The government fights over to eliminate such risks from occurring but most of them are contributed by the citizens. Other risks are contributed by other countries but the government still contributes to occurrence of some risks. The risks contributed by the government are difficulty to eliminate.

Indonesia’s Macroeconomic and Microeconomic risks

There are financial factors that affect the business environment and are adversely operating on profits and values of assets in the country. Economic risks are like financial factors such as currency controls a country control operation risk. Macroeconomic in this case refers financial risks that are associated with large numbers of credit finance rating occurring in all companies dealing with banking systems. This refers to economic or financial risk found in stocks and funds in different regions of the country. Economic projections on World Bank according to monitory survey outlines a negative to effect global development finance data on risk analysis. Micro economic risk in Indonesia determines the important priced factors of stocks and returns in for risk free credit rating agencies. This tends to use quantitative economic models and focus on the financial analysis where there is no counting of credit and economics risks and financial risk analysis.

In the largest sense, the study of economy shows that macroeconomic studies have negative impact on the gross changes hence causing unemployment problem to the group members. On the same, inflation and similar matters on the situation contributes to gross change on unemployment factors. In relation to macro economics risks, it does not initiate very much on the companies but by individuals but on the focusing of individual’s studies in various industries. It is a very beneficial factor used in to determine the aggregate causes of certain policies implemented on economy as a whole. Generally, field of economics studies the behavior of aggregate economics, these risks affects all the companies operating across the whole world. Strategies of micro level in economic risk are all well known as far as determinants of optimal firms are concerned. To emphasize on this point, it means that a very little literature is found on the outcomes of the micro economic risk management.

Indonesia’s Political risks

Credit ratings used by agencies in analyzing political risk consist off different techniques in determining the rate of risk exposure in Indonesia as a country. On the same these agencies mind to use some qualitative methods to factor out economic financial analysis. In this country, Markets economy results to falling of debts which are related to friendly reforms hence resulting to secure an investment grades in credit rating. This is due to severe interest groups who have lost out the measures aimed in the increased transparency idea of achieving a determined goal set. In this case funds may also be returned if the legislation is not performing on part of inflation or in coming up with different formats to control the capital.

Corruption and governance is a key factor to consider in Indonesia. Eradication of corruption has been on the process of attack in commissions’ part with the attempt by some senior official on law enforcement. In 2009 transparency international’s on latest corruption perception outlines a measurement of 2.8 thus showing a significant perception on the progress of corruption eradication progress.

In addition to this, the government should take over on the improvement of the effectiveness of the delivery of legal reforms. The inventors have to come up with some ways of adjusting the expectations of Indonesians civil services.

Indonesia’s Security

In Indonesia, is an issue of concern which is on rise? An issue of unsafe security has caused a lot of threat to people. Threat from militants is still on progress thus causing a great threat to people. Killing of people and bombs-making experts have significantly reduced threats but also some risk still persists in the area. For example last, a case of police was discovered in the area where new net work of armed militants was making operations of secret trainings in Aceh in Sumatra province. This group had a reason to create an Islamic religion on the area. In conclusion to this, there should be a military group of security who have an ability to regroup and more attacks and establish firm links on secure funding sustainability. Indonesia markets should be sustained with a security reform in order to retain sell-off of credit facilities. Political risk analysis s provides credit rating to agencies in different ways and this help a lot in assessing countries rate in risk exposure. In political risk analysis, it is termed as a moral general term affecting the wide area of particularly within a country.

Indonesia’s Transfer Risk

In transfer risk, it falls under the category of management in planning goal of certain activity. This falls under the category of taking actions in a specific risk. For example in this banking system, there are transfer risks which are analyzed accordingly to the management plan. In order to evaluate this, the process of management should be addressed to members of the society in running of business. In this case, risk is associated with the possibility of a currency not being able to send out of the country and this is caused by restrictions on central banks and debt scheduling. In international levels, trade transactions have restrictions due to government’s central banks which can not allow their currency to come out of their country.

Government may declare that the currency is inconvertible thus causing a decrease in the national debit transactions. This causes effect currency transactions hence causing risk transfer in Indonesia. Country ratings on risk transfer, is in least risk countries for investments’ on ratings which are divided in to small components including economic and risk factors. The risk associated with possibility of currency transfer causes an impact to the country as far as market on selling of goods and services are concerned. This will hinder market productivity hence reducing the gross rate. The probability of risk to occur is in high demand thus causing a high loss due to currency conversion exchange on restrictions which are made and imposed on the foreign exchange. Due to this, government causes a lot of impossibilities on moving money out to other countries hence resulting to political risks. these political risks caused by transfer risks now provides crediting agencies to use focusing methods on the political analysis and qualitative method s which results to lack of consensus in the methodology applied in assessing credit risks.

In business risks, some areas emerged showing up all the impacts on the international countries. Risks occur from uncertainties the effect form objectives whether positive or negative. This will happen being accompanied by coordinated activities on economical applications of the resources in minimizing monitoring and control of probabilities impact of unfortunate events. Risks occur due to uncertainties in financial markets. In project activities, risk arise due to credit risk liabilities in the situation and deliberate attack from events of uncertain events which unpredictable. The root causes of these risks are developed due to management methods in the contents of achieving goal goals and objectives set in the activities undertaken in a certain project. The strategies to manage the risk occurrence activities are the transferring risk to another party thus avoiding the probability of the risk and reducing the negative effect.

Indonesia’s Exchange Risk

In Indonesia country, exchange risks are grouped in categories of financial risk, credit risks, market risk and concentration risk. Managers of multinational firms employ a number of foreign strategies in order to protect against exchanges of rate risk. There is transaction exposures which are managed by the use of money markets in productivity period of activates performed. In this case, there are operational techniques which are followed up such as currency invoicing, leading and lagging of receipts and payments and the exposure on the part of net control in formation progress. Financial management is the department that deals with exchange of these rates and this is done by following a strategy. The production sites have some ideas putting down the cost of the productivity by looking on the policies pertain a flexible and source in supply chain of management process. Generally, export markets across the country of Indonesia have great chance of strong implementation of the development of activities. The financial products in this area have a greater impact on the exchange risk rate. Accounting standard of the home countries and transition methods require standard of development improvement on the part of risk assessments. The translation exposure of the largely depended countries. The firms can be managed by performing a balance work sheet in translation exposure.

Indonesia’s Location Risk

The country of Indonesia is a sovereign country situated in the continent Asia. It is in the south east part of Asia. The country is endowed with many islands approximately seventeen thousand five hundred and eight islands. Indonesia being a large country in terms of land area it has many ethnic tribes and amongst the many tribes there are many languages. Although the many islands the country is blessed with, it has a huge desert that covers a massive land in the country. The country massive land is sub-divided into thirty four major provinces. The country of Indonesia lies in the equatorial region between latitude eleven degrees south and six degrees north and longitudes ninety five degrees east and one hundred and forty one degrees east. The country is also situated on the edges of Australian, pacific and Eurasian tectonic plates where there is the biggest number of volcanoes. In places where there are many volcanoes there are expected a series of land tremors and earthquakes.

Volcano eruptions that occur in Indonesia lead to disastrous loss of many lives in the country. Indonesia has very many active volcanoes totaling to one hundred and fifty. Although their eruptions give high fertility to the soils of the country they are a major disaster to the country. The country lies in the equatorial region of the world hence it has tropical climate that support its marvelous biodiversity. The mountainous country has two diverse seasons which are monsoonal wet and dry seasons. The country borders Malysia, Papua New Guinea and East Timor. On the borders across marine tunnels the country borders Philippines, Palau, Singapore and Malaysia.

The countries forest cover is sixty percent endowed with a variety of wild animals. The large forest cover gives the country a better look and gives the tourism sector a major boost. The country has a large population despite the massive land that the country owns. The country faces a major challenge of poverty due to the high population. The countries environmental condition is polluted due to the high population and the high rate of deforestation. The country is rich when it comes to coastal beaches and island ecosystems which are a major tourist attraction. Tourism is also improved by the indigenous and the endemic species found in the country. This is adversely affected by deforestation that is rampantly occurring in the country. When the animals living places are destroyed the tourism sector is destroyed hence the countries revenue drops drastically.

Indonesia’s Sovereign Risk

Indonesia borrows loans from World Bank and other financial institutions which issue out loans top countries. They get loans for expansion of government projects and purchase of infrastructures. The loans are charged with high interest in which sometimes the government fails to pay. Currently the government is running under financial crises. It has borrowed loans to finance government operation. The country was facing security problems and in order to enhance security it had borrowed up loans to ensure that they have sufficient security personnel and sophisticate weapons. Huge loans have made the country to face inflation and the currency lost values. Indonesia has also borrowed loans from many financial institutions and failed to pay accordingly leading to increase of interest rate. Borrowing loans results to payment of huge amount due to high interest rate.

Indonesian citizens also borrow loan from government banks and fails to refund. This makes the bank to incur lose. After incurring loss they bank increase interest rate. In order to avoid such risk, the government should issue out strict financial rules which ensure compliance of terms after getting a loan. The government should also invest much from the countries resources to ensure recovery and payment of the borrowed loans. The government should also promote the youth welfare by issuing out grand to the poor to start up local business. Financial stability will make the government to facilitate operation and work effectively. The top government officials should work together with other nations to ensure that the financial problems are fully handled. Sovereign risk should be taken seriously and solved by the government. The graph below represents Indonesia’s debt for the last one year.

Indonesia’s Natural Risk

There are many natural risks endowed in the country of Indonesia such as Volcano Mountains. The country is affected by volcanic from its volcano mountains. The Volcano Mountains erupt leading to massive deaths in the country hence ruining the economy of the country. Although the mountains erupt giving the countries soils a major boost in their fertility it leaves most of the country inhabitants sorrowful and in misery. Earthquakes are another major calamity faced by the people of Indonesia. There are frequent earthquakes and tsunami due to the seismic activity in the country that has led to major disasters in the country. Many human being lives are terminated when these calamities happen. The countries forest cover is more than half. The tropical forests are very fertile hence they end up being used for agriculture and habitation. It has many indigenous and endemic species which would be a good tourist attraction for the country.

Due to deforestation the animal’s habitat has been destroyed leading to lack of living places for the animals hence they die. Deforestation has also led to environmental pollution in the country. The country forest cover has been destroyed due to industrialization hence this destruct the environment more. This has led to Indonesia having a huge greenhouse emitting effect which is a very major factor in the destruction of the ozone layer which protects the earth from the most dangerous rays of the sun. Urbanization has increased in the country due to deforestation hence high population in the country. High population results to adverse environmental issues, poor governance due to lack of resources and increased poverty levels in the country. When there is increased poverty in the country the economy of the country becomes poor hence the government strategies fail due to lack of resources.

Other risks which can take place include earthquake, floods, tsunami and Katrina. Those natural risks rarely occur but they cause a lot of damage in case of occurring. The country is an island and floods can occur anytime so the government should find ways to prevent such risks form taking place. Earthquakes occur regularly in Asian countries and Indonesia faces the risk of earthquake. Tsunami and Katrina can also occur since the country is an island. The government should find mitigation measures to ensure that the citizens are safe and free from natural risks.

Indonesia’s Social Risk

The country internal social relations are over influential ethnic groups. Most of the countries ethnic groups use similar language hence this illustrates that there are widespread regional ethnic entities. Wealth in the country is privately owned by the Chinese which leads to anti-Chinese violence through out the country. The Indonesian language is wide spread even into the neighboring countries hence adjacent countries can communicate fairly and freely without trouble. Most of the country people are Muslims but the country has six religions constitutionally.

The people of the region engage in sports such as badminton and football. The country has not invested much in sports because they believe that sports spectators are usually associated with gambling. They just engage in traditional sports such as bull racing and sepak. They have also engaged in film shooting which has been a major challenge in the past few years but it is now growing. Due to poor governance the media has been lagging behind hence the people of the country were not well informed about the national issues. Not until the end of the bad governance that the sector is growing but at a slow pace. The ministry of information hindered foreign media from exploring the country and controlling domestic broadcasters. When the social media of a country is poor there is lack of information to the country inhabitants hence this decreases the countries economy vigorously leading to lack of developments in the country.

The countries security is very poor that tourists visiting the country are not safe. When the security of a country is poor their will be no tourist safety hence the countries social sector is ruined leading to revenue from foreign countries hence poor infrastructure and no developments. Political instability in the country due to inexperienced leadership has led to socio-economic downfall which has led to high rates of poverty and hunger in the country.

People from different parts of Indonesian have different social and cultural practices. They practice social norms which differ. Indonesia also has many countries which accommodate people of different ethnicity and tribes. Those people create enmity between their boarders. They do not which to support each other. The difference in social practices has led to stagnation of economy. Many people do not want to contact business with people from different culture. They experience tribalism. The key social problems in the land included tribalism, racism and favors. People in power always support the members of their tribes.

Tribalism has made the country to face a lot of economic problems. In business people prefer to work or to contact business other people from their tribe. In many market centers people speak mother tongue and this is enough evidence to shown that tribalism exists. Tribalism discourages foreign investors. The country has been receiving few foreign investors. Foreign investors assist in economic growth since they contribute to government revenue through payment of taxes and fines.

Racism in the hand has a negative impact to the countries progress. Many of the investors have been moving out of the country due to increased rate of racism. People contact business with members of their own race. In many instances people prefer selling products at a lower price to individuals from their own race. In Indonesia, many people from different races contact business and stay in the major cities. There are Africans, Indians, Chinese, Americans and Asians among others. In the market people sell their products in respect of the race an individual belongs. People from one race sell and communicate in a friendly tone but those from different races they may end up fighting each other. The government has be4ing fighting racism but in vain. People of Indonesia have negative altitude to African and American since they have been in conflict with America and they claim that most of African countries receive support from America. Americans are mostly not welcomed in Indonesia and incase one American contact business in the region they are not willing to help or promote the business person.

Social risks have made most of the government offices to be occupied by people from on tribe or race. When an individual get employment in a top government office he/she prefers to employ people from his/her won tribe or race and this lead to employment of unprofessional people who provides substandard services. Employment in most offices is not done in respect of individual’s qualification but through corruption. In time this will lead to stagnation of economy since they professionals do not get job in the government but those without experience use corrupt means to acquire jobs. In the near future the management of government operation will be left in the h and of people who can not handle. The graph below represents the number of people employed in respect of qualification each year.

The sociological risks contribute to stagnation of the economy. The country does not receive investors due to tribalism and racism. When a given country has few investors it does not grow because foreign investors help a lot in economic growth through payment of taxes which increases government revenue. The government should find ways to eliminate tribalism, favor and racism. The people of Indonesia also should promote cultural practices which attract tourism. Practices like dancing and singing traditional sing can be done to attract tourism who will also invest in the country.

Conclusion

The risks faced by the government, citizens and investors in Indonesia are very spear and they need mitigation. Those risks should be mitigated to avoid extension to unaffected bodies. The government should find means of dealing with such risks. Citizens and visitors should also note the problems they cause with their dubious mistakes. People should respect each other and avoid disclosing information to enemies. Indonesia will develop with few or no risk and this should be ensured by the government.