PESTLE Analysis of Indonesia

Pestle analysis of Indonesia. The Republic of Indonesia is a Southeast Asian country comprised of 17000 islands. It’s situated between the Pacific and Indian Oceans, and it’s the largest island country in the world. Jakarta is the capital of Indonesia.

Indonesian history dates back to the 7th century. When the Indonesian Island played a significant role in terms of trade with India and China. The local inhabitants adopted Buddhism and Hinduism in the earlier centuries. Muslim Sufi traders influenced them with Islam, and the Western colonists brought Christianity and colonialism. The Dutch colonists occupied the Island for more than 350 years. The country finally gained its independence in 1945 with the help of the Japanese.

Indonesia’s total area is 735,358 square miles, and it’s the 14th largest country in the world. Nicobar and Andaman islands of India, Papua New Guinea, Palau, MalaysiaAustralia, Philippines, Vietnam, and Singapore are the neighboring countries of Indonesia. She’s one of the world’s most bio-diverse countries, comprising many forests and wilderness.

Today, we’ll study the pestle analysis of Indonesia. Here we’re going to focus on macro-environmental factors of the world’s largest island country. For internal factors, check out the swot analysis of Indonesia. Here’s the pestle analysis of Indonesia as follows;

Political factors impacting Indonesia 

Government & Administration

Indonesia follows the constitutional and presidential democratic system of government. The president has the complete power of being the head of the government, head of the state, and commander-in-chief of the armed forces. Indonesian politics has many political parties. Prosperous Justice Party, Indonesian Democratic Party of Struggle, Democratic Party, and Great Indonesia Movement Party are some of the tops. Her constitution doesn’t allow the president to serve the country for more than two terms of 5 years each.

Foreign Relations

Indonesia has established friendly relationships with the neighboring countries instead of having conflicted relations. She’s a member of trading organizations like WTO, Organization of Islamic Cooperation, East Asia Summit, Association of Southeast Asian Nations (ASEAN), Non-Aligned Movement, and G20. However, Indonesia turned down her membership in OPEC (Organization of Petroleum Exporting Countries).  

Safe & Secure

Indonesia is a safe and secure country, and its people trust the country’s law enforcement. According to a Global Law and Order (the US research organization) report, it reported that 69% of the people trust the local Indonesian police. 68% of people said that they feel safe while walking alone at night. It’s one of the biggest strengths of the country that attracts tourists.


Indonesia is facing a severe challenge of corruption. It has spread across the country in every business, political, and government institution. It’s worth mentioning here that many Indonesian provinces want to become independent. It’s directing the country towards political instability.

Economical factors affecting Indonesia 


According to a financial estimate, Indonesia’s annual nominal GDP in 2020 was 1.089 trillion US dollars, and it’s the 15th highest in the world. Out of which, her per capita income was 4038 dollars, and it’s the 108th highest in the world. A little drop in the country’s revenue is due to the economic crisis, but her performance is good comparatively.

Indonesia Economy

The Indonesian government owns a large number of businesses in the country. However, foreign investors and private enterprises are still dominating her economy.

Hydrocarbons, automotive, hospitality, mining, oil & gas, and agriculture are some of Indonesia’s leading industries. She exports her products to Singapore, India, Japan, the USA, and China, and the country imports many of her products from Thailand, Malaysia, Japan, Singapore, and China.


Indonesia has a corporate tax rate of 25%, and the personal income tax varies from 5% to 30%, depending upon their income level. On the other hand, non-Indonesian resident has a tax rate of 20% on their income.

Indonesia’s unemployment rate in 2020 was 4.84%, and the country has stabilized its unemployment rate under 5% for the past decade.

Social factors impacting Indonesia 

Demographic Diversity

Indonesia’s total population in 2020 was 270,203,917 people, and it’s the 4th highest in the world. In fact, she’s the world’s largest Muslim country. Approximately 86.70% of the population are Muslim, and they follow Islam, 10.72% are Christians, and 1.74% are Hindus.

Indonesia is one of the world’s largest diverse countries, ethnically and linguistically. Approximately more than 600 ethnic groups live there, and the country has over 700 spoken languages. According to an estimate, the average life of males and females in Indonesia is 67 and 71 years old.

Social Trends

Indonesia has a literacy rate of 95%, and its government is very cautious about the country’s healthcare and education system. The increase in the middle class in the country is shifting the attitude of the people. The Indonesian people show interest in fashion, healthy food, frozen processed food, ready meals, tech products, and western food.

Indonesia has the worst violation of human rights, extreme poverty, malnutrition, high smoking rate, nepotism, and corruption.

Technological Factors Affecting Indonesia 

Online Social Platforms

According to an estimate, Indonesian people are the most active users of Twitter. Instagram, Pinterest, Facebook, WhatsApp, and YouTube (Google) are some of the other popular social media platforms. However, TV remains the primary medium of mass communication.

Adapting Technology

Indonesia has been quick to understand and accept technology. Even the government has launched various tech projects and changed the language into local dialects to make it easier for her people to learn and adapt. Her industrial project focuses on three main areas chemicals, electronics, textile, automotive, and food & beverage.

The Indonesian government is also working on sensor technology, robots, 3D printing, human-machine interfaces, artificial intelligence, and the internet. If Indonesia excels in both industrial and digital technology, then it will become the global leader.

Lacking Tech Professionals

When we talk about technological development, you’ll need the tech workforce to share the knowledge and expertise. On the other hand, Indonesia doesn’t have a lot of tech workforce. She also lacks the infrastructure of the payment and delivery system, data security, and privacy issues.

Legal Factors Impacting Indonesia 

Laws & Regulations

Indonesian laws protect the rights of employees. For instance, businesses and companies must provide them with social security, religious holiday allowance, specific working hours, pay for overtime, and paid leave to their employees. However, it’s not easy for foreign companies to launch their business smoothly in Indonesia.

Environmental factors affecting Indonesia 

Natural Disasters

Indonesia has faced some of the worst natural disasters like Tsunamis and earthquakes. The 2004 Tsunami killed thousands of people in Indonesia and destroyed mass country’s infrastructure.

Water pollution, congested traffic, air pollution, exploitation of marine resources, speedy urbanization, and deforestation are some of the main challenges the country faces.

Tourism Industry

Indonesia is home to thousands of islands between Australia and Asia. They attract the attention of tourists from across the globe and promote the tourism industry. According to an estimate, Indonesia has earned average annual revenue of 2655.81 million dollars from 2010 to 2020.

Conclusion: Indonesia PESTLE Analysis Example Country

After a careful study of the pestle analysis of Indonesia, we’ve concluded that Indonesia is the world’s leading economy and a populous country. Natural disasters, limited tech professionals, and political corruption are some of the country’s main issues. Indonesia should address them; while paying heed to the external political, economical, social, technological, legal, and environmental factors impacting the country.

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