Lesson video

Hello and welcome.

My name is Ms. Harrison.

I'm so excited to be learning with you today.

Today's lesson is called "Key economic trends in Indonesia since 1990." Grab everything you might need for today's lesson and let's begin our learning.

By the end of today's lesson, you'll be able to explain how Indonesia's economic sectors have changed since 1990.

Before we begin this learning, we need to define the keywords that we'll be using throughout today's lesson.

The keywords are: GDP per capita, GNI per capita, foreign direct investment, and development.

GDP per capita, this is the total value of goods and services produced within a country, divided by its population.

GNI per capita, this is GDP plus income from foreign investments and remittances, divided by the population.

Foreign direct investment, this is when foreign countries invest in businesses or industries in another country, often by setting up or buying local companies.

Development, this is the process of improving living standards, economy, healthcare, and education.

Often this is measured by factors like life expectancy.

Now that we've defined these keywords, we can begin our learning.

The first question we are going to explore in today's lesson is, what caused Indonesia's rapid economic growth? Indonesia is located in Southeast Asia.

It is one of the region's largest and most important economies.

Since the early 1990s, it has seen a dramatic economic growth.

This means that industries, businesses, and infrastructure have rapidly developed, improving the lives of many people.

This growth has helped lift millions out of poverty and made Indonesia a key player in the global economy.

But what factors might contribute to Indonesia's growth? Pause the video here whilst you have a think, and press play when you're ready to continue.

Excellent.

Some of the factors that might contribute to Indonesia's growth are: globalisation, industrialization, political stability, technological advances, investment in infrastructure, and becoming independent in 1967.

Indonesia is one of the largest and most important economies in Southeast Asia and has gone through a major economic transformation over the past few decades.

Since 1990, Indonesia's GDP per capita, which measures the average income per person, has grown at an average rate of 5 to 6% each year.

This steady growth has helped improve living standards and reduce poverty across the country.

Looking back, Indonesia's economic growth really began in the 1970s through to the 1990s.

During this time, the government focused heavily on investment in infrastructure, industry, and natural resources, which helped boost the economy.

However, in 1997, the Asian financial crisis caused a serious economic downturn across much of Asia, including Indonesia.

The country faced high inflation, a collapsing currency, and rising unemployment.

In response, starting in 1999, the government introduced major economic reforms such as strengthening the banking system and opening up more sectors to foreign direct investment.

These changes helped Indonesia stabilise and return to growth.

Then in 2020, the COVID-19 pandemic caused another economic slowdown, like in many other countries around the world.

But despite that, Indonesia's economy has started to recover again and is continuing its growing journey today.

I would like you to identify the event that negatively impacted Indonesia's GDP per capita in 1997.

Was it A, the Asian financial crisis; B, COVID-19; C, Indonesia's independence; or D, relaxed FDI laws? Pause the video here whilst you have a think, and press play when you're ready to continue.

Fantastic.

The answer is A.

Asian financial crisis was what negatively impacted Indonesia's GDP per capita in 1997.

Well done.

Indonesia's GNI per capita has steadily increased over time, which shows a clear rise in income levels and an improvement in living standards for its people.

In 1997, during the Asian financial crisis, GNI per capita was around 2,700 US dollars.

By 2022, it had grown to $4,850, almost doubling over 25 years.

And looking ahead, by 2025, it's expected to surpass 5,500 US dollars.

This steady rise in GNI per capita reflects how Indonesia's economy has strengthened and how people are on average earning more and enjoying better living conditions.

What is the difference in GNI per capita from 1997 to 2025? Is it A, 1,900 US dollars; B, 2,200 US dollars; C, 2,800 US dollars; or D, 3,200 US dollars? Pause the video here and press play when you're ready to continue.

Excellent.

The answer is C, 2,800 US dollars.

Well done if you managed to get that correct.

So why has Indonesia's GNI per capita grown so much over time? There are a few key reasons, and they all link to big changes in the economy.

First, in the 1990s, Indonesia began to open up its economy.

The government reduced control and encouraged private businesses to grow.

This kind of economic liberalisation allowed companies to invest, expand, and create more jobs.

Secondly, global trade played a huge role.

Indonesia became more connected to the rest of the world, attracting foreign investment, gaining access to new technology, and selling its products to bigger international markets.

Next, the country invested heavily in infrastructure, building new roads, ports, and airports.

This made it easier to move goods and people, boosting trade and helping businesses grow.

Finally, there's urban growth.

As more people moved to cities, the demand for goods and services shot up.

This created more jobs, high productivity, and a stronger economy overall.

All of these changes have helped raise incomes and improve living standards, and that's why Indonesia's GNI per capita keeps climbing.

Which of the following has been a key driver for the increase in Indonesia's GDP since 1990? Was it A, decrease in foreign trade; B, economic liberalisation; C, limited foreign investment; D, decline in agriculture? Pause the video here whilst you decide, and press play when you're ready to continue.

Fantastic.

The answer is B, economic liberalisation.

Well done.

Andeep has described Indonesia's changes in GDP per capita.

Andeep has made some mistakes.

How many can you see? Pause the video here and press play when you're ready to continue.

Fantastic.

Let's check our answers.

You should have been able to spot eight mistakes.

I've corrected the mistakes that Andeep made, so your text should read like this.

Overall, Indonesia's GDP per capita has increased, rising from approximately 1,300 US dollars in 1990 to 5,700 US dollars in 2024.

An anomaly occurred after 1997 when Indonesia's GDP per capita sharply decreased.

Well done on this task.

You've done brilliantly.

We're now going to explore our second question of today's lesson: how have Indonesia's economic sectors changed? There are four economic sectors.

We have the primary sector, which focuses on agriculture, mining, forestry, and fishing; secondary sector, which is manufacturing, construction, and industry; tertiary sector, services such as banking, retail, transport, and tourism; and quaternary sector, which is knowledge-based industries such as IT and research and development.

Which of the following best describes the secondary sector of the economy? Is it A, businesses that extract natural resources such as mining and farming; B, businesses that manufacture products, sometimes from raw materials; C, businesses that provide services, such as banking and retail; or D, businesses based on information and knowledge, such as research and development of new products? Pause the video here whilst you give this a go, and press play when you're ready to continue.

Fantastic.

The answer is B.

Businesses that manufacture products, sometimes from raw materials.

Well done.

The primary sector.

Agriculture used to be the backbone of Indonesia's economy.

In 1990, it made up over 30% of the country's GDP, but today, that number has dropped to less than 15%.

So what happened? The main reasons are mechanisation, using machines instead of manual labour and a shift of workers into other sectors like manufacturing and services.

As Indonesia's economy has grown and developed, more people have moved away from farming to work in factories, offices, and cities.

This is a sign of economic development.

While agriculture is still important, Indonesia now relies more on industry and services to drive its economy forward.

Palm oil plantations remain a major contributor to Indonesia's primary sector.

Remember, palm oil can be found in most of our everyday goods like toothpastes and some foods.

Palm oil production employs millions of workers and generates around 3.

5% of the country's GDP per capita, so you can see it still contributes a significant amount to Indonesia's economy.

Which sector's contribution to Indonesia's GDP has declined by 15% since 1990? Was it A, the primary sector; B, secondary sector; C, tertiary sector; or D, quaternary sector? Pause the video here whilst you decide, and press play when you're ready to continue.

Fantastic.

The answer is A, the primary sector.

Well done.

Let's now look at the secondary sector.

Manufacturing in Indonesia has seen massive growth over the past few decades.

Industries like electronics, car production, and textiles have really taken off.

In the year 2000, the industrial sector made up about 25% of Indonesia's GDP, but by 2023, that has grown by 40%, which is a huge increase.

This growth shows how Indonesia's moving towards a more industrialised economy, with more factories, exports, and jobs in manufacturing.

The country has been able to boost income levels and compete in global markets.

Foreign investment has played a big role in Indonesia's industrial growth, especially in the car industry.

Companies like Toyota have expanded their production in Indonesia, turning the country into a key hub for car exports in Southeast Asia.

As of 2023, Toyota produces over 300,000 vehicles a year in Indonesia.

That's helped Indonesia become the third largest car producer in the entire Southeast Asian region.

This kind of investment creates jobs, boosts exports, and strengthens the economy.

Indonesia isn't just big in cars.

It also is a major hub for textile and garment production.

The country supplies clothing and fabrics to global brands around the world thanks to its large workforce and growing factories.

This industry creates millions of jobs and plays a key role in Indonesia's exports, making it an important part of the country's economy.

True or false? Indonesia's manufacturing sector has remained stagnant, with little growth in electronics, automotive production, and textiles.

Pause the video here whilst you decide if this statement is true or false, and press play when you're ready to continue.

Excellent.

This statement is false.

I would now like you to explain why.

Pause here and press play when you're ready to continue.

Fantastic.

The reason why the statement is false is because Indonesia's manufacturing sector now makes up 40% of GDP, driven by growth in electronics, automotive, and textiles due to foreign investment and technology.

Well done if you managed to explain that correctly.

Let's now look at the tertiary sector.

Indonesia's service sector, which includes things like banking, tourism, and retail, has grown really fast in recent years.

Today, services make up 43% of the country's GDP, showing how important this sector has become.

This growth reflects a rising demand for skilled workers and increased consumer spending.

As people earn more money, the economy develops.

From shopping malls to digital banking, the service sector is now a key part of Indonesia's modern economy.

Tourism is one of the biggest parts of Indonesia service's sector.

In fact, the island of Bali alone attracted 6.

3 million international visitors in 2024, making it one of the most popular tourist destinations in the world.

Tourism brings in valuable income, supports local businesses, and creates thousands of jobs in areas like hospitality, transport, and entertainment.

Lucas has said, "I wonder if the other islands in Indonesia are becoming more popular for tourists too." And that's a great question.

The answer is yes.

Other islands in Indonesia are definitely becoming more popular with tourists, not just Bali.

We can take a look at some examples.

Lombok, which is right next to Bali, is known for its beautiful beaches, surfing, and a stunning active volcano.

Java, which is home to Indonesia's capital Jakarta, as well as cultural sites like temples and volcanoes like Mount Bromo.

We also have Sumatra, which offers rainforest adventures, wildlife like orangutans, and Lake Toba, one of the world's largest volcanic lakes.

So we can see that lots of areas of Indonesia are also benefiting from tourism.

The quaternary sector.

Indonesia's quaternary sector, which focuses on knowledge, technology, and innovation, is growing quickly.

The IT sector and digital economy now contribute around 4% to the country's GDP.

This growth is being driven by advances in e-commerce, technology and development, and renewable energy.

It shows how Indonesia is not just focused on traditional industries, but also investing in innovation and future-focused sectors.

Izzy has said, "The quaternary sector, that's economic activities based on knowledge, research, and technology and information, isn't it?" Yes, she's correct.

That's exactly what the quaternary sector is based on.

True or false? In recent years, Indonesia's economy has shifted towards the primary sector, with agriculture becoming the dominant industry.

Pause the video here whilst you decide if this statement is true or false, and press play when you're ready to continue.

Excellent.

This statement is false.

I would now like you to explain why.

Pause here and press play when you're ready to continue.

Fantastic.

The reason why the statement is false is because Indonesia's economy has shifted towards the tertiary sector, which now makes up 43% of the country's GDP per capita, and it's driven by growth in services, tourism and finance, while agriculture's contribution has declined.

Well done if you managed to explain that correctly.

The quaternary sector in Indonesia mainly consists of A, farming and mining; B, research, IT, and financial services; C, manufacturing and industry; or D, transport and tourism.

Pause the video here whilst you decide, and press play when you're ready to continue.

Excellent.

The answer is B, research, IT, and financial services.

Well done.

Over the years, Indonesia's economy has gone through major changes, moving from mainly agriculture to a mix of industry, services, and technology.

But what's caused economic change in Indonesia? Pause the video here whilst you have a think, and press play when you're ready to continue.

Fantastic.

Some of the causes for economic change in Indonesia are: globalisation.

As the world became more connected, global demand for products like textiles, palm oil, and electronics boosted Indonesia's exports and helped its industries grow.

Technology.

The rise of digital services, IT, and e-commerce has created a new type of business and jobs, especially in cities.

Urbanisation.

As more people move from the countryside to cities, there are a big increase in demand for jobs in manufacturing and services.

And industrialization.

Foreign direct investment and smart government policies have encouraged the growth of factories and large scale production.

Together, these changes have helped transform Indonesia's economy into a more diverse and fast growing one.

I would now like you to complete the table below on Indonesia's economic sectors.

We're going to be looking at primary, secondary, tertiary and quaternary.

I would like you to provide a description for each and explain how each of them have changed.

Pause the video here, and press play when you're ready to check your answers.

Excellent.

Let's check our answers.

For primary sector, the description should be: involves extraction of natural resources such as agriculture, mining, and fishing.

How it's changed: agriculture has declined from over 30% of GDP in 1990 to less than 15% today, while palm oil and mining remain key industries.

Secondary sector, the description: manufacturing and industry, including factories producing goods like textiles and electronics.

How it's changed: Indonesia's industry sector grew from 25% of GDP in 2000 to 40% in 2023, with foreign companies like Toyota investing there.

Tertiary.

The description: service sector, including retail, transport, healthcare, and tourism.

How it's changed: services now make up over 43% of GDP.

Bali attracted 6.

4 million visitors in 2024.

And quaternary.

The description: knowledge-based industries, for example, research and development, IT and digital services.

And how it's changed: Indonesia's IT sector and digital economy are rapidly growing, contributing 4% to the country's GDP.

Well done on this task.

You've done brilliantly.

We're now going to explore our final question of today's lesson: how has foreign direct investment changed? FDI, or foreign direct investment, is when businesses or governments from one country invest in industries or companies in another country.

This happens when a foreign company sets up operations, builds factories, or buys shares in a local business.

So why is foreign direct investment important? It brings money, capital, that can be used to grow businesses.

It also introduces new technology, expert knowledge, and international business practises, all of which can help modernise the local economy.

And most importantly, foreign direct investment creates jobs and supports long-term economic development.

Since gaining independence from the Dutch in 1945, Indonesia has taken steps to manage and control how foreign businesses operate in the country.

One key moment came in in 1967 when the government introduced the Foreign Investment Law.

This law set the rules for how foreign direct investment would work in Indonesia, allowing overseas companies to invest in local industries under certain conditions.

The goal was to attract foreign capital while still protecting national interests.

This law laid down the foundation for how Indonesia has balanced economic growth with national control over the past few decades.

Some of the biggest foreign investors in Indonesia are countries like Singapore and China.

These countries invest heavily in key sectors such as manufacturing, trade, and infrastructure, helping to build factories, support new businesses, and develop transport systems like roads and ports.

This kind of foreign direct investment brings in money, jobs, and expertise, all of which play a big role in driving Indonesia's economic growth and development.

Foreign direct investment in Indonesia has changed a lot over time, focusing on different sectors as the economy has developed.

It started in 1967 when the Foreign Investment Law was introduced.

This law was designed to encourage foreign businesses to invest in Indonesia and boost economic growth.

In the 1990s, FDI mainly focused on oil, gas, and mining.

Foreign companies were interested in Indonesia's rich natural resources and invested heavily in extracting them.

By the 2000s, the focus began to shift.

Thanks to the low labour costs, Indonesia attracted foreign investment in textile factories and electronics manufacturing, making it a hub for global production.

From 2010 to today, FDI has grown rapidly in new areas, especially in the digital economy, e-commerce, and high-tech sectors.

These investments are helping Indonesia modernise and become more competitive in the global markets.

This timeline shows how Indonesia's economy has moved from being resource-based to tech-focused, all with the help of foreign investment.

What type of industries attracted most of Indonesia's FDI in the 1990s? Is it A, technology; B, agriculture; C, oil and gas; or D, banking? Pause the video here whilst you decide, and press play when you're ready to continue.

Excellent.

The answer is C, oil and gas.

Well done.

Foreign direct investment in Indonesia has changed a lot since 1967, and that's no coincidence.

Over the years, several key factors have helped shape the growth of FDI in the country.

First, government policies, like the 1967 Foreign Investment Law, opened the door for foreign businesses to invest in Indonesia.

Then came economic reforms, especially after the Asian financial crisis in the late 1990s.

These reforms made it easier and more attractive for foreign companies to do business in Indonesia.

Next, market growth.

As Indonesia's economy and population expanded, so did the demand for goods, services, and new industries.

This growth made the country a more appealing place to invest.

And finally, the development of infrastructure like new roads, ports, airports, and digital networks.

It has made it easier for foreign companies to operate and connect with markets.

All of these changes have helped transform Indonesia from a resource-based economy to a modern, fast growing one that attracts investment from around the world.

I would like you to add the missing labels to the diagram.

Pause the video here whilst you attempt this task and press play when you're ready to continue.

Fantastic.

The missing labels are: development of infrastructure and economic reforms. Well done.

Government policies.

The Indonesian government has introduced special policies to encourage foreign companies to invest in the country.

One major way they do this is by offering incentives such as tax breaks and creating special economic zones where businesses pay fewer taxes and face fewer regulations.

A good example is Batam, an island close to Singapore.

It's been developed as a special economic zone with lower operating costs, making it really attractive to foreign investors.

These policies help create jobs, boost exports, and drive economic growth, all while making Indonesia more competitive in the global economy.

Economic reforms. In the 1990s and 2000s, Indonesia introduced a series of economic reforms to attract more foreign direct investment.

One major change was lowering tariffs.

This made it cheaper and easier for goods to move in and out of the country.

At the same time, Indonesia eased trade restrictions, opening up its economy to more global businesses.

Another key step was joining the World Trade Organisation.

This helped simplify trade rules, build investor confidence, and made Indonesia more connected to global markets.

These reforms played a big role in boosting investment, trade, and long-term economic development.

True or false? In the 1990s and 2000s, Indonesia raised tariffs, increased trade restrictions, and avoided joining the World Trade Organisation to attract foreign investment.

Pause the video here whilst you decide, and press play when you're ready to continue.

Fantastic.

The answer is false.

I would now like you to explain why.

Pause the video here, and press play when you're ready to continue.

Excellent.

The reason why this is false is because in the 1990s and 2000s, Indonesia made economic changes to attract foreign investment by lowering tariffs, easing trade restrictions, and joining the World Trade Organisation to simplify trade.

Well done if you managed to explain that correctly.

Market growth.

Market growth is one of the biggest reasons why foreign companies are investing in Indonesia.

With a population of over 270 million people and a rapidly growing wealthy population, Indonesia offers a massive and expanding consumer base.

The economy is growing at around 5% per year, which means people have more money to spend.

As demand for goods and services increases, foreign companies see big opportunities and are eager to invest.

This growing market makes Indonesia one of the top investment destinations in Southeast Asia.

Nusantara is Indonesia's new capital city, and this is also going to help drive market expansion and development across the country.

Development of infrastructure.

Infrastructure development has played a key role in attracting foreign direct investment to Indonesia.

The government has spent heavily on improving transport and logistics, making it easier and faster for companies to do business across the country.

For example, the international airport has been expanded to handle more international flights and cargo, improving global connections.

One of the busiest ports in Indonesia has been modernised to speed up shipping and reduce export delays.

The country's also built the Trans-Java Toll Road, which connects major cities across the island of Java, cutting down travel time and boosting trade.

These upgrades make Indonesia more efficient, more attractive to investors, and more competitive in the global economy.

Why is Indonesia considered a top investment destination? Is it A, it has a small population and a shrinking middle class; B, its economy is growing at 5% annually, increasing demand for goods; C, it has a low population and a stagnant economy; D, the economy is shrinking, reducing the need for foreign investment? Pause the video here whilst you decide, and press play when you're ready to continue.

Fantastic.

The answer is B, its economy is growing at 5% annually, increasing demand for goods.

Well done.

True or false? Indonesia offers tax breaks and special areas to discourage foreign investment.

Special economic zones, like Batam, have higher costs and more regulations.

Pause the video here whilst you decide if this statement is true or false, and press play when you're ready to continue.

Excellent.

This answer is false.

I would now like you to explain why.

Pause here and press play when you're ready to continue.

Excellent.

The reason why this is false is because the government offers tax breaks and special areas to encourage investment.

Special economic zones like Batam have lower costs and fewer regulations.

Well done if you explained that correctly.

I would now like you to explain two reasons for the increase in foreign direct investment in Indonesia.

Aisha has said, "Foreign direct investment is when other countries invest in businesses or industries in another country, often by setting up or buying local companies.

Is that right?" Yes.

Aisha is correct.

And Alex has said, "The Indonesian government's decision to expand the Trans-Java Toll Road to connect major cities helped increase foreign direct investment, right?" Yes, exactly.

It reduced travel time, making Indonesia more efficient.

Pause the video here whilst you attempt this task, and press play when you're ready to continue.

Fantastic.

Let's check our answers.

Your answer could include some of the following points.

Two key reasons for the increase in foreign direct investment in Indonesia are the development of infrastructure and economic reforms. The development of infrastructure improved transport, telecommunication, and energy systems, making it easier for businesses to operate.

For example, the Indonesian government expanded the Soekarno-Hatta International Airport and modernised ports like Tanjung Priok Port and expanded the Trans-Java Toll, which connects major cities.

All of this reduced costs and boost efficiency, attracting foreign investors.

Economic reforms played a key role by reducing tariffs and trade restrictions, and Indonesia's membership in the World Trade Organisation provided a strong and reliable trade environment.

The government also eased foreign ownership rules, encouraging investment in sectors like electronics and manufacturing.

These changes created a more attractive business environment, driving greater FDI and economic growth.

Well done on this task.

You've done brilliantly.

We've now come to the end of our learning in the key economic trends in Indonesia since 1990, and you've done brilliantly.

But before we end this lesson, let's summarise everything we've learned today.

Since 1990, Indonesia has experienced rapid economic growth, with increased GDP and GNI per capita.

The economy has shifted from agriculture to manufacturing and services, and to attract foreign investment, the government reduced tariffs, eased trade restrictions, created special economic zones with tax incentives and boosted sectors like manufacturing and technology.

Well done in today's lesson.

You've done brilliantly, and I look forward to learning with you again very soon.