As Indonesia heads into a presidential election next April, the world's fourth most populous country is attempting to attract foreign investment while increasing control of key industries.

This tricky balancing act typical of resource-rich countries is in the hands of President Joko Widodo, who took office in 2014 and is running for re-election. An affable populist generally seen as pro-business, he is the country's first leader not chosen from its military and socioeconomic elite.

Until recently, he was considered a strong favorite to win, but sluggish economic growth and a fall in the value of the country's currency, the rupiah, have propped up the chances of his rival, retired general Prabowo Subianto.

This month, Widodo's government announced a new economic stimulus package aimed at boosting the rupiah and fueling growth in the $3 trillion economy, the biggest in Southeast Asia. The measures include a tax cut on luxury properties and opening domestic sectors including steel and chemicals to more foreign investment.

To shore up support, Widodo has also picked Islamic cleric Ma'ruf Amin as his running mate. Indonesia is the world's most populous Muslim-majority country.

One reason for Indonesia's obscurity relative to its size is sheer sprawl. It's made up of thousands of islands, mostly volcanic, spanning an eighth of the earth's circumference, and hundreds of different ethnic groups, many with their own languages.

The expanse of the archipelago means that its problems can be broad, too, from forest fires and Islamic extremists to disputes with foreign investors and falling commodity prices in faraway markets.

Like many countries that were colonized, in this case by the Dutch, Indonesia still has an economy dominated by large farm plantations, factory sites, and mines. Seven of its top 10 exports are industrial commodities.

Top Indonesia exports, first 8 months, 2018

• Coal $13.7 billion (+22%)
• Palm oil $10.9 billion (-11.5%)
• Petroleum gasses $6.9 billion (+20%)
• Electronics $5.8 billion (+4%)
• Rubber $4.4 billion (-18%)
• Precious stones, pearls, metals $3.9 billion (+4%)
• Electric machinery $3.8 billion (+1%)
• Iron and steel $3.6 billion (+93%)
• Crude oil $3.5 billion (+9.5%)
• Copper $3.1 billion (+83%)

Amid the millions of domestic businesses transacting with each other are big resource economies that are world leaders in key industrial and consumer commodities like copper, petroleum, coal, tin, rubber, coffee and palm oil.

In the high mountains of one island, Papua New Guinea, for example, is one of the world's most prolific mines, Grasberg which has been controlled by the US' Freeport-McMoran since the 1960s. For years, Indonesia's government wrestled with Freeport over the terms involved in unearthing copious amounts of copper and gold. The stakes are big: Grasberg employs around 20,000 people and made Indonesia the world's third largest copper exporter in 2018.

Copper exports, first 8 months, 2018

• Chile $12.7 billion
• Peru $8.1 billion
• Indonesia $3.1 billion
• Australia $3 billion
• Canada $1.8 billion

The mine exemplifies the tension faced by many mineral-rich countries. They need the expertise of outside companies but feel they deserve a larger share of the profits. Last year, the government forced Freeport to lower its stake to 49% from over 90%. Freeport was also required to invest in taking an open-air mine underground and building a smelter. The dispute last year caused the government to revoke Freeport's mining permit, triggering a dip in copper exports in 2017.

Indonesia copper exports, first 8 months

• 2010: 1.7 billion kg
• 2011: 1.1 billion kg
• 2012: 721.3 million kg
• 2013: 779 million kg
• 2014: 163.2 million kg
• 2015: 1.1 billion kg
• 2016: 1.2 billion kg
• 2017: 627.7 million kg
• 2018: 1.1 billion kg

Copper used to make pipes and wiring, has become essential to Indonesia's economic health. In particular, it's cashed in on China's output of roads, homes, bridges, computers and cars. Exports to China have boomed in the last few years, driven by Beijing's hunger for raw materials.

Indonesia exports to China, first 8 months

• 2010: $9 billion
• 2011: $13.7 billion
• 2012: $13.8 billion
• 2013: $14.2 billion
• 2014: $11.9 billion
• 2015: $10 billion
• 2016: $9.5 billion
• 2017: $13.6 billion
• 2018: $18.1 billion

Nine of Indonesia's top ten export destinations are in Asia, while relations with the European Union have frayed over the country's cultivation of palm to make oil. The EU has moved to ban palm oil imports.

Indonesia's top export destinations, first 8 months, 2018

• China $18.1 billion (+33%)
• Japan $13.3 billion (+19%)
• US $12.3 billion (+5%)
• India $8.8 billion (-3%)
• Singapore $8.6 billion (+6.4%)
• Malaysia $6.2 billion (+15%)
• South Korea $6.2 billion (+15%)
• Thailand $4.7 billion (+9%)
• Philippines $4.6 billion (+13%)
• Taiwan $3.1 billion (+15%)

Indonesia has become dependent on China for its supply of consumer goods like shirts, shoes and electronics. And most of its other suppliers are clustered in Asia. The exception is the US, which ships it, among other things, machinery, soybeans, oil, cotton, and wood.

Indonesia's top 10 sources of imports, first 8 months, 2018

• China $28.7 billion
• Singapore $14.2 billion
• Japan $11.9 billion
• Thailand $7.2 billion
• US $6.6 billion
• South Korea $6 billion
• Malaysia $5.8 billion
• Australia $3.8 billion
• India $3.3 billion
• Saudi Arabia $3.1 billion

Even as it negotiated the tough deal with Freeport, Indonesia's welcoming of foreign investment in other ways has not gone unnoticed. In 2018, the Heritage Foundation, an influential Washington think tank, increased Indonesia's "economic freedom score" by 2.3 points, making it the 69^th freest economy in the world.

Heritage credited Indonesia with "solid improvements in business freedom, monetary freedom and judicial effectiveness" which "more than offset lower scores for government integrity and fiscal health."

Posted 27 November 2018 by John Miller, Guest Blogger