Doing business in Indonesia
Indonesia is Southeast Asia's largest economy and has made great strides in recent years in terms of economic growth. The Indonesian government, under President Joko Widodo, has been pushing for business reforms and reducing red tape to attract more foreign investment and create job opportunities. As a result, the Indonesian economy has seen an increase in foreign direct investment and business activity.
Key Takeaways
The Indonesian government, led by President Joko Widodo, has implemented several measures to improve the business environment, including reducing red tape and streamlining business regulations.
The country has a young and growing middle class, which is driving domestic demand for consumer goods.
Indonesia's large natural resources sector attracts foreign investment and contributes to economic growth.
Challenges for businesses operating in Indonesia include land acquisition, organized crime, and industrial disputes.
The World Bank has ranked Indonesia at 73 in the ease of doing business rank. However, it still lags behind some of its peers in the ASEAN region.
The government is working to attract foreign direct investment. It has implemented tax incentives and trade agreements to facilitate business activity.
Some industries, such as infrastructure development and the creation of new cities, are prioritized by the government for investment.
Indonesian business culture is formal, with everyday business attire including long-sleeved batik shirts, and alcohol consumption is generally prohibited during business meetings.
It is essential for foreign businesses to familiarise themselves with local regulations, government officials, and relevant authorities to build strong business relationships with their Indonesian counterparts.
How does Indonesia, a country with over 255 million citizens and hundreds of local languages, communicate? And how can we communicate most effectively with them?
If you've been to Bali and asked the locals how to say thank you, they likely would have told you the Balinese suksma. In Jakarta, the national capital on the island of Java, they might say the Sundanese hatur nuhun, and over in Jogjakarta, they would use the Javanese matur nuwun. But anywhere in Indonesia, you could say the Indonesian terima kasih.
Indonesian, or Bahasa Indonesia locally, is based on Malay, which is also spoken in Malaysia, Singapore and Brunei, making it one of the top ten spoken languages in the world. In 1928, the Indonesian nationalist movement of the then-Dutch colony chose it as the language of their future nation. Because of trade, it was already a lingua franca across much of the archipelago. Today, many Indonesians speak several languages, including their local language and Indonesian. Local languages, as demonstrated above, are not related to Indonesian. They also use different scripts, whereas Indonesian is written in Latin script, the same as English.
Indonesian leader Soekarno declared independence in 1945. He was overthrown by Soeharto in 1968, who ruled until 1998. The fall of Soeharto marked the beginning of the period known as Reformasi, a self-explanatory name for many democratic reforms.
A new chapter in the world's relationship with Indonesia
Indonesia's economy, currently worth around three trillion US dollars and the sixteenth largest in the world, is set to grow to 5.9 trillion by 2030 and will be in the top five biggest economies globally.
Indonesia’s economy, currently worth around three trillion US dollars and the sixteenth largest in the world, is set to grow to 5.9 trillion by 2030 and will be in the top five biggest economies globally, according to the White Paper.
Key benefits are expected to include annual quotas of global imports, increased foreign ownership of Indonesia-based businesses including education institutions and hospitality venues and eliminating tariffs on Indonesian imports and exports.
Crack the Indonesian market
When breaking into an overseas market, a key consideration is how you will communicate with your target audience. There's no point placing newspaper ads in a country with low literacy or doing online marketing in English when people can access plenty of content in their native language.
Indonesian media is predominantly presented via television, radio, major newspapers and advertising. It is also the sole language of politics, administration and the judiciary. English is widely studied, although English proficiency is lower in Indonesia than in other South East Asian countries. The English First proficiency index ranked Indonesia 32 out of 72 countries surveyed.
According to the United Nations, literacy is relatively high in Indonesia, with a rate of 95.38% for the population 15 years and older. It is somewhat lower, with the population 65 years and older having a literacy rate of 70.06%.
Indonesians are also among the world's biggest social media users. There were 132.7 million internet users in 2016 (InternetWorldStats). Facebook is enormously popular, and Indonesians are among the world's most active Twitter users. This means there are cheap (even free), quick and easy ways to market to Indonesian consumers. Text-based advertising in Indonesia has enormous potential reach.
With new international partnership agreements, a substantial local market and a well-established lingua franca, Indonesia is primed for international trade, and now is the time to get involved.
Challenges and Opportunities
While the Indonesian economy has made progress in recent years, businesses must be aware of potential challenges, including industrial disputes and human rights issues.
The government is taking steps to address these challenges and to ensure the country remains a favourable destination for investment. It is also worth noting that the country has a negative investment list, which outlines specific business sectors restricted or closed to foreign investment.
Regarding economic indicators, Indonesia has been consistently improving its ease of doing business ranking. It has been making progress towards becoming a newly industrialized country. With its growing middle class and increasing domestic demand for consumer goods, Indonesia is an attractive destination for businesses looking for long-term growth opportunities.
Overall, Indonesia offers a wealth of opportunities for businesses looking to expand in Southeast Asia. With its large domestic market and growing middle class, the country is poised for further economic growth.
With proper preparation and local knowledge, foreign businesses can successfully navigate the Indonesian business environment and reap the rewards of investing in this populous country.
Doing business tips
Customs
Common business attire in Indonesia is formal wear, such as long-sleeved batik shirts, and it is customary to exchange business cards.
It is also worth noting that using the left hand for personal and sanitary purposes is considered rude in Indonesian culture.
In some regions, such as Banda Aceh, alcohol consumption is forbidden, and it is crucial to be mindful of local customs and traditions.
Key Indonesian phrases
Good morning: selamat pagi
Good afternoon (used for around 11am to 2pm): selamat siang
Good afternoon (used from 2pm until sunset): selamat sore
Good evening: selamat malam
Hello (informal): halo
Thank you: terima kasih
Excuse me: permissi
Sorry: maaf
Do you speak English?: Bisa bahasa inggris?
How much does this cost?: Berapa harganya?
My name is …: Nama saya …
Counting in Indonesian
One: satu
Two: dua
Three: tiga
Four: empat
Five: lima
Six: enam
Seven: tujuh
Eight: delapan
Nine: sembilan
Ten: sepuluh