Doing Business in Indonesia

The Indonesian Overview

Quoted as one of the dynamic and rapidly improving country in Asia Pacific, in terms of its competitiveness, Indonesia ranked 38 out of 148 countries in the Global Competitiveness Report 2013-2014 issued by the world economic forum.

Starting from the enactment of investment law back in 1967, Indonesia has gradually opened its door for foreign investor. As the time goes by, to compete with the other development countries, recently government of Indonesia has rapidly changed the investment infrastructure to become more ‘Investor friendly’ among other by issuing a new investment law in 2007 and in 2010 revising the Indonesian negative list of investment. Foreign direct investment in Indonesia is coordinated by the Indonesian Investment Coordinating Board (Badan Koordinasi Penanaman Modal or "BKPM").

Although currently most of the business sectors are already open for foreign investment, the government of the Republic of Indonesia still closed some business sectors that are considered sensitive for foreign investment i.e. marijuana cultivation, alcohol beverages industry (liquor, wine, and malt containing beverages), chlorine alkali industry that is processed by using mercury, public museums, etc.

Like many developing countries, although currently Indonesia is still struggling to establish an investor friendly environment, there are some advantages that can be offered by Indonesia to the foreign investor, as follows:

  • Stable economic growth

Based on Standard Chartered report quoted at BKPM's official site, Indonesia grew by 6.2% in 2012 and in 2014; stronger economic growth is expected around the lower end of the 5.8-6.2% range. Future economic expansion is expected to include more inclusive growth as nominal per-capita GDP is expected to quadruple by 2020.

  • Political stability

Quoted as "one of Asia Pacific's most vibrant democracies that has maintained political stability by the World Bank in 2013, Indonesia has succeed to develop decentralization system which allowed the division of substantial funds and authorities between the central and regional government.

The stability of Indonesia political system has been tested from conducting three successful and peacefully legislative and presidential elections.

  • Vast quantity of natural resources

Widely known for its abundant natural resources such as natural gas, coal, geothermal, palm oil, cocoa, tin, nickel and bauxite, Indonesia is considered as one of the major producer in the commodity market.

  • Large domestic market and demographics

Ranked as the 4th most populous country in the world, currently Indonesia's population has reached approximately over 240 million people. In terms of its demographics, with the rapidly growing population (approximately 2.3 million per year) and urbanization Indonesia is able to provide and strong and dynamic labor market for Investment.

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Source

Squire Patton Boggs (Singapore) LLP

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