Talking About Doing Business in Indonesia
3E Accounting offers a quick take on doing business in Indonesia, a land of opportunity for the entrepreneur in the know.
Currently, Indonesia is ranked 73rd in the World Bank’s Ease of Doing Business Index. However, this should not deter entrepreneurs from doing business in Indonesia, which has more than a quarter-billion people. The British Chamber of Commerce’s Business Confidence Index in 2019 showed that investors maintained a keen outlook on Indonesia.
The Government is almost single-minded in raising these rankings and has introduced sweeping changes. These include the controversial Omnibus Laws as well as freer foreign direct investment (DFI) criteria. Changes also include a focused shift online, such as the Online Single Submission (OSS) business registration system.
Building an Indonesian Business
Indonesia does still have significant hurdles that businesses need to overcome. For example, company incorporation and registration can take more than a month, although the OSS system has made significant improvements. Setting up as a limited liability company can require tedious submission of documentation and compliance. Whether local (Perseroan Terbatas or PT) or foreign (Perseroan Terbatas Penanaman Modal Asing or PT PMA), it’s prudent to engage business consultants. Firms such as 3E Accounting have extensive local experience and global expertise to ease the whole process.
PT PMAs may also experience more stringent regulations. Indonesia’s foreign compliance requirement is biased towards ensuring the economy and local labour benefit the most. Rules are quite firm, and foreign employees will need special work permits or KITAS, requiring substantial financial commitment. Further, customs and import compliance are strictly regulated to protect the local industries, making licensing a thorny issue at best. This can make it costly for foreign investors to have a business in Indonesia.
Cultural and bureaucratic issues should also be considered as Western business ideals do not apply across the board here. For example, the language may be a slight hurdle as Bahasa Indonesia is more widely spoken than English. Bureaucracy is also complex and requires dealing with multiple government agencies and regulations. The local business arena can be quite hierarchal. Sending a junior executive, no matter how talented, to meet with senior management might have adverse outcomes.
A Successful Run of Business
The news is not all doom and gloom as Indonesia offers extremely attractive prospects for the discerning entrepreneur. It is estimated that by 2025, approximately 60% of global economic growth will originate from Asia. Indonesia is ideally placed to capitalize on this market, especially as a trade member of ASEAN (Association of Southeast Asian Nations).
The Government has certainly made tremendous inroads towards improving Indonesia’s commercial environment. These include clamping down on corruption as well as refining policies and adopting better governance. A lot has also been invested in improving the infrastructure, thereby creating demand for construction-related businesses. The education industry is also on the rise, and there is tremendous demand for related trades. Indonesia has the fourth largest education system in the world and offers a lucrative market for education-related businesses.
3E Accounting can assist prospective entrepreneurs to start doing business in Indonesia. Customizable and professional business solutions are a speciality of 3E Accounting. Whatever your business needs, 3E Accounting can help create a solution.
Contact 3E Accounting today for an experiential chat with industry professionals that will change your outlook on business solutions.