Standing out among the G20 members, Indonesia would likely be an imminent Asian tiger disclosing ample opportunities for the world’s entrepreneurs to branch out in the near future. The 72-year-old nation flanked by two oceans is potentially great for investment and setting up business overseas as well. Its presence as a prevailing country in the economic sector is definitely inseparable from key factors such as top natural resources, a big number of youth, tremendous market, and so on. And these following reasons why to do business in Indonesia would automatically take your hesitancy down.
One of the World’s Most Populous Countries
Becoming a country with the 4th highest population in the entire globe is such a stupendous advantage which anybody needs to mark. According to Worldometers statistics, the average of population growth in the largest archipelago goes up by nearly 3 million people every year. It estimates that the total inhabitants will reach 272 million by 2020. This point of fact signifies that there is a large amount of potential for foreigners to set up a company in Indonesia, be it in agriculture realm or fishery affairs.
In addition to the substantial number of people, the island nation lying off the Australian shore boasts demographics exceedingly propitious for the extended term economic growth. This one is consolidated by 50% of Indonesian residents whose age are under 2 years old giving the exceptional demographic dividends in days to come. It doesn’t stop at that; based on the World Factbook, today’s total median age in Indonesia is 30.2 years – the male is 29.6 years whereas the female is 30.8 years.
The Indonesian Middle Classes Grow Significantly
Not only is the tropical paradise famous for its considerable total of occupants affecting the globe’s market progress but also the local middle class, growing rapidly. Arguably, this awesome verifiable truth lets the group subjected to the economic empowerment. In other words, the category is such a valuable object for worldwide business people when it comes to making an investment in Indonesia. One of the reports says that the country has the fourth biggest middle class in the world coming with millions of households in recent years.
As specified by McKinsey, Indonesia will be crowded with around 90 million of people from the related group namely class of consumers by 2030. Surprisingly with regard to purchasing-power parity, they are capable of earning more than 3,600 USD per year – what a massive income it is! It is pretty obvious that the existence of this prominent class which keeps expanding from time to time will put the poverty down, boost the revenue equality, as well as strengthen the national economic power.
Going for Business is Much Easier than Former Years
There is no quality of being futile once you scheme a company formation in the pearl of South East Asia. Why that early statement clearly emerges as foreigners have easier access to an array of profitable activities. Before everything gets commenced, you need to understand that there are two sorts of business entities allowed to be built in Indonesia, i.e., the limited liability company referring to PT (Perseroan Terbatas) and the foreign-owned liability company commonly known as PT PMA (Perseroan Terbatas Pemodalan Milik Asing). And your overseas investment belongs to the second classification.
Related article: 5 things you need to know about PT PMA
Unlike last year when you required much effort to deal with the business setup application, now seems painless and undemanding. Yes, it remains true that to register a company in Indonesia might highlight a set of lengthy and wearisome process. However, seeing the one-sided facet truly is not reliable – thus, taking other key factors into account would blow everyone’s mind. Those include a couple of dramatic improvements in acquiring finance, international trade participation, and tax payment. And the same is true of an easier business establishment, uncomplicated contract system, and electricity access.
As stated by tradingeconomic.com, Indonesia in the term of ease of doing business in the country in 2017 has significantly jumped upward 15 higher compared to the previous year. This incredible achievement makes this nation place in the 91st spot. Don’t you know that it used to be in 128th position? Consequently, there is no ground for not choosing Indonesia when it comes to investing and getting the most out of the abroad business opportunity. Ignoring it means you put yourself in vanity.
- The World’s 10th Biggest Economy and the Largest one in South East Asia
It is not such a secret anymore that Indonesia is regarded as one of the most emerging markets throughout the world. It obviously deserves to be called so due to its major role in controlling South East Asia’s economy. This freshly industrialized country is also the world’s 16th largest economy by total GDP. The GDP per capita always goes ahead and becomes the foremost component in the region. Yet unfortunately, it’s still below the world average. Some defining issues why the ranking position is far from people’s expectation include the domestic market dependency, government expenditure, and enterprise ownership.
The greatest sectors allowing Indonesia to remain at the top in regard to the nominal GDP cover agriculture, fishery, forestry, and livestock. Out of them, the agriculture sector of which contribution to the national GDP is about 14.43% is the highest of all. The central commodities dominating the exportation are no other than coffee, tea, natural rubber, spices, rice, cocoa, palm oil, and cassava. The presence of hydrocarbons cannot be disparaged. In 1999, this quarter contributed at the second place which is roughly 9% to GDP. While for gas and non-oil mining, the island nation has successfully expanded gold, copper, silver, bauxite, and nickel to the trans-border market.
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Favorable Business Culture
Once you set up a company in Indonesia and finally build an office, the initial impression you could feel is the unusual yet vibrant atmosphere. Some might get dumbfounded when running into an uncertain rhythm of work – it sometimes moves quickly or unhurriedly, depending on the company’s implied wisdom. Another attention-grabbing side of the business environment is the people for sure. Not only are the locals well-mannered and affable, but the individuals also generally show high respect to the employer and other workmates. It is no wonder that some foreigners do enjoy the vibrant surrounding while having a work meeting.
Apart from the extraordinary environment, a thing you will probably never find it in another place is the Indonesian batik attire worn during assorted business activities ranging from regular meeting with new clients to take a fresh project. This eye-catching outfit varying in color and pattern doesn’t only make the wearers feel convenient but also gives rise to joy, enthusiasm, and a new spirit at work.
An Internet-Savvy Generation
Indonesia is also known as a country with the largest internet users all around the world. This tangible potential is totally perfect for creating a bigger market network enabling you to gain a fair amount of customers easily. Additionally, the fact that more than the half of Indonesian populations are under the age of 30 is mesmerizing – and most out of them are active in using social media from Facebook to Instagram. In order for your own PT PMA to become long-lasting; you are absolutely free to take advantage of the online approach. And to promote your products with the method has never been a difficult task.
Generally speaking, the millennial citizens whose smart phone is more than one are in line with running the tricky business tactics in a developing country. To let any single chance manifested, you are recommended to team up with the local operators in the name of optimizing marketing strategy. For reassuring your potential future customers, it is vital that you establish your own PT PMA website with great content and themes riveting their attention. Manage the basic information like company profile and full address to avoid misconception.
The Decline of Indonesia’s Public Debt to GDP Ratio
On the authority of Sri Mulyani, the Indonesian finance minister, the nation’s public debt to GDP in 2017 decreases below 30% — this one is much lower than the set of the legal threshold at 60%. Last year also had significant decline which was around 27% or nearly 3,200 trillion IDR. The debt carried is arguably manageable and safe, great enough for foreign-based entrepreneurs to set up the company formation. In comparison to other countries such as Brazil and Malaysia owning debt to GDP ratio – each is about 70% and 56%, the Asian archipelago’s debt is relatively low. The country’s debt ratio difference toward USA (105%) and Japan (246%) is also pretty far-reaching.
Interestingly, the public debt of Indonesia which is around 143 billion USD is actually the foreign one. The biggest creditors helping the nation’s finance include the Asian Development Bank known as ADB, the World Bank, as well as Japan. Meanwhile, 39% out of the total domestic debt is deeply related to the intervention of foreign visitor’s hands. This year, the local government looks forward to reaching around 290 billion USD. After fathoming this fact, it is totally obvious that there is no excuse to register a company in Indonesia.
Foreigners are Accessible to Land Ownership
Aside from setting up a PT PMA in the archipelago, foreigners are permitted to have land. This policy applicable from early 2015 is based on Indonesia’s government regulation no. 103/2015 signed by the current president. It stipulates that expatriates have right to reside with the land and house ownership. There are three kinds of foreigner’s rights in respect of obtaining the estate and property – right to build (hak guna bangunan), right of cultivation (hak guna usaha), and right to use (hak pakai). In order for the certificate to be facile, a couple of requirements should be fulfilled. These following conditions need to be understood.
Right to build (hak guna bangunan) gives the certificate holder a privilege to make construction on the land. This one requires the foreign individuals to own the PT PMA (be it partial or full company ownership) and a valid temporary stay permit, known as KITAS. This type of certificate is handed out for around 30 years and lets the holder extend it up to 20 years. The renewal for another 30 years once the extension is over is possible. The special benefit of having the right to build is that you can sell, inherit, and exchange it.
The right of cultivation (hak guna usaha) is designed for those planning to cultivate land or expand their agricultural company. The certificate has 25-year validity and can be extended up to 35 years. You can’t obtain this unless establishing a PT PMA or foreign-owned company. Meanwhile, the right of use (hak pakai) is the most pertinent of all and often used by foreigners. It enables the people to either build a landed house or develop the land. The certificate holder has a right to take full advantage of the land for around 25 years with an extension up to 80 years.
Not Affected by the Global Financial Crisis
Although the economic crisis attacked the world in 2007 and 2008, Indonesia remained tough. The local financial circumstance was unbeatable due to the fact that the domestic consumption stayed stable. The up to date situation also indicates that this island nation is such an awesome site for the globe’s business people to build up a company. It has been shining since the foreign direct investment (FDI) constantly grows from year to year. The FDI into Indonesia has a significant increase which is about 12 percent out of 8.3 billion USD in 2017’s third quarter – the oil, gas, and bank investments are not included. The growth in the previous year was about 10.6 percent.
Industrial sectors highlighting this progress in regard to the foreign investment cover mining, electronics, metal, as well as machinery. The full amount of FDI in 2016 reaches 396.6 trillion IDR with an increasing number of 8.4 percent. Back in the second quarter of 2013, the progress of direct investment for foreigners was by 18.9 percent out of 6.54 billion USD whereas the domestic investment incredibly went up about 59.1 percent out of 2.04 billion USD. Arguably, the whole investment number for that year is 29.8 percent.
The Corruption and Bureaucracy Gradually Decreases
One of the clear reasons why to do business in Indonesia is the national finance transparency. It is definitely true that the corruption and bureaucracy issues have been affecting this nation for many decades. Yet, the government commitment to tackling down the social diseases in recent years seems blossomed. With the help of KPK (Corruption Eradication Commission), the number of public offense can be effectively minimized. The institution is officially appointed by Indonesia’s government to fight corruption.
A couple of stems to track corruption have been taken for the country’s economy betterment such as ratifying the UNCAC or United Nations Convention against Corruption and being active in the national strategy in preventing and eradicating corruption 2012-2025. In compliance with the corruption perceptions index, the archipelago is one of few countries in the world which has a stable improvement. A statistic graph released by Transparency International signifies that there is a marked increase from 2013 to 2016. The consecutive transparency index numbers are 32, 34, 36, and 37.
Being an Urban Nation
Owing to the fast development throughout the cities, the people inhabiting the rural areas massively enter the metropolis with numerous reasons for life betterment. This phenomenon commonly known as urbanization is likely unstoppable recently. It’s no wonder; Indonesia inevitably becomes an urban nation. What does it imply? The indication points out that more people now tend to be part of consumer society in need of products and services once occupying the modern places. It’s such a wider opportunity for foreigners to allow their PT PMA to be more expansive and well-developed.
According to indonesia.unfpa.org, there is an increase of urban population between 2015 and 2013 from 136.2 million to 118.8 million. The urbanization is predicted to rise up in the following years. In 2020, 153.7 millions of people will occupy the big cities such as Jakarta, Surabaya, and Bandung. The number will exceed 203.6 million in 2035. UNFPA also states that each province across the country will own 50 percent of urbanization rates or even more.
Many Cool Spots to Enjoy Vacation
Living in Indonesia is not just about focusing on business or fixing the marketing target. When the holiday comes, be sure to schedule a vacation so that you can beat your fatigue. There are a large number of options when it comes to picking out a cool spot to unwind. Are you a beach enthusiast? Don’t miss out Bali and Lombok. These regions literally are famous for their golden sand beaches and crystal clear water. If you love historical spots, hitting Borobudur and Prambanan temples is absolutely recommended. For the ultimate escape, you need to get lost in Raja Ampat.
In conclusion, setting up a company in Indonesia gives you more opportunities to stay productive. Apart from the reasons why to do business in Indonesia previously described, you need to know that the country will absolutely offer its best to make your company widely recognized overseas.
If you have any questions about PT PMA and its requirements, or want to book a consultation for assistance, you can arrange a meeting with SMART Legal Consulting at: