Current business situation
Indonesia is the world’s fastest growing consumer market. GDP reached USD 1
trillion in 2017 and is growing steadily at around 5% annually.
Per capita GDP has reached USD 4,000, resulting in rapid changes in
consumer spending patterns, savings behaviour and capital formation.
Private consumption makes up 57% of GDP. This is fuelled by a
rapidly expanding middle class aspiring to a modern, international standard
of living. Consumers will spend an additional USD 1 trillion a year by
2030. With half of Indonesia’s population of 262 million younger than 30,
there is growing demand for consumer goods, targeted education and
training, and innovative knowledge-based services and technology.
Indonesia’s significant growth in internet access and rapid uptake in
smartphone ownership is enabling government, business and consumers to take
advantage of new digital services.
Australia has a strong position as an agribusiness supplier to Indonesia
and has leading market positions in the provision of grains and meat.
Australia’s capabilities in the development of infrastructure and resources
are highly relevant to the growth challenges facing Indonesia.
Indonesia consists of 300 ethnic groups, dominated by two major ethnic
groups, the Javanese, 41% and Sundanese, 15% of the total
population across the archipelago.
A handshake is the standard form of greeting for both men and women. It is
common to shake hands with everyone present upon arrival and departure from
the meeting. Standard polite greeting is ‘Bapak’ (Sir) for men and ‘Ibu’
(Madam) for women, to be spoken before their first name. In some
circumstances, women may prefer to press their hands together when greeting
Always have plenty of business cards and treat other peoples’ cards with
respect when they are handed to you. Never give or offer your business card
(or any items) with your left hand. When formally addressing letters to
Indonesians, all names should be written in full.
Email is not a common means of communication, and emails often go
unanswered. This does not necessarily mean there is a lack of interest.
Whatsapp, and other online messaging systems (Line, Facebook messenger etc) are more commonly used, and are the preferred means of communication
for businesses and government officials. It is worth checking with your
Indonesian counterpart which method of communication they prefer.
Invitations to business functions often state lounge suit/batik.
Long-sleeved batik shirts are regarded as formal wear, (i.e. equivalent to
a business suit) and are frequently worn by both Indonesians and foreign
business people in Jakarta. Trousers, shirts and ties are common business
attire for men and women's business attire is typically a two piece suit
with a blazer, or a modest dress with sleeves.
Meetings may not necessarily start on time, in part reflecting severe
traffic congestion, especially in Jakarta. Always allow plenty of travel
time for meetings. Timing when setting up appointments is crucial, as it is
common to offer lunch or dinner when appointments are scheduled from
11.30am to 2.00pm or from 6.30pm to 8.30pm. Setting appointments on Friday
afternoons should be avoided as it is the prayer day and it is common for
businesses to have longer lunch breaks.
Around 88% of the total population of Indonesia are Muslim, hence
alcohol and pork is not widely consumed. However, Indonesians generally
tolerate alcohol consumption, but it is always best to ask first before
ordering drinks or food whether the appointment venue serves alcohol or
pork to show respect for their beliefs.
Importance should be placed on building relationships. Decision making
frequently occurs through consensus, and attempting to force a decision
will often have an adverse effect on negotiations. Business is considered
lost when an Indonesian begins to avoid you or act coldly towards you. In
larger or more traditional businesses, the corporate culture is top-down,
with ultimate decision-making often being the preserve of a small group of
leaders. However smaller or more modern companies often have flatter
structures more akin to Australian businesses. It is important to make
assessments on these factors when meeting a new client to ensure you
maximize the effectiveness of your engagements.
First-time meetings rarely generate any real results, unless the Indonesian
company makes the initial approach. It is more likely that repeated
meetings (formal and informal) over a period of time will be required
before any real business can be discussed. This period of time can range
between several months to several years. Meeting face-to-face is most
effective and highly appreciated, however to be polite, Indonesians will
often tell you what they think you want to hear.
Setting up in Market
Being referred by a local company is a strong entry point for businesses
looking to expand into Indonesia, and peer reference is a valued
endorsement on the quality of work.
Australian companies interested in establishing a legal entity in Indonesia
should first refer to Presidential Regulation Number 44 of 2016 (more
commonly known as ‘Negative Investment List’ ) to learn about businesses
that are closed or conditionally open for investment.
To assist potential foreign investors in setting up their office in
Indonesia, the government has assigned BKPM (Indonesia Investment
Coordinating Board) as the one-stop service provider for business license
processing, through its online licensing system the Online Single
Submission System (OSS).
Banking and finance
Indonesia’s central bank is Bank Indonesia. It implements a dual monetary
system for sharia and commercial banking and finance services. For more
information, visit Islamic Banking in Indonesia in Brief.
Under Indonesian Financial Authority (OJK) and Bank Indonesia monitoring,
the government encourages foreign banks operating in Indonesia to direct at
least 20% of their credit portfolio to the retail and small and
medium-sized enterprises (SMEs) sectors by 2018. The system acknowledges
BASEL III requirements and Foreign Account Tax Compliance Act (FATCA)
compliance standard for business taxation. Current banks in Indonesia
include four state owned, 116 private national banks, and 24 foreign owned
(Source: Business Monitor International, Indonesia Commercial Banking
Report, Q4 2014).
Major banking and financial providers offer accessible internet and mobile
banking and provide standard banking and finance services such as money
transfer, deposit and withdrawal, savings accounts and foreign exchange.
Links and resources
Government, business and trade
Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.