Current business situation
Indonesia is the largest of the ASEAN economies with an impressive political and economic track record over the past 10 years. Its economy is expected to grow five to six per cent in 2017 and 2018 (International Monetary Fund, World Economic Outlook Database, October 2016).
Consumption expenditure is the main driver of economic growth in Indonesia. Consumer confidence remains strong, driving solid sales performances for FMCG and food.
The strength of consumer confidence has positive implications in demand for services, including education, healthcare, financial and business services, recreation and leisure.
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 per cent and Sundanese, 15 per cent 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.
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.
Meetings may not necessarily start on time, in part reflecting severe traffic congestion, especially in Jakarta. Invitations to business functions often state lounge suit/batik, long-sleeved batik shirts are regarded as formal wear, (i.e. equivalent to a dark business suit) and are frequently worn by both Indonesians and foreign businessmen 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 dress with sleeves.
Timing preferences 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. Always allow plenty of travel time for meetings. According to the Pew Research Center’s Forum on Religion and Public Life, up to 88 per cent 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.
Setting appointments on Friday afternoon should be avoided as it is the prayer day and it is common for businesses to have longer lunch breaks. Emphasises is placed on building relationships and the corporate culture is top-down driven.
First-time meetings rarely produce any real result, 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.
Decision making frequently occurs through a 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 (Source: RSM, Doing Business in Indonesia 2014 and KPMG, Investing in Indonesia 2013).
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.
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 per cent 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
Ernst & Young Banking survey
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.