Doing business

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.

Business culture

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 a male.

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.