Download Doing business in Indonesia

Doing business
in Indonesia
Indonesia has laid out a welcome mat for
investors, encouraging the private sector to
ride a tidal wave of economic growth in the
country. The leading “breakout nation” still
has challenges to overcome, but the wheels
of prosperity have been set in motion and
the country may soon be considered among
the leading developing nations in the world.
tmf-group.com
Rise of a new BRIC
The Republic of Indonesia is south-east
Asia’s largest economy and the world’s
largest archipelago, comprised of around
17,000 islands spanning more than
5,000km along the Equator between
the Indian and Pacific Oceans.
Russia is cheap, but very reliant on oil. Brazil has a big consumer credit
It has been a hub of international trade since at least the 7th century,
attracting traders and foreign powers with its abundant natural resources.
Home to 243 million people, it is the world’s fourth-most populous
country behind China, India and the United States.
Having weathered the recent global financial crisis better than its fellow
G20 countries, Indonesia’s economy has been growing at about 6% per
annum in recent years thanks in large part to a combination of domestic
consumption, an emerging middle-class and productivity improvements
- the latter of which has accounted for more than 60% of the country’s
economic growth.
Ruchir Sharma, Head of Emerging Market Equities and Global Macro at
Morgan Stanley, has grouped Indonesia as a “breakout nation”, or a
country that consistently beats economic expectations by a wide margin.
But there is also a case for Indonesia to become an addition to the BRIC
designation, given that it is the largest country within south-east Asia,
has a huge population and immense natural resources.
“Over the first 10 years of this millennia the big
growth story has been China, but most people
are now convinced that Indonesia will be the
main growth story of the second decade,”
says Jochum Haakma, Global Director of Business Development
at TMF Group.
As the Investment Guarantee Fund paves a path towards economic
liberalization, Indonesia is laying out a well-worn welcome mat for
foreign investors, marching towards becoming one of the world’s most
important economies.
That boom is expected to continue - fuelled by its young population; the
strong consumption habits of its expanding consumer class; its rapid rate
of urbanization; and its natural resource wealth - allowing Indonesia to
pass countries including Germany and the United Kingdom to become
the world’s seventh-largest economy by 2030.
Home to 243 million people, it is
the world’s fourth-most populous
country behind China, India and
the United States.
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Why Indonesia?
Growth machine
Open for business
The largest economy in south-east Asia and one of the biggest emerging
markets in the world, Indonesia is frequently referred to as an economic
growth machine. Since 2004 the country has undergone a period of rapid
growth, topping 6% for the eighth quarter in a row between July and
September 2012.
Foreign investment is crucial to the long-term prospects of the country,
and both the public and private sectors are looking to encourage the
inflow of capital into the economy.
Indonesia enjoys a comfortable position in the global markets. Although
exports make up a significant chunk of the country’s economic output, it
is not wholly reliant on them. Any external shocks – the global financial
crisis; economic slowdown in China – can therefore be mitigated and the
country has continued to grow despite weak indicators elsewhere.
Private consumption and government spending have become an engine
for strong economic growth, increasing by 7.1% in 2012 compared to the
previous year. The second quarter of 2012 saw growth hit 6.4% year-onyear, up from 6.3% in the previous quarter. These figures were posted
despite exports slowing significantly, proving that the economy is not
wholly reliant on the global markets.
Studies by leading research organisations (Standard and Chartered,
PricewaterhouseCoopers) have placed Indonesia ahead of the developed
nations such as Germany and the UK in 2030 and beyond, based on vital
economic indicators such as the strength of its working population and
consumer base. This shows that not only will its growth be strong, it will
also be sustainable.
•
On the Indonesian Stock Exchange, there are 425 issuers with
a market capitalisation of $400 billion or 50.48% of GDP. As of November 2010, two-thirds of the market capitalisation was in the form of foreign funds.
• Between 1990 and 2010, Indonesian companies were involved in 3,757 mergers and acquisitions as either acquirer or target with a total known value of $137 billion.
MP3EI
A Masterplan to Accelerate and Expand Economic Development in
Indonesia (MP3EI) has been implemented by the government, which is
looking to achieve:
•
•
•
•
annual economic growth of 7-8% annually through the private sector
develop six economic corridors
strengthen national connectivity
accelerate national science and technology.
Risk
Risk is still a factor for companies investing in Indonesia and regulators
like to change rules and regulations - such as the 40% cap on single
shareholders for banks - at their whim. There is also a high degree of
corruption at all levels of society. However, many areas have become
less risky.
• Indonesia is relatively less risky than many emerging markets, with an average annual return of more than 25% and a beta coefficient of less than 0.8. (MSCI and Bloomberg, 2011).
• There is small market capitalization, leaving a lot of room to grow.
• It regained its investment grade rating from Fitch Ratings in late
2011 (BBB-), and from Moody’s Ratings in early 2012 (Ba1).
• Moody’s raised Indonesia’s foreign and local currency bond ratings
to Baa3 from Ba1 with a stable outlook.
“Investor appetite is the most important
ratings indicator for a country.”
- Jochum Haakma.
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Ways into Indonesia
Starting a business, such as a limited
liability company (or perseroan terbatas
in Bahasa Indonesia, the official
language) can be cumbersome, taking
around 45 days compared with 12 in
OECD countries. Paying taxes is also
more time-consuming, requiring 51
payments per year compared to the
OECD average of 13. Without the help of
local representatives this can significantly
intrude on a company’s ability to
conduct business in the country.
Representative office
A representative office is an extension of the parent entity and
cannot conduct local sales.
Limited Liability Company
A foreign direct investment company in Indonesia (known locally as
Penanaman Modal Asing or PMA), can take the form of a 100%
foreign-owned limited liability company or can be established as a
limited liability company through a joint venture with Indonesian
partners. Foreign equity participation limitations may apply,
depending on the intended principal activity.
BKPM
The Indonesian Investments Coordination Board (BKPM) regulates foreign
business activity in Indonesia as well as promoting the country through
embassies abroad. For foreign investors, this is an important source for
early information.
Negative investment list
There are certain areas of the economy cut off to foreign investment.
The Negative Investment List, or Daftar Negatif Investasi/DNI, outlines
in the sectors in question, which include:
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alcoholic beverage industry
fisheries
telecommunications towers
chemical materials
culture and tourism, such as casinos.
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TMF Group
One of the biggest barriers to
international investment is the burden
of accounting, legal, HR and payroll.
TMF Group has dedicated specialists
in place who can take care of the
administrative hassle of moving across
borders, leaving the company free
to focus on global ambitions.
PT TMF Indonesia
45th Floor
Menara BCA Grand Indonesia
Jl. M.H Thamrin No. 1
Jakarta 10310
Indonesia
Contact:
Mr. Vinod Kumar (President Director)
Telephone: +62 21 23585899
E-mail: [email protected]
TMF can assist by liaising with the Indonesian Investments Coordination
Board (BKPM), which is required for all foreign companies. We can obtain
approvals from BKPM and the Ministry of Law and Human Rights, obtain
the Domiciliation Statement, and apply for local tax ID and Business
Registration. We can get the company fully operational and will act as
a one-stop centre for all legal, accounting, tax and payroll compliance
requirements.
Indonesia is not alone in having complex local governance and
regulatory requirements, and having officers on hand in the country who
understand the local environment can lead to a seamless transition. TMF
Group combines extensive global resources with unrivalled knowledge
of local regulations, cultures and languages to help you achieve your
business goals.
All solutions are customised to fit your company’s needs, and are
coordinated through a single point of contact regardless of where you
are in the world; this helps to ensure excellent communication and
management. With a wide range of experience and a comprehensive
range of services, we can assist in seamless cross-border transitions.
TMF Group combines extensive global
resources with unrivalled knowledge of
local regulations, cultures and languages
to help you achieve your business goals.
tmf-group.com | Page 5 of 7
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html#axzz2Cf3HHlEm
http://www.huffingtonpost.com/daniel-wagner/investing-in-indonesiapromise_b_2061730.html
http://www.ft.com/cms/s/0/08d3b32a-df88-11e1-b81c-00144feab49a.
html
www.worldbank.org/en/country/indonesia
http://www.globalwaterintel.com/archive/12/8/market-profile/
indonesias-innovation-infrastructure.html
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http://internationalinvest.about.com/od/globalmarkets101/a/How-ToInvest-In-Indonesia.htm
tmf-group.com | Page 6 of 7
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