Why Invest in Indonesia?

The country’s political stability and its much better local policies that continue to support foreign investment, the enormous potential of its natural and human resources, among others, have put Indonesia on the list of the top 5 Asian countries for investment destination.

The country has its own benefits as well as challenges when it comes to setting up or operating a business in its realms, but getting an in-depth look at its foreign investment climate it should shed some light for those who intend to expand their business and invest in this Southeast Asian economic giant. Indonesia is the largest economy in ASEAN nowadays and is predicted to become the world's fourth-largest economy by 2045.

Why invest in Indonesia?

Ranked as the world’s fourth most populated country, Indonesia takes pride in its more than 260 million population which offers both great potential and challenges to foreign investors, big and small. The country’s population growth is estimated to reach a record1.2% per year with the majority of its productive workforce are millennials who from time to time have an increasing purchasing power.

Indonesia’s economic growth is also continuously increasing, where in the second quarter of 2017 alone, the year-on-year FDI in has reached its all-time highest, from 0.9% in the first quarter to 10.6%, which translates into IDR 109.9 trillion (USD 8.2 billion).

The world’s growing interest in Indonesia can also be attributed to the government’s serious efforts to attract more foreign investors through its various deregulation, process streamlining, tax deduction and incentive-driven policies that all are aimed to simplify the country’s bureaucracy in many aspects especially in terms of investors' licenses and permits, tax reduction/incentives, land acquisition, import-export, and so forth. The government's commitment to support the corruption eradication throughout the country is believed to be another good reputation it has recently achieved for the country to look attractive to investors.

Indonesia is known for its relatively stable economic and political condition as shown by its steadily increasing GDP.

Indonesia’s economic growth potential and challenges

By 2030, more than 90 million of all Indonesian population is expected to join the consumer class society entering the labor markets in bigger cities that enable more and more businesses to hire workers with a competitive wage.

While more business classifications are being opened for FDI, infrastructures continue to emerge as one of the top priorities not only in Java Islands but in other Indonesian regions like Kalimantan and Sumatera, just to mention a few. More roads, harbors, airports, and other physical facilities and infrastructures needed to run businesses smoothly are being made more accessible in more regions in the country especially in Java Islands.

This creates more business potentials available not only in the main cities of Java and Sumatera but also in other islands of Kalimantan, Sulawesi, Bali, Maluku and Papua.

Indonesia’s Bureaucracy Improvement

Under the leadership of President Joko Widodo a.k.a. Presiden Jokowi, Indonesia has revised and simplified several regulations with a goal to attract more foreign investments into the country and since 2015 the Indonesian government has already released 10 economic policy packages to attain that goal.

The following summarizes the said relevant key regulation revision and simplification programs and policies as incorporated by the Indonesian government in its key economic policy packages in order to encourage more interests in investing in Indonesia:

Package 2

Significant foreign investments, defined by a minimum investment value of IDR 100 billion (US$8 million) or a commitment to employ at least 1,000 employees, will receive simplified investment permits in industrial areas. Basic permits can be secured within three hours already including a principal license, new board of director endorsement, change in notarial deed of company establishment, tax identification number (NPWP) and so forth.

Streamlining of company registration permits at the Ministry of Environment and Forestry from 14 permits to only six.

Tax allowance request registration process will not exceed 25 days.

Tax holiday request registration process will not exceed 45 days.

Package 3

Applications for Land Approval and Registration for Business now can be processed through Indonesia National Single Window Systems Portal (PTSP) at the Ministry of Agrarian Administration and Spatial Planning. Several basic permits can be consolidated for registration through the PTSP for fast processing. PTSP is managed by the BKPM (Indonesia Investment Coordinating Board).

The technical land approval process will not exceed three days.

Adjustment of electricity tariffs for industrial usage, especially for labor-intensive and highly competitive industries.

Package 7

Eight investment permits for labor-intensive industries can now be secured within three hours.

Extension of tax allowances for up to 10 years for investments in certain businesses or regions.

Package 9

Following the implementation of the Integrated Supply Chain Service System now companies can process both reporting and request for approval online through the Indonesia National Single Window Systems Portal (PTSP). This is to ensure the smooth, accurate and effective acquisition of the export and import documents.

Indonesia offers attractive foreign investment opportunities for the following business sectors:

• Manufacturing;
• Agriculture;
• Marine industries;
• Infrastructure;
• Tourism.

Toward foreign investors, Indonesia will give more support and priority to those who have one or more of the following business characteristics:

• Labor-intensive industries;
• Less dependence on imported products and commodities;
• Export-oriented;
• Capital-intensive industries which apply transferable technology.

Last but not least, the energy sector especially the renewable energy, mining and oil & gas, of course, must still stand out as they are always required by the above sectors for their machinery to run smoothly.

Thank you,

Herpiani Ng