Doing Business in Indonesia
Some countries in Southeast Asia have been performing healthy fundamentals. They are Indonesia, Singapore, and Thailand. As one of the region’s best performers, Indonesia has reported low debt levels, positive credit impulse, and strong domestic consumption.
Five Prospective Sectors in Indonesia
Household consumption, which becomes one of the major drivers of growth in Indonesia, is strengthening, supported by people’s higher purchasing power, stronger Rupiah, and the low inflation. However, to maintain strong household consumption for supporting growth, Indonesia still looks for more investment over the medium term.
Therefore, it is potential to invest and conduct business here, in Indonesia. The Indonesia Investment Coordinating Board (BKPM) has identified five potential business sectors for investors. They are agriculture, infrastructure, industry, tourism, and maritime.
The agriculture sector covers corn plantation and cattle. Investment and business opportunities in dairy farms are feasible for investors, through fattening cattle and cattle breeding. In addition, corn plantation is also promising.
Corn has become one of the most interesting commodities in agribusinesses in Indonesia, as it is the main food corporations after rice and soybeans. For Indonesia’s economy, corn is strategic in agricultural development.
In the infrastructure sector, Indonesia welcome investors who wish to conduct businesses in dozens of projects. They are 35 giga Watts (gW) power generation, 24 seaports, and 12 public-private partnership (PPP) infrastructure projects.
Among other sectors, the industry sector offers so many spaces for investors. Businesspeople can be attracted by low labor cost, lower prices of industrial land, and availability of raw materials.
For example, the average wage of a textile worker in Indonesia was US$ 140 per month, while it hit US$ 247 per month in China. Some potential industries are textile, food and beverages, furniture, automotive, wood products, pulp and paper, smelter, and sugar.
What the Indonesian government offers in the tourism sectors also potential for investors in doing business. First, business people can enjoy tax allowance for development of tourism zone with no condition. Second, there is an exemption of import duty on tourism and culture, as well as machinery, transportation or communications for public transport services, public health services, port, mining, construction, and telecommunications industry. Third, there is also value added tax facility.
Meanwhile, in the fishing industry as a part of the maritime industry, there is a potential investment in cold storage, special logistics and production processing. Fisheries industry has reported a significant growth for the last five year. Indonesian domestic demand for fishery products is also believed to increase. It is because Indonesian per capita consumption is still relatively low.
Invest in Indonesia
Indonesia is the fourth biggest population in the world. More than 53 percent of people in Indonesia live in urban areas. They experience a modern lifestyle and have higher purchasing power. Realizing this condition, the Indonesian government has been preparing a number of economic policy packages, to make the domestic business prospective.
The government has prepared to launch the 15th economic policy package on logistics. It follows the 14th package release on e-commerce last November. BKPM is optimistic about Indonesia’s prospect in grabbing foreign direct investment this year, with a double-digit growth target. The investment realization as recorded in September 2016 compared to the same period in the previous year, is shown in the table below.
|Foreign investment||Rp 295 trillion||10.6 percent|
|Domestic investment||Rp 158 trillion||18.8 percent|
|Realized investment||Rp 453 trillion||13.4 percent|
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