Due to the lack of sufficient jobs in Indonesia, the government has continued to promote entrepreneurship. This is because of the potential job creation and was seen as a way of poverty reduction in the Republic. While the focus is now heavily targeted on the training of start-ups and micro businesses for the underprivileged, the welcoming of new business is also a major priority for the Indonesian Government.
Amongst the potential areas of business are the disruptive SaaS, IoT, AI, or even robotics, but they are just not more relevant for our discussion on promising business sectors in Indonesia.
Being ranked as the world’s fourth most populated country, Indonesia takes pride in its more than 270 million population which offers both great potential to foreign businesses, big and small. Indonesia is living a dynamic life in many aspects. Trends are frequently changing and the population – with the increased number of skilled millennials with purchasing power – is evidence that people in Indonesia are great consumers of services and products.
Investing in Indonesia will remain a promising yet challenging venture for the investors and it will result in more work and research to do on every forefront. Simplified rules and regulations, fast track license and permit acquisition and a variety of attractive incentive are some of the success factors for the country to attract more potential investors to finance business in the country.
Here we discuss some of the promising industries of business worth observing and exploring in Indonesia.
Mining and Energy Industry
Mining and energy industry is two sectors which are the major contributor to Indonesia’s annual GDP growth.
Believed as a powerhouse in the area of mineral production, it’s substantial mineral and coal reserves remain an attractive assets to investors to explore.
In the promise of creating more viable investment opportunities with the available natural resources, the government of Indonesia has been deregulating and simplifying licenses, permits including providing specific tax incentives to all foreign investors.
Indonesian coal producers have been enjoying the global trend of increasing coal prices over the years and coal price is forecasted to remain stable throughout the year.
As for the energy or power sector, Indonesia’s 2019 – 2028 Electricity Procurement Plan (RUPTL) was issued by the Ministry of Energy and Mineral Resources on February 20, 2019, and sets out Indonesia’s projections relating to electricity demand growth, energy mix, electricity infrastructure and available investment sectors for Independent Power Producers (IPPs).
Until the year 2028, Perusahaan Listrik Negara (PLN), a state-owned Electricity Company, together with private investors are expected to build a total of 77.8 GW of power generations projected electricity demand growth of 6.42%, with an additional 56.6 GW of power projects planned to be built by 2028, a slight increase to the previous RUPTL projection of 67,000 kilometers of transmission network; 464 kilometers of distribution networks and a total of 222,000 MVA of substation transformers across the Indonesian archipelago.
The industrial sector is currently contributing highly towards Indonesia’s annual GDP growth.The sub-sector of industrial namely manufacturing, is one major pillar of the nation’s economy since the 1970s
Although the manufacturing sub-sector has lost its momentum after the Asian Economy Crisis of the 1990s, it still constitutes the most popular sub-sector of Indonesia in terms of foreign direct investment (FDI).
The infrastructure in Indonesia is still not measuring up to an ideal modern life expectation. That being said, this condition has proved to be great for potential investors to come in and develop and invest in this sector.
Apart from the private sector’s sources to invest in infrastructures, the Indonesian government is said to also have planned out to spend about IDR 404 trillion on infrastructure projects.
From houses, placements, shop lots, tolls, highways, roads, airports, bridges, and power plants (as mentioned above) are among the top priority projects which foreign investors can look into of the government which some have been commissioned and used with the remaining ones being planned, designed and constructed.
Infrastructure development – as long as the fund is available – is relatively easy to do in Indonesia since the country has a great number of lands mass untouched, especially in places like Kalimantan and Sulawesi.
An amazing infrastructure in any country is of paramount importance to their economic development acceleration as well as attracting investors.
Consulting and Advisory
Management consulting is an industry that is worth in the Billions of dollars. Due to the very pressing requirements for IPO, good corporate governance, compliance, investors and customer demands, many established local companies in Indonesia have recently hired consultants to help them with meeting the requirements, and like most countries, they look into foreign investors for assistance. Some use consultants to help them to the task of improving business process and efficiency, training of their staffs and etc in order for them to be able to operate cost-effectively and efficiently. This will eventually give them the edge over their competitors.
As of today, over 1million consulting firms provide services across virtually all aspects of business globally, and in Indonesia there are at least 300 plus consulting companies plying their trade and sharing their knowledge in the relevant industries.
Consultants have inextricably and inseparably been linked to the success of many organisations globally. They help these organisations to think out of the box, identify the unidentifiable and make the impossible possible.
Leisure and Tourism
Indonesia, with their thousands of untouched islands, has became a place to go to for many foreigners. Be is couples, newlyweds, friends or family, Indonesia has a variety of islands available for the different types of visitors.
Hotels and amusement parks has become a major component of this industry with their exotic cultures and beautiful landscape.
Major cities in Indonesia have been promising places for foreign investors to open international hotel chains. It is a big opportunity for investors to do business in this sector.
Although most of the international tourists arrive in Indonesia through Jakarta, Bali, Lombok and Denpasar, investors should also consider exploring the other parts of Indonesia as their future investment destinations.
This will also correlate to the sector of infrastructure, as the construction of infrastructure is expected to enable the most beautiful places throughout the country to be easier to access and more enjoyable to visit and even to live in.
Infrastructures like hotels, hospitals, roads to reach a number of destinations, electricity, clean water, supermarkets/shops, cafes, ports and airports, and bridges should become readily available in order to attract more tourist into the areas.
Shipping, Ports and Maritime Industry
Maritime resources have been one of Indonesia’s most attractive development potentials and not only does it have great oceans, but also its surrounding islands have an abundance of natural resources.
Indonesia is a country with a great maritime potential as it has a group of islands with a 95,000 km coastline thus being a great potential for marine industry to grow.
Sea transports are used to transport coal long distance are the single cheapest and most effective mode compared to the road in Indonesia. Small and medium-sized barges with tugboats travel along the inland river system or the Intracoastal waterways to transport coal to nearby seaports, and it doesn’t only make the transport cost efficient, but it also promotes job opportunity to the locals.
The Indonesian government supports investors who want to invest in the large scale, capital-intensive projects such as shipbuilding, logistics, ocean shipping, ports and terminals throughout the country.
For foreign investors to invest in any of sectors mentioned above, the government of Indonesia will give more support and priority to those who have one or more of the following business characteristics:
- Less dependence on imported products and commodities;
- Labor-intensive industries
- Capital-intensive industries which apply transferable technology
Finally, for investors to succeed in any of the above mentioned 7 sectors and win the competition it is worth noting that they shall operate efficiently to always stay lean and then sell at more competitive prices yet with uncompromising better quality products and services.
Paul Hype Page & Co – OSS service provider and Asean Chartered Accountant.
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