Following our part one of Indonesia Business Guide, we explained and guided you on the guidelines to adhere to before Incorporating an Indonesia Company However, here we discuss further on the order to carry out business activities in Indonesia.
Economic Overview and the Benefit of Investing in Indonesian
Domestic consumption makes up 55.8% of Indonesia’s GDP. That is an important figure as it has helped Indonesia from the global economic crisis.
Indonesia is also the largest economy in Southeast Asia, ranking in at number 16th globally. Average annual economic growth of 5.5% over the last six years has reduced unemployment (from 7.1% in 2010 to 5.5% in 2016) and the poverty rate (from 13.3% in 2010 to 10.9% in 2016).
Before we continue, it is important to understand that Indonesia has become the worlds,
- Largest producer and exporter of crude palm oil
- Second largest producer of cocoa and tin
- Second largest exporter of coal
- 4th largest exporter of natural gas
Apart from the points mentioned above, this Republic also has ample of natural resources in the form of nickel, gold, coffee, and etc. Something that could guide you when you are thinking to incorporating a company.
The Indonesian Political Climate
Being the world’s third largest democracy, and largest economy in the Southeast Asia region, Indonesia is also a proud member the G20.
From how it used to be, it has transformed itself to become a role model for a successful political transition. This is because now, Indonesia is stable politically and has a Presidential system of democracy.
In President Joko Widodo, Indonesia has the first elect to come from outside the political and military elite. Unlike a constitutional monarch, bylaws are passed by Parliament or by Presidential decree. However, a Presidential decree needs to be confirmed by Parliament for it to take effect.
Indonesian Market Overview
Indonesia’s economy has high rates of informality particularly in the labour market. The International Labour Organization (ILO) has estimation that 60% of non-agricultural jobs in Indonesia are informal.
Stringent hiring and firing rules at the labour market regulation has pushed many Indonesian firms to run unregistered business to avoid compliance with the Indonesian labour law.
However, that is forecasted to changed as the new economic reform programme has been giving positive results.
Key reforms are in place to improve the business environment, access to electricity, registering property, paying taxes, acquiring finance, and establishing cross-border trade and contracts.
Indonesia is a large and geographically diverse country that relies heavily on the export of natural resources therefore new or existing companies should research the market and prospective partners thoroughly.
Top 10 industries importing into Indonesia
- Oil and Gas
- Iron and steel
- Electronic products
- Organic chemicals
- Iron or steel products
- Food waste and animal fodder.