Reasons Why Foreigners Should Set Up a Business in Indonesia

4 min read|Last Updated: January 17, 2023|
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Indonesia is a country which is full of opportunities for business activity. The country has been in a constant state of economic growth for many years, making it a suitable location for anyone to set up a business. This fact holds true for both locals and foreigners alike. People from all over the world have expressed interest in starting a business in Indonesia to take advantage of its increasing economic prosperity and benefit from access to its enormous market size.

When one takes a closer look at the business scene of the country, it can clearly be seen that there are many excellent reasons as to why a foreigner should be encouraged to set up a business in Indonesia.

1. Large Market Size

Indonesia is a nation which has a truly massive population. Almost 277 million people live in Indonesia today. This means that there are almost any people in Indonesia as there are in the rest of Southeast Asia combined. For this reason, those who choose to start a business in Indonesia can easily target their business activities at a particular cross-section of Indonesian society because the large market size means that there will always be a suitable target market for any business.

Business owners can also gain more benefits by conducting proper research to learn more about the specific demographical information regarding the population of Indonesia. This is because after gaining more information about the people who are likely to become customers of the business in question, the owner of the business can then use this information to inform and modify the approach to be taken by the business so as to better cater to both current and future customers alike.

2. Constant Economic Growth

Indonesia’s economy has registered positive growth rates in every quarter of the last two decades. On average, the country’s economy grows by approximately 5% every year. The highest economic growth rate ever recorded in Indonesia took place in the fourth quarter of 2004, when it grew by over 7%.

This frequent economic growth also means that businesses across the country have experienced an increase in the number of potential customers. This is because the country’s constant economic growth has caused more people than ever before to have larger amounts of disposable income. This in turn would make them more inclined to spend more money, and some of this money could easily be spent at a business owned by a foreigner.

3. Reasonable Corporate Tax Rates

Foreigners who have chosen to set up a business in Indonesia will benefit from the fact that by global standards, corporate tax rates in Indonesia are relatively reasonable. The current corporate tax rate in Indonesia is 22%. This figure represents a reduction from the previous rate of 28%.

When this rate is compared to those of other countries in the Asia-Pacific region, it can be seen that the corporate tax rate is fairly similar to or lower than those of such countries. Furthermore, the Indonesian government also offers specific tax exemptions and deductions which may apply in certain circumstances. Foreign business owners who are taxpayers in Indonesia may use such exemptions and deductions for their benefit and thus further reduce their overall corporate tax bill.

4. Openness to Foreigners

The business environment in Indonesia is one which generally welcomes the entry of foreign-owned businesses. This is because the government of Indonesia recognises the value that such businesses owned by foreigners can bring to the population and economy of Indonesia.

For this reason, the government of Indonesia openly encourages foreigners from all parts of the world to come to Indonesia to establish a business and thus contribute to the economic success of the country. As long as the business has been established in a lawful manner and does not infringe on the rights of anyone else, foreigners who start a business in Indonesia will not find it difficult to accustom themselves to the business atmosphere in Indonesia.

Conclusion

Any foreigner who is considering starting a business in another country ought to consider doing so in Indonesia. The country offers business owners, whether local or foreign, rare benefits which not many other countries in the world are able to provide. Indonesia’s immense population, burgeoning economy, and willingness to accept foreign input mark it out as a unique and viable location in which any enterprising and forward-thinking foreign business owner could establish a business and subsequently chart a path towards corporate success.

Why Foreigners Should Set Up a Business in Indonesia FAQs

Why does the Indonesian government deem the Negative Investment List to be necessary?2020-04-02T15:24:26+08:00

The Indonesian government introduced the Negative Investment List to prevent the Indonesian market from becoming oversaturated with foreign-owned companies. It also saw the Negative Investment List as a method through which entrepreneurial activity conducted by Indonesians could be encouraged.

Why was Indonesia’s corporate tax rate lowered in 2010?2020-04-02T15:23:48+08:00

The lowering of the corporate tax rate was a part of tax reforms carried out in 2009 and 2010. The lowering of the corporate tax rate came with an adjustment to the existing discounting scheme which had previously been based on revenue. This came a year after Indonesia had changed its corporate tax system from one which used progressive tax rates to one which used a flat tax rate.

What are some of the specific demographical divisions of Indonesia’s population?2020-04-02T15:22:40+08:00

According to the latest statistics, the majority of Indonesians live in the provinces of West Java, East Java, Central Java, North Sumatra, and Banten. The country’s population grows by around 1% every year. Approximately 55.3% of the population live in urban areas. Most of the population is aged between 25 and 54.

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