Global Business GuideIndonesia

Indonesia continues to implement measures to open up the archipelago to foreign investment, including removing sectors from its negative investment list. Consequently, foreign direct investment (FDI) flows continue to grow; FDI into Indonesia increased by 19.2 per cent year-on-year to IDR365.9 trillion in 2015.

Indonesia ranked 109^th in the World Bank's 2016 Doing Business rankings, rising from 120^th in the year prior. The rankings recognised a number of reforms enacted to make doing business easier. Indonesia made starting a business in Jakarta easier by reducing the time needed to register with the Ministry of Manpower. It also improved access to credit by enabling searches of the collateral registry by the debtor’s name. Paying taxes became easier and less costly through the introduction of an online system for paying social security contributions and a reduction of both the rate paid by employers and the ceiling for the contributions.

Key facts about starting a business in Indonesia:

• It takes 13 procedures and approximately 46.5 days to start a new business in Indonesia; this process is detailed in the Doing Business in chapter
• Obtaining a limited stay visa to be able to work in Indonesia takes around one month; employment regulations are discussed in detail in the Labour chapter
• Requesting and obtaining a building construction permit takes approximately 42 days and costs IDR68,281,500
• All Indonesian incorporated entities must prepare statutory financial statements in accordance with the Indonesian Accounting Standards (SAK); further details can be found in the Audit chapter
• Companies that wish to list securities on the IDX must, amongst other conditions, have engaged in their core business for at least 36 consecutive months at the date of application; this is discussed further in the Finance chapter

Indonesia's attractiveness as an investment location can be attributed to a number of factors, including its abundant natural resources, young workforce and large domestic market. Nevertheless, in order to make an informed decision, it is critical to understand the nuances of any local regime. The manner in which people conduct business in Indonesia may differ from the home countries of investors. Furthermore, variations on these distinctions may exist depending on the region and the industry in which a company operates.

Indonesia's official language is Indonesian or 'Bahasa Indonesian' which is a standardised dialect of the Malay language. Due to the size and structure of the country, most of the population will speak regional dialects. However, Bahasa Indonesian is the lingua franca of business.

Business in Indonesia is formal and companies tend to be hierarchical. Business attire is conservative. A handshake is the typical business greeting and business cards will usually be presented after initial introductions. Gifts are generally not exchanged as part of business interactions.

Those looking to establish a business in Indonesia may look across Southeast Asia for alternative options. However, Indonesia can be differentiated on the following factors:

• Indonesia is the largest economy in Southeast Asia and is projected to be the fifth largest economy in the world by 2030
• Indonesia has abundant natural resources, making it the world's: largest producer and exporter of crude palm oil, second largest exporter of coal and second largest producer of cocoa and tin
• The Indonesian government is considering cutting its corporate tax rate to as low as 17.5 per cent; this is further detailed in the Tax chapter
• USD180 billion will be invested in infrastructure by the government using Public Private Partnerships by 2025; further details can be found in the Infrastructure chapter
• The government offers incentives for certain pioneer industries for business with investment plans of at least IDR1 trillion; discussed further in the Trade chapter

While there are significant opportunities for investment in Indonesia, a number of challenges remain. The legal and regulatory system is often uncertain and changes can be enacted quickly. Complex bureaucracy means that the country's 'Ease of Doing Business' ranking remains low and businesses will face difficulties entering the market.

This guide has been developed to provide businesses with an overview of Indonesia, its legal regime, start-up and market entry considerations, tax and customs requirements and a general summary of the factors that may affect the decision to do business in Indonesia. However, the information contained in this document is generic in nature and you should not act or rely on it without obtaining specific professional advice.

Please note that the Global Business Guides may only be available in English.

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