Indonesia has the largest economy in Southeast Asia and a population of over 248 million people. It has a diverse culture with over 300 ethnic groups and 700 languages, though Bahasa Indonesia is the official language. The economy has grown steadily in recent years with GDP growth around 5-6% annually. Key opportunities for foreign investment and trade include infrastructure, consumer goods, agriculture, automotive, and ICT, as Indonesia's large and growing middle class increases domestic consumption. While corruption and strained political relations sometimes challenge foreign businesses, Indonesia overall remains an attractive emerging market.

1. DOING BUSINESSIN INDONESIA:
REFLECTIONSOF MY EXPERIENCES
DrJaneMenzies
jane.menzies@deakin.edu.au
DepartmentofManagement,DeakinBusiness School
DeakinUniversity, Australia
http://www.linkedin.com/profile/viewid=9062770&trk=nav_responsive_tab_profile

2. Map 1: Indonesia Archipelago (Source: Nations Online -
http://www.nationsonline.org/maps/indonesia_map_855.jpg)

3. CONTEXT OF INDONESIA
• Indonesia has the largest economy in Southeast Asia
• Is a World Trade Organisation (WTO) and ASEAN
member
• Key exports are largely textiles and those from the natural-
resources sector, including palm oil, seafood, rubber, oil,
gas and minerals.
• Population of 248 million people (DFAT, 2015)
• Standard & Poor’s Credit ratings: BB+ STABLE
• Moody’s Baa3 - STABLE
• Fitch Rating BBB - STABLE
• Overall Credit rating 46 STABLE

4. INDONESIAN ECONOMY: GDP

5. INDONESIAN ECONOMY: GROWTH RATE
• Consumption expenditure is major contributor to growth
• Consumer confidence remains strong
• Solid performance in motor cars, electronic goods, FMCG and food

6. INDONESIAN ECONOMY: GDP PER CAPITA

7. INDONESIAN ECONOMY: BALANCE OF
TRADE

8. INDONESIAN ECONOMY:
UNEMPLOYMENT

9. INDONESIAN ECONOMY: CPI

10. INDONESIAN ECONOMY: GOVERNMENT
DEBT

11. INDONESIAN POLITICS & CULTURE
• Republic of Indonesia came into being in 1945
• Indonesian elections in 2014
• President Joko Widodo (won 53% of the votes)
• PDI-I – 19%, Golkar Party 45%
• One of the largest democracies in the world
• People’s representative council (DPR) – 560 members
• Regional representative council (DPD) - 132 members
• Home to the largest Muslim population in the world
• 300 ethnic groups – 700 languages
• Bahasa Indonesia is the official language
• Strong ties to the Dutch

12. INDONESIAN LEGAL SYSTEM
• Uses a bureaucratic legal system
• Based on civil law
• Foreigners can’t own land
• Foreigners can own land using local nationals
• Corporate tax rate is 30% but 25% in other areas
• Special economic zones
(KPMG, 2013)

13. TYPES OF COMPANY
STRUCTURES IN INDONESIA
KPMG (2013) states:
• Limited liability company (PMA);
• Representative Office;
• Direct shareholding in a publicly listed company; or
• Direct participation by a foreign company in certain
sectors (i.e. oil and gas).
• Foreign investors can hold up to 100% ownership, or
between 45% to 95% ownership in certain industries.

14. INDONESIA – AUSTRALIA RELATIONS
• Australia’s trade with Indonesia worth $14.9 billion in 2013 - 12th-largest
trade partner.
• Trade in goods was valued at $11.2 billion in 2013, and included:
– wheat ($1.2 billion in 2013)
– sugar, molasses and honey ($363 million)
– live animals (excluding seafood) ($302 million)
–aluminium ($284 million)
– crude petroleum ($207 million)
– cotton ($195 million)
• Trade in services was $3.7 billion in 2013. Education-related travel and
personal travel.
• Australia’s total investment in Indonesia was valued at $10.9 billion and
• Indonesian investment in Australia was around $959 million in 2013 (DFAT,
2015).

15. REFLECTIONS OF INDONESIA
• Setup a joint program with an Indonesian University
• Interesting but a diverse country
• Indonesians are very friendly, and welcoming
• Hospitality is a used as a way to get to know each other
• Lots of different Indonesian cuisine to reflect diversity in
Indonesian culture
• Indonesians speak English very well
• Time
• Hard working
• Save face through indirect methods of communication
• Great importance on respect

16. REFLECTIONS OF INDONESIA
• Cultural elements are important
–Batik
–Indonesian food such as Nasi Goreng & Chicken Skewers
–Understanding of Cultural/Religious issues
• Indonesians are more conservative than Australians:
–Dress
–Drinking of alcohol
• Religion
• Need to take into account for the need to pray

17. REFLECTIONS OF INDONESIA
• Indonesia isn’t as developed as China
• Isn’t as expensive
• Indonesian still perceive westerner’s as something
amazing
• Infrastructure is still an issue (can spend hours in the back
of the car in Jakarta)
• Social media is very popular
• Strained political relationships between Australia &
Indonesia:
–Bali Bombings 2002
–Government Spy Scandal at the end of 2013
–Recent executions of Chan & Sukumaran

18. WHAT ARE THE OPPORTUNITIES IN
INDONESIA
• Aged care to Indonesia – by 2030 – 36 million will be
over the age of 60 – 80 million in 2050 (DFAT, 2015). Not
traditional for Indonesians to be cared for by aged care,
but it is in Australia. May solve a few problems.
• Agribusiness and food – Needs to import grains (wheat),
soya beans and beef. Desire for western consumption of
food – therefore vegetables, fruit, sugar, beef, dairy
products, wheat, bread, poultry and seafood.
• Automotive – Growing at 17.8% or 1.3 million vehicles,
ASEANs largest automotive market. Middle class set to
grow to 135 million by 2020. Purchasing power grows to
will car purchase. 25% of the population own bikes, 3.5%
own cars. Demand for parts and aftermarket items.

19. WHAT ARE THE OPPORTUNITIES IN
INDONESIA
Consumer goods – 90 million will be consumer class by 2030,
with a net income of $3600 US. 240 shopping malls (76 in
Jakarta), therefore expected to increase in regional areas.
Prospective retailers establishing in Indonesia or already existing
expanding.
Infrastructure - Airport developments, eastern Indonesian region
which is largely unexplored, need for local infrastructure providers
– architects, consultants, engineering service firms.
Information Communication Technology – Largest mobile
phone network in Asia – 390 million mobile users. 139 million
internet users. High use of social media. E-commerce is taking
off. Cloud computing increases. Needs to develop its broadband
infrastructure.

20. CONCLUSIONS
–Economic prospects remain strong with plans in place to further
stimulate the economy, boost infrastructure and increase wealth.
–Emerging middle class
–Strong financial system.
–It faces corruption issues that need to be dealt with
–Opportunities in many different sectors