Doing Business in Indonesia | Global Law Group
[co-authors: Lia Alizia, Maria Sagrado, Vincent Lie, Frederick Simanuntak]*
1. What is the current business climate in your jurisdiction, including the main political, economic and / or legal activities on the horizon in your country that could have a significant impact on business?
Despite the current pandemic which has forced most sectors to work remotely, foreign investors are still investing in Indonesia, especially during this first quarter of 2021. In addition to acquisitions of e-commerce, fintech, mining, foundry, loans from Foreign institutions have also kept us quite busy this year.
The introduction of the Omnibus Law which amended 76 laws and is implemented under 49 government regulations and presidential decrees has affected Indonesia’s legal environment as they required existing clients to make certain changes to their documents. company and their business licenses. Opening up “previously restricted foreign investment” under the current list of positive investments has played a major role in attracting more investment to Indonesia. For example, some retail, distribution, logistics (freight forwarding) and some healthcare activities are now 100% open to foreign investment.
Foreign banks lending to Indonesian companies have also become active again. The company has helped banks provide financing for the development of mining and processing refineries in Indonesia. Some transactions have also led to restructuring.
2. In which countries do you see the most inward investment? What about outgoing?
Inward investment: China, Korea and Japan remain the main foreign investors in Indonesia. They can invest either directly or through their subsidiaries in different countries, such as Singapore. According to data provided by the Investment Coordination Board (BKPM) in the second quarter of 2021, most foreign investment in Indonesia came from Singapore, Hong Kong, China, Europe, South Korea, Japan and the United States.
Foreign investment: Indonesian investors are more likely to invest in Indonesia than in other countries. However, some large Indonesian companies also invest in other countries, such as Singapore, Philippines, Malaysia, China, etc.
3. In which sectors / industries do you see the most foreign investment opportunities?
In addition to mining and related activities, e-commerce, Software as Service (SaaS), retail, FinTech, and metals-related industries still appear to attract foreign investors.
4. What advantages and pitfalls should others know about doing business in your country?
Considering the size of the Indonesian population and its age range, e-commerce / SaaS and retail, for example, both have a huge potential market in Indonesia. The new regulations under the Omnibus Law are the government’s effort to make doing business in Indonesia easier. As part of these, the procedures for obtaining certain licenses and approvals have been simplified. However, some local / regional governments still impose different requirements for certain licenses, which creates some uncertainty.
5. What is a cultural fact or custom about your country that others should be aware of when doing business there?
There are many traditions and cultures in Indonesia in its vast archipelago. Indonesia has many different peoples and each of them has its own language and local customs. To know the Indonesian market, it is advisable to have a local partner to help you better understand the different cultures.
*Makarim & Taira S