Doing Business in Indonesia
Indonesia's 250 million citizens constitute a major market potential for many entrepreneurs. At some five per cent annually, the economic growth is significant. Meanwhile the Government makes large investments to upgrade infrastructure nationwide. And to unravel red tape to woo foreign investors.Even so, those investors require a long term commitment to set up shop in the archipelago.
Read more on this page about: Banks, Investment Climate, Quick (online) deals, Discipline, Take your time, Contracts, Maintenance, Be Seen, Procedures, Personal Relationships, The Unseen.
Banks
One of the most important documents to arrange is the visa. Details of the admission requirements are available through the Indonesian embassies and consulates.bca (Bank BCA, one of the most popular consumer banks)
bi.go.id (Bank Indonesia with an English section)
bni (Bank Negara Indonesia)
bri (Bank Rakyat Indonesia has branches even in the most remote villages)
cimb niaga (Bank CIMB Niaga)
danamon (Bank Danamon)
hsbc.co.id (HSBC's Indonesian branch)
imq21 (real time Indonesian stock quotes and currency exchange rates)
jsx.co.id (Jakarta Stock Exchange -largely in Bahasa Indonesia)
mandiri (Bank Mandiri is Indonesia's largest bank)
maybank (formerly Bank Internasional Indonesia -BII)
antheusd (organizers of business promotion events in East Java, such as Indonesian City Expo and Pameraya Surabaya)
BKPM (Indonesia Investment Coordinating Board)
central-java. (Central Java Investment Board)
CI Patents (Channel International Patent for help on patenting and other intellectual property rights issues in Indonesia)
CVMakmurLestari (Everything you need for organic agriculture -this site is in Indonesian only)
Indonesia Office Space Finder (search tool that helps businesses find available serviced offices, managed office space and business centre accommodation in Indonesia)
Indotaxcenter (one stop tax and customs information)
jogja-export. (Jogja-Export combines a number of producers of rattan, bamboo, wood, silver and batik paintings, handicrafts and furniture)
juniorchamberd (Junior Chamber Indonesia)
kadin.net.id (Chamber of Commerce, the site is mostly in Bahasa Indonesia, but has a buyer-seller section in English)
okusi.net (service agent to help you with visa applications, business services, investments, real estate and more)
tradeindonesia (extensive B2B forum, also in Dutch and German)
yellowpages (Indonesia Yellow Pages -English and Indonesian)
Investment Climate
Indonesia's economy demonstrates solid annual growth figures of over five percent, and improving credit ratings.
The country has extensive natural resources outside of Java, including crude oil, natural gas, tin, copper and gold. Indonesia is the world's second largest exporter of natural gas, though it has recently become a net importer of crude oil. Major agricultural products include rice, tea, coffee, spices and rubber.
Indonesia's major trading partners are Japan, the United States, Singapore, Malaysia and Australia.
The central bank of Indonesia is Bank Indonesia
Indonesia's government is making steady progress in attracting foreign investors through a conducive investment climate. There are numerous opportunities for large and small investments in any of the economic sectors.Indonesia's credit ratings enjoy positive reviews. The Rupiah remains a strong currency in the region. It won't be long for Indonesia to join the ranks of the BRIC countries.
The World Bank recently ranked Indonesia as the world's 10th largest economy.
Still, widespread corruption and notorious red tape remain major obstacles. Legal protection for (foreign) businesses is another issue. Further challenges are caused by inadequate infrastructure.
For all those reasons the successful entrepreneur should make several trips to Indonesia to test the waters, talk with those who have gone before and establish a good relationship with the local business community and relevant government institutions and trade organizations.
There are agencies, such as Okusi Associates and INA (Indonesia Netherlands Association) providing professional assistance.
Talk with your Embassy, don't hesitate to hire a good Indonesian lawyer from the start and familiarize yourself with the business culture.
A Quick (online) Deal
A strong word of advice for unsuspecting overseas customers: don't be tempted to make a seemingly quick and clean (online) deal if you have not met the seller personally and ensured that he/she and the company can be trusted.It's far better to invest time and money into flying to Indonesia to check out the man or the woman and his or her business.
Remember: too good to be true is not true.Discipline
Doing business in Indonesia and working together with Indonesians is not much different from doing so in other countries.Unfortunately, Indonesian business people still bear the stigma of being undisciplined. It is believed that they always show up late for appointments -or not at all, and like to change agreements after the signing of the contract.
Some of that may still be true. But things are changing fast in Indonesia. On time arrival for appointments, honoring commitments and living up to expectations are now accepted practices.
You may improve the situation further by taking into account a few more points:
Take your Time
Time is fast becoming a scarce commodity, also in modern Indonesia. Yet, you will need lots of time in getting to know your Indonesian business partners: building up a strong personal relationship with them is considered more important than the deal itself.The bottom line is: become friends. Doing business successfully without being friends is one of the most difficult feats to accomplish.
In general, it is not done to be blunt or too direct. In preparation of your first-time business meeting in Indonesia it is not a bad idea to invest time and money in a cross-cultural training. If it is a good training program you will be introduced to the notion of tidak enak (not nice, not tasty and also 'doesn't feel good'). Indonesians often feel that it doesn't feel good to say what is on their mind. It might offend the other party and make him or her lose face. The result is that you may think the deal is done, while in fact your partner is not in full agreement with all the terms. You will find out later when those parts of the agreement are ignored or cause problems.
From your part it is good to hold on to being as outspoken and direct as you would be in a business meeting at home.
There is no way to fly in, do a quick deal and fly home again before the weekend. The result will be very disappointing.
More on this topic in our free travel and culture ebook Enjoying Indonesia.
Contracts
Any contract is only a number of sheets of paper. Although officially signed on meterai (tax stamps), in essence it remains just that: paper.To ensure that the deal goes as agreed you need to rely not only on the personal relationship you have cultivated with your business partners, but also on frequent follow-ups.
Send email, make phone calls and, most important of all, make regular visits to your business partner. Better still, ensure that you have a local presence.
Maintenance
Attention to detail is all important: Indonesia has been cash strapped for so long that a work mentality has developed in which 'fixing things' has become trhe norm.The need for maintenance is almost always overlooked or ignored. Instead, one waits until something breaks down and only then tries to fix it. If there is no fix, the tool, machinery or object remains as it is: broken.
Budgeting and regular training for quality management and maintenance are essential. Ensure that the maintenance budget is actually used for that purpose and not siphoned off.
Be Seen
In 2010 newspapers reported about insulted dock workers in Batam going birzirk, destroying most of the facility and burning cars. All that because an expatriate supervisor had called them "stupid Indonesians". A local police chief, trying to calm them down was greeted with cheers for saying that all foreigners insulting Indonesians should leave the country.The incident is a stark reminder that expatriates may have problems adjusting to how things are done in Indonesia. As a logical response they may prefer to distance themselves from 'the crowd'. It's a course for disaster waiting to happen.
Many problems can be avoided with very little effort.
If you have your office or factory in Indonesia, make a point to be seen and be heard: get out of your office regularly and spend some time on the work floor. Look at the production process, ensure that quality is delivered.
Build a supportive relationship with as many of your workers as possible or ensure that they understand what you mean by quality. Chat and joke with them, be interested in them. Solve problems together with them.
What ever happens: don't ever raise your voice, but solve issues behind closed doors.
The secret is to become a real and caring bapak (father figure) or ibu (mother figure).
Procedures
Procedures in Indonesia are rather bureaucratic. They are also rather complicated and often difficult to comprehend.Many formalities require going to offices, standing in line, filling out forms, and paying fees (sometimes you will not get receipts).
Living in Indonesia, of course you will have staff to take care of all that, but still you may need more time to get things done than you had anticipated.
Fortunately there are several agents to help you obtain visas and all sorts of permits, even to set up your own company and in general to help you survive in Indonesia, including Okusi Associates.
Personal Relationships
As with business relations, building relations with officials pays: unfortunately Indonesia ranks very high on the international corruption perception list.Somehow you will have to develop ways to reduce the amount of corruption you are exposed to.
One way of doing that is to build relationships with officials you have to deal with regularly. Such as at the Immigration office, the Home Department, customs officials (if you are importing or exporting) and even the sub-district office in the city or town of residence.
Establishing and maintaining high business values and norms, and high standards of accountability and honesty are other ingredients of doing business successfully, but possibly slower than you wish.
The Unseen
There is a different reality in Indonesia few expatriates consider a serious issue. It is magic, sorcery, witchcraft; the unseen world of good and evil forces.Modern Indonesian businessmen alike may shrug it off as old fashioned rubbish. Yet, very little is needed to upset someone seriously enough and bring him or her to consult a master in witchcraft, with the objective of casting a curse on you or your family.
Take some time to ask people to tell something about guna-guna and ask if they have had any experience with it.
Although the tales may sound unrealistic, it is better to be safe than sorry.
The Unseen is a factor you might as well reckon with..