Indonesia may not be as big as China in terms of scale and population, but it pretty much is in every other sense of the word, thanks to its limitless opportunities for businesses – large and small alike.
Here in the first ‘episode’ of the Southeast Asia analyzing series, we take a look at Indonesia and why you should consider this vibrant market for e-Commerce exports and sourcing products.
Some notable opportunities for businesses in Indonesia
Airports sector in Indonesia
Indonesia plans to build 15 new airports by 2019, 9 new air cargo facilities, redevelop 100 existing airports, and upgrade 26. A fourth terminal at Jakarta’s Soekarno-Hatta International Airport is also planned and expected to be operational by 2021.
There are opportunities for companies around the SEA region in:
- Modernising equipment (navigation surveillance, facilities for communication, etc.)
- Automating and upgrading airport systems
- Maintaining devices and upgrading systems
- Training of human resources
Education sector in Indonesia
With approximately 60 million students and almost 4 million teachers in 340,000 educational institutions, Indonesia is the third largest education system in the Asian region and the fourth largest in the world.
The Indonesian government allocated £23.4 billion (20% of the state budget) for education in 2017 and decentralised to local government in over 34 provinces nationwide.
The Indonesian government plans to increase its share of skilled workers, opens up opportunities for education providers to establish a presence with a focus on:
- English Language Training (ELT)
- Teacher training
- Continuing professional development
- Vocational training in sectors such as engineering, maritime, aerospace, railway, information technology
Marine sector in Indonesia
Indonesia has more than 240 active shipyards supporting the development of the maritime sector and 1700 ports. Of these, 111 are commercial ports while only 11 are container ports. According to the Investment Coordinating Board of the Republic of Indonesia, 24 new ports are to be developed by 2019.
In 2015, the Ministry of Industry announced plans to increase the national shipping industry ability from 85,000 deadweight tonnage (DWT) to 300,000 by 2025.
As the government is aiming to improve infrastructure, maritime connectivity development and maritime power, there are opportunities for:
- Development of roads
- Shipbuilding, including tankers, freighters, patrol vessels, warships and submarines
- Seaport construction and revitalisation
Oil and gas in Indonesia
Indonesia has proven gas reserves of 102 trillion cubic feet (TCF) in 2016. On a reserve basis, according to PWC in 2017, Indonesia ranks 15th in the world and the third in the Asia-Pacific region (following Australia and China).
Deep water exploration and production in Indonesia is still ongoing to cope with the increasing domestic demand. There will be significant opportunities for drilling and completion, equipment, pipelines and control lines.
Other opportunities exist in:
- Enhanced oil recovery technology to extend oil production
- Supply of subsea equipment and services
- Liquefied natural gas receiving terminals and regas facilities
- Education and training
- Coalbed methane and, potentially, shale gas
Waste disposal and treatment in Indonesia
Indonesia’s rapid economic growth and improvements in living standards are generating increasing levels of municipal solid waste.
Final disposal sites with sanitary landfill technologies make up only a small percentage of the total number of the country’s sites.
There are opportunities for:
- Waste handling and processing
- Waste-related design and engineering
- Operation and maintenance of waste disposal processes and sites
- Incinerators/thermal converters
- Boilers, steam turbines, generators, gas engines, segregators, dryers, conveyors
- Project financing
Other opportunities exist in off-grid waste to energy systems.
Start-up considerations in Indonesia
There are various ways to operate a business in Indonesia including:
- Setting up a joint venture company
- Establishing a representative office
- Appointing an agent, distributor or importer
Joint ventures in Indonesia
The ‘Penanaman Modal Asing’ (PMA) is the corporate entity required for foreign investors under the terms of the foreign investment law. It takes the form of ‘Perseroan Terbatas’ (PT), a limited liability company, with the joint ventures as shareholders.
- May be either publicly listed on the stock exchange or privately owned
- Must have 2 parties holding shares either a legal entity or an individual
The foreign investor’s shareholding percentage must meet requirements under the Indonesia Investment Coordinating Board’s Negative Investment List (DNI).
Representative offices in Indonesia
Foreign companies may open and maintain a representative office. The representative may be foreign or local. Such offices:
- Are not permitted to carry out any profit making business activities
- Can undertake sales promotion, market research and assistance to local agents and distributors
You should appoint third party advisers to assist with documentation as dealing with government ministries can be challenging. Lack of transparency can make the process last longer than expected.
The third party adviser needs to be reliable, experienced and most importantly have close connections with the relevant authorities.
Agents, distributors or importers in Indonesia
A foreign company will usually appoint one or more agents or distributors. They can keep track of market regulations, which can change at short notice.
You should spend time taking local advice and assessing a range of potential agents before making a choice. Beware of agents promoting similar or identical products.
Boxme is one of such local presence-ready establishment that can help you identify and meet potential partners in the field.
TO BE CONTINUED…
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