After gaining independence in 1945, Indonesia experienced rapid industrialization during the 1970s on the back of strong oil exports before labor-intensive industries became the new engine of growth in the late 1980s. The country is now the largest economy in Southeast Asia with a US$1.38 trillion economy by nominal GDP, and a member of the G20.
Indonesia’s most important export commodities are oil and gas, palm oil, and minerals, such as tin, gold, nickel, copper, bauxite, as well as coal. However, the country is moving away from exporting raw minerals to developing its own downstream industries which are key to the government’s economic growth strategy. For 2023, Indonesia is expected to see between 4.5-5.3 percent growth supported by growth in commodities, infrastructure, tourism, and manufacturing of high-value products like electric vehicle batteries.
The government of Joko Widodo remains prudent about its macroeconomic policies and structural reforms to attract foreign investment. Infrastructure is still the cornerstone of the government’s policies, with Indonesia needing over US$400 billion of infrastructure financing until 2024.
Other important considerations for foreign investors are Indonesia’s ongoing amendments to various laws to remove bureaucratic inefficiencies, simplify business licensing requirements, and liberalize more industries. An example is Government Regulation in Lieu of Law No. 2 Year 2022.
Consequently, for investors and firms seeking to do business in Indonesia, it is important to have a long-term outlook. After all, with a population of close to 300 million, a competitive labor market, a rapidly expanding digital economy, and rising incomes, it is not a market to be taken lightly.
This publication, designed to introduce the fundamentals of investing in Indonesia, was compiled by Dezan Shira & Associates, a specialist foreign direct investment practice providing corporate establishment, audit, business advisory, tax advisory and compliance, accounting, payroll, due diligence, and financial review services to multinationals and small- and medium-sized enterprises investing in emerging Asia.
An Introduction to Doing Business in Indonesia 2022 covers the following:
- Indonesia’s Positive Investment List
- Corporate establishment;
- Human resources and payroll; and
- Audit and compliance.
Source: asean briefing