For Indonesia, the recent US Presidential elections present an opportunity for the country to unleash the full potential of its domestic market and trade relationships in order to bolster its position in an era of increasing uncertainty and risk.
The Indonesian government recently announced the launch of its 14th economic policy package which focuses on providing incentives to e-commerce and creative industries as part of a wider blueprint to make Indonesia into a digitally focused economy.
The Indonesian government is confident that the incentives offered in the amnesty programme will convince Indonesian taxpayers, particularly those with assets parked abroad to avoid tax, to come forward and declare their assets and bring them back home.
On 16th June 2016, Bank Indonesia announced that it would cut interest rates by 0.25% to a benchmark rate of 6.5%. This recent rate cut was expected given the Jokowi administration’s focus on lowering the cost of lending for businesses as well as consumers.
President Joko Widodo has credited his government’s policies focused on reducing Indonesia’s external liabilities for the new-found stability, however other factors related to global monetary policy are a more likely explanation which will bring the success of the recent reforms and the question of Indonesia’s fragility into the spotlight should the Fed proceed with a hike in interest rates.
On 28th April 2016, the Indonesian government unveiled its 12th economic policy package aimed at improving the business climate for local SMEs in Indonesia which will of course benefit international investors as well.
The Indonesian Financial Services Authority (OJK) is attempting to accelerate the consolidation of the country’s state-owned banks and their shariah subsidiaries under a single holding company by 2018.
The continued emergence of ride-hailing apps such as Uber, Grab, and Go-Jek has placed undue pressure on the Indonesian government as it seeks to encourage innovation without impinging upon the interests of existing business titans.
On 17th March 2016, Indonesia’s central bank announced a further cut of its benchmark interest rate by 25 basis points to 6.75%. This move marks the third consecutive interest rate cut in as many months and reflects the dire need to increase lending so as to re-energise consumer spending and reinvigorate the economy.
On Thursday, 11th February 2016, the Jokowi government unveiled the much anticipated revised version of the Negative Investment List which was last subject to changes in 2014. Rounding off the previous 9 economic reform packages, President Jokowi touted the government’s tenth package as a ‘big bang’ in liberalising foreign investment in Indonesia.
The Indonesian government issued its ninth economic package on 27th January which includes a number of policies to stabilise beef supply and prices. This latest measure comes as the government moves forward with plans to improve the domestic economy by normalising consumption habits.
On 28th December 2015, Indonesia put into effect Government Regulation No. 103 of 2015 - a new regulation stipulating revised and newly-introduced rules on property ownership for foreigners.
On 24th November 2015, Mr Thomas Lembong in his capacity as Minister of Trade confirmed that Indonesia intends to revive long-dormant negotiations with the European Union (EU) to finalise an agreement on the proposed Comprehensive Economic Partnership Agreement (CEPA) between the two markets.
As a sign of furthering global integration, President Joko Widodo has expressed his intentions for Indonesia to join the Trans-Pacific Partnership during a recent meeting with US President Barack Obama. Following on from this announcement, the administration has faced criticism questioning Indonesia’s actual readiness to become a future member.
Having first declared its support for the establishment of the ASEAN Economic Community in 2007, Indonesia now faces the significant hurdle of realising the extensive regional integration that it mandates before 1st January 2016.
Indonesia through its latest policy package intends to expedite the development of special economic zones designed by the government to encourage businesses to set up in less saturated provinces and thereby promote widespread growth.
The Indonesian government announced the latest in its series of economic stimulus packages on 22nd October 2015. Following on from the positive reception of the third and fourth packages, it is hoped that this next series of measures will have a similar effect by boosting investment and job creation.
Having made some progress through its previous economic policy packages in allaying concerns within the business community related to rising costs, the Indonesian government on 15th October 2015 made public its plans to go a step further in addressing a core issue that was previously left untouched; namely, its labour laws.
In addition to providing investors with confidence in the government’s ability to deliver on highly touted economic reform plans, the third economic policy package is largely being applauded for its efforts to ensure the cost-competitiveness of businesses in the local manufacturing industry.
Despite the WEF citing rigidness in wages and inflexible firing as well as hiring procedures as key challenges that have dimmed the light on Indonesia’s competitiveness this year, President Joko Widodo’s administration has thus far steered clear of substantial reform in this domain.
Indonesia on 29th September 2015 announced its latest round of economic policy revisions to counter the market’s present slowdown. Unlike the first set of reforms introduced earlier this month, the second economic policy package has been well-received and serves as a much-needed win for a government that has been criticised for its passivity.
Indonesia on 9th September 2015 took steps to stem the current slowdown through a formalized plan of action designed to streamline bureaucratic processes and revive economic activity in the real sector. As the first of a three-part series of regulatory reforms, the economic policy package has been met with disappointment.
As a nation whose balance of trade is heavily dictated by the export of commodities, Indonesia looks to be among the economies most vulnerable to a slowdown in China. In this second instalment of a two-part analysis, further insights are provided into the nature of trade relations between the countries.
For Indonesia, the new reality of a protracted slowdown in China necessitates a reassessment of more than just the vulnerability of its capital market. In this first instalment of a two-part analysis, insights are provided into the impact of slowing growth on the still fledgling investment ties between the two nations.
In what is one of the first signs that the government has begun to accept the pressing need to introduce investment-friendly measures to counter-act waning confidence, Indonesia on 16th August 2015 enacted a revision to regulations regarding tax incentives for pioneer industries.
Having sunk beyond 13,800 IDR against the dollar, the Indonesian rupiah is in an uncertainty-fuelled state of limbo, leaving investors to speculate as to how low it can go. The currency’s position, however, should not be thought of as an indictment against Indonesia’s economic fundamentals.
As the latest step taken by a government looking to address slowing growth in Southeast Asia’s largest economy, Indonesia in July 2015 moved forward with plans to raise import tariffs on a broad array of consumer goods including coffee, tea, meat, cars and clothing.
Current economic difficulties have not been reflected in foreign direct investment in Indonesia. Foreign investors remain positive about the country’s long-term prospects, as evidenced by surging FDI levels that have gone from strength to strength in the first half of 2015.
In what would be an unprecedented move by a country that has long grappled with the question of its sovereignty in relation to land ownership, the Indonesian government appears set to allow foreigners to buy property. A proposed revision to current laws should enable expatriates to own luxury apartments.
Indonesia continues to serve as one of the world’s most promising markets for app-based businesses that are able to appeal to a youthful, smartphone-savvy consumer base by offering convenient solutions to the country’s day to day challenges.
The Indonesian government is taking steps to remedy the unfavourable economic downturn plaguing the nation since the final quarter of 2014 with plans to reduce the corporate tax rate. The rate cut is a short term solution that businesses will welcome and will ultimately see the government sacrificing its annual tax collection targets for the year.
Bank Indonesia is set to increase the Loan-to-Value (LTV) limitation for home mortgage loans, thereby reducing the obligatory minimum down payment for primary home buyers. This move is in response to a slowdown in property sales across the board.
Rising inflation, a weakening Rupiah and general economic downturn have forced the government to adjust Indonesia’s sales tax on luxury goods which will remove certain products from the current list of luxury items, as a means of spurring domestic consumption and encouraging growth.
Indonesia in early 2015 issued a draft regulation mandating the use of at least 40% local content in the manufacture of 4G smartphones sold within the country. Scheduled for implementation on 1st January 2017, this law brings about new opportunities to cooperate with local OEMs.
Indonesia’s new administration under Mr Joko Widodo has been nothing if not vociferous in announcing its plans to focus on infrastructure development to spur continued growth. Recent measures to boost the availability of funding and address the shortcomings of previous land acquisition reform suggest that the government is on the right track.
The Indonesian government aims to attract 932.9 trillion RP ($71.54 billion USD) in investment within the next five years to boost GDP growth by 7%.To do this, the government has instructed the Investment Coordinating Board to prepare special offices to provide investment-related information at a regional level.
The notion that Indonesia could become a net importer of natural gas by 2020 may seem absurd because it has the eighth largest proven gas reserves in the world. Despite this rich endowment, Indonesia could yet be facing net gas shortages by the end of the decade.
Indonesia holds the potential to be a major global producer and exporter of fishery and aquaculture products. As part of President Joko Widodo’s maritime centred vision, the country is making strides in curbing illegal fishing and has taken a more emboldened stance on fishery exports.
Pressure is on the new government to improve Indonesia’s competitiveness as an investment destination as the country looks to private investment as a key driver of economic growth in the midst of ongoing challenges to boost domestic output.
President Joko Widodo on 17th November 2014 formally implemented his government’s much-anticipated plan to raise the price of subsidized fuel by 2,000 IDR per litre. Attention is now rightly being paid to industries most affected by this reform and its impact on the business landscape.
With the deadline for companies to register their employees with BPJS I fast approaching, Indonesia’s new government has yet to show any signs of deviating from the plan to overhaul the social security system. In keeping with earlier reports, businesses in Indonesia have been told to complete the registration process by 1st January 2015.
Shockwaves were sent through Indonesia’s investment community in August as news broke on a new draft bill to limit maximum foreign ownership of plantations to 30%. Though this strict cap was later removed, the plantation bill raises real concerns about its immediate impact on key industries driving economic growth.
The impending inauguration of Joko Widodo has speculation abound in anticipation of policy shifts to be enacted by the new government. Having suffered from a ‘wait and see’ approach to long-term investments, the property sector in particular has been a topic of discussion and looks set to benefit from renewed consumer and business confidence.
Demand for steel in Indonesia has in recent years expanded at a rate largely unparalleled on the global stage. Opportunities are to be found in the manufacture of value added products catering to a growing automotive sector and a consumer base of rising purchasing power.
As Indonesia’s economy has grown so too have the challenges in providing a well-organised public transport system. Rising incomes and the flow of people into densely populated cities have already led to total gridlock in the capital, costing the country a fortune in lost productivity, wasted fuel and missed business opportunities.
An advantageous geographic position on the equator has long afforded Indonesia with immense potential for solar energy. With the country’s solar energy industry ready to begin a concerted expansion effort led by the government and state owned enterprises, demand for locally manufactured components such as solar panels is set to boom.
Faced with a swelling current account deficit, the Indonesian government is in the process of revising its stance on existing and impending regulations that would see a ban on the export of unprocessed mining products by 2014.
Amid a concerted drive towards increasing activity in oil and gas exploration, Indonesia in 2014 announced revisions to cabotage principles for offshore vessels. This update looks at changes to deadlines for exemption from cabotage laws for several offshore vessel types, in light of the country’s growth strategy for the shipyard industry.
Indonesia in April 2014 posted its largest trade deficit in nine months, placing additional pressure on a government already moving towards protectionist policies on a handful of key commodities. This development brings back into the spotlight the country’s existing measure to limit imports via a complex and often restrictive licencing process.
Indonesia on 1st May 2014 kicked off its most recent round of electricity tariff hikes carried out to curb the nation’s soaring energy and power subsidies. Imposed on industrial consumers, this price increase has local businesses concerned for their competitiveness as well as re-evaluating their outlook for the immediate future.
A retail sector heating up with the ongoing emergence of a middle class ready to spend presently has the Indonesian government striving to implement additional laws governing franchises in the country. These recent regulations seek primarily to spread the success enjoyed by a handful of large conglomerates already using the franchise business model
On course to achieve its target of a 10% increase in tourist arrivals in 2014, Indonesia’s tourism industry is beginning to show signs of fulfilling its immense potential. The country’s unique geography and the easing of foreign investment restrictions in particular present real opportunities to tap into the lucrative field of maritime tourism.
Indonesia since 2009 has required contractors of energy service projects to source a proportion of its components from local manufacturers. This policy has over the years been subject to revision and supplementary regulations that now place an even greater onus on companies to work with domestic providers of engineering services
The Indonesian government in April 2014 first made public its plans to carry out a merger between Bank Mandiri and Bank Tabungan Negara. This is in keeping with a current trend towards banking sector consolidation as the country strives to develop financial institutions with the capacity to fund key infrastructure projects and compete regionally.
Indonesia’s e-commerce market is fast becoming one of Asia’s most attractive destinations for investment. Driven by the sustained success of local pioneers in online B2C and C2C, as well as the emergence of new start-ups and the entry of international players, the industry is positioned to flourish as the number of internet users in the country rises.
Following an eventful end to 2013 that saw the postponement of several public listings, the Indonesian Stock Exchange (IDX) marked the start of a new year with the announcement of 30 companies expected to conduct an IPO in 2014. Headlining those going public are industry leaders in a host of key sectors such as infrastructure and public transport
Buoyed by the success of the country’s existing FTZs, the Indonesian government in early 2014 announced its plans to develop three areas into new special economic zones. The introduction of these zones comes at a key time as neighbouring countries also begin gearing up to attract investment in the lead up to the ASEAN One Market in 2015.
Indonesia has over the last few years been heralded as the darling of Asia’s private equity market. However, a recent dip in economic performance has since worked to dampen expectations for private equity opportunities in 2014. To better understand where it stands today, it is necessary to view Indonesia’s private equity market as one on the precipice of a new cycle.
Indonesia in recent years has been criticised for its inability to retain the country’s brightest minds and now runs the risk of suffering from a widening gap to its key ASEAN competitors in innovation, technological advancement and scientific discovery.
Indonesia’s parliament on 11th February 2014 passed into law the country’s first over-arching trade bill in a move that provides the government with the legislative foundation from which to exert greater control over exports and imports.
Waste management poses a mounting challenge in Indonesia as growing household consumption and accelerated business activity gives rise to higher volumes of organic food waste, plastic packaging and industrial byproducts.
Already among the most bullish consumers in the world, Indonesians heading into 2014 look set to amplify consumer confidence in anticipation of the upcoming legislative and presidential election.
Despite the introduction of a bill designed to facilitate the commercialisation and internationalisation of higher education, Indonesia’s tertiary education sector remains largely untapped by foreign universities.
With the implementation of government initiatives to achieve food security and promote downstream agribusiness opportunities having placed a renewed onus on the increased production of key commodities; Indonesia’s fertiliser manufacturing industry has experienced steady growth
Home to several of the country’s most rapidly growing provinces, East Indonesia is fast emerging from the shadows of the more developed islands in the west.
To encourage the development of higher value added activity in the country’s agriculture sector, Indonesia beginning in 2010 initiated several policies limiting the export of unprocessed commodities.
Indonesia’s per capita consumption of beef, which currently stands at just less than 3 kg annually, is expected to hit double digit growth within the next two decades; a significant increase from its present rate of 4.2% (Ministry of Trade) and very much indicative of rising demand for red meat in South East Asia’s largest economy.
Indonesia has long been unable to take full advantage of its potential as a destination for agribusiness. This stands to change, however, with the government’s initiative to incentivise business activity in downstream agricultural industries.
Indonesia formally announced its plan to lift limits on foreign investor involvement in several key industries as well as open up areas of business previously reserved in their entirety for local companies.
Sized up in the World Economic Forum (WEF) Global Competitiveness Index and the World Bank Ease of Doing Business Index, Indonesia’s current business climate demonstrated marked improvements across several key aspects, including those that have long frustrated foreign and local investors alike.
Indonesia’s real estate sector has been experiencing seemingly unstoppable growth for the last decade; however recent knocks to consumer confidence and higher interest rates are serving to potentially dampen the rate of future growth.
Indonesia’s surging service industries suffer from a distinct shortage in the availability of skilled labour; an issue that to date has prevented the sector from realising its potential as the driving force behind the country’s continued economic growth.
Indonesia currently stands at an important crossroads in its decision to set the minimum wage for 2014, given its significant impact on foreign investor perceptions of the country's attractiveness as an FDI destination.
On the 30th of September 2013, Indonesia and the European Union signed a landmark Voluntary Partnership Agreement (VPA) a move that is expected to boost the country’s already burgeoning timber industry and open up opportunities in related sectors.
On the 30th October 2013, Indonesia will host the 3rd annual Indonesia Halal Expo in Jakarta as part of a growing movement within the economy to embrace shariah compliant business opportunities.
Population: 255 million (estimated, 2015)
Currency: Indonesian Rupiah
Nominal GDP: $895 billion USD (IMF, 2015)
GDP per capita: $3,415 USD at Current Prices (IMF, 2015)
GDP Growth: 4.7% (2015)
External Debt: 34.77% of GDP (BI, Q3 2015)
Ease of Doing Business: 109/189 (WB, 2015)
Corruption Index: 107/175 (TI, 2014)