[co-authors: Lia Alizia, Maria Sagrado, Vincent Lie, Frederick Simanuntak]*
1. What is the current business climate in your jurisdiction including major political, economic and/or legal activities on the horizon in your country that could have a big impact on businesses?
Despite the current pandemic that 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, smelter, loans from foreign institutions have also kept us fairly busy this year.
The introduction of the Omnibus Law that has amended 76 laws and is implemented under 49 government regulations and presidential decrees has affected Indonesia’s legal environment as they have required existing clients to make certain changes to their corporate documents and business licensing. The opening up of ‘previously restricted foreign investment’ under the current Investment Positive List has played a major role in attracting more investment in Indonesia. For instance, some retail activities, distribution, logistics (freight forwarding), and certain healthcare businesses are now open for 100% foreign investment.
Foreign banks lending to Indonesian companies have also become active again. The Firm has been assisting banks with providing financing for the development of mining refineries and processing in Indonesia. Some transactions have also involved some restructuring.
2. From what countries do you see the most inbound investment? What about outbound?
Inbound Investment: China, Korea and Japan are still the top 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 Coordinating Board (BKPM) in the second quarter of 2021, most foreign investment in Indonesia has come from Singapore, Hong Kong, China, Europe, South Korea, Japan and USA.
Outbound Investment: Indonesian investors are more likely to invest in Indonesia than in other countries. However, some big companies in Indonesia are also investing in other countries, such as Singapore, Philippines, Malaysia, China etc.
3. In what industries/sectors are you seeing the most opportunity for foreign investment?
In addition to mining and related activities, e-commerce, SaaS (Software as Service), retail, fintech and metal related industries still seem to be attracting foreign investors.
4. What advantages and pitfalls should others know about doing business in your country?
Given the size of Indonesia’s population and its age range, e-commerce/SaaS and retail, for example, both have a huge potential market in Indonesia. New regulations under the Omnibus Law are the government’s effort to ease doing business in Indonesia. Under them, the procedures for obtaining some licenses and approvals have been simplified. However, some local/regional governments still impose different requirements for certain licenses, which is causing some uncertainty.
5. What is one cultural fact or custom about your country that others should know when doing business there?
There are many traditions and cultures in Indonesia throughout its extensive 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 help you get a deeper understanding of the different cultures.
*Makarim & Taira S