Economy & Trade
Over the last decade, Indonesia’s economic clusters –special economic zones (SEZs) and industrial estates have grown multi-fold, both in terms of number and breadth. In 2014, there were approximately 74 industrial estates with an area of 36,300 hectares in the country. By 2017, the number of industrial estates expanded to 87 with an area of 59,700 hectares. Similarly, the number of SEZs in the country has increased to 12; out of these, four are currently operational, representing economic activities across various industrial sectors.
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By: Vasundhara Rastogi
Strategically positioned along major sea lines connecting East Asia, South Asia, and Oceania, Indonesia holds a natural appeal for foreign investors. The country is the largest archipelago in the world, consisting of five main islands – Java, Sumatra, Kalimantan, Sulawesi, and Papua – and about 30 smaller archipelagos totaling approximately 17,508 islands. Aside from its geographical reach to major international markets, the country houses over 250 million people offering a viable domestic market for investors. In addition, the country has relatively low wage rates, which provide a cost-effective source of manpower for investors.
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By: Vasundhara Rastogi
Spread across more than 17,500 islands, the Indonesian archipelago is a pivotal trading hub in Southeast Asia. The island country borders Malaysia, Timor-Leste, and Papua New Guinea by land, and Christmas Island, India, the Philippines, Singapore, Thailand, Vietnam, Australia and Palau by sea.
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By Samuel Glickstein
In recent years Vietnam, Myanmar, and India have attracted a significant amount of media attention as potential manufacturing powerhouses. Although these countries may deserve consideration, Indonesia, the world’s fourth largest country, maintains numerous strengths that beckon to the business community. With over 260 million people and a total median age of 28.6 years, Indonesia possesses both a large workforce and a young population. Furthermore, increasing urbanization eases the cost of doing business for foreign companies that manufacture their goods in Indonesia and intend to sell their products to the country’s rising middle class. The Indonesian government has also realized the importance of developing the country’s manufacturing sector in increasing economic growth, creating employment opportunities, and reducing the archipelago’s reliance on exporting commodities. President Joko “Jokowi” Widodo has released numerous policy packages since September 2015 aimed at easing the cost of doing business in Indonesia, increasing foreign investment to make the economy more competitive, and boosting industrialization.
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By: Dezan Shira & Associates
Editor: Alexander Chipman Koty
Indonesia is composed of over 13,000 islands and home to over a quarter of a billion people. The country’s island-based geography presents rich diversity in ethnic, religious, and linguistic communities, as well as incredible biodiversity and a wide array of natural resources. While these features contribute to Indonesia’s unique advantages, they should also be at the forefront of investor’s minds when considering investment.
Understanding the infrastructure deficit
Amidst a variety of governance-based concerns, which are the subject of intense scrutiny and the target of government reform under the current administration, infrastructure remains a salient variable for investments, with significant profit implications. Pegged by the Asian Development Bank at a massive US$700 billion, infrastructure deficits in Indonesia can restrict the ability of investors to conduct operations in a successful manner. Fortunately, Indonesia has a number of investment options available to mitigate the impact of these challenges. Regardless of the nature of investment chosen, various factors – including tax incentives, infrastructure and logistics, proximity to resources, and labor costs and skill levels – must be taken into consideration when choosing a location for investment in Indonesia.
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By: Dezan Shira & Associates
The Indonesian economy is becoming the darling of Asia as economic growth hits 5.0 percent and the stock markets booms as foreign investors pour money into the country. The 2016 GDP growth rate, released by the Indonesian Central Statistics Agency last week, exceeds growth figures of 4.8 percent seen in 2015. Of this growth, part came from a healthy 5 percent increase in domestic consumption, while Indonesian imports and exports also increased, as did investment.
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By: Dezan Shira & Associates
Editor: Alexander Chipman Koty
In comparison to Singapore, Malaysia, and Thailand, Indonesia is more prohibitive to foreign businesses. Not only does Indonesia generally demand higher taxation, but it also has more bureaucratic red tape. Still, many investors are intrigued by the country’s enormous potential. Like Thailand, loss prevention requirements, timing requirements, and pre-remittance compliance are not required. In addition, Over 60 countries hold DTAs with Indonesia, reducing the relatively high withholding taxes the country levies. In order for investors to qualify for DTA benefits, recipients of remittances must confirm their tax residency by providing the Indonesian Tax Office with a certificate of domicile certified by their home country’s tax authority. Foreign entities operating through Permanent Establishments (PEs) generally have the same tax commitments as resident companies. PEs have a relatively broad definition in Indonesia and are subject to particular government regulations and tax rates. As such, investors should be certain whether or not their businesses accidentally qualify as PEs.
Dividends: Remittance of dividends is liable to a 20 percent withholding tax. This amount can be reduced through a DTA. Even with a DTA, however, the rate is generally still between 10 and 15 percent. If the nonresident recipient has a PE in Indonesia, domestic rates of 10 to 15 percent apply.
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Indonesia Briefing
