Industries

Indonesia’s E-Commerce Sector – Market Potential and Challenges

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Indonesia’s e-commerce industry holds a lot of promise for foreign investors. The country has more than 130 million internet users and a burgeoning consumer market riding on the growing accessibility of mobile internet in the country. Known as Asia’s foremost mobile-first nation, Indonesia offers retailers a unique opportunity to dominate its online retail market.

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Indonesia: Future Halal Market Hub

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By Dezan Shira & Associates

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Indonesia is the world’s largest Muslim majority country. Over 88 percent of Indonesia’s population is Muslim, and the country is well positioned to be a hub for Halal products in Southeast Asia.

Supporting this projection are Indonesia’s favorable demographics, rising disposable incomes, and growing consumer awareness on their religious obligations.

Indonesia is also keen to make its Halal industry attractive for investors. The government recently passed industry regulations and has earmarked new sites for the development of Halal industrial clusters.

professional-service_indob-icons-2017RELATED: Corporate Establishment Services from Dezan Shira & Associate

What is ‘Halal’?

The term ‘Halal’ refers to anything that is lawful or permissible under Islamic law and can refer to both goods and services acceptable to Muslims.

Thus, the Halal market and industry is absolutely wide-ranging. In the goods segment, it includes food and beverages, cosmetics, toiletries, clothes, and pharmaceuticals, among others. In the services segment, it includes tourism, banking, finance, and logistics.

Government makes Halal certification mandatory

Indonesia passed a law on Halal Product Assurance in 2014. The law specifies that all products that meet Halal requirements must be Halal certified from October 2019. Products that constitute non-Halal materials must have a label indicating their non-Halal status.

At present, obtaining Halal certification in Indonesia is based on voluntary initiatives. As a result, products from Indonesia are not officially viewed as Halal when they leave its ports. This means manufacturers miss out on a booming Halal market of an estimated 1.9 billion global Muslim consumers.

The responsibility for providing Halal certification will shift from the Indonesian Ulema Council (MUI) – the country’s highest authority on Islamic Affair, to the government managed– the Halal Products Certification Agency (Badan Penyelenggara Jaminan Produk (BPJPH). Though, the MUI will continue to play a role in the certification process by providing religious decrees to determine the Halal status of a product.

In addition, the government will also launch a one-stop service portal to provide online Halal certification services to producers of food, beverage, medicinal products, and cosmetics.

related-link_indob-icons_2017RELATED: Indonesia’s Investment Outlook for 2018

Indonesia’s Halal industrial clusters

Indonesia is currently building three Halal-focused industrial clusters to attract manufacturers of Halal products, Islamic banking and financial institutions, as well as Halal restaurants, hotels, malls, fashion boutiques, and entertainment centers.

One such cluster will be established at Batamindo Industrial Park on Batam Island (Riau Islands Province) and the other two clusters will be built on Indonesia’s most populous island of Java.

The three industrial clusters are aimed at international Islamic investors wanting to tap into the huge market potential of Halal finance, products, and services in Indonesia.

About Us

Indonesia Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in Singapore, Hanoi, Ho Chi Minh City and Jakarta. Please contact us at indonesia@dezshira.com or visit our website at www.dezshira.com.

 

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Dezan Shira & Associates’ Service Brochure

Dezan Shira & Associates´ brochure offers a comprehensive overview of the services provided by the firm. With its team of lawyers, tax experts, auditors and consultants, it is Dezan Shira´s mission to guide investors through Asia´s complex regulatory environment and assist with all aspects of establishing, maintaining and growing business operations in the region.

Examining Opportunities in Indonesia’s Upstream Palm Oil Sector

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By: Samuel Glickstein

Palm oil and palm oil-based products can be found in supermarkets around the world. Although palm oil can be used as a simple frying tool, this production-efficient oil can be blended and processed to create numerous food, pharmaceutical, and cosmetic products. The rapid growth of the palm oil industry in recent years has benefitted the economy of Indonesia, the world’s leading producer and exporter of the oil. The sector has provided employment to millions of Indonesians, particularly on the islands of Sumatra and Kalimantan, where most palm oil estates are located. According to the Indonesian Palm Oil Producers Association (Gapki) and Indonesia’s Ministry of Agriculture, Indonesia produced 32.5 million tons of crude palm oil (CPO) in 2015 and exported 26.4 million tons.

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An Introduction to Indonesia’s Renewable Energy Industry   

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By Samuel Glickstein

Indonesia possesses enormous potential for renewable energy. According to a 2015 report by the International Energy Agency (IEA), the nation has 75 gigawatts (GW) of hydropower potential and 28 GW, or 40 percent, of global geothermal reserves. The report also states that the archipelago holds solar energy potential of approximately 1,200 GW. Although Indonesia’s wind power potential is relatively small at less than 1,000 MW due to low wind velocity, this resource has also recently caught the attention of foreign companies.

Investors may consider Indonesia’s growing demand for energy as a significant reason to invest in the nation’s renewable energy sector. The country’s energy consumption has increased rapidly since the early 2000s, aided by a growing economy, rising middle class, and upticks in urbanization. In addition, the country’s electrification ratio (the percentage of households that are connected to the power grid) is approximately 82 percent, one of the lowest ratios in the Asia-Pacific region. This means that millions of Indonesians do not have access to electricity. Energy use is set to rise in coming years as the Indonesian government works to reduce poverty and develop remote areas that are not connected to the national power grid.

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Understanding Tax Treatment of Representative Offices in Indonesia

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By: Winnindo Business Consult
Editor: Mourme Taruna Halim 

In early April 2016, Indonesia Tax Authority indicated that Google Indonesia, Yahoo Indonesia, Facebook Singapore Pte Ltd and Twitter Asia Pacific Pte Ltd were avoiding tax in Indonesia.

Among the four companies, Facebook and Twitter are established in Indonesia in form of Representative Offices (RO). This article will not analyze the pros and cons of the representative office compared to other investment vehicles, but instead will focus on application of tax regulation to representative offices; and highlight regulations that caused tax authorities to target Facebook and Twitter.

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Setting Sail in the Sea of Java: An Introduction to Indonesian Aquaculture

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Indonesian FishingBy: Aysha Nesbitt

As the world’s largest archipelago, Indonesia is among the most important producers of aquaculture globally. In 2001, Indonesia ranked fourth in aquaculture output and has since increased its fishery exports to US $4 billion in 2015. Though Indonesia’s aquaculture industry has begun to make strides, it is still far from realizing its full potential.

In an effort to harness its comparative advantages, the Indonesian government has made monetary commitments to the sustainability of the industry and is working to relax regulations surrounding foreign investment. Upon their election in 2014, both President Joko Widodo and Susi Pudjiastuti, the Minister of Maritime and Fisheries, have been working to establish strategies to promote and expand Indonesia’s fisheries.

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Cascade Asia Upbeat on Renewed Opportunities in Indonesian Manufacturing

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By: Cascade Asia Advisors

As businesses look away from China and towards other countries to fulfill their manufacturing needs, Indonesia is an increasingly attractive prospect. With a massive workforce, a growing middle class, and newly established investment incentives, Indonesian leaders are making clear their commitment to promoting Indonesia as a hub of manufacturing in Southeast Asia.

Although Indonesia shows promising signs of growth in the manufacturing industry, regulations governing the sector are still cumbersome and are further complicated by governmental red tape. Ambiguous legislation, combined with stark regional differences in infrastructure, make it imperative for prospective investors to understand the Indonesian manufacturing climate. In this respect, Manufacturing in Indonesia: new options, opportunities and challenges, published by Cascade Asia Advisors, provides a clear overview of the current investment environment and considers the investment incentives, the fastest growing sectors, and the most cost effective locations in the country.

The following is a brief outline of Cascade Asia’s insightful article, which highlights the momentum that will move Indonesia closer to its goal of rebuilding its manufacturing industry.

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