Indonesia is ranked the fourth most populated country in the world while also being the one of the most powerful economies in Southeast Asia. According to CIA Factbook, the Indonesian population is estimated to grow to 267 million people by July 2020. Indonesia is a prime location for businesses to expand and grow for many reasons, such as free trade agreements, a growing economy, and a growing middle class, to name a few.
Keep reading as we discuss five reasons to do business in Indonesia.
Indonesia is a member of the Association of Southeast Asian Nations (ASEAN) and trades with nine other countries with minimal or zero tax. The other nine countries include Thailand, Malaysia, Singapore, the Philippines, Vietnam, Myanmar, Cambodia, Laos, and Brunei.
By doing business in Indonesia, traders can access a consumer population of more than 650 million in the ASEAN alone. It also makes trade cost-effective and saves businesses a significant amount of resources that could be allocated somewhere else. Beyond ASEAN, Indonesia also has trade access to India, China, South Korea, Japan, Australia, and New Zealand. Having an extensive list of connections makes Indonesia a prime epicenter for trade within the Southeast Asia region.
Bahasa Indonesia is the official language of Indonesia and there are more than 700 languages and dialects spoken across the country. Papua, one province alone has over 270 spoken dialects. However, the official business language in Indonesia is English. This eases the burden of language barriers for foreign business owners and allows a smoother entry into the Indonesian market.
However, if companies intend to market their products to Indonesian consumers, they should make sure their marketing is localized. Not only does this mean translating their products into local dialects, but they also should advertise their products using models and symbols that resonate with the locals to show that the company is knowledgeable about the culture. For example, the color red may symbolize danger in western cultures, but in Indonesia, it symbolizes luck and fortune.
Some important Indonesian business etiquette to remember is:
a. Patience is emphasized in Indonesian business. Companies may take time to respond to emails, especially if the sender is not explicitly known.
b. Business relationships are typically founded on trust, familiarity, and personal connections.
c. Indonesians place great emphasis on age, and respect towards elders is expected.
d. Watch body language. Hands on hips or folded arms can signify anger.
e. The left hand is considered dirty in the Indonesian culture. Avoid using the left hand when passing or receiving anything, such as business cards or gifts.
Indonesia is considered the fifth emerging country in the world after China, India, Brazil, and Russia. Indonesia’s growing economy means businesses can capitalize on emerging sectors. In 2019, Indonesia completed construction on fifteen new airports and plans to add another terminal at Soekarno-Hatta International Airport in Jakarta by 2021. Countries in the construction sector have the opportunity to take advantage of the growing demand for contractors, technicians, architects, and project managers. With so many new airports, Indonesia is becoming more connected making business easier to other industries as well.
Indonesia’s education sector is also expected to grow. The country has the fourth largest education system in the world, with one third of a million schools and universities. This emerging education sector will demand more teachers, class resources, training, technology, and construction. Not only will companies maximize on this opportunity but they will also positively impact the next generation of Indonesians’ education.
Between the years of 1971 and 2010, Indonesia’s population doubled. Indonesia’s median age is 31.1. In past years, the median age remained to be under 30 years old. A country where most of the population is young means there is a lucrative business opportunity within the next few years.
As the general population gets older, the country grows accustomed to modern business practices. A country full of young people also means an increase in educated, skilled workers. In due time, foreign companies that plan to hire employees in Indonesia will have an expansive employment pool to choose from.
Another reason why companies should look to Indonesia for their next business venture is that Indonesia has one of the world’s fastest growing middle-class. It is estimated that 90 million Indonesians will join the consumer middle-class by the year 2030, according to McKinsey.
Citizens joining the consumer middle-class will have higher amounts of disposable income and drive the demand for luxury products and quality services in Indonesia. With this growing demand and consumer culture, new opportunities will open for foreign businesses that plan to expand their services in Indonesia.