Indonesia in Brief – Part 2

By Brierley Penn

In part two of our focus on Indonesia, we take a look at the challenges presented to those considering doing business in Indonesia.

There’s really no way around it – Indonesia is not known as a country in which it is easy to conduct business. The World Bank ranking Indonesia #130 out of 185 countries would seem to reinforce this.

Corruption, red tape and uncertainty remain in both commercial and political life in Indonesia. Despite a recent crackdown on crooked officials in which hundreds of public servants of varying calibre have been rounded up, evidence would still suggest that corruption is an institutionalized aspect of business. The Jakarta Globe went as far as to estimate that the cost of corruption to the Indonesian economy was as high as $238 million USD,

Institutional red tape and the lengthy wait for businesses waiting for even the most straightforward of tasks is a strong deterrent to doing business in Indonesia. Excellent planning and forwards thinking at all stages of business becomes a necessity for successful companies.

One of the keys for New Zealand business success in China has been the introduction of the Asean Australia New Zealand FTA signed in 2008. With regards to Indonesia, New Zealand finds itself in a precarious position in that it is too small a country to find itself on the radar of everyday citizens, yet boasts too powerful a dairy industry for the Indonesia government to push for an FTA.

An important challenge that many businesses moving into foreign markets face is the differing legal systems from our own. Indonesia’s laws are predicated on a civil law legal system, however due to the varied history of the nation, its laws find their origins from three distinct sources – indigenous law, Dutch law and post-independence national law. The complexities of the legal system make native law practitioners a must for businesses contemplating operating in the area.

Finally, there is the case of the Indonesian Rupiah – one of the least valued currencies globally. Although the government is investigating the benefits of revaluing the currency  upwards which is undoubtedly positive for business, it further reinforces the uncertainties that remain with doing business in Indonesia.

Make sure you check back for our third and final part of Indonesia in Brief, where we collate and present the best advice given to us for doing business in Indonesia, from those most familiar with region.