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Doing business in Indonesia - a guide

Although it may not have garnered as much press as China and India in recent years, Indonesia is a large and fast-growing Asian economy that is gradually attracting the attention of businesses across the globe who are looking to expand.

Not only is Indonesia the world’s fourth most-populous nation, with 250 million people, but its economy is the largest in South-east Asia, meaning there are vast possibilities for organisations looking to extend into the country.

However, as with many Asian countries, a number of customs and business processes are in place, which must be observed if any expansion or deals are to be a success.

Introductions and customs

In general, English is spoken at a business level in Indonesia, though when dealing with the government or undertaking business outside the main cities, it is possible some translation may be required.

When meeting someone, avoid using your left hand to pass or receive anything, including business cards and gifts, and - if you are being introduced to several people - it is customary to introduce yourself to the eldest member of the group, which is a common practice in Asia.

As Indonesians place great emphasis on age and respect towards elders, in Indonesian society it is expected that older people are respected, but unlike some Asian nations, it is acceptable to shake hands with women, even if they are not the one to offer their hand first.

The culture of business

Negotiations with Indonesian businesses can be lengthy, so it is advisable to give enough time to carefully consider the business proposal, as the other party will do the same.

Often, it may take several meetings before an agreement is reached, with initial talks generally serving to make acquaintances before serious discussions take place.

Indonesia is very much a relationship-driven market, and so some companies may not respond very quickly to emails, particularly if the sender is not well known; as such, patience is the key to doing business successfully in the country.

Bear in mind that business relationships in Indonesia are based on trust and familiarity, and so personal contacts and networks are vital when coordinating and closing any business deals.

Finance and investment

Over the past decade, the Indonesian government has been actively introducing measures directed at encouraging investment in the country and improving both the country’s regulatory and economic environment.

With a target economic growth of more than six per cent for the coming years, there is a growing emphasis on attracting more foreign investment in order for the overall target to be met.

Some key moves have included amending the Investment Law provide more assurance on matters such as equal treatment among investors, the ability to repatriate profit from Indonesia, and investment incentives, while Tax Laws were also amended in 2008 and 2009 to improve tax administration and to reduce the corporate income tax rate to a flat 25 per cent.

Furthermore, Indonesia has developed an integrated service for both the central and regional governments to simplify the licensing process for businesses operating and investing in Indonesia, ensuring that the future is bright for any companies looking to expand their presence into the country and take advantage of its growing economy and prospects.

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