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8 Things You Need to Know Before Expanding to Indonesia

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Indonesia is known for its plethora of beaches, jungles, delicious cuisines, and, of course, business opportunities. The country belongs to the list of G20 members, which means it is one of the best destinations for entrepreneurs looking to start or expand businesses.

While there are plenty of benefits associated with expanding to Indonesia, it is important that you are well-informed about the country before initiating the expansion.

In this blog, we will be covering several crucial facts and other information regarding Indonesia. This information will assist you with your Indonesian expansion decision, regardless of the type and size of your business.

Things to Know About Before Expanding to Indonesia:

1)   Demography:

Over the last few years, Indonesia has been increasing its population by approximately 3 million a year. As of 2020, the estimated Indonesian population was around 270 million.

Needless to say, this large population results in promising investment and business opportunities for locals and foreigners alike, particularly in industries like fishery and agriculture.

2)   Business innovation

At the moment, the Indonesian reform package has led to a number of business innovations, making the country one of the most preferred business expansion destinations for foreigners. The Indonesian government has taken several steps to ease business establishment and expansion. One of the biggest results of those steps has been the OSS (Online Single Submission) that has been in effect since 2018.

Thanks to OSS, many investments and business aspects in Indonesia have changed for the better. One example of this is the license process simplification, which is now completely paperless.

3)   Major financial institutions:

The two biggest Indonesian financial institutions are the BCA (Bank Central Asia) and the Bank Mandiri. These banks have enabled online payments systems for almost a decade. Almost every entrepreneur looking to expand in Indonesia will sooner or later run into one of these two big players.

The BCA and Mandiri dominate the entire financial landscape hierarchy. Sometimes, this leads to inefficiencies and bottlenecks since both institutions strive to develop superior remedies for identical problems. Having said that, if a startup can handle this situation or, better still, come up with better solutions related to financial inclusion and payments, it can find itself in a fairly strong position – especially in Jakarta.

4)   Easing of Restrictions on foreigners:

Earlier, the Negative Investment List had placed many restrictions on foreigners regarding business and property ownership. However, recently, the Indonesian government introduced new regulations that alleviate many of the previous restrictions and is now allowing foreigners to invest in many other business sectors as well as own property. These steps were taken to attract more foreign investment and boost Indonesia’s economy.

According to the most recent Negative Investment List, foreigners can establish or expand a business in 54 Indonesian sectors.

5)   Language(s);

We are not kidding when we say that you will find approximately 730 languages and dialects being spoken across the country. Although many of these are Bahasa’s regional dialect, they can immensely differ from one another and often incorporate unique vocabulary.

A lot of entrepreneurs believe that as long as they are marketing their products in the official Bahasa language, they are good to go. Well, they could not be more wrong. If you want to really localize your offering, you need to be able to reach out to local consumers. Often, the inability to see eye-to-eye regarding a dialect proves to be a deal-breaker. A couple of Jakartans will not communicate in the same way that a Jakarta business representative would communicate with an Aceh consumer.

A smart way to overcome the language barrier is to find a sharp local partner who can assist you.

6)   The importance of social media:

Social media in Indonesia is inevitable, to say the least. Platforms like Facebook and Twitter influence a wide range of areas, including politics, entertainment, and business. The Indonesian archipelago belongs to the list of the top five global social media users, and even politicians understand that a failure to use social media for voter engagement will ultimately cost them on the day of the elections.

As of 2015, Indonesia had a whopping 72 million accounts on social media, out of which 62 million were created through mobile phones. The most popular platforms in the country are Google Plus, Twitter, and Facebook. Even though Path has a large number of Indonesian users, data indicates that Pinterest and Instagram enjoy greater popularity in the region.

7)   Decreasing bureaucracy and corruption:

The financial transparency within Indonesia has undoubtedly improved over the last few years. The government has made valiant efforts to eradicate bribery and corruption with the help of the KPK (Corruption Eradication Commission). As a result, Indonesia has become significantly safer for business owners and investors. Indonesia currently sits at 102 in the Transparency International Corruptions Perceptions Index (CPI), having jumped over twenty places in the last six years.

8)   The love for malls:

South Asian nations, particularly Indonesia, have a strong affection for their shopping malls. In fact, Jakarta itself is home to more than 173 shopping malls, which is pretty much unheard of even in markets such as the UK or the US.

Unlike western countries, though, Indonesians will usually enter huge malls en masse and buy everything they need to buy under the air-conditioned and secure location. So, if you are planning to open an online business in Indonesia, you should certainly try to make your products available in offline shopping malls.

Final Word:

So, there you have it, the pros and cons of doing business in Indonesia. The large population, diverse demographics, reduced corruption, and lower restrictions on foreigners make Indonesia the desired location for your next expansion plan.

If you want to know more about expanding your business into Indonesia, please feel free to reach out to us or click here.

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