While Indonesia has been getting some interest from foreign investors over the last few years, it is still not the easiest country in the APAC to do business. Starting a business here can be tough, as is reflected in the country’s World Bank Doing Business rankings. There are many obstacles to running a business here and a lot of red tape. You also have to deal with a significantly different job and business climate in general. Let’s take a look at some of the challenges of conducting business in Indonesia and how to surmount them.
Starting a Business
Indonesia ranked 166th on the World Bank’s rankings, and this can be attributed to a few reasons. One of the main ones is the multiple loops you have to go through before being able to lawfully operate a business in the country. The average number of procedures needed to start a business in other countries of the OECD is 5. The number is 9 in Indonesia.
This is why you won’t be able to start or run a business in Indonesia without someone who has a solid understanding of the local system, especially when it comes to employment. You should start looking for an Indonesia PEO right now if you ever intend to set up shop in the country. A PEO like New Horizons Global Partners will handle all recruitment and employment responsibilities for you. They will be able to help you draft employee contracts and benefits. And they’ll do all of this without you having to go through the arduous process of establishing a second entity in the country.
If you were thinking of building a facility for your business in Indonesia or getting in the development business, good luck. First of all, development is largely inaccessible to foreigners, and building permits take a lot of time in the country. As a matter of fact, getting a construction permit in the country can take over 150 days and a grand total of 13 procedures.
Another thing that will surprise many investors is how much it costs to have certain amenities installed, like electricity for instance. The cost of having electricity installed is way higher than in other countries of the OECD. You first need to get a Guaranteed Electrical Installation Certificate, then a Certificate of Operation Worthiness from the National Electrical Contractors Association. This is not even counting the extra costs for manual labor.
Benefits of Doing Business in the Country
However, there are a few benefits to doing business in the country. First, it has a great geographical location that places it right in the middle of the APAC, which gives it direct access to the Chinese, Southeast Asian, South Asian, and Australian markets. It also has one of the strongest investor protections in the world, which makes it a good option if you were intending to enter into a partnership with a local.
Starting a business in Indonesia is not for the faint of heart, but is still a country that offers tons of opportunities for savvy investors with a plan. Make sure that you speak with someone with boots on the ground first and take the steps necessary to get prepared for the reality of doing business in the country.