Help Celebrate Indonesian Independence Day with a new look at the Indonesian market

Take a new look at Indonesia

 

August 17th was Indonesian Independence Day and celebrates Indonesia’s emergence as an independent State at the end of World War II. Although there have been ups and downs over the past 65 years, including an attempt by the Dutch to reinstate colonial rule, Indonesia has emerged as one of the strongest economies in the Asian Region, and arguably the most promising economy in the world. In my role as the South Australian Chairman of the Australia Indonesia Business Council I had the opportunity to attend the formal reception at the Indonesian Ambassador’s residence in Canberra on August 17th, and what a reception it was…. The warmth that was accorded to both the Indonesian hosts and  conversely the international guests was amazing. Indonesia has truly emerged as an important player in the Asian region and hundreds of guests were there to help Indonesia celebrate. In Australia, businesses are starting to once more look to Indonesia for growth opportunities, and it is indeed a market to consider if your business is looking to engage with Asia. But why is Indonesia such an attractive Market?  

Indonesia has since Independence attempted to diversify its economy, through development of manufacturing and new industries, to compliment the traditional focus upon agriculture and oil and gas revenues. However when we look at the major exports from Indonesia we can see that Oil and Gas is still the major export product accounting for approximately 90% of exports to Australia for example. This export figure is replicated across Indonesia’s other major trading partners. Indonesia does not have the same trade profile as China, and we will rarely see cheap toys and textiles with ‘Made in Indonesia’ printed on them. This does not mean that there are no manufacturing opportunities in Indonesia, because there are, and there are also agricultural opportunities and mining opportunities for international Businesses. Indonesia is a land of increasing opportunities.  

Indonesia is close to established International Shipping Channels and destinations such as Singapore

 

As a resource base Indonesia is growing with investments from all the major global miners, and these mining operations all need crucial technical and service support, and Australian companies have jumped into the void to help the Indonesian partners supply this need. As a manufacturing base, Indonesia has many advantages. Firstly, the government is keen to expand and encourage foreign investment in manufacturing in Indonesia, while for manufacturers looking for a location close to existing distribution channels, Indonesia could not be a better location. Indonesia is a stone’s throw from Singapore the major through port for trade from east to west and north to south. In fact, most trade between China and Australia, and China and Europe will pass through Singapore. Think of the time advantage from manufacturing in Indonesia, instead of China, there is a potential saving of 10 days or more in transport time alone.  

Indonesia is also a strong market in its own right, with economic growth in 2010 above 5%. This is great in anyone’s language, and the strength in the Indonesian economy has seen its credit ratings rise to BB+ ratings, which is a good result for an emerging economy. The Indonesian domestic market is moving in the right direction and many Australian and global MNC’s are taking advantage of these strong market conditions. Finance, banking, mining, manufacturing, automotive and service industry companies are all moving into the Indonesian market to reap the rewards on offer. With a population in excess of 245 million people and growing, Indonesia has a large domestic economy and labour force ready for foreign investment. So when you are considering investing in a new international market in Asia, seriously consider Indonesia. It is perfectly positioned to be a springboard of success for you company into Asia and beyond.  

If you would like more information on the market opportunities in Indonesia, consider joining the Australia Indonesia Business Council (www.aibc.com.au), who can help your business with the networking, advocacy and business tools to succeed in the new emerging Indonesia.

Indonesia: 2000 years new and a land of business opportunity…if you are prepared for the challenges

Build your Business in Indonsia

Indonesia is the string of islands to the north of Australia, and has long had issues with dealing with foreigners. These foreigners have been the Chinese traders who have been in the area for millennia, the Indian and Arab traders who have brought with them the various religious belief systems that are common to the islands, or the Dutch and other European colonists who have had a trading hold over Indonesia in recent centuries.  These tensions developed further during the battles for independence from the Dutch, and the subsequent political upheaval over various periods of the past 60 years.   These issues have been around for more than 1500 years, but have over this time not inhibited trade through the region for very long. Indonesia is at the epicentre of trade between East and West, it is a stone’s throw from Singapore, and forms a nexus between India and China.  

The past decade in Indonesia has seen a transformation in the governance in Indonesia, and has just started to settle down, with President Yudhoyono, recently elected to a new term.  Indonesia skipped through the GFC with little negative impact and maintained positive economic growth during 2008, 2009 and has seen increased forecasts of growth for 2010. The time is ripe to re-engage with Indonesia in a business sense, and take advantage of the opportunities.  In recent months the Australian and Indonesian governments have commenced working on a free trade (FTA) agreement which has the potential to create increased business opportunities in Indonesia for Australian Businesses. As with any FTA, the negotiations will take months to years, but in the mean time Australian businesses have recently gained improved trade conditions with Indonesia as part of the expanded ASEAN free trade area that has commenced in 2010. Notwithstanding these improved investment and trade conditions in Indonesia, there are still many challenges that need to be effectively navigated if investment into the Indonesian market is to be a success.

It is important to remember that Indonesia is an ethnically diverse society, with each island (there are approximately 18,000 of them) having their own cultural traditions. Add to that the influence of the Ethnic Chinese, who have been trading in Indonesia for the past 1000 years, you can see the impact culture has on how you conduct business in Indonesia. You need to know who you are doing business with, Javanese, Balinese, Sumatran or Chinese Indonesian (or any of the other ethnic groups that exist throughout the islands).

Generally speaking Indonesia has a peaceful and gentle culture, and this translates into the conduct of business. Explicitly aggressive behaviour is not displayed, and they will expect a similar calm and gentle approach from anyone with whom they are negotiating.   It is important to remember that Indonesia is a society that is based upon religion and the majority of the population are Muslim, which means that as a rule, they don’t drink alcohol, don’t eat pork, and will be accommodating of any guests they host. So don’t confuse hospitality and friendly behaviour as a sign of a successful business deal. It is said that there are three types of ‘yes’ in Indonesia which actually mean: No, maybe but probably No, and Yes. It is critical that when doing business in Indonesia that you observe all non-verbal behaviour to help ensure you can identify what the true response has been. Rarely will you be told No.

Be aware of the cultural nuances when conducting business in Indonesia

The Ethnic Chinese in Indonesia however can be a different story, and although influenced by the Indonesian culture in which they live, they exhibit behaviours much more in common with the Chinese in Singapore, Malaysia, Hong Kong and China. Relationship building is critical to business success, and it is much more likely that the business relationship may develop over a dinner banquet or a game of golf. Although aggressive behaviour is rarely displayed, you can expect dealings with Ethnic Chinese Indonesians’ to be much more assertive and forthright than with the ethnic Indonesians.

Now, don’t get me wrong there are other challenges other than the cultural issues when entering the Indonesian market and you will need to consider the legal issues and non-tariff barriers that can be a hindrance to trade.  But you need to consider the cultural nuances of trade first if you are to even contemplate success in Indonesia. Just remember the facts – Indonesia is the 4^th largest country by population, with over 235 million, and it is Australia’s closest neighbour. Entering the Indonesian market is full of bureaucratic complexities and cultural challenges, but the business rewards can be very large if you are culturally aware and have patience.