As the largest economy in Southeast Asia and the fourth-most populous country in the world, Indonesia’s market offers opportunities across many sectors. With rising disposable income levels, Indonesia’s growing middle class has a growing interest in products and services imported from abroad.
In order for U.S. companies to successfully enter the Indonesian market, it is advisable to find and appoint local partners to represent their products. It is highly recommended that U.S. companies visit and have face to face meetings with prospective partners and conduct due diligence in person when possible. Appointments with representatives require care since it may be difficult to terminate an unsatisfactory relationship and form a new relationship.
Developing an understanding of Indonesian culture and local consumer preferences is a key factor for success. Patience, persistence, and presence are three key ingredients for success in Indonesia.
Important factors affecting purchasing decisions in Indonesia are pricing, financing, technical skills, and after-sales service. Firms should be prepared to invest in training for their local staff, from entry-level personnel to experienced managers.
Indonesian non-financial firms often depend on trade financing and obtain nearly 50% of their financing from abroad via loans, bonds, and other forms of credit. The Export–Import Bank of the United States, the official export credit agency of the U.S. federal government, often provides working capital and loan guarantees to U.S. companies exporting to Indonesia. The United States International Development Finance Corporation is the U.S. federal government’s development finance institution and provides secure financing opportunities to U.S. firms planning to invest in the Indonesian market.
Although it is possible for U.S. companies to sell directly to the government and state-owned companies, local agents or distributors are often critical (and at times, required by law) for successful project development and delivery of products or services. Many government tenders are awarded based on the proven track record and relationship of an agent or distributor with the government agency.
In early August 2021, President Jokowi officially launched the Online Single Submission (OSS) System, a web-based platform for issuing business licenses to facilitate micro to large entrepreneurs. The hope was that through the OSS System, the business licensing would be adjusted to the level of risk, thereby improving the ease of doing business in Indonesia. Jokowi said he would continue to cut regulations that could hinder business and investment licensing, warned against graft and called for transparency between government officials and entrepreneurs in the process of obtaining business permits. At the same time, Investment Ministry/Coordinating Board of Investment (BKPM) and Finance Ministry inked a memorandum of understanding (MoU) to increase investment and national revenue as well as foster institutional strengthening. The Minister of investment said that the MoU was a form of collaboration between the ministries to expedite business licensing, and to ease the flow of investment into the country.