Indonesia is Worth a Close Look
February 06, 2017 7:57 PM
Indonesia is the eighth largest economy in the world. Though not yet a middle income country, it has a large middle class that can afford imported goods. There is considerable demand for U.S. and European technology and expertise.
Indonesia is Southeast Asia’s largest economy with a GDP of $861 billion in 2015, over five percent growth over the last decade. New political leadership vows to improve infrastructure, diversify the economy, and reduce barriers to doing business with the hope of increasing growth to 7 percent by 2017.
Indonesia is the largest Muslim country in the world with 255 million people. It has the world’s fourth largest middle class with more than 17 million households and may grow to 20 million households by 2030. Indonesians are enthusiastic users of social media with more than 60 million people on Facebook.
Business activity, including exports and imports, have dipped recently, partly due to the slowdown in China and declining global commodity prices. For U.S. businesses there are many good opportunities. Indonesian consumers appreciate U.S. agricultural products and demand is growing, even with the strong U.S. dollar and high shipping costs.
There are also good opportunities in aviation, IT, power generation, clean energy technology, health equipment, infrastructure and many other sectors.
Success over the longer term requires going there and selecting a good distributor or partner. Geographically, the country is a series of islands, representing micro markets. Conditions in Bali are different than in Sumatra. So it’s better to start in one place, and usually, but not always, that place is Jakarta, the bustling capital. The international airport is sleek, efficient and uncrowded. Then you step out the door into a hot and humid evening, and waiting to great you is one of Asia’s most crowded and chaotic megalopolises.
Help getting going
This is why help from your embassy is so critical. You can’t parachute into here expecting things to fall into place here. Without knowledgeable help, you’ll quickly get overwhelmed by the traffic and noise of a city and country on the move. Your embassy can usually arrange meetings with pre-screened buyers who’ve expressed an interest in your products and serving as your distributor in the country. The embassy commercial officers will also recommend hotels, a car and driver, and an interpreter if needed. They will accompany you to meetings and advise you during the process. If a local lawyer is needed to complete an agreement, they can arrange that to. Fees for this services vary, but some are free and others are charged on a costs recovery basis.
An alternative route is to use a distributor in Singapore to sell your goods. Singapore has had a long and mutually successful relationship with buyers in Indonesia. Goods transshipped via Singapore are duty free, and you Singapore distributor will take care of everything. You’ll pay a commission, which still might be better than trying to do it yourself. Australia also has good trade relations with Indonesia, and at its southern most part is very close to the northern city of Darwin.
In summary, Indonesia isn’t any easy market. It was to be part of the TPP, but the U.S. pulled out of the deal and its fate among the remaining countries is at this writing unknown. The agreement would have made Indonesia more accessible to the other member countries, including the U.S. Still, it’s hard to overlook the demographics—and as your Asia strategy develops, Indonesia should be part of it.
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