PHOTO: IFAN BIMA/UNSPLASH.COM
Indonesia is ASEAN’s largest country spanning a population of 270 million people and a land area of 1.9 million square kms, that is almost five times the land area of Norway. The country is spread across the Equator and some 17,000+ island, the largest being Sumatra, Java, Borneo/Kalimantan (shared with Brunei and Malaysia), Sulawesi and Papua (shared with Papua New Guinea). Being an island nation, the country is heavily dependent on marine transport and fisheries as a food source, much like Norway.
Indonesia through its sheer size, has a huge domestic market with a growing middle class starting to become affluent and thereby an increasing desire for foreign goods and brands as well as foreign travel. The GDP/Capita was USD 4,200 in 2020, that’s well above other ASEAN countries like the Philippines and Vietnam.
The country is abundant with natural resources like oil and natural gas and in addition, coal, tin, copper, gold, and nickel. Agriculture produces are rice, palm oil, tea, coffee, cacao, medicinal plants, spices, and rubber.
Norway was one of the first countries to recognise Indonesia’s independence in the early 1950’s and since that time the relationship and cooperation between the two nations has grown substantially, especially in the sectors of energy, marine and fisheries.
According to the Oslo Chamber of Commerce “the strengthening of economic relations between Indonesia and EFTA states, particularly Norway, through a Comprehensive Economic Partnership Agreement (IE-CEPA) will enable two-way trade and investment to be intensified and diversified. And, as trade and investment increases, so too do opportunities for large, small and medium-sized enterprises. Positive investment conditions encourage innovation, strengthen competition, support job creation and raise living standards. A Comprehensive Economic Partnership Agreement helps to pave the way for stronger economic relations and sustainable prosperity for the people of Indonesia and Norway, resulting in a steady increase in the value of bilateral trade.
In 2020, Indonesia’s exports to Norway was a modest NOK 1.7 billion with the main commodities being apparel and footware, while Norway’s export to Indonesia stood at NOK 1.9 billion with seafood and fertilisers being the main commodities. However, the seafood exports to Indonesia came to a standstill in March 2021 due to problems with regulatory approvals. At the time of writing the Norwegian authorities are in dialogue with Indonesian authorities on the matter.
The World Bank sees Indonesia as one of East Asia Pacific’s most vibrant democracies and the largest economy in Southeast Asia, recording impressive economic growth to become the world’s 10th largest economy in terms of purchasing power parity and now a member of the G-20.
Indonesia follows a 20-year development plan, which began in 2005, and is divided into 5-year medium-term plans, called the RPJMN (Rencana Pembangunan Jangka Menengah Nasional) each with different development priorities. The current medium-term development plan ends in 2024 and aims to further strengthen the economy by improving the country’s human capital and competitiveness. Unfortunately, this has been negatively impacted by the COVID-19 crisis, which has forced the government to implement emergency fiscal packages equivalent to 3.8% of GDP in 2020 and to 4.2% in 2021 to deal with the health impact, provide relief to households and firms, and support the vaccine roll-out as well as the recovery, say The World Bank. But despite these setbacks, there are still significant business opportunities for Norwegian companies and investments in Indonesia and the future for both countries and their continued cooperation looks bright.
Indonesia is a rapidly growing investment hub with a rising global profile and exciting opportunities for Norwegian companies, particularly because of the collaborative history between the two nations.
An abundance of natural resources, a young and technically trained workforce as well as a significant and rapidly growing domestic economy support Indonesia’s commitment to the growth of green and sustainable industries, backed by ambitious carbon neutrality plans and substantial stimulus packages. According to Bain & Company, these commitments not only benefit the climate and wellbeing of Indonesia’s people, but they are estimated to generate more than USD 1 trillion in annual economic opportunities by 2030.
As mentioned above, the sheer size of the Indonesian economy, estimated at USD 1.2 trillion in 2021 coupled with a huge domestic market, should make Indonesia an interesting country for businesses in many sectors.
Over 20-international airports across the Indonesian archipelago service visitors from over 100-different countries, making it very accessible for tourists and business travellers alike.
In 2019, Indonesia’s primary international hub, Jakarta’s Soekarno-Hatta International Airport, served around 70 million passengers and Bali’s Ngurah Rai International Airport handled 24 million visitors. Additionally, there are more than 100 – international schools catering largely to expatriate families in Sumatra, Java and Bali; the majority of which use British or American curriculums. However, it must be kept in mind that local business and social cultures present unique challenges to foreign investors looking to make their mark in Indonesia. Gaining insight into the inner workings of businesses and the people here can greatly increase one’s odds of success in this emerging market.
1. Subtle & indirect communications
2. High sense of pride
3. Strong personal connections
4. Importance of communal opinions
5. Importance of appearances
Starting a business in Indonesia typically require 11 procedures, takes 10 days and costs approximately 5.7-percent of income per capita, which savvy investors know is very efficient when compared to the averages across East Asia and the Pacific. Tax rates in 2021 in Indonesia are generally a flat rate of 22 percent, which is slated to be reduced to 20 percent in 2022. Small enterprises with an annual turnover of less than IDR 50 billion (approximately NOK 30 million) are entitled to a 50 percent discount of the standard tax rate and enterprises with a gross turnover of less than IDR 4.8 billion (approximately NOK 3 million) are subject to a final tax of 0.5-percent of the turnover.
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