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Doing business in indonesia

Doing business in Indonesia  

This year, Indonesia is expected to see between 4.5-5.3 percent growth supported by growth in commodities, infrastructure, tourism, and manufacturing. With this, we safely say that now is the best…

This year, Indonesia is expected to see between 4.5-5.3 percent growth supported by growth in commodities, infrastructure, tourism, and manufacturing. With this, we safely say that now is the best time to establish a startup company in Indonesia. These days, startups are also commonly associated with advanced usage of technology in their operations, more specifically the use of the internet as a means of distributing their products or services to their target market.  

Doing business in Indonesia 

In Indonesia, startups have emerged as the biggest players and it’s not an overstatement to call them the anchor of the country’s economy. The fact that currently, Indonesia has 9 startups successfully reaching unicorn status (valued above USD 1 billion) and 2 startups reaching decacorn status (valued above USD 10 billion). This means that Indonesian startups have managed to put the country on the map and go toe to toe with the biggest startups in the world.  

For foreign investors, doing business in Indonesia is an exciting prospect. In this article, we will discuss reasons for foreigner should consider setting up business in Indonesia  

Why Do Business in Indonesia? 

1. Size of Indonesia’s Economy and internet users  

Indonesia’s internet economy is currently thriving, growing with an average rate of 49% since the year 2015. These numbers have positioned the country as the biggest internet economy in Southeast Asia. Projections say that the valuation of Indonesia’s internet economy will pass USD 130 billion by 2025.

Among the big players in this sector are e-commerce, online travel, online media, and ride-hailing. The glooming effects of the pandemic doesn’t seem to affect the Indonesian startup landscape. Investors are still quite comfortable injecting their funds to Indonesian startups. 

Moreover, Indonesia is focused to build more infrastructure projects across the country. In 2019, current Indonesia President, Joko Widodo announced of relocation Indonesia new capital from Jakarta to East Kalimantan and the plan to move its capital will open up new opportunities for foreign investors. The new opportunities include better infrastructure, transportation, electricity, power plants, schools, education, hotels, properties and etc.    

Indonesia’s first high-speed train

Indonesia, first high-speed train is set to operate by August 2023. This will make travel between Jakarta and Bandung much faster.  

According to DailySocial, there were 71 funding transactions involving startups in Indonesia during the second quarter of 2022, with a valuation estimated to exceed USD 1,4 billion. In terms of the nominal, it recorded USD 300 million increase from the previous quarter.  

Furthermore, it is also reported that around 17 Indonesian startups received more than USD 50 million funding during this period. These numbers highlight the immense potential of the Indonesian startup ecosystem. 

According to 2022 report by DS Innovate, Indonesia boasts an amount of 204 million active Internet users, that accounted over for 73% of the population. With approx. 280 million of population, investing in Indonesia and counting on the usage of the internet to advance their operations, it is not surprising that Indonesia emerged as a huge market for those startups to reach customers nationwide.   

2. Indonesia’s government programs

When you’re establishing a startup in a foreign company, the local government will always be an important stakeholder. Upon your startup’s inception, you must be sure to follow all the laws and regulations. In Indonesia, the government does not just sit back and watch, but rather offers support for emerging startups.

In the first parts of this article, we mentioned the amount of decacorns and unicorns in Indonesia. These details were brought up by the President of Indonesia Joko Widodo in his annual speech in front of the People’s Consultative Assembly. In his speech, the President also reaffirmed his government’s commitment to fully support up and coming technology-based startups.  

Through numerous Ministries, the Indonesian government also made real efforts and programs in support of startups in the country.  

3. Untapped business opportunities in Indonesia  

Around the world, startups are hugely successful because they typically serve one purpose: to solve real life problems. In Indonesia, that is also the case. Ride-hailing startups like Gojek were built upon the people’s need of vehicle options that can be summoned anytime and anywhere. That being said, it is fair to conclude that the key for successful startups is to know exactly what problem they are trying to solve. In Indonesia, many startups are already established to solve recurring issues, but problems are still persist.  

The potential opportunity in tackling poverty, education, traffic jam In Indonesia, especially in Jakarta. It has become a common sight that has been going on for years with seemingly no solution in sight. On the way to and from work, the traffic will be so jammed that it’s taking hours off people’s lives on the road.  

All these problems have one thing in common:  opportunity for startup in Indonesia with the capabilities to tackle and solve these problems.  

4. Low cost of living in Indonesia 

As a lower-middle income country, the cost of living in Indonesia is substantially lower than Western countries. Living in Jakarta, the capital city, is 60% cheaper than living in New York or London, 40% cheaper than living in Berlin, and 50% cheaper than living in Melbourne. Compared to its neighbors, living in Jakarta is over 50% cheaper than living in Singapore. You can find accommodation at very cheap prices, apartments and hostels prices vary and lots of options are at your disposal. This is especially with the emergence of accommodation mobile applications. Eating out is also very affordable. With less than 10 USD, you can easily afford 3 meals per day. 

In terms of establishing a startup, the usual foreign company. In terms of workplace, the common choice is to rent separate office spaces in buildings. Recently, the emerging trend for foreign company including local is to use co-working space instead of renting and paying yearly advance rental cost. Using co-working space is more cost-effective than traditional office spaces. For investors, cost of living is also an important thing to consider. With significantly lower cost of living and hiring cost, you can lower the cost of your business expenses and achieve better of return of setting business in Indonesia.   

5. Young, dynamic and hunger for success talents  

With the country expected to become the biggest online economy in the region by 2025, the demand for high quality talents in the startup industry has risen higher than ever. New and emerging fields like AI, DevOps, data and programming are becoming popular discourse and young talents with these skills on their repertoire are also increasing. 

If you establish your startup in Indonesia, you will have the opportunity to recruit local talents with soft and hard skills. Most common are in fields like e-commerce, data analysis, fintech, and machine learning. Furthermore, it is worth noting that top universities in Indonesia are now implementing the Kampus Merdeka program. In this program, final year students have opportunity to do an internship that relates with their majors. Many of these students chose to do their internships in startups. With this type of program, it is hoped that the best young talents in Indonesia will be accustomed to the work culture of highly performing startups. Students are also encouraged to take up an academic exchange with overseas university.  

Summary : 

Indonesia is a growing country in Southeast Asia and with the largest population. With the development of high-speed train, relocation of capital, untapped business opportunity, low cost and young talents – the business will have lots of opportunities doing business in Indonesia.   

If you decide to start doing business in Indonesia, contact us and a business consultant will assist to handle your questions for setting up company in Indonesia, including obtaining necessary licenses and permits. 

Aura Partners is a consultancy firm and will help you to navigate the process with ease offer all the services you could possibly need starting from company establishment up, accounting, payroll and Indonesia tax filing. 

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