Doing business in Indonesia is quite difficult because the mentality and traditions of this country are markedly different from those to which we are accustomed. This applies to both interpersonal communication and contacts with government institutions and services. How to find a free niche in a highly competitive market and is it possible for a company to securely gain a foothold in it “from the outside”? How difficult is the SNI / BPOM product certification procedure and what needs to be done to obtain the corresponding document? What are the basic rules for customs clearance?
Business in Indonesia: a promising market or the outskirts of civilization?
It is impossible to say seriously that the largest economy in Southeast Asia, which demonstrates stable growth rates, is a “suburb”. The jurisdiction with a population of 266 million people is not yet among the world leaders, but many experts argue that this moment will not belong.
The potential market capacity is truly huge, so doing business in Indonesia will certainly be profitable, especially if it is focused on the manufacturing sector. It is also worth considering that about 60% of local products are consumed here, so there shouldn’t be any problems with the sale.
Please note that the entry threshold, which is still quite low, will soon rise significantly. In this regard, the example of Singapore and Hong Kong is very indicative, which is 30-40 years broke into the elite club of world leaders. At the very beginning, very little money was required to open a company there. Now the situation is completely different. Therefore, if your intentions are serious, it is not worth dragging out too much time.
Business in Indonesia: how to enter the market?
- Self-service entry into the market
The classic option assumes a full-fledged registration of the company. It can be quite costly, but this way you get the freedom of action and yourself determine the next steps in full.
Steps to take:
- Company registration.
- Opening a bank account.
- Office arrangement.
- Hiring employees.
- Warehouse rent (optional).
- Building and debugging a business chain.
- Search for suppliers and partners.
- Formation of a distribution network (optional).
- Organization of partnerships with local companies
This scheme assumes that business in Indonesia will be conducted through partners. Consequently, the level of initial and current ones will decrease slightly, but the success of your company will largely depend on the qualifications of local firms that will represent your interests.
- Determination of the list of potential partners, suppliers, distributors, and buyers.
- Adaptation of the business scheme to your requirements and wishes.
- Organization of the negotiation process, the beginning of a dialogue with the main partners.
Exports to Indonesia in 2021: options to go to market
We assume that you have already calculated the potential risk, identified the most competitive products, and are ready to arrange regular deliveries. This, of course, should be done first. But then the question arises – how exactly to enter the market. If we discard exotic schemes of dubious legality and focus exclusively on legal options, there will be two of them:
- Direct exit. You work in Indonesia in your retail stores, or you distribute products through existing retail chains on behalf of your company. This way you will retain complete control over all business processes and will be able to get the maximum profit. This method also has disadvantages. These are quite significant financial costs and difficulties with the execution of all documents (we recall that foreigners can only own companies in the PT PMA format in Indonesia).
- Exit through a distributor. You will officially work in the market of the jurisdiction with the help of an intermediary who will deal with imports and direct sales. The undoubted advantage of this method is the significantly lower initial costs. But you must clearly understand that such a scheme will reduce profits and the degree of control over the business.
- Another option is to use a nominee service. It allows you to combine the advantages of the previous schemes, but in this case, the business will be conducted solely on trust since such opportunities are not spelled out in the corporate legislation of the jurisdiction at all. They are not illegal, but in the event of a conflict, the rights to the company will belong to the persons specified in the statutory documents.