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uk/government/publications/overseas-business-risk-
indonesia/overseas-business-risk-indonesia#political
http://country.eiu.com/Indonesia
https://factsofindonesia.com/social-factors-effecting-business-in-
indonesia
1. Political
Indonesia is the world’s third largest democracy, the largest economy in southeast Asia, and the the
only member of ASEAN in the G20. It is a role model for a successful political transition. Indonesia is
stable politically and has a Presidential system of democracy. A comprehensive push for
decentralisation has seen much power transferred to the regions.
President Joko Widodo took up office on 20 October 2014. He is the first leader of Indonesia to come
from outside the political and military elite. The next Presidential election is due in 2019 (April 17 th)
Parliament is constituted by the House of Representatives and the Regional Representational Council.
The House of Representatives contains members from 10 different political groupings. The Regional
Representational Council includes representatives from each of Indonesia’s 34 provinces.
Laws are passed by Parliament or by Presidential decree. A Presidential decree must be confirmed by
Parliament for it to take effect.
2. Economic
Indonesia, has a GDP of US$1,016 billion in 2017 and is ranked 16th globally, making it in 2017 the
largest economy in southeast Asia and larger than that of most EU countries. Average annual
economic growth of 5.1% over the last 5 years has reduced unemployment (from 7.1% in 2010 to 5.4%
in 2017) and the poverty rate (from 13.3% in 2010 to 10.12% in 2017). The economy expanded by
5.07% in 2017 (yearonyear). Growth is on an upward track, as GDP grew by 5.06% in the first
quarter of 2018 (compared to 5.01% in quarter one of 2017), largely supported by 7.95% growth in
investment (quarteronquarter).
There is a strong push for a more investment and export oriented growth as in 2017 domestic
consumption (54% of GDP) was already high. Investment grew by 7.27% and export grew by 8.5%
(yoy) supported by rising commodity prices. The Indonesian economy is heavily dependent on natural
resources and extractive industries, and the government wants to increase the share of manufacturing
exports and processed commodities.
Inflation is stable, with the central Bank of Indonesia maintaining an inflation target of between 3 5%.
Bank Indonesia cut its policy rate twice in 2017 (currently at 4.25%) on the back of low inflation, a
narrower current account deficit and a more stable currency. However, there may be pressure to
increase the interest rates in the near future as the rupiah weakens against the dollar in light of the
changes in the US economic policy.
In terms of fiscal policy, the Government deficit for 2017 was within the mandated 3% limit.
Government revenues yield some 11% of GDP; low by comparison to its regional neighbours, limits
fiscal headroom to pursue growth enhancing spending. Improvement in tax administration and
reducing informality in the economy are key factors to collect more tax revenue. Fuel subsidy reform
has improved public spending capacity to boost growth. But it is uncertain whether this reform can be
sustained if oil prices increases.
Indonesia is a country with more than 17,000 islands so logistics can be a challenge. Infrastructure
development has been high on President Jokowi’s agenda as over the years, 19% of government
spending is dedicated to infrastructure spending. Geographical barriers also accentuate regional
disparity and income inequality. Almost 60% of GDP are generated on Java Island. Gini coefficient
rose from 0.37 in 2007 to 0.39 in 2017 which has the potential of creating social tensions, tackling
inequality has been high in President Jokowi’s agenda. He has introduced various social protection
programmes including a conditional cash transfer programmes and health programmes.
With a population of 265 million people, Indonesia represents a large market with a GDP per capita of
US$3570. Between 20302040, it is predicted to have a “demographic bonus” as the people of
productive age will represent 64% of the population. However, Indonesia needs to improve its labour
market outcomes. Despite low unemployment rate (5.5%), Indonesia’s has high rates of informality in
the labour market, low female labour participation rate (50.73%) and high youth unemployment
(20.44%). Indonesia has committed 20% of the government budget on education in order to turn these
challenges into opportunities. Indonesia has stringent labour laws and reforming it is a politically
sensitive issue. Onerous severance payments for permanent workers and restrictive dismissal
procedures encourage informality. In certain provinces, rapid increases in minimum wages are not
associated with productivity.
Indonesia is an open economy, but high dependence of foreign portfolio inflows (foreign investors
account for nearly 40% of tradable Indonesian government bond ownership and 40% of trading value
on the stock exchange), and reliance on commodity exports make it vulnerable to global economic
developments notably US economic policy and the declining demand from China.
The recent decision to increase foreign ownership in several sectors and to open up sectors previously
closed to foreign investors has sent a positive signal for greater openness in the future. Despite a
commitment from the President and some of his Ministerial Team to a proreform, profree trade
agenda, there are still many challenges faced by foreign investment and imports.
A complex and dynamic legal and regulatory environment can present challenges for business.
Although well intentioned, Indonesia’s 16 economic reform packages have had mixed reviews: some
positive elements have simplified business licensing and cut red tape (contributing to the improved
Ease of Doing Business ranking from 91 to 72). But with many of the recent reforms having focused
on the relatively easier, “quickwin” activities, further progress will require a greater focus on more
challenging structural and longerterm reforms.
Indonesia has considerable growth potential for foreign businesses, despite existing challenges, and
those that are present generally achieve good returns.
3. Human rights and business
Indonesia was the first Asian country and the fifth country in the world to ratify all core International
Labour Organisation (ILO) Conventions. Since becoming a member in 1950, Indonesia has ratified a
total of 18 ILO conventions. Domestically, laws have been passed which have specific provisions
referring to human rights and business including the 2007 Corporate Law which imposes mandatory
duties on every limited liability corporation working directly or indirectly with natural resources to
limit the environment and social impact of its activities.
There are a number of institutions responsible for human rights issues related to business. These
include, but are not limited to, the National Human Rights Commission (KOMNAS HAM);
Ombudsman and the Corruption Eradication Commission (KPK). KOMNAS HAM has stated that the
main human right issues related to business are ownership of property and land, indigenous people’s
rights, environment, health, water and labour rights. In 2016 KOMNAS HAM received 1030
complaints involving corporations, a slight increase from previous years.
Trade unions are legal and active in Indonesia, but only represent a small proportion of the total
workforce. Strikes and demonstrations do occur, for example on Labour Day and often over pay and
working conditions. There is a statutory minimum wage which differs by province, but there are issues
with compliance and enforcement of this.
Child rights are protected according to the constitution and several national laws. For example, the
Manpower Act sets the minimum age for work at 15 and the minimum age for hazardous work at 18.
The Act also permits light work for children between ages 13 and 15, as long the work does not disrupt
their physical, mental and social development.
The Indonesian government has also stated that ratification of the Optional Protocol to the Convention
on the Rights of the Child is a priority. However, child labour is prevalent in Indonesia, particularly in
informal employment and in the agricultural and domestic service sectors. Girls under 15 are often
employed as domestic workers, sometimes with long hours and no holiday.
Women make up approximately 2 fifths of the employed population in Indonesia; however, they are
disproportionately represented in certain occupations, for example in the informal economy, and as
unpaid family workers. Women are significantly underrepresented in senior professional positions but
there has been some recent progress demonstrated by an increase in women’s participation in politics
and management. This gap is largely because of cultural and social barriers, education attainment and
lack of work experience. The National Commission on Violence against Women states that there are
421 local byelaws which intentionally or in practice discriminate against women.
4. Bribery and corruption
In addition, commercial organisations carrying on business in the UK can be liable for the conduct of a
person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK.
In such a case it would not matter whether the acts or omissions which formed part of the offence took
place in the UK or elsewhere.
In addition, commercial organisations carrying on business in the UK can be liable for the conduct of a
person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK.
In such a case it would not matter whether the acts or omissions which formed part of the offence took
place in the UK or elsewhere.
Corruption remains a challenge for Indonesia and acts as a major deterrent to business and investment.
Bribery and bribing public officials is against the law in Indonesia and the Indonesian Government is
publicly committed to tackling all forms of corruption. The Corruption Eradication Commission (KPK)
not only monitors the potential of political corruption, but also interactions between companies and
their staff and government officials related to the delivery of public services, such as the issuing of
business permits or provision of other business documentation. The Government of Indonesia has
streamlined licensing procedures and transitioned to online systems to reduce the potential of illegal
payments. However, corruption remains a regular feature of business life.
Indonesia is ranked 96th in Transparency International’s Corruption Perception Index (CPI) for 2017
with a CPI score of 37, a significant improvement from 2014 (107th), though this was a slight drop
from 2016 (90th). The large scale decentralisation of government since 2000 is thought to have
increased corruption despite a Presidential push to reduce it. President Jokowi has also promised to
make tackling corruption a priority and he has a proven track record on this in his previous roles as
Governor of Jakarta and Mayor of Solo.
Indonesia´s rank in the World Bank Ease of Doing Business (EDOB) has improved to 72 out of 190
countries in 2017 from 91 out of 189 in 2016. The government claimed the sharp improvement was the
result of streamlining its licensing procedures and delivering more services online. Indonesia’s
progress is among the most improved economies in the region compared to Malaysia (dropped by two
positions) and Philippines (dropped by 14 positions). President Jokowi’s target is for Indonesia to
achieve 40th by 2019.
Read the World Bank’s more indepth publication on the issues of Doing Business in Indonesia 2017.
Foreign businesses should be aware that the risks of encountering bribery or attempted bribery are
relatively high in Indonesia. Visit the Business AntiCorruption portal for advice and guidance about
corruption in Indonesia and some basic but effective procedures you can establish to protect your
company from the corruption risks.
Read the information provided on our website on bribery and corruption.
5. Terrorism threat
Please read the information provided on the terrorism page of the FCO travel advice.
6. Protective security/organised crime
Please read the information provided on the safety and security page of the FCO travel advice.
7. Intellectual property
Intellectual Property Rights (IPR), as intangible assets, are a key factor in the competitiveness of your
business in the global economy. IPR can protect your innovation from competitors and can also be an
important source of cash flow though licensing deals or selling Intellectual Property (IP). IPR
infringement can lead to loss of business, revenue, reputation and competitive advantage unless you
take steps to protect your IP both in the UK and abroad.
When exporting to Indonesia, it is essential to register your rights in Indonesia as soon as possible in
order to be able to defend and enforce them. IP rights are territorial in nature which means that
registrations in the UK or another country’s jurisdiction are not automatically enforceable in others.
Indonesia has been a member of the World Trade Organisation (WTO) since 1995. Indonesia is also a
signatory to a number of international intellectual property (IP) treaties administered by the World
Intellectual Property Organisation (WIPO):
signatory to the Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPS)
– sets the international standards for various aspects of IP
the Paris Convention – protection of industrial property
the Berne Convention – relating to the protection of copyright
the Patent Cooperation Treaty (PCT) – provides for a common patent filing system
the Madrid Protocol – protection of marks in the territories of the System’s other members
Indonesia has accordingly enacted laws covering patents, copyright, trademarks, industrial designs
trade secret, plant varieties, integrated circuits and traditional knowledge to implement its obligations
under the international treaties.
Please find here a full list of WIPO references to Indonesia.
Generally speaking Indonesia’s IP legislation is comprehensive and in accordance with international
standards, however two challenges remain: lack of public awareness of IP and lack of law enforcement
IP infringements. Those mechanisms still need to be strengthened.
7.1 IP top tips for businesses
be aware of ‘bad faith’ registration of trade marks (intentionally registering someone else’s
preexisting IP). Cancellation of badfaith registration can be expensive
be aware of corruption. The government is taking steps to address this however it is worth
discussing potential corruption risks with your attorney when enforcing your rights through
the authorities
Indonesia works under a first to file system, meaning he first person to file an IP right there
will own that right when granted. This means an earlier user may find they are infringing a
later filed registration
Indonesia is part of the ASEAN Patent Examination Cooperation (ASPEC), a regional patent
worksharing programme among 9 participating ASEAN Member States (AMS). The purpose
of this programme is to share search and examination results between the participating offices
to allow applicants in participating countries to obtain corresponding patents faster and more
efficiently. ASPEC is free of charge and operates in English
Businesses are generally encouraged to learn more about IP issues relevant to their specific industry
sector and to consider defensive measures early in their plans to enter the Indonesian market.
Political : Indo negara iklimnya masi belom bagus buat investasi asing, pertumbuhan ekonomi
terhambat gara2 pilpres kek cacat2 gitu orang2nya, di pilpres mendatang dipercaya Jokowi masi
menang
Economy
Papua Nugini, Fiji, Indo trade talks
Tren inflasi sempat turun di februari 2019 tapi berbalik naik per Maret 2019
BI tetep maintain high reserves untuk menekan inflasi 2019
Kerjasama bilateral, multilateral, regional namanya aneh2 tp ada di web
http://country.eiu.com/Indonesia
Budget Jokowi buat periode berikutnya masih manageable, kaga nyebabin utang yg meledak
Social
Mass rapid transit udah jadi di Jakarta
Technological: mau implement blockchain di segala bidang, palapa ring yang tertunda, sekarang udah
mulai jalan, 5G di Jakarta
Environmental
Indonesia menjadi salah satu negara plg bagus di green banking (umbrella policy oleh OJK)
Maraknya gerakan reduce plastic usage, rehabilitasi bahari
Threat dari masalah keamanan negara, gerakan garis keras, teroris, dll. Bisa cek indo itu aman apa
engga di:
Please read the information provided on the terrorism page of the FCO travel advice.
Please read the information provided on the safety and security page of the FCO travel advice.
Legal
OJK sedang giat2nya mengawasi perekonomian berbasis digital untuk menyiapkan payung hukum
yang optimal
https://www.ssek.com/blog?dx_blog_category=43&task=search