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Introduction to the INDONESIAN MARKET Is Dedicated to Provide a Broader Understanding Regarding Existing Sectors and Investment Incentives in Indonesia

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Introduction to the INDONESIAN MARKET Is Dedicated to Provide a Broader Understanding Regarding Existing Sectors and Investment Incentives in Indonesia Table of Contents Introduction ................................................................................................................................ 1 1. Indonesia: Country Profile ...................................................................................................... 4 1.1 Quick Facts ...................................................................................................................... 4 1.2 Key Socio – Political Factors ............................................................................................ 5 1.3 Economic Overview .......................................................................................................... 6 2. Economic Sectors – Overview ............................................................................................... 8 2.1 Healthcare ........................................................................................................................ 8 2.2 Information and Communication Technology (ICT) ........................................................... 9 2.3 Food & Beverage .............................................................................................................11 2.4 Automotive ......................................................................................................................12 2.5 Agribusiness ....................................................................................................................14 2.6 Textile & Footwear ...........................................................................................................15 2.7 Cleantech ........................................................................................................................17 2.8 Maritime ...........................................................................................................................18 2.9 Aviation ............................................................................................................................19 3. Indonesia’s Special Economic Zones (SEZ) and Industrial Estates (IE) ................................22 3.1 Introduction ......................................................................................................................22 3.2 Policy and Advantages ....................................................................................................23 3.3 Free Trade Zones (FTZ) ..................................................................................................27 3.3.1 Introduction ...............................................................................................................27 3.3.2 General Conditions for Import and Export of Goods into and from FTZs ...................28 3.3.3 FTZ – Benefits and Challenges .................................................................................29 3.4 Industrial Estates .............................................................................................................32 3.5 Ports in Indonesia ............................................................................................................34 3. Conclusion ............................................................................................................................38 Contacts....................................................................................................................................39 References ...............................................................................................................................41 Abbreviations ............................................................................................................................44 Introduction Following publication of the Business Guide in 2015, the EU-Indonesia Business Network (EIBN) is now presenting a series of up-to-date data and knowledge on the conditions for conducting business in Indonesia. With the Indonesian government’s intention to boost foreign investment in the country, we hope that this Business Guide can help foreign investors to understand more about the process of developing their business in Indonesia. These publications aim to provide guidance to European Union small and medium enterprises (SMEs) who look to Indonesia as a possible market, attempting to clarify as simply as possible what doing business in Indonesia entails, as well as exporting and importing to and from the country. In addition, these guide books also aim to encourage those among the European business community who are not familiar with Indonesia’s potential to follow economic developments in the country and identify possible business opportunities in their industries. EIBN exists to support EU SME in discovering and accessing the Indonesian market, supported by an Indonesian and European team of market experts and project officers. The EIBN team works every day to discover and develop knowledge on key sectors in which European companies can bring the much-sought added value that an emerging and large market such as Indonesia demands. The Network’s mission is not simply to make available more knowledge about business opportunities in Indonesia, but most importantly to help EU companies on the ground. In order to achieve this, EIBN provides a set of useful features on its Web Portal (www.eibn.org) that are free-of-charge, as well as a fast-responding business enquiry helpdesk. Finally, EIBN offers prospective EU companies business support services at competitive rates, delivering quality business intelligence and privileged contact with players on the ground, in both the private and the public sector. EIBN is a truly pan-European business support platform that stands ready to help all businesses headquartered in any of the 28 EU Members States. Across many sectors, the Network enables SMEs to explore and tap into the rich potential of the Indonesian market. Mustering the expertise of the most well-established European chambers of commerce in Indonesia, EIBN presents itself as a genuine and smart alternative to purely private business consultancies and is the result of a project initiated and co-funded by the European Union. The information in this guide book reflects the work and mission of EIBN, and is but one of the many publications we offer as a no-charge download to all EU companies who register for free on www.eibn.org. Due to a dynamic regulatory environment, Indonesian provisions, laws and regulations issued by the different government bodies frequently change, even though some are of recent issue. This, of course, is highly dependent on the sector. In particular, regulations released by the National Agency of Food and Drug Control (BPOM) tend to change quickly, effecting Food & Beverages, Cosmetics and Agribusiness, among others. 1 The present volume I Introduction to THE INDONESIAN MARKET is dedicated to provide a broader understanding regarding existing sectors and investment incentives in Indonesia. It compiles information from many different sources, including publications, live interviews and case-studies, using the most recently available data in 2019, while reverting to previous years where the most updated information was either not available or inaccessible. This publication is part of the EIBN SME GUIDE series, which is comprised also of volume II EXPORT & SOURCE and volume III SET UP A BUSINESS. 2 3 1. Indonesia: Country Profile 1.1 Quick Facts Official Name Republic of Indonesia Political System Presidential Democracy Capital Jakarta Area 1,904.569km2 Population 270 million (2019 est.) Age Distribution (2019) 0-14 years: 25.94% 15-24 years: 16.81% 25-54 years: 42.3% 55-64 years: 8.6% 65 years and over: 6.2% GDP (nom.) EUR 864 billion EUR 3,495.42 per capita Currency Indonesian Rupiah (IDR/Rp) EUR 1 ~ IDR 15.500 4 1.2 Key Socio – Political Factors Indonesia is: The 4th most populous country in the world, with a population of around 270 million people. The 3rd largest democracy in the world following its transition into a stable and thriving democracy since 1998. The largest Muslim country in the world with over 80% of the Indonesian population following the Muslim faith. The biggest archipelago in the world consisting of over 17,000 islands spanning three time zones. Indonesia has been an active (board) member in various regional and international organizations and has signed and ratified most relevant international treaties and conventions, notably in respect of trade and investment agreements; a total of 233 international organizations that Indonesia has joined hitherto1. While Indonesia alone constitutes a high-potential business country, its membership of the Association of the South-East Asian Nations (ASEAN)—comprised of Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam--further increases its prospects. Indonesia, together with the nine other ASEAN Member States, forms an economic bloc with a total market size of more than 600 million people and a progressively more integrated economic area, moved towards the realization of an ASEAN Economic Community (AEC) at the end of 2015. With this AEC, long-term investors in Indonesia are offered the opportunity to expand their horizons beyond the Indonesian market. Under the ASEAN Free Trade Agreement (AFTA) the six original ASEAN members (Indonesia, Malaysia, Singapore, Thailand, the Philippines and Brunei) agreed to reduce import duties to lowering of intra-regional tariffs to 0-5% five percent or less by 2010, giving more time to
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