Indonesia CCG 2017
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Indonesia Table of Contents Table of Contents __________________________________ 1 Doing Business in Indonesia ___________________________ 6 Market Overview __________________________________ 6 Market Challenges _________________________________ 7 Market Opportunities _______________________________ 8 Market Entry Strategy _______________________________ 9 Political Environment _______________________________ 9 Political Environment _______________________________ 9 Selling US Products & Services __________________________ 9 Using an Agent to Sell US Products and Services ________________ 9 Establishing an Office _______________________________ 11 Franchising _____________________________________ 12 Direct Marketing __________________________________ 13 Joint Ventures/Licensing _____________________________ 13 Selling to the Government ____________________________ 14 Distribution & Sales Channels __________________________ 15 Express Delivery __________________________________ 16 Selling Factors & Techniques ___________________________ 16 eCommerce _____________________________________ 16 Trade Promotion & Advertising__________________________ 19 Pricing ________________________________________ 21 Sales Service/Customer Support _________________________ 21 Protecting Intellectual Property _________________________22 Due Diligence ____________________________________22 Local Professional Services ____________________________22 Principle Business Associations _________________________ 23 Web Resources ___________________________________ 23 Leading Sectors for US Exports & Investments_______________ 24 Medical Equipment & Supplies _________________________ 24 2 Education and Training ______________________________27 Franchises _____________________________________30 Aviation _______________________________________ 32 Telecommunications _______________________________36 Power Generation _________________________________38 Agricultural Sectors ________________________________ 41 Customs, Regulations & Standards ______________________ 44 Trade Barriers __________________________________ 44 Import Tariff ___________________________________ 46 Import Requirements & Documentation____________________ 47 Labeling/Marking Requirements ________________________ 48 U.S. Export Controls _______________________________ 48 Temporary Entry _________________________________ 50 Prohibited & Restricted Imports ________________________ 50 Customs Regulations ______________________________ 54 Standards for Trade _______________________________ 54 Trade Agreements ________________________________ 56 Licensing Requirements for Professional Services ______________ 56 Web Resources ___________________________________57 Investment Climate Statement _________________________57 Executive Summary ________________________________57 Openness To, and Restrictions Upon, Foreign Investment _________ 59 Poli ci es Towa rds Forei gn Di rect Investm ent _______________________ 59 Limits on Foreign Control and Right to Private Ownership and Establishment____ 59 Ot her Investm ent Poli cy R evi ews _____________________________ 60 Business Facilitation ____________________________________ 60 Outward Investment ____________________________________ 62 Bilateral Investment Agreements and Taxation Treaties __________ 62 Legal Regime ____________________________________63 Transparency of the Regulatory System _________________________ 63 International Regulatory Considerations _________________________ 64 L egal Syst em a nd Ju di cial Indep endence _________________________ 64 Laws and Regulations on Foreign Direct Investment __________________ 65 Competition and Anti-Tru st L aws ____________________________ 65 Expropriation and Compensation _____________________________ 65 3 Dispute Settlement _____________________________________ 67 Bankruptcy Regulations __________________________________ 68 Industrial Policies ________________________________ 68 Investment Incentives ___________________________________ 68 Foreign Trade Zones/Free Trade/ Trade Facilitation ___________________71 Performance and Data Localization Requirements ___________________ 72 Protection of Property Rights __________________________ 74 R eal Prop erty ________________________________________ 74 Intellectual Property Rights ________________________________ 74 Financial Sector _________________________________ 76 Capital Markets and Portfolio Investment ________________________ 76 Money and Banking System ________________________________ 76 Foreign Exchange and Remittances ____________________________ 77 Soverei gn Wea lth Funds __________________________________ 79 State-Owned Enterprises ____________________________ 79 Privatization Program ___________________________________ 80 Responsible Business Conduct _________________________ 80 Corruption _____________________________________ 81 Political and Security Environment ______________________ 82 Labor Policies and Practices____________________________83 OPIC and Other Investment Insurance Programs_______________ 85 Foreign Direct Investment and Foreign Portfolio Investment Statistics __ 85 Contact for More Information _________________________ 87 Trade & Project Financing ___________________________ 87 Methods of Payment _______________________________ 87 Banking Systems _________________________________ 88 Foreign Exchange Controls ___________________________ 88 US Banks & Local Correspondent Banks ____________________ 90 Project Financing__________________________________ 91 Financing Web Resources ____________________________ 92 Business Travel __________________________________ 92 Business Customs ________________________________ 92 Travel Advisory ___________________________________93 Visa Requirements _________________________________93 Currency______________________________________ 94 4 Telecommunications/Electric__________________________ 94 Transportation __________________________________ 94 Language _____________________________________ 95 Health _______________________________________ 95 Local Time, Business Hours and Holidays___________________ 97 Temporary Entry of Materials or Personal Belongings ___________ 99 Travel Related Web Resources _________________________ 99 5 Doing Business in Indonesia Market Overview Indonesia is Southeast Asia’s largest economy with a GDP of 932 billion in 2016 (USD), ranking 8th in the world based on purchasing power parity, and averaging over 5% growth over the last decade. Growth is projected by the IMF to reach 5.1% for 2017 due to strong private consumption. President Joko Widodo (known as "Jokowi") took office in October 2014 and has pledged to improve infrastructure, diversify the economy, and reduce barriers to doing business in Indonesia as a means of increasing economic growth. Over the past decade Indonesia has enjoyed steady economic growth, though less than needed to pull the country into upper middle-income status. Sound macroeconomic policies, combined with growing domestic demand and high commodity prices, propelled economic expansion in recent years, but protectionist policies, corruption at all levels of government, poor infrastructure, weak rule of law, and labor rigidity continue to pose challenges. Beginning in September 2015, the Government of Indonesia (GOI) announced a series of economic reform packages in an effort to spur its GDP growth and encourage foreign investment. The announced reforms are a positive signal of the Jokowi administration’s desire to improve the business climate; however, the implementation and impact of the policy reforms remains limited. Nonetheless, the Indonesian market has many positive attributes. Indonesia has a GDP per capita of $3,604 ($11,700 at PPP) that exceeds many of its ASEAN neighbors such the Philippines and Vietnam, and with 258.8 million people (IMF), Indonesia’s economy comprises nearly half of ASEAN economic output. Indonesia is a thriving democracy with significant regional autonomy. It is located on one of the world’s major trade routes and has extensive natural resource wealth distributed over an area the size of the United States and comprised of 17,508 islands (CIA World Factbook). According to Euromonitor International, Indonesia has the world’s fourth largest middle class with 17.3 million households as of 2014, and is forecasted to expand to around 20 million households by 2030. Globally, Indonesians are the fourth largest users of Facebook (87 million, April 2017). According to Statista, in May of 2016, Indonesia was found to have the third highest number of active Twitter-users in the world, after the United States and 6 Indi a. Also according to Statista, in May of 2017, Indonesia had the fifth highest number of internet users in the world at 132 million. Market Challenges The business environment in Indonesia is challenging, with Indonesia ranked 91 out of 190 countries in the Ease of Doing Business 2017 report by the World Bank. U.S. firms encounter complex bureaucratic and regulatory requirements which make it time-consuming to enter the market. Indonesian infrastructure and service networks have not been developed or maintained to keep pace with the booming consumer-led economy, causing increased transaction costs and inefficiencies that hamper exporters and investors. Deregulation has reduced some barriers, but non-tariff barriers remain widespread and the bureaucracy can still be cumbersome. Laws are often opaque or conflicting. Import licensing procedures and permit requirements, product labeling requirements,