Doing Business In Indonesia

Indonesia: It's not all like this anymore.

Por: kekepana.com

Did you realize that the Jakarta metropolitan area is the world’s 4th largest, sporting more than 22 million people? Or that Indonesia is the world’s 18th largest economy? Indonesia’s economy has also stayed rather robust during the last few years of economic weakness, and some 60 million people are positioned to enter the ranks of the middle class in the next decade. Yet the country is only the #32 destination for U.S. exports, signaling that there may be room for improvement.

These were some of the points made at a Honolulu workshop last week, part of a series about doing business with the APEC economies staged by the Hawaii Pacific Export Council, the U.S. Commercial Service and a host of local and state agencies. A special sponsor was the newly formed Hawaii Indonesia Chamber of Commerce (HICHAM). The primary speaker was Michael Hogge, the U.S. Department of Commerce’s desk officer for Indonesia, Singapore and Brunei. Michael is temporarily in Honolulu to help get ready for next month’s APEC summit. Amin Leiman, president of HICHAM, and David Day, HICHAM’s chairman, also chimed in.

There is plenty of opportunity for U.S. sales in Indonesia. Americaneducational services are seen as the top priority by the American Embassy in Jakarta, whether for providing training in Indonesia or attracting Indonesian students to U.S. schools and colleges. Indonesians seem especially interested in U.S. MBA programs, finance, engineering and hard sciences. (The University of Hawaii at Manoa – and dozens more – participated in a Dept. of Commerce education mission to Indonesia earlier this year.)

Indonesia already hosts about 160 U.S. franchises and seems hungry for more. There is a swiftly developing retail sector in which foreign retailers have only 8% of the outlets, but earn 40% of the retail sales. Non-Indonesian retailers can be found as huge hypermarkets, mini markets or even specialty stores.

Indonesia boasts 40% of the world’s geothermal resources (not too surprising considering the vast number of volcanos), but very little of it has been exploited. The renewable energy market as a whole is growing 22% annually and U.S. suppliers have only 3% of the market.

American cosmetics are selling well. The prime items here are skin care products, hair care and spa or massage products. Both Hogge and Leiman cautioned, though, that the cosmetics market is very, very brand conscious. If you don’t have a brand in America, you don’t have one in Indonesia.

Like everywhere else, virtually anything having to do withinformation technology sells well in Indonesia. Hogge, however, mentioned a burgeoning official interest in fostering telemedicine software to better supply medical advice and diagnostics on Indonesia’s many thousands of remote islands.

OK, that’s the hype. What’s the downside? Hogge cautioned against signing up a rep in Indonesia too quickly. Make sure and do your due diligence carefully, because Indonesia is one of those markets where it can be a long, tough, painful slog to end a business relationship.

And then there is corruption. Politicians in Jakarta talk a good game about fighting corruption, but a presumption of honesty is slow in coming. Indonesia stood an embarrassing #110 on Transparency International’s 2010 Corruption Perceptions Index. Be careful out there and use the Foreign Corrupt Practices Act as a shield. Compounding the corruption problem is a generally ineffective legal system, weak enforcement of intellectual property rights, and an often complex regulatory environment that breeds the conditions that invite corrupt practices. In fact, Indonesia ranks only #121 on the the 2011 World Bank’s Ease of Doing Business Index. Small wonders payments get made under the table.

In sum, not an easy place to do business, but a great market if you develop it carefully. And many of the corruption problems disappear if you simply sell to an Indonesian importer and let them cope with the internal market.

When I asked what Indonesians think of Hawaii, Leiman responded that they love Hawaiian music, especially the ukelele and that Hawaii 5-o is a fantastic brand in Indonesia. He did say, however, that most Indonesians aren’t quite sure that Hawaii is part of the United States.