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How to Do Business in Indonesia

Southeast Asian economies are booming. While it may seem scary for some small businesses to expand to the region, many of these nations have seen stable exponential growth over the past decade. In fact, Southeast Asia may be one of the more secure places to invest in the world.

 

Indonesia is quietly becoming a world economic power, and a prospective hotbed for international business investment. Currently, the island nation represents the largest economy in Southeast Asia, and the 16th largest in the world.

 

Indonesia has averaged 5% growth in each of the past 10 years. The government is looking to increase this with a plan implemented in 2015 that works to encourage foreign investment with upgrades to infrastructure.

 

Indonesia is quietly becoming a world economic power, and a prospective hotbed for international business investment.

 

The plan has been a major success so far, largely due to Indonesia’s placement along a major global trade route. As a result, the nation is about to become a middle-income country. In fact, Indonesia is home to the world’s 4th largest middle-class.

 

Citizens with increasing amounts of expendable wealth and a soaring GDP has made Indonesia the apple of many small businesses’ eye. Over the past decade, bilateral trade between the US and Indonesia has increased by 53%. Trade agreements are currently being discussed to expand this relationship even further and continue this development.

 

Along with the US-Indonesia TIFA (Trade and Investment Framework Agreement), the two countries are working to increase trade, and resolve bilateral issues. The US government is committed to increasing trade with the region, and the small businesses of both nations have everything to gain.

 
 

Introduction to Indonesia

 

Indonesia is the world’s largest island country, and houses the world’s 4th largest population. Java, the nation’s largest island, hosts 60% of that population, along with many governmental and business headquarters.

 

Its mountainous and coastal geography make Indonesia vulnerable to natural disasters like monsoons and earthquakes. However, the islands are rich in natural resources, and while exports don’t make up much of the nation’s GDP, the government is looking to change that.

 

For US small businesses, Indonesia represents a dynamic economy opening to the global marketplace. With over 17,000 islands combining to approximately the size of the continental US, the doors of opportunity are just waiting to be knocked on.

 

Major Cities

 
Indonesia-major-cities
 

Jakarta “The Big Durian”

Named after the infamously stinky local fruit, “The Big Durian,” Jakarta is Indonesia’s most populous city with a central population of 9.6 million inhabitants. In fact, the second most populous city in Indonesia is just the eastern side of Jakarta. Its blend of European and Asian influences has made Jakarta a historic tourist site, with houses from the Dutch Colonial Era still standing.

 

The higher standard of living attracts immigrants, tourists, and business people alike. Jakarta is also the nation’s political and economic center, and is often ranked highly in the world’s fastest-growing economies. For international small businesses, Jakarta is the first place to look for investment and export opportunities, as its reputation in the global marketplace continues to rise.

 

West is Best

80% of Indonesia’s population lives in the western region. Composed of Sumatra and islands known as the Sunda, western Indonesia holds most of the country’s wealth, industry, and the highest average quality of life.

 

Though a positive sign for Indonesia’s economy, wealth gaps, unemployment rates, and lower quality of healthcare are much more common in the east. This has created an economic disparity that, while propelling the nation’s most populous island, has seemingly left the east in the dust.

 

However, the affluent reputation of western Indonesia has left a large gap for international businesses to enter in the east. If you’re feeling adventurous, eastern Indonesia could be an untapped resource.

 
 

Currency

 

The official currency of Indonesia is the rupiah (IDR). Its most common rate of exchange is to USD, and its lowest banknote (1000IDR) works out to $0.08 USD. The currency consists of coins ranging from 100 to 1000 units, and notes that extend above that. Coins are gradually being rolled back as they fall out of use. Because of the low exchange rate, most purchases are made with bank notes, so keeping some in your wallet when traveling is highly recommended.

 

The exchange rate for the rupiah is at a historic low, dropping 25% between 2013 and 2016.

 

The exchange rate for the rupiah is at a historic low, dropping 25% between 2013 and 2016. The Bank of Indonesia has said that this is in an attempt to improve the country’s trade balance with the US. This development is huge for small businesses, and a weakened IDR is an opportunity to take advantage of affordable Indonesian exports.

 

The exchange rate for the rupiah is at a historic low, dropping 25% between 2013 and 2016. The Bank of Indonesia has said that this is in an attempt to improve the country’s trade balance with the US. This development is huge for small businesses, and a weakened IDR is an opportunity to take advantage of affordable Indonesian exports.

 
 

Languages

 

The official language of Indonesia is, of course, Indonesian. There are a ton of dialects of this central language, including Javanese, which is the country’s most widely spoken language that isn’t officially recognized.

 

English is widely spoken across the country. In fact, English is considered the official language of business in the region, and native Indonesian speakers tend to speak it during negotiations. This makes communication between small businesses and their Indonesian suppliers much easier.

 

However, this shouldn’t be taken for granted. Don’t assume that your supplier will speak English fluently, or at all. Ask what the preferred language is for the meeting. If it is in Indonesian or Javanese, an interpreter or translator may be required to reduce misunderstandings during negotiations.

 

Language Loss

The number of English speakers is steadily increasing across the country, to the chagrin of many native Indonesian speakers. Many parents are deciding that proper English education is more important than a traditional Indonesian one, leading to a steady drop in fluent speakers of the language among young populations.

 

Being aware of this issue and the possible language barriers resulting from it is important for small business and international investors to avoid insulting your potential suppliers.

 
 

Holidays

 

Indonesian holidays and observances depend on religious affiliation. Because of Indonesia’s rich cultural history, the government recognizes all major religions’ holidays, either as observances or public holidays. If holidays are denomination-specific (Hindu, for example), it may still affect business for those who identify with that religion. All Indonesian holidays are listed below, and are marked depending on who observes them, and when.

 

HolidayDateObservance
New Years DayJanuary 1Nationwide
Chinese Lunar New YearJanuary 28Nationwide
Maha ShivaratiFebruary 24Nationwide
HoliMarch 13Nationwide
Day of Silence, Hindu New YearMarch 17Nationwide
Good FridayMarch 30Nationwide
Easter SundayApril 1Nationwide
Ascension of the Prophet MuhammadApril 13Nationwide
Labor DayMay 1Nationwide
Ascension Day of Jesus ChristMay 10Nationwide
Waisak Day, Buddha’s AnniversaryMay 29Nationwide
Idul FitriJune 12-15Bank Holiday
Indonesian Independence DayAugust 17Nationwide
Muslim Day of SacrificeAugust 21Nationwide
Raksha BandhanAugust 26Nationwide
JanmashtamiSeptember 2Nationwide
Islamic New YearSeptember 11Nationwide
Ganesh CaturthiSeptember 13Nationwide
NavaratriOctober 10Nationwide
Diwali/DeepavaliOctober 19Nationwide
The Prophet Muhammad’s BirthdayNovember 20Nationwide
Christmas DayDecember 25Nationwide

 

Communication from the US

 

If you need to contact your Indonesian supplier by telephone, +62 must be added before the area code. For example, the US and Canadian phone code is +1.

 

Setting up a meeting over the phone or through email is fine. However, Indonesian suppliers may take a while to respond to an email, as your message has to travel through the company hierarchy

 

Setting up a meeting over the phone or through email is fine. However, Indonesian suppliers may take a while to respond to an email, as your message has to travel through the company hierarchy. Wait for a response to make arrangements.

 
 

Finding a Supplier

 

Small businesses may have a hard time finding a supplier in Indonesia. Finding reliable outlets and resources can be tricky, especially for first-time traders. Thankfully, the Indonesian government’s website, dedicated entirely to trade, has created a directory for foreign businesses.

 

The website lists the country’s registered importers and exporters, contact information, and a “Corporate Directory.” The directory lets your business search specific companies, their industries, and what part of the country they’re in. This way, small businesses across the globe can easily navigate the island geography of Indonesia, and a foreign market that they haven’t experienced yet.

 
 

Traveling to Indonesia

 

US citizens can travel to Indonesia with a passport valid for at least 6 months beyond their date of arrival, as long as it has two blank pages. Be sure to keep your passport on you at all times. Foreign visitors may be detained if unable to produce papers or passports for proof of visit, so keeping it within reach is highly recommended.

 

Visas

US citizens may visit Indonesia for 30 days without a visa.

 

If you want to extend your stay for 30 more days, you need a “visa-on-arrival,” which costs $35 USD. This visa may only be extended once, for a total of 60 days. Visitors are unable to extend their stay beyond the second 30-day extension.

 

US citizens may visit Indonesia for 30 days without a visa.

 

Beyond 60 days, you need to get a “visa-in-advance.” This visa is issued for non-tourism travel purposes, and must be applied for in-advance of your visit. It’s recommended that you contact your nearest Indonesian embassy or consulate for further information, but we’ve also included general information in the ”Resources” section of this guide.

 

Fines for overstaying your visa start at 250,000 RPI ($20 USD).

 

Health/Vaccines

The Center for Disease Control and Prevention (CDC) recommends that tourists traveling to Indonesia get hepatitis A and typhoid vaccines, along with the routine vaccines.
Depending on where and for how long you’re staying, the CDC also advises travelers to get their malaria, hepatitis B, Japanese Encephalitis, rabies, and yellow fever shots.

 

Zika is also a concern in Indonesia. Pregnant women and their partners should take special care to prevent mosquito bites, and may want to avoid the trip altogether. Other travelers don’t have to go that far, but should still try to prevent bites by sleeping under mosquito nets and exercising other precautions.

 

Using a Cell phone

If you want to bring your US cell phone on a business trip to Indonesia, you may be out of luck. Your provider is unlikely to work well in the region. If it does, you will be charged enormous roaming fees, sometimes exceeding seven times the normal rate.

 

You’re better off buying a local SIM at the airport, or at a convenience store nearby. These SIMs come preloaded with a particular plan of your choosing, with a certain amount of texts and calls.

 

Your best bet is to use Telkomsel as a provider. It has the widest coverage in the country by far. The plans come loaded with some data to connect you to the internet wherever you are. Except the jungle, of course.

 

The other option is to buy a cell phone after leaving the airport. Known in the region as “hand phones” or HPs, cell phones are easily found in the city, and can cost as little as $40USD with a preloaded SIM card included.

 

Wifi

Indonesia’s wifi penetration is fairly low across the country. While free public internet access is available in almost all metropolitan centers, it can be spotty and is generally unavailable between cities.

 

Internet Expansion

Things are looking up for Indonesian wifi availability, though. Google has recently introduced its “Google Station” program to the region, which promises to broaden internet access across the country. Between 2016 and 2017, internet penetration in the region grew by 51%, and looks to exceed that through this program.

 

International business people have this to look forward to when searching for a free wifi signal.

 

Trade Shows

Jakarta is the place to be for Indonesian trade shows. English speakers are common, but shouldn’t be taken for granted. Generally, being respectful is the best method. There are, however, a few rules of thumb for trade shows that aren’t religion or culture specific. Here are the top three for attending and participating in Indonesian trade shows.

 

WhatWhere
WhenWhat about
Electric, Power, & Renewable Energy IndonesiaJakartaEvery 2 YearsEnergy, Environmentally-Friendly Technology
Building & Infrastructure IndonesiaJakartaEvery 2 YearsConstruction, materials, infrastructure
Truck IndonesiaJakartaEvery 2 YearsConstruction, Automotive, Manufacturing
Cosmetic Processing PackagingJakartaYearlyCosmetics, Beauty, Fashion
Indo Beauty ExpoJakartaYearlyBeauty, Fashion, Health and Wellness
Indo Health ExpoJakartaYearlyHealth and Wellness, Lifestyle, All-Natural Goods

 

  1. Search for Seniors: Elders are highly respected in Indonesian culture. When meeting a group of people at a booth or when a group comes over to yours, be sure to introduce yourself to the oldest or highest-ranking person first. This is a sign of respect for the person and their culture.
  2. Cards are King: Business cards are very important in Indonesia. At a trade show, be sure to have business cards on hand. It’s recommended that one side is English, and the other in Indonesian. This isn’t required, but does show genuine investment in clear communication.
  3. Avert Your Eyes: Extensive eye contact with Indonesian suppliers can make them feel uncomfortable. Though it implies attentiveness by you, Indonesians may see this as an act of aggression or displeasure. When attending a trade show, be sure to avert your eyes often.

 
 

Business Culture

 

Indonesian business culture is unlike any in the world. The island nation does adhere to many practices of the Asia-Pacific region. But, owing to its diverse population, Indonesian business practices are very specific. Knowing these business methods is crucial to succeeding in the Indonesian export market.

 

People and Places

Indonesia is well-known as a blended culture. The island hosts the largest Muslim population in the world, and many other religious denominations are officially recognized. Business culture in Indonesia reflects this diversity, and foreign business owners need to be aware of each religion’s specific practices and traditions.

 

Indonesian people tend to identify with family, region, religion, and language as a result of cultural blending. “Group thinking” is common in Indonesian business culture, as business partners and friends often work together. No decision is made lightly or without consulting with peers and higher ups. For more information, check out the “Business Negotiations” section of this guide.

 

Relationships

 

Indonesian business people don’t get straight to the point. Business culture in Indonesia focuses on relationship building.

 

Indonesian business people don’t get straight to the point. Business culture in Indonesia focuses on relationship building. This is related to the cultural focus on family and hierarchy, and will be vital to negotiating deals later. Engaging in small talk, and a general interest in local culture can make the difference between a deal and a bust.

 

Timing

Punctuality is important in Indonesia…for you. Showing up on time is respectful, and is a general rule for doing business in any country. However, Indonesian business people believe in an “elastic” time, known in the region as jam karetor “rubber time.” The concept speaks to other philosophies on “timing” that greatly affect business negotiations. Don’t be surprised if your Indonesian supplier is late to a meeting, but you shouldn’t be.

 
 

Business Communication

 

Getting to know business partners on a personal level is key to communicating in Indonesia. Business meetings take place in person. The hope is that business partners will establish a personal relationship before conducting business.

 

Though English is the “language of business,” don’t assume that your Indonesian supplier will be comfortable speaking formally in it. Be prepared to bring along a translator, interpreter, or local guide to help you and your business partner avoid miscommunications that could impact negotiations.

 

Indirect

Being friendly only goes so far, though. Indonesian suppliers, while sincere, prefer indirect forms of communication. Business people in the region may avoid saying exactly what they mean, and will say “yes” when they mean “no.” This reserved communication style is about “saving face.” Public displays of emotion or “shame” are avoided at all costs in Indonesia, as it is considered a loss of reputation, honor, or “face.” Called malu in Indonesian, saving face involves avoiding embarrassment or embarrassing anyone. Dodging confrontation, grand displays of emotion, or other obvious “tells” are staples of Indonesian communication because of this trait.

 

This greatly affects international business dealings, as US small business owners may negotiate and communicate in different ways. Don’t use tactics that require lots of banter back and forth. Don’t try to unearth what your supplier is thinking with prying questions. To be safe, reflect the reserved communication style of the region. Take a seat, engage in small talk, and establish a relationship. Read the nonverbal cues and gestures that give away what your supplier may be feeling without them needing to tell you.

 
 

Business Etiquette: Do’s and Don’ts

 

Building a rapport can take a while, and building a network through a local connection can speed up the process.

 

To help you navigate these complex cultural differences, we’ve compiled a quick dos and don’ts list for conducting business in Indonesia. By keeping these in mind when meeting suppliers in the region, you’re sure to get ahead of the competition and impress your business partners.

 

  • Don’t Rush: Greeting suppliers before a meeting can take a while. It can involve lots of handshakes and culturally specific practices. Let the formalities take their course, and throw in a “selamat pagi” if you can. It means “good morning.”
  • Go Local: Find someone living in the region, versed in the culture, and who preferably knows the language. Indonesians make deals with friends. Building a rapport can take a while, and building a network through a local connection can speed up the process.
  • Bring Something: Gift giving is big in Indonesian business. They are usually small, but offering a gift at a business meeting in Indonesia shows you’re grateful, and that you respect your supplier taking time out of their day to meet with you.
  • Boots on the Ground: Don’t show the soles of your feet. Often, men and women will cross their legs, exposing the bottoms of their feet. Avoid this in Indonesia. It’s a sign of respect and attentiveness to keep your feet planted and your back straight.
  • Names and Titles: Titles are very important in Indonesia. Be sure to use them when saying someone’s name. As well, Indonesians can have very long names and may use a nickname. Follow suit with everyone else unless invited to use the shorter version.
  •  

 

These few tips are sure to get you by in your meetings.

 
 

Business Negotiations

 

Etiquette and business culture are good things to know. But when you need to close, negotiations are the heart of every business meeting. Though you want to keep calm and reserved, there are a few things to know to help seal the deal in Indonesia.

 

Rank

Indonesian business practices center around the highest-ranking person at the negotiating table. They hear the deal first, and have the most pull in decisionmaking. You should greet this person first. They will likely be the only one speaking during the negotiation, so they’re easy to identify. Knowing this, you can start to control the pace of negotiations. By catering to and addressing that high-ranking person directly, you reduce the time it takes for proposals to go through and deals to be closed. Not only will you seem aware of cultural norms, your business benefits from being respectful.

 

Rinse and Repeat

Business negotiations take a long time in Indonesia. Back and forth between higher-ups and employees can go on for a while. Between these interactions, important information can be lost or misremembered, and tons of questions tend to be asked because of that. Make sure to repeat your stance multiple times and state it clearly for all parties to understand. This cuts down on meeting length, frequency of meetings, and ultimately brings the negotiation to a close sooner and more efficiently.

 

Don’t Put it in Writing

 

Bringing contracts to the table may even be viewed as disrespectful, a sign of distrust in the negotiation process or in the “word” of your supplier

 

Bringing a written agreement or asking to sign a contract is considered normal in many business negotiations. In Indonesia, this is rarely the case. This tactic fails often, and could even act as an agenda to discuss each matter individually. Bringing contracts to the table may even be viewed as disrespectful, a sign of distrust in the negotiation process or in the “word” of your supplier. From the Indonesian perspective, both parties “lose face” in these situations.

 
 

Regulations and Permits

 

The Indonesian government requires a ton of documentation to import into the country, but less so for exports. It depends on the type of export, but the process can still be lengthy and confusing. Finding a local broker in the area is recommended for first-time exporters, as they will help to navigate the requirements that are region and good specific. For questions regarding imports into the US, check out the Customs Bureau’s tips for first time traders.

 

Fortunately, after years of World Trade Organization (WTO) disputes, Indonesia has recently slashed many of its import and export requirements. Exporters only need to apply for the Indonesian National Single Window (INSW), which gives them a single electronic location to submit applications and customs forms to the Indonesian government for processing.

 

Indonesian exports are generally not subject to import duties, VAT (value-added tax), and other taxes on goods with an international destination.

 

Before importing from Indonesia, your desired exporter must apply for an NIK, or a Customs Identification Number. This number allows customs to keep up-to-date records on registered importers to help other international investors. There are a ton of forms to fill out, and US businesses should be aware of the procedure to avoid dealing with an unregistered exporter.

 

The desired exporter must then notify the customs office before the goods arrive to submit import documents to customs. For international businesses, there are a lot of logistical hoops to jump through when exporting from Indonesia. But relations are improving, and the thorough process ensures your goods are taken care of.

 
 

Beware

 

Aside from dating and credit card scams, there are few rip-offs, specific to Indonesia, that small businesses need to worry about. However, there are larger issues that small businesses need to be aware of when exporting internationally.

 

Corruption

Indonesia still experiences a fairly-high level of corruption in certain government and legal sectors. As well, it has been reported that agents and distributors are involved in corruption scandals. Progress is being made, but the US Commercial Service still recommends that any potential exporters contact them before making any decisions or deals.

 

There are also frequent reports of judicial corruption throughout the country. Formal dispute settlements are generally considered ineffective, and business disputes may even be considered criminal matters in Indonesia. Partnering up with a legitimate and registered importer will reduce issues significantly.

 

Infrastructure

One of the issues for foreign investors in Indonesia has been its infrastructure. Because of its unique geography, the Indonesian government has had difficulty building roads and bridges between islands and even cities. This makes transport difficult, but safety remains a key issue. The islands are at risk of earthquakes and other natural disasters that destroy such infrastructure. If transport routes aren’t improved, international businesses will have difficulty traveling to or finding suppliers in the region.

 

The good thing for small businesses, though, is that the Indonesian economy is using its failing infrastructure as an incentive for foreign investment.

 

The good thing for small businesses, though, is that the Indonesian economy is using its failing infrastructure as an incentive for foreign investment. The government is promoting a Public Private Partnership (PPP) to invite international businesses to capitalize on Indonesia’s many rebuilding projects. For more information on the project, check out the Asia Development Bank’s document describing the proposed projects in full.

 

Payments

The low rate of exchange between the IDR and USD gives US businesses an advantage when paying suppliers in the region. If you’re doing business from home, this makes sending payments and buying goods much cheaper.

 

But, ecommerce makes up very little of the Indonesian GDP. Cash and credit cards still reign in the region, and business people traveling to Indonesia should always carry a decent amount of IDR for small transactions. Credit cards will work for anything larger.

 

As a result, there aren’t many online payments solutions in the region, and even sending money through the dated banking system can pose issues for US small businesses.

 

This is where Veem comes in. With Veem, you don’t have to add payments to the list of headaches when paying suppliers. We are a global payments solution that takes the wasted time and pain out of your finances.

 

Our multi-rail system provides you with the best possible method for sending your payments internationally. It’s secure, and we don’t charge an extra fees. Send your money fast, and follow it from home with our payments tracking dashboard.

 

Your money is safe with us. Sign up here, and enter the future of global payments.

 
 

Resources

 

Registered Importer/Exporter Directory

Visa-in-Advance Consulate Information and Useful Links

Health Information for Visitors to Indonesia (CDC)

Telkomsel Provider Information in Indonesia

US Customs Bureau Tips for First Time Exporters/Importers

Indonesian Customs Identification Number Forms and Information (NIK)

Asia Development Bank’s Public Private Partnership Project, Indonesia

 


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