The Indonesian economy is currently riding the crest of the wave. Economic growth in Indonesia is better than previous years and that is why the country is seeing an influx of investors determined to mine success in these economically favorable times.
Indonesia is the largest archipelago in the world and has great natural resources, a lot of economic potentials and is one of the leading ASEAN markets. These aren’t the only things that make the market attractive to investors, but these are some of the top reasons:
Ease of business is increasing every year
Indonesia has made significant efforts that have seen it jump to the 73rd position in the ranking list released by the World Bank for Ease of Doing Business. Rodrigo Chaves, the World Bank Country director has said that the following factors were responsible for the improved rankings;
- Easy to establish a business
- Improved access to electricity
- Registering of property
- Ease of acquiring finance
- Tax payments
- Engagement in cross border trade
- Contract establishment
Business classifications are opening up to foreign investments
The maximum allowed foreign ownership of companies in Indonesia is determined by the Negative Investment List, a list that specifies what business activities are not open or are conditionally open to foreign investment. This determines the limit of foreign ownership from 0-100% on the basis of the business classification.
The regulation was revised in 2016 and led to the opening up of many industries. Business categories including restaurant, café, bar, property/real estate brokers and hotels can now enjoy 100% of foreign ownership if required. That opens up the market to added investment.
Land available to foreigners in Indonesia
Since the beginning of 2015 foreigners have been allowed to own land in Indonesia. In the country, a foreigner can have access to land for three different objectives with the following certificates:
- Hak Guna Bangunan- Right to build
- Hak Guna Usaha- Right of cultivation
- Hak Pakai- Right to use
The main advantage comes with Hak Pakai where a foreigner can buy a landed house or an apartment in Indonesia. An investor can apply for Hak Pakai when:
- He has a foreign-owned company (PT PMA)
- Has a local company
- Is a person with a valid work and stay permit (KITAS)
Decreasing corruption and bureaucracy
If you are an investor in Indonesia, you may have had a brush with bureaucracy or even corruption in the past. However, the Corruption Eradication Commission (KPK) has enforced regulations to track corruption and the result has been a cleaner economy in Indonesia. The proactive steps include
- The authorization of the United Nations Convention Against Corruption (UNCAC)
- Implementation of the National Strategy of Corruption Prevention and Eradication (2012-2025).
Indonesia is one of the few countries showing a steady improvement according to the Corruption Perceptions Index and this makes it a great place for burgeoning industries.
Growing and a bigger middle class
Indonesia has one of the fastest growing middle-class segments and that makes it an attractive target for investors About 90 million Indonesians will be joining the consumer class by 2030, according to the reports by McKinsey.
This report indicates that there will be an additional $1 trillion in annual spending.
Indonesia has the 4th largest population in the world and it is growing as we speak. Based upon the Worldometer’s statistics the country’s population grows by roughly 3 million every year. Indonesia is geared up to have a population of 272 million by the year 2020. A large population base is a bait that attracts a lot of investors to Indonesia’s shores. The demographics also are favorable for long term business with 50% of Indonesians being under 2 years of age.
In addition, Indonesia is increasingly getting urbanized. 44% of the Indonesian population lived in towns and cities in 2010 according to the CIA World Factbook on Indonesia. More and more numbers of people are moving into towns and cities than ever before. This spells success for investors who will find it easier to push products and services in cities rather than the country.
Great investment opportunities in Indonesia
Apart from the above reasons, Indonesia has a growing economy and continuous GDP growth which makes it the biggest economy in Southeast Asia. This is encouraging news for investors who are on the lookout for profits from this nation.
Entering into business there are huge investment opportunities in Indonesia that investors must explore. It is an interesting opportunity for those who are willing to overcome the initial hurdle of a complicated market and get rewarded with the bonus of low competition. If you give yourself time to understand the market, Indonesia is one magnet that is sure to attract your investment.
Indonesia has been seeing significant investments from countries including Singapore, Japan, China, and South Korea. US$2.6bn FDI came from Singapore in Q1 of 2018. India has also been pouring investments into Indonesia through Singaporean units, as stated by BKPM Head Thomas Lembong.
There could be a political change coming in Indonesia as the country heads to the polls on April 17, 2019, and international investors will be eagerly awaiting the election outcome.
According to the Jakarta Post, Indonesian Stock Exchange has argued the minimal impact of elections on its stock exchange.