Why Invest in Indonesia?

Indonesia as a nation is quickly developing into one of the busiest and biggest business hubs in the world. This Southeast Asian country is the world’s largest island country, and its location is central to 11 major places which include Papua New Guinea, Timor, Malaysia, Singapore, Vietnam, the Philippines, Australia, Palau, and India’s Andaman and Nicobar Islands.

This blog gives a list of 7 reasons as to why invest in Indonesia –

1. The Population

Indonesia is the 4^th most populated nation in the world with a population of over 267 million people as of 2020. Among the several islands of which Indonesia is made of, Java is the world’s most populous island while being a home to more than half of the country’s population. From an investment perspective it draws attention towards the manpower the country can offer and the ability of these numbers to work on a variety of sectors.

• Going Digital

Indonesia is punching above weights in the digital platform showcasing a significant rise in numbers in recent years. These numbers facilitate global trade while helping the entire nation to connect seamlessly. 

• Growing Economy

Despite the pandemic, Indonesia’s economy is the 16^th largest in the world by nominal GDP and 7^th by GDP at PPP. Indonesia is the only regional power in Southeast Asia and is considered a middle power in global affairs.

The country is a member of several multilateral organisations, including the United Nations, World Trade Organization, International Monetary Fund, G20, and a founding member of Association of Southeast Asian Nations, Asia-Pacific Economic Cooperation, East Asia Summit and Asian Infrastructure Investment Bank.

Services are the economy’s largest sector and account for 43.4% of GDP (2018), followed by industry (39.7%) and agriculture (12.8%). Since 2009, it has employed more people than other sectors, accounting for 47.7% of the total labour force, followed by agriculture (30.2%) and industry (21.9%).

• Range of Sectors for Investment

The following is a shortlist of the ideal sectors in Indonesia to invest in

• Manufacturing Industry
• Maritime
• Agriculture
• Tourism
• Lifestyle Industry

While the above offers good return on investment, the Republic of Indonesia makes sure there is a significant Infrastructure Development – Energy, Transport, Roadways, Railways, Airport and Seaport so that there is a smooth and continuous transition across all businesses.

• Easy Licensing

For investors showing interests in potential businesses for trade or ownership, using either an Indonesian Personal ID or a Passport ID a new membership can be applied at www.oss.go.id. OSS – Online Single Submission is administered by the AHU – Ministry of Law & Human Rights and seeks all basic details before passing it on to a Notary.

Note: Licences are instantly issued but will be activated and become effective once commitment(s) incl. payment(s) (if required) are fulfilled during specific regulated period.

• Incentives

All these incentives are available as options while having to fulfil certain eligibility criteria.

• Fiscal Incentives based on Business Activities:
  • Tax Holiday
  • Mini Tax Holiday
  • Tax Allowance
  • Super Tax Deduction
  • Exemption of ID and Import VAT
  • Reduction of Withholding Tax (WHT)
    
    
• Fiscal Incentives based on Locations:
  • Facilities for Export-oriented Companies
  • Facilities for Free Trade Zone (FTZ)
  • Facilities at Special Economic Zones (SEZ)
    
    
• Land Ownership for Foreign Investors

Indonesia allows foreign investors to have land ownership and have placed 3 strong laws by which land for business can be acquired.

• Right to Cultivate (Ind: Hak Guna Usaha or “HGU”) Certificate
  
  • Entitled for Indonesian Limited Liability Company (owned by local, foreign, or JV) to cultivate, harvest and agribusiness products on the purchased land.
    
  • Granted for the period of 35 years, can be extended to another 25 years, and renewable to 35 years.
    
    
• Right to Build (Ind: Hak Guna Bangunan or “HGB”) Certificate
  • Entitled for Indonesian Limited Liability Company (owned by local, foreign, or JV) to build and own all buildings and facilities (e.g. manufacturing facility, housing complex, apartment building) on the purchased land.
    
  • Granted for the period of 30 years, can be extended to another 20 years, and renewable to 30 years.
    
    
• Right to Use (Ind: Hak Pakai”) Certificate
  • Entitled for Indonesian Limited Liability Company (owned by local, foreign, JV), foreign individuals, and foreign diplomatic corps to use land and own all buildings and facilities on the purchased land for office or house.
    
  • Granted for the period of 30 years, can be extended to another 20 years, and renewable to 30 years.

Land certificates and transaction have different formalities to be followed.