2024: Doing Business in Indonesia

Published on Mar 27, 2024

Doing Business in Indonesia

1. What is the current business climate in your jurisdiction including major political, economic and/or legal activities on the horizon in your country that could have a big impact on businesses?

The business climate in Indonesia remains dynamic, characterized by stability and strength, driven by growing domestic demand and infrastructure investment. On the political front, the government is actively promoting economic growth through regulatory reforms and investment-friendly policies. This includes efforts to simplify business licensing processes and enhance infrastructure development. In February 2024, Indonesia held the world's largest single-day elections, choosing a president and legislators. There are no indications of political instability, as the presumptive president-elect, who will take office in October 2024, has pledged to maintain the current government's policies. Consequently, the markets responded positively to the election outcome, reassuring foreign investors that investment policies and ongoing projects will continue.

Economically, Indonesia continues to focus on sustainable development, with a particular emphasis on sectors such as renewable energy, technology, and manufacturing. Ongoing efforts to diversify the economy and attract foreign investment have bolstered the overall economic outlook. Despite post-pandemic economic recovery challenges, Indonesia's domestic growth remains strong. On the legal front, discussions and initiatives are underway to improve the legal framework for businesses, including dealing with the rapid development of artificial intelligence. The government aims to create a more conducive environment for investment by updating and reviewing relevant regulations.

Looking ahead, planned activities include further infrastructure development, environmental sustainability initiatives, and potential adjustments to tax regulations. Businesses are advised to stay informed about these changes, as they can significantly impact operations and strategies in the Indonesian market.

2. From what countries do you see the most inbound investment? What about outbound?

Most inbound investments come from Singapore, amounting to 25% of total foreign direct investment in Indonesia in 2023. The second largest investor is China, contributing to 17% of total foreign direct investment, followed by Japan and the United States. South Korea has also emerged as a significant investor, focusing on the technology and electronics sectors. In terms of outbound investments, Singapore remains the top destination for Indonesian investors, followed by Malaysia and the Netherlands. There is also a growing economic relationship with China, leading to an increase in outbound investment activities.

3. In what industries/sectors are you seeing the most opportunity for foreign investment?

As of 2023, the transportation, warehousing, and telecommunication sectors ranked highest in terms of investment realization. These industries saw a total investment realization of IDR 43 trillion (USD 2.75 billion). Followed closely is the mining sector, with a total investment of IDR 37.9 trillion (USD 2.42 billion). The success of projects such as a high-speed railway highlights the promising prospects in transportation and infrastructure. Furthermore, the technology and telecommunications sectors continue to be attractive, with rapid digitalization offering numerous investment opportunities.

4. What advantages and pitfalls should others know about doing business in your country?

The Indonesian economy proved its resilience during the COVID-19 pandemic and continues to enjoy strong growth. The country's sound economic conditions, coupled with rising public consumption, create a robust environment for further business growth. Moreover, the government continues to develop policies designed to attract greater investment, especially in Indonesia's abundant natural resources. As of 2024, Indonesia remains the only Southeast Asian country to have joined the G20 forum, proving its relevance and alignment with global forums.

Although Indonesia offers many advantages for investors, some challenges remain. The country's population is predominantly composed of the productive age group. However, the quality of Indonesian human resources may require improvement to meet global needs, especially in certain regions. Disparities in education quality across Indonesia result in skillset discrepancies among the workforce, prompting some employers to invest significant time and effort to improve employee skills. Furthermore, the archipelago is prone to natural disasters, so having a relevant risk management system may be prudent.

5. What is one cultural fact or custom about your country that others should know when doing business there?

Indonesia comprises many diverse regions, each with its own local authorities and policies. While the central government plays the main role in policymaking, provincial and regional authorities may implement additional regulations following national laws. However, the government's commitment to support business is commendable. Many administrative processes have been digitalized and automated to accelerate the business licensing process. Inter-departmental checks and balances within government authorities are being optimized. As a result of these initiatives, doing business in Indonesia remains appealing and rewarding for foreign investors.

Our Firm

1. What distinguishes your firm from others in your market?

Makarim & Taira S. stands as a distinguished law firm in Indonesia, tracing its roots back to its establishment in 1980 by Harvard alumni Nono Anwar Makarim and Frank Taira Supit. The firm has evolved into a premier legal institution with a reputation for providing exceptional legal services.

Guided by a vision to be the Indonesian law firm of choice, Makarim & Taira S. has been trusted with delivering value-driven legal services and maintaining professional excellence for corporations worldwide. This vision aligns seamlessly with the firm's core values of integrity, respect, accountability, collaboration, growth, service excellence, and compassion. These values form the bedrock of its approach to legal practice, ensuring that clients receive not only expert legal advice but also a commitment to ethical conduct, continuous improvement, and a genuine understanding of their challenges.

The firm excels across a diverse range of practice areas, including Banking & Finance, Capital Markets, Competition & Antitrust, Construction, Mergers & Acquisitions, Employment, Foreign Investment, Franchise & Licensing, Insolvency & Restructuring, Projects & Energy, Intellectual Property Rights, Real Estate, as well as Litigation, Arbitration & Dispute Resolution.

Over the years, Makarim & Taira S. has cultivated enduring relationships with clients since its inception, reflecting the trust and loyalty inspired by the quality of services provided. The firm's international presence is bolstered by collaborations with globally recognized firms, and membership of the World Law Group (WLG).

Amidst numerous accolades and rankings from leading global legal directories, Makarim & Taira S. remains dedicated to delivering high-quality, value-driven services. With a focus on trust, integrity, and a growing global footprint, the firm continues to be a top-tier legal partner in Indonesia, poised to fulfill its vision and be a trusted choice for corporations worldwide.

2. Describe the culture of your firm.

At our Firm, we hold a steadfast commitment to a set of core values that define our culture and shape our interactions. Integrity is the cornerstone of our identity—we approach every endeavor with unwavering honesty, ethics, and trustworthiness. In recognizing the intrinsic value of everyone, we foster an environment built on respect, where diverse thoughts, feelings, and backgrounds are accorded the importance they deserve.

Accountability is embedded in our ethos—we take full responsibility for our decisions, actions, and results, ensuring transparency and reliability in all that we do. Collaboration is more than a strategy; it's a belief in the power of working together to achieve shared goals. As advocates for continuous improvement, we embrace growth, promoting learning as a perpetual journey.

Service excellence is not merely a goal but a commitment to go above and beyond, consistently exceeding expectations. Compassion is the beating heart of our Firm—we genuinely care about the perspectives and challenges of others, translating empathy into action to provide meaningful help.

With these values as our guiding principles, we cultivate an environment where integrity, respect, accountability, collaboration, growth, service excellence, and compassion are not just words but the driving force behind every endeavor we undertake.

3. How does your firm participate in Corporate Social Responsibility (CSR) and/or Environmental, Social and Governance (ESG) initiatives?

Makarim & Taira S. views corporate social responsibility (CSR) as an integral part of our identity as a responsible and ethical organization. The Firm is committed to making a positive impact on the community and contributing to social and environmental well-being. This commitment aligns with the values of integrity, respect, accountability, collaboration, growth, service excellence, and compassion that form the foundation of the Firm’s vision.

The Firm actively engages in environmental initiatives, participating in tree-planting programs and conservation efforts for endangered species such as sea turtles and orangutans, showcasing a commitment to global sustainability and biodiversity preservation.

In addition to environmental commitments, Makarim & Taira S. demonstrate a dedication to community empowerment. The Firm provides professional development opportunities for youth with Down syndrome, contributes to educational initiatives, addresses stunting issues in children, and supports inclusive education, investing in the well-being and future of the communities it serves.

Education and knowledge sharing are integral components of the firm's ethos, with active involvement in teaching endeavors and educational programs. Makarim & Taira S. believes in the transformative power of knowledge, contributing to the development of the next generation of legal professionals.

Moreover, the firm prioritizes health and wellness, encouraging employees to participate in blood donation drives. By fostering a culture of giving back through blood donations, Makarim & Taira S. emphasizes collective well-being and solidifies its role as a responsible corporate citizen dedicated to holistic community impact. Overall, the firm's diverse initiatives reflect a commitment to excellence not only in legal practice but also in environmental conservation, community welfare, education, and health.

By incorporating CSR principles into its core values, Makarim & Taira S. demonstrates a holistic commitment to environmental, social, and governance responsibility. The Firm aims to be a positive force for change, contributing to the betterment of society and the environment in line with its role as a responsible corporate citizen.

4. Are there any new and exciting initiatives, practice areas or industry focuses in your firm?

In recent years, our firm has witnessed significant new developments in Indonesia's energy and natural resources sectors, primarily driven by the government's goal of transitioning to electric vehicles and reducing carbon emissions. In mining, there has been a strong push for investment in both downstream and upstream sectors, especially in nickel, due to the growing demand for electric vehicle batteries. In the digital sector, there has been rapid development in AI, financial technology, and data protection initiatives. At the same time, Indonesia has embarked on solar energy initiatives, hydropower projects, and adopting carbon capture and storage in oil and gas projects.

These strategic initiatives have attracted both foreign and domestic investment in projects in the clean energy and nickel industries. Our firm has gained significant exposure to several of these ventures, assisting throughout the entire project lifecycle, from financing to implementation and continuation.