indonesia - an overview - Business Sweden

indonesia - an overview - Business Sweden

CONFIDENTIAL FOR INTERNAL USE WITHIN CLIENT COMPANY ONLY INDONESIA - AN OVERVIEW BUSINESS SWEDEN October 2016 INTRODUCTION INDONESIA – THE LARGEST...

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CONFIDENTIAL FOR INTERNAL USE WITHIN CLIENT COMPANY ONLY

INDONESIA - AN OVERVIEW BUSINESS SWEDEN October 2016

INTRODUCTION

INDONESIA – THE LARGEST ECONOMY IN SOUTHEAST ASIA Business Sweden in Indonesia Business Sweden supports with several services on the Indonesian market such as market analyses, partner selection, and counselling and strategy development for entering the market. In order to facilitate establishment we also offer turn-key solutions such as office space, assistance with recruiting, accounting and administration. Indonesian business culture is relationship oriented and the contact network is crucial to build trust and do business here. Business Sweden staff has far-reaching connections both within the public and private sector. In parallel, the Team Sweden brand and Swedish Embassy connections play an important role and open many doors in our daily work. The bureaucracy is one of the main challenges that Swedish companies face in Indonesia and many of the administrative processes are more time consumer than in other countries. With our experience on the market, we’re able to facilitate many of these thresholds. Do not hesitate to contact us to talk about Indonesia as a potential market for your company and how Business Sweden can assist you to further investigate the market potential, entry strategies and/or how to develop existing business. Welcome to Indonesia!

Anders Wickberg Trade Commissioner to Indonesia

BUSINESS SWEDEN

28 NOVEMBER, 2016

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INTRODUCTION TO ASEAN

THE ASEAN ECONOMIC TRADING BLOC WAS FORMED 1967 TO PROMOTE GROWTH, STABILITY AND PEACE ASEAN - THE ASSOCIATION OF SOUTHEAST ASIAN NATIONS MYANMAR VIETNAM LAOS THAILAND PHILIPPINES

Cambodia CAMBODJA

MALAYSIA

BRUNEI

INDONESIA SINGAPORE

ASEAN HAS OVER TIME DEVELOPED TO BECOME A REGIONAL FORCE IN ASIA

BUSINESS SWEDEN

28 NOVEMBER, 2016

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INTRODUCTION TO ASEAN

THE OVERALL INTRA-ASEAN TRADE HAS SURGED BY SEVEN-FOLD OVER THE PAST DECADE EXTERNAL-ASEAN TRADE USD BILLION

SHARE OF MAJOR TRADE PARTNER WITH ASEAN, 2014

INTRA-ASEAN TRADE USD BILLION

x5

x7

DURING THE SAME PERIOD EXTERNAL-ASEAN TRADE INCREASED FIVE-FOLD SOURCE: ASEAN STATISTICAL DATABASE BUSINESS SWEDEN

11 NOVEMBER, 2016

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INTRODUCTION TO INDONESIA

INDONESIA IS PREDICTED TO BE THE WORLD TOP 10 LARGEST ECONOMY IN THE NEXT 20 YEARS

FACTS ABOUT INDONESIA  Indonesia is the 4th largest country in the world, with a population of around 250 million  In 2015, Indonesia made a total of $2.84 trillion of PPP (Purchasing Power Parity) GDP. This makes it the world’s 8th best in terms of GDP (PPP).  Indonesia will be the world's seventh largest economy In 2030.  Indonesia is the largest archipelago in the world with more than 18,000 islands.

 Jakarta is the 13th largest city in the world with a population of around 11.3 million people. DESKTOP RESEARCH BUSINESS SWEDEN

28 NOVEMBER, 2016

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INTRODUCTION TO INDONESIA

INDONESIA IS PROJECTED TO HAVE A SIGNIFICANT GROWTH FOR THE NEXT 25 YEARS Indonesia Now

 16th Largest Economy in The World

 45 Million consumer Class  54%

Indonesia 2030

 7th Largest Economy in The World  135 Million consumer Class

 71%

populations in the city

populations in the city

producing

74% of the GDP

 55 Million skilled workers in

producing

86% of the GDP

 113 Million skilled workers in the Indonesian economy

the Indonesian economy

MCKINSEY (MCKINSEY.COM) BUSINESS SWEDEN

28 NOVEMBER, 2016

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INTRODUCTION TO INDONESIA

UNCTAD SURVEY SHOWN THAT INDONESIA IS IN THE WORLD TOP 3 FOR INVESTMENT DESTINATION TNCs’ top prospective host economies, 2014–2016 (Percentage of respondents selecting economy as a top destination) Indonesia Thailand Vietnam Malaysia Singapore

27 TOP 5 ASEAN COUNTRIES

14 12 8

7

China United States India Brazil Germany United Kingdom Russian Federation Australia France Poland Mexico Japan

44 41 26 23 20 14 10 10

Developed Economies Developing and Transition Economies

9 8 8 8 0

5

10

15

20

25

30

35

40

45

50

UNCTAD (UNCTAD.ORG) BUSINESS SWEDEN

28 NOVEMBER, 2016

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INTRODUCTION TO INDONESIA

INDONESIA SIGNIFICANTLY IMPROVED BUSINESS CLIMATE COMPARED OTHER TO ASEAN COUNTRIES EASE OF DOING BUSINESS INDEX RANKING 2010 VS. 2016

ASEAN6

Rank 2016 -50

-100

100

50

0

1

Singapore

Rank 2 (-1) Rank 23 (+0)

Malaysia 50

Thailand Rank 46 (-30)

Vietnam Rank 82 (+8)

100

Can’t keep pace

Indonesia

Rank 91 (+35)

Philippines

Rank 99 (+35)

Improving

Rank change 2010 - 2016

SOURCE: WORLD BANK – EASE OF DOING BUSINESS BUSINESS SWEDEN

11 FEBRUARY, 2016

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INTRODUCTION TO INDONESIA

INDONESIA FDI HAS BEEN INCREASE FOR MORE THAN 20% FROM YEAR 2014 - 2015

160 140

Rp. (In Trillion)

120 100 80 60 40 20 0 Q1

Q2

Q3

Q4

Q1

Q2

Q3

2013 DDI FDI Total

Q1 27 65 93

Q2 33 66 99

Q4

Q1

Q2

Q3

2014 Q3 33 67 100

Q4 34 71 105

Q1 34 76 106

Q2 38 78 116

Q4

2015 Q3 41 78 119

Q4 41 78 120

Q1 42 82 124

Q2 42 92 135

Q3 47 92 140

Q4 46,2 99,2 145

BKPM (BKPM.GO.ID) BUSINESS SWEDEN

28 NOVEMBER, 2016

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KEY INDICATORS IN INDONESIA

SWEDISH COMPANIES HAVE A BIG OPPORTUNITIES TO HELP INDONESIA IN MAXIMIZING THEIR POTENTIAL

Infrastructure

Growing Consumer Class

Shift to Manufacturing

Infrastructure is the main indicator for economic growth in Indonesia

Growing consumer class give a positive impact for Indonesia economy.

Indonesia is currently focus in increasing the growth of manufacture in Indonesia

Indonesia is the country with the highest population growth in the consumer class segment.

After the 1998 crisis, Indonesia unable to reach the potential like it was shown before the crisis.

2010: 45 million of Indonesia population can be categorize in consumer class category with (>$3,600 annual income).

2014: Manufacturing products only counted 35% from total Indonesia export.

Indonesia infrastructure development is still experiencing issues in finance and legal aspect. 2016: Rp.213 trillion is the budget allocated by Indonesia government for infrastructure development.

INDONESIA INVESTMENTS (INDONESIA-INVESTMENTS.COM) BUSINESS SWEDEN

28 NOVEMBER, 2016

10

KEY INDICATORS IN INDONESIA

[INFRASTRUCTURE]

GOVERNMENT ARE SHIFTING BUDGET FROM VARIOUS SECTORS TO INCREASE THE INFRASTRUCTURE BUDGET GOVERNMENT SUBSIDY 2012 – 2016, TRILLION RUPIAH

KEY POINTS

450,0 400,0 350,0

Subsidy for Infrastructure will continue to increase

Significant increase on government subsidy for infrastructure has become one of the evidences that the government is really serious in developing the infrastructure in Indonesia.

Swedish knowledge and technologies

Swedish companies can provide adequate resources and technologies to help Indonesia government in developing the infrastructure in Indonesia.

Various and equitable infrastructure development

Swedish companies can provide a support in many different sectors of infrastructure as the government are intended to have an equitable development in various sectors (agriculture, marine, etc).

300,0 250,0 200,0 150,0 100,0 50,0 0,0 2012 Energy

2013 Education

2014

2015

Infrastructure

2016 Health

INDONESIA INVESTMENTS (INDONESIA-INVESTMENTS.COM) BUSINESS SWEDEN

28 NOVEMBER, 2016

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KEY INDICATORS IN INDONESIA

[GROWING CONSUMER CLASS]

INDONESIA IS THE 3RD LARGEST CONSUMER CLASS POPULATION IN INDONESIA CONSUMER CLASS POPULATION IN INDONESIA 2000 – 2015, MILLION PEOPLE 200

170 Million (61%) 135 Million (48%)

150

Positive impact for Indonesian economy

85 Million (32%)

100

50

KEY POINTS

45 Million (19% of Populations)

High demand for product and services

Providing products and services from various sectors with better quality can become the biggest opportunity as the demand will increase in line with the growing consumer class population.

Biggest in ASEAN

Total of consumer class population in Indonesia is more than the total population of Malaysia and Singapore combined.

2030 F (2)

2030 F (1)

2020 F

2010

0

2030 F (1) with 5-6% GDP Scenario 2030 F (2) with 7% GDP Scenario CAGR 2010 – 2030 F(1)

CAGR 2010 – 2030 F (2)

Development of most sectors (property, electronics, automotive, etc) in Indonesia are depending on the buying power of consumer income population.

*The consumer class populations defined as individual with annual income above $3,600

MCKINSEY (MCKINSEY.COM) BUSINESS SWEDEN

28 NOVEMBER, 2016

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KEY INDICATORS INDONESIA

[SHIFT TO MANUFACTURING]

INDONESIA NEED A BIG INVESTMENT TO INCREASE THEIR COMPETITIVENESS INDEX GLOBAL MANUFACTURING COMPETITIVENESS INDEX 2016, INDEX SCORE (100=HIGH, 10=LOW) Singapore (*1) (10)

68,4

Thailand (*2) (14)

60,4

Malaysia (*3) (17)

59

Vietnam (*4) (18)

56,5

Indonesia (*5) (19)

55,8

TOP 5 ASEAN COUNTRIES

China (1)

100

United States (2)

99,5

Germany (3) 80,4

South Korea (5)

76,7

United Kingdom (6)

75,8

Taiwan (7)

Government aim to increase the index

Large indirect cost because of poor logistics

93,9

Japan (4)

KEY POINTS

72,9

Mexico (8)

69,5

Canada (9)

68,7

India (11)

Low wages but poor unit labour cost

67,2

Switzerland (12)

With the potential that Indonesia have, Swedish companies can support the manufacturing sector to increase their competitiveness index. Swedish support to develop a better logistics (transportation, container handling, etc) in Indonesia will help the companies to reduce their indirect costs. Indonesia currently need a technologies and knowledges that can help them to increase their unit labour cost.

63,6

Sweden (13)

62,1 0

20

40

60

80

100

120

DELLOITE (DELLOITE.COM) BUSINESS SWEDEN

28 NOVEMBER, 2016

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SWEDEN IN INDONESIA

SWEDISH COMPANIES ALREADY PROVIDE A SUPPORT IN ALMOST ALL REGION ACROSS INDONESIA BALIKPAPAN

MEDAN

Volvo and Scania have the warehouse and aftersales service centre in here to serve the whole Kalimantan island

H&M open it first store outside Jakarta in 2015

PALU Biogassystem has set up together with local municipality

PAPUA In Pegunungan Bintang, ABB has contributed to several solar panel installations, providing electricity in remote area.

EAST NUSA TENGGARA A pilot micro geothermal off grid energy project will be set up here by Swedish Company Energeotek with local partners.

TANGGERANG BANDUNG

The 1st IKEA Store open in 2014

SAAB and ITB are working together to build an innovation centre at the ITB Campus

EAST LOMBOK Creation of sustainable and self-sufficient eco tourism hotel and leisure area

JAKARTA

CIBITUNG

YOGYAKARTA

Most of Swedish Companies have their offices in here such as Atlas Copco, Astra Zeneca, and Volvo Group. Furthermore it is also the home for Embassy of Sweden and Business Sweden

Gunnebo has one of their factories here, employing nearly 300 people to produce safety solutions

Based for INSISTS, the Indonesian Swedish initiative for sustainable energy solutions

BANYUWANGI PT. Lundin a Swedish cutting edge ship wharf is based in here

SOURCE: EMBASSY OF SWEDEN BUSINESS SWEDEN

28 NOVEMBER, 2016

14

SWEDEN IN INDONESIA

TODAY, THERE ARE APPROXIMATELY 70 SWEDISH COMPANIES IN INDONESIA EXAMPLES OF SWEDISH COMPANIES DOING BUSINESS IN INDONESIA        

ABB Alfa Laval Atlas Copco AstraZeneca Autoliv Electrolux Volvo H&M

       

Ericsson IKEA Saab Sandvik Scania SKF Tetra Park EF

       

Akzo Nobel Coatings Flexlink IFS Oriflame Securitas Lundin Zalora Luxe Living

       

Oddbit Mixon Eude Flexlink Emric Ecmant Eco Regions Axis Communications

SOURCE: BUSINESS SWEDEN AND EMBASSY OF SWEDEN BUSINESS SWEDEN

28 NOVEMBER, 2016

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FORMS OF ESTABLISHMENT

THERE ARE VARIOUS ESTABLISHMENT FORMS, SUITABILITY DEPENDING ON ACTIVITY TYPE  Allowed activities

Type of activity

Form of establishment Agent/Distributor

Export to Indonesia

Import from Indonesia



Sales in Indonesia

Manufacture in Indonesia



Limited Liability Company (PMA)



* Only supporting function







Level of stake and control

Representative Office

BUSINESS SWEDEN

28 NOVEMBER, 2016

BUSINESS SWEDEN

11/28/2016

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BUSINESS SWEDEN IN ASEAN

WITH 5 OFFICES IN SOUTH EAST ASIA WE ARE AT HOME ON YOUR FOREIGN MARKETS BUSINESS SWEDEN’S PRESENCE IN ASEAN

VIETNAM

BUSINESS SWEDEN’S SERVICE OFFERINGS Business Sweden makes it easier for Swedish companies to grow internationally EVALUATE OPPORTUNITIES

THAILAND CHOOSE STRATEGY

ESTABLISH PRESENCE

MALAYSIA SINGAPORE

GROW BUSINESS

INDONESIA

BUSINESS SWEDEN

28 NOVEMBER, 2016

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CONTACT US BUSINESS SWEDEN IN INDONESIA

WISMA METROPOLITAN I (WTC5), 9TH FLOOR JL. JEND. SUDIRMAN. KAV.29, 12920 JAKARTA , INDONESIA

P +62 (0)21 570 6000 F +62 (0)21 570 5268 [email protected]