Indonesia is notorious for its difficult business setup process. Even the country’s Minister of Cooperatives and Small and Medium Enterprises (SMEs), Mr. Anak Agung Gede Ngurah Puspayoga, said during a recent meeting that many SMEs in Indonesia still find it difficult to obtain business permits. This can cause issues when completing business setup as these permits are required to secure loans from a local or international bank.
To battle this problem Indonesia began to make reforms to secure easier gateways for both local and foreign-owned SME’s to quickly and effortlessly obtain their required business permits.
This plan aims to boost the country’s SME sector by attracting fresh foreign investments before the upcoming commencement of the ASEAN Economic Community (AEC) scheduled for the end of 2015.
“Immediate strengthening, especially in the small and medium enterprises sector, is needed. Efforts towards this end could be started by giving them access to markets, in addition to capital assistance,”
says World Bank economist Ahya Ihsan
This statement is supported by global business which is interested to expand to this vast market, but simply does not have the time and patience to deal with the current red tape imposed by the Indonesian Government.
Further to the proposed reform we can identify four advantages to registering a SME company in Indonesia, including:
Massive domestic market
Surprising to many, Indonesia is the fourth most populous country in the World and their GDP is growing at a favorable rate 6 per cent per annum. As a result, Indonesians’ per capita income and purchasing power is steadily increasing, reaching attractive levels for foreign investors;
Demand for innovation
In the past decades, foreign investment and trade with Indonesia was concentrated around the manufacturing and mining sector. However, we suggest new SMEs focus on the massively transformed services sector as in recent years there is massive demand for quality and innovative service providers.
Cheap operating costs
Compared to Westernized economies and even most Asian countries, Indonesia boasts very low operating and living costs. To put it simply, every aspect of daily life and the business cycle is very cheap including food, transport, utilities, rent, wages etc.
Tax efficient setup solution
Indonesia is picking up good business practices from its neighbors like Singapore and Malaysia and has begun to operating a new Special Economic Zone (SEZ). Batam is the first of its kind opened in Indonesia and conveniently offers multiple tax incentives to businesses that use the area to manufacture goods for export purposes. As a result, when imported goods enter the zone they are free from VAT, import duty and Local Service Taxation.
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Photo Credit: nseika under CC BY-NC-SA 4.0.