Indonesia Market

Market Overview     

Indonesia is Southeast Asia’s largest economy with 240 million people, and GDP growth

above 6.5% in 2011 and projected to remain above 6% for the next five years. During

the difficult global conditions of 2009, Indonesia’s economy was among the top

worldwide performers, due to a number of factors, including strong domestic demand

and rich natural resources. Solid macroeconomic fundamentals, a stable currency and

recent upgrades in bond ratings have made in Indonesia an economy to watch in the

coming decade.

• The consumer market continues to lead growth in the world’s fourth-largest

country with 240 million citizens, 50% of whom are under the age of 30. 

• GDP per capita of $3,500 exceeds many of its ASEAN neighbors such the

Philippines and Vietnam. 

• Indonesia is a thriving democracy with significant regional autonomy. It is located

on the world’s major trade routes and has extensive natural resources spread

over an area the size of the United States and comprising over 17,000 islands.

• It is a top-ten market for U.S. agricultural products and within the top 30 overall

markets for U.S. exports. 

• Indonesia ratified the Cape Town Treaty, which gives U.S. aircraft exporters

access to financing through international protection and registration of financial

interests. In 2009 Indonesia implemented the ASEAN-China free trade

agreement. 

• The number of households in Indonesia with US$5,000 to US$15,000 in annual

disposable income is expected to expand from 36% of the population to more

than 58% by 2020. 

• More than 60 million low-income Indonesian workers are projected to join the

middle class in the coming decade, significantly increasing the already strong

consumer demand.

Market Challenges

• The business environment in Indonesia is challenging, currently ranked 128 out

of 183 for Ease of Doing Business by the World Bank. U.S firms often find it

complex and time consuming to enter the market and to negotiate through the

regulatory and industrial landscape. 

• Indonesian infrastructure and service networks have not been developed or

maintained in accordance with the booming consumer led economy, causing

multiple transaction costs and inefficiencies that hamper exporters and investors. 

• Deregulation has successfully reduced some barriers by creating more

transparent trade and investment regimes, but the bureaucracy can still be

cumbersome. Laws are often opaque or conflicting and some Ministries may

have very different regulations regarding similar actions.

• Although measures have been undertaken by the Indonesian government,

Corruption is still active at all levels of society, and is a concern for many

businesses looking to operate within Indonesia.

• Although improving, significant rule-of-law issues persist. Dispute settlement

mechanisms are not highly developed and business and regulatory disputes,

which would be generally considered administrative or civil matters in the United

States, may be treated as criminal cases in Indonesia. 

• Competition from companies from Singapore, China, Japan, Malaysia, Korea,

and other regional players is intense.

adapt their business model and pricing scheme to compete effectively.