Indonesia is “Open for Business” to Foreign Firms

Over 100 of ASEAN's top business leaders attended a panel discussion on "Winning in Indonesia: Accelerating Economic Progress and Partnerships", organized by The Boston Consulting Group together with Asosiasi Pengusaha Indonesia (APINDO) at the Shangri-La Hotel today.

JAKARTA—Over 100 of ASEAN's top business leaders attended a panel discussion on "Winning in Indonesia: Accelerating Economic Progress and Partnerships", organized by The Boston Consulting Group together with Asosiasi Pengusaha Indonesia (APINDO) at the Shangri-La Hotel today.

Indonesia's Coordinating Minister for Economic Affairs, Sofyan Djalil delivered the keynote speech for the event, and reiterated the government's commitment to greater economic progress, and invited the private sector to participate in Indonesia's economic growth.

Given its 250 million population which skews young (almost 80% of the population is under 55 years old), Indonesia has piqued the interest of investors looking for a large consumer base. The government's recent moves such as the abolishment of fuel subsidies and reopening of trade negotiations have only served to endear Indonesia to the investor community.

The Chairman of APINDO, Hariyadi B. Sukamdani, lauded the government's move to replace the current bureaucratic process of issuing business licenses with a new one-stop integrated service. Such reforms are buoying optimism within the business community, as evinced by APINDO's business sentiment survey monitoring enterprises' perception of the new government's first 100 days.

To serve ASEAN's largest country by land area, big investments in infrastructure are required to connect people, goods, and information within the archipelago. While the fuel subsidy policy changes have freed up fiscal space, the government will need to provide enough financing for such infrastructure needs, estimated to be over US$ 400 billion.

"Even with the state budget's dramatic reorientation towards infrastructure spending, it would not meet the financial requirements of the government's ambitious infrastructure project," Hariyadi said.

The Boston Consulting Group's report, Accelerating toward Greater and More Sustainable Prosperity: Ten Key Priorities for the New Indonesian Government, which was presented to Sofyan Djalil in a private meeting in January this year, recommends that the government broaden alternative payment options for infrastructure projects and also integrate its existing infrastructure financing agencies. The report highlights key success factors for PPPs, and provides relevant benchmark and lessons from other countries.

However, doing business in Indonesia is not without its challenges. Hans-Paul Bürkner, Chairman of The Boston Consulting Group, cites the managerial talent gap as a key hurdle for businesses operating in Indonesia. According to the BCG report "Tackling Indonesia's Talent Challenges", Indonesia faces between 40-60% shortfall in managerial talent by 2020, a threat to Indonesia's burgeoning services sector.

Yet Dr. Buerkner, who is also Co-Chair of the 24th World Economic Conference on East Asia, remains optimistic about Indonesia. "Addressing the talent shortage requires, of course, enormous efforts by all countries in the region in terms of investment in education and training. At the same time, talent is becoming increasingly mobile, and the formation of the ASEAN Economic Community, targeted for end of 2015 will promote a single market allowing for freer movement of talent within ASEAN, and should attract skilled workers from other parts of the world to this economic region."

In summing up the panel discussion, Janmejaya Sinha, Regional Chair of BCG, Asia-Pacific, who was moderator of the panel, affirmed the importance of playing to win in Indonesia, "Indonesia is the biggest opportunity in the world right now, with a government that is committed to change and to partnering with the private sector. The time for talk has passed; winning in Indonesia is an imperative for survival for any regional or even global player. To do so, companies should be bold with their investments, actively engage with the government to develop open partnerships, and customize their business model for the local market. "

For more information on the reports mentioned, please reach out to SEAMarketing@bcg.com

About APINDO

The Employers Association of Indonesia (APINDO) is an Indonesian Employers’ Organization that is democratic, free, independent, and responsible, particularly dealing with Industrial Relations, investment, and any business-related issues. It strives for the achievement of a competitive investment climate and growth, equitable socio-economic level, and the creation of harmonious, dynamic, equitable and equal Industrial Relations. Besides the National Board, APINDO has area coverage which consists of 34 APINDO Provincial Board and District/Municipal Boards.

As an active member of International Organization of Employers (IOE), APINDO promotes its members’ involvement in international trade and investment summits in the global arena. Hand in hand with the government, APINDO is appointed as an expert on international trade negotiations, representing Indonesian employers as business delegation.

APINDO was founded in Jakarta, January 31st 1952 and named the Foundation for Employers’ Socio-Economic Affairs Consultative Body in Indonesia (PUSPI). On the 2nd National Conference in Surabaya 1985, the name of PUSPI was amended into the Employers Association of Indonesia (APINDO).

About Boston Consulting Group

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