Doing business in Indonesia - Director Magazine

Doing business in Indonesia

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Night-time view of Jakarta, Indonesia

It’s a nation where CEOs prefer WhatsApp to emails, Union Jacks are permanently aflutter and there are around 20 million Twitter users. Could the tech-savvy Anglophile population of Indonesia offer Britain a welcome post-Brexit boost?

As names for Silicon Valley ventures go, Project Loon is hardly the most auspicious moniker. Its premise – hundreds of helium blimp-like balloons drifting over Javanese rice paddies and steamy Sumatran volcanoes delivering internet connectivity to millions of WiFi-hungry Indonesians – seems like a far-fetched sequel to Pixar animation Up.

However, later this year, Google’s Project Loon will indeed take off, when it launches 12m-tall balloons into the sky above Indonesia, providing greater connectivity to the population (255 million people scattered across 17,000 islands) and hoping to conquer the archipelago’s challenging topography in a way underwater cables or satellite tech can’t.

There’s a good reason Google is interested in Indonesia. Although only 29 per cent of Indonesians can access the internet, those who are connected are possibly the planet’s most prolific users. In a typical month around 65 per cent of internet users in Indonesia spend time on Twitter, the country has the world’s fourth-largest Facebook market, while the average time spent online is 5.1 hours per day.

Indonesia’s digital love affair – spurred by freedom from the censorship-heavy Suharto dictatorship and the affordability of smartphones – presents obvious opportunities for e-commerce, gaming and fintech companies, especially when its growing nouveau riche (74 million Indonesians fit the World Bank’s definition of ‘middle class’) and youth (about 60 per cent of Indonesians are under 30) populations are considered.

Its economy is robust too. Indonesia is predicted to be the world’s seventh-largest economy by 2030; GDP growth in 2016 is forecast to be 5.3 per cent.

As Chris Wren, executive director at the British Chamber of Commerce in Indonesia, says: “If only two or three per cent of this 255 million population are in your market, it can present huge opportunities… Nobody ever pulls out of this market. They just grow, develop and reinvest.”

Indonesia offers more than appealing demographics – it’s a nation of ardent Anglophiles too. In Jakarta’s street markets and malls, shirts emblazoned with English Premier League teams are ubiquitous, as is Union Jack iconography. Yet despite this passion for British brands, Indonesia is ranked a distant 47th in our goods export market.

Although it’s a little early to tell if Brexit Britain can upgrade this bilateral relationship, should the UK strike trade deals with the Asean [Association of Southeast Asian Nations] free-trade area, “Indonesia could be used as a hub for many countries” according to Wren, who adds: “If I was manufacturing and could rely upon Indonesia’s huge domestic consumption to underpin it, I’d probably hub and approach the rest of the Asean from here.”

British recruitment firm Michael Page added Jakarta to its 35-country portfolio in 2013. Since launching with a six-strong team, the Indonesian office – under the auspices of president director Olly Riches – now employs 32 people, placing job-hunters into positions in booming sectors such as e-commerce, healthcare and infrastructure.

Says Riches: “Indonesia is one of the most successful launches we’ve had, we’ve been profitable from year one,” attributing its success to factors such as “companies now putting regional heads into Indonesia rather than Singapore.”

Entrepreneurially minded foreign universities are also seizing upon openings within the world’s fourth-largest education system (50 million students and 2.6 million teachers). Coventry University employs a six-strong Jakarta team, helping to deliver the university’s degrees in Indonesia, bring Indonesian students to the UK and provide in-house corporate training.

“Indonesia was not the most obvious choice [for expansion] but we knew there was lots of opportunity,” says Paul Noon, Coventry University’s pro-vice chancellor for enterprise and innovation, adding young Indonesians’ enthusiastic embrace of social media is a “great way of advertising to potential customers”.

Despite this smartphone fervour, less than 50 per cent of Indonesians can access their finances, offering opportunities for companies such as traceability software solutions provider Traceall Global (see p60), which hopes to introduce its app that allows fishermen to access bank loans.

“Indonesia is under-banked,” says Wren, who also notes British-based Islamic banks could flourish in the world’s most populous Muslim nation. Although these possibilities – not to mention working in the supply chain of infrastructure projects such as building Jakarta’s scheduled-for-2017 MRT (mass rapid transit) system, consulting on 2018 Asian Games and the £276bn overhaul of Indonesia’s transportation – will turn heads, Riches points out: “Indonesia is not a quick-win country – you need to have a long-term agenda.”

Wren adds: “If businesses do a bit of Googling, they see all this stuff about population and GDP growth, and think, ‘Gosh! All I have to do is turn up with a suitcase full of products and I’ll go home with a case full of cash’. Unfortunately, viewing Indonesia as a place to quickly fill order books is not the right way to approach this market.

Indonesia has to be considered as a strategic medium-term investment market entry, with businesses committing to at least two visits to succeed.” Indeed, it has taken Traceall Global four years to secure deals, with CEO/president Alan Steele noting: “One thing we’re taught in Europe and America is ‘Close the deal’. You don’t do that in Indonesia – it’s a long, protracted process.”

Red-tape hurdles

The biggest impediment, insiders argue, is Indonesia’s byzantine bureaucracy. The country ranks 114th in the World Bank’s ‘Ease of doing business’ index, with new companies needing to consult such Kafkaesque-sounding government departments as the Ministry of Manpower and Transmigration.

Michael Page swerved such difficulties by deciding to initially run its Indonesia operations from the Malaysian capital Kuala Lumpur for six months prior to opening its Jakarta office. “There is a protectionist element to Indonesia, which you can understand – they don’t want people coming here, stealing resources and leaving them in a mess,” says Riches.

“This slows down the process of companies coming in… The potential in Indonesia is enormous but I haven’t seen it work for those companies coming in with very aggressive plans. You need to learn and adapt to the market first. It’s a balancing act between patience and ambition.” Says Noon: “You have to remind yourselves it’ll take longer than you want but the prize is high so you don’t get frustrated.”

Frustration. It’s something Jakarta’s citizens experience daily with its nerve-shredding traffic – the megalopolis of 9.6 million people was recently named the world’s most congested city. “Moving around is the biggest challenge – travelling 100 yards can take an hour,” says Noon.

Another foible which foreign workers find irksome is the Indonesian indifference towards email. Businesspeople prefer liaising face-to-face or on mobile messenger apps such as WhatsApp, rarely replying to emails. The fondness for instant messaging means that UK-based businesspeople such as Steele are in their offices at 5am every day [Jakarta is seven hours ahead of GMT]. “Normally, when organising trips, we’d send emails saying, ‘Can you find a date for us?’,” says Noon. “But that doesn’t work in Indonesia because people won’t check emails or respond – you need to ring them.”

Indonesia is undergoing its most politically stable period ever. In 2014, Joko Widodo (known as ‘Jokowi’), a self-made furniture businessman, became the country’s first democratically elected president with no links to the Suharto dictatorship. He has shown a strong pro-foreign investment streak and promised to tackle Indonesia’s endemic corruption problems.

“If your business involves interacting with government departments or regional authorities, then the likelihood of corruption raising its head is fairly high,” says Wren. “If you submit a document that has to be rubber-stamped by a court and it doesn’t come with an additional sweetener, then it’ll take a little longer to come out.”

Indonesia also has human rights hurdles to overcome. Last year UK film-makers Rebecca Prosser and Neil Bonner were detained for six months in an Indonesian prison for attempting to make films without the correct visas, while British grandmother Lindsay Sandiford has been sentenced to death by firing squad for smuggling cocaine, despite claiming she was coerced.

Meanwhile, more than a decade on from the 2002 and 2005 Bali bombings, the spectre of terrorism still prevails, with an attack in Jakarta killing eight people this year. There’s also the palm oil problem.

Throughout 2015, forest fires raged due to deforestation caused by palm oil plantation development. A boycott has led to a dramatic fall in the price for a key export, with Jokowi pledging to cut output.

However, the more positive advances Indonesia has made since the Suharto regime ended in 1998 have shown that it is both receptive and ready for further foreign investment. As Steele says: “[Success] in Indonesia does take time. But once you’ve cracked through that wall, there are huge prizes at the end of it.”

Case Study: Traceall Global

The Tracheal Global team in Indonesia

Founded in 1998, Glasgow-based Traceall Global specialises in ‘traceability software’, which has tracked seafood from “net to plate”, kept tabs on Coca-Cola’s thousands of chillers across Europe and monitored the origins of food products bought for Jamie Oliver’s catering businesses. In April, Traceall signed a memorandum of understanding [MOU] with the Indonesian government, aimed at alleviating its illegal fishing problem which costs the economy $20bn a year (£15.2bn).

“It’s an enormous problem,” explains CEO/president Alan Steele (above right). “Boats from other nations take fish from Indonesian waters, process the fish in their own countries before selling back to the Indonesians.” By giving tuna unique IDs, Traceall is able to track the fish throughout its supply chain to monitor where it’s been caught, whether it complies with quotas and its temperature in storage. The data-capturing systems will be implemented on all Indonesian fishing vessels, with the Scottish firm also developing an electronic fisheries logbook, replacing its existing paper-based logging system.

The MOU follows partnerships forged earlier this year with Bali Seafood International (which is installing Traceall software in its processing plants) and seafood supplier Intan. However, the deals were forged after significant groundwork and nearly-monthly visits by Steele since 2012. “I’ve been travelling to Indonesia for four years and only now have we converted that energy into sales.”

During that time, Steele built his partners network and won trust by “getting his sleeves rolled up”, going out in fishermen’s boats or visiting processing plants: “As a CEO, I’m normally walking around in a pinstripe suit, but then you find yourself barefoot walking on a beach. But that’s how you gain the trust.”

Traceall is working on a plan to recruit Indonesian interns through UK universities, with the aim to employ them as Traceall workers upon a return to their home country.

traceallglobal.com
@TraceallGlobal

Indonesia Facts

A 2016 survey revealed Bahasa Indonesia is the world’s cheapest business language to master, costing £5,175 (learning Korean will set you back £41,155)

Indonesia accounts for nearly 40 per cent of the total economic output of the 10-member Asean bloc

The Indonesian retail market nearly doubled in size between 2008 and 2014 – it is forecast to be worth almost $550m (£419m) this year

In April 2016 a growth-hungry European Union agreed to start free-trade talks with Indonesia

Read parts two and three of our report on Indonesia

Jakarta city guide
Emirates Jakarta to Gatwick via Dubai review 

Links 

britcham.or.id
@ceobritcham
michaelpage.co.id
@MichaelPageID
coventry.ac.uk
@covcampus

About author

Christian Koch

Christian Koch

Alongside his work for Director, Christian has written features for the Evening Standard, The Guardian, Sunday Times Style, The Independent, Q, Cosmopolitan, Stylist, ShortList and Glamour in an eclectic career which has seen him interview everybody from Mariah Carey to Michael Douglas through to Richard Branson with newspaper assignments including reporting on the Japanese tsunami and living with an Italian cult.

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