Expanding Your Business to Indonesia? 4 Essential Considerations To Make

TIMESINDONESIA, JAKARTA – With a GDP of over $1.37 trillion, Indonesia has the largest economy in Southeast Asia and the 16th largest economy globally. By expanding to Indonesia, United States investors can access new Southeast Asian markets, an enormous and young workforce, and a wealth of natural resources such as coal, silver, gold, copper, and petroleum.

This article will explore four considerations when expanding your business to Indonesia. 

Advertisement

Local Employment Laws And Regulations

If you need to hire employees to work for your business in Indonesia, you must comply with all the employment laws and regulations in the country. This ensures Indonesian employees get the correct wages and benefits, such as paid holidays, maternity leave, sick leave, and healthcare.

As an employer, you must understand local employee rights to ensure a successful global expansion into Indonesia. In addition, you must make sure that you pay your employees on time and report all your taxes correctly.

However, for those wanting to expand to Indonesia without opening a legal entity in the country, you can consider hiring an Employer of Record (EoR) provider. EoR providers such as Remote People employ foreign workers on your behalf and take on the legal responsibility for them. 

Following local employment laws and regulations or hiring an EoR provider can protect your global business against significant noncompliance penalties, a damaged reputation, imprisonment, and business shutdown.

Don't Take The Large Population For Granted

With a population of 278 million people and over 130 million workers in the country, Indonesia has the largest labor market in Southeast Asia and the fourth largest labor market worldwide.

However, despite its large labor market, only 55 million workers are considered 'skilled'. In contrast, Singapore is considered to have the 14th most skilled labour force in the world despite a much smaller population of 5.92 million people. Vietnam and the Philippines also rank above Indonesia for their skilled labor force.

Trade Agreements

The US is one of Indonesia's largest trading partners. However, as of now, Indonesia does not have a Free Trade Agreement (FTA) with the US. 

Instead, the two countries have had a Trade and Investment Framework Agreement (TIFA) since 2006. A TIFA aims to strengthen economic ties between Indonesia and the US.

In addition, as a member of the G20, Indonesia meets annually with countries, including the US, to discuss trade agreements, international development, and economic stability. So, there could be a FTA in the near future.

Culture And Language 

Understanding the local culture allows you to follow best practices for business opening hours, building strong relationships and establishing trust within the country. 

Indonesia is primarily a Muslim country, but it is also home to other religious communities, such as Christians, Hindus, and Buddhists. 

Due to the many different religions in Indonesia, the country has a range of nationwide public holidays that are very different to what we have in the US. Some of the key holidays to consider when opening a business in Indonesia include:

●    Eid al-Fitr. A two to three-day Muslim holiday that marks the end of Ramadan.

●    Eid al-Adha. Another two to three-day Muslim holiday.

●    Balinese Hindu New Year or Nyepi. This is a day of silence, fasting, and meditation for the Hindu community, usually held in March following a day of festivals and celebrations.

●    Ascension Day. This holiday day in May or June commemorates the Christian belief in the Ascension of Jesus into heaven.

●    Vesak. This holiday in May or June celebrates the birth, enlightenment, and death of Buddha.

In addition, they also have some public holidays similar to those in the US, such as New Year's Day, Good Friday, Easter, Labour Day, Independence Day, and Christmas Day. However, Labour Day and Independence Day are celebrated on different days than in the US. 

Finally, the official language in the country is Bahasa Indonesia. While English and other languages are widely spoken in urban areas and business circles, having local language skills or a translator is beneficial for doing business. 

Ready To Expand To Indonesia?

Now is a good time to expand your business to Indonesia, as they continue improving their ease of doing business (EODB) ranking by making it easier for foreign and local investors to start a business, pay taxes online, enforce contracts, and trade across borders. 

**) Ikuti berita terbaru TIMES Indonesia di Google News klik link ini dan jangan lupa di follow.