Indonesia – A Prime Development Location for Our Clients

Our office in Indonesia was established for one, core reason: our clients. Increasingly we found our clients wanted our support in this fast-growing, fast-paced and diverse country, where opportunities for investment in Indonesia’s Special Economic Zones are proving highly productive. So, what are the opportunities for our clients in Indonesia, and how can we support your business with your expansion into this country? Read on, and we’ll tell you more…

Why are companies moving/expanding their operations to Indonesia?

The Economy – Indonesia is the largest country in Southeast Asia with a high economic growth rate, the largest economy in Southeast Asia, currently the 16th largest economy in the world in terms of GDP and a member of the G20. Indonesia has seen steady growth in exports of processed goods that reflects the strong performance of the palm oil industry, rubber tire, automobile assembly, automotive parts and network cables. This demonstrates the big economic shift Indonesia has made from the country’s historical primary industry activities surrounding the extraction of natural materials.

Demographic composition – As the 4th most populous country in the world, Indonesia has a vast population of over 273 million and is the 10th largest country in the world in terms of purchasing power. A high percentage of this vast population makes up an increasingly skilled labour market, highly attractive to overseas investors.

Natural Resources – Indonesia has an abundance of natural resources including minerals, metals and fuel for processing into a diverse range of products for export. In addition, Indonesia has a plethora of renewable resources which lend themselves to agricultural products as well as sustainable operations. (More on sustainability and renewable energy further in this article).

Geographical Location & Infrastructure – Ideally located for access to some of the world’s most important trade routes, Indonesia has 1799 sea and air routes for export, as well as proximity to some of the world’s largest markets via the Malacca Strait (the most active sea lane in the world and major global shipping route). The country’s many airports, sea ports and highways, and other infrastructure including excellent drainage systems, high-speed internet and communication systems all support the successful establishment and operations of new business ventures.

Indonesia’s Special Economic Zones (SEZs)

The government of Indonesia has a strategic policy encouraging investment in specific geographical locations of the country for industrialization by a large list of specified industries, particularly manufacturing and processing as well as some areas which are dedicated to tourism. As such, this has resulted in a number of highly attractive incentives for overseas investors, both financial and non-fiscal incentives, which combined with Indonesia’s innate advantages mentioned above are contributing hugely to the desirability of Indonesia for foreign businesses.

Fiscal Incentives include:

  • Significant reductions in corporate income tax liabilities
  • Exemption from VAT
  • No Sales tax on luxury goods
  • Reduction of local tax of 50-100%
  • Customs and excise incentives including exemption of duties
  • and more…

In addition to these bottom-line-friendly incentives, there are also a number of noteworthy benefits in the form of non-fiscal incentives, including:

  • Easing of and support in applicable Permitting and Licensing
  • No controlled goods regulations
  • Easier immigration processes
  • Land titles valid for 80 years
  • No export obligations
  • Building permits
  • Property ownership for foreigners
  • and more…

Where are the Special Economic Zones in Indonesia?

One of the Indonesian government’s intentions behind the SEZ, was the diversification of investment beyond the large island of Java. As the largest archipelagic country in the world, Indonesia is made up of over 17,000 islands, a huge number of which are perfect for this kind of industrialisation with exceptional travel links, infrastructure and natural resources abound, as well as receiving development investment from the government for this policy. There are 20 Special Economic Zones in Indonesia which have been approved currently, some of which are still in development (not all represented on the map below). Eight of these have been designated for Tourism and the rest have been allocated for industry (Manufacturing and Processing) as part of the Indonesian government’s 4.0 industrial revolution plan.

Map of Indonesia’s Special Economic Zones:

Indonesia's Special Economic Zones

1. Arun Lhokseumawe SEZ. 2. Sei Mangkei SEZ. 3. Nongsa SEZ. 4. Batam Aero Technic SEZ. 5. Galang Batang SEZ. 6. Tanjung Kelayang SEZ. 7. Tanjung Lesung SEZ. 8. Lido SEz. 9.Kendal SEZ. 10. Gresik SEZ. 11. Singhasari SEZ. 12. Mandalika SEZ. 13. Maloy Batuta Trans Kalmantan SEZ. 14. Palu SEZ. 15. Likupang SEZ. 16. Bitung SEZ. 17. Morotai SEZ. 18. Sorong SEZ. 19. Tanjung Api-Api SEZ.

Industries which can take advantage of Indonesia’s Special Economic Zones:

• Energy Industry
• Petrochemical and Chemical Industries
• Food & Beverage Industries
• Electronic & High-Tech Industries
• Palm Oil, Rubber, Wood, Nickel, Copper, Steel, Bauxite, Agricultural and other Processing & Manufacturing Industries
• Logistic Industries
• Textile & Fashion Industries
• Automotive Industries
• Base Metal Industries
• Tourism (certain SEZs dedicated to this specifically)

As we have specific experience in supporting clients in these industries, it stands to reason that many of our international clients are expressing interest in Indonesia’s SEZ incentives and are actively looking to expand by building facilities in some of these areas – some of which are already underway with our engineering support.

How we can support clients with projects in Indonesia:

Our dedicated IntES team in Indonesia are ideally positioned to support our clients in their transition to the country. With a number of projects already completed and others currently ongoing, we offer all our IntES Engineering consultancy services from our office in Indonesia, including full EPCM services, Project Management, Civil Engineering, Process Plant Engineering, Construction Management, Procurement and many more specialised engineering services besides.

By engaging IntES for their projects in Indonesia our clients get the advantage of having a local team, with local knowledge, whom can specifically help and advise with local laws, regulations and offer general support with re-locating or establishing business operations in Indonesia – as well as being able to be physically present on the project site. Our IntES Indonesia team are expert, experienced engineers and project managers, whom, like all our IntES teams, take a client-centric, transparent and collaborative approach, becoming an extension of our clients’ own project teams. In addition, all our IntES offices work together collaboratively across Asia, Europe and Africa, and as such, our clients also get the additional benefit of the combined expertise and experience of all our engineers, including our High-Value Engineering Centre.

Why not speak to one of our experts in our Indonesia Office? Get in touch with us to discuss your engineering needs and how we can support your business with your next project.

Sources: kek.go.id, worldbank.org, aseanbriefing.com, investinasia.id