Indonesia - Market Challenges Indonesia - Market Challenges
The business environment in Indonesia is challenging, with Indonesia ranked 72 out of 190 countries in the Ease of Doing Business 2018 report by the World Bank. U.S. firms encounter complex bureaucratic and regulatory requirements which make it time-consuming to enter the market.
•Indonesian infrastructure and service networks have not been developed or maintained to keep pace with the growing economy, causing increased transaction costs and inefficiencies that hamper exporters and investors. Non-tariff barriers remain wide-spread and the bureaucracy can still be cumbersome. Laws are often opaque or conflicting. Import licensing procedures and permit requirements, product labeling requirements, preshipment inspection requirements, local content and domestic manufacturing requirements, and quantitative import restrictions impede U.S. exports.
•Although significant anti-corruption measures have been undertaken by the Indonesian government, corruption remains a concern for many businesses looking to operate within Indonesia. Indonesia ranked 96th on Transparency International’s Corruption Perceptions Index 2017. Companies are recommended to have a solid due diligence process in place and should consult with the U.S. Commercial Service prior to signing with agents and distributors.
•Significant rule-of-law issues persist. Formal dispute settlement mechanisms are not considered effective, and business and regulatory disputes— which would generally be considered administrative or civil matters in the United States—may be considered criminal cases in Indonesia. The court system is widely viewed as corrupt. In addition, international arbitration is widely discouraged by the government of Indonesia and it is difficult to have foreign arbitration awards enforced in Indonesia
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•Competition from third country firms such as Singapore, China, Japan, Australia, Korea, Russia, France, and other regional players is intense, and U.S. firms often have to significantly adapt their business model and pricing scheme to compete effectively.
•Official trade statistics understate market opportunities and American presence given the large numbers of U.S. shipments that are recorded as U.S. exports to Singapore, but which ultimately enter Indonesia, and U.S. sales in Indonesia that U.S. multinationals source via third countries.