Delegates to a special Indonesia trade seminar, organised by the Indonesian Embassy and held at Auckland’s Stamford Plaza Hotel on September 30th, were left in no doubt about the Indonesian government’s commitment to easing business barriers in the Southeast Asian republic.
They had come to learn about business opportunities in the world’s 10th largest economy. They didn’t go away disappointed. Delegates to the Doing Business with Indonesia: Trade & Investment Opportunities seminar in Auckland on September 30th first had to get their head around some impressive trade figures between the two countries. Indonesian Ambassador to New Zealand, H.E. Jose Tavares, informed the gathered audience that bilateral trade in 2014 totalled NZD1.78 billion, with the respective trade ministers confident of reaching a target of $4 billion by 2024.
This goal will be fuelled by the ASEAN FTA which will see 99 percent of New Zealand goods entering the market tariff-free by 2020.
Indonesia’s economy is growing by 4.7 percent a year – a number of New Zealand companies, including BECA and Fonterra are actively engaged in that growth. By 2030 it’s predicted that Indonesia will be the world’s seventh largest economy, with a consuming class of 135 million.
Trade between Indonesia and New Zealand is growing – in the 2014/2015 year, Indonesia imported $370 million worth of goods from these shores. But New Zealand is only 23rd in the ranks of exporting countries to the republic. So the over-riding message from the seminar was that there’s plenty of opportunity for growth.
Sri Moertiningroem, director of the Sydney-based Indonesia Investment Promotion Centre, outlined a number of initiatives by the Indonesian government to make it easier to do business there – including licensing simplification, tax incentives and ‘de-bottlenecking’ departmental processes.
Starting a business now takes around just nine days – a significant improvement.
Kiwi perspectives
Several New Zealand exporters shared their Indonesian experiences. Lance Sheppard, director international business development for Power Tech ASEAN, a company specialising in solar power for remote locations, says Indonesia, with its 17,508 mostly off-grid islands, is their land of opportunity.
Sheppard says there were three success drivers for Power Tech going into the Indonesian market. The first centred on NZTE-backed trade missions which provide the ability to make contact with decision-makers and engage in dialogue with government departments and regional officials. “Those relationships are very powerful when you’re first starting up, right through to when you’re looking to grow your business through the ASEAN region.”
The second driver is around relationships in general. “The power of a relationship will conquer all,” says Sheppard. “You must build a friendship first before you even start to discuss business.”
Be conscious of matching the two management hierarchies when arranging meetings with Indonesian companies, he adds. Sending your top person to a meeting is a sign of commitment.
And yes, commitment to the market is Power Tech ASEAN’s third success driver. The company has opened an office in Jakarta, hired Indonesian staff, and has a genuine desire to improve the lives of communities associated with the solar power projects they’re involved in. Sheppard’s seen the positive changes in the Indonesian economy too, and the efforts by government to make things more seamless for companies looking to set up there.
Kim Calvert, Cottonsoft NZ country manager, also shared useful tips on doing business in Indonesia. Cottonsoft is partnered with Asia Pulp & Paper (APP), which supplies much of its raw material.
Calvert says Indonesians are positive, progressive and supportive, however government rules are strictly enforced. It pays to be familiar with the rules that apply to your particular industry.
He uses the analogy of parent/teenager communication to describe the situation of working with Indonesian business people. “We may both be speaking in English but sometimes we can fundamentally be speaking different languages.” Kiwis are particularly bad at speaking too fast, he explains.
It’s also important to build relationships face-to-face – you’ll make faster progress. And Calvert’s ‘things to watch’ file includes matching up expectations on quality and on rules; ensuring that meanings are not lost in translation (including industry jargon); and above all, remembering that everything is negotiable.
When doing business in Indonesia, make sure you talk to the decision-maker, says Calvert. “I’ve also noticed that people never deliver bad news. The Indonesians are very respectful and don’t want to cause a fuss or conflict.” Ensuring the continuation of communication is therefore paramount, he says. “Things will go wrong in business, but that relationship needs to still be protected.”
Remember that a deadline is not a deadline there either, he says. “It’s something you agree to, but unless you have a really strong process in place, it may not be met, and the Indonesians may not be too worried about that. If you have a critical deadline make sure it’s built into your process.”
Indonesia has many public holidays and observances too, including Ramadan, and these must be taken into account for supply chains, says Calvert.
And his last tip? “For the growing Indonesian middle class branding equals trust. If you have a strong brand, and you’re well-known, then you will get a positive response.”
Seminar delegates also got to hear the Zabbana story, which highlights the diversity of New Zealand businesses trading with Indonesia. Zabbana is a well-known fashion accessory brand established by Kiwi Kelly Bozzone that utilises Indonesian manufacturers to produce its stunning range of jewellery and leather bags. While there were the usual teething problems initially, such as the language barrier and interpretation of information – these were minimalised by regular visits to the manufacturers twice a year and email contact.
The final Kiwi perspective came from Chris McKeown, GM Southeast Asia for NZ Oil & Gas, a company that has invested around $35 million in Indonesia’s lucrative oil and gas market, and has a number of on-shore projects underway on the island of Sumatra. (The amount of oil and gas that has been discovered on Sumatra is 15 times more than what’s been discovered in New Zealand.)
McKeown says there is plenty of opportunity for building a sustainable business in the region. He describes the energy market there as “booming”, and has also seen the result of less bureaucracy and the encouragement of more foreign investment. “It’s actually happening in Indonesia,” he says.
Article by Glenn Baker, editor of Exporter magazine.
