COUNTRY RISK ANALYSIS INDONESIA

D
Dr.H. Susilo Bambang Yudhoyono President (RI)

Short facts :
Short facts Official name Capital city Government type Currency Population Official language Geography The republic of Indonesia Jakarta Republic Rupiah (IDR) 236 million people Bahasa Indonesia 17,508 islands & 1,919,440 sq km of land area & coastline 54,716kms

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Continued... Ethnicity GDP GDP per capita Revenues Expenses Inflation rate 85% muslims, 10% christians, 2% muslims US$932.1 billion US $3,900 $92.62 billion $98.88 billion 5.3%

GDP growth :
GDP growth

Setting up Business Activities and a Company in Indonesia :
Setting up Business Activities and a Company in Indonesia To establish a business in Indonesia, if you do not require a local legal entity for the investment proposed, you could choose to appoint an Agent or Distributor, or set up a Representative Office. Many foreign investors at the early stage of entering the Indonesia market choose to set up an Agency Agreement or Representative Office, then later after the business starts to grow they will apply for a Foreign Direct Investment Company (FDI) status.

To establish a representative office, the company needs to issue 3 letters :
To establish a representative office, the company needs to issue 3 letters Letter of Intent - stating the intention of the company to establish a representative office Letter of Appointment - stating the appointment of the chief representative Letter of Statement - stating that the Chief Representative will follow Indonesian regulations

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Continued... The three letters must be stamped by a notary public and approved by the Indonesian Embassy in the home country of the firm. Upon approval, the Indonesian Embassy will issue a Letter of Notification (Surat Keterangan). Upon completion of the four letters the process can continue to the related government ministry in Jakarta, to incorporate a fixed license for 2 years.

RUBBER INDUSTRY :
RUBBER INDUSTRY Profile Competitors Pros and cons

RUBBER INDUSTRY :
RUBBER INDUSTRY Indonesia is now the world's second largest natural rubber producer after Thailand with a production output of 1.8 million tons last year, and an expected output of 1.95 million tons this year. The country has rubber estates covering an area of 3.3 million hectares spread over more than 20 provinces. Indonesian exports of natural rubber have steadily increased in the past four years both in volume and value. Exports have increased by an average 5.3 per cent annually.

Competition :
Competition Indonesia's main competitor is Thailand, the largest supplier of natural rubber to China, accounting for 70 per cent of China's imports.China, which has now opened its market to all suppliers of natural rubber, needs more than 1 million tons of natural rubber a year.

LOCATION-WHERE ARE THE RUBBER PLANTATIONS :
LOCATION-WHERE ARE THE RUBBER PLANTATIONS Singapore Top of Malaysia Thailand Southern east Asian countries 90% of true rubber production today occurs in the Southeast Asian countries. The location where rubber trees grow has to be hot, damp and near the equator. Therefore its grown in Indonesia.

Pros of rubber industry :
Pros of rubber industry Increase in demand for rubber in China, India & America Suitable climate Large plantation areas Increase in prices to $2.5 per kg Potential to be no 1 in production

Cons of Rubber Industry :
Cons of Rubber Industry Indonesia is no longer number one in natural rubber production in the world. Indonesia failed to fully take advantage of the rise in the rubber prices as wide rubber plantations have not been well taken care of within the country Many rubber plantations have been neglected as a result of the price fall earlier. The productivity of Indonesian rubber plantations, therefore, is low and the quality is poor

PEStle analysis :
PEStle analysis Indonesia

Political Factors :
Political Factors Indonesia is considered as republic country. In indonesia every after 5 years election is being conducted for president, VP post by direct vote of citizenary. Indonesia has one of the longest labour forces in the world & rank 5th. Labour force by occupation – Agri – 42.1 % , Industry – 18.6 % , Services – 39.3 %

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Continued... The indonesian company law of 1995 in the most important framework for the current legislation or corporate governnance in indonesia. Prime/Ending rate – Commercial prime lending int rate – 6.41 % Central bank discount ratio is 10.83 %

Economic factors :
Economic factors Gross Domestic Product Per Capita Income Exchange rate Foreign Direct Investvestment Inflation rates

Social factor :
Social factor Population Age factor Education Religion

Technological factor :
Technological factor Transport system Communication system Broadcasting technology

Environmental factor :
Environmental factor Geographical location Time zone Natural or environmental disaster

Swot analysis :
Swot analysis Indonesian

Strengths :
Strengths Abundant Resources Strong labour force Low mortality rate Ethical education, increased welfare, security Actors

Weaknesses :
Weaknesses Over population Illegal logging and Piracy political problems and inequity Rights abuses Dependent on Australian security

Opportunities :
Opportunities Long term development Employment and training opportunities Enlightened self-interest Regional security Reforestation Military modernization Effective law enforcement

Threats :
Threats Terrorism Deforestation Poverty Malnutrition Disregard for law

FDI rules in indonesia :
FDI rules in indonesia Allows 100% FDI investment in selected areas of business only. Limits foreign direct investment to 95%, with a minimum of 5% ownership by an Indonesian. Allows FDI investment with certain conditions. Stipulates the sectors which are closed to FDI investment.

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Continued... You can obtain a copy of the FDI application in English from Indonesian embassies overseas or from the Investment Coordinating Board office either from the head office in Jakarta or from regional offices in the provinces. For those companies choosing to make a 100% foreign investment, there is a requirement that 15 years from the commencement of commercial operations, the 100% foreign shareholder must sell at least 5% of the firm to an Indonesian entity. A company which is initially 95% foreign owned is not subject to any divestment requirement.

CORPORATE TAX STRUCTURES :
CORPORATE TAX STRUCTURES Indonesia company tax rate is 25%. Corporations with an annual gross income up to Rp 50 billion are entitled to a tax discount of 50% of the standard rate on taxable income derived from the portion of gross income up to Rp 4.8 billion.

Other taxes on corporations :
Other taxes on corporations Capital duty – No, but various registration fees apply.Payroll tax – Employers are required to withhold, remit and report income tax on employment income of their employees.Real property tax – Land and building tax is payable annually on land, buildings and permanent structures. The rate is typically not more than 0.5% of the value of the property, although higher rates apply to certain high-value housing and large estates.Social security – Employers must contribute to Indonesia's social security system if they employ 10 or more individuals or maintain a payroll expense of IDR 1 million per month. The employer's contribution rate for old-age compensation is 3.7%.Stamp duty – Certain documents are subject to stamp duty at a nominal amount of IDR 3,000 or IDR 6,000.Transfer tax – A land and building transfer duty of 5% is payable when a person or company obtains rights to land or a building with a value greater than IDR 60 million. Certain exceptions/reductions apply, including transfers in connection with a merger.Other – Sales of shares listed on the Indonesian stock exchange are subject to a final tax of 0.1% of the transaction value; an additional tax of 0.5% applies to the share value of founder shares at the time of an initial public offering.

Public Companies :
Public Companies As for public companies, corporate tax deduction at 5% will be granted when meeting the following requirements:1. Minimum listing requirement is 40%2. The minimum public ownership is 300 individuals where each individual holds less than five percent of the paid-in shares3. The above two conditions must be fulfilled at least in six months (183 days) in a tax year.

Currency fluctuation :
Currency fluctuation

Indonesia Exports: Commodities :
Indonesia Exports: Commodities Oil & gas Plywood Textiles Rubber Electrical appliances

Indonesia Imports: Commodities :
Indonesia Imports: Commodities Machinery and equipment Chemicals Fuels Foodstuffs

Major industry sectors :
Major industry sectors Agriculture: With 42.1% of the total labor force engaged in agriculture, Indonesia can be rightly considered an agrarian economy. The sector contributed 14.4% to the country’s GDP in 2009. In 2006, the country yielded food crops worth 213,529,700 million rupiahs, which was 35% more than the 2003 level. Rice and coffee remain the major produce of the country, making it the world’s fourth biggest producer of these products.

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Continued... Mining: The fall in commodity prices in 2009, due to the global economic downturn, resulted in several major mining companies putting their investment plans on hold. However, the mining industry is expected to reach US$123 billion by 2014, with yearly growth of 10%-11% from 2010 onwards. Increase in international interest can be seen in the Indonesian coal sector, after the significant number of deals that took place in the last quarter of 2009.

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Continued... Textile and Apparel: The textile and apparel manufacturing industry of Indonesia ranks 14th in the world. In 2008, the value added by textiles and clothing manufacturing dropped to 1.2%. Industry was hard hit by the global recession of the late 2000s. Around 155 textile production companies went bankrupt in 2009 due to an increase in the cost of production and enormous inflow of cheap stuff from China.

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Continued... Tourism: Tourism is among the biggest economy boosters in Indonesia. This is apparent in the fact that 6.45 million visitors came to the country in 2009, despite of hotel bombings in Jakarta. Tourism contributes 3% to the GDP of the country. The tourism growth plan for 2010 aims at 7 million foreign tourists. However, this is much lower than that of its tiny neighbor Singapore, which was visited by 9.5 million people in 2009.

Thank you :
Thank you