Article by Tanja Harjuniemi, Seven Stones Consulting

Ville Tavio, the Minister for Development Cooperation and Foreign Trade of Finland and his business delegation is attending the 10th World Water Forum in Bali in May. I had the honor to introduce them Indonesia’s business environment for Finnish companies at the luncheon last Sunday. Take a look at my speech.

What is Indonesia like as a trade partner for Finland?

Indonesia, with its powerful macroeconomic performance, potential demographic factors – some 145 million Zoomers and Millennials – and an ongoing investment boom, presents a lucrative market for Finnish companies. As a developing country, Indonesia’s potential for sustainable international trade is on the rise, promising a bright future for businesses.

In recent years, Indonesia has stood out among ASEAN countries regarding macroeconomic performance: high growth per capita, high gross fixed capital formation, and stable exchange rate. However, Indonesia is behind with technological infrastructure and innovations and has yet to abolish trade barriers and indirect trade costs. It’s also noteworthy that domestic credit to the private sector is low, limiting access to loans.

Indonesia stands out for its success in reducing poverty and income disparities and providing opportunities for people to improve their economic status. However, Indonesia lags behind in educational attainment. There is also a risk of modern slavery in the trade of goods.

Indonesia stands out with a low ecological and carbon footprint per capita. The share of renewable energy is also high among Asian Pacific countries. Instead, Indonesia needs to catch up with low wastewater treatment levels, a high proportion of natural resources in the trade, and high energy intensity.

What should a Finnish company consider when entering Indonesia?

It’s all about investment: investment in money and investment being present.

Direct investments depend on a go-to-market strategy. Setting up a joint venture or foreign-owned company requires direct investments. Building a sales channel requires investment in the capabilities of the local distributor, including its technical, sales, marketing, and manpower capabilities.

There are also indirect trade costs. Obtaining the necessary permits and licenses is time and money-consuming even though the Omnibus law in 2021 made doing business easier. Logistics in an archipelagic country with insufficient infrastructure is also time and money-consuming. Corruption is still prevalent but steadily improving. A significant development is the introduction of mandatory halal certification, a certification required for products to be sold in Muslim-majority countries, which will come into effect in 10 years, starting with food and beverages this year and continuing with cosmetics, chemical products, medicines, medical devices, clothing, household appliances, office products, etc.

Investment in being present is not just a strategy, it’s a necessity in Indonesia. Networking with business and government circles in Jakarta and other regions is crucial for success. Local content and knowledge transfer has to be taken into account, emphasizing the need to understand and respect the local business culture. There need to be direct benefits for local communities, like new business opportunities and job creation, especially in undeveloped regions. Long-term commitment is key: Some Finnish companies consider Indonesia a secondary market, saying, “If you find a project, we might think about it.” That’s a no-go attitude in Indonesia.

What business opportunities Indonesia offers for Finnish companies?

Generally speaking, everybody everything. Singapore, China, Hong Kong, Japan, and Malaysia were the top foreign investors in Indonesia in 2023, investing in high-potential industries such as e-commerce, travel and tourism, infrastructure and construction, mining and processing raw materials, and aviation. These industries offer significant opportunities for Finnish companies with expertise in these areas.

Also, big tech is investing in Indonesia. Microsoft is investing in cloud and AI infrastructure. Apple opened the Apple Develop Academy for human resources development, and Nvidia is opening an AI center for infrastructure and human resources development.

Do Finnish companies have something to offer in these sectors? Absolutely! Many Finnish companies are global leaders in sustainable and smart technologies. Let’s stick to it! Find your niche! Here is plenty of market. No matter how big or small the company! A stable economy that is related to your size is enough for your success in Indonesia. Bear in mind that sometimes, low-tech is more valued than hi-tech, especially in undeveloped regions.