Indonesia has experienced momentous change since the end of former president Suharto’s rule in May 1998. Having opened an office in the capital, Jakarta, that same year, Control Risks has witnessed first-hand the transformation that has taken place. The difference between the start and end of former President Yudhoyono’s two terms (2004-14) is startling – a country that had witnessed multiple terror attacks and still reeling from economic shocks saw its per capita income increase four-fold and became a darling of private equity investors for its burgeoning middle class.
The current President, Joko “Jokowi” Widodo is well into his first term after coming to power on a ticket of reform and clean governance. He has managed to secure a working majority in the lower house of parliament and ensured key posts in his refreshed cabinet are filled by capable technocrats. But he has also inherited a difficult economic situation with the end of the commodities cycle, a weakened currency and an ever more decentralized system of government.
There are over 500 units of local government (provinces, regencies and cities) and the President’s party controls only about one third of them. Unfortunately the “old Indonesia” of corrupt practices, byzantine bureaucracy and unreliable rule of law is never far away. The often notorious nexus between business and politics-government persists often masquerading under the banner of ‘economic nationalism’.
The net result is that Indonesia remains one of the most attractive but simultaneously challenging investment destinations in South-east Asia. Huge numbers of potential customers await, but the courts cannot be relied upon to uphold your contractual rights. The government makes the right noises to foreign investors, only to introduce arbitrary changes in vital areas such as local content requirements. Extremely high-quality potential business partners can be found, but they exist alongside thoroughly toxic peers. And at the same time, vested interests frequently seek to unfairly outmanoeuvre competitors, often using arms of the police, judiciary or government to achieve their aims.
Understanding these challenges and contradictions – and putting in place strategies to overcome them – is at the heart of much of the work undertaken by Control Risks’ Indonesia practice. Our extensive institutional knowledge of Indonesia’s political, commercial and operational environment, supplemented by a diverse network of contacts, supports clients across all sectors in understanding and managing the risks they face.
We help companies planning market entry to identify and engage with the key influencers in their sector. We assist those looking to expand to navigate the complex and capricious regulatory landscape at national and local levels and understand the background, integrity and intentions of potential acquisition targets, JV partners and customers. And we help our clients safeguard their business operations from fraud, corruption and predatory practices – routine operational challenges that are part of doing business in ASEAN’s largest country.
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