COUNTRY PROFILE REPORT: INDONESIA

Austrade’s International Business Survey (AIBS) is an important source of insight into the activities and opinions of Australia’s internationally-active businesses (IBs). Supported by Austrade, Efic and the Export Council of Australia and conducted by the University of Sydney, AIBS 2016 is the third survey in the AIBS series and builds upon the work of its two predecessors to help inform our understanding of Australia’s international business engagement at the firm level.

While much analysis of Australia’s international economic performance takes place at the macro level and focuses on aggregates such as total exports and the trade balance, AIBS provides a window onto how individual Australian businesses are adapting to the changing global economy and our place in it.

AIBS 2016 is based on online survey work conducted during late 2015 and early 2016 and captures the responses of 913 Australian companies drawn from 19 industry sectors (and 93 sub-sectors) and operating across more than 100 international markets. Thirty-three per cent of respondents are from the manufacturing sector, which once again is the single largest source of survey participants, while around half of respondents are drawn from a range of services industries.

AIBS 2016 does a particularly good job of capturing the views of internationally-experienced small and medium-sized enterprises (SMEs): about 90 per cent of survey respondents have less than 200 employees while 63 per cent have been earning international revenues for a decade or longer. More comprehensive background on this year’s survey participants is available towards the end of this Highlights Report as well as from the main survey report, which has been compiled by the University of Sydney.

AIBS 2016 Detailed insights into Australia’s international business engagement

INDONESIA

This report provides the results of Australia’s International Business Survey (AIBS) 2016. This

latest report follows AIBS surveys of internationally-active businesses published in 2015 and

2014.

A total of 31 companies (representing around 3 per cent of survey respondents) nominated

Indonesia as their first most important overseas market. As reflected in Figure 1, strong

growth/ profit opportunities were cited as the most important reason by 55 per cent for

targeting the market, followed by the proximity of the country (cited by 39 per cent of

companies).

Figure 1 Key reasons for targeting Indonesia as the first overseas market

Survey question: Why was this market your first target?

Number of respondents = 31

3%

3%

3%

3%

6%

10%

10%

16%

39%

55%

29%

39%

42%

45%

58%

29%

58%

13%

42%

32%

68%

58%

55%

52%

35%

61%

32%

71%

19%

13%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Followed similar firms / competitors

Advice from external advisors / other businesses

Trade mission or similar

Familiar culture / language

Easy / safe business environment

Presence of FTA or other market access agreement

Low barriers to trade / investment

Presence of family or personal contacts

Proximity

Strong growth / profit opportunities

Very important Moderately important Not important

Among the companies that identified Indonesia as their most important overseas market,

25 per cent were from the manufacturing sector, and 20 per cent were agricultural, forestry

and fishing companies (Figure 2). Among the service-oriented industries, professional,

scientific and technical services (16 per cent of companies) was the top sector that

considered Indonesia to be its most important market.

Figure 2 Main businesses - Indonesia

Survey question: What is the main business of your company?

Number of respondents = 56

2%

2%

2%

2%

2%

2%

7%

9%

13%

16%

20%

25%

0% 5% 10% 15% 20% 25% 30%

Retail trade (n=1)

Accommodation and food services (n=1)

Information media and telecommunications (n=1)

Administrative and support services (n=1)

Health care and social assistance (n=1)

Other services (n=1)

Mining (n=4)

Wholesale trade (n=5)

Education and training (n=7)

Professional, scientific and technical services (n=9)

Agricultural, forestry and fishing (n=11)

Manufacturing (n=14)

Companies are most likely to service the Indonesia market directly from Australia, with 64

per cent of respondents indicating this as their preferred servicing mode (Figure 3). A

smaller percentage of companies (17 per cent) prefer servicing the market through an agent

or distributor based in Indonesia.

Figure 3 Main mode of servicing exports to Indonesia

Survey question: What is the main mode of servicing for the top two countries from which

you have earned international revenue in the past year?

Number of responses = 53

Note: the sample consists of companies that identify Indonesia as either top 1 or top 2 country from which they have earned international

revenue in the past year.

Directly from Australia , 64%

Through an agent or distributor overseas,

17%

Through an agent or distributor in Australia,

8%

Licensing and franchising, 0%

Foreign sales branch or subsidiary, 9%

Joint venture, 2%Online sales from third

party website, 0%Online sales from own

website, 0%

Among the companies that identified Indonesia as their most important overseas market,

close to 80 per cent perceive that it is more difficult or much more difficult to business in

the country as compared doing business in Australia (Figure 4).

Figure 4 Ease of doing business in Indonesia

Survey question: What is the ease of doing business for the top two countries from which

you have earned international revenue in the past year?

Number of responses = 53

Note: the sample consists of companies that identify Indonesia as either top 1 or top 2 country from which they have earned international

revenue in the past year.

Much more difficult, 25%

More difficult , 51%

Same, 19%

Much easier, 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Ease of doing business (%)

A reputation for dependability and reliability was cited by 86 per cent of respondents as the

most important factor for ensuring market success in Indonesia (Figure 5). Other important

key market success factors identified were a reputation for honesty and trustworthiness

(cited by 80 per cent of companies) and a reputation for value for money (cited by 70 per

cent of companies).

Figure 5 Key factors in ensuring success in your top two international markets –

Indonesia

Survey question: How important are the following to ensuring success in your top two

international markets?

Number of responses = 56

Note: the sample consists of companies that identify Indonesia as either top 1 or top 2 country from which they have earned international

revenue in the past year.

14%

23%

36%

38%

38%

39%

41%

48%

54%

63%

63%

70%

80%

86%

34%

39%

41%

32%

36%

46%

39%

30%

36%

29%

30%

25%

18%

13%

36%

32%

21%

23%

20%

13%

14%

20%

11%

7%

7%

5%

2%

2%

16%

5%

2%

7%

7%

2%

5%

2%

2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Access to competitive finance

Enhanced access to key markets via FTAs or similar

Access to best-practice technology

Access to highly-skilled labour

Access to low-cost production

Access to best-practice management skills

A strong national (Australian) brand

Access to high-quality market information

A competitive exchange rate

A strong company or product brand

A reputation for innovation and adaptability

A reputation for value for money

A reputation for honesty and trustworthiness

A reputation for dependability and reliability

Very important Moderately important Not important Not applicable

Understanding market compliance and risk and education around international pricing for

the market were cited by 23 per cent of respondents as the most important factors they

considered when they targeted Indonesia as their top overseas market (Figure 6).

Figure 6 Key factors in targeting your most important current market – Indonesia Survey question: When you targeted your most important current market, how important were the following:

Number of responses = 26

Note: the sample consists of companies that identify Indonesia as top 1 country from which they have earned international

revenue in the past year.

12%

12%

12%

12%

12%

15%

15%

19%

19%

19%

19%

19%

23%

23%

27%

31%

38%

38%

54%

35%

62%

38%

38%

50%

62%

65%

42%

62%

50%

46%

38%

42%

31%

46%

23%

31%

35%

31%

15%

15%

23%

15%

12%

12%

12%

8%

4%

4%

12%

8%

4%

12%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Education around IP and trade mark protection

Education around Non-Tariff Barriers

Access to EMDG or similar grants

Purchase of specific, tailored advice on marketconditions and requirements

Help and advice with local language and businessculture

Participation in trade missions

General information on local economic and politicalconditions

Information on local agents and other relevantcontacts

Access to finance

Access to official Australian support in-market

General information on local business taxes andregulations

General information on local customs and borderprocedures

Education around international pricing for the market

Understanding market compliance and risk

Very important Moderately important Not important Not applicable

Around 46 per cent of respondents identified networking and gaining access to foreign

business/industry networks as the most important way to effectively understand and

operate successfully within the business culture of Indonesia (Figure 6). Other important

approaches identified were hiring Australian employees who have cross cultural or language

skills (identified by 42 per cent of companies), and having a local business partner (identified

by 38 per cent of companies).

Figure 6 Key factors in understanding and operating in the business culture –

Indonesia Survey question: How important are the following for understanding and operating in the business culture of your

most important market (on a scale of 1-5, multiple choice):

Number of responses = 26

Note: the sample consists of companies that identify Indonesia as top 1 country from which they have earned international

revenue in the past year.

8%

19%

23%

35%

38%

42%

46%

23%

35%

27%

23%

27%

31%

23%

23%

12%

19%

23%

15%

8%

15%

12%

15%

31%

19%

15%

19%

12%

4%

8%

4%

27%

15%

15%

15%

15%

12%

15%

12%

8%

4%

4%

4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Use of professional service firms

Networking with Australian companies in the samemarkets

Digital skills – social media in market, and e-commerce skills

Networking or access - foreign government networks

Overseas employees with cross cultural or languageskills

A local business partner

Australian employees with cross cultural or languageskills

Networking or access – foreign business/industry networks

Very important 5 4 3 2 Not important 1 Not applicable

As shown in Figure 7, respondents have a mixed outlook on their business operations in

Indonesia, with 39 per cent indicating that they expect their business to do better and 14

per cent expecting their business to do much better than last year. However, 23 per cent

expect their business to perform worse compared to last year.

Figure 7 Overall outlook – Indonesia

Survey question: What is the overall outlook for your company’s international operations in

2016 compared to 2015?

Number of responses = 56

Note: the sample consists of companies that identify Indonesia as either top 1 or top 2 country from which they have earned international

revenue in the past year.

Much better (n=8), 14%

Better (n=22), 39%Same (n=13), 23%

Worse (n=13), 23%

Much worse (n=2), 0%

Australia’s International Business Survey 2016 is the follow-up to the inaugural survey of Australia’s international businesses published in 2014, and AIBS 2015. The findings of this report are distinctive and significant because they provide key insights into the nature, needs, concerns and future plans of the overall Australian international business community from the company perspective. AIBS is one of Australia’s largest and most in-depth surveys of internationally-active businesses (IBs). AIBS 2016 is the latest survey in the series and introduces several new questions. AIBS 2016 reports on the views of 913 Australian IBs drawn from 19 industry sectors (and 93 sub-sectors) and operating across more than 100 international markets. AIBS 2016 was commissioned by the Export Council of Australia (ECA), with the support of Austrade and Efic (Export Finance and Insurance Corporation), and was conducted by the University of Sydney (USYD).

ACKNOWLEDGEMENTS

AIBS partners would like to thank all of the state and federal government agencies that supported the AIBS initiative in 2014-2016, as well as our industry and bilateral chamber partners.

AIBS 2016 CONTRIBUTORS

Austrade ■ Mark Thirlwell, Chief Economist ■ Divya Skene, Economist

Export Council of Australia (ECA) ■ Lisa McAuley, CEO ■ Stacey Mills-Smith, Trade Policy & Research Manager

Efic ■ Cassandra Winzenried, Senior Economist ■ Geir Kristiansen, Senior Manager, Insights, & Analytics

The University of Sydney ■ Sid Gray, Professor of International Business, University of Sydney Business School ■ Wei Li, Lecturer in International Business, University of Sydney Business School ■ Sandra Seno-Alday, Lecturer in International Business, University of Sydney Business School ■ Catherine Welch, Associate Professor of International Business, University of Sydney Business

School

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