Exporting to Indonesia: Market Potential

Export to Indonesia represents a significant growth opportunity for Italian companies in international markets. With a population of over 270 million people and a growing economy, Indonesia is establishing itself as an increasingly interesting target country. In 2024, there was an increase in exports compared to 2023, driven by sectors of excellence such as industrial machinery, agri-food and energy.

The market shares of the Italian exports to Indonesia have also shown a significant increase compared to the main competitors: between January and July 2024, Italy reached a share of 0,85%, thus overtaking France (0.75%), the United Kingdom (0.53%) and Spain (0.28%). This increase highlights the still untapped potential of a market with growing demand, especially in sectors where the made in Italy is recognized for its quality and expertise.

Export to Indonesia: Factors to Consider

The Indonesian government is actively working to make the country more attractive to foreign investment. Since 2015, 15 reform packages have been introduced to reduce regulatory barriers, simplify investment procedures and improve the overall business climate.

Furthermore, since July 2016, Indonesia and the European Union have been negotiating a free trade agreement, known as Comprehensive Economic Partnership Agreement (CEPA). The aim is to reach an agreement that facilitates trade and investment, addressing various issues such as trade tariffs, non-tariff barriers, services and investment, acquisitions, competition rules, intellectual property and sustainable development.

Industry opportunities for companies that want to export to Indonesia

Despite the challenges still to be faced, such as social inequality and poverty, the country is experiencing significant growth. The good economic performance of recent years, together with the availability of young, low-cost and increasingly qualified labor, has allowed Indonesia to emerge as an interesting outlet market for Italian companies.

The latter find opportunities both in investments in sectors that have traditionally driven the Indonesian economy, such as mining and oil extraction, the energy sector, rubber and palm oil cultivation, and in the export of consumer goods destined for an expanding domestic market, characterized by a growing middle class with greater purchasing power. In particular interest for companies that want export to Indonesia the following sectors are found:

• Machinery and equipment: the growing industrialization of the country has increased the demand for advanced machinery, which covers 41.5% of Italian exports. Italian companies can provide equipment for production, processing and industrial automation, sectors in which Italy has a long tradition of excellence.
• Agri-food: with the growing focus on food safety and quality, Indonesia needs technologies and machinery for food processing and distribution. The export of Italian food products, such as wines and gastronomic specialties, is another promising area for Made in Italy.
• Renewable Energy: Global focus on sustainability has opened up opportunities in renewable energy, such as solar and biomass. Indonesia is seeking technologies to develop clean energy sources, providing space for Italian innovation.
• Infrastructure and construction: with a developing infrastructure, there are significant opportunities for export of construction technologies and materials. Italian companies can provide expertise and innovative solutions for infrastructure projects. In addition, the Indonesian government has launched numerous projects to improve the transportation network and urban infrastructure, creating additional space for Italian investments.

Regulations and compliance

A crucial aspect for companies that want export to Indonesia, is to understand local regulations. Businesses need to be aware of compliance requirements, including permits and product certifications. Working with local experts is essential to facilitate market entry and ensure compliance with regulations. It is also important to consider tax regulations and investment law, as they can significantly impact business operations. 
Although every company is unique and the search for the right partner is linked to specific factors, there are some requirements to keep in mind to start exporting:

• Importer Identification Number (API): mandatory proof of the importer's identification, valid for five years and renewable, governed by the Regulation of the Ministry of Commerce n. 27/2012.
• Customs Identification Number (NIK): required to access importer records in the DGCE system, must be obtained from the DGCE and remains valid unless cancelled by the competent authority.
• Special Importer Identification Number (NPIK): required for the import of certain products, such as rice and electronics, and issued by the Ministry of Commerce.
• Registered Importer Number (ITPT): mandatory for importing food and beverage products, electronics and clothing, essential for operating in the Indonesian market.

Market access strategies

For Italian companies wishing to export to Indonesia, it is essential to adopt effective strategies and market entry methods to maximize the opportunities for success, such as the following: 

• Joint Venture: collaborating with local companies allows you to exploit their knowledge of the market and existing distribution networks, thus facilitating entry into the country.
• Branches and Representatives: Establishing a direct presence in Indonesia provides greater control over operations and marketing, helping to increase brand visibility. It is also advisable to register your trademark in Indonesia to protect your intellectual property rights.
• Ecommerce: with the increasing digitalization, theecommerce represents a promising way to reach Indonesian consumers, allowing companies to expand their market with low initial investments. The rapid growth of the e-commerce sector in Indonesia offers numerous opportunities for Italian companies.

Logistics and distribution

Given the logistical complexity of Indonesia, with over 17,000 islands and a vast territory spanning three time zones, careful planning of distribution strategies is essential. Working with experienced logistics partners is key to addressing supply chain challenges and optimizing product distribution. 

Therefore, it will be crucial to take into account local infrastructure and transportation systems to ensure effective distribution. Indonesia also presents additional logistical challenges related to inventory management and delivery times, which require careful strategic planning.

Culture and Business Practices

Understanding Indonesian culture is crucial for business success. Especially in this context, relationships are based on trust and mutual respect. Italian companies should dedicate time to building strong relationships, participating in networking events and collaborating with local associations. The relational approach is particularly relevant, as negotiations can take longer than in other cultures, making it essential to respect hierarchies and protocols. It is therefore essential to correctly identify the ways of target market communication to access a network of contacts and opportunities.

Export to Indonesia therefore presents significant opportunities for Italian companies, in a growing and expanding market. Investing in solid relationships, understanding local regulations and adapting strategies to market needs can lead to positive results. Octagona, specialized in internationalization strategies and in detail competitor analysis and the market, is able to offer support in this area. For further information, do not hesitate to contact us.