Indonesia: advantages for startups that you did not know

Being the heart of the Southeast Asian archipelago, Indonesia has many moments to admire - climate, beaches, rainforest and many more. At the same time, in recent years, Indonesia has become an attractive destination for entrepreneurs. Now, the country has been facing explosive growth in the number of startups. Indonesian capital, Jakarta, ranks 3d on Startup Genome’s 2021 “Emerging Ecosystems” with a total startup value of $34 billion. What is behind this skyrocketing interest?

Fast-growing middle-class population with increasing incomes

The Indonesian population is 270 million people. It consists of increasingly youthful and self-confident middle-class people. It is the world's fourth largest middle-class population with growing income and purchasing power. This leads to the growth of the Indonesian economy, which is currently ranked 16th in the world’s top economies. According to the McKinsey prognosis, Indonesia will become the 7th largest economy by 2030.

Advanced international network

Indonesia is an ASEAN member. This status implies low or zero tax trade with the following states: Brunei, Cambodia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. It provides access to a population of more than 667.3 million people. The Indonesian Comprehensive Economic Partnership Agreement (CEPA), signed with the European Free Trade Association (EFTA), is also very lucrative for businessmen. It covers trade in goods and services, intellectual property rights, investment, government procurement, trade and sustainable development. Moreover, Indonesia has signed many Free Trade Agreements (FTAs) with other countries, opening up the business to beneficial expansion opportunities.

Convenience of doing business

In 2020, according to a report by the World Bank, Indonesia ranked 73 out of 190 economies in terms of ease of doing business. For instance, company registration in Indonesia is very simplified — foreign investors can expect to complete the entire company registration process in 1.5 months. Furthermore, the recently introduced Online Single Submission (OSS) system enables businesses to start their operations immediately as long as a Business Identification Number (NIB) has been obtained through the system, with no need to obtain additional licenses. Finally, most foreign investors can work with a permit called the Investor KITAS, which includes easy application and waiver of work permit government fee (DPKK).

Investments and benefits

Indonesia is witnessing a growing number of homegrown investors who actively invest in promising ideas, products, and services. Furthermore, the number of overseas companies investing in the country is constantly increasing.
The government encourages investments through various tax incentives. Finally, businesses that engage in R&D activities can enjoy a 300% reduction in gross income. Businesses in the trailblazing industries can have up to a 60% reduction in their net income.

Emerging tech hub

The growing Indonesian young generation leads the country to the status of the emerging digital hub. Indonesia attracts most VC investment in multi-vector startups, payments, retail and financial services. Opportunities for tech startups continue to boom. The Indonesian Government is focused on transforming the virtual infrastructure that is the main lifeline of the digital economy, tech-based startups, and almost all major sectors and turning the country into the digital economy. Thus, the digital sector, fintech and e-commerce, specifically the companies looking to address anything from woeful transportation services and the high cost of logistics to lack of access to conventional banks, are going to collect more and more investments in the upcoming years.
Indonesia can seem modest with its 8 unicorns. Nevertheless, there are only 40 in Southeast Asia. In other words, every 5th unicorn of SEA is born here, in Indonesia. The pleasant conditions for doing the business in this country will undoubtedly contribute to the increasing number of unicorns and significant startups in the near future.If you are a founder of a promising startup and searching for a prospective market to scale up, consider Indonesian one — maybe it is your company will become the next Indonesian unicorn!