A land of opportunities and challenges

It seems at times almost implausible that you will ever reach your destination but somehow you do. The same could be said for the country’s economy.

Indonesia’s economy enjoyed a remarkable 6.3% GDP growth last year, and is expected to continue growing at this level. Not surprisingly Indonesia is attracting a lot of investor interest, but much like its capital’s traffic for the visitor, doing business is a baffling and confusing experience for many international investors.

The discussions at the Maritime Indonesia 2013 conference last week went some way to explain the complexities of doing business in the world’s fourth most populous country. Two words used together frequently throughout the discussions were “opportunities and challenges”. Wherever there were business opportunities there were plenty of challenges to go along with them.

The phased introduction of a cabotage law since 2005 has made Indonesia an all together more complex place for international shipping investors. It has certainly been good for local owners. For an international owner who wants a slice of the action the most they have is 49% stake in a joint venture, something many are not keen on given the lack of legal certainty that Indonesia provides.

The ports and terminals sector is where many see opportunities and it is an area APM Terminals has flagged up on a number of occasions in recent years. However, movement on new projects is often painfully slow as terminals bid out, winners announced, then bids cancelled. As a result projects can remain on the drawing board for decades. Even if they are built the issue of landside infrastructure remains.

The “b and c” words - bribery and corruption - are not talked about in public but privately foreign nationals working in Indonesia euphemistically refer to “local political difficulties”. Transparency International’s 2012 corruptions perception index ranked Indonesia at 118 out of 176 countries surveyed number one being the least corrupt, 180 the most.

If things do go wrong for you when operating in Indonesia it can prove very costly - just ask IM Skaugen. Its vessel the Norgas Cathinka was involved in a fatal collision with 40-year old ferry in Indonesia last September. Despite the voyage data recording showing it was not the Norgas Cathinka that caused the collision, the vessel remains under detention costing the company $400,000 a month in lost earnings.

Indonesia is a market that offers many opportunities but also many pitfalls to go with them. It is certainly not for the faint-hearted and much like having a good local driver to negotiate Jakarta’s traffic is essential, so is carefully choosing a local business partner to help negotiate the speed bumps you are sure to encounter.