Doing business in IndonesiaIndonesia has laid out a welcome mat for investors, encouraging the private sector to ride a tidal wave of economic growth in the country. The leading “breakout nation” still has challenges to overcome, but the wheels of prosperity have been set in motion and the country may soon be considered among the leading developing nations in the world.

tmf-group.com

Rise of a new BRIC

The Republic of Indonesia is south-east Asia’s largest economy and the world’s largest archipelago, comprised of around 17,000 islands spanning more than 5,000km along the Equator between the Indian and Pacific Oceans.

Russia is cheap, but very reliant on oil. Brazil has a big consumer credit It has been a hub of international trade since at least the 7th century, attracting traders and foreign powers with its abundant natural resources. Home to 243 million people, it is the world’s fourth-most populous country behind China, India and the United States.

Having weathered the recent global financial crisis better than its fellow G20 countries, Indonesia’s economy has been growing at about 6% per annum in recent years thanks in large part to a combination of domestic consumption, an emerging middle-class and productivity improvements - the latter of which has accounted for more than 60% of the country’s economic growth.

That boom is expected to continue - fuelled by its young population; the strong consumption habits of its expanding consumer class; its rapid rate of urbanization; and its natural resource wealth - allowing Indonesia to pass countries including Germany and the United Kingdom to become the world’s seventh-largest economy by 2030.

Ruchir Sharma, Head of Emerging Market Equities and Global Macro at Morgan Stanley, has grouped Indonesia as a “breakout nation”, or a country that consistently beats economic expectations by a wide margin. But there is also a case for Indonesia to become an addition to the BRIC designation, given that it is the largest country within south-east Asia, has a huge population and immense natural resources.

“Over the first 10 years of this millennia the big growth story has been China, but most people are now convinced that Indonesia will be the main growth story of the second decade,”

says Jochum Haakma, Global Director of Business Development at TMF Group.

As the Investment Guarantee Fund paves a path towards economic liberalization, Indonesia is laying out a well-worn welcome mat for foreign investors, marching towards becoming one of the world’s most important economies.

tmf-group.com | Page 2 of 7

Home to 243 million people, it is the world’s fourth-most populous

country behind China, India and the United States.

Why Indonesia?

Growth machine

The largest economy in south-east Asia and one of the biggest emerging markets in the world, Indonesia is frequently referred to as an economic growth machine. Since 2004 the country has undergone a period of rapid growth, topping 6% for the eighth quarter in a row between July and September 2012.

Indonesia enjoys a comfortable position in the global markets. Although exports make up a significant chunk of the country’s economic output, it is not wholly reliant on them. Any external shocks – the global financial crisis; economic slowdown in China – can therefore be mitigated and the country has continued to grow despite weak indicators elsewhere.

Private consumption and government spending have become an engine for strong economic growth, increasing by 7.1% in 2012 compared to the previous year. The second quarter of 2012 saw growth hit 6.4% year-on-year, up from 6.3% in the previous quarter. These figures were posted despite exports slowing significantly, proving that the economy is not wholly reliant on the global markets.

Studies by leading research organisations (Standard and Chartered, PricewaterhouseCoopers) have placed Indonesia ahead of the developed nations such as Germany and the UK in 2030 and beyond, based on vital economic indicators such as the strength of its working population and consumer base. This shows that not only will its growth be strong, it will also be sustainable.

Risk

Risk is still a factor for companies investing in Indonesia and regulators like to change rules and regulations - such as the 40% cap on single shareholders for banks - at their whim. There is also a high degree of corruption at all levels of society. However, many areas have become less risky.

• Indonesiaisrelativelylessriskythanmanyemergingmarkets,with an average annual return of more than 25% and a beta coefficient of less than 0.8. (MSCI and Bloomberg, 2011).

• Thereissmallmarketcapitalization,leavingalotofroomtogrow.

• ItregaineditsinvestmentgraderatingfromFitchRatingsinlate 2011 (BBB-), and from Moody’s Ratings in early 2012 (Ba1).

• Moody’sraisedIndonesia’sforeignandlocalcurrencybondratings to Baa3 from Ba1 with a stable outlook.

“Investor appetite is the most important ratings indicator for a country.” - Jochum Haakma.

Open for business

Foreign investment is crucial to the long-term prospects of the country, and both the public and private sectors are looking to encourage the inflow of capital into the economy.

• OntheIndonesianStockExchange,thereare425issuerswith a market capitalisation of $400 billion or 50.48% of GDP. As of November 2010, two-thirds of the market capitalisation was in the form of foreign funds.

• Between1990and2010,Indonesiancompanieswereinvolvedin 3,757 mergers and acquisitions as either acquirer or target with a total known value of $137 billion.

MP3EI

A Masterplan to Accelerate and Expand Economic Development in Indonesia (MP3EI) has been implemented by the government, which is looking to achieve:

• annualeconomicgrowthof7-8%annuallythroughtheprivatesector• developsixeconomiccorridors • strengthennationalconnectivity • acceleratenationalscienceandtechnology.

tmf-group.com | Page 3 of 7

Ways into Indonesia

Starting a business, such as a limited liability company (or perseroan terbatas in Bahasa Indonesia, the official language) can be cumbersome, taking around 45 days compared with 12 in OECD countries. Paying taxes is also more time-consuming, requiring 51 payments per year compared to the OECD average of 13. Without the help of local representatives this can significantly intrude on a company’s ability to conduct business in the country.

Representative office

A representative office is an extension of the parent entity and cannot conduct local sales.

Limited Liability Company

A foreign direct investment company in Indonesia (known locally as Penanaman Modal Asing or PMA), can take the form of a 100% foreign-owned limited liability company or can be established as a limited liability company through a joint venture with Indonesian partners. Foreign equity participation limitations may apply, depending on the intended principal activity.

BKPM

The Indonesian Investments Coordination Board (BKPM) regulates foreign business activity in Indonesia as well as promoting the country through embassies abroad. For foreign investors, this is an important source for early information.

Negative investment list

There are certain areas of the economy cut off to foreign investment. The Negative Investment List, or Daftar Negatif Investasi/DNI, outlines in the sectors in question, which include:

• alcoholicbeverageindustry • fisheries • telecommunicationstowers • chemicalmaterials • cultureandtourism,suchascasinos.

tmf-group.com | Page 4 of 7

TMF Group

One of the biggest barriers to international investment is the burden of accounting, legal, HR and payroll. TMF Group has dedicated specialists in place who can take care of the administrative hassle of moving across borders, leaving the company free to focus on global ambitions.

TMF can assist by liaising with the Indonesian Investments Coordination Board (BKPM), which is required for all foreign companies. We can obtain approvals from BKPM and the Ministry of Law and Human Rights, obtain the Domiciliation Statement, and apply for local tax ID and Business Registration. We can get the company fully operational and will act as a one-stop centre for all legal, accounting, tax and payroll compliance requirements.

Indonesia is not alone in having complex local governance and regulatory requirements, and having officers on hand in the country who understand the local environment can lead to a seamless transition. TMF Group combines extensive global resources with unrivalled knowledge of local regulations, cultures and languages to help you achieve your business goals.

All solutions are customised to fit your company’s needs, and are coordinated through a single point of contact regardless of where you are in the world; this helps to ensure excellent communication and management. With a wide range of experience and a comprehensive range of services, we can assist in seamless cross-border transitions.

tmf-group.com | Page 5 of 7

PT TMF Indonesia45th Floor Menara BCA Grand Indonesia Jl. M.H Thamrin No. 1 Jakarta 10310 Indonesia

Contact: Mr. Vinod Kumar (President Director)Telephone:+622123585899E-mail: vinod.kumar@tmf-group.com

TMF Group combines extensive global resources with unrivalled knowledge of

local regulations, cultures and languages to help you achieve your business goals.

Sources

http://www.huffingtonpost.com/daniel-wagner/investing-in-indonesia-promise_b_2061730.html

http://internationalinvest.about.com/od/globalmarkets101/a/How-To-Invest-In-Indonesia.htm

http://finance.yahoo.com/blogs/daily-ticker/brics-123351582.html

http://www.ft.com/cms/s/0/08d3b32a-df88-11e1-b81c-00144feab49a.html#axzz2Cf3HHlEm

http://www.huffingtonpost.com/daniel-wagner/investing-in-indonesia-promise_b_2061730.html

http://www.ft.com/cms/s/0/08d3b32a-df88-11e1-b81c-00144feab49a.html

www.worldbank.org/en/country/indonesia

http://www.globalwaterintel.com/archive/12/8/market-profile/indonesias-innovation-infrastructure.html

http://www.thejakartaglobe.com/business/indonesias-economic-growth-tops-6-for-8th-quarter/554447

http://www.ft.com/cms/s/0/08d3b32a-df88-11e1-b81c-00144feab49a.html#axzz2E64AXdkd

http://www.worldbank.org/en/country/indonesia/overview

http://internationalinvest.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=internationalinvest&cdn=money&tm=83&f=10&su=p284.13.342.ip_&tt=2&bt=0&bts=0&st=12&zu=http%3A//post.nyssa.org/.a/6a0120a8cdef2c970b014e5fc0b36c970c-popup

http://www.thejakartaglobe.com/business/moodys-also-says-indonesia-economy-now-investment-grade/492255

http://www.imq21.com/news/read/45520/20111206/113011/Gita-Rasio-Kapitalisasi-Pasar-Modal-RI-di-Bawah-50-.html

http://www.imaa-institute.org/statistics-mergers-acquisitions.html#MergersAcquisitions_Indonesia

http://www.eurocham.or.id/index.php?option=com_content&view=article&id=210&Itemid=154

http://internationalinvest.about.com/od/globalmarkets101/a/How-To-Invest-In-Indonesia.htm

tmf-group.com | Page 6 of 7

tmf-group.com

DisclaimerWhilst we have taken reasonable steps to provide accurate and up to date information in this publication, we do not give any warranties or representations, whether express or implied, in this respect. The information is subject to change without notice. The information contained in this publication is subject to changes in (tax) laws in different jurisdictions worldwide. None of the information contained in this publication constitutes an offer or solicitation for business, a recommendation with respect to our services, a recommendation to engage in any transaction or legal, tax, financial, investment or accounting advice. No action should be taken on the basis of this information without first seeking independent professional advice. We shall not be liable for any loss or damage whatsoever arising as a result of your use of or reliance on the information contained herein. This is a publication of TMF Group B.V., P.O. Box 23393, 1100 DW Amsterdam Zuidoost, the Netherlands (contact@tmf-group.com). TMF Group B.V. is part of TMF Group, consisting of a number of companies worldwide. A full list of the names, addresses and details of the regulatory status of the companies are available on our website: www.tmf-group.com. © 2013 TMF Group B.V.