Financial and Professional Services sector in Indonesia
Finance district Indonesia
The continuing growth of Indonesia’s economy results in an increasing demand for professional services e.g. legal, accountancy and management consultancy.
Indonesia’s economic growth continues to be strong, being 6.2% in 2012, although growth in Indonesia is expected to lower slightly to 5.9% (World Bank’s projection) in 2013. It is South East Asia’s largest economy and the 16th largest in the world.
Indonesia’s credit rating has reached investment grade. The long-term foreign currency rating from Fitch Ratings’ is BBB-, while Moody’s is Baa3.
There are 120 banks with more than 13,000 branches in Indonesia. These consist of state-owned banks, local private banks (foreign exchange and non-foreign exchange licensed banks), foreign banks and the regional development banks.
Bank Indonesia (Central Bank) has the authority to issue policy rules and regulations. It has introduced and enforced certain regulations in 2012 aimed at improving banks’ efficiency to optimise their contribution to the economy, while strengthening the resilience of the banking system in the context of global economic slowdown. These regulations govern multi-licensing and limits to bank ownership.
In October 2011, Indonesia’s Parliament passed a long-awaited law to establish a financial services regulator (OJK) with the authority to regulate and supervise the financial services industries, and thus assuming the Ministry of Finance and Capital Market and Financial Institutions Supervisory Agency’s function in regulating and supervising the capital market, insurance, pension funds, leasing companies and other financial services institutions, as well as Bank Indonesia’s function in regulating and supervising the banking sector (as of 31 December, 2013).
Foreign providers of professional services (legal, accountancy.) wishing to practice in Indonesia are subject to a different set of requirements.
Continuous growth of the middle class in recent years offers huge opportunities for priority banking products.
Banks are increasingly focusing on providing better services and product innovation to their customers as well as enhancing the effectiveness of risk management, information analysis and compliance. Consequently, most banks will increase expenditure in their IT infrastructure investment.
Considering the size of the Muslim population in Indonesia and the growth of the Islamic banking sector over the past 5 years, there is a higher growth potential in Sharia banking compared with commercial banking. Strategic investment and partnerships are to be found in expanding the product base that Sharia banks are able to offer to customers. Limited knowledge of more sophisticated banking products also presents collaboration opportunities.
In spite of the current regulations, there is an increasing interest on the part of foreign providers in supplying professional services in Indonesia to support the activities of international and Indonesian clients.
Getting into the market
There are various methods of entry into Indonesia’s:
Purchase of shares in banking entities
Acquiring an existing bank
Opening up a branch of a foreign bank
Establishing a new bank
Investing in Islamic banks.
Professional Services Sector:
Establish presence in association with Indonesian firms;
Open a representative office
Enter an MOU with relevant institutions
Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS).
To commission research or for general advice about the market, get in touch with our specialists in country – or contact your local international trade team.
Lian Jap, British Embassy Jakarta, Indonesia; Tel: +62 21 23565265; Fax +62 21 2356 5352; Email: [email protected]
UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows.
IDC Financial Insights Financial Services Summit 2013
Jakarta, 3 September 2013