City Spotlight: Investing in Jakarta

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By Edward Barbour-Lacey

Located on the northwest coast of Java, Jakarta is the capital of Indonesia and the largest city in the country. Strategically located in the archipelago, Jakarta serves as the gateway to the rest of the country. The city is a special territory holding the status of a province, and consisting of Greater Jakarta, which covers an area of 637.44 square kilometers.

With a population of almost 10 million, the city is the political, economic, and cultural center of Indonesia. Jakarta serves as a melting pot for the country’s diverse range of ethnic groups, over 300.

The average worker’s salary is US$240 per month and there is a mandatory welfare contribution of 4.8 percent of the employee’s total salary. However, steep wage increases are often common, particularly due to the country’s increasingly powerful trade unions.

Professional Service_CB icons_2015RELATED: Pre-Investment Services from Dezan Shira & Associates 

Despite being a modern city in many ways, Jakarta’s infrastructure system still leaves much to be desired. Traffic jams can be extensive, particularly in the business district. Further complicating matters, public transportation is still quite poor since the government has mainly focused on adding more roads.

SME assistance

Small and medium-sized enterprises (SMEs) make up almost half of Indonesia’s GDP. Due to their importance, the country’s government is keen to help grow and support these businesses. As a result, the government is currently developing a series of pilot projects aimed at developing SMEs in Indonesia; these projects are likely to be long-term. The government’s Ministry for Cooperatives and SMEs can be found here.

An additional area of support for SMEs in Indonesia comes from the International Finance Corporation (IFC), which has been working in Indonesia for some time now. According to its website, the IFC works to improve access to finance by investing in commercial banks and aiding them in the provision of loans to micro, small, and medium enterprises.

According to the IFC, the organization “helps companies to increase their business productivity and bottom line by adopting global best practices. Our involvement in manufacturing and services industry helps Indonesian companies meet local demand and enter international markets. Our corporate governance program provides advice to companies to be more competitive and attract local and foreign capital by improving the transparency of their business operations.”

Additionally, the IFC is working to improve the quality of Indonesia’s infrastructure through targeted investments in transportation, power plants, telecoms, ports, and other projects.

Key business sectors and industries

Like the country as a whole, Jakarta’s economy is made up of a range of sectors and industries. Indonesia’s workers are often highly skilled and low cost, making the country an attractive destination for foreign investment. The key economic sectors of Jakarta include the following:

  • Banking
  • Trading
  • Financial services
  • Manufacturing
  • Services

The cities top industrial sectors include the following:

  • Automotive
  • Electronics
  • Mechanical engineering
  • Chemicals
  • Biomedical sciences manufacturing

Additionally, Jakarta has a very attractive luxury property investment sector. In fact, Knight Frank, a global real estate consultancy, reported that, in 2013, Jakarta offered the highest return on high-end property investment in the world.

Jakarta is also considered a key shopping destination in both Indonesia and in Southeast Asia. Another area of interest is e-commerce. Illustrating the rise of e-commerce in Indonesia, annual online sales are forecast to grow from US$1 billion-$3 billion in 2014 and reach US$10 billion by the end of 2015. With its population of nearly 10 million and relatively well-developed network infrastructure, the capital, Jakarta, has led initial growth in this market; recently, however, orders from outside the country’s capital have begun to swell, hinting at big opportunities for growth in second and third-tier cities.

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Industrial and economic zones

Some of the industrial and economic zones in and around Jakarta include the East Jakarta Industrial Area (EJIA), which has successfully grown into one of the biggest industrial clusters in Indonesia. Additionally, there is the Jakarta Bay Industrial Zone (JBIZ). There are also a number of industrial areas located in Bekasi, located on Jakarta’s eastern border. In addition to serving as a factory town for Jakarta, Bekasi also provides numerous workers who commute to the city center everyday.

The city is also home to the Port of Jakarta (Tanjung Priok Port). The port is the country’s largest seaport, with an annual traffic capacity of around 45 million tons of cargo and 4,000,000 TEU’s.

Conclusion

Jakarta is one of the most industrialized and business-friendly areas in Indonesia. If the city can continue to improve its infrastructure and business regulations, growth seems assured for this dynamic Southeast Asian city.


About Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asia@dezshira.com or visit www.dezshira.com.

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