Indonesia Foreign Trade Market Development Strategy Unveiled! A Must-Read for International Traders!

09-19 09:39 | 1068 visits

Indonesia, as the largest economy in ASEAN, has maintained a long-term growth rate of 5%. In 2022, it achieved its largest trade surplus to date, with investments growing by 44% to a record-breaking $80 billion. It is considered one of Southeast Asia's most important and dynamic markets.

Country Overview

The Republic of Indonesia, often referred to simply as Indonesia, is located in Southeast Asia and is the world's largest archipelagic nation. It controls key international maritime routes such as the Sunda Strait, the Malacca Strait, and the Lombok Strait. Major islands include Kalimantan, Sumatra, Sulawesi, and Java. It covers a land area of approximately 1.9 million square kilometers and has a maritime area of about 3.17 million square kilometers (excluding exclusive economic zones). Indonesia has a coastline that stretches over 54,716 kilometers.

Population: 276 million (as of December 2022), making it the fourth most populous country in the world.

Ethnicity: Indonesia is home to hundreds of ethnic groups, with Javanese people comprising 45% of the population, along with Sundanese, Madurese, Malays, and others.

Language: The official language is Indonesian.

Religion: Approximately 87% of the population practices Islam, making Indonesia the country with the largest Muslim population in the world.

Capital: Jakarta, with a resident population of 10.56 million.

Economic Overview

Indonesia is the largest economy in ASEAN and a significant member of the G20. It has a large market potential, a high degree of market openness, and relatively open financial markets. The growth of the Indonesian economy is mainly supported by consumption, exports, and investments.

In 2022, Indonesia's Gross Domestic Product (GDP) reached IDR 19,588.4 trillion (approximately $1.32 trillion USD), with a year-on-year growth rate of 5.31%. The per capita GDP was $4,783.9 USD. The total foreign trade volume was $528.68 billion USD, with a year-on-year growth rate of 23.79%. The trade surplus reached $54.46 billion USD, marking a 15-year high.

China-Indonesia Trade Relations

China has become Indonesia's largest trading partner and a major source of investment.

In 2022, bilateral trade between China and Indonesia reached $149.1 billion USD, with a year-on-year increase of 19.8%. China's imports from Indonesia amounted to $77.77 billion USD, increasing by $14 billion USD, or 21.7%.

In 2022, Chinese companies made direct investments in Indonesia totaling $8.23 billion USD, making China the second-largest source of foreign investment in Indonesia.

On August 30, 2022, RCEP officially came into effect in Indonesia. Indonesia granted zero tariff treatment to more than 700 Chinese product lines, including some automotive parts, motorcycles, televisions, clothing, and footwear.

Market Development Potential

Demographic Dividend: Indonesia is set to benefit from a significant demographic dividend in the coming decades. By 2030, Indonesia's total population is projected to reach 296 million. Sixty percent of Indonesia's population falls within the working-age range, and the labor force is expected to continue growing steadily for the next decade. This large and youthful workforce gives Indonesia a competitive advantage in labor costs.

Internet Penetration: Local internet users in Indonesia are expected to reach 226 million by 2025, with an estimated penetration rate of 80%. High internet penetration provides a strong foundation for the development of Indonesia's e-commerce market.

E-commerce Potential: In 2022, Indonesia became the largest e-commerce market in Southeast Asia, with e-commerce sales reaching $80.95 billion USD. By 2026, Indonesia's e-commerce sales are expected to reach $130.3 billion USD, accounting for 36.5% of total retail sales.

Expanding Network of Friends: Indonesia has entered into and ratified 73 bilateral investment treaties (BITs) and 22 multilateral agreements with investment provisions (TIPs), leveraging its geographical and resource advantages to strengthen international economic and trade cooperation.

Customer Characteristics

Characteristics of Indonesian Customers:

Punctuality: Indonesians are known for their relaxed approach to time, often referred to as "rubber time" in Indonesian, signifying significant flexibility. Delays of 30 minutes to an hour are considered normal.

Reluctance to Say No: Indonesians tend to avoid direct refusals. When visiting Indonesian clients, they are likely to respond with extreme friendliness and say they will consider or discuss your proposal, but often you may not receive a response.

Online Shopping Habits of Indonesian Customers:

Love for Discounts: Indonesian consumers favor discounted or low-priced products when making purchases. After a business's promotion ends, they may move on to another business to find alternative deals.

Social Media Shopping: Indonesia has a strong social media presence, with users spending over 3 hours per day on social media. Over 30 million Indonesians have engaged in online transactions, with 60% of sales coming from e-commerce platforms.

Preference for Bank Transfers: Indonesian consumers have three payment options when purchasing goods: ATM transfers, convenience store payments, and online bank transfers. However, the majority (94%) prefer bank transfers.

Weekday Shopping: Indonesian consumers typically do not shop online on Fridays and Saturdays. They tend to search for products on Sundays and add them to their carts, completing purchases on weekdays.

Top-Selling Categories

Home Products: Various furniture, kitchenware, paint, vases, decorations, blankets, lighting fixtures, curtains, and more.

Fashion: Muslim clothing, handbags, shoes, hair accessories, cosmetics, perfumes, and skincare products.

Food: Various snacks, candies, pastries, and beverages.

Outdoor Products: Sports and fitness equipment, bicycles, travel gear, and more.

Electronics: Laptops, smartphones, cameras, tablets, and gaming devices.

Appliances: Various televisions, washing machines, air conditioners, refrigerators, fans, blenders, and other electrical appliances.

Automotive: Vehicles, motorcycles, petroleum, and more.

Development Channels

Important Exhibitions in Indonesia 2023–2024:

The 5th Indonesia HOMELIFE Expo

Date: November 23–25, 2023