HSBC Treasury Management Profiles 2018 -

Current section, Introduction

Introduction

Indonesia is Southeast Asia’s largest economy. Manufacturing is the primary source of economic growth (in 2016 it contributed 20.5 per cent to GDP), but services such as those provided by the tourism sector (11 per cent of GDP in 2016), are also strong contributors to the country’s GDP. However, economic growth has been sluggish. GDP grew by 5.0 per cent in 2016, and is forecast to grow by 5.1 per cent in 2017. President Joko Widodo has implemented a major infrastructure programme to help stimulate the economy; the World Bank estimates that USD500 billion is required to be spent in order to meet the country’s infrastructure needs. In September 2017, in a move aimed at securing greater support for government infrastructure projects, Indonesia's financial regulator, the OJK, changed its rules governing investments by non-bank financial institutions. Attracting wider investment to boost growth and jobs is also required to lift investment in the country: FDI in Q1 2017 was a modest 0.9 per cent year-on-year, according to Indonesia’s Investment Coordinating Board. To strengthen the investment climate, the government has announced a number of policy reforms intended to reduce red tape and to speed up the time it takes to process investment applications.

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Legal and regulatory

  • Foreign exchange accounts can be held by residents abroad. Resident domestic currency (IDR) accounts are allowed to be converted into foreign currency
  • Non-resident bank accounts are permitted in both foreign and domestic currency. Non-residents are restricted to holding current, savings and time deposit accounts. A transfer in IDR to a non-resident account is permitted only as part of an underlying economic transaction
  • Onshore banks are prohibited from carrying out certain transactions with non-residents including the provision of overdrafts and domestic currency transfers between accounts held by the same non-resident

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Taxation

  • Resident companies are taxed on their worldwide income
  • Non-resident companies are only taxed on their Indonesian-sourced income including income attributable to a permanent establishment (PE) in the country
  • A corporate taxpayer (other than a PE) with taxable income of IDR4.8 billion is subject to a corporate tax rate of 1 per cent. Revenue of between IDR4.8 billion and IDR50 billion receives a 50 per cent reduction on taxable income for gross revenue up to IDR4.8 billion

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Payment instruments and systems

  • Cash is an important payment medium in Indonesia, particularly for low-value retail transactions. Electronic credit transfers are used for both high-value corporate and low-value retail payment transactions, although cheque use remains high, particularly for commercial payments. Payment card use, particularly of debit cards, is rising
  • Electronic money and mobile wallet payment schemes are increasingly popular: in 2016, year-on-year mobile wallet transaction value increased 90 per cent
  • Indonesia operates two national payment systems: BO-RTGS, an RTGS system, and the SKNBI automated clearing system for credit and debit transfers

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Cash management

  • Notional pooling and cash concentration is permitted for resident entities only. Cross-border sweeping is permitted
  • A range of collection services are available, including lockbox services

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Electronic banking

  • Internet and mobile banking services are provided by the country’s leading banks for both corporate and retail purposes
  • In 2015, the Financial Services Authority launched a branchless mobile banking service aimed at individuals, particularly in rural areas, who do not have access to banking facilities. Six banks provide this service
  • Of the estimated 132.7 million internet users in the country, 48 per cent access the internet via a smartphone

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To read the full report on Indonesia and to discover more on these and other topics, including banking and trade, please click on the Download PDF option.

Sources:

  • Indonesian Internet Service Provider Association
  • Organisation for Economic Co-operation and Development
  • World Bank
  • Indonesia's Statistics Agency (Badan Pusat Statistik)

The materials contained on this page were assembled in May 2017 (unless otherwise dated).

 

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