Mon, 28 Sep 2015
From:
By Sara Schonhardt
U.S. jeans and clothing maker Levi Strauss & Co. has big ambitions for Indonesia. The nation of 250 million is the company’s fastest-growing market in Asia, and Levi’s wants to invest and expand aggressively.

But it is stymied by everything from mounting tariffs and sudden shifts in policy to regulations that prohibit foreign retailers from operating their own stores, says Sumesh Wadhwa, head of the Levi’s Indonesia unit. In July, regulators raised duties to 25% from 15%; Levi’s got only one day’s notice, and its goods were stalled at customs until it paid the balance, he says.

The Indonesian government is rolling out measures to smooth the way for global investors—the first batch earlier this month—but they have yet to produce concrete results.

“So far,” said Mr. Wadhwa, the government has shown “great intentions, very little visible action to us.”

The frustrations at Levi’s underscore the challenges many foreign companies are facing as they try to expand in one of the region’s biggest economies.

Indonesia is the third-most-populous country in Asia after China and India, and its economy—also the third-largest—has been growing at 5% to 6% for most of the past decade as it rode a global commodities boom. Increasing urbanization and rising incomes have boosted Indonesians’ spending power. Household spending grew 20% over the past five years, and last year totaled almost $500 billion, double that of Thailand.

Foreign investment also climbed, to $28.5 billion in 2014 from $16.4 billion in 2010, though growth has stalled over the past year, according to Indonesia’s Investment Coordinating Board.

Now economic growth is sputtering, sinking to a six-year low of 4.67% in the second quarter, in part because of a plummeting rupiah and China’s weaker-than-expected appetite for exports such as coal and palm oil.

That has left many multinationals increasingly impatient with a host of obstacles to doing business in the country, including high tariffs, curbs on foreign investment, long-neglected infrastructure and rules that shift often and without warning.

Some companies say barriers are growing instead of shrinking: Indonesia has asked smartphone makers to source more parts locally starting in 2017, tightened restrictions on foreign labor, and added e-commerce as well as some oil-and-gas and electricity-installation services to the list of sectors closed to foreign investment.

President Joko Widodo has pledged to help. On Sept. 9, he said the government was revising 89 regulations that hinder business, easing licensing requirements for exports and imports, doing away with several overlapping rules and making it easier for tourists to get visas. He also promised more deregulation this month and in October.

One regulation the government has said it plans to relax is a surprise January decree that banned the sale of beer in convenience stores, cutting profits nearly in half for the country’s brewers.

Michael Chin, president director of Indonesia’s biggest beer producer, PT Multi Bintang, which is majority-owned by Heineken Holding NV of the Netherlands, said the move “sounds positive,” but the details—which might include letting local governments decide where alcohol can be sold—remain unclear.

Jakob Friis Sorensen, the head of shipping company Maersk Line Indonesia, says high import tariffs that depress trade, and a ban on using foreign currencies in domestic transactions, top his list. The currency rule in particular has forced multinationals that once settled accounts in dollars to hedge themselves against swings in the rupiah, a costly step that pushes up prices for their goods, Mr. Sorensen says.

Heavy-equipment providers say they have been hit by a ban on the export of raw ores, aimed at pushing mining companies to process more metal domestically.

Indonesia should streamline the process for setting up companies, says Willson Cuaca, managing partner at East Ventures, a Singapore-based venture-capital firm that has invested about $15 million in early-stage startups since 2010, mostly in Indonesia. In Singapore, entrepreneurs can set up a company in less than two hours, he says, while in Indonesia it takes at least a month to get the documentation needed to open a bank account.

The biggest challenge for Levi’s, says Mr. Wadhwa, is a rule that requires single-brand foreign retailers to operate through franchisees. Levi’s now has about 60 shops in Indonesia, and sales have been growing at a double-digit rate for the past five years, he says. The company would like to open 15 new stores a year, but the franchisees are willing to open less than half that number, Mr. Wadhwa says.

The rule also makes it hard to retain and develop staff, he says, because training and salaries are determined by franchisees.

Levi’s has also been hurt by the higher import tariffs implemented in July, in a bid to aid domestic producers. Those apply to more than 1,000 goods, including apparel.

Indonesia’s new administration is more transparent than previous regimes, and its officials are willing to listen to companies’ suggestions for improving regulations, says Mr. Wadhwa. “But it’s taking a long time,” he says.



News Search/Filter
Transaction Rates
17 Aug 18
Buy
Sell
AED1
3,905.20
3,905.20
AFN1
196.97
196.97
ALL1
129.72
129.72
AMD1
29.70
29.70
ANG1
7,779.22
7,779.22
AOA1
53.05
53.05
ARS1
482.59
482.59
AUD1
10,412.68
10,412.68
AWG1
8,002.51
8,002.51
AZN1
8,425.56
8,425.56
BAM1
8,339.10
8,339.10
BBD1
7,172.25
7,172.25
BDT1
169.85
169.85
BGN1
8,340.36
8,340.36
BHD1
38,040.23
38,040.23
BIF1
8.09
8.09
BMD1
14,344.51
14,344.51
BND1
9,494.90
9,494.90
BOB1
2,076.34
2,076.34
BRL1
3,672.98
3,672.98
BSD1
14,344.51
14,344.51
BTC1
93,022,162
93,022,162
BTN1
204.19
204.19
BWP1
1,327.51
1,327.51
BYN1
6,985.73
6,985.73
BZD1
7,140.60
7,140.60
CAD1
10,899.67
10,899.67
CDF1
8.81
8.81
CHF1
14,382.14
14,382.14
CLF1
613,537.92
613,537.92
CLP1
21.43
21.43
CNH1
2,088.40
2,088.40
CNY1
2,083.70
2,083.70
COP1
4.70
4.70
CRC1
25.29
25.29
CUC1
14,344.51
14,344.51
CUP1
562.53
562.53
CVE1
147.42
147.42
CZK1
633.80
633.80
DJF1
80.58
80.58
DKK1
2,187.63
2,187.63
DOP1
287.60
287.60
DZD1
120.51
120.51
EGP1
801.28
801.28
ERN1
956.52
956.52
ETB1
520.33
520.33
EUR1
16,312.52
16,312.52
FJD1
6,776.17
6,776.17
FKP1
18,235.54
18,235.54
GBP1
18,235.54
18,235.54
GEL1
5,777.74
5,777.74
GGP1
18,235.54
18,235.54
GHS1
2,942.99
2,942.99
GIP1
18,235.54
18,235.54
GMD1
297.85
297.85
GNF1
1.58
1.58
GTQ1
1,915.30
1,915.30
GYD1
68.60
68.60
HKD1
1,827.39
1,827.39
HNL1
596.94
596.94
HRK1
2,197.51
2,197.51
HTG1
212.99
212.99
HUF1
50.35
50.35
IDR1
1.00
1.00
ILS1
3,907.23
3,907.23
IMP1
18,235.54
18,235.54
INR1
204.87
204.87
IQD1
12.03
12.03
IRR1
0.33
0.33
ISK1
132.41
132.41
JEP1
18,235.54
18,235.54
JMD1
105.79
105.79
JOD1
20,217.69
20,217.69
JPY1
129.21
129.21
KES1
142.32
142.32
KGS1
210.52
210.52
KHR1
3.52
3.52
KMF1
33.13
33.13
KPW1
15.93
15.93
KRW1
12.72
12.72
KWD1
47,291.38
47,291.38
KYD1
17,222.41
17,222.41
KZT1
39.84
39.84
LAK1
1.68
1.68
LBP1
9.49
9.49
LKR1
89.42
89.42
LRD1
92.81
92.81
LSL1
1,006.27
1,006.27
LYD1
10,301.69
10,301.69
MAD1
1,499.65
1,499.65
MDL1
862.45
862.45
MGA1
4.31
4.31
MKD1
264.97
264.97
MMK1
9.39
9.39
MNT1
5.87
5.87
MOP1
1,775.17
1,775.17
MRO1
40.12
40.12
MRU1
399.01
399.01
MUR1
411.60
411.60
MVR1
927.84
927.84
MWK1
19.72
19.72
MXN1
755.05
755.05
MYR1
3,493.97
3,493.97
MZN1
243.17
243.17
NAD1
986.73
986.73
NGN1
39.73
39.73
NIO1
450.07
450.07
NOK1
1,691.33
1,691.33
NPR1
127.61
127.61
NZD1
9,443.94
9,443.94
OMR1
37,262.35
37,262.35
PAB1
14,344.51
14,344.51
PEN1
4,331.07
4,331.07
PGK1
4,331.66
4,331.66
PHP1
268.49
268.49
PKR1
116.85
116.85
PLN1
3,788.58
3,788.58
PYG1
2.49
2.49
QAR1
3,939.64
3,939.64
RON1
3,501.99
3,501.99
RSD1
138.24
138.24
RUB1
214.51
214.51
RWF1
16.34
16.34
SAR1
3,824.49
3,824.49
SBD1
1,818.26
1,818.26
SCR1
1,055.61
1,055.61
SDG1
797.35
797.35
SEK1
1,560.13
1,560.13
SGD1
10,425.93
10,425.93
SHP1
18,235.54
18,235.54
SLL1
2.19
2.19
SOS1
24.80
24.80
SRD1
1,923.37
1,923.37
SSP1
110.11
110.11
STD1
0.68
0.68
STN1
664.86
664.86
SVC1
1,640.18
1,640.18
SYP1
27.85
27.85
SZL1
986.74
986.74
THB1
432.12
432.12
TJS1
1,522.82
1,522.82
TMT1
4,086.80
4,086.80
TND1
5,178.91
5,178.91
TOP1
6,208.30
6,208.30
TRY1
2,451.13
2,451.13
TTD1
2,129.41
2,129.41
TWD1
466.32
466.32
TZS1
6.27
6.27
UAH1
519.35
519.35
UGX1
3.82
3.82
USD1
14,344.51
14,344.51
UYU1
454.32
454.32
UZS1
1.84
1.84
VEF1
0.10
0.10
VND1
0.62
0.62
VUV1
132.20
132.20
WST1
5,541.56
5,541.56
XAF1
24.86
24.86
XAG1
211,794.36
211,794.36
XAU1
17,029,164.34
17,029,164.34
XCD1
5,307.77
5,307.77
XDR1
20,003.03
20,003.03
XOF1
24.86
24.86
XPD1
14,202,491.66
14,202,491.66
XPF1
136.69
136.69
XPT1
11,287,962.18
11,287,962.18
YER1
57.30
57.30
ZAR1
984.95
984.95
ZMW1
1,403.71
1,403.71
ZWL1
44.49
44.49
Taxation Exchange Rates
31 Aug 16 - 06 Sep 16
USD 1
13,232.00
AUD 1
10,043.30
CAD 1
10,213.70
DKK 1
1,999.40
HKD 1
1,706.22
MYR 1
3,283.28
NZD 1
9,623.63
NOK 1
1,605.23
GBP 1
17,433.70
SGD 1
9,757.68
SEK 1
1,569.45
CHF 1
13,631.10
JPY 100
13,101.00
MMK 1
11.01
INR 1
197.29
KWD 1
43,920.70
PKR 1
126.23
PHP 1
285.00
SAR 1
3,528.53
LKR 1
91.12
THB 1
382.08
BND 1
9,756.53
EUR 1
14,885.50
CNY 1
1,987.61

Okusi Associates: Indonesian Business & Management Services