IA-CEPA: A Strategy Towards Market Entry in Indonesia.
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Saksara has been involved in forging closer relationships with Indonesia through higher education and research since our inception in 2013. We have worked in contexts as diverse as public health issues like maternal mortality and tobacco control, to market research for the international higher education sector. Education has been an excellent sector to inform a broader view of the trade and investment opportunities that await Indonesia and Australia. Education was the single biggest service-based export for Australia in 2019, contributing $37.6 billion to the Australian economy and supporting 240,000 jobs. Likewise, education dominates Australian service exports to Indonesia, and on falling wheat prices last year, became the number one Australian export to Indonesia.
I recently co-authored a report for the Western Australian government in partnership with Australian Government (AusTrade) on the opportunities for the vocational education and training sector in East Java. The report was co-authored with Professor John Williams from Curtin University. Saksara Research delivered the on-the-ground research in East Java and, as part of that process, I was able to interview more than 60 company executives representing more than 100,000 employees. I was left with important insights and impressions from those discussions with the business community in East Java, however central to all of these was a more sophisticated grasp on just how vast and diverse the opportunities are in Indonesia for Australian businesses and institutions.
The Indonesia Australia Comprehensive Economic Partnership Agreement (IA-CEPA) is the culmination of more than 10 years of hard work by stakeholders from both countries. There remains a universal belief that deepening the relationship between our two countries, both economically and socially, is an important aspect of sustainable development and regional security. IA-CEPA is a strong foundation in which Australian business can launch market entry strategies.
The purpose of this post is to share some thoughts on strategy with those contemplating deepening their engagement with Indonesia. There is a compelling case well beyond the opportunities presented by IA-CEPA. Indonesia is now a middle-income economy of 270 million people right on the geographic doorstep of Australia. Domestic consumption is driving economic growth, and the appetite for international goods and services is growing exponentially. All of this aside, the single most understated opportunity of Indonesia is having access to a pool of young, well qualified workforce talent capable of supporting successful market entry. This capacity is also well-placed to grow, with half of Indonesia’s vast population under 30 years old, and of which a growing proportion are well-qualified, technologically literate, with competent English language skills through education and global connectivity.
So onto some snippets of advice from us about how to proceed. Many of those already invested in Indonesia will have realised this already, however for those contemplating the opportunities presented from IA-CEPA, we advise the following:
Develop capacity early
A relatively universal truth about Indonesia is that everything takes a bit more time than foreign companies usually plan for. There is early stage capacity building that aspirants can begin, and these include: growing your knowledge and understanding of Indonesia, developing the networks you will need, and developing an understanding of the opportunities for your product or service in the relative geographies of Indonesia.
Research thoroughly
Market research can be a complicated endeavor, and the instinct of many has been to trust their instincts, rely on the general demographic and economic data, or just take throw caution to the wind based on a hunch. It sometimes pays off, however usually ends in frustration and failure. I encourage everyone to research thoroughly. It has always astonished me how something that works in Jakarta is a flop in Bandung, or how decidedly different Surabaya is to other markets within Indonesia. Nuanced research is a wise investment towards success. The methodologies don’t need to be complex and expensive. Many enterprises can independently engage in a level of market research using open source and connected research tools.
Seek out local partners carefully
One of my mantras for success and sanity in Indonesia has been to structure business with as few external points of reliance as possible. My experience has been that these points at which we rely on other entities for our success, are most often the fissure points that we need to invest time and money to remedy. Collaborations, partnerships, and a degree of reliance on others is unavoidable, and this means that you need to invest more due diligence in selecting your partners carefully. We are all familiar with more wind than waves in business, so partnerships based on quality performance and outcomes is essential. The usual rules apply here. Quality partnerships can catapult your endeavours in Indonesia, so approach this task diligently.
Approach the market incrementally
I have become an advocate for pilot projects, trial runs, market testing or whatever your sector calls it. There are numerous strategies for approaching the market incrementally. Many international products enter the market through re-sellers, and online. Many services begin a more substantial engagement and permanent presence in Indonesia with initial smaller projects and collaborations. This strategy has served the Australian university sector well as they have begun shifting from partnerships with local institutions to a more substantial independent presence.
Develop people to support your success
The key to success for most enterprises lies in its people. Beginning with the development of local expertise is a common sense strategy for the long haul in Indonesia. There are multiple ways to approach the training and development of people to support your products or services. We have recently been involved in the development of online skills certification for subcontractors of foreign construction materials. We are also engaged in supporting foreign enterprises to offshore some of their work to local workforce talent in Indonesia. Although the cost savings are significant, the primary motivation is to deepen their engagement with Indonesia through the spin-offs that local, knowledgeable, and in-situ staff can reward them with.
After almost 8 years focused on education and research, Saksara has recently launched Saksara Employment, partly in response to IA-CEPA and other jurisdictions looking towards the potential of Indonesia. We had developed and maintained a careers and HR database of international graduates from around the world returning to Indonesia over the past seven years. This has primarily been for the purpose of partnering graduates with local and international companies. The next logical step for us was to play a greater role in helping foreign companies with market entry strategies, which includes both market research, and employment services.
We provide foreign companies and organisations with a range of services that allow them to strategically develop a staff presence in Indonesia without the obstacles and costs associated establishing a company or representative office. We facilitate the substantive employment of local staff for foreign entities. We also manage all the administrative aspects of their employment locally, while giving organisations complete virtual supervision of their offshore team. Although the cost savings are substantial, we firmly believe that the more compelling rationale is to look toward a Global Business Services (GBS) or Business Process Outsourcing (BPO) solutions as a strategy towards engaging more meaningfully with Indonesia. It is a cost effective strategy for gathering intelligence, building networks, developing local knowledge, and most importantly growing local workforce talent expertise.
For more information, or to talk to us about Indonesia, contact Saksara here.