A rapidly growing economy and a strong labour force have strengthened Indonesia’s ranking in the Grant Thornton Global Dynamism Index (GDI) which ranks the business growth environments of 60 leading economies. The country ranks 40 overall although this masks significant disparities between indicator areas highlighting key strength and weaknesses.

Low unemployment and significant growth in labour productivity places Indonesia among the top nations globally for labour market (3). Meanwhile, the country ranks 8 for market growth due to a growing economy and strong private consumption. Overall, the country ranks towards the lower end of the table for technology (53) and financing environment (43).

Globally, Singapore offers the best business growth environment for dynamic businesses according to the GDI as a result of a strong financing and regulatory environment. Israel (rank 2) has also risen six places this year. Australia (rank 3=) drops two places but still ranks in the top five for business operating environment and labour market. Finland (rank 3=) and Sweden (rank 5) have both risen slightly, due to favourable business operating environments and an advanced technology infrastructure.

Perception vs reality

Further analysis shows that the opportunities in Indonesia’s might not be fully appreciated by international business leaders. According to Grant Thornton’s International Business Report (IBR) survey, businesses expanding or considering expanding into Indonesia do not always recognise the benefits of operating in the country.

Despite the country’s strong labour force, just a fifth (19%) cite the availability of skilled workers as a key driver in their choice of location, while a quarter (25%) cite low-cost labour. Among the most popular reasons for choosing Indonesia are proximity to a firm’s supply chain (45% of respondents).

Meanwhile, Indonesia’s poor GDI ranking for business regulation is reflected by the fact that 47% of international investors cite local legislation and regulation as a barrier to doing business, while 37% cite political uncertainty

Johanna Gani, Managing Partner, Grant Thornton Indonesia said: “In a globalised world, businesses looking for opportunities in dynamic markets must consider a range of economic, social and political factors when making decisions. They must balance instinct with reason, perception with reality.

“Indonesia provides attractive opportunities in an expanding market, and many investors recognise this opportunity. Businesses clearly feel that there are numerous advantages to doing business in Indonesia that might not be captured in official data. However, as advisors to dynamic businesses, it’s our job to make sure firms have the full facts at their disposal when making key decisions.

“The business world is always changing, with the realities on the ground often surprising business leaders who take a closer look. In order to maximise growth potential, business leaders need to refresh their perceptions of foreign markets in line with the market insights at their disposal. Once in tandem, better decisions can be made.”