What Products & Services Is Indonesia Buying From Russia?

Какие товары и услуги Индонезия покупает в России?

Op/Ed by Chris Devonshire-Ellis

Upcoming Indonesia – EAEU FTA Means Opportunities For Russian Exporters

Indonesia is currently negotiating a Free Trade Agreement with the Eurasian Economic Union, with then Russian Prime Minister Dmitry Medvedev confirming this at the 14th East Asia summit in November. An Indonesia-EAEU FTA could well be signed off later this year, meaning Russian businesses need to start market research activities into the opportunities in this market now.

Indonesia is a good choice for a developing trade partner for Russia, it has a large and increasingly prosperous consumer base of 260 million, spending US$0.6 trillion in 2018, about 40% of the total ASEAN spend. Consumer confidence is also high. Recent reports here by DBS Singapore and here by Deloittes point to a booming, if disparate domestic economy.

Current Russian trade trends with Indonesia are also on an upwards path, as we can see in these statistics courtesy of Trading Economics (figures in millions of US dollars) and grew steadily during the course of 2019.

Indonesia has also been a port of call for Russian auto manufacturer Kamaz, who established a manufacturing plant in the country in 2018 and also set up a number of service centres. There are additional benefits for Russian businesses establishing manufacturing facilities in the country, Indonesia is a member of the ASEAN bloc, which also includes Brunei, Cambodia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand & Vietnam. These countries enjoy free trade between each other, meaning subject to rules of origin regulations, production in one country can be exported, duty free, to the other.  ASEAN also has Free Trade Agreements with China and India. This means, given the right circumstances, a Russian-owned manufacturing entity could export, duty free to these additional markets.

It is worth noting that Russia also has a Double Tax Treaty with Indonesia, which if used correctly can reduce profits taxes for Russian entities based in Indonesia. Professional advise should be sought.

In terms of exports to Indonesia, Russia currently sells a variety of products, ranging from oil and gas to fertilizers and automotive parts. A breakdown can be seen here.

It should be noted that there are Quality Control standards differences between Russia and ASEAN nations, and Russian exporters should be aware of these. We covered this in the article Quality Control Challenges For Russian Exporters To ASEAN.

Our practice, Dezan Shira & Associates, has offices in Jakarta and Batam in Indonesia and are familiar with the protocols concerning import/export and can advise on local market conditions. Please contact Maria Kotova at russia@dezshira.com for assistance both with local market intelligence and business plan development in addition to corporate establishment, tax advisory and on-going corporate compliance in Indonesia.

Related Reading

• Setting up in Indonesia
  After overcoming the Asian financial crisis in 1998, Indonesia developed into a vibrant democracy with the largest and most dynamic economy in Southeast Asia. The country’s GDP has grown at a consistent pace at just above five percent in the past year. In this issue of the ASEAN Briefing magazine, we begin by introducing Indonesia’s business environment by highlighting its major industries as well as its tax and visa regulations.