Selling to the Government in Indonesia

A Hot Tip about Sales in Indonesia

Posted on: 2 Mar 2010

Although it may be possible in some cases to sell directly to the government, there is good reason to use the services of an agent or distributor for the early stages of project development, delivery, installation and service needs. Traditionally, most government procurement decisions have been based on long-established relationships. This does not necessarily mean illegal payments are involved, but these relationships could exclude participants not well known in the market.


New-to-market U.S. firms need the careful advice of local representatives to avoid wasting time and money participating in a competition with a non transparent process. U.S. firms also need to be sensitive to the difficulty some Indonesians have in delivering bad news. For example, if your agent knows a tender is structured against your company's interest, he may be reluctant to disappoint you with the bad news in advance. A close relationship with the agent is the best way to ensure frankness.


In early 2009, the GOI plans to issue new regulations which stipulate the requirement to use 456 kinds of local products (in 21 categories such as agriculture equipment, defense equipment, chemical, EPC services for electrical, electronics and telecommunication equipment) for projects owned by the government, state-owned companies, and Production Sharing Contractors. It is planned that the list of the local products will be updated every six months.


For other sales to the GOI, U.S. firms should become familiar with the "Blue Book" or the “Green Book”, a listing of major projects identified by the GOI as essential to national development priorities. The document is published annually by the National Planning Agency (BAPPENAS) and constitutes the official list of projects that are open to foreign official assistance and other sources of external financing. Most of the projects listed in these books require "soft loan" (low interest rate) financing. The USG does not initiate soft loan financing, although the U.S. Eximbank can offer balance loans to match tied aid. Indonesia has rarely accepted offers that would displace other donor commitments made through the annual World Bank-sponsored Consultative Group on Indonesia (CGI). Ad-hoc soft loans offered outside the CGI may offer opportunities to use Eximbank balancing provisions.


U.S. firms should also familiarize themselves with opportunities available through ADB, or World Bank-funded projects.




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Posted: 02 March 2010

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