“The Indonesian economy, the biggest in Southeast Asia” grew by 6.2% last year, as BBC News reported this week .  Down from 6.5% in 2011, the Indonesian economy still grew markedly faster than the US (2.2% ) and the EU (at -0.3%) in 2012.  Direct investment into Indonesia rose 23% last year and the government is seeking to match those figures in 2013.  Growth sectors include energy and natural resources. financial services, consumer-led industries, and infrastructure, as the Legal 500 has outlined.

In the broader context, the EU and US combined account for one-half of the worlds economy, according to the European Commission — “but the International Monetary Fund (IMF) expects advanced economies to expand at just 1.4% this year, compared with 5.5% growth among developing economies” as the Wall Street Journal reported last month.  And by 2050, the economies of Mexico and Indonesia may overtake those of France and Great Britain,  as the Arabian Gazette recently reported.

Foreign law firms move in – albeit with restrictions

Naturally, high-growth developing economies, Indonesia among them, have become very attractive to foreign law firms seeking to generate new revenue outside currently moribund developed economies.

Among them, US-based international law firm White & Case, whose revenues rose 4% last year, anounced last month that it had “strengthened its Indonesia Practice through an association with MD & Partners, a newly established Indonesian law firm based in Jakarta.”

Indonesia does not permit foreign law firms to establish an office in the country or practice local law.  However, Lawyers Weekly in Australia reported last year that: “according to Allens’ executive partner, Robert Cornish, the fact the firm has been unable to set up shop in Indonesia has not created a barrier to doing business [there]“.

Opportunity for Indonesian law firms

Given the likelihood of Indonesia’s continued long-term robust economic growth, foreign law firms are likely to continue to seek to compete for business in the world’s 4th most populous nation.  Domestic law firms, however, have in some cases established impressive platforms for attracting new business.

For example, Soewito Suhardiman Eddymurthy (SSEK), one of the largest independent law firms in Indonesia, regularly blogs and is active on Twitter as well.  A decided breath of fresh air among incumbent law firms in developing markets seeking to defend their domestic advantage in the face of growing (albeit restricted) foreign competition.

SSEK’s blog is an example of a law firm that has superbly positioned itself as a gateway to the Indonesian marketplace.   Law firms in Malaysia, Singapore, Hong Kong, South Korea — and other legal markets facing foreign competitive pressure – would do well to match the efforts of SSEK.  Indeed, SSEK and other firms who emulate them, should they couple an effective social media initiative with an active business development effort, will be even more well placed to defend and increase home market share.

The future looks bright

Prominent academic and economist Dr Muhammad Chatib Basri, chairman of Indonesia’s Investment Coordinating Board (BKPM), recently told the American Chamber of Commerce in Indonesia (when asked about the countries future economic prospects) that:  “GE, Caterpillar and L’Oreal come to Indonesia because of its huge market. So I am quite optimistic. It is a combination of good policy and good luck”.

Law firms active in Indonesia, both foreign and domestic, have reason to be optimistic as well.  But given increasing competition – they’ll need to work effectively to capture new business in the future.

Posted by John Grimley

John Grimley edits and publishes Asia Law Portal

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