This article is one in an occasional series on markets around the world, examining the legal, regulatory and corporate environment for businesses.

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Global firms such as Dentons, Norton Rose Fulbright and White & Case, as well as Big Four accounting firms KPMG and PricewaterhouseCoopers, have in recent years formed alliances with Jakarta-based firms so they can have access to the Indonesian market.

The appeal of Indonesia is clear: the country's economy is worth more than $1 trillion, a milestone reached in 2017, making it Asia's fifth-largest economy and the largest in all of southeast Asia.

And it's growing steadily. According to World Bank data, Indonesia has maintained growth of about 5% since 2014. And the World Bank forecasts the country will grow 5.1% this year and 5.2% next year.

 

Fuelling that growth is investment valued at tens of billions of dollars. Last year, $29.3 billion worth of foreign direct investment went to Indonesia from 21,972 projects, according to data from the country's Investment Coordinating Board (BKPM); Singapore and Japan were the top two investors.

Indonesia is rich in natural resources, including coal, gold, silver, copper and nickel as well as oil and gas. Plus, the southeast Asian country's tropical climate and highly fertile soil support agriculture products, including palm oil, rubber, coffee and cocoa.

In addition to foreign investment, deals worth billions of dollars are generated by domestic companies. Indonesia is home to four unicorns: ride-hailing app Go-Jek, online booking platform Traveloka and e-commerce platforms Tokopedia and Bukalapak.

Just earlier this year, Go-Jek raised $1 billion in a funding round led by Google and Chinese tech giants JD.com and Tencent, valuing the company at about $10 billion, according to media reports. And last December, Tokopedia raised $1.1 billion in a funding round led by Chinese e-commerce giant Alibaba and Japanese conglomerate SoftBank, valuing the company at more than $7 billion, according to media reports.

The startups are supported by Indonesia's large population of more than 260 million people, the world's fourth most populous country, with a rising middle class. There's also work to come from Indonesia moving its capital from the crowded and polluted megacity of Jakarta on Java island to the forested island of Borneo. The relocation of the capital will take a decade and cost as much as $32.5 billion, which will be mostly funded by public-private partnerships and private investment.

Legal market

While multinational companies are entering Indonesia, it is difficult for global law firms to follow their clients into the country. Indonesia has one of the most restrictive legal markets in Asia: foreign firms are not allowed to open offices or practise local law in Indonesia, or share profits with their local counterparts. Indonesia is among a handful of countries that uses a civil law system based on the Roman-Dutch model.

The only way global firms can access the Indonesian market is through an association with a local firm. Recent examples include:

2019: KPMG with Lubis Ganie Surowidjojo, one of the largest Indonesian firms, with more than 100 lawyers. LGS had a six-year association with Clyde & Co, which ended in April.

2018: Dentons with Hanafiah Ponggawa & Partners, a former alliance firm of Taylor Wessing.

2017: Holman Fenwick Willan with Rahayu & Partners; PwC with Melli Darsa & Co., which previously had an alliance with Squire Patton Boggs until 2016.

2016: Hogan Lovells with Dewi Negara Fachri & Partners. The firm replaced its previous Indonesian association, which was with Hermawan Juniarto, after three years; Norton Rose Fulbright with TNB & Partners. It replaced its previous Indonesian association, which was with Susandarini & Partners, after five years.

2015: White & Case with Witara Cakra Advocates, the U.S. firm's third alliance. It was previously associated with MD & Partners for two years and with Ali, Budiardjo, Nugroho, Reksodiputro for six years.

However, several major global firms that previously had Indonesian alliances are no longer affiliated with an Indonesian firm.

2017: Clifford Chance ended its alliance with Linda Widyati and Partners after three years.

2016: DLA Piper ended its alliance with Ivan Almaida Baely & Firmansyah after three years; Squire Patton Boggs ended an alliance with Melli Darsa & Co. after two years.

Most of the legal work in Indonesia relates to banking, capital markets, corporate, mergers and acquisition and project finance.

Top firms

Assegaf Hamzah & Partners, one of the largest firms in Indonesia, with more than 100 lawyers. Has had an alliance with leading Singaporean firm Rajah & Tann since 2014.

In 2018, AHP served as local counsel to the Indonesia government on a $1.25 billion Islamic green bond issue.

In 2017, AHP advised U.S. private equity giant KKR & Co. on a $75 million acquisition of a 12.64% stake in breadmaker PT Nippon Indosari Corpindo Tbk.

Ali, Budiardjo, Nugroho, Reksodiputro, another 100-plus firm. The Indonesian member firm for legal network Lex Mundi.

In 2018, ABNR served as Indonesian counsel on Uber Technologies Inc.'s merger with southeast Asian rival Grab Inc.

ABNR is advising state-owned railway operator PT Kerata Api Indonesia on a $1.38 billion syndicated loan toward financing the development of a rail project in Jakarta, which is expected to be completed in 2021.

Ginting & Reksodiputro, the Indonesian associate firm of Allen & Overy since 2010, with about 40 lawyers.

Ginting represented Tokopedia on the $1.1 billion funding round last year led by Alibaba and SoftBank.

In 2018, Ginting served as Indonesian counsel to Melbourne-based private equity firm EMR Capital and other exiting investors on a $1.21 billion sale of one of Indonesia's largest gold mines to local equipment lessor PT United Tractors Tbk.

Hadiputranto, Hadinoto & Partners, the Indonesian member firm of Baker McKenzie. One of the largest Indonesian firms with about 100 lawyers.

In 2017, HHP represented a consortium of Indonesian and Chinese companies on a $4.5 billion loan by China Development Bank to build Indonesia's first high-speed railway, connecting its capital Jakarta to the textile hub of Bandung.

Hiswara Bunjamin & Tandjung, the Indonesian associate firm of Herbert Smith Freehills since 2001. Has about 70 lawyers.

In 2018, HBT served as Indonesian counsel to Australian mining giant Rio Tinto on a $3.5 billion sale of a 40% stake in Grasberg, the world's second-largest copper mine, to Indonesian state-owned mining company Inalum.