Indonesian law firms in tight competitive edge

JAKARTA, Indonesia – Indonesian law firms are facing rising competition from global rivals lured by Indonesia’s growing economy and the increasing number of corporate clients needing advice on major deals, such as infrastructure projects.

President JokoWidodo’s government has made investment in Southeast Asia’s largest economy and infrastructure, such as roads and railways, a priority.

For example, the country’s Investment Coordinating Board is targeting 932.9 trillion rupiah (US$76.6 billion) in investment within the next five years, as part of the government’s push to boost gross domestic product (GDP) growth by 7%, according to reports.

This means potentially big fees for law firms that specialize in these sectors. The government also wants more investment in agriculture, energy, mining and heavy industry.

Most foreign law firms have formed an alliance with local law firms. Both parties commit to sharing information and expertise as well as referring potential clients.

Some global firms have acquired small local law firms, but operate under the acquired party’s name. Under Indonesian law, foreign lawyers are allowed to be only consultants to local lawyers as they cannot represent clients in court or set up their own offices.

For example, AssegafHamzah& Partners, Indonesia’s second-largest law firm by number of hired lawyers, recently teamed up with Rajah & Tann, one of the largest law firms in Singapore and Southeast Asia.

Another Jakarta-based law firm, NurjadinSumonoMulyadi& Partners, recently tied up with Bird & Bird from Britain. Indonesia’s largest law firm, Hadiputranto, Hadinoto& Partners, has long had an alliance with U.S. firm Baker & McKenzie.

“Forming an alliance with Rajah & Tann is a way to fend off competition from those global law firms which make a billion dollars a year,” said Ahmad FikriAssegaf, managing partner at AssegafHamzah& Partners.

It would give his firm access to Rajah & Tann’s networks in Myanmar, Thailand, Malaysia, Vietnam, Laos, Cambodia and China.

Each country has its own expertise, Fikri said, pointing out that Malaysian lawyers, for example, would help their Indonesian counterparts in railway deals as they have had abundant exposure in such projects.

Indonesian lawyers are familiar with mining transactions, so they can share their expertise with counterparts in Myanmar, for example. Indonesia is the world’s largest thermal coal exporter and also a major nickel exporter.

Fikri also said smaller firms in South-east Asia have more than ever been venturing into new and unfamiliar markets, something that only big multinationals did in past decades. “They need reliable legal and market advice that is not just confined to their own jurisdiction,” he said.

Indonesia stands out for its sheer market size and potential economic growth, Rajah & Tann managing partner Lee EngBeng said, referring to the tie-up. “We anticipate many Indonesian companies expanding into the region where business associations and potential for partnerships will continue to be strongest,” he added.