Thinking of Setting Up Business in Indonesia?

Thinking of Setting Up Business? How to Own 100% of Your Company and Avoid Pitfalls

Doing business in one of the most populous and welcoming nations on earth, Indonesia can be a rewarding and profitable experience. But investors should be mindful of a myriad of potential pitfalls and certainly consider professional help when trying to negotiate the hurdles that these 17,000++ islands represent!

The first and foremost item to know about is the Negative Investment List known as Daftar Negatif Investasi in Bahasa – The DNI should be part of your initial DNA as it represents a list of business sectors that are on the one hand prohibited and on the other permitted but conditionally.

The three most common ways for corporate formation are via PT PMA (a foreign company), KPPA (a foreign representative office), and KP3A ( a foreign trade representative office).

The easiest version, known succinctly as PT (local company), enables companies to have limited liability as well as supporting work visas. At least one director, two shareholders and one commissioner, all local people, will be required to set this up within a time of about one month. By and large activities under this business regime will be unrestricted though of course subject to local compliance.

PT PMA (foreign company) can be fully foreign-owned and supports work visas. Business activities are subject to certain regulatory frameworks but directors, shareholders and commissioners need not be local people.

KPPA is ideal for companies seeking to do market research for business development in what is one of the most visited countries and culturally vibrant countries in SE Asia. Under this, just one resident Chief Representative Officer is required but business activities are limited.

KP3A is also a Representative Office with slight differences to KPPA.

Setting up businesses in Indonesia can be easier than other SE Asian nations but there are still a variety of pitfalls and regulatory requirements that must be navigated.

Frequent changes to the law can be a challenge when traversing the tricky waters of business set-up which makes hiring a team to assist the process, with their banks of up-to-date legal professionals, a time-saving must.

Corruption can be a major headache requiring a fair degree of local knowledge. Intertwined with this is the time-consuming and bureaucratic processes that can delay matters for the uninitiated.

While Indonesia has made great strides in recent years the lack of transportation and logistic competence can at times affect business operations. Indeed, these have to be seen in an Asian context rather than compared to the expectations inherent in the West.

Language barriers are coming down but cultural differences remain key; understanding how business is done in the nation is as important as knowing the niceties of Bahasa (the local language).

Resolving legal disputes and enforcing contracts can be a minefield while tailoring strategies to reach the diverse corners and consumer markets in this vast nation are challenging for foreign entities.

In conclusion, Indonesia’s burgeoning economic success is attracting many foreign companies – but seeking professional help is key.