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Setting up a business in Indonesia

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Setting up a business in Indonesia as an expat is possible, provided you have all related information. Find out more in this article.

For many years, Indonesia has been attracting foreigners wishing to invest in the country. In fact, many of them have already settled and set up their business there, particularly in the tourism and hospitality industry. Moreover, according to existing laws, foreigners do not need a local partner to be able to set up a business there. So you can start by inquiring about related formalities with the Investment Coordinating Board (BKPM) which is a branch of the Ministry of Manpower (Tenaga Kerja Kementerian).

Note that administrative procedures can be quite complex. In fact, these vary according to different types of companies and investors involved in the project. But these should not prevent you from succeeding like many businessmen who are actually involved in foreign trade.

Types of companies

There are different types of companies in Indonesia, namely the Limitless Capital Partnership, the Perseroan Terbatas, the Public Limited Liability Company, PMA and the Modal Asing Penanaman.

The setting up of a Limitless Capital Partnership required a minimum of two shareholders whose liability shall be unlimited.

The Perseroan Terbatas (PT) is a local law company which requires a minimum of two shareholders whose liability shall be limited. A minimum capital of 50 million Indonesian rupiahs is required. Note that the partners' responsibilities will be determined by their respective contributions.

The Public Limited Liability Company requires at least two shareholders and a minimum contribution of 50 million of Indonesia rupiahs. Partners' responsibilities will be determined according to their respective contributions just like in the case of the PT.

Foreigners are not allowed to have the majority stake. In fact, these should be attributed to local partners. If you want it otherwise, you may as well set up a Modal Asing Penanaman (MAP) which will entitle you to hold up to 99% of the company's shares. Note that the setting up of a MAP generally starts with the setting up of a Perseroan Terbatas (PT). You will be required to go through the BKPM once you have obtained your local province's Governor's authorization.

Note that you will have to make a quarterly activity declaration to local authorities if you wish to set up a permanent MAP.

 Good to know:

According to the MAP laws, you will have the right to own a land or building in Indonesia. As a founder, you can either be the company's manager (Direktur utama) or its supervisor (Komisaris).

Procedures

To set up your business in Indonesia, the following procedures apply:

  • finding shareholders
  • meeting the minimum capital requirements, or more if possible
  • obtaining the AKTA PENDIRIAN, that is the company's notarized status
  • opening a bank account in the company's name and deposit the required capital (preferably with a notary whose title ends with PPAT, which means that he is allowed to take care of entrepreneurship formalities)
  • declaring your revenue after obtaining your company's tax identification number, that is the Wajib Nomor pokok pajak
  • legalizing the company with the appropriate Ministry (Imigrasi dan hak manusia Asasi). In most cases, this step is performed by the notary.

Promising sectors

Investment prospects are abundant in Indonesia in spite of the world economic crisis which has affected most economic powers. Its growth rate continues to rise. Thus, Indonesian nationals can boast about living in an archipelago which hosts many natural resources such as gas, oil, rubber, palm oil, coffee, rice, as well as rich mines and forests. Other fields such as textiles, handicrafts, paper production, tourism, etc., are also very promising.

Hence, you just have to pack up your bags, as well as your capital, and move to Indonesia so as to help it become one of the world's major economic powers in the coming years.

 Good to know:

Your business partners do not necessarily have to be Indonesian nationals. However, a local partner's presence is advised with a 2 to 5% contribution to the company's capital.

 Useful links:

Indonesia Investment Coordinating Board www5.bkpm.go.id
Kemlu - Ministry of Foreign Affairs www.kemlu.go.id
Doing Business - Starting a business in Indonesia www.doingbusiness.org
Indonesian Chamber of Commerce and Industry www.bsd-kadin.org
Indonesia Investments www.indonesia-investments.com
About.com - How to invest in Indonesia internationalinvest.about.com
Ministry of labor and migration www.depnakertrans.go.id
Imigrasi dan hak manusia Asasi - General Department of Immigration www.imigrasi.go.id

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