HOW TO NAVIGATE THE INDONESIAN BUSINESS CLIMATE
Navigating the Indonesian business climate can be challenging, but there are some key steps you can take to increase your chances of success.
Do your research
Do your research: Before entering the Indonesian market, it's important to research the local business culture, regulations, and laws. You should also research your competitors and potential partners.
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Build relationships: In Indonesia, relationships are important in business. It's important to build strong relationships with local partners, suppliers, and customers. This can be done through networking events, trade shows, and social media.
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Understand the local regulations: Indonesia has specific regulations and laws governing business activities, including tax regulations, import/export laws, and labor laws. It's important to understand these regulations and comply with them.
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Hire local staff: Hiring local staff can help you navigate the local business culture and regulations, and can also help you build relationships with local partners.
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Learn the language: While English is spoken widely in Indonesia, learning the local language (Bahasa Indonesia) can help you build stronger relationships with local partners and customers.
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Be patient: Doing business in Indonesia can take time. It's important to be patient and to build relationships slowly over time.
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Partner with local companies: Partnering with local companies can help you navigate the local market and build strong relationships with local partners.
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Dynamic Legal System
Overall, navigating the Indonesian business climate requires patience, persistence, and a willingness to learn about the local culture and regulations. By following these tips, you can increase your chances of success in the Indonesian market.
Indonesia has a dynamic legal system. A trustworthy agent and lawyer will be your best allies when starting a business. Doing thorough research is the second component of this. Make wise decisions when selecting your business partner, nominee, and agent. You don't want to lose money due to dishonest people. Create relationships, then get down to business.
Determine the type of business
Determine the type of business entity you want to establish: In Indonesia, common types of business entities include a limited liability company (PT), a representative office, a joint venture, or a sole proprietorship. Each has its own legal requirements and implications, so it is important to choose the appropriate type of entity for your needs.
Obtain a business license: Depending on your business type, you may need to obtain a business license from the relevant government agency. For example, if you plan to open a restaurant or a hotel, you will need a specific license from the Tourism Department.
Register your business: Once you have obtained your business license, you will need to register your business with the relevant authorities, such as the Ministry of Law and Human Rights, the Ministry of Manpower, or the Tax Office. This will involve submitting various documents and forms, including your business plan, Articles of Association, and other relevant documentation.
Obtain a tax identification number (NPWP): All businesses operating in Indonesia must have an NPWP, which is a unique tax identification number. You will need to register for this with the local tax office.
Open a bank account: You will need to open a local bank account in Indonesia for your business operations.
Hire employees: If you plan to hire employees, you will need to comply with Indonesian labor laws, including minimum wage and benefits requirements, and register your employees with the social security agency.
Obtain other necessary permits: Depending on your business type, you may need to obtain additional permits or licenses, such as a building permit or an environmental permit.
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Company Structure
Here are 3 types of company structures that foreigners can set up in Indonesia. You can change your company structure, nominees and add licenses over time. However, this can be a pricy process. Spending a few more dollars at start can be worth it in the long run.
Local Company / Perseroan Terbatas (PT) …
is also referred to as a limited liability company and is a type of legal organization used to operate businesses that are made up of capital shares. Because it requires less startup capital and can be established more quickly than foreign businesses, it is the most prevalent business entity in Indonesia.
Two local shareholders, a director, and a commissioner make up a PT company's typical organizational structure. A PT company's drawback is that no foreign ownership is permitted in the form of a percentage. This indicates that the only business owners who can incorporate this entity are those who live in the area. Advised for people who want to start a local business without planning to bring in any outside investors.
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Foreign-owned Company / Penanaman Modal Asing (PMA) …
A PT PMA company is regarded as a fully or partially foreign-owned limited liability company that is subject to the Foreign Capital Investment Law. Before incorporation, the Capital Investment Coordinating Board (BKPM) must approve the proposed capital investment.
The main advantage of forming a PT PMA company is that it provides foreign-owned businesses with the best legal means of conducting business and making a profit in Indonesia. The start-up capital requirement will be high and it won't be available for all business fields due to its international market position.
Representative Office (KPPA)
A branch of an overseas parent company is also referred to as a representative office (KPPA), and neither of these entities contribute to your business's ability to make money. The goal of opening a representative office in Indonesia is to carry out market research, evaluate the suitability of the nation for your business, and to conduct corporate communications with a maximum lifespan of five years.
Working Permit & Visa
Work Permit Kitas
With this kind of KITAS, you are able to work and make money in Indonesia. You can only get it if you have a sponsoring business that is legally registered in Indonesia. A work permit cannot be obtained prior to employment because it is only granted for a specific position in a specific company. Additionally, you ARE NOT ALLOWED to hold multiple jobs or work for different companies at once. The holders of work Kitas are also permitted to open bank accounts, obtain health insurance, pay taxes, purchase automobiles or motorcycles, among other things.
Investor Kitas
This visa is created for business investors in Indonesia, allowing them to live and manage their business in Indonesia. An Investor KITAS holder does not need to apply for a work permit because they are eligible to work in Indonesia without a company sponsorship. However when establishing your PT PMA business, you can submit an application for a work Kitas if your field of work require this.
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Business Visa
With a business visa, you have the authority to bargain, sign contracts, attend conferences and workshops, network with suppliers and partners, plan export shipments, and manage your investment projects (like purchasing real estate or lands).
Multiple-Entry Business Visa
This visa has a 12-month expiration date and cannot be extended. Each visit is limited to a maximum stay of two months (60 days).
Single-Entry Business Visa
This visa may be extended up to four times, with a maximum stay of 60 days. An extra 30 days are given with each extension.
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Retirement Visa
Indonesia offers a retirement visa for foreigners who wish to retire and live in Indonesia. This visa is called the Retirement Visa (also known as Visa Tinggal Terbatas Lansia or VITAS Lansia).
Start your business in Bali
Bali has a unique culture, you might need help to navigate cultural differences and customs to avoid misunderstandings and ensure successful business relationships.
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Choose an agent that have local knowledge of the business landscape, including market conditions, competitors, and potential opportunities for growth.
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You can save time and effort in the process of setting up and running your business, as they can handle administrative tasks such as registering your company, obtaining necessary permits and licenses, and dealing with local bureaucracy.
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They can also represent your company in Bali, negotiating on your behalf and building relationships with local partners and clients.
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