With 260 million people and over 300 ethnicities and languages, Indonesia presents a unique challenge to anyone looking to start up a business. Indonesian market holds up a lot of economic potentials, which makes it even more attractive to both local and foreign companies to establish their business in the country. Apart from advancement in technology and the growing skyline of Indonesia, businesses in Indonesia are also investing in the right Jasa SEO and advertisement tools to grow their business.
Comparison between Indonesian entities:
| S.No | Detail | PMA Company | Representative office |
| 1 | Total set up cost | US$19440 | US$19250 |
| 2 | How long to set up the company | 3 Months | 3 Months |
| 3 | How long to open bank account | 4 Weeks | 3 Weeks |
| 4 | Corporate tax payable in Indonesia | 25% | None |
| 5 | Public registration of shareholders and directors | Yes | No |
The best thing about starting your business in Indonesia is its connection with the neighbour countries. The country shares its land borders with Malaysia and Papua New Guinea, along with oceanic connection with Singapore, Philippines and Australia. Hence, Indonesia is a great base for expanding your business across Asia and the Pacific. Establishing a business in Indonesia for foreigners is not as straightforward as that of the locals, but with a few tips and tricks, you can successfully start a new business in Indonesia.
Here’s a list of 10 Tips on how to start your new business in Indonesia:
- Capital
Having a capital for your business is necessary to get things moving and start doing what they set out to do. According to Indonesian business laws, a new business needs to have a plan to raise $1 million in initial capital. However, this law is rarely enforced by the Government-owned investment agencies. They are much more rigorous in calling in the USD$300,000 notary statement needed to validate funds committed to the business.
- Partnership
Having a local partner for your business in Indonesia is not compulsory but advisory. This is meant to keep foreign companies from dominating the Indonesian market and exploiting the local talent. A fully foreign-owned business may face a loss of restrictions. Hence, the simplest way to avoid such restrictions is to seek out a local partner who can hold enough of the business in their name. There are different rules for different industries, and some of the businesses may require partnering with an Indonesian citizen.
- Domicile Letter
Under Indonesian law, foreign businesses are required to have an office during the process of incorporation. Domicile Letter or Surat Keterangan Domisili is the document to prove your office location in Indonesian. To obtain a domicile letter, you require a lease agreement for your office. A residential address is not accepted as a business address. The domicile letter will be issued by the Kelurahan (administrative village) and Kecamatan (city/regency’s subdivision).
- Business Registration
If you are planning to establish a business in Indonesia, then you need to submit your company’s name to the Ministry of Law and Human Rights. There is a long list of rules and regulations, which a name needs to conform to, ensuring that it cannot be confused with any existing business or government body.
- Company Location
Indonesia is a vast country and has over 8,000 islands spanning over two oceans. Going from one island to another can be dependent on the weather and even travelling in the country can be difficult thanks to potholed roads and a rough landscape. Therefore, it is recommended to pick a location that is going to work the best for your business. Figure out how you can be close to your customers, suppliers and natural resources. After choosing a suitable location, you’ll need to hire premises for a minimum of six months.
- Hiring the locals
Apart from having a local partner, it is necessary to hire local talent when making up your workforce. The Ministry of Labour in Indonesia will require proof that you attempted to hire Indonesian workers, and where you have appointed foreigners, why Indonesians were not suitable for the task. According to the labour laws, small companies can only employ locals, and medium-sized businesses are only allowed to appoint two foreigners and those only if locals are not suitable. Larger businesses can appoint as many foreign workers as they like, but ten Indonesian workers must be hired for every foreigner.
- Workers’ Social Security Program
Whether you hire hundreds of people or just a dozen, you need to register your business with the social security program. Depending on the size of your business, you may be accountable for administering payments to a number of schemes, including accident security, death security and pension funds. Joining the program can be complex as you’ll need to gather up a lot of documents for each and every employee.
- Bank Account
Foreign Businesses can open a bank account after the registration is complete. A list of documents required by the Indonesian bank to open a bank account as a PT PMA is to be submitted by the business owner. Opening a bank account in the midst of business registration is possible in certain banks in Indonesia only, and more documents are required.
- Build a website
It’s necessary to have a business website, preferably both in English and Indonesian language. Indonesians prefer doing online research before buying a new service or product. Having a fully-function, customer-friendly website, which displays complete information about your services and products, will create a positive image of your brand amongst the local audience. Ensure to collaborate with a leading Web Design company for better results.
- Collaborate with influencers and celebrities
Businesses believe that getting an influencer or celebrity on board as for your company is a great way to capture the hearts and minds of an Indonesian audience. It seems to have worked well for many of the local and foreign businesses in Indonesia. This will give your brand not just the needed awareness, but also credibility as an authority in Indonesia.
Summing Up
Although establishing a business in Indonesia seems to be getting easier every year, there are still a lot of hurdles that entrepreneurs have to walk through. However, this can be taken as an opportunity rather than a limitation, as the foreign competition is not too extensive, and access to a 260-million strong consumer base is quite a reward. It is recommended to make plans well in advance, and consider setting up your company before you’ve had a signed contract.
