Doing Business in Indonesia

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13/3/22

Doing Business in Indonesia - Company establishment and for eig n dir ect investment in Indonesia

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Indo nesia is asserting itself as a prime destinatio n fo r internatio nal business and investment. The co untry's natural reso urces, large po pulatio n (including its rapidly gro wing middle class), macro eco no mic stability, generally o pen investment regime, and lo w asset prices have beco me majo r attractio ns o ver the past few years.

The central go vernment's Master Plan fo r the Acceleratio n and Expansio n o f Indo nesian Eco no mic Develo pment (MP3EI) fo r the perio d 2011-2025 is set to facilitate widespread investments o f all sizes acro ss the archipelago . Rp 4,000 trillio n has been earmarked to achieve desired develo pments in Indo nesia's six designated eco no mic co rrido rs within the MP3EI – mo st o f these are expected to co me fro m the private secto r and state-o wned enterprises, and a big chunk will go to infrastructure pro jects to facilitate co nnectivity within the archipelago . Despite the attractio ns, ho wever, Indo nesia has remained a co untry o f many iro nies and co nfusing co mplexities. So me critics have lebelled it ho pelessly chao tic; o thers have cited gradual impro vements. And the intricacies o f setting up a co mpany and making an investment in Indo nesia are many and co mplex. Setting up Business Activities and a Co mpany in Indo nesia

To establish a business in Indo nesia, yo u have a range o f o ptio ns depending o n yo ur need. If yo u are to sell pro ducts o r services witho ut the need fo r yo ur o wn presence in Indo nesia, yo u co uld cho o se to appo int an Agent o r Distributo r. Alternatively, yo u co uld set up a Representative Office. A Representative Office allo ws yo u a legal presence in Indo nesia, but it is no t allo wed to undertake business transactio ns o r receive sales payments in Indo nesia. So me fo reign investo rs at the early stage o f entering the Indo nesia market cho o se to set up an Agency Agreement o r Representative Office, then later after the business starts to gro w they will apply fo r a Fo reign Direct Investment Co mpany (FDI) status. Mo st, ho wever, prefer to go straight to establishing a full-fledged co mpany (i.e. limited liability o r PT). This is referred to mo st co mmo nly in Indo nesia by its Indo nesian acro nym PMA, o r Penanaman Mo dal Asing. This is the o nly fo rm o f co mpany allo wed fo r fo reign investment, as o ther fo rms, such as CV and UD, are reserved fo r Indo nesians o nly, and are usually small-scale. Representative Office

A Representative Office can be established depending upo n the line o f business and the necessary licenses issued by the related go vernment department. The critical limitatio n o f a Representative Office is that they are no t allo wed to co nduct direct sales and canno t issue Bills o f Lading.

www.expat.or .id/business/companyestablishment.html

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13/3/22

Doing Business in Indonesia - Company establishment and for eig n dir ect investment in Indonesia

Representative Offices are set up primarily fo r marketing, market research, o r as buying o r selling agents. Mo st businesses quickly find the Representative Offices very limiting. It's o ften mo re time and co st effective to fo rm an Indo nesian co mpany right fro m the start.

Limited Liability Co o r Perseroan Terbatas (PT)
Fo reign Direct Investment, mo st o ften referred to by its Indo nesian abbreviatio n PMA, is go verned primarily by the Law No . 25 o f 2007 o n Investment, which replaced its predecesso r legislatio ns (i.e. Law No .1 o f 1967 o n Fo reign Investment, as amended by Law No . 11 o f 1970, and Law No .6 o f 1967 o n Do mestic Investment as amended by Law No . 12 o f 1970).

The 2007 law did away with the previo us differential treatments between...
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