Setting Up A Business in Indonesia: Part 1

Business setup in Indonesia Image by Fauxels on Pexels
Image by Fauxels on Pexels

Seven Stones Indonesia recently expanded their portfolio of services to include legal advice and market entry services while still maintaining their position as a key real estate and tourism influencer and advisor.

And in a short space of time it’s become clear this was a strategic move in the right direction.

One of the main concerns from new clients this expansion has attracted relates to how foreigners can legally set up and operate medium to larger businesses from scratch as well as restructuring already existing businesses to comply with Indonesia’s regulations.

It’s a good question so we’re goping to try and explain things in two blogs.

This post looks at setting up a PT PMA or a PT PMDN, Foreign Ownership and something called the Negative Investment List.

The second blog looks at getting the right Permits, JVC’s and Profit Share Agreements.

So, let’s take a closer look.

PT PMDN and PT PMA

The simplest legal path to building your business is to set up a PT PMDN (for local entrepreneurs) or PT PMA (for foreigners).

For both, the process is fairly straightforward and takes between 2 to 5-weeks to establish and upload to Indonesia’s OSS system. Depending on the business stream other permits might be needed, but as a general rule the process and timeline would look something like this:Businss Set Up GraphicIt’s worth noting that in the majority of cases foreigners should aim to establish a PT PMA.

Foreign Ownership and the NIL

However, several business streams can only be partially opened by foreigners with between 49% – 85% shares. More complete information on which businesses this applies to can be found on the latest version of what’s known as the Negative Investment List.

But there are also many business streams that are 100% open to foreign ownership.

For example, foreigners can own 100% shares in any resort or resort management classified as being 3-Stars or above.

Smaller businesses and perhaps villas, typically look to set up PT PMA using various management business streams, owning real estate, consultancy in tourism and real estate and so on.

If a business stream is not mentioned in the Negative Investment List it is, in most cases, open to foreign investment.

Some investors are uncertain about committing to IDR 2.5 billion (approx. USD 180,000) in paid up capital. But the capital can be used right away for investment and your company operations.

By law the total investment value needs to be IDR 10 billion within one year. If this is not the case, it seems BKPM will most probably allow more time to qualify as long as there is good evidence of growth.

Some investors also obtain various forms of loan and credit to comply with this. Please note that it is at the sole discretion of BKPM to approve or not.

Follow this link for the second part of this blog …

 

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Andrzej Barski

Director of Seven Stones Indonesia

Andrzej is Co-owner/ Founder and Director of Seven Stones Indonesia. He was born in the UK to Polish parents and has been living in Indonesia for more than 33-years. He is a skilled writer, trainer and marketer with a deep understanding of Indonesia and its many cultures after spending many years travelling across the archipelago from North Sumatra to Irian Jaya.

His experience covers Marketing, Branding, Advertising, Publishing, Real Estate and Training for 5-Star Hotels and Resorts in Bali and Jakarta, which has given him a passion for the customer experience. He’s a published author and a regular contributor to local and regional publications. His interests include conservation, eco-conscious initiatives, spirituality and motorcycles. Andrzej speaks English and Indonesian.

Terje H. Nilsen

Director of Seven Stones Indonesia

Terje is from Norway and has been living in Indonesia for over 20-years. He first came to Indonesia as a child and after earning his degree in Business Administration from the University of Agder in Norway, he moved to Indonesia in 1993, where he has worked in leading positions in education and the fitness/ wellness industries all over Indonesia including Jakarta, Banjarmasin, Medan and Bali.

He was Co-owner and CEO of the Paradise Property Group for 10-years and led the company to great success. He is now Co-owner/ Founder and Director of Seven Stones Indonesia offering market entry services for foreign investors, legal advice, sourcing of investments and in particular real estate investments. He has a soft spot for eco-friendly and socially sustainable projects and investments, while his personal business strengths are in property law, tourism trends, macroeconomics, Indonesian government and regulations. His personal interests are in sport, adventure, history and spiritual experiences.

Terje’s leadership, drive and knowledge are recognised across many industries and his unrivalled network of high level contacts in government and business spans the globe. He believes you do good and do well but always in that order. Terje speaks English, Indonesian and Norwegian.

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Ridwan Jasin Zachrie

CFO of Seven Stones Indonesia, Jakarta

Ridwan is one of Indonesia’s top executives with a long and illustrious career in the financial world. He holds several professional certifications including being a Certified Business Valuer (CBV) issued by the Australian Academy of Finance and Management; Broker-Dealer Representative (WPPE); and The Directorship Certification for Directors and Commissioners, issued by the Indonesian Institute of Commissioners and Directors.

His experience includes being the Managing Director at one of the top investment banking groups in the region, the Recapital Group, the CFO at State-owned enterprises in fishery industry and the CEO at Tanri Abeng & Son Holding. He’s also been an Independent Commissioner in several Financial Service companies and on the Audit and Risk Committee at Bank BTPN Tbk, Berau Coal Energy Tbk, Aetra Air Jakarta as well as working for Citibank, Bank Mandiri and HSBC. His last position was as CFO at PT Citra Putra Mandiri – OSO Group.

Ridwan has won a number of prestigious awards including the Best CFO Awards 2019 (Institute of Certified Management Accountant Australia-Indonesia); Asia Pacific Young Business Leader awarded by Asia 21 Network New York USA (Tokyo 2008); UK Alumni Business Awards 2008 awarded by the British Council; and The Most Inspiring Human Resources Practitioners’ version of Human Capital Magazine 2010.

He’s a member of the Board of Trustees of the Alumni Association of the Faculty of Law, Trisakti University, Co-Founder of the Paramadina Public Policy Institute and actively writes books, publications and articles in the mass media. He co-authored “Korupsi Mengorupsi Indonesia” in 2009, which helps those with an interest in understanding governance in Indonesia and the critical issue of corruption. Ridwan speaks Indonesian and English.

Per Fredrik Ecker

Managing Director of Seven Stones Indonesia, Jakarta

Per is the Managing Director of the Seven Stones Indonesia (SSI) Jakarta office and has more than 25-years’ experience in Indonesia, China, and Western Europe. He previously worked in senior management positions with Q-Free ASA, Siemens AG, and other companies in the telecom sector. Over the last six years, he has been the Chairman of the Indonesia-Norway Business Council (INBC) and recently become elected to be on the board of EuroCham Indonesia.

His most recent experience is within Intelligent Transport Solutions (ITS), Telecom, and other sectors within the Indonesian market. He is today through his position in SSI and by representing Norway Connect, promoting Nordic and European companies that would like to explore business opportunities in the Indonesian market. He’s also playing an active role to help create the Nordic House concept in Jakarta that will provide an excellent platform for Nordic companies entering Indonesia, where they’ll find a community that can offer support with trusted information and affordable services to enter this market.