Is it Hard to Start a Business in Indonesia?
Corporate Secretary Service – Indonesia is one of the most promising economies. With more than 260 million people, it is the fourth most populous country in the world, and has a surface area of 1.9 million km2 spread across more than 17,000 islands. This, coupled with significant economic growth of around 5% and the emergence of the middle class , make the country attractive for companies looking to open new markets.
In this sense, what strengths does Indonesia present when choosing it as a country to export to?
- It is the largest economy in Southeast Asia (ASEAN region).
- Domestic demand is the basic pillar of growth.
- Significant investment needs in infrastructure.
- Agreement on tariff reduction
- Rich in natural resources.
- Solid financial system.
- Investment grade sovereign rating BBB- Stable (S&P) / BBB- Positive (Fitch).
In addition, the country has a reasonably balanced macroeconomic framework , with a good external payments position and significant growth in the consumer goods and industrial sectors, which presents good prospects for companies wishing to enter the country.
However, some weaknesses must also be taken into account:
- Weak and lacking transparency in regulatory and governance system.
- Low efficiency of public administration and excessive bureaucracy.
- Poor implementation of public projects.
- Important reforms pending.
In addition, it should be noted that in an archipelago of Indonesia’s size, the lack of infrastructure poses a major challenge from a logistics point of view. However, this also presents a good opportunity, since the infrastructure plan will require hiring. Other interesting sectors in the country are industrial supplies (electrical machinery and machine tools, packaging machinery, medical and laboratory equipment, agricultural industry, etc.) and chemical products.
Other sectors that offer good business opportunities are those linked to private consumption and the growing middle class , such as food and beverages, pharmaceuticals, cosmetics, clothing and footwear, and hospitality. Another important sector is the automotive and components sector.
Regarding the possible formats to enter the country, we find two ways. The first, to establish a foreign entity via:
- Representative office: its exclusive activity is to manage the interests of the company or its subsidiaries. It is not permitted to conduct business or transactions that involve income.
- Branch: This is only applicable in very specific cases (such as infrastructure tenders that require it), and the parent company assumes all the obligations of the branch. Management is more complicated than that of a public limited company.
On the other hand, it is also possible to establish an entity in Indonesia , taking into account different company formats:
- Limited liability company: the form is that of a public limited company (PT in Indonesian). It requires a minimum of two partners, which can be 100% foreign (physical or legal). There are restrictions depending on some sectors. The company with foreign capital is called PMA. Minimum registered capital of IDR 50 million and the paid-up capital is a minimum of 25% of the registered capital.
- Joint venture: This is a very common form of business development that requires an Indonesian partner. It must be in the legal form of a public limited company (PT).
In any case, and as always when thinking about exporting to a new country, it is necessary to know its customs and its way of doing business.
Don’t worry about developing your business by setting up a company in Indonesia, because Portcorp is here as a solution for your business. Portcorp is your comprehensive corporate secretary service in Indonesia. With our presence, you can get a dedicated company secretary to support you to what you need. Our company secretaries will track deadlines and file paperwork so your business keeps running smoothly. Contact us now for your business success in the future!
