Looking Into Options Available for Conducting Business in This Country
Many business individuals are contemplating to expand their business into Indonesia. The numbers are showing promising uptrend economy. This is due to the business environment reform Indonesia has been through for the past few decades. Indonesia falls into the category of a newly industrialised nation. There are several reasons why you need to set up a company in Indonesia. One of them is the growing middle-income class. Hence, the consumer market in Indonesia is relatively immense, given its population.
The Infamous List
Indonesia protects its domestic market via a list of industries allowable for foreign ownership. The plan is called the Negative Investment List, regulated by the Indonesia Investment Coordinating Board. Indonesia allows foreign investors to have total ownership within specific business sectors. It all depends if it is mentioned in the Negative List. If the industry is not in the list, then foreign investors have the opportunity to set up a company in Indonesia. Otherwise, foreigners are allowed a specific percentage to a business venture here in Indonesia.
The Legal Business Entities
If you desire to set up a company in Indonesia, you can do so through the available options. There is a foreign-owned limited liability partnership (PT PMA) where you have a say in everything you do in the business. There is also a local limited liability partnership (PT). This option is available only for local ownership. Your involvement in such a business entity is limited to only as an investor. But this particular business entity is open to all business sectors in Indonesia. As a foreign investor, you can also opt to open a representative office.
Which to Choose?
Let’s take a look at each business entity benefit before to dive to set up a company in Indonesia. If you are adamant about setting up shop in the archipelago, you know you should begin with a market analysis. Although you can hire or engage a local partner to do so, you would rather understand and see it for yourself how the Indonesian market works. For this reason, you can set up a representative office. As a representative office, you are not allowed to conduct trade activities. Your business activities are limited to market research, corporate communication and promotion. A representative office can also assist with the preparation of foreign-ownership LLP. The start-up cost for a representative office is meagre and having a chief executive officer is sufficient. But, you want to get into the deep of the Indonesian market. Yet, understanding its policies and legal framework might take some time.
Nevertheless, you are ready to invest significantly in industries only open to the domestic market. You can register a local company through a local nominee agreement. It means you are signing a contract with a local shareholder. There is also the option of purchasing a shelf company. A shelf company is all registered and ready for operation the moment all transactions are complete. Finally, as some sectors can have 100% business foreign ownership, foreign investors can incorporate a PT PMA. However, if you want to venture into industries where foreigners can acquire a specific percentage of ownership, a PT PMA is on a joint-venture basis.