Indonesia is Set to Develop by Leaps and Bounds, Thus the Construction Industry is Booming

How to Set Up a Construction Business in Indonesia

For the vast population of Indonesia, there is an overwhelming demand for housing development. With the construction of housing development growing at a fast pace, there is an inevitable need to compliment that with proper and functional infrastructures. The Indonesian government is also spending up to IDR 6 quadrillion for overall development in the country. There are also plans to move the administrative capital of Indonesia to East Kalimantan, Borneo. Thus, there are plenty of opportunities if you plan to set up a construction business in Indonesia.

 

Local Partnership Allowed

Under the updated Negative Investment List, foreigners can set up a construction business in Indonesia through a joint venture. The construction industry in Indonesia does not allow total foreigner ownership but allows foreign specializing in the construction segment to set up a PT PMA. This company structure is a joint venture with a local partner. The construction industry is among the protected industries where Indonesians are to lead and provide for the country’s needs. But, Indonesia may still lack in specific areas; thus, a PT PMA can offer construction works or construction consultancy service. If the joint venture can offer both, then it is called an integrated construction services.

 

Broad Industry

The construction industry covers a broad segment of categories or classifications. If you decide to set up a construction business in Indonesia, there are four main classifications to choose from. This is essential to obtain the necessary licensing and permits to begin your business. The categories are civil construction, building construction, electrical installation and speciality construction. As a contractor, there is the sub-classification to decide upon.

 

Forming the Company

Once you have found a local partner, it is time to form a company. As mentioned before, the only available company structure is a PT PMA. Its minimum requirement is to have two shareholders, one of which can be a foreigner. The foreign partner must obtain a work permit called KITAS and an NPWP (tax ID). The company will need a 25 per cent paid-up capital, which is the minimum capital. Other requirements to form the company is a business and license from the Indonesia Investment Coordinating Board (BKPM), a domicile letter, duly notarised establishment deed with articles of incorporation, company registration certificate (TDP) and taxpayer registration (NPWP). The company formation will be under the Indonesia Investment Coordinating Board, which may take more than a month. Next is to obtain a construction Association Membership (KTA). It is mandatory to get such membership from various construction associations. Memberships are specific to the construction services you are offering, such as:

  1. Contractor or construction works should acquire membership from Gapeksi (Gabungan Perusahaan Konstruksi Nasional Indonesia)
  2. Integrated construction services should obtain membership from Gapenri (Gabungan Perusahaan Rancang Bangun Indonesia)
  3. Construction consultancy should acquire membership from Inkindo (Ikatan Nasional Konsultasi Indonesia)

Now, with the necessary construction membership, you have to obtain the certificates as a construction company.

  • If you are an architect, engineer or some other relevant specialist, get an Expertise Certificate (SKA)
  • get your construction business entity certificate (SBA) from the Construction Services Department Institute.

How to Set Up a Construction Business in Indonesia