Seeds of Success – Set Up an Agricultural Business in Indonesia
3E Accounting explains how you can set up an agricultural business in Indonesia and become a successful agripreneur!
Indonesia is an immense archipelago boasting of varied landscapes and an abundance of arable land. While economic diversification has reduced agricultural contribution to the economy, the recent pandemic has shifted that equation. This sector is now the second-largest contributor and is formidable enough to employ a third of the population. It’s a great time to invest in this industry and set up an agricultural business in Indonesia.
A Natural Bounty for Business
Agriculture in Indonesia encompasses:
- Large Plantations – usually for export and consisting of palm oil, cocoa, rubber, tea, coffee and cassava
- Small to medium agribusinesses – generally for domestic consumption and consisting of rice, corn, fruits, soybeans and vegetables
While foreign investment in the agricultural sector is encouraged, the Agrarian Law is strictly applied to ensure sustainability. Only an Indonesian citizen has the Right to Ownership or Freehold Title to land.
The Right to Cultivate Act governs the agribusiness of farming, fishing and livestock. Under this Act, foreign investors and incorporated legal entities with a Letter of Domicile may lease private or state-owned land. The lease period for individuals and companies is 25 and 35 years, respectively, with an option to extend for another 25 years.
All companies, including an agribusiness, must be registered with the Trade Register or Company Registry in Indonesia. In compliance with the law, the following legal structures can be established:
- Local Limited Liability Company (Perseroan Terbatas or PT) which is locally owned
- Limited Liability Company (Perseroan Terbatas Penanaman Modal Asing or PT PMA) which is foreign-owned
PT PMA companies will also need to apply for the Permanent Business License from the Capital Investment Coordinating Board (BKPM). Registration for licensing is via the Online Single Submission (OSS) system, which provides a Business Identification Number (NIB).
Agribusinesses will need to get a location permit to purchase or lease the land to be cultivated. The land will also have to be registered at the Land Office and National Land Agency.
The government recently enacted regulation No 5, Procedures for Business Licensing within the Agricultural Sector. It divides licensing into two main categories:
- Business Licence
- Operational or Commercial Licenses
Each category contains numerous subsections of licences such as for crops, plantations, livestock, food ingredients, etc. Depending on the exact nature of your agribusiness, you might require rights to sell or export cultivated produce. You will also need statements of ownership. To avoid mistakes and confusion, it is highly advisable to engage professionals such as 3E Accounting. They have the necessary experience to handle all the procedural rules and regulations, saving you time and resources.
Under the Farmer Protection and Empowerment Law, all agribusinesses must have the following insurance coverage:
- Natural disasters and climate changes in insurance
- Insect attack insurance
- Animal infectious diseases insurance
Back to the Basics
It may seem extremely discouraging to set up an agricultural business in Indonesia. There are myriad regulations and approvals, and it’s easy to miss out on some crucial element. That’s why having reliable partners such as 3E Accounting is essential. With a tried and tested track record, 3E Accounting will ensure that your business is up and running efficiently.
Contact 3E Accounting today for the best professional advice on tailor-made business solutions.