Doing Business in Indonesia

​Indonesia widely opens the door to all investors in the world. Abundant natural resources, a young and technically trained work force and a large and growing domestic market, combined with an improving investment climate and a higher global profile, are just a few of Indonesia's salient strengths. With stability firmly engrained after 17 years of vibrant democratic rule, Indonesia's vast economic potential is primed for takeoff.

 According to Indonesia Investment Coordinating Board (BKPM), investment flows from Europe to Indonesia amounted to 13,3 billion USD (equivalent to Rp 172,9 trillion in Indonesian currencies IDR 13.000/ USD). It is inevitable that European companies perceive far-reaching opportunities in Indonesia.

Setting up business in Indonesia is now much simpler as the Indonesian government together with Indonesia Investment Coordinating Board (BKPM) has established the One Stop Service-Center (OSS-C) or Pelayanan Terpadu Satu Pintu Pusat (PTSP Pusat)

The OSS-C (PTSP Pusat) at BKPM was inaugurated on 26 January 2015 to provide a simpler, faster, more transparent and integrated service for investors in Indonesia. Investor no longer needs to go around Jakarta to consult and obtain permits. At the OSS-C, 22 ministries and government institutions are now integrated. Investment licenses for almost all sectors have been delegated and served at BKPM, such as manufacturing industry, power, oil and gas and tourism sectors.

Having investment licenses processed in one system and working together under one roof will facilitate better coordination among related parties at the national level. This allows authorities to reduce the process time, synchronize procedures, avoid authority overlap and eliminate red tape.

 

Investment Procedure in Indonesia

1.    Establishment of a company in Indonesia

  1. Obtain Principle License (Izin Prinsip or IP) at BKPM One Stop Service-Center or OSS-C.
  2. Able to establish the legal entity of your company in Indonesia by engaging a public notary to issue Deed of Establishment.

 The Deed of Establishment of FDI Company (PT PMA) could be issued by public notary in Indonesia and it is prepared in Bahasa Indonesia.

 The Deed of Establishment contains the following information:

  1. Name and address of the company
  2. Line of business of the company
  3. The articles of association
  4. The composition of the Board of Directors or BoD (Direkasi) and the Board of Commissioners or BoC (Dewan Komisaris) of the company
  5. The identity of the company shareholders and the share of ownership

After the establishment of the legal entity, the public notary will register the new PT PMA to the Ministry of Justice and Human Rights of the Republic of Indonesia. Once registered, the establishment of new PT PMA will be published in the state gazette (Berita Negara).

The ratification of legal entity by the Ministry of Justice and Human Rights of the Republic of Indonesia will serve as the basis of establishment of PT PMA. From this point, the PT PMA will be able to start setting-up the company infrastructure and related operational licenses.

 

2.    Other Licenses Required to Start a Business

The licenses required to start a business depends on the business sector. Generally, trading or service provider company could start the business operation as soon as it receives the Business License (Izin Usaha or IU). However, other business sectors, such as manufacturing, plantation, information and technology, education, medical and health, and hospitality, should obtain specific licenses pertaining to their business sector from relevant government agencies or ministries.

According to Regulation of the Chairman of BKPM Number 15 Year 2015, the business license (Izin Usaha or IU) is meant to:

  1. Business Permit is a license shall be owned by the company to begin the implementation of production operations that produce goods or services unless it is stipulated by legislation;
  2. Business Permit issued separately of the laws and regulations of the Ministry/Institutions that foster the sector or line of business;
  3. Business Permit valid throughout the company is still conducting business, unless specified by sector legislation.

 

3.    Opening a Bank Account

The regulation of Central Bank of Indonesia requires that all banking transactions (such as capital injection, administration of loans, payment of capital equipment, raw material, etc) of a newly established PT PMA be transacted through a special foreign investment bank account in Indonesia. In general, the required documents to open such account are as follows:

  1. BKPM Principle License (IP), the Deed of Establishment, Company Domicile Certificate (SKDP), Tax ID (NPWP);
  2. The power of attorney to the person who is given the authority to open bank account;
  3. Resident Identity Card (KTP) or passport of the authorized person to open bank account;
  4. Photo of the authorized person to open bank account;
  5. Minimum deposit IDR 10 million or USD 1.000.

Further information regarding the establishment and preparation for a new company in Indonesia can be seen at BKPM official website: http://www3.bkpm.go.id/id/prosedur-investasi.