Small tips that may help when doing business in Indonesia
Indonesia is a land of opportunity. The economy of the world’s 4th most populated country grows at an average yearly rate of 6 %. The business potential is gigantic.
However, Indonesians do things is their own way, et more important, at their own rhythm.
One needs to be patient. Patience is a virtue. Time will settle everything;
« Orang sabar disayang Tuhan» « Patient people are beloved by God »
Rules & regulations
Complex and ever changing regulations may slow down the development of a project.
Regulations can be issued by the central government or the local governments.
They are often complex and may be contradictory.
A recent example, in 2015, has shown the Ministry of Law imposing for non-resident administrators of Indonesian companies to obtain a Work Permit. However to obtain a work permit, you need a permanent address in Indonesia, as rightfully pointed out the Ministry of Immigration.
After several rounds, the law has been abrogated but not without having created concerns to the thousands of foreign investors in the country.
Dialog is essential in Indonesian life. Time will settle everything…
While English is developing in the big cities, it is still largely unknown in the provinces.
Within the administrations or companies, its practice is getting common among young generations but senior managers will not speak it. However lot of them will be able to read.
Obviously, all legal documentation will be in Indonesian language. However, contracts can be written both in English and Bahasa Indonesia, the latter prevailing in case of contradiction.
A trustworthy Indonesian translator will come handy.
How to make a presentation and conduct a meeting
Presentations and offers can be made in English. However, it might be prudent to work with a trustworthy translator.
Things must be presented simply. Every topic will trigger long discussions. Therefore, it is better to stick to the facts.
It is utmost important to build up a good relationship. Indonesian will easily trust someone if the mood is good.
Tensions must be avoided at all costs. One might say that a good meeting was a meeting with lots of laughter.
There must substance in the discussion, but reaching harmony is essential.
Setting up a business
Due to the complexity of the administrative rules, to set up a business may take a while.
First, you must define clearly the scope of the business (KBLI) and verify that it may be owned by foreigners and is not on the “negative investment list”
Choose your registration location. You will have to deal with local authorities. The recommendation would be to do it in Jakarta where foreign companies are the most known.
You need send to approval of the BKPN (Foreign company approval board, www.bkpm.go.id )
Every detail of the application will have to be checked and well understood. It is not unusual for foreign companies to register in good faith a business scope to realize, years later, that it does not exactly correspond to the very nature of the activity.
It is possible to modify it but it means going through another long administrative process.
Take the time to well describe the scope of activities.
Obtaining a work permit
As everything in Indonesia, obtaining a work permit can be fairly easy…or extremely complicated.
Do not start working without a properly issued work permit (KITAS). Immigration laws are quite severe in Indonesia and you will not be protected by your “investor status”.
Employment laws protect Indonesian employment. To obtain a work permit, it will have to be demonstrated that you are not taking the job of an Indonesian. Then you may need to hire some locals with the promise of training them so that they will be able to take over your position when you leave.
The number and qualification of the locals to be hired will vary following the immigration office you are reporting to.
Even for a short stay, an activity can be considered as local employment.
For instance, a technician that will come from overseas to fix machinery will need to obtain a work permit.
Commercial meetings are not considered as local works. However, if you would use frequently an office, you might be deemed working in Indonesia.
This is not a big problem by itself but strictly following the law will reduce your exposure to administrative annoyances.
Choose a proper and registered agent
It is possible to go and register by yourself. It will probably take a very long time…if you ever succeed.
In a country where palavers are an essential way to communicate and achieve consensus, it is better to let locals do the job.
Be careful about who you are appointing. We would recommend checking on the offices and staff. Nice offices in the business district and a staff that speaks proper and well-articulated English are good criteria for selection.
There are many serious companies proposing these services, including the French Chamber of Commerce and Industry (www.ifcci.com).