Doing Business in Indonesia

Preparing to export

Consultation and bespoke research

Visit: www.great.gov.uk for guidance on how to research overseas markets as well as a range of other important issues for exporters.

Researching the Indonesian market

Indonesia is a large and diverse country. Different regions are likely to have different industry clusters. Good local research is needed and you should consider regional plans and market-entry requirements using both desk research and market visits.

You need to determine whether:

• there is a market for your product or service

• your pricing is competitive

• to adapt your business model

The questions listed below should help you to focus your thoughts. Your answers to them will highlight areas for further research and also suggest a way forward that is right for your company. You may then want to use this as a basis for developing a formal Indonesia strategy, although this may not be necessary or appropriate for all companies: Your aims: Do you wish to buy from Indonesia, sell to Indonesia or both? Do you wish to establish your own company presence in Indonesia (for example through a corporate or non-corporate entity, direct sales, appointing a local agent, online selling, licensing or franchising)? Do you need to be involved in Indonesia at all? Do you see Indonesia as part of a wider plan including e.g. other Southeast Asian markets now or in the future? Your company: Can you carry out a detailed SWOT analysis of your company? What are the unique selling points for your product or service? Do you know if there is a market for your product or service in Indonesia? Do you know if you can be competitive in Indonesia? Are your competitors already in Indonesia? If so, what are they doing? Do you have the time and resources to handle e.g. the demands of communication, travel, product delivery and after-sales service? Your knowledge: Do you know how to secure payment for your products or service? Do you know where in Indonesia you should start? Do you know how to locate and screen potential partners, agents or distributors? Have you carried out any Indonesia-specific customer segmentation, and do you know how to best reach potential customers in-market? It is unlikely that you will have the answers to all these questions at the outset and these ‘knowledge gaps’ could form the basis for further research and investigation. Some of these questions will require quantitative research in your sector, while others involve more contextual and cultural considerations.

Talking to other people in your industry and regularly visiting Indonesia will give you access to the most current advice, and such experience can often lead to new insights and form the basis for further research.

There is also some useful guidance on developing a marketing strategy, customer segmentation, competitor and SWOT analysis etc. on the https://www.great.gov.uk/ site – and the IOE&IT and British Chamber can help too.

There may be trade shows held in Indonesia each year, which could be useful to test product viability in the market. The Department for International Trade (DIT) Tradeshow Access Programme at: https://www.gov.uk/guidance/tradeshow-access-programme provides funding in the form of grants for eligible businesses to attend overseas trade shows.

The funding helps your business gain:

• market knowledge

• experience in attending and getting the most from overseas trade shows

• advice and support from trade experts
  
  

Visit the DIT events portal at: https://events.trade.gov.uk/ to find upcoming events and missions.

Find out more about marketing your goods and services for Indonesia at: https://www.great.gov.uk/.

Contact the DIT team in Indonesia at: https://www.gov.uk/world/organisations/department-for-international-trade-indonesia#contact-us for events and company launches at British Embassy locations.

 

Start-up considerations

There are various ways to operate a business in Indonesia including:

• setting up a joint venture company

• establishing a representative office

• appointing an agent, distributor or importer
  
  

Joint venture

The ‘Penanaman Modal Asing’ (PMA) is the corporate entity required for foreign investors under the terms of the foreign investment law. It takes the form of ‘Perseroan Terbatas’ (PT), a limited liability company, with the joint ventures as shareholders. PMA companies:

• may be either publicly listed on the stock exchange or privately owned

• must have 2 parties holding shares either a legal entity or an individual

The foreign investor’s shareholding percentage must meet requirements under the Indonesia Investment Coordinating Board’s Negative Investment List (DNI).

Representative office

Foreign companies may open and maintain a representative office and the representative may be foreign or local. Such offices:

• are not permitted to carry out any profit making business activities

• can undertake sales promotion, market research and assistance to local agents and distributors

You should appoint third party advisers to assist with documentation as dealing with government ministries can be challenging. Lack of transparency can make the process last longer than expected.

The third party advisor needs to be reliable, experienced and most importantly have close connections with the relevant authorities.

Contact the Department for International Trade (DIT) Indonesia for information about third party advisors.
 

Agent, distributor or importer

A foreign company will usually appoint one or more agents or distributors. They can keep track of market regulations, which can change at short notice.

You should spend time taking local advice and assessing a range of potential agents before making a choice. Beware of agents promoting similar or identical products.

Department for International Trade (DIT) Indonesia can help you identify and meet potential agents and distributors.

Risk

The Overseas Business Risk service provides geopolitical and economic analysis on overseas markets to new and expanding exporters. The guides also provide information on potential risks including human rights issues, bribery and corruption, terrorism, criminal activity and intellectual property. Explore more here. 

 

Direct exports and sales in Indonesia

Direct exports means you supply your products direct to the customer. You handle all the logistics of marketing, selling, sending overseas and getting paid.

You may wish to use local representation. Options include using an agent, distributor or wholesaler.

The DIT’s trade specialists at: https://www.gov.uk/overseas-customers-export-opportunities can help you identify local representatives for your products in Indonesia.

 

Setting up a business entity in Indonesia

Joint venture

The ‘Penanaman Modal Asing’ (PMA) is the corporate entity required for foreign investors under the terms of the foreign investment law. It takes the form of ‘Perseroan Terbatas’ (PT), a limited liability company, with the joint ventures as shareholders. PMA companies:

• may be either publicly listed on the stock exchange or privately owned

• must have two parties holding shares, either a legal entity or an individual

The foreign investor’s shareholding percentage must meet requirements under the Indonesia Investment Coordinating Board’s Negative Investment List (DNI). See: http://www3.bkpm.go.id/en/investment-procedures/negative-investment-list.

Representative office

Foreign companies may open and maintain a representative office and the representative may be foreign or local. Such offices:

• are not permitted to carry out any profit making business activities

• can undertake sales promotion, market research and assistance to local agents and distributors

You should appoint third-party advisers to assist with documentation, as dealing with government ministries can be challenging. Lack of transparency can make the process last longer than expected.

A thorough evaluation of your potential partner may be time consuming and expensive, but doing so will greatly reduce the risk of serious problems in the future. The third-party adviser needs to be reliable, experienced and most importantly have close connections with the relevant authorities.

Contact the DIT team in Indonesia at: https://www.gov.uk/world/organisations/department-for-international-trade-indonesia#contact-us for information about third-party advisers.

Appointing an agent, distributor or importer

A foreign company will usually appoint one or more agents or distributors. They can keep track of market regulations, which can change at short notice.

You should spend time taking local advice and assessing a range of potential agents before making a choice. Beware of agents promoting similar or identical products. The DIT team at the British Embassy Jakarta can help you identify and meet potential agents and distributors. See: https://www.gov.uk/world/organisations/department-for-international-trade-indonesia#contact-us.

Online selling to Indonesia

Indonesia is one of the biggest online markets worldwide, with over 100 million online users, and e-commerce has grown significantly. About 50% of the population is under 30, and it is forecast that the number of e-commerce users will reach around 40 million by 2020.

However, e-commerce in Indonesia remains governed by a complex set of laws and regulations, and there are challenges with inadequate infrastructure, poor payment systems and logistics.

Find out about DIT’s E-Exporting programme at: https://www.gov.uk/guidance/e-exporting, which can help you export your products to Indonesia.

Check out online marketplaces in Indonesia at: https://selling-online-overseas.export.great.gov.uk/, where DIT has negotiated listings at better-than-commercial rates.

Licensing or franchising in Indonesia

To obtain a Franchise Registration Licence (Surat Tanda Pendaftaran Waralaba or STPW), a franchisor in Indonesia must submit a copy of their draft master franchise agreement and register a franchise prospectus with the Indonesian Ministry of Trade. See: http://www.kemendag.go.id/en.

Franchisors and franchisees can only engage in business activities as specified in their business licences, and must use local components for at least 80% of their raw materials, business equipment and merchandise.

Regulations limit the number of company-owned outlets operated by franchisors to 150 stores such as minimarkets, supermarkets, department stores, hypermarkets and wholesalers, and 250 outlets for restaurants and cafés. 

The Indonesian Ministry of Trade has details about franchising regulations in Indonesia. See: http://www.kemendag.go.id/en.

Visit the international section of the British Franchise Association at: http://www.thebfa.org/international for more information on franchising.

[Source: DIT/ gov.uk]

 

Getting finance to fulfil an export contract to Indonesia

Globally, Indonesia ranks 72^nd out of 190 economies in the World Bank’s “Doing Business – Ease of Getting Credit” report 2018. See: http://www.doingbusiness.org/rankings.

To make it easier to fulfil an export contract and grow your business, schemes are available to UK companies selling products and services to Indonesia. Contact your bank or specialist financial organisation for assistance.

UK Export Finance (UKEF) has significant risk capacity to support exports to Indonesia. See: https://www.gov.uk/guidance/country-cover-policy-and-indicators#indonesia. You can contact one of UKEF’s export finance advisers at: https://www.gov.uk/government/publications/find-an-export-finance-manager for free and impartial advice on your finance options.

 

Getting paid in Indonesia

Only authorised banks may carry out foreign trade-related exchange operations. All domestic financial transactions must be conducted in Rupiah, although there are some exemptions.

You may wish to talk to a specialist about finance, including how to get paid in Indonesia. This could be a bank, an accountant or you can contact the DIT team in Indonesia at: https://www.gov.uk/world/organisations/department-for-international-trade-indonesia#contact-us for help to find a financial adviser in Indonesia.

Your contract will specify the terms for payment. However, if there is any dispute you will need to go through the Indonesian legal system for resolution.

 

Transferring money from Indonesia

Carrying more than Rp100 million in or out of Indonesia requires prior approval from the Bank of Indonesia (BI): http://www.bi.go.id/en/Default.aspx, and must be reported to the Director General of Customs and Excise (DGCE): http://www.beacukai.go.id/websitenew/index.html. There is a 10% fine (up to a maximum of Rp300 million) for failure to report.

---

 

 

comments powered by Disqus