What’s in this article
- Business Opportunities in Indonesia 2021
- What are the Types of Entities You Can Set Up in Indonesia
- What are the Requirements to Set Up an Indonesian Company
- Documents Required to Set Up a Company in Indonesia
- Procedure to Incorporate an Indonesia Company
- Challenges You May Face as a Foreign Entrepreneur in Indonesia
- FAQs
Entering and setting up a company in Southeast Asia’s largest economy is one of the top draws for investors, whether locally or internationally, despite the pandemic. Indonesia has been steadily growing as a destination with the growth of the middle class, free trade agreements, and opportunity to own land.
With 90 million Indonesians expected to be part of the middle class by 2030, consumerism will rise, opening doors for businesses to set foot into the country.
Business Opportunities in Indonesia 2023
While the pandemic has dampened and slowed down the country’s economic growth, there are still business opportunities that companies and entrepreneurs can tap into. The three sectors that have shown potential for growth in 2023 and beyond are:
1. Healthcare and Pharmaceuticals
The pandemic has brought a focus to healthcare, with more individuals putting the onus on them to take care of their health. With this new emphasis and the introduction of the Positive Investment Lists, foreigners can own 100% of the shares in the following healthcare and pharmaceutical companies:
- Hospitals with more than 200 beds
- Manufacturing of pharmaceuticals
- Wholesale healthcare and pharmaceutical products
2. Digital & E-Commerce
Did you know that Indonesia is experiencing a digital boom and that the government has pushed for digital transformation? With the digital economy expanding by 11% to US$44 billion from US$40 billion in 20219, it is a great time for investors to set up a digital or e-commerce company.
Some of such companies include:
- Cloud kitchen services
- Delivery services
- Digital wallets
3. Manufacturing
The manufacturing sector in Indonesia is one of the biggest contributors to its economy at an estimated 20%. With the year-on-year growth of 4% since 2016, it presents a lucrative opportunity for investors to start a manufacturing business.
Here are some of the potential sectors for your manufacturing and production business:
- Electronics
- Automotive
- Chemicals
- F&B
What are the Types of Entities You Can Set Up in Indonesia
Before you register a company in Indonesia, it is important to know the types of business entities that you can set up in the country.
| Types of Business Entities | Description |
|---|---|
| Local Company/ Perseroan Terbatas (PT) |
NOTE: While a PT company is mainly for locals, foreigners usually set up a PT company under a local nominee arrangement. |
| Foreign-owned Company/ Penanaman Modal Asing (PMA) |
|
| Representative Office (KPPA) |
TIP: KPPA’s usually conduct marketing efforts and when there are sales enquiries, they will redirect to parent companies for payment and invoicing. |
What are the Requirements to Set Up an Indonesian Company
For each type of business entity, there are certain set of requirements that the company has to fulfil before incorporation.
| Business Entities | Requirements |
|---|---|
| PT |
|
| PT PMA |
|
| KPPA |
|
Documents Required to Indonesia Company Incorporation
The documents required for PT and PT PMA are the same, although for KPPA, there have a set of different documents that you will have to provide.
| Business Entities | Documents |
|---|---|
| PT & PT PMA
(Foreign & Local Legal Body and Personal Foreigner) |
Company Documents
Shareholder Documents
Personal Documents – Directors & Commissioners
NOTE: Edited photos are not accepted. |
| KPPA | Company Documents
Chief Representative Officer Documents
NOTE: Edited photos are not accepted. |
The shareholder documents vary for each type of PT PMA company, whether foreign legal body, local legal body, or a personal foreigner. These documents are listed below:
| Business Entities | Shareholder Documents |
|---|---|
| PT PMA – Foreign Legal Body |
|
| PT & PT PMA – Local Legal Body |
|
| PT & PT PMA – Personal Foreigner |
|
Procedure to Incorporate an Indonesia Company
There are 6 steps for company incorporation in Indonesia, which will take approximately 1-2 months for a complete registration.
Step 1: Apply for a company name
Check your desired company name is available – you can use our free company name checker to do so here! If the name is available, you may proceed to apply and register for your desired company name with the Ministry of Law and Human Rights.
Here are some tips when choosing a company name. Do not select names that:
- Are similar to existing companies
- Are identical or similar to any name of a state, government, or an international agency without official approval
- Does not conform to the purposes/ objectives/ activities of the company
- Consist of a set of numbers, letters, or figures that do not form any words
Step 2: Apply for Deed of Establishment
The Deed of Establishment is to be applied online, together with the submission of the certificate of the bank account and official copy of the bank transfer advice. If the application is successful, you will receive a legalisation on the establishment of the company and can announce the establishment within the following 14 days.
Step 3: Apply for the Certificate of Company Domicile
The next step is to apply for the Certificate of Company Domicile where all Indonesian limited liability companies are required to hold.
Step 4: Obtain a tax registration number (NPWP)
After getting your Certificate of Company Domicile, you will need to obtain a valid tax ID for financial purposes with the local tax authority. The documents required for this application include:
- Deed of Establishment
- Identity card of the director
- Statement letter to confirm place of business
Step 5: Get your business identification number (NIB)
The NIB is obtained from the Online Single Submission. This is a unique number that is assigned to your company as a form of identification (like an identification card!).
Step 6: Apply for other relevant documents and licenses
Different types of businesses require various business licenses. Depending on the nature of your business, you will need to apply for licenses before you are allowed to start your operations.
Challenges You May Face as a Foreign Entrepreneur in Indonesia
During the incorporation process, you may face some challenges, especially as a foreign entrepreneur. Some of these challenges include:
1. Regulations
There are many regulations in Indonesia with new regulations and changes to existing regulations a common feature in the country. To keep up with these changes, it is recommended that a company hires a trusted incorporation and tax partner for a smooth incorporation process.
2. Opening a company bank account as an expat
When opening a corporate bank account in Indonesia, there are different rules and requirements, depending on the banks. This may be confusing for a first-time foreign entrepreneur to assess which bank is best suited for the business.
3. Obtaining work permits
In order to live and work in Indonesia, one has to have a valid working permit and KITAS. The Indonesian government has imposed strict employment limits on foreign workers, making it more difficult to obtain such permits to bring foreign talents from other countries.
4. Limited number of sectors
The Indonesian government has recently issued the new positive investment list, which replaces the negative investment list. For the new list, the number of restriction sectors was reduced from 350 to 46. However, there are still certain sectors that a foreign entrepreneur could not invest in.
FAQs
Articles of association form a document that specifies the regulations for a company’s operations and defines the company’s purpose. The document lays out how tasks are to be accomplished within the organisation, including the process for appointing directors and the handling of financial records.
As of 4 March 2021, the Positive Investment List was introduced to significantly reduce the number of restricted sectors that prevents foreigners to enter from 350 to 46.
The Negative Investment List was replaced by the Positive Investment List in 2021. The list details the restricted sectors that the government prohibits investors and entrepreneurs to invest in.
Yes, you can. You will need a local nominee director for your foreign local company incorporation.
