Many people who own a foreign company choose to set up a representative office in Indonesia. Doing so allows them to learn more about the Indonesian market. Thus, should they ever expand their company to Indonesia, they will have an inherent advantage over their competitors.
One of the business entities which could be set up in Indonesia is that of the representative office. Representative offices are set up by foreigners who already own a company abroad. The representative office in Indonesia is to be affiliated with its owner’s foreign company. The opening of a representative office often serves as a step on the path towards the opening of a foreign-owned company (PT PMA) in Indonesia. Representative offices are usually set up to enable the company owner to better understand the Indonesian market, become more familiar with prospective customers in Indonesia, find suitable distributors and business partners, and advertise the products sold or services provided by the affiliated foreign company.
Types of Representative Offices in Indonesia
Anyone who is interested in setting up a representative office in Indonesia ought to know about the four types of representative office which exist in Indonesia. These are the general representative office of a foreign company (KPPA), the representative office of a foreign trading company (KP3A), the representative office of a foreign construction service company (BUJKA), and the representative office of a foreign oil and gas company (KPPA MIGAS). Each of these types of representative offices has particular qualities which specifically pertain to certain types of business activities to be carried out.
KPPAs are created to establish a market presence in Indonesia without the need to make a significant capital investment. It also manages and represents its affiliated foreign company. Before a KPPA can be set up, an application to the Indonesian Investment Coordinating Board (BKPM) must be made. Such an application is to be made through a director or manager of the affiliated foreign company. It is also possible to utilize the services of a lawyer for this purpose. KPPAs are to be located in office buildings of provincial capital cities. A KPPA license has a validity period of three years and can be extended indefinitely.
KP3As promote the products of their affiliated foreign companies in Indonesia. However, a KP3A is not permitted to engage in any trading or sales activities. KP3As differ from KPPAs in several ways. The owner of a KP3A may open a branch office anywhere in Indonesia; such is not permitted of KPPA owners. The license required to set up a KP3A also differs from that of a KPPA. It is known as a SIUP3A. There are three varieties of SIUP3A: a Temporary SIUP3A which is valid for two months from the date of issuance, a Head Office SIUP3A which is valid for one year from the date of issuance, and a Branch Office SIUP3A and SIUP3A extension which are valid for three years from the date of issuance unless details in the letter of appointment specify otherwise.
BUJKAs may only be set up by foreign construction companies which have obtained a B or B2 business qualification. BUJKAs are allowed to carry out certain construction projects in Indonesia. However, they may only do so when working with a local construction organization (BUJK). BUJKAs are also allowed to conduct market research as well as interact with other companies and institutions. Other tasks which may be performed by a BUJKA include those of procurement of construction services as well as hiring of staff members for management of the office. All relevant applications and documents pertaining to the setup of a BUJKA are to be submitted to the Ministry of Public Works. The permit connected to the setup of a BUJKA is valid for three years and extendable.
A KPPA MIGAS may be set up by any foreign oil or gas company. It is to be used as the company’s permanent establishment in Indonesia. There are several similarities between a KPPA MIGAS and a KPPA. One of these similarities concerns regulation: a KPPA MIGAS is regulated in the same way as is a KPPA. Before setting up a KPPA MIGAS, a recommendation letter from the Ministry of Oil and Gas is required. Applications to set up a KPPA MIGAS are to be submitted to the BKPM. The permit for a KPPA MIGAS is valid for three years; this permit may also be extended. There is no location in which a KPPA MIGAS must be established.
