Incorporating a business in Indonesia requires extra effort compared with many other ASEAN countries. By setting aside the right amount of time to understand Indonesian business climate, society, and regulatory environment, doing business in Indonesia can be easy and profitable.

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Business Challenges in Indonesia

Indonesia, as we know, is not an easy place to start a business. From the widespread corruption remains, weak legal system and social instability, makes up to some of Indonesia-specific traits many foreign capital and foreign investment continue to struggle with 

It is important to underline that, while undoubtedly challenging, the prospects for foreign investors doing business in Indonesia are better today than they ever have been.  

For the first time in a long time, the Indonesian government has a clear pro-business stance, and a firm commitment to increasing Indonesia’s competitiveness and deepening the integration with the global economy.  

Incorporating a business in Indonesia requires extra effort compared with many other markets. By setting aside the sufficient time to understand Indonesian business climate, society, and regulatory environment, doing business in Indonesia can be easy and profitable. 

However, despite its strong economic performance, Indonesia faces challenges that stifle private-sector development. For businesses looking to take advantage of its high growth levels and ambitious economic future, having a local person can prove to be a real asset. 

 

Starting a Business in Indonesia 

It takes an average of takes nine procedures and 47 days to establish a corporate entity in Indonesia. New businesses must liaise with the Indonesian State Treasury, the Ministry of Law and Human Rights and the Ministry of Manpower, as well as complying with several regulations before being able to successfully incorporating. 

 

Registering an Indonesian Property 

Including getting a land certificate examination and paying tax on the acquisition, it takes approximately 22 days to register a property and six procedures. Also, with the mass land that they have, the cost of registering a property is higher than the norm in Indonesia. 

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Getting the Required Credit 

The World Bank and IFC rank Indonesia in 129th place in the world for ease of getting credit, and that will explain a lot about the resources available in the republic. However, it is bound to improve as research conducted by Indonesian government found that strengthening legal rights of creditors by improving the asset-based lending system and promoting a real property registration system will improve the credit environment. 

 

Paying Indonesian Taxes 

There are about 51 tax payments to be made each year taking 259 hours of company time to deal with on average. Corporate income tax of 25% takes 75 hours to process, and social security contributions and VAT add another 184 hours to the total. These are all on average, and the time might differ depending on individuals. 

 

Understanding Indonesian Business Culture 

People who come to Indonesia with a clear vision yet a flexible mind will find no problem blending in. Prejudice often leads foreigners into false expectations; therefore follow these steps to shape your idea of how business works with Indonesians. 

Let us give you 6 types of culture that you will need to embrace, before coming to Indonesia. 

1.     Relationship before Business 

 There are a number of customs and traditions that need to be followed if you are in Indonesia. Indonesians are very proud of both their cultural heritage as well as they happily show kindness towards a foreigner. However, once you are in Indonesia, you will understand how many customs actually need to be followed. Also, how it affects doing business. 

2.    Power and Hierarchy Influencing Indonesian Business Culture 

Hierarchy principles here are similar to several other ASEAN countries. Not everyone is equal in society and this also reflects in an organisation. In other words, employees with less power in life expect and accept to have less at a workplace as well. 

3.    Using the “Yes, Boss” Phrase 

This phrase does mean “Yes”, but mostly to make a person happy, show respect and satisfy the request of another. However, do not be fooled into thinking it automatically confirms what is being discussed in between partners. 

4.    Importance of Having Connections 

Who you know is more important than what you know. This is very important especially when dealing with governmental sector in Indonesia. Indonesians grow a strong bond with people they know, and this coincides with point number two. They follow up on those close to them as well as on those of higher rank. If you are new, chances are you are going to be left behind in the list. Therefore, bond and build relations with the locals while putting in a genuine interest. 

5.    Avoid Agreements on First Contact  

While follow-ups to new connections are not prioritised, Indonesians feel committed to relationships and keeping them on good terms. Saying “no” is not something they will say easily, in order to continue to build on the relationship. Thus, it is often that they skip a meeting or contact if they feel it is about business and they are not ready. So be prepared.