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How To Start A Business In Indonesia

Indonesia is a vast and varied country. With a population of 260 million and over 300 ethnicities and languages, it presents a unique challenge to anyone looking to start up a business.

The country’s natural riches and stable politics have seen Indonesia’s economy sail through the global recession and go from strength to strength. With bustling cities, luxurious beaches, pumping party towns and lush jungle hideaways, Indonesia is increasingly drawing expats to its shores.As the economy grows, the skylines become increasingly dominated by giant skyscrapers and big companies brining in international expertise to spur on the next round of growth. Sharing land borders with Malaysia and Papua New Guinea and maritime connections to Singapore, Malaysia, The Philippines and Australia, Indonesia is a great base from which to expand across Asia and the Pacific.

Wherever economies boom, bright ideas flourish and ambitious individuals start creating their own businesses and industries. Expats can often been found heading these projects, bringing ideas from their own cultures and areas of expertise.

Although there is an increasing number of expat entrepreneurs in Indonesia, they aren’t necessarily having an easy time of establishing their own companies.

Indonesia’s bureaucracy is complex and frustrating. Just as a you start to get to grips with the processing involved in achieving anything in Indonesia, the rules will change or additional forms will be added to the system.

The world bank lists Indonesia 91st out of 189 countries for ease of doing business. The study revealed that setting up a new business is especially difficult.

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Before a business can begin operating there is a long list of licences, registration numbers and certificates to acquire and an even longer list of government agencies which must be informed of your details.

Before setting out into the big world of business in Indonesia , make sure you check rules and regulations apply to your specific circumstances, but in the meantime take a moment to look through our list of top tips for setting up your company.

Have capital

Every business needs money in order to get things moving and start doing what they set out to do.

However, by the strict letter of Indonesian law, new businesses need to have a plan to raise USD$1 million in initial capital. Government-owned investment agency BKPM rarely enforces this ruling. However they are much more rigorous in calling in the USD$300,000 notary statement required to demonstrate funds committed to the business.

Have a local partner

There are two sets of rules when it comes to running a business in Indonesia. This is meant to keep foreign companies from dominating the markets, squashing local talent.

The simplest way to make life easy is to seek out a local partner who can hold enough of the business in their name to give access to lesser restrictions.

Different industries face different rules and for some you may be required to take on an Indonesian as an equal partner.

Hire local

In addition to requiring local partners in ownership, you’ll be required to prioritise local talent when hiring your workforce. The Ministry of Labour will require proof that you attempted to hire Indonesian workers, and where you have hired foreigners, why Indonesians were not up to the task.

Choose your location wisely

Indonesia is big, with over 8,000 islands spanning two oceans and some unreliable transport links.

Getting from island to island can be dependant on the whims of tropical weather and even travelling over land can be difficult thanks to potholed roads and a rugged landscape.

So picking a location that is going to work for your business is important. Do you need to be close to customers, to suppliers or to natural resources? Once you’ve worked out the answers, you’ll need to hire premises for a minimum of six months.

Know whom you can hire and how

Indonesia is keen to see the majority of jobs in new business going to Indonesian nationals. Small companies can only hire locals, medium sized businesses are only allowed to hire two foreigners, and those only if locals are not suitable. Larger businesses can hire as many foreign workers as they like, but 10 Indonesian workers must be hired for every foreigner.

Register the company name

Any business operating in Indonesia needs to submit its name to the Ministry of Law and Human Rights.

There is a long list of rules which a name needs to conform to, ensuring that it cannot be confused with any existing business or government entity. It must also be made up of recognized words and be linked to the activity the business conducts.

Join the Workers’ Social Security Program

Whether you employ hundreds, dozens or just yourself, you need to register with the social security program.

Depending on the size of the business, you may be liable for administering payments to a number of schemes, including pension funds, accident security and death security.

Just joining the program can be complicated as you’ll need to gather up a host of documents for each and every employee.

Have you run a business in Indonesia? Share your experiences in the comments, or fill in the questions here to be featured in an Expat Experience interview!

Article by Andy Scofield, Expat Focus International Features Writer

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