Doing business in indonesia

UK Trade & Investment Doing business in Indonesia

Doing business in Indonesia


Are you a member of a UK company wishing to export overseas? Interested in entering or expanding your activity in the Indonesian market? Then this guide is for you!

The main objective of this Doing Business

Guide is to provide you with basic knowledge

about Indonesia; an overview of its economy,

business culture, potential opportunities and an

introduction to other relevant issues. Novice

exporters, in particular will find it a useful

starting point.

Further assistance is available from the UKTI

team in Indonesia. Full contact details are

available at the end of this guide.

Important Information - Sanctions and Embargoes

Some countries maybe subject to export restrictions due to sanctions and embargoes placed

on them by the UN or EU. Exporting companies are responsible for checking that their goods

can be exported and that they are using the correct licences.

Further information is available on the Department for Business, Innovation & Skills

(BIS)

The purpose of the Doing Business guides, prepared by UK Trade & Investment (UKTI) is to provide information to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report‟s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report‟s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.

http://www.berr.gov.uk/whatwedo/europeandtrade/strategic-export-control/sanctions-embargoes/index.html

http://www.berr.gov.uk/whatwedo/europeandtrade/strategic-export-control/sanctions-embargoes/index.html


Content

Introduction 4

Preparing to Export to Indonesia 12

How to do business in Indonesia 13

Business Etiquette, Language and Culture 17

What are the challenges? 19

How to Invest in Indonesia 20

Contacts 22

Resources/Useful Links 23


Introduction

President Susilo Bambang Yudhoyono was elected as Indonesia's sixth President in 2004. He was

re-elected for another five-year term during the Presidential elections on 8 July and was sworn-in

on 20 October 2009.

GDP growth was 6.1% yoyo in 2008 and 4.5% year on year in 2009, among the highest in G20.

The government is now forecasting growth of 6% in 2010.

Trade relations between the UK and Indonesia are healthy. UK exports to Indonesia totalled £327

million in the third quarter of 2010 (£350 million in 2009 and £391 million in 2008). According to

official Indonesia Investment Coordinating Board Statistics, the UK is a leading investor (after

Singapore, Netherlands, Japan and South Korea) in Indonesia with Foreign Direct Investment

Realization worth US$ 587.7 million in December 2009.

Indonesia is one of UK Trade & Investment's seventeen High Growth Markets.

Strengths of the market Indonesia is a country of huge potential. It has a population of over 230 million (similar

demographics to the BRIC markets), and an affluent and inspirational middle class estimated to

be at least 35 million - equivalent to a substantial country on its own. Despite the challenging

economic environment, Indonesia‟s economy, the largest in ASEAN, outperformed many of its

neighbours at 4.5% in 2009, and growth between 5.5 - 6% is predicted for 2010.

Opportunities in Indonesia

A number of sectors offer good opportunities for UK companies:

Ports

This should be a key area of development with opportunities for UK companies to become

involved in port modernisation and development as well as construction of new ports and allied

facilities.

Airports

Passenger numbers have increased six-fold since 1997 and are growing. Construction of new

airports and expansion of existing ones will be needed and this may offer business opportunities

for UK engineers, designers as well as providers of related equipment, including navigation and

radar equipment

Railway

The development of and investment in rail infrastructure in Indonesia has been slow but is vital

both in supporting commuter expansion and moving freight. Expansion in mining sector

development in outlying areas should see further developments and the government is looking to

push ahead with plans for a monorail/MRT system for the City of Jakarta.

Life Sciences

Against the background of the Government‟s long-term healthcare development plan “Healthy

Indonesia 2025”, there is a growing demand from Indonesian patients for high quality treatment

and advanced technological medical products and services including dental care/cosmetic

dentistry – this offers business opportunities for UK suppliers of healthcare equipment and

services.


Infrastructure

President Susilo Bambang Yudhoyono has made infrastructure development a key priority for the

Government in 2010 and this should generate opportunities for UK contractors and engineering

consultants in many segments of the sector. The construction sector alone is the largest in South

East Asia representing around 45% of the market.

Financial Services

With a predominantly Muslim population (the world‟s largest); Indonesia is one of the key

markets outside the Gulf that offers real potential for UK companies surrounding Islamic Financial

Services/Sharia banking. Another area of opportunity for UK companies is the provision of

software, technology and associated training to help local banks deliver high quality services.

UK financial services institutions operating in Indonesia include: Standard Chartered Bank, HSBC

and Prudential. As a percentage of total assets, foreign banks account for about 10.5% of total

banking assets. In addition, many large private commercial banks are majority-owned by foreign

institutions.

Oil & Gas

The upstream sector offers real potential for independent operators to develop new working

areas. There are also significant levels of oil and gas activity, which bring further opportunities for

support industries including products, manpower and services (in particular training and skills

development). Demand for the import of operational goods is high and there are business

opportunities right across the board for UK suppliers of products and equipment.

Power Generation

Foreign investment in the sector is welcomed with particular opportunities existing in the design

& construction of new power plants (coal, thermal and hydro), the refurbishment and upgrade of

existing plants, supply of products and equipment and provision of specialist engineering and

asset management services

Renewable energies

Indonesia is making positive noises about investing in renewable energies and has considerable

resources to make this happen. The Government has set out progressive policies on promoting

the use of renewable fuels and sustainable technologies and this will offer opportunities for UK

energy companies who can supply equipment and related technologies.

Mining

Indonesia is the largest producer of thermal coal in addition to producing vast amounts of other

minerals (copper, nickel, gold and tin) and has potential for further mineral development (US$6

billion is expected to be invested in the sector in the next few years). Some of the world‟s leading

mining operators are already here (e.g. Newmont, Freeport, BHP Billiton, Vale INCO and Rio

Tinto) and there are opportunities for UK companies to supply mining equipment and services

Environment

Indonesia suffers from serious deficiencies in the collection and treatment of solid waste, which

the government is trying to address through its new climate change strategy, which includes

waste management. Wastewater treatment is another major problem for Indonesia as many

industries simply discharge untreated wastewater straight into the river. Opportunities exist for

UK companies who can supply affordable wastewater treatment technologies to recover and treat

water.

Creative & Media

The greatest areas of opportunity for UK companies include animation, digital media, software

and cinematography followed by book and magazine publishing, live performance and design

services.


Giftware, Toiletries, Jewellery and Tableware

Indonesia‟s younger generation and growing affluent & inspirational middle class favour global

brands, which they see as more exclusive and attractive. UK brands enjoy a strong reputation,

and many are present in the market through retailers like Marks & Spencer, Body Shop,

Mothercare, Habitat, Debenhams, Next and Harvey Nichols – there is scope for more.

Information Communications Technology (ICT)

The development of nation-wide telecommunications is a top priority for a country of over 17,000

islands. While the development and expansion of the fixed-line network is slow, a steady growth

of the mobile telecommunications sector, which has a relatively low penetration rate of around

42%, offers opportunities for UK companies with innovative solutions that can help mobile

operators to improve the quality of their services and offer new and innovative features to their

customers.


Trade between UK and Indonesia

Bilateral trade relations between the UK and Indonesia are substantial, with the balance

historically in Indonesia's favour. In 2009, the UK exported over £350 million worth of goods (and

a total of £327 million in the third quarter of 2010). However, the actual total is much higher as

many goods are transhipped via Singapore and not registered as exports to Indonesia. The

provision of services - including financial services as well as other „invisible‟ - remain a particular

UK strength, but our top 10 exports in 2009 included a wide range of goods, including transport

equipment and pulp & waste paper.

Main UK exports are:

• Pulp and waste paper

• Metalliferous ores & metal scrap

• Power generating machinery & equipment

• General industrial machinery & equipment & machine parts

• Manufactures of metal N.E.S

• Machinery specialized for particular industries

• Organic chemicals

• Essential oils and perfume materials; toilet preparations

• Other transport equipment

• Professional, scientific & controlling instruments & apparatus

UK imports were up 1.9% y-o-y at £1.2b in 2009, which predominantly were textile products.

2006

£ million

2007

£ million

2008

£ million

2009

£ million

2010

Jan-Sep

£ million

Exports 318.2 288.6 391 350 327

Imports 1,021.6 992.3 1,144 1,166 998

According to Indonesia‟s Investment Coordinating Board, Foreign Direct Investment realization in

2009 reached US$ 10.8 billion and Domestic Investment realization US$ 378 million. Major British

investors include BP, the Jardine Matheson Group, Unilever, Shell, Standard Chartered Bank,

HSBC, Rio Tinto, Premier Oil, BAT, Prudential, Rolls Royce, GlaxoSmithKline and Astra Zeneca.

There is also a strong and growing UK retail presence including Marks and Spencer, Next,

Debenhams, Top Shop, Ted Baker and Harvey Nichols.

Regulations known as The Negative List were introduced in mid 2007 restricting foreign

shareholdings in new investments in a number of "sensitive" sectors. The regulations met with

criticism from local and foreign businesses and were a further blow to Indonesia's image as a

destination for FDI. The revision to the Negative List (Presidential Decree No. 36 of 2010) was

issued in May 2010. Questions are raised on whether the revised regulation will accommodate the

goal of attracting foreign investments.

Economic Overview


In 2009, GDP growth reached 4.5% while GDP per capita was US$ 3,900. Private and public

consumption were the main contributors, whilst investment showed signs of slowing.

Indonesia is undoubtedly better prepared to cope with the global downturn than at the time of

the Asian Financial Crisis in 1997/98. The economy is expected to rebound in 2010. GDP growth

was 6.1% year on year in 2008 and 4.5% year on year in 2009, among the highest in G20. The

government is forecasting growth of 5.5% in 2010. Inflation fell from a high of 12.1% y-o-y in

September 2008 to 2.8% y-o-y in December 2009. However, it is rising again and Bank of

Indonesia expects inflation to reach 4-5% by end of 2010. FOREX reserves were US$ 93 billion in

November 2010.

In January 2009, the Government announced an economic stimulus package of IDR 73 trillion

(approximately US$ 6.4 billion) to help maintain positive economic growth, control rising

unemployment and support exports. The package includes tax saving, lower import duties,

subsidies and additional government spending on infrastructure development.

Indonesia's economy has stabilised in recent years. Structural reforms have led to some

progress, but poor infrastructure, a complex regulatory environment and corruption hamper

investment and growth.

The budget deficit was reduced to 0.5% of GDP in 2008. The global economic slowdown that led

to a lower tax revenue, and government‟s fiscal stimulus of IDR 73 trillion (USD 6.4 billion), the

budget deficit in 2009 increased to 1.6% of GDP; lower than the estimated 2.5%. The 2010

budget deficit is now planned at 2.2% of GDP, partially to carry over stimulus funding into this

year. In January 2009 fuel price came down to the April 2008 level, after it was raised by 28% in

May 2008. The government has now postponed plans to reduce fuel subsidies (and increase fuel

prices) in 2010, but will likely to constantly reduce all subsidies until 2014.

Compared with other countries in the region, Indonesia is not particularly export focussed. Some

29% of GDP is derived from exports, mainly in the hydrocarbon, mining and agricultural sectors,

and imports in manufactured goods.

Population Indonesia is now the fourth most populous country in the world with a population estimated at

234.7 million as of 2007. Over 50% of the population lives on Java, the Lesser Sunda Islands

Bali, Timor and Lombok.

• Two thirds of the population are under the age 30 with 35% under the age of 15.

• According to the Indonesia's Central Statistics Agency the population growth rate is

1.5% annually.

• The country is made up of about 300 ethnic groups each with their own customs,

cultures and local languages.

• The indigenous population of Indonesia‟s major islands is mainly of Malay stock.

Getting here and advice about your stay

By air

FCO Travel Advice

The FCO website has travel advice to help

you prepare for your visits overseas and to

stay safe and secure while you are there.

For advice please visit the FCO Travel

section

http://www.fco.gov.uk/en/travel-and-living-abroad/travel-advice-by-country/country-profile/



With the exception of Garuda Airlines, Mandala Airlines, Airfast Indonesia, Ekspres Transportasi

Antarbenua (operating as Premi Air), Indonesia Air Asia and Metro Batavia, all Indonesian airlines

are refused permission to operate services to the EU because Indonesia is unable to ensure all its

airlines meet international safety standards. It is recommended that you avoid flying with

Indonesian carriers subject to the EU operating ban. Flight times from London are approximately

18 hours depending on routes and stopovers.

There are international airports in several locations across Indonesia including Jakarta, Surabaya,

Bali, Lombok, Ujung Pandang and Medan. International departure tax is Rupiah 150,000.

Different rates of departure tax apply to domestic routes ranging from Rupiah 25,000 to Rupiah

50,000.

How to get to & from the airport

International flights land at either Jakarta, Bali or Medan. Jakarta International Airport is situated

about 30km from the city centre.

Before departure, it is advisable to check with your travel agent regarding hotel courtesy buses

and/or cars. Most of the larger international hotels provide this service. If this service is not

available make sure you use a taxi from a registered taxi firm inside the airport. British Embassy,

Jakarta, staff are advised to use only taxis from the Bluebird and Silverbird group.

It is reasonable to give the driver a 10% tip. Taxis to the city centre will cost approximately

Rupiah 200,000.

Travelling in Indonesia

Air

Air travel is the easiest and most comfortable way to get around Indonesia. It is recommended

that you avoid flying with Indonesian carriers subject to the EU operating ban. At airports in

major towns in Indonesia, porters should be given a tip of IDR 10,000 for a small bag and IDR

15,000 for a heavier one.

Ships/Ferries

All main ports in Indonesia are served by government-owned ships, with ferries also running

between islands.

Rail

The train service in Indonesia only covers Java and parts of Sumatra.

Road

The buses are used mostly by locals and are slow, unreliable, and overcrowded, but cheap. The

roads are often excellent, particularly on Java but the traffic is heavy. Traffic drives on the left. In

towns, the only practicable method of transport is a car. In Jakarta, air-conditioned taxis with

metres can be obtained at most major hotels. They may also be hired on an hourly basis - the

most suitable arrangement for a longer journey. As it can be difficult to find a taxi in some parts

of Jakarta, taxis can be retained for the return journey. Tips are not expected but are

appreciated.

Passports/visas Visas are required for UK nationals entering Indonesia. British citizens visiting Indonesia are able

to buy a 30 day visa upon arrival at a cost of US $ 25. Visas of this kind can be extended once for

a maximum of 30 days by applying to Immigration offices within Indonesia. Some visitors may be

able to use the on-board facility for purchasing visas before arrival. We understand that this

service is currently restricted to a small number of flights, but is likely to be expanded in the

future.


You are advised to consult the Indonesian Embassy in London.

You should ensure that your passport is valid for a minimum period of six months upon arrival.

Entry to Indonesia may be refused and airlines may not carry passengers holding passports with

less than six months validity. You are required to retain your arrival card for presentation to

Immigration upon your departure.

Overstaying without the proper authority is a serious matter and visitors can be held in detention

or refused permission to leave the country until a fine is paid.

If you stay in private accommodation in Indonesia (not a hotel) you must register your presence

with the local police or you could face a fine of IDR 5 million (£350). If you stay in a hotel you

will be registered automatically.

For further information, please contact the Indonesian Embassy in London

http://www.indonesianembassy.org.uk/

You are advised to consult the Indonesian Embassy in London for detailed information about

passport/visa and work permit/residence requirements.

Health Advice

The standard of local medical care in Indonesia can be poor and some medical tests cannot be

done reliably. Good medical care can be very expensive and in remote areas attention for serious

injuries or illness is likely to be unobtainable. You may require expensive medical evacuation

costing up to tens of thousands of pounds. Therefore you should ensure your policy covers you

for medical evacuation by air ambulance.

Indonesia suffers from periodic problems with air quality reaching hazardous levels because of

seasonal smoke haze from forest fires. You are advised to check news reports and follow local

advice.

Dengue fever, chikungunya and malaria occur in Indonesia. These diseases are transmitted by

mosquitoes. There are no vaccinations against these diseases, but there are preventative

measures that you can take, as advised on the National Travel Health Network and Centre

(NaTHNaC) website. You should visit your GP to discuss malaria prevention tablets. The number

of cases of dengue fever increases rapidly during the rainy season. A significant increase has

been reported in areas in Kalimantan and East Java at the beginning of 2010.

There is a risk of rabies throughout Indonesia, in particular in Bali. In December 2008, local

officials reported an outbreak of rabies in Bali, following a small number of deaths in the village of

Ungasan in Uluwatu district (Badung Regency). In 2009, the presence of rabies was also

confirmed in the Kutah area of Bali and in Pecatu village, near Nusa Dur. Sanglah Hospital in Bali

has prepared a special area to treat people suspected of being exposed to the rabies virus and

doctors in other clinics in Bali have been trained to care for potential victims. A small number of

deaths, from rabies, at Sanglah Hospital have been reported in 2009. For further information

about rabies see the NaTHNaC website.

In the 2008 Report on the Global AIDS Epidemic the UNAIDS/WHO Working Group estimated that

around 270,000 adults aged 15 or over in Indonesia were living with HIV; the prevalence rate

was estimated at around 0.2% of the adult population. This compares to the prevalence rate in

adults in the UK of around 0.2%. You should exercise normal precautions to avoid exposure to

HIV/AIDS. For more general information on how to do this see our HIV and AIDS page.

You should seek medical advice before travelling to Indonesia and ensure that all appropriate

vaccinations are up-to-date. For further information on vaccination requirements, health

outbreaks and general disease protection and prevention you should visit the websites of the




National Travel Health Network and. Centre (NaTHNaC) or NHS Scotland's Fit For Travel or call

NHS Direct on 0845 46 47.

For more general health information see our Travel health page and for food/drink hygiene see

our Eat and drink safely page.

A (H1N1) - Swine Flu

There is a dedicated Swine Flu page. Guidance on Pandemic Flu can be obtained on the UK

Department of Health website.

Avian Influenza (Bird Flu)

There have been outbreaks of Avian Influenza (Bird Flu) in commercial and backyard poultry and

a small number of pig farms in Indonesia. Infected birds have been found in all of Indonesia's 33

provinces with the exception of Gorontolo and North Maluku and there are ongoing outbreaks.

Indonesia has more confirmed cases of human fatalities than any other country with over 100

reported fatalities (February 2009). The most recent death was in January 2010 in Jakarta

province. Most human cases had direct contact with sick/dead poultry or were exposed to

environments with recent outbreaks of the virus.

The WHO have confirmed that the deaths of seven members of one family in the TanaKaro

district of North Sumatra in May 2006, were likely to be the result of limited, non-sustained

human-to-human transmission of the virus. However, to date, there has been no evidence of

widespread or sustained human-to-human transmission in Indonesia.

The risk to humans from Avian Influenza is believed to be very low. However, as a precaution,

you should avoid visiting live animal markets, poultry farms and other places where you may

come into close contact with domestic, caged or wild birds; and ensure poultry and egg dishes

are thoroughly cooked.

The World Health Organisation (WHO) has warned of the possibility that the Avian Influenza

outbreaks could lead at some point to a human flu pandemic, if the virus mutates to a form,

which is easily transmissible between people.

British nationals living longer term in an Avian-Influenza affected region should speak to their

employers about any pandemic influenza contingency plans which they may have in place and

take personal responsibility for their own safety in the event of a future pandemic, including

considering their access to essential supplies and adequate healthcare and ensuring travel

documents are up to date. You should read this advice in conjunction with our Avian and

Pandemic Influenza page, which gives more detailed advice and information.

You are advised to take out full medical insurance (covering medical evacuation by air

ambulance) when visiting Indonesia. There are no reciprocal healthcare agreements between

Indonesia and the UK.

Visitors who are not accustomed to the tropical climate are exposed to the risk of stomach

infections and should have appropriate medicine available.


Preparing to Export to Indonesia

Foreign companies will usually appoint agents/distributors, who may be individuals or companies,

to distribute and market their products in Indonesia. It is advisable to spend time taking local

advice and assessing a range of potential agents before making a choice. Beware of agents

promoting similar or identical products. Manufacturing activities are normally affected through an

Indonesian subsidiary or a license agreement with a domestically owned third party. The

following are the optional routes to take:

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

but may undertake sales promotion, market research and assistance to local agents and

distributors.

Agent or Distributor

A foreign company that wishes to sell its products in Indonesia will usually appoint one or more

agents or distributors.

Joint Venture Company

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 a limited liability company

(perseroan terbatas - PT), with the joint ventures as shareholders. PMA companies may be either

publicly listed on the stock exchange or privately owned.


How to do business in Indonesia

What companies should consider when doing business The following are some tips to help companies setting out on the road to exporting success.

1. English is widely spoken in all the major cities in Indonesia. However, if possible, try to be

accompanied by a native speaker, especially when travelling outside Jakarta.

2. Appointing the right local partner is the key to success in this market

3. Meeting the potential partner face to face is very important to gauge their expression of

interest towards your business.

4. Indonesians like to be „courted‟, and prefer to establish a personal relationship in advance

of a business one. It should be noted that Indonesians prefer to do business face to face

and tend to neglect all forms of written communication. An initial fax to Indonesian

companies will need to be followed up by phone calls to arrange appointments. Final

confirmation of any arrangement for meetings can often only be done once you arrive in

the country.

5. Indonesian businessmen like to receive trade literature on new or innovative products, but

few will contact the sender in response. They believe that if a company is serious about

entering the market, a representative will invest some time and money to research the

market personally.

6. Business decisions are primarily made on price (mostly quoted in US Dollars). Liquidity in

the public and private sectors is tight and cost can be more important than quality.

7. It is advisable to use the Letter of Credit for payment process when doing business in

Indonesia.

Gateways/Locations – Key areas for business Jakarta is the capital city of Indonesia, with a population of 9 million, of which 2 million are

affluent, aspirational and have a high disposable income. The economy is based on trading,

industries (food and beverage, cigarette, textile, chemical and craft) and services (property,

banking, insurance and telecommunication). Jakarta province also has a strong agriculture sector.

With a total population of nearly 3 million people, Surabaya‟s economy centres on services and

trading industries. Many big manufacturing companies such as PT Unilever Indonesia Tbk. and PT

Sampoerna Tbk., have located their head offices in Surabaya.

Bandung, with a population of 2.5 million is well known as a centre for textile and garment

manufacturing.

The oil & gas, natural gas and mining industries are largely centred on Kalimantan, in areas such

as Balikpapan, Samarinda and Bontang. Papua, the eastern part of Indonesia, reserves oil & gas

and other mining resources.

Market entry and start up considerations It is not possible for a PMA company (Indonesian companies with foreign shareholdings) or other

foreign entities to import on an unrestricted basis into Indonesia. Domestic companies may only

import if they obtain an import license.

Foreign companies based outside Indonesia who export to Indonesia will need to establish a

relationship with a local import and distribution company. Alternatively, you can establish a

representative office to conduct market research and to promote the parent company's product

range.


There are restrictions on imports at two levels:

• Goods restricted to state owned companies e.g. fuel and lubricants

• Goods restricted to sole agencies that must be approved by the government.

The classification of goods subject to import restrictions is periodically changed and intending

importers are advised to contact National Agency for Export Development (NAFED) for up to date

information.

Product Registration

Pharmaceutical, food and cosmetic products must be registered through the Indonesian Food and

Drug authority (BPOM - Badan Pengawas Obat dan makanan) and each registered product must

be labelled with sticker.

Foreign companies can contact relevant department to find out more information about product

registration, e.g. foreign companies selling medical and healthcare products need to seek an

advice from the Ministry of Health for registering their products.

Customs and Regulations Indonesia and the UK signed a Double Taxation Agreement on 5 April 1993 for the avoidance of

double taxation and the prevention of fiscal evasion with respect to income and capital gains. The

Agreement applies to persons who are resident of one or both of the contracting states.

Import Duty - Import duty is payable at the rates from 0% - 150% on the customs value of

imported goods. Customs value is calculated on the cost, insurance and freight level (CIF).

Value Added and Luxury Sales Tax - VAT is typically imposed at 10% CIF value of importers. This

can be reduced or increased by a government regulation to 5% or 15%. Certain manufactured

taxable goods may be subject to luxury sales tax (LST) ranging from 10-75%. To ascertain

whether a particular item is subject to LST and to identify the LST rate, reference should be made

to the Customs book in light of the relevant harmonised system (HS) doe.

Income Tax - Taxpayers are obliged to make a prepayment of their annual tax obligation by a

withholding of 2.5% (7.5% if the company does not possess an import permit) of CIF value of

imports.

It is however possible to apply for an exemption, deferment or restitution of import duties where

the import meets certain criteria.

The most common such criteria are:

• Imports used in production of exports;

• Capital goods, spares and raw materials by manufacturers and certain other sectors;

• Equipment and materials imported for use in a foreign aid funded project.

•

The regulatory environment is complex and subject to change. It is worth consulting the UK

Trade & Investment team for more information.

Legislation Initial investment proposals need to be approved by BKPM (Investment Coordinating Board). The

government publishes a list of business fields that are closed to investment and business fields

that are conditionally open for investments (Presidential Regulation No. 36 of 2010 which

replaced previous Negative List issued in 2007).

Legislation is complex and regular corrections and amendments often take place. It is worth

consulting the UK Trade & Investment team for further information.

Responding to Tenders

http://www.bkpm.go.id/


Tenders are usually posted in daily newspapers such as Kompas and The Jakarta Post.

The normal tender specification will require certain certificates along with their tender bid. For

example the newly established PMA companies shall at least have obtained a Certificate of

Registration of Oil and Gas Supporting Services. In order to bid for tenders, a foreign company

must appoint local agent to act on their behalf.

Recruiting and Retaining Staffing There is an abundance of unskilled and semi skilled labour. Skilled labour, although available, is

more difficult to find. Indonesia has one of the lowest average wage rates in Asia.

The major employment agencies in the Jakarta area are:

JAC Recruitment Indonesia

Menara Cakrawala (Skyline Building) 19th Floor

Jl. M.H.Thamrin No.9

Jakarta 10340

T: +62 21 315 9504

F: +62 21 315 9520

www.jac-recruitment.co.id

BoLe Associates

Graha Pratama 18th Floor

Jl. M.T. Haryono Kav.15

Jakarta 12810

T: +62 21 837 90615

F: +62 21 837 90614

www.bo-le.com

PT Monroe Consulting Group

Wisma Kemang 2nd Floor

Jl. Kemang Selatan Raya No.1

Jakarta 12560

T: +62 21 781 7040

F: +62 21 781 7041

www.monroeconsulting.com

Documentation

Commercial Invoice

Invoice must be signed by the manufacturer and must contain the following information:

Name of Shipper

Consignee

Port of Loading

Port of Discharge

Carrier/ Vessel

Country of Origin

Departure Date

Number & Date of the invoice

Purchase Order Number

Number and Date of L/C

L/C Issuing Bank

Details of the contents including the quantity, unit price, total amount in CIF Value

Freight Charges

Tariff Code number

Insurance

http://www.jac-recruitment.co.id/

http://www.bo-le.com/

http://www.monroeconsulting.com/


Number and packing ( Gross Weight and Net Weight)

Pro-forma Invoice

This is not a compulsory, although, needed by the importers for quoting price.

Labelling and Packaging Regulations Labeling should be in Bahasa Indonesia. Exemptions may be granted only if there are no

Indonesian words to substitute or if there is difficulty in finding Bahasa Indonesia with similar

meaning.

Foreign companies should consult their partner and local authorities about labeling and packaging

requirements. Further information is available from the Directorate General of Customs and

Excise.

Getting your Goods to the Market 5 ports that handle international trade in Indonesia are Batam, Medan, Surabaya, Jakarta and

Makassar.

The main bonded zones are Batam, Bintan and Karimun Islands. Companies operating in Bonded

Zones benefit from incentives such as an easier Bonded Zone approval process, additional entry

points, less strict monitoring of movements of goods, and other similar facilities. Companies will

no longer pay VAT, import duties and luxury tax.

Intellectual Property Rights It is difficult to protect against product imitations. Although Indonesia subscribes to the

International Convention for the protection of Industrial Property (the Paris Union), it still has

limited patent law and limited copyright protection.

Patents - Indonesia's first patent law came into force in 1991 and was amended in 1997 to be in

line with international conventions and treaties on intellectual property rights. The Uruguay

Round Agreement, to which Indonesia is a signatory, provides for a 20 year duration period (10

years for a single patent).

Trade Marks - The Indonesian Trademark Act was introduced in 1992 and was similarly amended

in 1997 to be in line with GATT conventions and treaties. The Act provides protection for the first

company to apply for and use a specific trademark in the country. No bona fida prior use is

recognised nor is the first user of a mark legally protected unless the mark in question has been

registered. A registered mark remains valid for an initial term of 10 years from the date of filing

and may be renewed for another 10 years. Registration for a trademark with the Directorate of

Patent & Copyright establishes a presumption of its first use and may assist in proof of ownership

in the event of a dispute. Once registered, a trademark may be cancelled if the mark is not used

for 3 consecutive years.

Copyright - The 1982 copyright law was amended in 1987 and 1997 and is now in line with GATT

convention and treaties. The law covers published, unpublished and anonymous works. In

principle, it does not matter whether the item is registered or not. The copyright term is 50 years

from the first publication with the exception of photographs.

http://www.bkpm.go.id/en/info.php?mode=baca&cat=10&t=Business%20Facilities

http://www.bkpm.go.id/en/info.php?mode=baca&cat=10&t=Business%20Facilities


Business Etiquette, Language and Culture

General - to the Indonesians (and in particular the Javanese), form and face are extremely

important. Public shows of deference to one's elders or superiors lead to the 'Bapak Syndrome'

(the boss is always correct, and only he or she can decide). Courtesies are also important, and

displays of rudeness or impatience frowned upon, and considered embarrassing. Backslapping is

not appreciated.

Clothing - a shirt and tie are acceptable for most business meetings. Safari suits can be worn on

formal occasions. Batik shirts are considered appropriate for formal occasions such as cocktail

parties and receptions. Muslim customs, especially those concerning female clothes, should be

observed and make up and perfume are acceptable, if used moderately. Lightweight clothes are

recommended but rainwear and warmer clothes maybe needed for cool evenings and upland

areas.

The Left Hand - you should not offer anything with your left hand, nor receive anything from

someone with your left hand. Giving and receiving with both hands is, however, acceptable.

Feet - showing someone else the soles of your feet is considered highly discourteous in

Indonesia: it is safer not to cross your legs when sitting.

Stance - standing with your hands on your hips or with your arms folded is regarded as

aggressive and rude.

Refreshments - it is usual during a meeting to be offered coffee or a soft drink. It is, however, not

done for the guest to start drinking until positively and formally invited to do so by the host. (If

the host starts drinking himself, then this can be taken as a normal invitation). If the host forgets

to drink himself, and the coffee gets cold, it is just too bad. The guest should consume at least

some of the drink, however unpalatable.

The following list of general notes may assist newcomers to the country. It is not a complete

guide and applies to both men and women:

• Business dealings should be conducted through an agent and tend to be slow;

• Shake hands when meeting people; both men and women will extend their hands;

• Bowing from the waist is a sign of respect;

• Be friendly, Indonesians place great emphasis on personal relationships;

• Never lose your temper;

• Business cards are exchanged immediately after introductions and should be presented

with both hands or with the right. Do not use your left hand;

• At the end of a meeting, saying thank you in Indonesian will certainly help the relationship

(Terima kasih);

• Literature can be in English, but prices quoted should be in US Dollars as well as Pounds

Sterling;

• The correct way to beckon someone is to wave hand down. Do not use crooked finger, it is

considered rude;

• Be prepared for personal questions;

• When invited to a home a gift is appreciated but must be given with the right hand.

Language The official language is Bahasa Indonesia. English is widely spoken by young people but

interpretation may be required for business meetings, particularly outside Jakarta and other

major cities in Indonesia. The UKTI team can help you find a translator or interpreter.

Meetings and Presentations

When you meet someone for the first time in a business environment, you should introduce

yourself with your full name and your organisation. Shaking hands is followed by the exchanged


of business cards. When addressing senior management in Indonesian companies, you should call

them „Pak‟ for male and „Ibu‟ for female.

Meetings may not necessarily start on time and guests may arrive late due to traffic conditions.

People often do not confirm their participation in meetings/events, or they confirm at a much

later stage than is the case in the UK. Last minute cancellations of meetings are fairly common,

so it is important to build flexibility into visit programmes to accommodate last minute changes.

Negotiations

The key to success in negotiating a business partnership in Indonesia is clear communication and

development of long-term relationship. It is important to be very well prepared for the first

meeting. However, technical data and pricing are very often discussed from the beginning.

Indonesian partners are usually reluctant to provide information on turnover, competition, and

share of the market before they meet in person. However, they will be more open once they meet

and tend to release information face to face. You should be prepared to discuss technical data

and pricing from the beginning, and should note that foreign companies would be expected to

share the promotional and marketing campaign cost.


What are the challenges?

Foreign companies may encounter some challenges when doing business in Indonesia, including:

• Complex bureaucracy

• An uncertain and unpredictable legal and regulatory environment

• Tax administration

Getting Paid – Terms of Payment

Most quotations will be in US dollars and CIF in any major port in Indonesia. Normal terms of

payments employed in foreign trade are permitted (L/C), telegraphic transferred if done in

advance, COD or open account.


How to Invest in Indonesia

Initial investment proposals need to be approved by BKPM (Investment Coordinating Board). As a

general rule, all business sectors are open for foreign investment unless specifically prohibited.

The Government publishes a list of business fields that are closed to investment and business

fields that are conditionally open for investments (Presidential Regulation No. 36 of 2010 which

replaced the previous Investment Negative List of 2007).

Foreign Direct Investment also known as “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

a limited liability company (Perseroan Terbatas – PT), with the joint venture partners as

shareholders. PMA companies may be publicly listed on the stock exchange or privately owned.

Foreign companies are encouraged to seek assistance and advice from the Indonesian

Investment Coordinating Board (BKPM). BKPM can provide advice in the regulatory environment

for investors and are responsible for the processing of all foreign and domestic investment

applications. BKPM also issues approvals and business licenses.

The initial investment approval is normally granted for the period of 3 years and when the

commercial operations are ready to commence, the FDI has to apply for a permanent business

license valid for 30 years but can be extended for a further 30 years.

Licences/Permits

The processes involved in becoming an FDI company (in chronological order):

• Submit the application and the required documentation as per the investment plan to

BKPM (Investment Coordinating Board). A joint venture agreement should also be drawn

up if an investment includes Indonesian partners

• Obtain the initial license (Surat Perintah Pemeriksaan Pajak - SPPP) which will be valid for

3 years

• Incorporate the SPPP (Surat Perintah Pemeriksaan Pajak)

• Establish the company‟s articles of association (with sufficient proof of capital investment)

through a public notary. This should then be sent to the Ministry of Justice & Human

Rights for approval and recording in the state gazette which is issued on a monthly basis

• Register the company address with the local municipal Government

• Obtain tax payer registration number (NPWP – Nomor Pokok Wajib Pajak) and value-

added tax number from the Tax Office

• Obtain various licenses such as facilities, import & export and manpower planning from

the Ministry of Trade

• Apply for the Fixed Operating License from BKPM (Investment Coordinating Board)

• Prepare and send half yearly reports to the BKPM (Investment Coordinating Board)

• Incorporate facilities to begin operations

• Obtain provincial approval for the Fixed Operating Licenses

• Receive Fixed Operating License with 30 years validity period


Financial Assistance Indonesia offers tax holidays to investors in certain industries. Further details can be obtained

from UK Trade & Investment at the British Embassy.


Contacts

If you have a specific export enquiry about the

Indonesian market which is not answered by

the information on this report, you may

contact:

UK Trade & Investment Enquiry Service Tel: +44 (0)20 7215 8000

Fax: +44 (0)141 228 3693

Email: [email protected]

You will be signposted to the appropriate

section on our website, or transferred at local

call rate directly to the British Embassy in

Jakarta.

Otherwise contact the team in Indonesia

directly:

UK Trade & Investment Indonesia British Embassy Jakarta

Jalan MH Thamrin 75

Jakarta 10310

Indonesia

Deborah Clarke

Director of Trade & Investment

Tel: +62 21 2356 5200

Fax: +62 21 2356 5352


Owen O’Connor

Deputy Director for Trade & Investment

Email: Owen.O'[email protected]

Sectors:

• Advanced Engineering

• Fire, Police & Security

• Defence

• Global Sporting Events

• Olympics

Lian Jap

Senior Trade & Investment Manager


Sectors:

• Financial Services

• ICT

• Science & Technology

• Research & Development

• Education & Skills

Annetly Ngabito

Trade & Investment Manager


Sectors:

• Ports

• Construction

• Railways

• Leisure & Tourism

Diah Ayu Noor



Sectors:

• Energy

• Environment & Water

• Low Carbon

• Metals & Minerals

• Mining

Peggy Gaspersz



Sectors:

• Life Sciences

• Creative & Media

• Agri Technology

• Food & Drink

• Giftware, Jewellery & Tableware

Debby Sabrina Tobing

Senior PA to Director of Trade &

Investment


Sector:

• Clothing, Footwear & Fashion

Ingrid Novianti

Assistant Trade & Investment Manager


Sector:

• Engineering – Automotive

Esther Sirait



Sector:

• Airports

Annie Lufti



Sector:

• Chemicals

mailto:[email protected]











Resources/Useful Links

Country Information:

BBC Website:

http://news.bbc.co.uk/1/hi/country_profiles/default.stm

FCO Country Profile:


Culture and communications:

CILT – National Centre for Languages - Regional Language Network in your area:

http://www.cilt.org.uk/workplace/employer_support/in_your_area.aspx

Kwintessential culture guides:

http://www.kwintessential.co.uk/

Customs & Regulations:

HM Revenue & Customs: www.hmrc.gov.uk

Import Controls and documentation (SITPRO): http://www.sitpro.org.uk

Economic Information:

Economist:

http://www.economist.com/countries/

Export Control

Export Control Organisation:

http://www.bis.gov.uk/exportcontrol

Export Finance and Insurance:

ECGD: http://www.ecgd.gov.uk/

Intellectual Property

Intellectual Property Office:

www.ipo.gov.uk

Market Access

Market Access Database for Tariffs (for non-EU markets only):

http://mkaccdb.eu.int/mkaccdb2/indexPubli.htm

SOLVIT – Overcoming Trade Barriers (EU Markets only)

www.bis.gov.uk/EUMarketAccessUnit

Standard and Technical Regulations:

British Standards Institution (BSI):

http://www.bsigroup.com/en/sectorsandservices/Disciplines/ImportExport/

National Physical Laboratory: http://www.npl.co.uk/

Intellectual Property - http://www.ipo.gov.uk/

http://news.bbc.co.uk/1/hi/country_profiles/default.stm


http://www.cilt.org.uk/workplace/employer_support/in_your_area.aspx

http://www.kwintessential.co.uk/

http://www.hmrc.gov.uk/

http://www.sitpro.org.uk/

http://www.economist.com/countries/

http://www.bis.gov.uk/exportcontrol

http://www.ecgd.gov.uk/

http://www.ipo.gov.uk/

http://mkaccdb.eu.int/mkaccdb2/indexPubli.htm

http://www.bis.gov.uk/EUMarketAccessUnit

http://www.bsigroup.com/en/sectorsandservices/Disciplines/ImportExport/

http://www.npl.co.uk/

http://www.ipo.gov.uk/


Trade Statistics:

National Statistics Information: http://www.statistics.gov.uk/hub/index.html

UK Trade Info: https://www.uktradeinfo.co.uk/

Travel Advice:

FCO Travel: http://www.fco.gov.uk/en/travel-and-living-abroad/

NHS: http://www.nhs.uk/nhsengland/Healthcareabroad/

Travel health: http://www.travelhealth.co.uk/

Produced by the UKTI Team in Indonesia

Contact: Deborah Clarke, Director of Trade & Investment


Last Updated: November 2010

Business Link: International Trade

Business Link‟s International Trade pages provide an overview of export basics including

licensing, customs procedures, classifying and movement of goods, other regulatory

information and export paperwork issues. It also introduces exporters to the UK Trade Tariff.

Essential reading for exporters! Find out more at:

http://www.businesslink.gov.uk/bdotg/action/layer?r.s=tl&r.lc=en&topicId=1079

717544

http://www.statistics.gov.uk/hub/index.html

https://www.uktradeinfo.co.uk/

http://www.fco.gov.uk/en/travel-and-living-abroad/

http://www.nhs.uk/nhsengland/Healthcareabroad/

http://www.travelhealth.co.uk/

