In recent years, Indonesia has emerged as a leading destination to do business. In order to do business in Indonesia, it is mandatory for you to obtain all the necessary licenses and permits. To make sure your business operations go smoothly, it would also be helpful to start and maintain a positive working relationship with the Indonesian business and governmental circle. Business in Indonesia has several important areas you have to consider.
Prominent Business Sectors in Indonesia
In its long history, Indonesia’s economy has leaned heavily towards the agriculture sector. Geographically, the country is blessed with plenty of fertile soil which are located evenly within the larger Indonesian territory. In the late 1960s, a significant process of industrialization and urbanization was kickstarted by the government. This expanded the country’s economic focus towards manufactured imports and new kinds of sectors.
- Automotive Industry
In Indonesia, the automotive industry is generally seen as the cornerstone of the country’s manufacturing sector. Many world class car manufacturers have started manufacturing factories or expanding distribution in the Indonesian territory. Indonesia is the second-largest car manufacturing nation in Southeast Asia. The robust growth is supported by the increasing amount of population, meaning that the target market is already available.
With typically low labor costs and a continuously expanding middle class, international car manufacturers have been investing heavily in order to expand production capacity in Indonesia. As for the designs, low-cost-green-car (LCGC) have been gaining popularity in recent years. However, it is quite widely known that most Indonesians still would rather buy multipurpose vehicles (MPV), considering the fact that they are able to carry many people. This is very useful because, by nature, Indonesians like to take their family members on a trip using their cars.
Just like other parts of the world, the current buzz in the automotive industry is electronic vehicles (EV). As we strive to reach a more sustainable future, the massive production and distribution of EVs are very common occurrences that you can see in Indonesia. As such, the EV sector seems like the specific niche that you can tap in to if you have ambitions on entering the automotive industry in Indonesia.
- Property Industry
In recent years, the property industry has been one of the pillars of the economy. There are several reasons for this. First, property industries will grow once there’s macroeconomic growth in the country (represented by the increase of per capita GDP). This has occurred in Indonesia and as a result, purchasing power is increasing. In the past decade, the Indonesian GDP has increased exponentially. With these figures, it is estimated that around seven million people are entering the middle class every year. This puts them in the position to purchase houses, apartments, and condominiums.
Furthermore, Indonesia currently has a beneficial demographic composition. With a population of over 270 million people, the country is already a promising market to begin with. It is also strongly supported with the fact that over half of the population are young people below the age of 30. In Indonesia, this term is commonly known as “bonus demography” which is expected to peak in the next 30 years. This strongly suggests that many young Indonesians will be looking to buy their first property in the near future.
Finally, it is known that Indonesia is undergoing a rapid process of urbanization. More than half of the Indonesian population currently lives in urban areas and the numbers are expected to increase. When this happens, the demands for new houses, apartments, etc. will continue to increase. For potential business investors, this serves as a hugely potential market to tap into. If you come to Indonesia to enter the property market. There will be a large market of potential buyers at your disposal.
- Tourism Industry
Indonesia was badly struck by the Covid-19 pandemic and the tourism sector is badly impacted. Now that we are slowly recovering to normal conditions, the tourism sector is once again in a prime position to bounce back. The Indonesian government is making strategic plans to revive the industry, including offering foreign investors to take on projects worth up to USD 1 billion.
One of the efforts to revive Indonesian tourism is the cooperation between the Ministry of Tourism and the Ministry of Investment. The two institutions agreed to work together intensively to build the creative economy and infrastructures, exchanging data and information, and upskilling the workers in the tourism industry. Furthermore, the Ministry of Law and Human Rights through the Immigration Services are continuously formulating new regulations to ease foreign traveler’s way to Indonesia.
This was done by creating new policies like Second Home Visa and Visa on Arrival. The results are clear for all to see. The tourism industry in Indonesia has come back to life. As business practitioners, it becomes such an interesting opportunity for you to invest in Indonesian tourism, either in the hospitality side or even invest in the tourism objects.
Business Permit Registration for Foreign Companies in Indonesia
After securing the certificate and being officially established as a Perseroan Terbatas (PT), a company still needs to obtain and register their tax identity then process a business permit (Perizinan Berusaha) before starting their operations, which consists of Basic Requirements (Persyaratan Dasar) and Risk-Based Business Permit (Perizinan Berusaha Berbasis Risiko).
The Basic Requirements consist of:
- Kesesuaian Kegiatan Pemanfaatan Ruang (KKPR), a document that verifies the planned usage of the location being used.
- Persetujuan Lingkungan/Environmental Permit, a document that verifies that the operations of the will not endanger the environment, issued by the Ministry of Environment and Forestry.
Persetujuan Bangunan Gedung dan Sertifikat Layak Fungsi, documents that verifies that the building used follows a certain quality and safety standard.
Risk-Based Business Permit in Indonesia
The Risk-Based Business Permit consist of:
- Low-Risk Business owners are required to have a Nomor Induk Berusaha (NIB)/Business ID Number.
- Medium-Risk Business owners are required to have NIB and standard certificates.
- High-Risk Business owners are required to have NIB and a business license.
After all documents are submitted, the application will be reviewed by the Online Single Submission (OSS) system under the jurisdiction of the Ministry of Investment. Should the application be approved, the business permit will be issued by the aforementioned ministry on behalf of the government
How can Double M help?
Before starting your business in Indonesia. It is important to decide whether you want to establish your own company or join forces with others. Double M can help you either way. We can help you establish your company in Indonesia or help you find local partners which suits you.