So, the question that often comes to your minds is how to start doing business in Indonesia? Let’s discuss in more detail what every foreign investor should consider before entering the Indonesian business.
Things to Consider Before Doing Business in Indonesia
Before you decide to start your investment in Indonesia, you need to consider the following:
Type of business
Please note that there are some sectors or industries that are prohibited or restricted from foreign ownership. This is written in the Negative Investment List. In the list, there are several restrictions on foreign ownership from zero (0) to ninety-five (95) percent. This brings you to a further question: Should you find a local partner or not. However, there are some businesses that can be fully owned (100%) by foreigners.
The type of company
Because the Indonesian government wants to protect micro, small and medium entrepreneurs, there is a policy stating that when foreign investor decide doing business in Indonesia, a company must be registered as a limited foreign liability or PMA. To set up a foreign company, it is required to meet certain requirements regarding the minimum investment and the amount of paid-up capital.
Human Resource Problems
Although Indonesia is listed as the fourth most populous country in the world with more than 60% of the total population in their productive age (aged 15-60 years), not all of them have sufficient skills to participate in world industry and commerce.
This is because the education sector is not evenly distributed over large areas. This condition causes the company to face difficulties in finding a talent pool, especially in areas outside Java.
On the other hand, hiring foreigners also requires complex requirements. This will be a challenge that must be resolved for every PMA. Several successful PMAs in Indonesia have overcome this problem by providing sufficient training to meet the required capacity requirements. Therefore, you need to be really selective in choosing human resources based on your needs in order to avoid overcharging by hiring unskilled or unsuitable people.
Diverse Markets
Indonesia is not only a country with the largest archipelago in the world, but also has an overly complicated market segmentation. Given that there are many races, languages, religions, customs, and values, you cannot assume Indonesia is a single market. Each target group has different needs according to the approach taken. You need to understand market diversity comprehensively if you decide doing business in Indonesia.
