Business setup in Indonesia can be tricky for foreign individuals unaccustomed to the local regulations. Due to the constant change of regulation, foreign investors must find a trustable service provider to assist in setting up the company. One of the regulations that have recently undergone a significant change is the company code or KBLI. The Government is looking to attract more foreign investment in Indonesia simpler company set up regulations.
According to Tempo, Indonesia’s economy may grow 4.7% – 5.5% in 2022. This growth expectancy is positive news for Indonesia since the country experienced a slump of 2.1% in 2020. To further improve the economic condition, the Government has been trying to stimulate spending. However, the local businesses have suffered immensely from the pandemic impact. Thus, the only way for the country to stimulate the economy and earn more income is through facilitating business setup in Indonesia for foreign companies.
Global Economic Effect
In 2021, there was a surplus in foreign investments in Indonesia. However, the increase may have been due to the high demand for coal and nickel. Even though the mining industry did well, other industries remained in a slump for the past year. The ongoing pandemic and the new mutations of the COVID-19 virus causes the economic environment to be unconducive for other businesses. The Omicron variant, even though not as fatal, is easily contractible. Entrepreneurs once again fear that another lockdown might ensue. Many foreign investors cancel their investment plans due to the uncertainty of the situation.
Nonetheless, 2022 seems to be a hopeful year for entrepreneurs as the number of fatal cases dwindles. According to Reuters, despite the rocketing number of infections, fatal cases in the United Kingdom have not risen due to booster shots. Thus, the Prime Minister decides to lift the COVID-19 measures altogether and co-exist with the virus. Should this step proves to be successful, there is a possibility that other nations may follow suit. If so, there is a high chance that the world economy and Indonesian businesses will recover.
In contrast to the United Kingdom, the Indonesian Government takes a more careful approach to the growing number of Omicron infections. Recently the Government changed the social restrictions level from PPKM Level 1 to PPKM Level 2. At PPKM Level 2, restaurants and other public places limit their occupancy to 50%. Booster vaccine inoculation programs are also actively happening in public places. Citizens can register for their booster vaccine shot once they receive a barcode in the Peduli Lindungi application.
Business Setup in Indonesia
Business setup in Indonesia can be a good way for foreign investors to penetrate the developing market. Without a foreign entity, foreign nationals cannot do business transactions within Indonesia. There are several requirements for a company set up in Indonesia. The most important one is for the foreign investor to identify what industry or business they want to invest in. They also need to prepare their organizational structure and the percentage of shares for each stakeholder.
Next, foreign companies must know which KBLI code identifies their business in Indonesia. KBLI code will determine the amount of foreign ownership and other business conduct regulation within each industry. At MESO Serviced and Virtual Office, foreign investors can consult with the legal team to determine which KBLI code suits their interest. If the KBLI code only allows for partial ownership, foreign investors must find a local partner.
The third thing to prepare is the business capital which amounts to USD 1,000,000. Once foreign investors receive their company decree, they need to open a local bank account. Then they have to deposit the business capital and show the proof of funds to the Government. The function of this capital is not just for operational purposes but also to prove to the Government that the foreign investor commits to the investment.
Once foreign investors have the three points ready, they will be able to set up a business in Indonesia. For more information on business setup in Indonesia with MESO, visit www.meso.co.id or contact us on Whatsapp at +62812-1315-4189.