Industry for PMA in Indonesia has various regulations that may prove to be troublesome for companies in the future. The government restricts risky or strategic industries, allowing only local investments. Some of those industries include energy and food sources. The reason behind this restriction is due to national interest and preservation.
Unfortunately, many foreign entrepreneurs are not aware of this know-how. Thus, some may have spent a lot of money on market research only to find out that they cannot run the business in Indonesia. It is important to note that businesses that call for partial ownership require foreign entities to have a local business partner. This local business partner must have the required capital to fulfil the company establishment requirement.
Benefits of Fully Owning a Company
There are several benefits that entrepreneurs can enjoy if they have full ownership of the company. One of them is the management system. Many issues arise when two parties with their distinctive management system have to merge. The differences in management systems can be detrimental to the company’s success. For example, if the foreign company uses an open management system but the local partner is used to a top-down system, then a compromise is needed. Failure to compromise can lead to difficulty in leadership and management within the company.
The second benefit for foreign companies to owning a company is easier finance management. From budgeting to operation costs, and even dividend, it could be troublesome if the business partner they have does not share the same view. Plus, merging with a local company means that both sides of the company would have to negotiate the terms of profit division. Many companies failed to achieve this goal and had to dissolve their cooperation.
Moreover, by merging with a local company, there must also be a compromise to each’s corporate culture. The fast process-based system commonly used in foreign companies may not be familiar with its local counterpart. Thus, the company may have to adopt significant corporate culture changes to cater for both sides of companies. Having their own company allows foreign entrepreneurs to uphold their corporate culture and operational routine.
Industry for PMA Ownership
Industry for PMA is available to check through the online submission system. However, companies must first determine the Standard Classification of Indonesia Business Field (KBLI code) to specify the company industry. Foreign Investment companies can only choose one option. Within this KBLI code, there are also details to regulate the company ownership permission. However, Presidential Regulation Number 10, 2021 is the document that details the lists of industrIes available for PMA.
With the most recent update on the aforementioned regulation, these days, most industries are available for foreign-owned companies. However, one of the requirements is to establish a large-sized company. Industries that permit partial ownership or even disallow foreign ownership can be seen in the third attachment of Presidential Regulation Number 49 2021.
In addition to the industry for PMA, foreign entrepreneurs may also be interested in owning a property or two in Indonesia. According to Kompas, there are two kinds of property permits available in Indonesia. The first permit is the building rights (HGB) and the second one is the utility rights (HP). Usually, each region has a minimum price for foreign nationals to be able to purchase it. It is also important to remember that only those with proper legality meet the requirements for property ownership.
For further information on company establishment, visit www.meso.co.id, or send us a message on our Whatsapp number +62812 1315 4189.