for foreign investors looking to capitalize on the future of Indonesia, here are some things to think about before jumping into the archipelago with both feet.
If you are a foreign gauging the potential of young companies in Indonesia investment, it would be naive to think that there are safer parts, warranties, or easy victories. If you are looking for certainty in Southeast Asia, it is best to stay in Singapore, where the political climate has a stable balance sheet and regulations are more effective.
But if you're looking to the future and prefer the road less traveled, there are some things you need to familiarize yourself with before jumping into the business world with Indonesia both feet.
In Singapore, it takes about one to two days to incorporate a new business entity. According Hawksford Singapore, a leading business portals of the nation, this brief period applicable to most cases, provided that the contractor has the necessary documents, company name, director and shareholder details and that an address registered in the country, and two other easy to come by auditors.
However, until recently, it took about 53 days to start a business on paper in Indonesia, according to recent data from the World Bank. An entry service in the local market for foreign Indosight called highlights some of the pain points associated with starting a business in Indonesia, which included the treatment of PT-letter registered with the local government and a 21-day waiting period to get square things away with the ministry of law and human rights. Foreigners seeking to set up shop in Indonesia must also become well versed with Negative List of countries of investments.
List of negative investments of Indonesia precise sectors of the local economy in which foreign investment is restricted or completely blocked. It imposes limits and seemingly arbitrary limits participation across a variety of industries. These limits are between zero property allocation and 95 percent. The list is large, but some of its sectors include maritime affairs and fisheries, public works, transport, energy and mineral resources, health, financial, communication and IT, tourism and others.
World Resources Institute (CC)
In May, Andrew White, CEO of the US Chamber of Commerce in Indonesia has published an opinion piece in Jakarta Globe , who explained that the list was first published in 1998 and is supposed to be revised every three years, although the government did not respect the schedule as promised.
White believes the limits imposed by the list are arbitrary. He claims that his red ribbon serves as both a stumbling block and a source of confusion for investors as most companies, venture capital and private equity firms are looking for a long term certainty and a list of investment authorizations that may change every three years can not create uncertainty. "The investment limits in oil and gas are particularly inappropriate given the desperate need for Indonesia to boost production and reduce its dependence on imported fuels," says White.
In September, the Indonesian Ministry of administrative and bureaucratic reform announced that the registration of a company in the archipelago is now easier with a single online submission form that offers a one-stop-service and aggregated from several ministries process different. in theory, these one-stop-services reduce the amount of downtime of 53 days just six days.
but some people still remain skeptical. "the idea is always good, but performance is always determined by the action plans they have in place and what kind of concrete measures they will do, "said Euben Paracuelles, an economist based in Singapore, Nomura Holdings Bloomberg about the one-stop-service. Paracuelles believes a single point would require "a very strong coordination" between the ministries and the Investment Board, which Indonesia has not just yet.
The Plan marked the first effort by President Joko Widodo, known as Jokowi, to fight against the red band responsible for naming the World Bank Indonesia as one of the most challenging economies in which to start a company from Bloomberg . In the hope that Jokowi will reproduce its policies as governor by throwing unnecessary bureaucracy, digitize the collection of taxes, and the revival of infrastructure efforts in Indonesia, investors have gone ahead and seized nearly US $ 4 billion of Indonesian equities this year.
However, as regards foreign investment, much skepticism remains. Foreign investors need dozens of permits from different departments, including investments in Indonesia Coordinating Council for approval to begin operations. They also have to go to different departments to use permits land, import duties and export. Companies that want to come to Indonesia to seek oil need 289 licenses.
Djembar Lembasono (CC)
Indonesia clocks also among the lowest in terms of its capacity to enforce contracts. This is important for investors to consider, because each potential donor will have a different risk tolerance regarding hiring employees and dishing wages. If you're the kind of investor who needs to know your employees are legally bound to your company for a predetermined period of time, you might rethink the development shop in Indonesia want currently.
Many foreign investors find that the best way to deal with all the paperwork of the archipelago is simply incorporated in Singapore or select companies that are registered in Singapore but who are authorized to operate Indonesia.
According to International Enterprise Singapore, the agency responsible for foreign economic conduct of the nation by the Government, bilateral trade between Indonesia and Singapore remained warm throughout the years. Singapore was one of the first foreign investors in Indonesia for a few last three years, while the archipelago is the second largest trade partner of Singapore in ASEAN.
As Indonesia continues to attract the interest of foreign investors, Singaporean companies are in a unique position to draw in sectors such as infrastructure, utilities, consumer goods and services.