Doing business in indonesia

UK Trade & Investment Doing business in Indonesia
Doing business in Indonesia

Are you a member of a UK company wishing to export
overseas?
Interested in entering or expanding your activity in
the Indonesian market? Then this guide is for you!
The main objective of this Doing Business
Guide is to provide you with basic knowledge
about Indonesia; an overview of its economy,
business culture, potential opportunities and an
introduction to other relevant issues. Novice
exporters, in particular will find it a useful
starting point.
Further assistance is available from the UKTI
team in Indonesia. Full contact details are
available at the end of this guide.
Important Information -
Sanctions and Embargoes
Some countries maybe subject to export restrictions due to sanctions and embargoes placed
on them by the UN or EU. Exporting companies are responsible for checking that their goods
can be exported and that they are using the correct licences.
Further information is available on the Department for Business, Innovation & Skills
(BIS)
The purpose of the Doing Business guides, prepared by UK Trade & Investment (UKTI) is to provide information to help
recipients form their own judgments about making business decisions as to whether to invest or operate in a particular
country. The Report‟s contents were believed (at the time that the Report was prepared) to be reliable, but no
representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and
Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the
Report, its completeness or its suitability for any purpose. In particular, none of the Report‟s contents should be
construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument.
No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may
arise out of or in connection with the Report.

Content
Introduction 4
Preparing to Export to Indonesia 12
How to do business in Indonesia 13
Business Etiquette, Language and Culture 17
What are the challenges? 19
How to Invest in Indonesia 20
Contacts 22
Resources/Useful Links 23

Introduction
President Susilo Bambang Yudhoyono was elected as Indonesia's sixth President in 2004. He was re-elected for another five-year term during the Presidential elections on 8 July and was sworn-in on 20 October 2009.
GDP growth was 6.1% yoyo in 2008 and 4.5% year on year in 2009, among the highest in G20. The government is now forecasting growth of 6% in 2010.
Trade relations between the UK and Indonesia are healthy. UK exports to Indonesia totalled £327 million in the third quarter of 2010 (£350 million in 2009 and £391 million in 2008). According to official Indonesia Investment Coordinating Board Statistics, the UK is a leading investor (after Singapore, Netherlands, Japan and South Korea) in Indonesia with Foreign Direct Investment Realization worth US$ 587.7 million in December 2009.
Indonesia is one of UK Trade & Investment's seventeen High Growth Markets.
Strengths of the market
Indonesia is a country of huge potential. It has a population of over 230 million (similar demographics to the BRIC markets), and an affluent and inspirational middle class estimated to be at least 35 million - equivalent to a substantial country on its own. Despite the challenging economic environment, Indonesia‟s economy, the largest in ASEAN, outperformed many of its neighbours at 4.5% in 2009, and growth between 5.5 - 6% is predicted for 2010.
Opportunities in Indonesia
A number of sectors offer good opportunities for UK companies:
Ports
This should be a key area of development with opportunities for UK companies to become involved in port modernisation and development as well as construction of new ports and allied facilities.
Airports
Passenger numbers have increased six-fold since 1997 and are growing. Construction of new airports and expansion of existing ones will be needed and this may offer business opportunities for UK engineers, designers as well as providers of related equipment, including navigation and radar equipment
Railway
The development of and investment in rail infrastructure in Indonesia has been slow but is vital both in supporting commuter expansion and moving freight. Expansion in mining sector development in outlying areas should see further developments and the government is looking to push ahead with plans for a monorail/MRT system for the City of Jakarta.
Life Sciences
Against the background of the Government‟s long-term healthcare development plan “Healthy Indonesia 2025”, there is a growing demand from Indonesian patients for high quality treatment and advanced technological medical products and services including dental care/cosmetic dentistry – this offers business opportunities for UK suppliers of healthcare equipment and services.

Infrastructure
President Susilo Bambang Yudhoyono has made infrastructure development a key priority for the Government in 2010 and this should generate opportunities for UK contractors and engineering consultants in many segments of the sector. The construction sector alone is the largest in South East Asia representing around 45% of the market.
Financial Services
With a predominantly Muslim population (the world‟s largest); Indonesia is one of the key markets outside the Gulf that offers real potential for UK companies surrounding Islamic Financial Services/Sharia banking. Another area of opportunity for UK companies is the provision of software, technology and associated training to help local banks deliver high quality services.
UK financial services institutions operating in Indonesia include: Standard Chartered Bank, HSBC and Prudential. As a percentage of total assets, foreign banks account for about 10.5% of total banking assets. In addition, many large private commercial banks are majority-owned by foreign institutions.
Oil & Gas
The upstream sector offers real potential for independent operators to develop new working areas. There are also significant levels of oil and gas activity, which bring further opportunities for support industries including products, manpower and services (in particular training and skills development). Demand for the import of operational goods is high and there are business opportunities right across the board for UK suppliers of products and equipment.
Power Generation
Foreign investment in the sector is welcomed with particular opportunities existing in the design & construction of new power plants (coal, thermal and hydro), the refurbishment and upgrade of existing plants, supply of products and equipment and provision of specialist engineering and asset management services
Renewable energies
Indonesia is making positive noises about investing in renewable energies and has considerable resources to make this happen. The Government has set out progressive policies on promoting the use of renewable fuels and sustainable technologies and this will offer opportunities for UK energy companies who can supply equipment and related technologies.
Mining
Indonesia is the largest producer of thermal coal in addition to producing vast amounts of other minerals (copper, nickel, gold and tin) and has potential for further mineral development (US$6 billion is expected to be invested in the sector in the next few years). Some of the world‟s leading mining operators are already here (e.g. Newmont, Freeport, BHP Billiton, Vale INCO and Rio Tinto) and there are opportunities for UK companies to supply mining equipment and services
Environment
Indonesia suffers from serious deficiencies in the collection and treatment of solid waste, which the government is trying to address through its new climate change strategy, which includes waste management. Wastewater treatment is another major problem for Indonesia as many industries simply discharge untreated wastewater straight into the river. Opportunities exist for UK companies who can supply affordable wastewater treatment technologies to recover and treat water.
Creative & Media
The greatest areas of opportunity for UK companies include animation, digital media, software and cinematography followed by book and magazine publishing, live performance and design services.

Giftware, Toiletries, Jewellery and Tableware
Indonesia‟s younger generation and growing affluent & inspirational middle class favour global brands, which they see as more exclusive and attractive. UK brands enjoy a strong reputation, and many are present in the market through retailers like Marks & Spencer, Body Shop, Mothercare, Habitat, Debenhams, Next and Harvey Nichols – there is scope for more.
Information Communications Technology (ICT)
The development of nation-wide telecommunications is a top priority for a country of over 17,000 islands. While the development and expansion of the fixed-line network is slow, a steady growth of the mobile telecommunications sector, which has a relatively low penetration rate of around 42%, offers opportunities for UK companies with innovative solutions that can help mobile operators to improve the quality of their services and offer new and innovative features to their customers.

Trade between UK and Indonesia
Bilateral trade relations between the UK and Indonesia are substantial, with the balance historically in Indonesia's favour. In 2009, the UK exported over £350 million worth of goods (and a total of £327 million in the third quarter of 2010). However, the actual total is much higher as many goods are transhipped via Singapore and not registered as exports to Indonesia. The provision of services - including financial services as well as other „invisible‟ - remain a particular UK strength, but our top 10 exports in 2009 included a wide range of goods, including transport equipment and pulp & waste paper.
Main UK exports are:
• Pulp and waste paper
• Metalliferous ores & metal scrap
• Power generating machinery & equipment
• General industrial machinery & equipment & machine parts
• Manufactures of metal N.E.S
• Machinery specialized for particular industries
• Organic chemicals
• Essential oils and perfume materials; toilet preparations
• Other transport equipment
• Professional, scientific & controlling instruments & apparatus
UK imports were up 1.9% y-o-y at £1.2b in 2009, which predominantly were textile products.
2006
£ million
2007
£ million
2008
£ million
2009
£ million
2010
Jan-Sep
£ million
Exports
318.2
288.6
391
350
327
Imports
1,021.6
992.3
1,144
1,166
998
According to Indonesia‟s Investment Coordinating Board, Foreign Direct Investment realization in 2009 reached US$ 10.8 billion and Domestic Investment realization US$ 378 million. Major British investors include BP, the Jardine Matheson Group, Unilever, Shell, Standard Chartered Bank, HSBC, Rio Tinto, Premier Oil, BAT, Prudential, Rolls Royce, GlaxoSmithKline and Astra Zeneca. There is also a strong and growing UK retail presence including Marks and Spencer, Next, Debenhams, Top Shop, Ted Baker and Harvey Nichols.
Regulations known as The Negative List were introduced in mid 2007 restricting foreign shareholdings in new investments in a number of "sensitive" sectors. The regulations met with criticism from local and foreign businesses and were a further blow to Indonesia's image as a destination for FDI. The revision to the Negative List (Presidential Decree No. 36 of 2010) was issued in May 2010. Questions are raised on whether the revised regulation will accommodate the goal of attracting foreign investments.
Economic Overview

In 2009, GDP growth reached 4.5% while GDP per capita was US$ 3,900. Private and public consumption were the main contributors, whilst investment showed signs of slowing.
Indonesia is undoubtedly better prepared to cope with the global downturn than at the time of the Asian Financial Crisis in 1997/98. The economy is expected to rebound in 2010. GDP growth was 6.1% year on year in 2008 and 4.5% year on year in 2009, among the highest in G20. The government is forecasting growth of 5.5% in 2010. Inflation fell from a high of 12.1% y-o-y in September 2008 to 2.8% y-o-y in December 2009. However, it is rising again and Bank of Indonesia expects inflation to reach 4-5% by end of 2010. FOREX reserves were US$ 93 billion in November 2010.
In January 2009, the Government announced an economic stimulus package of IDR 73 trillion (approximately US$ 6.4 billion) to help maintain positive economic growth, control rising unemployment and support exports. The package includes tax saving, lower import duties, subsidies and additional government spending on infrastructure development.
Indonesia's economy has stabilised in recent years. Structural reforms have led to some progress, but poor infrastructure, a complex regulatory environment and corruption hamper investment and growth.
The budget deficit was reduced to 0.5% of GDP in 2008. The global economic slowdown that led to a lower tax revenue, and government‟s fiscal stimulus of IDR 73 trillion (USD 6.4 billion), the budget deficit in 2009 increased to 1.6% of GDP; lower than the estimated 2.5%. The 2010 budget deficit is now planned at 2.2% of GDP, partially to carry over stimulus funding into this year. In January 2009 fuel price came down to the April 2008 level, after it was raised by 28% in May 2008. The government has now postponed plans to reduce fuel subsidies (and increase fuel prices) in 2010, but will likely to constantly reduce all subsidies until 2014.
Compared with other countries in the region, Indonesia is not particularly export focussed. Some 29% of GDP is derived from exports, mainly in the hydrocarbon, mining and agricultural sectors, and imports in manufactured goods.
Population
Indonesia is now the fourth most populous country in the world with a population estimated at 234.7 million as of 2007. Over 50% of the population lives on Java, the Lesser Sunda Islands Bali, Timor and Lombok.
• Two thirds of the population are under the age 30 with 35% under the age of 15.
• According to the Indonesia's Central Statistics Agency the population growth rate is 1.5% annually.
• The country is made up of about 300 ethnic groups each with their own customs, cultures and local languages.
• The indigenous population of Indonesia‟s major islands is mainly of Malay stock.
Getting here and advice about your stay
By air
FCO Travel Advice
The FCO website has travel advice to help you prepare for your visits overseas and to stay safe and secure while you are there.
For advice please visit the FCO Travel section

With the exception of Garuda Airlines, Mandala Airlines, Airfast Indonesia, Ekspres Transportasi Antarbenua (operating as Premi Air), Indonesia Air Asia and Metro Batavia, all Indonesian airlines are refused permission to operate services to the EU because Indonesia is unable to ensure all its airlines meet international safety standards. It is recommended that you avoid flying with Indonesian carriers subject to the EU operating ban. Flight times from London are approximately 18 hours depending on routes and stopovers.
There are international airports in several locations across Indonesia including Jakarta, Surabaya, Bali, Lombok, Ujung Pandang and Medan. International departure tax is Rupiah 150,000. Different rates of departure tax apply to domestic routes ranging from Rupiah 25,000 to Rupiah 50,000.
How to get to & from the airport
International flights land at either Jakarta, Bali or Medan. Jakarta International Airport is situated about 30km from the city centre.
Before departure, it is advisable to check with your travel agent regarding hotel courtesy buses and/or cars. Most of the larger international hotels provide this service. If this service is not available make sure you use a taxi from a registered taxi firm inside the airport. British Embassy, Jakarta, staff are advised to use only taxis from the Bluebird and Silverbird group.
It is reasonable to give the driver a 10% tip. Taxis to the city centre will cost approximately Rupiah 200,000.
Travelling in Indonesia
Air
Air travel is the easiest and most comfortable way to get around Indonesia. It is recommended that you avoid flying with Indonesian carriers subject to the EU operating ban. At airports in major towns in Indonesia, porters should be given a tip of IDR 10,000 for a small bag and IDR 15,000 for a heavier one.
Ships/Ferries
All main ports in Indonesia are served by government-owned ships, with ferries also running between islands.
Rail
The train service in Indonesia only covers Java and parts of Sumatra.
Road
The buses are used mostly by locals and are slow, unreliable, and overcrowded, but cheap. The roads are often excellent, particularly on Java but the traffic is heavy. Traffic drives on the left. In towns, the only practicable method of transport is a car. In Jakarta, air-conditioned taxis with metres can be obtained at most major hotels. They may also be hired on an hourly basis - the most suitable arrangement for a longer journey. As it can be difficult to find a taxi in some parts of Jakarta, taxis can be retained for the return journey. Tips are not expected but are appreciated.
Passports/visas
Visas are required for UK nationals entering Indonesia. British citizens visiting Indonesia are able to buy a 30 day visa upon arrival at a cost of US $ 25. Visas of this kind can be extended once for a maximum of 30 days by applying to Immigration offices within Indonesia. Some visitors may be able to use the on-board facility for purchasing visas before arrival. We understand that this service is currently restricted to a small number of flights, but is likely to be expanded in the future.

You are advised to consult the Indonesian Embassy in London.
You should ensure that your passport is valid for a minimum period of six months upon arrival. Entry to Indonesia may be refused and airlines may not carry passengers holding passports with less than six months validity. You are required to retain your arrival card for presentation to Immigration upon your departure.
Overstaying without the proper authority is a serious matter and visitors can be held in detention or refused permission to leave the country until a fine is paid.
If you stay in private accommodation in Indonesia (not a hotel) you must register your presence with the local police or you could face a fine of IDR 5 million (£350). If you stay in a hotel you will be registered automatically.
For further information, please contact the Indonesian Embassy in London http://www.indonesianembassy.org.uk/
You are advised to consult the Indonesian Embassy in London for detailed information about passport/visa and work permit/residence requirements.
Health Advice
The standard of local medical care in Indonesia can be poor and some medical tests cannot be done reliably. Good medical care can be very expensive and in remote areas attention for serious injuries or illness is likely to be unobtainable. You may require expensive medical evacuation costing up to tens of thousands of pounds. Therefore you should ensure your policy covers you for medical evacuation by air ambulance.
Indonesia suffers from periodic problems with air quality reaching hazardous levels because of seasonal smoke haze from forest fires. You are advised to check news reports and follow local advice.
Dengue fever, chikungunya and malaria occur in Indonesia. These diseases are transmitted by mosquitoes. There are no vaccinations against these diseases, but there are preventative measures that you can take, as advised on the National Travel Health Network and Centre (NaTHNaC) website. You should visit your GP to discuss malaria prevention tablets. The number of cases of dengue fever increases rapidly during the rainy season. A significant increase has been reported in areas in Kalimantan and East Java at the beginning of 2010.
There is a risk of rabies throughout Indonesia, in particular in Bali. In December 2008, local officials reported an outbreak of rabies in Bali, following a small number of deaths in the village of Ungasan in Uluwatu district (Badung Regency). In 2009, the presence of rabies was also confirmed in the Kutah area of Bali and in Pecatu village, near Nusa Dur. Sanglah Hospital in Bali has prepared a special area to treat people suspected of being exposed to the rabies virus and doctors in other clinics in Bali have been trained to care for potential victims. A small number of deaths, from rabies, at Sanglah Hospital have been reported in 2009. For further information about rabies see the NaTHNaC website.
In the 2008 Report on the Global AIDS Epidemic the UNAIDS/WHO Working Group estimated that around 270,000 adults aged 15 or over in Indonesia were living with HIV; the prevalence rate was estimated at around 0.2% of the adult population. This compares to the prevalence rate in adults in the UK of around 0.2%. You should exercise normal precautions to avoid exposure to HIV/AIDS. For more general information on how to do this see our HIV and AIDS page.
You should seek medical advice before travelling to Indonesia and ensure that all appropriate vaccinations are up-to-date. For further information on vaccination requirements, health outbreaks and general disease protection and prevention you should visit the websites of the

National Travel Health Network and. Centre (NaTHNaC) or NHS Scotland's Fit For Travel or call NHS Direct on 0845 46 47.
For more general health information see our Travel health page and for food/drink hygiene see our Eat and drink safely page.
A (H1N1) - Swine Flu
There is a dedicated Swine Flu page. Guidance on Pandemic Flu can be obtained on the UK Department of Health website.
Avian Influenza (Bird Flu)
There have been outbreaks of Avian Influenza (Bird Flu) in commercial and backyard poultry and a small number of pig farms in Indonesia. Infected birds have been found in all of Indonesia's 33 provinces with the exception of Gorontolo and North Maluku and there are ongoing outbreaks. Indonesia has more confirmed cases of human fatalities than any other country with over 100 reported fatalities (February 2009). The most recent death was in January 2010 in Jakarta province. Most human cases had direct contact with sick/dead poultry or were exposed to environments with recent outbreaks of the virus.
The WHO have confirmed that the deaths of seven members of one family in the TanaKaro district of North Sumatra in May 2006, were likely to be the result of limited, non-sustained human-to-human transmission of the virus. However, to date, there has been no evidence of widespread or sustained human-to-human transmission in Indonesia.
The risk to humans from Avian Influenza is believed to be very low. However, as a precaution, you should avoid visiting live animal markets, poultry farms and other places where you may come into close contact with domestic, caged or wild birds; and ensure poultry and egg dishes are thoroughly cooked.
The World Health Organisation (WHO) has warned of the possibility that the Avian Influenza outbreaks could lead at some point to a human flu pandemic, if the virus mutates to a form, which is easily transmissible between people.
British nationals living longer term in an Avian-Influenza affected region should speak to their employers about any pandemic influenza contingency plans which they may have in place and take personal responsibility for their own safety in the event of a future pandemic, including considering their access to essential supplies and adequate healthcare and ensuring travel documents are up to date. You should read this advice in conjunction with our Avian and Pandemic Influenza page, which gives more detailed advice and information.
You are advised to take out full medical insurance (covering medical evacuation by air ambulance) when visiting Indonesia. There are no reciprocal healthcare agreements between Indonesia and the UK.
Visitors who are not accustomed to the tropical climate are exposed to the risk of stomach infections and should have appropriate medicine available.

Preparing to Export to Indonesia
Foreign companies will usually appoint agents/distributors, who may be individuals or companies, to distribute and market their products in Indonesia. It is advisable to spend time taking local advice and assessing a range of potential agents before making a choice. Beware of agents promoting similar or identical products. Manufacturing activities are normally affected through an Indonesian subsidiary or a license agreement with a domestically owned third party. The following are the optional routes to take:
Representative Office
Foreign companies may open and maintain a representative office and the representative may be foreign or local. Such offices are not permitted to carry out any profit making business activities but may undertake sales promotion, market research and assistance to local agents and distributors.
Agent or Distributor
A foreign company that wishes to sell its products in Indonesia will usually appoint one or more agents or distributors.
Joint Venture Company
The "Penanaman Modal Asing" (PMA) is the corporate entity required for foreign investors under the terms of the foreign investment law. It takes the form of a limited liability company (perseroan terbatas - PT), with the joint ventures as shareholders. PMA companies may be either publicly listed on the stock exchange or privately owned.

How to do business in Indonesia
What companies should consider when doing business
The following are some tips to help companies setting out on the road to exporting success.
1. English is widely spoken in all the major cities in Indonesia. However, if possible, try to be accompanied by a native speaker, especially when travelling outside Jakarta.
2. Appointing the right local partner is the key to success in this market
3. Meeting the potential partner face to face is very important to gauge their expression of interest towards your business.
4. Indonesians like to be „courted‟, and prefer to establish a personal relationship in advance of a business one. It should be noted that Indonesians prefer to do business face to face and tend to neglect all forms of written communication. An initial fax to Indonesian companies will need to be followed up by phone calls to arrange appointments. Final confirmation of any arrangement for meetings can often only be done once you arrive in the country.
5. Indonesian businessmen like to receive trade literature on new or innovative products, but few will contact the sender in response. They believe that if a company is serious about entering the market, a representative will invest some time and money to research the market personally.
6. Business decisions are primarily made on price (mostly quoted in US Dollars). Liquidity in the public and private sectors is tight and cost can be more important than quality.
7. It is advisable to use the Letter of Credit for payment process when doing business in Indonesia.
Gateways/Locations – Key areas for business
Jakarta is the capital city of Indonesia, with a population of 9 million, of which 2 million are affluent, aspirational and have a high disposable income. The economy is based on trading, industries (food and beverage, cigarette, textile, chemical and craft) and services (property, banking, insurance and telecommunication). Jakarta province also has a strong agriculture sector.
With a total population of nearly 3 million people, Surabaya‟s economy centres on services and trading industries. Many big manufacturing companies such as PT Unilever Indonesia Tbk. and PT Sampoerna Tbk., have located their head offices in Surabaya.
Bandung, with a population of 2.5 million is well known as a centre for textile and garment manufacturing.
The oil & gas, natural gas and mining industries are largely centred on Kalimantan, in areas such as Balikpapan, Samarinda and Bontang. Papua, the eastern part of Indonesia, reserves oil & gas and other mining resources.
Market entry and start up considerations
It is not possible for a PMA company (Indonesian companies with foreign shareholdings) or other foreign entities to import on an unrestricted basis into Indonesia. Domestic companies may only import if they obtain an import license.
Foreign companies based outside Indonesia who export to Indonesia will need to establish a relationship with a local import and distribution company. Alternatively, you can establish a representative office to conduct market research and to promote the parent company's product range.

There are restrictions on imports at two levels:
• Goods restricted to state owned companies e.g. fuel and lubricants
• Goods restricted to sole agencies that must be approved by the government.
The classification of goods subject to import restrictions is periodically changed and intending importers are advised to contact National Agency for Export Development (NAFED) for up to date information.
Product Registration
Pharmaceutical, food and cosmetic products must be registered through the Indonesian Food and Drug authority (BPOM - Badan Pengawas Obat dan makanan) and each registered product must be labelled with sticker.
Foreign companies can contact relevant department to find out more information about product registration, e.g. foreign companies selling medical and healthcare products need to seek an advice from the Ministry of Health for registering their products.
Customs and Regulations
Indonesia and the UK signed a Double Taxation Agreement on 5 April 1993 for the avoidance of double taxation and the prevention of fiscal evasion with respect to income and capital gains. The Agreement applies to persons who are resident of one or both of the contracting states.
Import Duty - Import duty is payable at the rates from 0% - 150% on the customs value of imported goods. Customs value is calculated on the cost, insurance and freight level (CIF).
Value Added and Luxury Sales Tax - VAT is typically imposed at 10% CIF value of importers. This can be reduced or increased by a government regulation to 5% or 15%. Certain manufactured taxable goods may be subject to luxury sales tax (LST) ranging from 10-75%. To ascertain whether a particular item is subject to LST and to identify the LST rate, reference should be made to the Customs book in light of the relevant harmonised system (HS) doe.
Income Tax - Taxpayers are obliged to make a prepayment of their annual tax obligation by a withholding of 2.5% (7.5% if the company does not possess an import permit) of CIF value of imports.
It is however possible to apply for an exemption, deferment or restitution of import duties where the import meets certain criteria.
The most common such criteria are:
• Imports used in production of exports;
• Capital goods, spares and raw materials by manufacturers and certain other sectors;
• Equipment and materials imported for use in a foreign aid funded project.
•
The regulatory environment is complex and subject to change. It is worth consulting the UK Trade & Investment team for more information.
Legislation
Initial investment proposals need to be approved by BKPM (Investment Coordinating Board). The government publishes a list of business fields that are closed to investment and business fields that are conditionally open for investments (Presidential Regulation No. 36 of 2010 which replaced previous Negative List issued in 2007).
Legislation is complex and regular corrections and amendments often take place. It is worth consulting the UK Trade & Investment team for further information.
Responding to Tenders

Tenders are usually posted in daily newspapers such as Kompas and The Jakarta Post.
The normal tender specification will require certain certificates along with their tender bid. For example the newly established PMA companies shall at least have obtained a Certificate of Registration of Oil and Gas Supporting Services. In order to bid for tenders, a foreign company must appoint local agent to act on their behalf.
Recruiting and Retaining Staffing
There is an abundance of unskilled and semi skilled labour. Skilled labour, although available, is more difficult to find. Indonesia has one of the lowest average wage rates in Asia.
The major employment agencies in the Jakarta area are:
JAC Recruitment Indonesia
Menara Cakrawala (Skyline Building) 19th Floor
Jl. M.H.Thamrin No.9
Jakarta 10340
T: +62 21 315 9504
F: +62 21 315 9520
www.jac-recruitment.co.id
BoLe Associates
Graha Pratama 18th Floor
Jl. M.T. Haryono Kav.15
Jakarta 12810
T: +62 21 837 90615
F: +62 21 837 90614
www.bo-le.com
PT Monroe Consulting Group
Wisma Kemang 2nd Floor
Jl. Kemang Selatan Raya No.1
Jakarta 12560
T: +62 21 781 7040
F: +62 21 781 7041
www.monroeconsulting.com
Documentation
Commercial Invoice
Invoice must be signed by the manufacturer and must contain the following information:
 Name of Shipper
 Consignee
 Port of Loading
 Port of Discharge
 Carrier/ Vessel
 Country of Origin
 Departure Date
 Number & Date of the invoice
 Purchase Order Number
 Number and Date of L/C
 L/C Issuing Bank
 Details of the contents including the quantity, unit price, total amount in CIF Value
 Freight Charges
 Tariff Code number
 Insurance

 Number and packing ( Gross Weight and Net Weight)
Pro-forma Invoice
This is not a compulsory, although, needed by the importers for quoting price.
Labelling and Packaging Regulations
Labeling should be in Bahasa Indonesia. Exemptions may be granted only if there are no Indonesian words to substitute or if there is difficulty in finding Bahasa Indonesia with similar meaning.
Foreign companies should consult their partner and local authorities about labeling and packaging requirements. Further information is available from the Directorate General of Customs and Excise.
Getting your Goods to the Market
5 ports that handle international trade in Indonesia are Batam, Medan, Surabaya, Jakarta and Makassar.
The main bonded zones are Batam, Bintan and Karimun Islands. Companies operating in Bonded Zones benefit from incentives such as an easier Bonded Zone approval process, additional entry points, less strict monitoring of movements of goods, and other similar facilities. Companies will no longer pay VAT, import duties and luxury tax.
Intellectual Property Rights
It is difficult to protect against product imitations. Although Indonesia subscribes to the International Convention for the protection of Industrial Property (the Paris Union), it still has limited patent law and limited copyright protection.
Patents - Indonesia's first patent law came into force in 1991 and was amended in 1997 to be in line with international conventions and treaties on intellectual property rights. The Uruguay Round Agreement, to which Indonesia is a signatory, provides for a 20 year duration period (10 years for a single patent).
Trade Marks - The Indonesian Trademark Act was introduced in 1992 and was similarly amended in 1997 to be in line with GATT conventions and treaties. The Act provides protection for the first company to apply for and use a specific trademark in the country. No bona fida prior use is recognised nor is the first user of a mark legally protected unless the mark in question has been registered. A registered mark remains valid for an initial term of 10 years from the date of filing and may be renewed for another 10 years. Registration for a trademark with the Directorate of Patent & Copyright establishes a presumption of its first use and may assist in proof of ownership in the event of a dispute. Once registered, a trademark may be cancelled if the mark is not used for 3 consecutive years.
Copyright - The 1982 copyright law was amended in 1987 and 1997 and is now in line with GATT convention and treaties. The law covers published, unpublished and anonymous works. In principle, it does not matter whether the item is registered or not. The copyright term is 50 years from the first publication with the exception of photographs.

Business Etiquette, Language and Culture
General - to the Indonesians (and in particular the Javanese), form and face are extremely important. Public shows of deference to one's elders or superiors lead to the 'Bapak Syndrome' (the boss is always correct, and only he or she can decide). Courtesies are also important, and displays of rudeness or impatience frowned upon, and considered embarrassing. Backslapping is not appreciated.
Clothing - a shirt and tie are acceptable for most business meetings. Safari suits can be worn on formal occasions. Batik shirts are considered appropriate for formal occasions such as cocktail parties and receptions. Muslim customs, especially those concerning female clothes, should be observed and make up and perfume are acceptable, if used moderately. Lightweight clothes are recommended but rainwear and warmer clothes maybe needed for cool evenings and upland areas.
The Left Hand - you should not offer anything with your left hand, nor receive anything from someone with your left hand. Giving and receiving with both hands is, however, acceptable.
Feet - showing someone else the soles of your feet is considered highly discourteous in Indonesia: it is safer not to cross your legs when sitting.
Stance - standing with your hands on your hips or with your arms folded is regarded as aggressive and rude.
Refreshments - it is usual during a meeting to be offered coffee or a soft drink. It is, however, not done for the guest to start drinking until positively and formally invited to do so by the host. (If the host starts drinking himself, then this can be taken as a normal invitation). If the host forgets to drink himself, and the coffee gets cold, it is just too bad. The guest should consume at least some of the drink, however unpalatable.
The following list of general notes may assist newcomers to the country. It is not a complete guide and applies to both men and women:
• Business dealings should be conducted through an agent and tend to be slow;
• Shake hands when meeting people; both men and women will extend their hands;
• Bowing from the waist is a sign of respect;
• Be friendly, Indonesians place great emphasis on personal relationships;
• Never lose your temper;
• Business cards are exchanged immediately after introductions and should be presented with both hands or with the right. Do not use your left hand;
• At the end of a meeting, saying thank you in Indonesian will certainly help the relationship (Terima kasih);
• Literature can be in English, but prices quoted should be in US Dollars as well as Pounds Sterling;
• The correct way to beckon someone is to wave hand down. Do not use crooked finger, it is considered rude;
• Be prepared for personal questions;
• When invited to a home a gift is appreciated but must be given with the right hand.
Language
The official language is Bahasa Indonesia. English is widely spoken by young people but interpretation may be required for business meetings, particularly outside Jakarta and other major cities in Indonesia. The UKTI team can help you find a translator or interpreter.
Meetings and Presentations
When you meet someone for the first time in a business environment, you should introduce yourself with your full name and your organisation. Shaking hands is followed by the exchanged

of business cards. When addressing senior management in Indonesian companies, you should call them „Pak‟ for male and „Ibu‟ for female.
Meetings may not necessarily start on time and guests may arrive late due to traffic conditions. People often do not confirm their participation in meetings/events, or they confirm at a much later stage than is the case in the UK. Last minute cancellations of meetings are fairly common, so it is important to build flexibility into visit programmes to accommodate last minute changes.
Negotiations
The key to success in negotiating a business partnership in Indonesia is clear communication and development of long-term relationship. It is important to be very well prepared for the first meeting. However, technical data and pricing are very often discussed from the beginning.
Indonesian partners are usually reluctant to provide information on turnover, competition, and share of the market before they meet in person. However, they will be more open once they meet and tend to release information face to face. You should be prepared to discuss technical data and pricing from the beginning, and should note that foreign companies would be expected to share the promotional and marketing campaign cost.

What are the challenges?
Foreign companies may encounter some challenges when doing business in Indonesia, including:
• Complex bureaucracy
• An uncertain and unpredictable legal and regulatory environment
• Tax administration
Getting Paid – Terms of Payment
Most quotations will be in US dollars and CIF in any major port in Indonesia. Normal terms of payments employed in foreign trade are permitted (L/C), telegraphic transferred if done in advance, COD or open account.

How to Invest in Indonesia
Initial investment proposals need to be approved by BKPM (Investment Coordinating Board). As a general rule, all business sectors are open for foreign investment unless specifically prohibited. The Government publishes a list of business fields that are closed to investment and business fields that are conditionally open for investments (Presidential Regulation No. 36 of 2010 which replaced the previous Investment Negative List of 2007).
Foreign Direct Investment also known as “Penanaman Modal Asing” (PMA) is the corporate entity required for foreign investors under the terms of the foreign investment law. It takes the form of a limited liability company (Perseroan Terbatas – PT), with the joint venture partners as shareholders. PMA companies may be publicly listed on the stock exchange or privately owned.
Foreign companies are encouraged to seek assistance and advice from the Indonesian Investment Coordinating Board (BKPM). BKPM can provide advice in the regulatory environment for investors and are responsible for the processing of all foreign and domestic investment applications. BKPM also issues approvals and business licenses.
The initial investment approval is normally granted for the period of 3 years and when the commercial operations are ready to commence, the FDI has to apply for a permanent business license valid for 30 years but can be extended for a further 30 years.
Licences/Permits
The processes involved in becoming an FDI company (in chronological order):
• Submit the application and the required documentation as per the investment plan to BKPM (Investment Coordinating Board). A joint venture agreement should also be drawn up if an investment includes Indonesian partners
• Obtain the initial license (Surat Perintah Pemeriksaan Pajak - SPPP) which will be valid for 3 years
• Incorporate the SPPP (Surat Perintah Pemeriksaan Pajak)
• Establish the company‟s articles of association (with sufficient proof of capital investment) through a public notary. This should then be sent to the Ministry of Justice & Human Rights for approval and recording in the state gazette which is issued on a monthly basis
• Register the company address with the local municipal Government
• Obtain tax payer registration number (NPWP – Nomor Pokok Wajib Pajak) and value- added tax number from the Tax Office
• Obtain various licenses such as facilities, import & export and manpower planning from the Ministry of Trade
• Apply for the Fixed Operating License from BKPM (Investment Coordinating Board)
• Prepare and send half yearly reports to the BKPM (Investment Coordinating Board)
• Incorporate facilities to begin operations
• Obtain provincial approval for the Fixed Operating Licenses
• Receive Fixed Operating License with 30 years validity period

Financial Assistance
Indonesia offers tax holidays to investors in certain industries. Further details can be obtained from UK Trade & Investment at the British Embassy.

Contacts
If you have a specific export enquiry about the Indonesian market which is not answered by the information on this report, you may contact:
UK Trade & Investment Enquiry Service
Tel: +44 (0)20 7215 8000
Fax: +44 (0)141 228 3693
Email: enquiries@ukti.gsi.gov.uk
You will be signposted to the appropriate section on our website, or transferred at local call rate directly to the British Embassy in Jakarta.
Otherwise contact the team in Indonesia directly:
UK Trade & Investment Indonesia
British Embassy Jakarta
Jalan MH Thamrin 75
Jakarta 10310
Indonesia
Deborah Clarke
Director of Trade & Investment
Tel: +62 21 2356 5200
Fax: +62 21 2356 5352
Email: Debbie.Clarke2@fco.gov.uk
Owen O’Connor
Deputy Director for Trade & Investment
Email: Owen.O'Connor@fco.gov.uk
Sectors:
• Advanced Engineering
• Fire, Police & Security
• Defence
• Global Sporting Events
• Olympics
Lian Jap
Senior Trade & Investment Manager
Email: Lian.Jap@fco.gov.uk
Sectors:
• Financial Services
• ICT
• Science & Technology
• Research & Development
• Education & Skills
Annetly Ngabito
Trade & Investment Manager
Email: Annetly.Ngabito@fco.gov.uk
Sectors:
• Ports
• Construction
• Railways
• Leisure & Tourism
Diah Ayu Noor
Email: Diah.Noor@fco.gov.uk
Sectors:
• Energy
• Environment & Water
• Low Carbon
• Metals & Minerals
• Mining
Peggy Gaspersz
Email: Peggy.Gaspersz@fco.gov.uk
Sectors:
• Life Sciences
• Creative & Media
• Agri Technology
• Food & Drink
• Giftware, Jewellery & Tableware
Debby Sabrina Tobing
Senior PA to Director of Trade & Investment
Email: Debby.Tobing@fco.gov.uk
Sector:
• Clothing, Footwear & Fashion
Ingrid Novianti
Assistant Trade & Investment Manager
Email: Ingrid.Novianti@fco.gov.uk
Sector:
• Engineering – Automotive
Esther Sirait
Email: Esther.Sirait@fco.gov.uk
Sector:
• Airports
Annie Lufti
Email: Annie.Lufti@fco.gov.uk
Sector:
• Chemicals

Resources/Useful Links
Country Information:
BBC Website:
http://news.bbc.co.uk/1/hi/country_profiles/default.stm
FCO Country Profile:
http://www.fco.gov.uk/en/travel-and-living-abroad/travel-advice-by-country/country-profile/
Culture and communications:
CILT – National Centre for Languages - Regional Language Network in your area:
http://www.cilt.org.uk/workplace/employer_support/in_your_area.aspx
Kwintessential culture guides:
http://www.kwintessential.co.uk/
Customs & Regulations:
HM Revenue & Customs: www.hmrc.gov.uk
Import Controls and documentation (SITPRO): http://www.sitpro.org.uk
Economic Information:
Economist:
http://www.economist.com/countries/
Export Control
Export Control Organisation:
http://www.bis.gov.uk/exportcontrol
Export Finance and Insurance:
ECGD: http://www.ecgd.gov.uk/
Intellectual Property
Intellectual Property Office:
www.ipo.gov.uk
Market Access
Market Access Database for Tariffs (for non-EU markets only):
http://mkaccdb.eu.int/mkaccdb2/indexPubli.htm
SOLVIT – Overcoming Trade Barriers (EU Markets only)
www.bis.gov.uk/EUMarketAccessUnit
Standard and Technical Regulations:
British Standards Institution (BSI): http://www.bsigroup.com/en/sectorsandservices/Disciplines/ImportExport/
National Physical Laboratory: http://www.npl.co.uk/
Intellectual Property - http://www.ipo.gov.uk/

Trade Statistics:
National Statistics Information: http://www.statistics.gov.uk/hub/index.html
UK Trade Info: https://www.uktradeinfo.co.uk/
Travel Advice:
FCO Travel: http://www.fco.gov.uk/en/travel-and-living-abroad/
NHS: http://www.nhs.uk/nhsengland/Healthcareabroad/
Travel health: http://www.travelhealth.co.uk/
Produced by the UKTI Team in Indonesia
Contact: Deborah Clarke, Director of Trade & Investment
Email: debbie.clarke2@fco.gov.uk
Last Updated: November 2010
Business Link: International Trade
Business Link‟s International Trade pages provide an overview of export basics including licensing, customs procedures, classifying and movement of goods, other regulatory information and export paperwork issues. It also introduces exporters to the UK Trade Tariff.
Essential reading for exporters!
Find out more at: http://www.businesslink.gov.uk/bdotg/action/layer?r.s=tl&r.lc=en&topicId=1079717544

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