Expanding Your Business in Indonesia: What to Prepare
24 December 2022
The need – or opportunity – to establish an international presence in the market is a reality for companies operating in today’s economic environment. Of course, this entails establishing a business in another country—and you might have set your eyes on Indonesia.
There are several reasons for business expansion. You may want to tap into a strong market or a local talent pool. Perhaps there is a steady flow of import/export between your company’s location and that other location, and you decide it would be more cost-effective to simply put boots on the ground there.
Whatever your reason behind the business expansion, you should keep a few things in mind when starting a business in Indonesia.
Prepare the Risks of Foreign Exchanges
This is when the value of your investment fluctuates due to currency fluctuations. For example, if your domestic currency appreciates against a foreign currency, any profits your company earns in that foreign country will be reduced once converted back into your own currency. Because exchange rates can be difficult to predict, protecting your business from this type of risk can be difficult.
According to Indonesian law, the corporate structuring for PT PMA requires a minimum of one director, one commissioner, and two shareholders.
Prepare for Differences in Cultural Norms
This might be obvious, but it is worth the reminder. Doing things the way you do them in your home country may not always be compatible with the cultural norms of your new workplace. What you usually find common in your home country might be different in Indonesia. Your team and partners might behave differently, though still maintaining the same level of expertise or professionalism.
Speaking up and sharing your opinions and ideas, for example, is often rewarded in American culture, even if you don’t necessarily have new insights to add. In contrast, in Indonesian culture, we are more introverted and quiet in group settings, preferring to share feedback more openly in smaller groups or one-on-one.
Prepare to Understand the Community
Do your homework and learn about what works and what doesn’t in the new environment you’re about to operate in, no matter how big or small the cultural differences are. It’s no coincidence that locals appreciate it when you make an effort to communicate with them in their “language,” whether that’s through words, gestures, culture, gesticulations, feedback, commentary, conflict, or anything else.
Get Familiar with the Local Laws
It is essential to get familiar with the local Indonesian laws to make sure your business is legal. Knowing the local laws is critical because the consequences of failing to comply can be severe. There is two most important regulation any foreign investors need to know; the Indonesian Law No. 40 of 2007 on Limited Liability Company, which guide the establishment of foreign-owned companies, and the Law No. 25 of 2007 on Capital Investment regulates foreign investment in the country, which addresses direct investments in all sectors. On top of that, you also need to get familiar with employment law, building regulations, taxes, and much other legal stuff. It can get quite overwhelming for any investors, so you can always seek help from our professionals from Synergy Pro.
Look for the Local Talents
Rather than bringing talent to you, go to where they are. Indonesia has a large pool of talent that attracts foreign companies. They have a good education system, and a fair number of them speak English, making it easy to build a blended team.
Professional talents from Indonesia are cost advantages as well. However, don’t focus solely on how much money you can save by starting a business in a new country with lower wages. The nuances of finance go deeper than that; consider the skill sets available, the competition for top talent, and other costs associated with establishing a new location.
Hire The Local Experts
Many people emphasize the importance of having local representation when starting a business in a foreign country to help you avoid potential pitfalls and misunderstandings. More importantly, they will assist you in ensuring full compliance in all aspects of local business, whether financial in terms of reporting, taxes, and so on, or legal in terms of labor and trade laws. It is also important to have the local team involved in the team-building process, as it will create a sense of belonging to the local team and boost their enthusiasm.
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