Doing Business in Bali

Bali is a piece of heaven on earth. Its stunning landscapes, breathtaking cultures, friendly people, vibrant communities, and dynamic business activities are only several of so many reasons why foreign people invest in this land of the god and goddess. Besides, Bali is a well-known place to provide luxuries and prestige so that it is not surprising if Bali has become the destination for so many business people from all over the world.

Bali is located in the mid-part of Indonesia, with the area of around 2,175 square miles. The population of Bali based on the latest census was 4,225,000. As one of the most popular tourist destination in Asia, it is estimated that there are more than 1,500,000 foreign tourists visited Bali, and this number grow continuously every year. Tourism is the biggest magnet in Bali.

Moreover, Bali and its exoticism have been becoming a favorite business place. Many people, domestically or internationally, come to Bali to do—or at least discuss—businesses. Bali has also increasingly become a destination for start-ups and collaborative works. Therefore, it is not surprising that despite its beauties, Bali also offers many business opportunities for both Indonesian and foreign investors.

The first and most important thing to prepare is your investment plan. You must first consider what area of business you want to invest in and then check it in Indonesia negative investment list. You must aware that certain kinds of businesses are prohibited (or allowed with certain restrictions) to be fully owned by foreigners. (Read: Foreign Investment in Indonesia).

After that, you also need to understand that there are minimum paid up capital and investment in Indonesia. Based on the newest regulation from Indonesian Investment Coordinating Board (BKPM), it is clearly stated that the minimum capital for foreign company is IDR 10 billion. In addition, the paid up capital that the company has should be 25% of the authorized capital or above IDR 2.5 billion. It is very important to note that based on the most recent regulation, the amount of the paid up capital should have a legal proof that must be submitted to the Indonesian Minister of Law and Human Rights. This policy is applied to ensure that the foreign company is healthy and able to run its business operation well based on the laws and regulation applied in Indonesia. Having the capital ready, you can start to prepare the registration of your foreign company in Indonesia.

However, if your capital is less than the specified amount mentioned above, you still can invest in Indonesia by having other forms of businesses. Opening a representation office or a local company—instead of a foreign company—is another alternative that you can do to invest in Indonesia. However, different kinds of companies also have different kinds of rules. Take for example, if you want to open a representative office, you don’t need to have large amount of capital or paid up capital. However, it is prohibited to directly generate revenue and profit, as well as engage in sales.

If you want to open a local nominee, you can choose the following type of company (based on the amount of the company’s net worth:
- A micro company, which has the net worth up to IDR 50 million.
- A small company, which has the net worth between IDR 50 million to IDR 500 million.
- A medium company, which has the net worth between IDR 500 million to IDR 10 billion.
- A large company, which has the net worth above IDR 10 billion.

Next, you need to consider a business address, because you cannot register your company in Indonesia unless you have a local business address. You even have to submit the document signed by the local authorities stating the exact location of your business. Therefore, having a reputable business address is very crucial.

The business address shall be located in the business district or area. If your budget is big enough, you can rent a place. However, if you only have limited budget, you can use the service of virtual office and serviced office. Serviced or virtual offices are both accepted legally under Indonesian law.

You need to do a comprehensive research if you want to choose the right place to conduct your business in Bali. You may choose an agent to help you, but you must keep in mind that you are dealing with trusted and reputable agent to avoid inaffective decisions. The other reason also because changing business address is a complicated thing. Moreover, you should also match the type of business and the area of Bali that you choose. Some areas are more suitable for certain businesses.

It is important to check the spot by yourself before you agree to rent the place. This rule is a must for both serviced office and virtual office. You must check the facilities as well as the neighboring areas.

When you run a business, you need workers. You need to hire people with work ethics and professional capabilities to support your daily business activities. Being a foreigner in a country with complicated bureaucracy, you will find it difficult to get the best local talents. Even when you want to hire foreign people, you need to follow certain strict law and regulation to bring them legally to your company. It means that you need an HR management, which has thorough understanding of your company as well as the law in Indonesia.

Most specifically in Bali, there are also some strong cultural values that are brought to the professional fields. This includes many special holidays with certain obligations that should be followed by any business in Bali. One example is Nyepi Holiday, which requires all business to shut its operation during the day. Without prior knowledge of these kinds of cultural values, you will find it hard to cope with the local workers.

Thus, establishing an HR Management for your business in Bali is vital. Your HR Management team should also create certain HR guidelines and functions that will affect your whole business. These include HR policies, compensation policies, recruitment, and training.

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It takes 1 to 1.5 months to establish a company.

The process of starting a company in Indonesia can be done by one of these 3 ways. These legal entities are: Local Company, Foreign Direct Investment Company known as a Limited Liability Company, and Representative Office.

A. Local Company (PT) - Company Registration Indonesia as Local PT
A foreigner can start doing business in Indonesia as a local citizen or a foreign investor under a local nominee arrangement as this kind of company allows only 100% local ownership. On the contrary to other legal entities, a local company is not a subject to such strict requirements and limits.

B. Foreign Owned Company (PT PMA) - Company Registration Indonesia as PMA
Foreign-owned limited liability company is a legal entity that can be fully owned by foreigners. However, the maximum foreign ownership is determined by the business sector and business activities. The restrictions are listed in a regulation called the Indonesian Negative Investment List.

C. Representative Office - Company Registration Indonesia as Representative Office
Commonly considered as a branch of parent company overseas, it can be your first step to enter the Indonesian market. The purpose of this legal entity is marketing activity, preparing the establishment of PT PMA, or conducting market research. No direct selling or generating revenues is allowed.

Indonesia offers great opportunities to foreign investors due to the country’s large and young population, rising consumption, abundant natural resources, and cheap labour. Therefore, each year foreign direct investment (FDI) realization in Indonesia tends to grow. This section discusses the incorporation of a foreign investment limited liability company in Indonesia, known as Perseroan Terbatas Penanaman Modal Asing (abbreviated PT PMA). It is the legal entity through which a foreign investor can conduct commercial activities in Indonesia.