Doing Business

Understanding the Cost of Doing Business in Indonesia

Trường Lăng

October 24, 2024

Doing Business

Understanding the Cost of Doing Business in Indonesia

Trường Lăng

October 24, 2024

cost-of-doing-business-in-indonesia-3

Indonesia has become one of the largest economies in the Southeast Asia region. With the huge marketing potential, many foreign investors and entrepreneurs came into the country in search of their luck. These days, Indonesia has been doing many interventions in improving its business climate.

Still, businesses find their journey to build a nest in Indonesia tough with various stumbling blocks. The complications of local regulations combined with the fluctuating currency rate and regional disparity make for a somewhat unpredictable financial environment. According to Apindo, or Indonesian Employers Association, business in Indonesia generally spends higher than in other ASEAN-5 countries.

That is why companies must first understand how to build their nest in Indonesia; one of the most important steps, therefore, is to build a strategy for cost management in the market. Hence, understanding the financial implications of operating in this dynamic environment is critical both for local and foreign businesses.

Key Takeaways:

  • Indonesia became one of the biggest economies in Southeast Asia.
  • According to Apindo, or the Indonesian Employers Association, doing business generally costs more in Indonesia compared to the other ASEAN-5 countries.
  • A number of emerging trends are pushing foreign investment upwards, making Indonesia one of the favorite destinations for companies seeking to expand their operations in Asia.

Why Do Business in Indonesia?

Since Indonesia has become the largest economy in Southeast Asia, Indonesia has been an appealing place to consider for any form of investment. Indonesia is the best investment for a foreign investor who is looking for great growth opportunities. It is a very strategic location for business who aim to tap into new markets due to its youthful workforce and a rapidly growing middle class.

The Indonesian government prioritizes the improvement of business environment. Some of the improvements were tax incentives, job opportunities expanding to expats, support for the New Capital Nusantara project, according to Jennifer Halim, Manager, International Business Advisory Unit, Dezan Shira & Associates, Jakarta (Jennifer Halim, 2023).

A number of factors make the country popular for foreign investors who seek to diversify their operations into Asia. It became relatively easier to reach ASEAN and South Asia, two booming markets with growing consumer bases. Besides, a number of companies are aiming to support their activities in China and, at the same time, consider alternative strategies that could diversify risks. With favorable trade agreements and business incentives, Indonesia is in a very good position to attract companies wanting to diversify their presence without relying solely on the Chinese market.

A number of recent disruptions to global supply chains and rising labor costs in China have helped more solidly position Indonesia as a comparator in a “China+1” strategy. Indonesia has earned its place among the most promising markets in the world, boasting a large and skilled labor pool, a growing middle class with increasing purchasing power, and an abundance of natural resources. According to Standard Chartered Bank, Indonesia’s economy, currently valued at US$4.2 trillion, is expected to reach US$10.1 trillion by 2030, which could place it as one of the largest economies globally based on purchasing power parity. This growth presents a very exciting opportunity for investors looking to benefit from a fast-changing market.

To foreign investors, Indonesia offers a substantial market with ample room for further growth. A favorable investment climate, combined with a diversified economy and commitment to reform, makes Indonesia a promising destination for those who want to expand their business footprint in Asia.

Indonesia has also been incrementally moving the ranking pertaining to the ease of doing business through streamlining and enhancement of the general climate of doing business in the country. Some of the areas that have been enhanced by the country to favor EODB include the following:

  • Ease of Starting a Business: The process is made simpler with the introduction of an online system for business licensing that issues electronic certificates.
  • Paying taxes: An e-filing and e-payment system has been implemented for key taxes, thus streamlining the process.
  • Enforcing contracts: Things have gotten better in that an online case management system for judges has been implemented to improve efficiency in filing and serving court documents.
  • Trading across borders: There is increased efficiency regarding online processing of export customs, thus reducing time and costs traditionally involved in conducting cross-border trade.
  • Access to electricity: The renovations and upgrading of the electric grid infrastructure have improved access to electricity for business.

You Might Also Like: Comprehensive Steps for Establishing a Trading Business in Indonesia

Ease of Doing Business in Indonesia-Process, Time, and Cost

Doing business in Indonesia, especially in metropolitan cities such as Jakarta, requires the acknowledgement of how doing business in Indonesia requires consideration of intricacy with regard to procedures and processes in place. Business setup in Indonesia requires an investment process that shall consider a wide array of regulatory frameworks along many lines of operation such as licensing and permits, which is often quite elaborate and time-consuming.

Explore Further Topic: Exploring Indonesia’s Potential: A Snapshot of FDI Inflows

These processes may take a quite different time depending on the type of business and the place; usually, there is additional bureaucratic friction in urban centers. Besides financial costs, setting up operations in Indonesia includes all sorts of expenses: from paying registration fees and compliance costs to ongoing operational expenditures. It is important for businesses to understand these aspects in their effort to plan and allocate resources and make strategies that enable easy entry and expansion in this vibrant market.

Quoting from World Bank Group in the book with the title ‘Doing Business 2020: Economy Profile – Indonesia’, following are the details of the process, time, and cost of doing business in Indonesia, precisely Jakarta (World Bank Group, 2020).

1. Paying Fee to Obtain Company’s Name Clearance

Some kind of fee is paid for clearance of a company name. It usually is done through the medium of a notary, using some kind of computerized processing system.

In real life, the notaries conduct name reservations and clearances. To obtain the clearance for a proposed company name, he has to pay IDR 100,000 to the notary. This fee is payable online through Yap. This step will take less than a day to complete.

2. Clearance of the Company’s Name at the Ministry of Law and Human Rights

According to, the company cannot use a denomination that:

  • has already been legally used by another company or is similar to the name from another company;
  • offends public order and/or decency;
  • represents, or contains, an expression identical or similar to the name of a state agency, government agency, or international agency, except with their approval;
  • it does not state the purpose and objective and business activities of the company or it only mentions the purpose and objective of the company, but it does not have a name of its own;
  • the company’s name consists of mere numbers or figures or letter/l set of letters without forming any words; or
  • means a Company, legal entity, or civil enterprise (persekutuan perdata).

If the name of the reservation is similar or identical to any other company, the Ministry of Law and Human Rights may refuse such an application. Based on Article 4 of the MoLHR Regulation No. 1/2016, an electronic application of the company name shall be submitted to the Minister of MOLHR through the Legal Entity Administration System (Sistem Administrasi Badan Hukum, SABH). This application includes the submission of the Application Form Company Name, which comprises:

  • the Payment Number for the name of the company approval
  • the Name of the reserved company

The electronic approval for the Company Name issued by the Minister of MOLHR, as mandated in MoLHR Regulation No. 1/2016, will comprise:

  • the Booking Number of the company name
  • the approved name of the company
  • date of booking
  • expiration date
  • payment code

3. Non-Tax State Revenue (PNBP) Fee Payment of Legal Services

cost-of-doing-business-in-indonesia-1
Source: Portonews

Pursuant to Attachment 1 of Government Regulation No. 45/2016, PNBP for legal services regarding the establishment of a PT shall be paid. The notary processes the payment through the Yap platform, which can be done in less than a day.

The fee schedule, in accordance with Regulation of the Ministry of Law and Human Rights of the Republic of Indonesia No. 8 of 2018, reads as follows:

  • 500,000 IDR, to validate the company as a legal entity;
  • 430,000 IDR for publication and supplement in the State Gazette

4. Coordination with a Notary to Obtain the Standard Form of the Company Deed and Notarize Company Documents

Here, the notary has to get the form of the deed in standard form for the company, which the founders of the business will fill in and consider with regard to the provisions agreed upon. Afterwards, the notary will be notarizing the documents of the company; the notarial deed, or in other words, the deed of establishment, and the articles of association.

Based on Regulation No. 8 of 2018 by the Ministry of Law and Human Rights of the Republic of Indonesia, the notary fee for drafting and notarizing company documents shall be as follows:

  • IDR 500,000 if the share capital is up to IDR 25 million;
  • IDR 2 million if the share capital is up to IDR 500 million;
  • IDR 4 million for companies whose capital is up to IDR 1 billion.

5. Making of Company Stamp

Though company stamps are not legally required in Jakarta, nevertheless, all applications must be stamped by the companies. No institution will entertain and approve any document without a stamp of the company. It will take a day and cost IDR 30,000.

6. Filing the Application to the Ministry of Law and Human Rights for Approval of the Deed of Establishment

According to Indonesian Company Law No. 40 of 2009 Articles 9, 10, 29 and 30, the application for approval of the company establishment deed may be submitted electronically to the Ministry of Law and Human Rights (“Ministry of Law”). The bank account certificate and a copy of the relevant bank transmittal advice shall be attached to such application.

This is because the application and processing is an online process, and the submission may take less than one day. The steps of application are as follows:

  • The application must be submitted within 60 days from the date of the establishment deed.
  • In case the application meets the requirement, a statement of no objection shall be issued electronically by the Ministry of Law, if the application fails to meet the requirement, it shall issue a statement of objection electronically.
  • The applicant needs to submit the original application, together with supporting documents, to the One Stop Service Center within 30 days from the no-objection statement date received from the Ministry of Law.
  • Within fourteen days after the above two are satisfied, the Ministry of Law will issue the legalization of establishment of the company.
  • Company information approved, including but not limited to company name, domicile, objectives, duration, and capital, shall be registered in the Company Registry.
  • The Ministry of Law shall publish the establishment of the company in the Supplement State Gazette (TBNRI) within 14 days from the date of issuance of the Ministry’s Approval Letter.

As from March 2014, the Ministry of Law and Human Rights issues approvals for the deed of establishment electronically.

7. Application for Certificate of Company Domicile

The founders of the business must secure a certificate of company domicile. This is given by the head of the village, Lurah, where the company is situated or by the management of the building if space there is rented for an office.

This may take two days. No fee pays for obtaining this certificate.

8. Single Business Number Application

In July 2018, the single business number, or NIB, took over for the permanent business trading license, or SIUP, and the company registration certificate, or TDP.

Starting on July 9, 2018, the launch of new electronic integrated business licensing services that can be accessed through the Online Single Submission (OSS) portal opens registration for the NIB. This can take from 1 day and with no cost.

9. Register with the Ministry of Manpower

According to Article 6 of Law No. 7 of 1981 on the Obligatory Labor Affairs Report, any company is required to provide a report on its labor affairs to the Minister of Manpower and Transmigration or his representative at the latest 30 days from the date of establishment of the company. Such a report shall relate to the following matters, among others:

  • identification of the company;
  • labor relations;
  • protection of workers;
  • job opportunities

The Labor report shall be submitted online through www.wajiblapor.kemnaker.go.id. The mandatory labor affair report registration is approved within one day from the receipt date of the complete application. The registration process will only take a day to finish with no charge at all.

10. Registration of Workers Social Security Program (BPJS Ketenagakerjaan) and Healthcare Insurance Program (BPJS Kesehatan)

cost-of-doing-business-in indonesia-2
Source: Kompas.com

There are two types of Social Security Programs from BPJS, obliged for the employees to participate in: the Workers Social Security Program (BPJS Ketenagakerjaan) and the Healthcare Insurance Program (BPJS Kesehatan).

BPJS Ketenagakerjaan provides insurance for workers related to work accidents, old age, pension scheme, and death. The employers shall contribute as follows:

  • Large and medium-scale businesses participate in all the programs, including occupational accident, old age, pension, and death security.
  • Small businesses shall enroll for occupational accidents, old age, and death security programs.
  • Micro businesses shall include occupational accident and death security programs.

The workers also should be registered with BPJS Kesehatan, for which the employees have to provide data, such as full name, date of birth, selected health service provider, and other personal data concerning family members covered under health insurance, in addition to the salary data.

An application for both the Social Security Programs can be jointly made online using the form available on the website at www.bpjs.go.id. A soft copy of the certificate will be issued within a single day. The applicant will also be sent by post the membership card and the registration certificate.

11. Acquisition of a Taxpayer Registration Number (NPWP) and a VAT Collector Number (NPPKP)

It is mandatory to register with the tax authority in advance to obtain a VAT collector number, NPPKP Nomor Pokok Pengusaha Kena Pajak and a taxpayer registration number, NPWP Nomor Pokok Wajib Pajak. Applications can be submitted to the relevant tax office for where the company is resident or online via http://www.pajak.go.id.

Through online application, it can be done by registering yourself on the website as a taxpayer and then follow the procedure stated there, such as filling out the application form and attaching the document copies as mentioned below:

  • The deed of establishment
  • Identity card of one active Director, KTP
  • Letter Statement assuring the place of business from one active Director- Form is Provided.

The NPPKP is issued online, and the NPWP card along with the Registered Statement Letter may be obtained within one calendar day after the submission of documents free of charge. NPWP can be collected from the tax office or delivered by post.

Viettonkin: Smoothening Your Way into Business in Indonesia

In the end, it is a question of how one wades through the cost of doing business in Indonesia, with so many different financial obligations and regulatory requirements, along with various administrative procedures. From securing basic permits and registrations to compliance with labour legislation and taxation- adequately equipped with the information on how to handle these costs, a business will be better situated to handle these costs intelligently. It will go on to grow and change continuously, and having a deep-seated understanding of such costs will be vital for any company looking to establish business in this thriving economy.

In such a case, Viettonkin Consulting stands in a strategic position to help businesses deal with all this complexity. At Viettonkin, we believe that with our custom solutions and deep knowledge of local regulations, combined with extensive experience in serving foreign investors, we know just how to make the commencement process as smooth as possible and continue operating smoothly in Indonesia. With the support of Viettonkin, one can optimize costs by receiving valuable insights into the marketplace, which enables smoother entry to and sustainable growth within the Indonesian business landscape.

Want to know more about how Viettonkin can help your company in an Indonesian business setting? Click this link to learn further.

Also Read: Comprehensive Guide to Obtaining Business Licenses in Indonesia for New Companies

Related posts

Doing Business

Learn About the Challenges of Doing Business in Indonesia

Business, in simple words, implies organized efforts of individuals or groups to produce goods and sell them, or services, for profit. It lies in the ...
Read more
Doing Business

A Complete Guide to Business Licenses in Indonesia for New Companies

In Indonesia, business licenses play a crucial role in pursuing legal compliance and performing smooth business operations. More than being the legal right to conduct ...
Read more
Doing Business

A Full Guide How to Start a Trading Company in Indonesia

Trading companies played a great role during the early stages in setting up Indonesia’s commercial scenery. From highly being characterized by small enterprises operated by ...
Read more
Doing Business

(Part 3) Semiconductor Production: Vietnam’s Potential

Embarking on an impactful journey, Vietnam is poised to realize its prowess in semiconductor production. In a landscape propelled by the global demand for innovative ...
Read more

Download our Latest Ebook about Real Estate and Property!

Real estate holds a pivotal position in the development of a country, not only via the spillover impacts on other economic sectors such as construction, manufacturing, tourism, finance and banking etc. but also affecting the social dynamic by mobilizing the residency and infrastructure system. Foreign direct investment in real estate (RFDI) in Vietnam has a long running history and is unique in that it is largely dominated by the private sector compared to other industries which usually still have a rather large Government involvement. International capital has consistently been selecting real estate as the destination of choice, given that RDI has always been in the top 2 and 3 for volume inflow over the last 10 years, even throughout extremely turbulent periods such as COVID-19, per the General Statistics Office of Vietnam’s (GSO) data. Find out more in this ebook edition.

Tải cuốn ebook mới nhất về nền kinh tế số Việt Nam!

The digital economy of Vietnam has been fueled and accelerated by the global digital trends and the pandemic Covid-19. The movement of digital transformation is underway in every corner of Vietnamese life, strongly influencing the way people do things. Digital economy is the future of the Vietnam economy. Realizing the potential of the digital economy, the Vietnam government has issued policies, guidelines and created legal frameworks to support and further enhance this economy. In this ebook edition, the digital economy is looked at from different angles. Perspectives from the key elements comprising Vietnam digital economy are examined and discovered.

Our Happy Clients