Indonesia News

How to Set Up a Limited Liability Company in Indonesia

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It is not mandatory for foreign investors looking to enter the Indonesian market to establish a new Limited Liability Company. Would-be investors may just invest their capital in an existing local company operating in their field of business by following standard acquisition procedures. However, for those looking to establish a new Limited Liability Company or Penanaman Modal Asing (PT PMA), the following are the key steps they would need to follow:

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Indonesia Market Entry Models: Limited Liability Company

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There are two main market entry options available for foreign investors looking to expand into Indonesia: a Limited Liability Company and a Representative Office. A Limited Liability Company is known as Perseroan Terbatas or ‘PT’. Under a PT, shareholder liability is limited to the extent of the capital agreed to be contributed by the shareholders. Indonesian law divides PT into two classes: (1) Local Company and PDMN Company and; (2) Penanaman Modal Asing (PT PMA). In this article, we discuss the PT PMA, where up to 100 percent overseas ownership is permitted.

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Indonesia’s E-Commerce Sector – Market Potential and Challenges

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Indonesia’s e-commerce industry holds a lot of promise for foreign investors. The country has more than 130 million internet users and a burgeoning consumer market riding on the growing accessibility of mobile internet in the country. Known as Asia’s foremost mobile-first nation, Indonesia offers retailers a unique opportunity to dominate its online retail market.

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Indonesia’s Growing Special Economic Zones – Opportunities and Challenges

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Over the last decade, Indonesia’s economic clusters –special economic zones (SEZs) and industrial estates have grown multi-fold, both in terms of number and breadth. In 2014, there were approximately 74 industrial estates with an area of 36,300 hectares in the country. By 2017, the number of industrial estates expanded to 87 with an area of 59,700 hectares. Similarly, the number of SEZs in the country has increased to 12; out of these, four are currently operational, representing economic activities across various industrial sectors.

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Indonesia Relaxes Loan-To-Value Ratio to Spur Credit Growth

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By Dezan Shira & Associates

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Bank Indonesia, the country’s central bank recently announced a relaxation of the loan-to-value (LTV) and financing-to-value (FTV) ratios in the real estate sector. The move, which will come into effect from August 1, 2018, will reduce the down payment obligations of property buyers. The move is also expected to prompt home buyers to purchase real estate by availing the House Ownership Credit (Kredit Pemilikan Rumah – KPR) scheme. It is also aimed at providing more flexibility to banks and financial institutions to disburse loans through the mortgage program.

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Indonesia Increases Interest Rate for Second Time in Two Weeks to Boost Flagging Rupiah

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By Dezan Shira & Associates

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Bank Indonesia (BI), the country’s central bank recently raised its key interest rate for the second time within a span of just two weeks. The move is seen as an attempt to arrest the volatility of the Rupiah, the country’s currency as well as to prevent the outflow of capital from the archipelagic nation.

On May 30, 2018, BI increased its key benchmark by 25 basis points to 4.75%. This was a repeat of an earlier increase of 25 basis points announced on May 17, 2018. The previous increase was in itself the first interest rate hike in four years.

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IP Protection in Indonesia’s Food and Beverage Industry

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By: South-East Asia IPR SME Helpdesk

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The food and beverage (F&B) industry includes the research and development, processing, production, wholesale and distribution, including branding and retailing, of a wide range of food and beverage products.

Recent research by the EU SME Centre suggests that European SMEs are increasingly expanding their business abroad, and are making significant investments in product development, pricing and growth strategies in emerging markets.

 

Rapid economic growth in South East Asia is creating a burgeoning market for imported F&B products. Indonesia accounts for one third of the region’s GDP and has the fifth largest fresh food market in the world. The turnover in Indonesia’s processed F&B industry grew by 4 to 5 percent in the first quarter of 2015 from the same period in the previous year.

While opportunities for EU SMEs in Indonesia’s F&B industry are promising – the country is demanding more ‘Westernized’ products – it should be noted that the majority of the Indonesian population is Muslim. This means that all slaughtered food must possess halal certification and adhere to specific labelling requirements, and that importers should be aware of regulations related to alcohol.

As well as paying attention to Indonesia’s F&B regulations, EU SMEs should also take steps to ensure that their IP rights are protected. There are several types of IP that are relevant to the F&B industry.

Trade marks in Indonesia

Concerns about food safety and halal observance in Indonesia, and the relatively high number of counterfeit and home-made products (especially in the alcoholic beverage industry) mean that F&B reputation is especially important.

A trustworthy brand can be critical to the success of F&B products in Indonesia, as in other countries in South-East Asia. A company’s trade mark can therefore be critical for distinguishing the goods of one trader from those of another – i.e. it can function as a badge of quality.

Indonesia uses a ‘first-to-file’ system, meaning that the first person to register a trade mark owns the right to it – regardless of who ‘created’ it first. It is particularly important to register your trade mark in Indonesia because trademark piracy due to ‘bad faith’ registration is a serious problem. ‘Bad faith’ registrations occur when a trade mark is registered by a third party that does not own the trade mark, thereby preventing the legitimate owner from registering it.

Geographical indications

It is also possible to register geographical indications (GIs) in Indonesia. This includes products that originate from a specific geographical location and thus possess certain qualities associated with that area.

Examples include Bordeaux wine, Parmesan Reggiano cheese and Parma ham. To register a GI, the registrant must belong to a collective organization representing a group of producers in the area that produces the goods they want to register.

Packaging

Creative packaging styles are developed to distinguish the external look of different products. Despite its commercial significance, the importance of packaging is often underestimated, as is the importance of protecting design aspects of products to prevent counterfeiting and replication.

Packaging elements can be registered as trademarks, design patents or copyright; 3D trademarks are another way to protect product packaging.

Design patents

Design patents may be used to protect the visual appearance of products. They cover:

  • The shape of a product (e.g. Chambord’s distinctive bottle);
  • The pattern of a product (e.g. Tunnock’s Caramel Wafer);
  • The shape and pattern of a product;
  • The shape and color of a product;
  • The shape, pattern and color of a product.

Two types of patents are recognized in Indonesia:

  • Standard patents: for products and processes – three to five years to file; 20 years patent protection; and
  • Simple patents: for products only – two to three years to file; 10 years patent protection.

In both cases, annual payments must be made after the grant to keep the patent valid. In the case of the standard patent, publication takes place 18 months or more after the filing date, whereas for the simple patent the application will be published three months or more after the filing date.

Copyright

Copyrights can also be used to protect packaging rights in Indonesia. Shapes, ornamental features, products featuring works of applied and fine art can be protected, as can images of F&B products – brochures, catalogues, web content, labels and marketing materials.

Copyright protects the expression of an idea, but not the idea itself.  Copyright in a work is effective from the date of creation of the work, and there is no need to register copyright (though it is possible to record copyright at the Copyright Office).

Trade secrets

A trade secret is widely understood as non-public information that is financially valuable and is guarded with confidentiality measures. In the F&B industry, trade secrets may refer to ingredients or processing methods that are critical to the taste, texture, appearance and smell of a product. A famous example is the Coca Cola formula.

In Indonesia, trade secrets may be protected by applying physical, technical and contractual barriers. While there is no official registration process, EU SMEs intending to import F&B products to Indonesia might consider asking their employees to sign agreements to agree to keep trade secrets confidential. All private documentation should also be marked: ‘confidential – do not disclose.’

There is no time limit to trade secret protection – it will remain a secret until it is publicly disclosed.

Case study: Es Teler 77 – an Indonesian success story

Company background

Es Teler 77 is an Indonesian fast-food chain, with over 200 restaurants in Indonesia and several in Malaysia, Singapore and Australia. It was established by Mrs. Murniati Widjaja and her husband in 1982, when they began selling a fruit ice drink called “Es Teler” from a kiosk outside a shopping mall in Jakarta.

Establishing a brand

The name “Es Teler 77” was decided when the couple decided to add the Chinese lucky number 77 to the name of their kiosk. To advertise their brand name, the family sponsored local competitions and attempted to beat national records, such as creating the biggest Christmas tree in Indonesia. These events drew media attention and increased their small company’s profile.

Gradually, their business drew larger swathes of customers; the kiosk was upgraded into a small restaurant, and several food items were added to the menu.

Due to the restaurant’s increasing popularity, the family chose to register “Es Teler 77” as a trade mark to protect their company from fraudulent activity. They also registered the company’s service mark “Juara “
Indonesia” in categories including restaurants, cafeterias, hotels, catering, beverages, food services, and various F&B categories (such as meatballs, iced drinks and syrups). Understanding the value of trade marks, the company created and registered another service mark: “Mie Tek Tek” – which would be used exclusively for noodle outlets.

Franchising

Much of Es Teler 77’s success can be attributed to its strict franchising strategy. Franchisees are required to pay around EUR 7,600. This entitles them to a franchise term of 5 years. Franchisees are obligated to send their staff to an Es Teler 77 training center for one week, followed by three weeks at an established Es Teler outlet. Franchises must be in either mall, shopping center or supermarket locations.

related-link_indob-icons_2017RELATED: IP Protection in the Philippines’ Food and Beverage Industry

The Es Teler 77 brand is widely known in Indonesia and South-East Asia due to its owners’ meticulous protection of its trade marks. The company has also invested in catchy marketing and has developed a strong and highly reputable franchise.

Take-away messages for EU SMEs in Indonesia’s F&B industry

  • Mandatory F&B regulations and labelling requirements do not cover IP protection in Indonesia. To protect your trademarks, designs and copyrights in Indonesia you should always consider registering them.
  • Due to F&B safety concerns and the prevalence of counterfeit goods in Indonesia, brands and packaging are often key to the success of EU SME products.
  • Registration is the key to the protection of your IPR in Indonesia.
  • Design patents can be a good way to protect your product packaging.
  • Keep trade secrets confidential – regulate access to information with physical barriers, such as contracts.

About South-East Asia IPR SME Helpdesk

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The South-East Asia IPR SME Helpdesk supports small and medium sized enterprises (SMEs) from European Union (EU) member states to protect and enforce their Intellectual Property Rights (IPR) in or relating to South-East Asian countries, through the provision of free information and services. The Helpdesk provides jargon-free, first-line, confidential advice on intellectual property and related issues, along with training events, materials and online resources. Individual SMEs and SME intermediaries can submit their IPR queries via email (question@southeastasia-iprhelpdesk.eu) and gain access to a panel of experts, in order to receive free and confidential first-line advice within 3 working days.

The South-East Asia IPR SME Helpdesk is co-funded by the European Union.

To learn more about the South-East Asia IPR SME Helpdesk and any aspect of intellectual property rights in South-East Asia, please visit our online portal at http://www.ipr-hub.eu/.

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Indonesia: Future Halal Market Hub

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By Dezan Shira & Associates

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Indonesia is the world’s largest Muslim majority country. Over 88 percent of Indonesia’s population is Muslim, and the country is well positioned to be a hub for Halal products in Southeast Asia.

Supporting this projection are Indonesia’s favorable demographics, rising disposable incomes, and growing consumer awareness on their religious obligations.

Indonesia is also keen to make its Halal industry attractive for investors. The government recently passed industry regulations and has earmarked new sites for the development of Halal industrial clusters.

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What is ‘Halal’?

The term ‘Halal’ refers to anything that is lawful or permissible under Islamic law and can refer to both goods and services acceptable to Muslims.

Thus, the Halal market and industry is absolutely wide-ranging. In the goods segment, it includes food and beverages, cosmetics, toiletries, clothes, and pharmaceuticals, among others. In the services segment, it includes tourism, banking, finance, and logistics.

Government makes Halal certification mandatory

Indonesia passed a law on Halal Product Assurance in 2014. The law specifies that all products that meet Halal requirements must be Halal certified from October 2019. Products that constitute non-Halal materials must have a label indicating their non-Halal status.

At present, obtaining Halal certification in Indonesia is based on voluntary initiatives. As a result, products from Indonesia are not officially viewed as Halal when they leave its ports. This means manufacturers miss out on a booming Halal market of an estimated 1.9 billion global Muslim consumers.

The responsibility for providing Halal certification will shift from the Indonesian Ulema Council (MUI) – the country’s highest authority on Islamic Affair, to the government managed– the Halal Products Certification Agency (Badan Penyelenggara Jaminan Produk (BPJPH). Though, the MUI will continue to play a role in the certification process by providing religious decrees to determine the Halal status of a product.

In addition, the government will also launch a one-stop service portal to provide online Halal certification services to producers of food, beverage, medicinal products, and cosmetics.

related-link_indob-icons_2017RELATED: Indonesia’s Investment Outlook for 2018

Indonesia’s Halal industrial clusters

Indonesia is currently building three Halal-focused industrial clusters to attract manufacturers of Halal products, Islamic banking and financial institutions, as well as Halal restaurants, hotels, malls, fashion boutiques, and entertainment centers.

One such cluster will be established at Batamindo Industrial Park on Batam Island (Riau Islands Province) and the other two clusters will be built on Indonesia’s most populous island of Java.

The three industrial clusters are aimed at international Islamic investors wanting to tap into the huge market potential of Halal finance, products, and services in Indonesia.

About Us

Indonesia Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in Singapore, Hanoi, Ho Chi Minh City and Jakarta. Please contact us at indonesia@dezshira.com or visit our website at www.dezshira.com.

 

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The Guide to Employment Permits for Foreign Workers in Indonesia

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There are two types of employment visas available for foreign workers planning to work and live in Indonesia: ITAS (Izin Tinggal Terbatas), a limited stay permit, issued by the Indonesian Immigration Directorate General through the local immigration office; and KITAP (Kartu Izin Tinggal Tetap), a permanent stay permit that is available for application to only those foreign workers who have held ITAS for a minimum of three consecutive years.

While ITAS is a limited stay permit, VITAS (Visa Izin Tinggal Terbatas) is the limited stay permit visa, a prerequisite to the issuance of the ITAS.

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Indonesia Eases Tax Holiday Policy for New FDI Projects

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By Dezan Shira & Associates

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In a bid to attract more investment to support the country’s economic growth, Indonesia recently issued a new regulation granting a 100 percent Corporate Income Tax (CIT) cut to new FDI-backed businesses.

Further, the new regulation grants tax holidays to new investors in any of the 17 pioneer industries including transportation, telecommunications, robotic components, oil and gas refinery, train engines, medical devices, pharmaceutical raw materials, power plant machinery, and processing of metals and agricultural products among others. Pioneer industries are those that create added value, introduce advanced technology and have strategic value for the national economy. Previously, the provision was available to only eight such industries.

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