Government Regulations Aim to Add Value to Indonesia’s Mining Industry

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By: Winnindo R&D Team
Editor: Samuel Glickstein

The Indonesian government recently published its fourth revision of Regulation No. 23 2010, which governs the country’s mineral and coal mining sector.

The government also published two decrees for the Ministry of Energy and Mineral Resources to implement the regulation: Ministerial Decree No. 5 and Ministerial Decree No. 6. Ministerial Decree No. 5 concerns the increase of the added value of minerals for domestic processing and purification and Ministerial Decree No. 6 Year involves the export agreement.

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According to Ministerial Decree No. 5, holders of mining production and operation licenses, special mining production and operation licenses, as well as mining production and operation licenses that specialize in processing and purification are obligated to fulfill minimum processing and/or purification requirements. Companies may process and purify minerals individually or through joint ventures.

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Selecting the Optimal Location for Indonesian Manufacturing

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By Samuel Glickstein

In recent years Vietnam, Myanmar, and India have attracted a significant amount of media attention as potential manufacturing powerhouses. Although these countries may deserve consideration, Indonesia, the world’s fourth largest country, maintains numerous strengths that beckon to the business community. With over 260 million people and a total median age of 28.6 years, Indonesia possesses both a large workforce and a young population. Furthermore, increasing urbanization eases the cost of doing business for foreign companies that manufacture their goods in Indonesia and intend to sell their products to the country’s rising middle class. The Indonesian government has also realized the importance of developing the country’s manufacturing sector in increasing economic growth, creating employment opportunities, and reducing the archipelago’s reliance on exporting commodities. President Joko “Jokowi” Widodo has released numerous policy packages since September 2015 aimed at easing the cost of doing business in Indonesia, increasing foreign investment to make the economy more competitive, and boosting industrialization.

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Examining Opportunities in Indonesia’s Upstream Palm Oil Sector

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By: Samuel Glickstein

Palm oil and palm oil-based products can be found in supermarkets around the world. Although palm oil can be used as a simple frying tool, this production-efficient oil can be blended and processed to create numerous food, pharmaceutical, and cosmetic products. The rapid growth of the palm oil industry in recent years has benefitted the economy of Indonesia, the world’s leading producer and exporter of the oil. The sector has provided employment to millions of Indonesians, particularly on the islands of Sumatra and Kalimantan, where most palm oil estates are located. According to the Indonesian Palm Oil Producers Association (Gapki) and Indonesia’s Ministry of Agriculture, Indonesia produced 32.5 million tons of crude palm oil (CPO) in 2015 and exported 26.4 million tons.

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A Guide to Indonesia’s Industrial Parks and Special Economic Zones

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By: Dezan Shira & Associates
Editor: Alexander Chipman Koty

Indonesia is composed of over 13,000 islands and home to over a quarter of a billion people. The country’s island-based geography presents rich diversity in ethnic, religious, and linguistic communities, as well as incredible biodiversity and a wide array of natural resources. While these features contribute to Indonesia’s unique advantages, they should also be at the forefront of investor’s minds when considering investment.

Understanding the infrastructure deficit

Amidst a variety of governance-based concerns, which are the subject of intense scrutiny and the target of government reform under the current administration, infrastructure remains a salient variable for investments, with significant profit implications. Pegged by the Asian Development Bank at a massive US$700 billion, infrastructure deficits in Indonesia can restrict the ability of investors to conduct operations in a successful manner. Fortunately, Indonesia has a number of investment options available to mitigate the impact of these challenges. Regardless of the nature of investment chosen, various factors – including tax incentives, infrastructure and logistics, proximity to resources, and labor costs and skill levels – must be taken into consideration when choosing a location for investment in Indonesia.

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Indonesia Has Huge January 2017 Import-Export Surge 

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By: Dezan Shira & Associates

Indonesia’s trade had a huge boost in January this year as it soared to a US$1.4 billion surplus, way up from US$10 million in January 2016. Also encouraging was the increase in the non-oil and gas exports, up 29.2 percent Y0Y to US$9.4 billion, while imports in the non-oil and gas sector also rose to 14.5 percent at just under USD12 billion.

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Understanding Tax Treatment of Representative Offices in Indonesia

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By: Winnindo Business Consult
Editor: Dustin Daugherty

Recent years have seen numerous high-profile cases by the Indonesia tax authority against prominent foreign tech firms. Most notable of these cases is that of Google, which allegedly used an Indonesian RO to carry out its in-country business activities, but shifted all taxable profit to an offshore entity in Singapore. However, Google’s case is not uncommon. In fact, many investors also do the same thing and invoice clients from offshore entities, presenting themselves and their businesses to legal issues.

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Although previously this tax avoidance strategy may have been low-risk, the recent crackdown by the tax authorities demonstrates how essential it is that investors, even those using ROs in the country, take measures to ensure full tax compliance. Thus, to avoid the fate of Google and others, it is essential for companies operating ROs in Indonesia to have a strong grasp of tax regulations. Further, given the complexity of such regulations, investors are encouraged to seek the assistance of professional services experts of tax officials to avoid costly oversights.

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Establishing a Representative Office in Indonesia

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By: Winnindo Business Consult
Editor: Dustin Daugherty

As a country with a population exceeding a quarter billion – by far the largest in ASEAN – Indonesia is an alluring market for foreign companies to promote and sell their products and services w. With a young population (the median age is 29 years, which is low by regional standards) and a large and growing middle class, many foreign businesses have established Indonesian subsidiaries to tap into the large market.

However, in many cases – especially for small and medium-sized enterprises (SMEs) or other investors lacking the resources of multinational corporations – it is prudent to ease into the market slowly with a less expensive and lighter footprint to explore opportunities and gain market insights before committing to larger investments. For companies looking to conduct market research, identify potential partners, provide post-sales service or other support services, or even oversee the execution of commercial agreements with local partners, a Representative Office (RO) offers a low risk and low cost local presence. An RO can be an ideal structuring option to take advantage of Indonesia’s vast potential without committing substantial investment capital for patient investors initially content to conduct more limited activities and without a need to generate revenue locally.

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Indonesia Booming As Foreign Investors Seek China Alternatives 

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By: Dezan Shira & Associates

The Indonesian economy is becoming the darling of Asia as economic growth hits 5.0 percent and the stock markets booms as foreign investors pour money into the country. The 2016 GDP growth rate, released by the Indonesian Central Statistics Agency last week, exceeds growth figures of 4.8 percent seen in 2015. Of this growth, part came from a healthy 5 percent increase in domestic consumption, while Indonesian imports and exports also increased, as did investment.

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Intellectual Property Rights and Trademarks in Indonesia

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By: Dezan Shira & Associates
Editor: Samuel Glickstein

Foreign firms in Indonesia can protect their investments by familiarizing themselves with the country’s intellectual property rights (IPR) landscape. Indonesia possesses a strong legal IPR framework that generally meets international standards.  The country is a member of the World Trade Organization (WTO) and has acceded to the Agreement on Trade-related Aspects of Intellectual Property (TRIPs Agreement). Furthermore, Indonesia has ratified most major international IP agreements, including the Paris Convention and the Berne Convention. In 2014 the Indonesian government amended the 2002 Copyright Law to improve the efficiency and effectiveness of the country’s IPR system and protect copyright owners. The changes include extending copyright protections for most types of works from 50 years to 70 years after the death of the author, outlawing the illegal upload and download of copyrighted material for commercial purposes, creating harsher penalties and criminal sanctions for copyright violations, and establishing landlord liability for “deliberately and knowingly” permitting the sale or duplication of copyright infringing products.

However, it is difficult to safeguard and enforce IPR in Indonesia. The Office of the United States Trade Representative has placed Indonesia on its Special 301 Priority Watch List, a list of trading partners that experience IPR protection and enforcement issues. Counterfeiting as well as physical and online piracy are common in Indonesia. According to the International Intellectual Property Alliance, 86 percent of business software in the archipelago is unlicensed and retail piracy rates are likely even higher. Investigators from the Directorate General of Intellectual Property (DGIP) do not have authority to arrest people and must cooperate with the police for enforcement action. IP owners in Indonesia must file formal complaints with the police before authorities can take action. Carrying out raids on businesses that violate IPR in Indonesia is an expensive and time-consuming process because the police must interview witnesses.

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Employing Local Workers in Indonesia    

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By: Dezan Shira & Associates
Editor: Samuel Glickstein

In order for a foreign firm to thrive in Indonesia, it must adapt to the country’s labor laws and human resource procedures. Although there is some space for flexibility in human resource management in Indonesia, the country’s labor laws and regulations have established firm protections for workers. Employers who violate these obligations will likely face significant legal repercussions. Therefore, it is paramount that employers learn about Indonesian manpower laws and the expectations that they may encounter when they interact with local workers.

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