A lot has been said lately about doing business in Indonesia and why companies like Facebook, Google and RIM chose Malaysia over Indonesia. Some of the reasons named are the lack or shortage in human capital, the bureaucracy, tax issues and maybe even some liability issues. And then there’s corruption and bribes. For as long as I live here the newspapers are full of corruption scandals often involving huge bribes. Complete drama’s between the police, government officials, tax officials and in the centre of it all the KPK, which is the anti-graft body in Indonesia.
So how hard is it actually to start a business in Indonesia?
First a big fat disclaimer. I’m a foreigner living and working in Indonesia. By no means do I think I know the Indonesian society better than native Indonesians. But, when it comes to foreigners starting a business here I think have something to say simply because I pretty much went through the whole process. So this is a post by a foreigner doing business in Indonesia intended for other foreigners who are considering to register a business here.
What triggered me to write this was an article on Daily Social written by Rama. Just to make sure things are in the right context please read the whole article.
The essence of Rama’s post I think can be captured in two quotes:
This law basically forbids US companies giving bribe (as an act of corruption) specifically in order to do foreign investments. In Indonesia, this can be very tricky.
It is a public secret that in Indonesia, it is almost impossible to register a firm or doing business documents without giving bribe to the government.
I’m just guessing that the law in the Netherlands is pretty much similar, but we didn’t bother to look it up anyway. Right from the start we agreed that there will be no briberies whatsoever. Sure there will be skeptics amongst you so let me clarify why we felt and still feel so strong about this.
Establishing a company based on bribes is like building a company on quick sand. Shit has a tendency to come out, maybe not today, maybe not next year but it will. When it does it can potentially ruin a company, the invested money along with the lives of the responsible managers. In anyway risking an investment by doing bribes in the process would be extremely stupid from any perspective.
One of the questions asked in the comments to the DS post was:
there are already many overseas companies with 100% investment set up in Indonesia… I wonder how they get around these bribery issues )
Well, let me give a quick and easy answer, there are actually laws, rules and regulations in Indonesia which you can follow. We chose to follow them to the letter and at no point any party involved asked for or proposed a bribe.
So is Dailysocial completely wrong? Well, there’s no way of denying corruption being present in probably every layer of society. But my point is, it takes two sides for a bribe, the one giving the bribe and the one receiving it. The process to start and register our company here, getting all the permits and required documents was indeed a lengthy and sometimes highly frustrating process. Sure I can imagine it’s tempting to offer bribes to get things done or speed up the process. Just don’t do it or go along with it when asked, it’s NOT mandatory!
In my time on Bali I’ve seen many “entrepreneurs” and even established International companies losing loads of money because their whole enterprise or project was based on bribes. A hotel chain getting a permit to build a hotel to later have to break it down again. Same happens to project developers wanting to make a quick buck building villas to then later see their permits revoked. My experience is that despite corruption and bribes, in the end the law is the law, also in Indonesia. If you want to start your business based on bribes, be my guest but don’t blame anyone else when things get ugly.
Here’s some must read material on doing business in Indonesia. Since you’re probably new to Indonesia I would definitely advice to get a good lawyer with proven experience in setting up foreign companies. Don’t forget to reserve some serious budget for that, just like anywhere else lawyers aren’t cheap in Indonesia.
Prepare yourself for the fact that it will take time, more than you would expect and probably more than the official documents state. But, it will be worth it. Local presence is key when you want to be successful in Indonesia. In the end, if you manage to build a profitable business the upside completely outweighs the money and efforts you’ve invested in the start.
Did you have a different experience? Don’t agree at all? Drop it in the comments!