If you do not want to set up a local business yourself, you need a local representative either on a commission basis or as an agent. A branch office is generally not allowed in Indonesia, except for the banking sector (only for the world’s 200 largest banks).
If you want more control over your activities in Indonesia you can decide to set up two types of representative offices: a foreign representative office and foreign trade representative office. When engaging in construction services activities, you might want to establish the third type ‘foreign construction services representative office’. For most business areas, companies can set up a representative office in Indonesia. Representative office set up is through application to the Investment Co-ordinating Board (Badan Koordinasi Penanaman Modal—BKPM) for companies wishing to engage in areas of business under BKPM’s jurisdiction, regional representative offices or through authorisation from the relevant ministry, e.g. the Ministry of Industry & Trade for those engaged in bilateral trade.
Foreign Representative Office
A foreign representative office may be set up to manage the interest of a (group of) foreign company(/ies) or to prepare for the establishment and development of its business in Indonesia. The letter of appointment from the relevant foreign company directs who will lead the foreign representative office. It can be one or more either Indonesian or foreign persons.
The activities you can perform as a foreign representative office are very limited. These include the role of supervisor, intermediary, coordinator or manager of the foreign company’s interests. However managing the foreign company, its subsidiary or its branches in Indonesia is not allowed. Else, it is not permitted to generate any revenue in Indonesia or to engage in any commercial activities, such as agreement or sale or purchase transaction of goods and services with an Indonesian company or citizens.
Foreign Trade Representative Office
A foreign trade representative office is established by a foreign company or a group of foreign companies to act as its/their representative in Indonesia. It may be established as either a selling agent, manufacturer’s agent, and/or purchasing agent. A foreign trade representative office is prohibited from conducting trades, transactions, or sales activities which represent an entire transaction from beginning to end. The scope of a foreign trade representative office is limited to:
- Introduction, promotion and enhancement of marketing of goods produced by foreign companies;
- Market research and supervision of domestic sales in Indonesia;
- Review of business opportunities in Indonesia;
- Close contracts for and on behalf of the appointing companies with companies in Indonesia in the framework of the exports.