Sabadell International Business

Exporting to Indonesia

Opportunities for Spanish companies in Indonesia

Strong points

  • Biggest economy in South East Asia, and an ASEAN region.
  • Internal demand is the foundation on which its growth is based (great increase of the middle class).
  • Major needs for investment in infrastructures
  • Intra-regional agreement for reducing customs duties (ASEAN).
  • Rich in natural resources.
  • Sound financial system.
  • Sovereign credit rating for Investment grade BBB- stable (S&P) / BBB-Positive (Fitch).

Weaknesses

  • The regulatory and governance system is weak, opaque and requires more transparency
  • Low efficiency of public administration and excessive bureaucracy.
  • Poor implementation of public projects.
  • Major reforms still waiting to be introduced.

Investments

  • Opportunities in infrastructures, industrial supplies, chemical products and consumer products.
  • Agreements for promoting and protecting investments with many countries, including Spain (APPRI 1996). Has signed IGA and MIGA
  • Right to transfer and repatriate in foreign currencies, capital, profits, dividends, interest, loan repayments, royalties…
  • Incentives for foreign investment restrictions in certain sectors
  • There are special economic zones and customers deposits.

Prospects

  • Sustained growth of 5,50% with potential of +6% in the next few years.
  • Major programme for development of new infrastructures.
  • Reasonably balanced macro- economic programme and in a good external payments position.
  • Significant growth in the consumer goods and industrial sectors.

Banco Sabadell in Indonesia

Experience

Banco Sabadell’s relations with banking in Indonesia go back to the early 1970s

Over all this time it has developed close and firm bonds with a wide range of Indonesian banks, meeting the needs of Spanish exporters.
The proximity of the regional office of Banco Sabadell in Singapore, which has been working in the country since 1990, has enabled it to work in close cooperation with this market and its public and private agents.
BS Singapore has also reinforced its our capacity to work with and advise companies, investors, importers and exporters and is well known in the financial and economic community of the country.

Services

  • A quality, personalised service for Spanish companies.
  • Commercial advice on the market, local banking and many different financial products.
  • Monitoring transactions, projects and tenders,
  • Networking with the chief agents.
  • ECA and structured financing for specific projects.

Business structure in Indonesia

Incorporating a foreign company

A foreign company can set up a business in Indonesia as a:

Representative Office

Its work can only involve handling the interests of the company or its subsidiaries. It cannot do business or perform any operations entailing income.

Branch

Only applicable for certain highly specific cases (such as tenders for infrastructures which require this) and the parent company takes on all the obligations of the branch. Running one of these is more complicated than a corporation (PT).

Incorporating an Indonesian company

Limited Liability Company

  • The structure is that of a public limited company (PT in Indonesian).
  • Partners: at least two, and they may be 100% foreign (natural or legal). There are restrictions in some sectors.
  • Companies with foreign capital are given the name of PMA.
  • Minimum authorised capital of IDR and minimum paid up capital of 25% of the sum authorised.

Joint venture:

A very common form for business development that requires an Indonesian partner. It must have the legal form of a corporation (PT).

It is advisable to get assistance from a local legal firm when choosing the form of economic activity and for any legal matter that it is going to be handled in the country

Means of payment in Indonesia

Collection

Exports to Indonesia

  • Documentary Credit:
    means the seller can enjoy the security of being paid before shipping the goods. Option of financing the Indonesian payer (importer).
  • Collection:
    collection management of trade documents with the purchaser by bank in Indonesia. Usually with sight draft or payment.
  • Guarantees for advance payment: 
    performance bond, deposits and also for regular transactions or capital goods.
  • Forfaiting:
    mixed finance (FIEM loan / buyer credit) available for public projects.

Payment

Imports from Indonesia

  • Documentary Credit:
    banking payment commitment conditional on submitting documents accrediting export
  • Import remittance:
    collection management of commercial documents with purchaser by the Spanish bank
  • Guarantees.
  • Simple transfer: 
    a common means of payment and collection

International negotiation protocol in Indonesia

  • It is very important to form a relationship and be able to maintain it.
  • Regular visits and follow-ups.
  • Offer a high standard of technical after- sales service (especially for exporters of equipment and machinery, industrial supplies, etc.).
  • Flexible negotiations intended for mutual benefit. With private companies, one tends to deal with Indonesian Chinese, but in public companies, usual practice is to deal with Indonesian Bumis (natives).
  • Negotiations with public companies are more complicated and take longer to obtain results.
  • It is important to have a local agent.
  • Indonesians are friendly and easy to get on with.

 

Contact

Singapore

Keck Seng Tower 133, Cecil Street, 09-01 A
069535 - Singapore
Tel. (+65) 6224 27 07

Contact