Indonesia Market Entry Models: Representative Office
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), where up to 100 percent overseas ownership is permitted.As an alternative to establishing a Limited Liability Company or investing in an existing PMDN or PMA Company, foreign investors are permitted to open a Representative Office in Indonesia. In this article we discuss the salient features of a Representative Office.
There are three main types of Representative Office in Indonesia:
- A Representative Office under the control of the Department of Trade
- A Representative Office under the control of the Department of Public Works, and
- A Representative Office of a Foreign Oil and Gas Company
A representative office licensed by the Department of Trade is the most common form of representative office.However, the range of activities that may be conducted by such a representative office is quite narrow.
In particular, it may not undertake trading activities, own production facilities or undertake operational business activities and, therefore, cannot accept orders, participate in tenders, sign contracts or engage in the import, export or distribution of goods.
The types of activities that may be conducted by such a representative office include marketing and promotional activities and information gathering for the foreign parent company.