Opening a representative office is the fastest and also the easiest way of getting a legal and market presence in Indonesia. Despite having more limitations compared to limited liability companies, it also has its advantages.
A representative office is an office set up by a company located outside of Indonesia (parent company) to take care of its business in Indonesia.
The main prerequisite for opening a representative office in Indonesia is that you must already have an existing legal entity abroad.
Representation office of a foreign company legally established outside Indonesia, can act as a coordinating entity and promote interests of the parent company in Indonesia. Representation office has no right of commercial operation, all financial transactions must be carried out by the headquarters of the company outside Indonesia.
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It frequently occurs that a foreign investor opens a representative office in Indonesia first in order to ‘get to know the market‘. If his findings are positive, then he can open a PT PMA. The advantage of opening a representative office first is that it requires no large capital investment and it is a relatively easy and quick way to establish a legal entity in Indonesia. Contrary to the PT PMA (which is restricted by the Negative Investment List), a representative office can be established in most – but not all (!) – industry sectors (for example, a law firm cannot open a representative office in Indonesia).
Indonesia is a lucrative market for foreign entrepreneurs due to the country’s huge population (a giant consumer force), low minimum wages, and abundant natural resources. However, if Indonesia is a new market for you, or, if you are not sure whether your product, services or project can become a success, or, your financial resources are limited, you are advised to open a representative office first, and use this legal entity to explore the market, promote your products, find business partners (distributors) and become acquainted with Indonesia’s (business) culture. But, we emphasize again, you cannot use your representative office to generate profit or engage in direct business activities.