Indonesia’s complex geography—comprising more than 17,000 islands—combined with underdeveloped logistics infrastructure and urban congestion, presents challenges for distribution and sales. Nonetheless, the country has a full spectrum of agents, distributors, wholesalers, and retailers operating in its economy. Many foreign firms choose to partner with local distributors due to their market knowledge, infrastructure, and regulatory familiarity.
While finding a stocking distributor is possible, many Indonesian companies are reluctant to assume the carrying costs of warehousing. Consequently, some foreign companies use offshore warehousing in regional hubs such as Singapore to ensure timely and efficient delivery.
Distribution and Sales Channels
Indonesia’s business landscape features various agents, distributors, and other economic intermediaries. However, securing a stocking distributor can be difficult, as many are reluctant to bear the costs associated with warehousing. Corruption further complicates the logistics environment, prompting some businesses to use offshore warehouses, particularly in Singapore, as a more secure alternative. Additionally, severe traffic congestion and underdeveloped infrastructure significantly increase the cost of transporting goods over long distances from a central warehouse within the country.
Using an Agent or Distributor
Foreign companies that wish to sell their products in the Indonesian market are required to appoint a local agent or distributor according to the Ministry of Trade (MOT) Regulation No. 24 of 2021 on Agreements for Distribution of Goods by Distributors or Agents, which revokes and replaces the MOT Regulation No. 11/M-DAG/PER/3/2006. This appointment must be formalized through a notarized agreement. If the principal is offshore, the agreement must also be certified by an Indonesian trade attaché or official within the goods’ country of origin at the representative office. Additionally, the appointed local distributor or agent must obtain a Registration Certificate (Surat Tanda Pendaftaran or STP) from the Ministry of Trade as proof of their registration.
An agent is an Indonesian national trading company that acts on behalf of a principal, either domestic or foreign to market goods or services without taking ownership. The agent does not acquire rights to the goods or services and operates based on a commission or fee structure. The principal may be a manufacturer or supplier located offshore or onshore. A distributor is an Indonesian national trading company that purchases, stores, and sells goods or services on its behalf. Unlike agents, distributors take ownership of the goods and are responsible for their sale and distribution.
Any business operating as an agent or distributor must register with the MOT and obtain a Registration Identity, called STP (Surat Tanda Pendaftaran). STP is evidence that a company has been registered as an agent and/or distributor, issued by the Director of Business Development and Corporate Registration, Ministry of Trade. If the principal is offshore, the agreement must be notarized and certified by an Indonesian trade attaché at an Indonesian Embassy or Consulate and submitted to the Ministry of Trade. These agreements may adopt the law of any country, but if they are written in a language other than Indonesian, they must be translated by a sworn translator. Certain other memberships, recommendations, and/or licenses must be obtained and produced depending on the imported goods.
A producer principal, a supplier principal based on approval from the producer principal, foreign investment companies operating in the trading field as distributors or wholesalers, or representative offices of foreign trade companies can appoint an agent or distributor. It’s common for Indonesian importers to represent multiple foreign manufacturers and product lines. Large conglomerates often establish specialized units for different product categories. At the same time, medium and small importers may focus on a narrower range of goods but remain open to adding unrelated product lines if they are profitable.
Foreign companies often establish close relationships with Indonesian importers, allowing them to function cohesively. The Indonesian company acts as the importer and distributor, while the foreign company promotes its products and may second expatriate staff to the Indonesian partner. A more active role for the foreign firm can be arranged through management contracts, which may take the form of technical assistance agreements, management agreements, or combined management/financial agreements.
Establishing an Office
Foreign investors in Indonesia have two primary options for establishing a business presence: setting up a representative office or forming a limited liability company, known locally as a Perseroan Terbatas (PT). A representative office is ideal for companies interested in exploring the market without engaging in direct commercial activities. Such offices are restricted to non-revenue-generating functions like market research, liaison, brand promotion, and business development.
Establishing a PT is the preferred route for those ready to launch full-scale operations. There are two types of PTs: the PT PMA (Penanaman Modal Asing), which permits partial or full foreign ownership depending on the business sector’s eligibility under Indonesian investment regulations, and the PT PMDN (Penanaman Modal Dalam Negeri), which is reserved for domestic enterprises with ownership limited to Indonesian citizens or legal entities.
A foreign company can establish itself in Indonesia as a foreign investment company (PT PMA), but only in sectors permitted under the Positive Investment List, which replaced the Negative Investment List in 2021 through Presidential Regulation No. 10 of 2021 (amended by Regulation No. 49 of 2021). This reform aims to attract more foreign investment by allowing up to 100% foreign ownership in many sectors. However, specific sectors remain restricted, closed, or conditionally open, often requiring joint ventures or partnerships with local entities. Unless otherwise specified, full foreign ownership is generally allowed.
In Indonesia, foreign investment companies (PT PMA) are eligible for a range of fiscal and non-fiscal incentives, particularly when operating in priority sectors outlined in the Positive Investment List. These incentives may include tax holidays, tax allowances, import duty exemptions, and streamlined licensing processes. Priority sectors typically align with Indonesia’s strategic goals, such as infrastructure, renewable energy, manufacturing, and the digital economy.
The Indonesian Investment Coordinating Board (BKPM), now the Ministry of Investment/Investment Coordinating Board, is the central authority for coordinating and facilitating domestic and foreign investment in Indonesia. To streamline the investment process, it operates an Integrated One-Stop Service Center (Pelayanan Terpadu Satu Pintu or PTSP), which simplifies licensing procedures by consolidating approvals from various government agencies into a single access point, reducing bureaucratic complexity and improving ease of doing business.
BKPM Regulation No. 4 of 2021 (now under the Ministry of Investment) and Law No. 11 of 2020 (Omnibus Law on Job Creation), along with its implementing regulations, investors looking to establish a foreign investment company (PT PMA) must meet several key requirements:
The minimum total investment requirement of IDR 10 billion (excluding land and buildings) per business activity
The minimum paid-up capital of IDR 2.5 billion (or 25% of the total investment)
The requirement for at least two shareholders, and the appointment of a minimum of one director and one commissioner
The IDR 10 million minimum per share
Foreign individuals can still hold positions as shareholders, directors, or commissioners
The Indonesia Investment Promotion Center (IIPC) in New York City at https://www.iipcnewyork.org/, is the official representative of the Indonesian Ministry of Investment/Investment Coordinating Board (BKPM) for the Americas. Located at 370 Lexington Avenue, New York, NY 10017, IIPC New York offers free consulting services on Indonesian investment opportunities and procedures and assistance in identifying potential local partners. For U.S. companies seeking information on investment requirements in Indonesia, it is advisable to contact IIPC New York. Additionally, the BKPM (now Ministry of Investment and Downstream Industry) headquarters in Jakarta can be reached at Jl. Jend. Gatot Subroto No. 44, Jakarta 12190, and contact details are available on their official website https://www.bkpm.go.id/.
For the most recent information, including the 2024 Investment Climate Statement for Indonesia, visit the U.S. Department of State’s official website: 2024 Investment Climate Statement: Indonesia.
Franchising
On September 2, 2024, the Indonesian government enacted Government Regulation (GR) No. 35 of 2024 on Franchising (GR 35/2024), replacing the earlier Government Regulation No. 42 of 2007 (GR 42/2007). This new regulation aims to enhance the regulatory framework for franchises in Indonesia as well as promote a more dynamic and compliant franchise industry aligned with global standards.
The enactment of GR 35/2024 presents significant implications for U.S. franchisors looking to expand to Indonesia.
The key changes are:
Intellectual Property (IP) Registration: U.S. franchisors must ensure that all relevant intellectual property is registered before applying for a franchise registration (STPW)
Legal Documentation: U.S. franchisors are now required to provide legalized business permits from their home country alongside the franchise offering prospectus.
Business System: Franchisors must develop a clear, documented business system that is easy to understand and implement, encouraging consistency across franchise operations.
Profitability Evidence: The regulation mandates a minimum of three years of operational history and two years of audited financial statements. While this may pose challenges for new entrants, this requirement emphasizes the importance of stability and viability for market participants, encouraging franchisors to adapt their financial reporting practices accordingly.
Local Content Requirement: GR 35/2024 emphasizes the use of local products and services. The sourcing of materials locally can help foster goodwill and strengthen community ties according to the regulation.
Streamlined Processes: The regulation eliminates the previously required five-year STPW renewal requirement, simplifying long-term franchise maintenance for U.S. franchisors in Indonesia.
Revised Administrative Sanctions: The regulation introduces a structured system of sanctions, including two warning letters, a 14-day business suspension, and potential STPW revocation. This tiered approach underscores Indonesia’s commitment to compliance, with expanded actions for noncompliance.
Direct Marketing
Direct marketing in Indonesia has evolved significantly. While traditional methods like printed ads, catalogs, and telemarketing are still used, especially in rural and older demographics, most direct marketing now happens online. Social media platforms such as WhatsApp, Instagram, TikTok, and Shopee have become dominant tools for reaching consumers directly. U.S. and local companies continue to leverage multi-level marketing (MLM) networks. Increasingly, businesses use influencer and affiliate marketing, push notifications, and chat-based selling (conversational commerce). However, rising digital privacy concerns and tighter regulations influence direct marketing.
Joint Ventures/Licensing
To attract more foreign direct investment, the Government of Indonesia issued Presidential Regulation No. 10 of 2021, the Positive Investment List, replacing the former Negative Investment List (Perpres 44/2016). Unless otherwise restricted, this regulation opens many business sectors to 100% foreign ownership. Some sectors remain entirely closed to foreign investment or are subject to special conditions, including ownership caps, location-based restrictions, or partnership requirements.
While foreign investors can own companies outright in many areas, joint ventures with local partners remain a standard and often strategic route for market access, regulatory compliance, and cultural fit. All investments are registered through the Online Single Submission – Risk-Based Approach (OSS RBA) platform, which aligns licensing requirements with the business’s risk level. The government also offers incentives for investments in priority sectors such as renewable energy, downstream industry, infrastructure, and digital technology.
A joint venture with a local Indonesian partner is often essential for success, particularly in sectors where local relationships, regulatory navigation, and cultural understanding are critical. While some industries now allow full foreign ownership, many investors prefer JVs to leverage the local partner’s network, knowledge, and market access.
Choosing the right partner is crucial. Many firms now provide background checks, financial due diligence, and credit reports on Indonesian businesses, helping investors reduce risk. In addition to joint ventures, foreign companies increasingly consider licensing, franchising, or digital partnerships as flexible alternatives depending on the sector and business model.
Dissolving a partnership or joint venture in Indonesia can be legally and financially challenging, particularly if the relationship was entered without strong legal safeguards. For this reason, choosing the right partner from the start is critical. While local connections can provide an edge, they should not overshadow the importance of sound business judgment, professionalism, and shared strategic goals.
Today, it is standard practice to draft comprehensive JV agreements that include exit strategies, dispute resolution clauses, and governance frameworks. Investors are also encouraged to conduct thorough due diligence using available legal and financial tools to ensure their prospective partner has the capabilities and integrity needed for a successful long-term relationship.
In Indonesia, personal relationships and mutual trust are vital in forming business partnerships. While these cultural values are still highly influential, the importance of a clear and mutually understood written agreement has grown significantly in recent years. To avoid future disputes, contracts should be carefully drafted, reviewed in both languages, and thoroughly discussed with all parties. Even if personal trust exists, a sound legal agreement is strongly recommended as it provides clarity and recourse. While the Indonesian legal system can be inconsistent in contract enforcement, many investors mitigate this risk through international arbitration clauses, third-party mediation, and jurisdictional safeguards.
In some cases, licensing agreements for products or services can be a more cost-effective and flexible option than direct investment or joint ventures for U.S. companies doing business in Indonesia. However, the same level of due diligence and care in partner selection is essential. Licensing arrangements must comply with Indonesian regulations on IP rights, royalty taxation, and commercial registration, particularly in sectors like franchising and tech. For current guidelines, restricted sectors, and registration procedures, visit https://www.bkpm.go.id/
Express Delivery
Major international express delivery companies—including FedEx, UPS, and DHL—operate in Indonesia’s primary cities, offering international and domestic courier services. Local logistics providers such as JNE (Jalur Nugraha Ekakurir), Pos Indonesia, RPX (FedEx affiliate), Pandu Logistics, and Wahana continue to serve the domestic market.
E-commerce has spurred the growth of hyperlocal and instant delivery services. GO-SEND (part of the GoTo Group, which includes GOJEK and Tokopedia) and GRABExpress dominate urban areas for same-day and app-based deliveries. Other major logistics players include J&T Express, SiCepat, Ninja Xpress, AnterAja, and Shopee Xpress, which are tightly integrated with Indonesia’s booming e-commerce platforms.
Since January 30, 2020, Indonesia has lowered its de minimis threshold for B2C e-commerce imports from US$75 to just US$3 per shipment. This policy aims to protect local small and medium enterprises (SMEs) from a surge of untaxed, low-value imports. Products such as textiles, clothing, footwear, and bags valued at $3 or more are now subject to import taxes ranging from 32.5% to 50%, depending on the category. Other goods within the US$3 to US$75 range incur a flat tax rate of 17.5%. Even shipments below US$3 are not fully exempt and must pay 11% VAT.
Indonesia restricts foreign ownership in postal and courier services, requiring majority Indonesian control under current investment regulations. Foreign firms may participate through joint ventures or partnerships but are generally limited to operating in provincial capitals with international gateways. Under Customs Regulation 11/2020, logistics providers must include the consignee’s NPWP (Tax ID Number), National ID (NIK), or phone number in the manifest of all inwards and outwards shipments to and from Indonesia. Indonesian customs have since relaxed the requirement by allowing a phone number to be used instead of an NPWP on the manifest. However, as of December 31, 2022, the Customs Directorate had yet to issue a written regulation for relaxation policy, and the industry fears the lack of legal certainty will cause future obstacles for shipping.
Due Diligence
In general, the business sector in Indonesia still operates in a somewhat opaque environment. For this reason, it is very difficult to get accurate financial and business reputation information about prospective customers or partners. Therefore, foreign companies intending to do business with potential local partner companies or agents are recommended to perform appropriate due diligence on their potential partners prior to established the partnership in Indonesia. U.S. Commercial Service in Jakarta offers the International Company Profile (ICP) service to assist U.S. companies with vetting potential business associates. Note that ICP’s can only be done on companies and not on individuals. Contact the U.S. Commercial Service office in Jakarta for details on price and availability or visit our website at https://www.trade.gov/indonesia.