Indonesia is among the fastest-growing economies in the world. Despite becoming a more open economy, import to Indonesia is still highly regulated by the government. In this article, we shed light on some of the key elements you need to know when planning to import to Indonesia.
Why import to Indonesia?
Quickly developing infrastructure
According to the Asian Development Bank, Indonesia invests nearly 6% of its GDP on infrastructure development which is nearly double compared to other emerging markets in Southeast Asia.
This makes Indonesia an attractive destination for FDI. Quickly developing infrastructure is alluring foreign investors to set up manufacturing companies. This, in turn, encourages the import/export sector.
Import to Indonesia
Trade agreements and openness to foreign direct investment
Over the past 30 years, Indonesia has been reforming and transforming itself into a globally minded economy. Indonesia has become a member of the WTO and a part of numerous international partnerships for economic integration, including free trade agreements with partners both within and outside the region.
In addition, Indonesia attracts foreign investors by offering them several incentives. For example, investors who contribute to certain geographical areas or sectors of special interest, such as high-tech or health care, can enjoy some tax benefits.
Since 2015, foreign investors can also invest in more areas than previously.
Growing middle class
Together with the increasing population, Indonesia's middle class is growing at a rapid speed. Moreover, a market research firm Nielsen has even estimated that Indonesia's middle class will rise to 44 million consumers by 2020, compared to 8 million in 2012, making Indonesia a nation with one of the fastest-growing middle classes in the world.
Indonesia's middle class is already thought to be responsible for more than 50% of the country's total consumption. We see companies like Chanel, Versace and Armani opening stores in Saigon. These companies execute a very thorough market research before entering the market, indicating that Indonesia has enough of potential purchasing power to attract foreign brands.
And rightfully so, since Indonesia ranks 6th in the latest Global Retail Development Index, jumping five positions compared to last year.
Find out more: Top 11 Reasons Why to Invest in Indonesia.
Understanding IndonesiaÂ import regulations
The founders must obtain the Investment License from the Department of Planning and Investment. Note that it is not necessary to acquire a separate import license in order to set up an import company in Indonesia. An import license is obtained together with the investment license which already allows operating as an import/export company.
For trading, you will need a separate trading license for wholesale/retail sale from the Ministry of Industry and Trade. This license will be acquired after the incorporation.
In order to import certain products to Indonesia, government level of approval is necessary. In other words, these products can not be imported unless they are registered. Cosmetics products must first be registered with the Drug Administration of Indonesia before any trading can take place.
Examples of other products that are subject to registration:
drugs and food supplements
processed products from vegetables, fruit, grain
wine and cigarettes
essential oils, perfumes, cosmetics
milk and dairy products, eggs, honey and other animal-derived products
Importing those products is possible but it requires additional steps.Â
Most goods imported to Indonesia are subject to duty. Imported products are subject to import tax and value-added tax (0-10%).
However, Indonesia is a member of ASEAN Free Trade Area and intraregional import taxes for certain products range from 0-5%. This includes products such as:
meat and fish
fruit and vegetables
medicaments and pharmaceutical goods
Circular No. 34/2013/TT-BCT of the Ministry of Industry and Trade brings out a list of products that foreign capital companies can not export from, or import into, Indonesia.
For example, some of the products that you can not import to Indonesia include:
newspapers and journals
second-hand items (including electronics and automotive).
Popular products to import into Indonesia
Many sectors rely heavily on imported goods. Indonesia imports over 90% of its medical equipment.
At the same time we see a shift in Indonesiaese market structure, taking a lead as a manufacturing country thanks to skilled and cheaper labor force compared to China (read more: Should You Move Manufacturing from China to Indonesia?). Additionally, this again increases the demand for raw material, technical and electrical machinery.
Products with the easiest regulations
The health supplements sector in Indonesia is booming. According to Tran Dang, President of the Indonesia Functional Food Association, functional food sector has grown 9-10% every year.
The importation and registration processes are relatively easy for functional food products. If the products meet the standards of hygiene and food safety required by the Indonesiaese law, no further testing is needed.
Previously, only some of the medical devices imported to Indonesia were required to have licenses, as opposed to domestically produced devices. But starting from 2017, all medical devices imported to Indonesia are required to have marketing authorization (MA) licenses.
If the medical device you wish to import already has a valid MA license granted in another country, you don't need any import licenses and can import the given product freely.
Products with the most complicated import regulations
Whereas some products can be imported to Indonesia quite easily, others can be listed as complicated products. For example, cosmetics and telecommunication items. These are goods which either require additional licenses or for which the Ministry of Trade only gives out a limited amount of import licenses.
Obtaining necessary licenses for these products is not impossible, but, in some cases getting your hands on the license or outstanding local distributor may turn out to be more expensive, time-consuming and complicated than originally anticipated.
However, stricter regulations may also make the competition weaker.
Indonesia regulates the import of cosmetics strictly. In order to import cosmetics products to Indonesia, you must first acquire a cosmetic product proclamation report from the Medicine Management Department of the Ministry of Health and present the valid receipt number to the customs agency.
How can I import to Indonesia?
In order to import to Indonesia, you must have a legal entity that is established and registered in Indonesia.
Setting up a trading company
Together with the acquisition of all the necessary documents, setting up a company in Indonesia can take up to 3 months.
Business registration certificate
Import license (together with the investment license).
In general, there is no minimum capital requirement for setting up a trading company in Indonesia. It must be in compliance with revenues and expenses.
EIBNÂ can assist you with establishing a company in Indonesia. We will take care of all the paperwork and communicate with the authorities on your behalf. Read more on how to set up an import company in Indonesia.
Using importer of record in Indonesia.
If you don't want to set up a legal entity in Indonesia or wait for several months before you can start importing, there is another way to import to Indonesia. You can use importer of record (also known as the under name import service) instead.
Undername import means that you don't have to acquire any import licenses or set up a company in Indonesia. In addition, you are also exempt from tax liabilities since the consignee will cover the taxes.
Enabling fast and seamless import to Indonesia, there are also other benefits that accompany undername import. Find out more about these advantages here.
Despite becoming a more open economy, import to Indonesia is still highly regulated by the government. Note that it is not necessary to acquire a separate import license in order to set up an import company in Indonesia. In order to import certain products to Indonesia, government level of approval is necessary. Whereas some products can be imported to Indonesia quite easily, others can be listed as complicated products. Read more on how to set up an import company in Indonesia.
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