The island of Bali, located between Lombok and Java, is Indonesia’s top tourist destination. As of 2010 the population of this exotic island stood at over 3 million inhabitants. Many of these are foreign investors and expatriates who have established themselves in businesses and/or bought property in Bali.
Bali has become well known around the world as a glamorous retirement and lifestyle destination, many feel they are living the dream. The very friendly, always smiling Balinese people are very tolerant of expats living in Bali. The climate is wonderful with sunshine shining throughout the year and pleasant day temperatures range between 20 to 33 degrees.
It is not only the lifestyle but the many great business opportunities that are bringing increasing numbers of foreign nationals to live in Bali.
The very low cost of living, abundance of local labour and low rates of pay for local workers offers a viable business strategy. Very low rates of pay exist for personal assistants and staffing, like private drivers and nannies for children (live in nannies can be hired from as little as US$40.00 per month. Accommodation is also affordable, a good quality villa can be rented from just US$5,000.00 a year fully furnished.
How do I start a business in Bali
Before you start, spend time in Bali and research in advance the type of business that has the most chance of success. Be aware that no matter how unique your business is, the local commercial community will replicate without hesitation. Following are a few things you will required to have in place before you can set up your business.
To obtain 100% legitimate legal status, profit from investments, have full work in Indonesia and residence rights in Bali you require an Immigration Working Visa (KITAS).
A tourist visa issued on entry is valid for 30 days.
A business visit visa is valid for up to 60 days which will give some time to start your application.
You will need to open a bank account with a local Indonesian bank.
Like all banks regular transactions are essential, this demonstrates that you are investing in Bali from day one.
Company Ownership requirements
To purchase Commercial property a foreign investment company is set up with the shareholding in your name.Your lawyer will help you organize the necessary documents and permits on your behalf, these are standard Indonesian Government issue.
PMA which is the standard legal abbreviation for Penanaman Modal Asing and is classified as a foreign investment company enabling 100 % foreign ownership with limited liability under Indonesian company law. A PMA affords maximum protection of interest for the foreign investor, however some business activities may now require an Indonesian national partner, this will require a legal-name only partner to ensure compliance.
The cost of setting up you PMA company is in the region of $6500 USD and may take as long as 14 days
Ensure you only use qualified lawyers to apply for the legal papers required for business applications, work permits and visas and always obtain a quotation for legal services first. Advice is case by case specific as there are different rules for different areas.
Peter Johnson – Austrindo Law office
He was a partner in a law firm in Western Australia, as well, he worked as a legal advisor to the liberal government on small business before Peter Johnson established his legal practice in Bali.
His legal office Austrindo is the biggest and most reputable legal office in Bali. It is a quiet haven of calm efficiency amongst the noise and chaos. He and his staff of 22 lawyers and lawyers in training advice clients, almost exclusively expats, on all legal matters from criminal, civil, property, visas, company formation, work permits, right through to divorce.
Poor understanding of the language, culture and legal system are the key obstacles for expats wanting to do business in Bali – legal stuff challenges most of us anywhere, but in a developing country with a less than rigorous legal protection a translator with legal knowledge is a godsent that Austrindo identified they now employ three translators who speak several languages and can act as an English interpreter of the legal system.
In Indonesia legal affairs are usually conducted through a notary (notaris) who is a qualified lawyer that acts as the agent for the government in land matters representing both parties. He is qualified to draw up legal documentation and collect taxes on behalf of the government. Therefore there is potential for conflict of interest they are not able to give legal advice about your legal rights or the dangers and pitfalls you may encounter. Austrindo are qualified to give you this service and the subsequent peace of mind.
Austrindo will ensure that your property;
- Has authenticity of title
Is free of other claimants
Is free of village disputes
Has no Issues around access
Has correct zoning
Has correct building and renovation permits
Fees are little higher than at home because the lawyer’s role is bigger, there is less protection in the system so more work is involved in protecting your interests. To ensure accuracy Austrindo sends their lawyers out into the field to view the property, measure the land , speak to the local people about the land and speak to the banjar ( local community council) to become aware of any issues affecting the land. This on-the-ground investigation is vital if costly misunderstandings are to be avoided.
Buying a Residential Property ; Villa or Land
Firstly, you can not borrow money in Bali for the same reasons you cannot borrow in Australia as a foreigner.You must have residency, a credit history in Indonesia, and be able to provide security via an asset.
Only Indonesian citizens have hakmilik ( freehold title)
However an Indonesian citizen can hold property on your behalf – documents are executed between you and an Indonesian to protect your interests.
Leaseholds are held in your name, usually for a term of 25 years with 25 year extensions, which are generally easily obtained.
Any other types of title are not recommended due to complexity and cost.
Real Estate Agents.
“Buyer beware”, agents are not scrutinized in Bali as they are in Australia, there is no prudential supervision. Real estate qualifications are not required. Exclusivity of listings is rare and fees are not a fixed rate but negotiable.
As Peter Johnson has unequalled experience in the property industry, his primary objective is to see that foriegners have a good Bali experience, I asked him what general advise he had for people looking to invest in Bali, He made the following suggestions.
“Don’t do what you wouldn’t do at home, for example give someone control of your cheque book, or leave your business to run itself for 6 months without a boss present”…… Seems pretty obvious doesn’t it.
So if you are careful and thorough you can indeed create a wonderful life for yourself in Bali and investing in the investment industry seems like a sure bet.
The Future of Tourism
In fact International tourism recovered strongly in 2010 according to the advance release of the UNWTO World Tourism Barometer. International tourist arrivals were up by almost 7% to 935 million, following the 4% decline in 2009 – the year hardest hit by the global crisis.
While all regions posted growth in international tourist arrivals, emerging economies remain the main drivers of this recovery.
Bali is changing into a modern society at a rapid rate, it is far from the hippie hangout of the 70’s. There is a high level of sophistication in most things , the food, the shopping , the resorts and the visitors and residents. All of this is because of the professionalism in business and legal dealings that are now an expectation and an obligation.