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In marketing a particular product or service in Indonesia, foreign individuals or companies are not necessarily required to set up a business entity in the country as appointing a local agent or distributor can also serve to fast-track a venture; especially for the short and medium-term. Many foreign investors in the early stages of entering the Indonesian market initially opt to go into an agency or distributorship agreement with local companies before later forming a foreign investment company (Penanaman Modal Asing/PMA) after the business itself shows promising growth and a broader operational presence is needed.
According to Minister of Trade Regulation No. 11/M-DAG/PER/3/2006 which specifies the provisions and procedures for the issuance of a certificate of registration (Surat Tanda Pendaftaran/STP) for agents and distributors operating in Indonesian territory, a foreign principal can appoint local agents or distributors to carry out the sales operations for its goods or services. These agents and distributors are required to be registered national trading companies. In terms of the principal’s role, it is further differentiated into manufacturer and supplier. A supplier is an intermediate party holding the right from a manufacturer to appoint local agents or distributors. With regards to agents and distributors, the different types include agent, sub-agent, sole agent, distributor, sub-distributor and sole distributor.
The first step for foreign individuals and companies in designating a local partner as an agent or distributor for their goods or services, of course, is having a business agreement and a letter of appointment in place. These documents will need to contain:
Name and address of the principal (manufacturer or supplier).
Name and address of the agent or distributor.
Brand and type of goods.
Marketing region.
Duration of appointment.
The full name and title of the signatories.
Name and address of the principal (manufacturer or supplier).
Name and address of the agent or distributor.
Brand and type of goods.
Marketing region.
The rights and obligations of respective parties.
Terms for termination of the agreement and dispute settlement.
Duration of the agreement.
Full name and title of the signatories.
Subsequently, the next stage is for the local partner to register with the Ministry of Trade. The requirements for formalising its status as an agent and distributor of goods or services on behalf of an overseas entity are as follows:
Application letter and form.
Copy of the agreement which has been legalised by a public notary office in the principal’s home country.
Copy of the certificate from Indonesia’s commercial attaché or official in the principal’s home country.
If the appointment was made by a supplier, a letter of authorisation or approval from the principal manufacturer is further required.
Copy of the trading license (Surat Izin Usaha Perdagangan/SIUP) of the local partner.
Copy of the certificate of registration (Tanda Daftar Perusahaan/TDP) of the local partner.
For distributors and sole distributors; copy of the general importer identification number (Angka Pengenal Importir Umum/API-U).
Copy of Deed of Establishment and/or Deed of Amendment of the local partner which has been validated by the respective authority.
For local limited liability companies; copy of validation of a legal entity from the Ministry of Law and Human Rights.
For agents and sole agents; to draft a statement letter declaring that they are not in possession or storing the goods for which they are agents of.
Original copies of product or service catalogues/brochures/leaflets made by the principal.
Copy of licenses or other certificates of registration issued by technical agencies related to the goods in accordance with applicable regulations.
For the registration of sub-agents and sub-distributors of goods and services coming from abroad; points a, e, f, h and i similarly apply with the additions of:
Legalised copy of the agreement or letter of appointment from the agent, sole agent, distributor or sole distributor.
Copy of a valid STP from the agent, sole agent, distributor or sole distributor.
A national trading company which has lawfully been appointed as an agent or distributor by a foreign individual or company shall be granted an STP issued by the Ministry of Trade of the Republic of Indonesia free of charge within five working days. It should be noted that one STP can only be issued for one agent or distributor; one type of goods from one brand; and for one marketing region. In the event of more than one appointment having been made by the supplier or the manufacturer, a certificate will only be granted to the first applicant. An STP will have a minimum duration of two years unless specified otherwise in the agreement.
As another alternative for foreign individuals and companies in taking advantage of the prospectively lucrative Indonesian market, is to establish a distribution company as a viable option to familiarise oneself with the local market before deciding on a more permanent presence in Indonesia. For this purpose, the proposed foreign investment company (PMA) will need to apply for a business license from Indonesia’s Capital Investment Coordinating Board (BKPM) (See Setting up a Business in Indonesia and Incorporating a PMA Company in Indonesia). In this context, the PMA will fall into the category of a PMA operating in the trade sector as a distributor or wholesaler.
For more information about appointing a local agent/distributor or finding a local partner in Indonesia, contact GBG Indonesia
Global Business Guide Indonesia - 2016
Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)
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