The year 2019 will go down in Indonesia as one with investments underperforming and sluggish growth. In fact domestic and international factors led to declining exports and a GDP decrease now under 5%. In front of such a scenario, providers of investment goods and machinery see a need for focusing more on providing technical services to their clients than hoping for a quick market turnaround. If new orders are postponed, existing machinery will have to do the job and therefore strengthening after sales services is the call of such days to come. This creates heightened demand to add on to a representative office or wholesales company. For pro-active service programs and being able to supply spare-parts on time to safeguard customer satisfaction add-ons are required by the Indonesian Investment Board BKPM.

Investment regulations allow owners of foreign trade representative offices to better their situation by setting up a separate entity authorized to provide technical services. While representative offices are suitable to promote products and services and research market information they are NOT entitled to hire technical staff and just send them out to the factories for servicing machinery. In order to avoid violations of the investment law, a closer look into the applicable business line definitions (the so called KBLI in the Negative Investment List) shows that luckily there are two classifications available that stand for machinery repair and installation/instatement of industrial machinery. An after-sales-service oriented entity can be established with 100% foreign investment for most industries. Even for wholesale companies of foreign investors that might not sell to end-users directly can better their situation by setting up a technical service entity in form of a limited liability company.

Please contact PRIME Consultancy for further discussions and a faithful analysis about your situation and needs.

Kind regards

Jochen Sautter

President Director