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Indonesia Trade Agreements: Benefit for Singaporean Investors

Indonesia Trade Industry Outlook

Foreign investors must have an Indonesia import license when entering the Indonesian trade industry. Foreign trade has been paramount in boosting Indonesia’s economic growth by contributing 37.3% towards the GDP in 2019. The International Monetary Fund projected export of goods and services to bounce back by 18.4% and imports to ascend by 23.5% in 2021.

Among ASEAN countries, Singapore’s contribution in Indonesia’s exports was 7.7% whereas imports from Singapore stood at 10.1%.

Importing to Indonesia – Opportunities for Singapore’s Investors    

Singapore investments in Indonesia amounted to US$9.8 billion, making it the highest foreign investor in the country in 2020. The annual Leader’s Retreat, where leaders from both countries discuss key bilateral issues and prospective joint ventures demonstrates potent bilateral ties. Such events attest to the strong bilateral relations and ensure confidence in Singaporean firms to invest in the Indonesian market. 

Indonesia Trade Agreements with Singapore:

Aside from its geographical accessibility, growing opportunities, as well as government support through Positive Investment List (PIL), Singapore Investors can further profit from the existing trade agreements between Indonesia and Singapore. Following are some trade agreements between them :

ASEAN Free Trade Agreement (FTA)

The ASEAN member countries have lowered the import tariff range down to 0-5% through an effective agreement named the Common Effective Preferential Tariff (CEPT) Scheme.

Indonesia-Singapore Bilateral Investment Treaty (BIT)

The Indonesia-Singapore BIT administers additional protection of Singapore Investments in Indonesia and vice versa. The treaty establishes a multi-tiered dispute settlement mechanism involving mediation, consultations and international arbitration through the International Centre for Settlement of Investment Disputes (ICSID).

Indonesia-Singapore Double Tax Avoidance Agreement (DTAA) 

Signed between Indonesia and Singapore, the DTAA reduces the tax rates on branch profits and royalties on copyrighted works from 15-10%. Moreover, DTAA administers taxation on capital gains and prevents tax evasion.

Importing Goods Into Indonesia – Understanding Indonesia Import License 

Trading companies looking to set up export and import operations in the country must obtain an Indonesiian business license for trading, called SIUP. Four major types of SIUP are:

Type (License) Size (Company) Net Worth (in US$)
Micro SIUP Micro-sized, Sole Proprietorship < US$3,560
Small SIUP Small-sized > US$3,560;

< US$35,606

Medium SIUP Medium-sized > US$35,60;

< US$712,125

Large SIUP Large-sized > US$712,125

Since Branch Offices and Representative Offices are considered as a unit of the parent company or acting on behalf of their corporate headquarters, it is not mandatory for these business entities to obtain an SIUP.  

Types of Indonesia Import License: 

A company must have an API or Import Identification Number in order to import goods to Indonesia under the laws of the Indonesian Ministry of Trade (MoT). Primarily, there are two types of Import Identification Number: General Import License (API – U) – goods imported are for trading purpose; and Producer Import License (API – P) – import of industrial raw materials for further processing. 

Understanding the Import Procedure in Indonesia

As the process for the business set-up proceeds, obtaining an import license for a foreign investor becomes comparatively complex. The following table demonstrates the timeline to set up an import business in Indonesia:

Business Process/ License Obtaining  Tentative Time
Incorporation of PT PMDN or PT PMA in Indonesia 6 weeks
Obtaining Permanent Business License (IUT), mandatory for all foreign investment companies. 1 – 2 weeks
Obtaining Import License API-U or API-P 1 week
Getting NIK (Customs Identification Number) and SRP (Customs Registration Certificate)  4 weeks 
Acquiring a recommendation from DEPTAN Ministry of Agriculture (only for a particular category such as food or children’s items) 4 weeks
Approval by other authorities depending on your product category (e.g. National Agency of Drug and Food Control for food products) 3 weeks
Approved by the Ministry of Trade (MoT).

 

How Cekindo can Assist 

Setting up a business overseas can be a tedious and daunting process. Cekindo’s comprehensive business solutions can help you in all facets of setting up your business in Indonesia. Our consultants have thorough knowledge of the Indonesian Market and can help you create a viable roadmap for your business. Our experienced legal advisors will assist in all statutory and regulatory aspects of your investment.

Cekindo can also act as your Importer of Records provider in Indonesia handling all aspects of importing, including documentation, payments of duties and delivery of your product.

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