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  • ___________________________________________________________________________

    2010/SOM1/EC/WKSP/006 Session 2

    Key Challenges Faced by Entrepreneurs: Indonesia

    Submitted by: Indonesian Chamber of Commerce and Industry (KADIN)

    Workshop on Reducing Start-up and Establishment Time of Businesses

    Hiroshima, Japan1-2 March 2010

  • Realityontheground:Keychallengesfacedbyentrepreneurs

    LeoJ.SusiloViceChairmanof

    PermanentCommitteeonBusinessEthics

    IndonesianChamberofCommerceandIndustry

    WorkshoponReducingStartupandEstablishmentTimeofBusinesses

    Hiroshima,12March2010

    INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    Preliminary notes ThispresentationwilltrytopresentcriticalopiniononwhathavebeenreportedinDoingBusinessinIndonesia2010;

    Inlinewiththeworkshop,observationwillbedoneonlytotheareaofStartingtheBusiness

    2

    Wewillobservefromtheperspectiveofmicro,smallandmediumenterprise

  • INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    Starting a business

    BUSINESSIDEA

    OWNPRODUCT

    OTHERSPRODUCT

    PROTECTION

    ARRANGEMENT

    BUSINESSENTITY

    STARTUP&

    ESTABLISHMENT

    OPERATIONAL

    3

    Source:LowKeeYang&B.S.Tabaluja(2002),p.23.Modifiedasnecessary

    INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    Starting a business

    4

    START

    PUBLICNOTARY:Establishmentdeed(articleofassociation)

    CERTIFICATEOFDOMICILE

    TAXOFFICETaxidentificationnumber(NPWP)TaxpayerregistrationVATcollector(PKP)

    BANKACCOUNT

    1ST INSTANCECOURTRegistrationofestablishmentdeed

    LOCALAUTHORITIESFORCOOPERATIVE,MSME&TRADING:Permanentbusinesstradinglicense(SIUP)Companyregistration(TDP)

    END

    Startupprocedureforsoleproprietorship(UP,PD)(excludeprofessionalservices)

    1a

    1b

    3

    2

    4

    4days

    2days

    2days

    2days

    10 15days

    Note:Compliancetothemanpowerregulationcanbetakencareafterthecompanyisestablishedandinoperation

    2days

  • INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    Starting a business

    5

    START

    PUBLICNOTARY:Establishmentdeed(articleofassociation)

    CERTIFICATEOFDOMICILE

    TAXOFFICETaxidentificationnumber(NPWP)TaxpayerregistrationVATcollector(PKP)

    BANKACCOUNT

    1ST INSTANCECOURTRegistrationofestablishmentdeed

    LOCALAUTHORITIESFORCOOPERATIVE,MSME&TRADING:Permanentbusinesstradinglicense(SIUP)Companyregistration(TDP)

    END

    Startupprocedureforpartnership(Firma,CV)(excludeprofessionalservices)

    1a

    1b

    3

    2

    4

    4days

    2days

    2days

    2days

    2days

    10 15days

    Note:Compliancetothemanpowerregulationcanbetakencareafterthecompanyisestablishedandinoperation

    INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    Starting a business

    6

    START

    PUBLICNOTARY:ConfirmingthenameofthecompanyEstablishmentdeed(articleofassociation)

    CERTIFICATEOFDOMICILE

    TAXOFFICETaxidentificationnumber(NPWP)TaxpayerregistrationVATcollector(PKP)

    BANKACCOUNT

    MINISTTRYOFLAW&HUMANRIGHT:ApprovalofestablishmentdeedPublicationinStateGazette LOCALAUTHORITIESFOR

    COOPERATION,MSME&TRADING:Permanentbusinesstradinglicense(SIUP)Companyregistration(TDP)

    END

    Startupprocedureforlimitedliabilitycompany(PT)

    1a

    1c

    3

    4

    5

    5days

    2days

    2days

    Transitionperiod:1 4weeks Normalprocess:3 7days

    2days

    10 15days

    Initialpaidupcapitalor Statementofshareholders&Boardmembers

    1days

    1b

    2

    Note:Compliancetothemanpowerregulationcanbetakencareafterthecompanyisestablishedandinoperation

  • INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    The challenges

    7

    Ca.50millionofMSMErepresent60%ofGDP 50%oftheMSMEinIndonesiagounregistered(p.13); ItreportedMSMEwithlegalstatusoflimitedliabilitycompany(PT)onlyanddidnotconsiderotherMSMEwithanotherlegalstatus.

    TheQuestions:Why50%oftheMSMEinIndonesiagounregistered?Isitdifficulttogetinformationaboutcompanyregistration,ifitisnotalimitedliabilitycompany(PT)?Isitcostlytoregisterandtoformalizeacompany,ifitisnotaPT?Whathavebeenundertakentorectifythissituation?

    INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    The challengesThekeychallenge:Choosingtherightbusinessentity: SoleProprietorship; Partnership(Firma)orLimitedLiabilityPartnership(CV

    Perseroan Komanditer);

    LimitedLiabilityCompany(PerseroanTerbatas)Whattoconsider?

    Theeasinessofthestartupprocedure Prosandconsonbusinessentitychoice Accesstobankcreditorothersourceoffund

    8

  • INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    The challengesEasinessofbusinessstartup Formicroandsmalltherecommendedbusinessentityto

    beusedissoleproprietorshiporpartnership(seethepreviousprocedurechart):

    Thechallengesare: Howtoreducethecostforthepublicnotaryorisitpossible

    thatestablishmentdeedformicroandsmallbusinessentitytobemadebyotherauthority?

    Howthelocalauthoritiescanspeeduptheissuanceofbusinesstradinglicenseandcompanyregistrationprocess?

    CanwehaveaOneStopService formicroandsmallenterprise,suchasforCooperative(byMinistryofCooperative,SmallandMediumEnterprise)orPublicAccountant(byMinistryofFinance)?

    9

    INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    The challengesEasinessofbusinessstartup Forsmallandmediumenterprisetherecommended

    businessentitytobeusedislimitedliabilitycompany(seethepreviousprocedure);

    Thechallengesare: Isthatpossibletoreducethecostforthepublicnotaryorto

    standardizethecost? Howcanthelocalauthoritiesspeeduptheissuanceofbusiness

    tradinglicenseandcompanyregistrationprocess? IsthatpossibletohaveaOneStopService forsmalland

    mediumenterprise,suchasforCooperative(byMinistryofCooperative,SmallandMediumEnterprise)orPublicAccountant(byMinistryofFinance)?

    10

  • INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    The challengesProandconsofeachbusinessentity Soleproprietorship

    Havethefullcontrolovertheoperationandalsofinancialgain,butontheotherhandalsofullliabilityifthebusinessgoesdown;

    Limitedfinancialresources,hastodependlargelyonhis/herownresourcesduringthestartupperiod.

    Difficultornoaccesstobankcreditorfinancialassistance Somecountermeasureshavebeentaken,butmostlynotforstartupbusiness:GovernmentprogramKUR(Creditforpeople)andKUK(Creditforsmallenterprise);

    Somestateownedbankshaveprogramformicroandsmallenterprisefinancing;

    CSRprogramfromsomestateownenterprises,especiallyinmicroandsmallindustryfinancing

    11

    INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    The challengesProandconsofeachbusinessentity Partnershiporlimitedliabilitypartnership:

    Thecontrolaresharedamongthepartners,eachpartnercanrepresentthepartnership/firm. Onepartnerbindsthefirm;

    Liabilityrestnotonthefirm,butonthepartnersjointlyorseveral,incaseofFirma

    LimitedliabilityforshareholdersincaseofPTAdditionalfinancialresourcesandmanpowerforstartup.Difficulttobankcreditorfinancialassistance

    Somecountermeasureshavebeentaken,butmostlynotforstartupbusiness:GovernmentprogramKUK(Creditforsmallenterprise); Somestateownedbankshaveprogramformicroandsmallenterprisefinancing;

    CSRprogramfromsomestateownenterprises,especiallyinmicroandsmallindustryfinancing

    12

  • INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    SummaryKeychallengesthatmade50%ofmicro,smallandmediumenterpriseinIndonesiaremainnotformalizedorregisteredare:

    Thecosttonotarizecompanydocumentsisstilltohighforthem;

    Theprocessofissuingbusinesstradinglicense(SIUP)andcompanyregistration(TDP)bylocalauthoritiesisstilltolong

    Mostlytheyarelackofcapital; Ingeneraltheydonotseethebenefitofbeingformalizedorregistered,thatis,couldmakeaccesstobankcrediteasier;

    13

    INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY

    THANK YOU14

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