Indonesia Eases the Way for MSEs to Start Business

4 mins read

The Indonesian government is taking significant steps to facilitate the establishment of micro and small enterprises (MSEs) by streamlining bureaucratic procedures and permits. This effort, aimed at reducing the complexity of starting new businesses, falls under the ambit of the Job Creation Law. As part of this initiative, the Ministry of Law and Human Rights has introduced more straightforward processes, as announced by Cahyo R. Muzhar, the director general of General Legal Administration (AHU) at the Ministry of Law and Human Rights.

The announcement was made during a focus group discussion (FGD) titled “Starting Business” held in Bali as part of the 61st Asian-African Legal Consultative Organisation (AALCO) activities. The goal is to make it more accessible for entrepreneurs, especially MSEs, to launch new businesses by removing overlapping regulations and simplifying the procedures involved.

Until now, establishing a company in Indonesia had been subject to various conditions and complex procedures. The Ministry of Law and Human Rights’ endeavour is to simplify this process and allow for more straightforward business setup, including the creation of individual companies.

President Joko Widodo has emphasised the importance of facilitating business operations, especially for micro and small enterprises, recognising their significant contribution to the nation’s economy.

Under this new framework, individual companies have been introduced as an option for MSEs to establish their businesses. Laila Yunara, the ministry’s coordinator of legal entities at AHU, outlined the criteria for setting up individual companies, which include being an Indonesian citizen, at least 17 years old, and requiring a maximum capital of Rp5 billion (approximately US$318,000).

Individual companies offer advantages such as the separation of assets and the flexibility to determine the capital amount. The registration process is straightforward, involving filling out a form and incurring a registration fee of only Rp50,000 (around US$3). Furthermore, individual companies receive legal entity status immediately and are provided with taxpayer identification numbers (NPWP) for corporations upon registration.

Yunara explained that individual companies have the flexibility to change into capital partnership companies if they acquire more shareholders or no longer meet the MSE criteria. This transition involves a notarial deed and electronic registration. Applicants must electronically submit a statement confirming compliance with legal provisions, taking full responsibility for the accuracy of the format and information presented.

The 61st annual AALCO meeting, scheduled for October 15-20, is expected to provide a platform for discussions on legal and business infrastructure, particularly concerning micro, small, and medium enterprises (MSMEs). AALCO’s mission is to support the development of its 47 member countries by addressing legal matters, including those related to economic growth. Indonesia, as the largest economic power in Southeast Asia, stands to benefit from this forum as it promotes legal development and bridges the information gap between policymakers and business actors.

In conclusion, Indonesia’s commitment to simplifying the process of establishing MSEs is a significant step towards fostering entrepreneurship and economic growth. By reducing bureaucratic hurdles and creating a more accessible pathway to business formation, the government aims to encourage more individuals to venture into the world of entrepreneurship and contribute to the nation’s thriving MSE sector.