Top 10 Complaints of Foreign Investors in Indonesia

Kenneth Yeung conveys some common complaints from expats who opted to do business in Indonesia.

‘Indonesia Expat does not condone bribery or other unlawful practices, but some foreign investors claim it’s usually the only way to get things done’

1. Corruption & Red Tape

Investors often face demands for informal payments or gifts. You need a permit promptly – and later want it renewed? Then hire an agent to pay an unofficial fee and pretend it’s a legitimate cost. You want to operate without an official threatening to put you out of business over a spurious technicality? Then make a monthly payment through a backdoor channel. Developing a mine? Make sure everyone gets a cut, and turn a blind eye to illegal mining. Some compliant foreign firms are hounded by repeated audits, while local competitors pay to be left alone. Others have been flagged on suspicion of money laundering merely for not turning a profit in early years. Play by the rules, and you’ll end up on an uneven playing field, losing out to those who break the rules.

2. Extortion

Foreign investors with a visible presence may become targets of predatory groups and organised crime gangs, some tolerated by the state or with alleged ties to authorities and business associations. At the small end of the scale, you open a restaurant and receive a visit from a local gangster asking for a monthly contribution to keep the peace. Fail to pay, and your property might be vandalised. On a larger scale, entire projects can be blockaded, factory gates sealed, and demonstrations staged. Pay enough and the problems disappear, except for the ongoing extortion.

3. High Start-up Costs

In Singapore, foreigners starting a company require minimum paid-up capital of S$1. In Indonesia, a foreign direct investment company (PMA) requires minimum issued and paid-up capital of Rp10 billion (USD605,000) per line of business.

This is officially to protect local small and medium enterprises and deter non-serious investors, and not because Indonesia doesn’t like more efficient foreign competition. Loopholes exist, such as using local nominees (technically illegal) and opening a representative office (which is not supposed to generate revenue), but these can lead to serious compliance problems.

4. Lack of Local Talent + Termination Woes

In many sectors, there simply aren’t enough highly qualified people at the top end to go around, so finding and retaining good people becomes a battle — and some people that you pay top dollar for don’t always deliver. Hiring foreigners isn’t an easy solution due to formal and informal restrictions. Another problem is the red tape and costs involved in firing local employees, especially if you can’t reach a mutual termination agreement. A typical nightmare scenario involves a finance officer or senior personnel embezzling funds. You decide to fire them without pressing charges. Instead, they report you for minor infractions and demand an enormous payout. Either way, you lose.

5. Mandatory Local Partners

In several sectors, a PMA can’t hold 100% of shares. And at least one director must be a resident of Indonesia. This means some foreign investors need to take on a local partner. That’s great if you can secure an ethical and competent one, but troubles will brew if you’re pushed to accept a partner who is more skilled at creating problems than solving them. Some joint venture partners underperform and fail to meet project deadlines, leaving the company liable for losses. Try to make them pay, and they could sue you in a local court, even though your contract states that disputes must be settled by arbitration in Singapore. And even if you do win in Singapore, good luck with the enforcement in Indonesia.

6. Land Acquisition & Property Scams

PMAs can hold land rights to build, cultivate and use, but cannot own freehold title in Indonesia. Buying land through a nominee and developing villas in Bali can be fraught with risk. A bigger problem occurs when a company undertakes a major project, especially in the electricity, mining, or infrastructure sectors. Land prices can suddenly skyrocket due to local land mafias, resulting in delays and inflated costs. Even if you do your due diligence and check “all” land certificates, conflicting ownership claims may still arise.

7. Lack of Legal & Policy Certainty

The evidence is on your side. The system is not. The process from filing a police report to getting a final Supreme Court ruling can take years and be prohibitively expensive, so many foreign companies end up cutting their losses. Sudden policy shifts, such as mining export bans, can derail investment plans overnight. Local content rules add another layer of uncertainty. During projects that take years to develop, new officials can emerge with new regulations to make life more difficult.

8. Intellectual Property Violations

A foreign company brings its famous brand to Indonesia, only to find it has already been registered by a trademark squatter. You either pay off the squatter or sue them and risk losing. Popular brands may spawn local imitators, seeking to cash in on a name – from Superman wafer biscuits to Donald Duck flogging knock-off aphrodisiacs. Counterfeit branded goods are another problem, sold openly on e-commerce platforms and at popular markets and some malls. Anything from a Hello Kitty hairpin to a Hermès handbag could be fake. Trademark holders can report violations, but takedowns rarely last, and enforcement is weak.

9. Transport & Export Logistics

Moving goods from production sites to ports, or distributing products outside Java, can be a logistical nightmare. In eastern Indonesia, logistics can make up 30% of product cost due to poor infrastructure, quasi-official border fees, and return trips with empty containers. At Jakarta’s Tanjung Priok Port, bottlenecks lead to delays, increasing storage costs. For importers and exporters, unofficial clearance fees and slow bureaucracy are not uncommon. Some pay fixers to handle these hurdles, but they may still face long waiting times.

10. Quality of Life Issues

Being a foreign investor can be stressful, but the potential rewards should outweigh all the hassles once you’ve established a strong network, trusted staff, and a smooth operational system. If you become an Indonesian resident for compliance and management purposes, especially in Jakarta, the novelty of navigating chaos may soon wear off. Stress due to bureaucracy and hidden costs, plus lethal pollution levels and interminable traffic, can easily shorten your lifespan.