Foreign Companies Guide to Legally Operate in Indonesia’s Construction Industry

Indonesia, as one of the largest construction markets in Southeast Asia, attracts many foreign investors who can legally operate in the sector by either establishing a PT PMA (Foreign Investment Limited Liability Company) or setting up a KP BUJKA (Representative Office of a Foreign Construction Company). To successfully enter Indonesia’s booming construction market, Learn more about the best option for your business here!

PT PMA vs. KP BUJKA: What’s the Difference?

The main differences between PT PMA and KP BUJKA lie in business structure, ownership, partnership requirements, and operational flexibility.

• PT PMA is a limited liability company (Perseroan Terbatas - PT) registered under Indonesian law, allowing foreign investors to have greater control over their business operations. As an Indonesian legal entity, PT PMA can directly undertake construction projects without the obligation to partner with local companies.

  
  

• KP BUJKA, on the other hand, is only a representative office of a foreign construction company. Since it is not an Indonesian legal entity, KP BUJKA must collaborate with a local construction company (BUJK) through a joint operation (KSO) for every project.

  
  

Additionally, foreign ownership regulations are a key factor in choosing the right business model. If you set up a PT PMA, foreign ownership is limited based on the company’s country of origin:

• ASEAN investors can own up to 70% of shares, with a minimum of 30% owned by a local BUJK.

• Non-ASEAN investors can own up to 67% of shares, with a minimum of 33% owned by a local BUJK.

Meanwhile, KP BUJKA does not require local shareholders since it operates solely as a representative office of its foreign parent company.

Pros and Cons of Each Option

KP BUJKA Characteristics

• Flexibility without setting up a legal entity

  • KP BUJKA allows foreign companies to operate in Indonesia without forming a new legal entity, making it a quicker and more cost-effective option compared to PT PMA.

• Utilize parent company’s project experience

  • Foreign parent companies can use their international project experience to obtain an Indonesian Business License (SBU), which is essential for operating in the country.

• No minimum capital or local shareholder requirement

  • KP BUJKA does not require a minimum capital investment or the involvement of local shareholders.

• Must always partner with a local company

  • KP BUJKA cannot operate independently and must establish a joint operation (KSO) with an Indonesian construction company for every project.

• More complex administrative processes

  • Each project requires setting up a joint operation, which can be time-consuming and administratively burdensome.

PT PMA Characteristics

• Operate independently

  • Unlike KP BUJKA, PT PMA does not require a joint operation for each project, giving the company greater autonomy and flexibility in managing operations.

• Stronger legal standing

  • As an Indonesian legal entity, PT PMA has a clearer legal status, making it easier to handle permits, contracts, and legal disputes.

• More control over business operations

  • Despite foreign ownership restrictions, PT PMA still allows majority foreign ownership and full control over business activities.

• Minimum capital requirement

  • PT PMA must comply with Indonesia’s investment regulations, which include a minimum capital requirement as stipulated in Law No. 40 of 2007 on Limited Liability Companies.

• Must have a local shareholder

  • Unlike KP BUJKA, which is fully controlled by its foreign parent company, PT PMA must have a local partner as a shareholder to comply with Indonesian regulations.

• Cannot use the parent company’s project experience

  • Unlike KP BUJKA, PT PMA must establish its own track record to obtain a construction business license (SBU) in Indonesia.

    
    

Which Option is Right for You?

Choosing between PT PMA and KP BUJKA depends on your business strategy and operational needs.

• If you want a quick and flexible market entry without significant capital investment or the need for local shareholders, KP BUJKA is the more practical option.

• If you prefer full control over your business operations, do not want to rely on joint operations for every project, and are willing to invest for the long term, then PT PMA is the better strategic choice.

  
  

Need help setting up a PT PMA or KP BUJKA in Indonesia?

Let Mega Global Investment assist you throughout the entire company establishment process, including finding a reliable local partner!