It may at times be advantageous to have a partner (local or otherwise) in Indonesia, though it is vitally important who your partner is. This may sound somewhat obvious but experience has constantly shown that this needs to be further emphasised and underscored to new foreign investors.

The first consideration is to determine whether your business activity allows for full ownership of your investment entity in Indonesia, as certain business activities are regulated under investment laws (at the time of this publication). Having done so, it would be clear whether having a local business partner is mandatory or optional. In any case, it would be good to learn a little more.

Having a sound local partner on-the-ground can definitely alleviate various hassles when navigating the complex web of local administrative bureaucracy, or even open new avenues of business opportunities due to network connections and prowess in cultural development. Moreover, said local partner may also contribute in managing the employees of the business to great effective effect by bridging the gap between cultures. Doing business in Indonesia is still largely based on forming and cultivating relationships.

Nevertheless, the importance of the quality of documentation securing and regulating the relationship between the partners should not be in any way diminished, and this should in no way hamper or prevent further cultivation of relationship to a mutually beneficial state. One of the most common excuses that have been bandied by foreign investors is that putting in place documentation from the outset may affect commercial relationships, where a ‘lack of trust’ is implied. From a professional perspective – clarity, precision, and lucidity are the key markers to commencing a promising Joint-Venture relationship that would minimise risk of future disputes and consequently, hefty legal fees.

Conducting due diligence (“DD”) of your potential partner should therefore be pursued as one of the first (if not the first) courses of action in forming a JV. Meanwhile, it is not absolutely necessary on every occasion to conduct a comprehensive and exhaustive DD on your potential partner. The extent of the DD will depend on subjective variables unique to each case, and nevertheless to be further assured and relied upon by formalised representations and warranties if required.  Other legal considerations would include repatriation of funds and issues pertaining to majority/minority circumstances.

Last but not least, it must be acknowledged that even all good things will come to end at a specific stage, as the proverb goes, and as such it is also essential to contemplate exit mechanisms prior to entering into a JV with your potential partner. Far from being a prophecy of doom or a show of bad faith, the clarity and certainty manages expectations and enables for assurances to be provided, if necessary and within reason. For further information about this https://kfmap.asia/research/indonesia-industrial-property-investment-guide/773

Writer : Andrew Tuah & Anthoni Tuah from Tuah & Suparto Advocates and Solicitors.

Source : https://kfmap.asia/research/indonesia-industrial-property-investment-guide/773