Is Banjar the main authority on the island?

This article is inspired by a real client story and the frequent question from experienced entrepreneurs: “How much do I need to pay to Banjar if I run a business in Bali?”.

I can imagine how the word "pay" might already be making you uncomfortable. If you're running a business in Bali, you're likely already paying for:

You can probably continue this list yourself…

And now, after you've gone through all of this, found a place to do business, the locals tell you that you can’t run your business here..

What is a Banjar?

Of course, not every local named Wayan will come to your office to explain the rules of doing business. Only authorized representatives of the local self-governance body — BANJAR (in simple terms, a community) — do that.

You’ve probably seen these people managing traffic, blowing whistles on the streets, or ensuring safety during ceremonies.

People say Banjar is the social glue, helping in times of life's difficulties. Typically, all the men from the area are part of the Banjar (community). In cases of trouble, people usually go to the Banjar for help, rather than to the government.

But what does this have to do with business?

Does a business need approval from Banjar?

Asia is a region full of contradictions, and Indonesia is a prime example. On one hand, there’s the government, which grants licenses and official rights to run a business. On the other hand, there’s the local self-governance (Banjar), which historically holds great influence and unquestioned authority over the people.

If you ask a Balinese person whether business operations need to be approved by the Banjar, you'll get different answers.

Here’s what our staff had to say:

Some say it’s important to show respect, while others argue it’s unnecessary since the government is above all, and we, as newcomers, should just follow its instructions.

As a European, I certainly lean towards the second perspective. FOR ME, LIKE MANY NEWCOMERS TO THE ISLAND, A CLEAR HIERARCHY OF INSPECTORS AND CONTROLLERS IS NEEDED TO UNDERSTAND PRECISELY WHOSE RULES I AND MY BUSINESS NEED TO FOLLOW.

BUT, it’s not that simple..

Theory vs. Reality

One of my clients, let’s call him Client K., thought the same way when he opened a motorbike rental company in Bali.

He went through all the necessary steps for:

And he was planning to start real activities when suddenly the need arose to change the virtual office to a real one (there’s no debate here; if you are running a real business with a physical location, it’s always better to do it this way).

You can read about the types of offices here - https://bali-legal.com/en/office-bali-en.

To change the address in the company’s charter, a document called SKTU (something like a registration in a specific Banjars) is needed. Naturally, to obtain it, one has to go to the Banjars where the business is located.

Here is where it became clear in Client K.’s situation:

It was clear that such a reaction was far from what he expected.

In general, when you do business in Bali, you always feel somewhat unprotected, and frankly, there’s always something to nitpick about (reports, authorized capital, hired employees, salary levels, licenses), which is why I ADVISE EVERYONE TO MAINTAIN ACCURATE REPORTING - https://bali-legal.com/en/tax-reports-bali-en. THIS GREATLY REDUCES THE CHANCES OF BEING HARASSED.

And this is why Client K.'s situation, stemming from a simple procedure to change the address in the charter documents, put both him and me into a slight gloom.

How did the story end, and does the Banjars have real power?

I won’t say that they couldn’t even issue a regular SKTU the first time, which led to a refusal to change the address, but we’ve all gotten used to that, haven’t we? Have you ever accomplished something with the locals in Bali on the first try? =)

What’s much more interesting is that after lengthy negotiations, a flurry of activity, and nervous glances, the Banjars issued their standard response: “sorry ya, but you cannot conduct business on our territory".

No amount of persuasion or explanations that the government clearly has a different opinion helped.

Simply put, the refusal to issue the proper documents and the DENIAL OF PERMISSION TO OPERATE AN ALREADY OPENED BUSINESS was the MAIN OUTCOME OF THIS STORY.

Does the Banjars have real power? You can decide for yourself, but here are the conclusions I drew after speaking with several clients who have lived on the island for over 10 years each:

1 - If you have a real business that you operate on the ground, it's better to pay the Banjars.

Forceful pressure doesn't really work in Bali. There's no point in arguing your case to the point of exhaustion. Yes, you are right that what is happening is legally incorrect, but what’s the use if your business constantly faces resistance and could ultimately be destroyed, even down to having your office burned down?

2 - The amount of money you pay is not a bribe per se—it’s a voluntary community membership fee for ceremonies, road repairs, and appeasing the spirits.

Don’t pay too much at once. A monthly payment of 200,000 to 300,000 IDR is quite sufficient. If you start with large amounts, the Balinese will get used to it and will consider a decrease in the payment as an insult, even if your business isn’t doing as well.

3 - If your business falls into competitive niches already occupied by locals, it’s better to negotiate with the Banjars before looking for an office. Do this after you’ve opened your company and obtained the necessary licenses.

The types of businesses I’m referring to include:

I think these examples are enough to understand which category your business might belong to.

You can read about how to legalize such activities at https://bali-legal.com/en/legal-bali-one-en и https://bali-legal.com/en/legal-bali-second-en.

4 - After you’ve opened a legitimate company, just go to your area of business and ask any local where the Banjars council is located. They’ll guide you.

You can take a forceful approach by involving the police or even ignoring these restrictions (both methods I strongly do not recommend).

Or…

If you need support and have many questions about how to act wisely in the current conditions, CONTACT US via TELEGRAM OR WHATSAPP for quick communication.

Together, we will make life on the island comfortable.