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At the time of writing this article, my biggest concern was that I would be torn apart by representatives of local companies, my fellow businesspeople, and expats using this scheme. I’ve heard persistent requests not to publish the article, so that things wouldn’t tighten up and people could work in peace.
But! First of all:
I AM NOT CALLING ON ANYONE TO BREAK THE LAW, and secondly:
WE, AS A COMPANY, AS EMPLOYEES, AS PEOPLE, ARE ONLY IN FAVOR OF LEGAL MEANS OF LIVING, DOING BUSINESS, AND EARNING MONEY IN INDONESIA.
I simply want to shed light on the shadowy side that must be seen to understand the full picture. Like my fellow entrepreneurs, I prefer to see the entire landscape and not ignore the risks to my business that may arise from my own improper and illegal actions.
If you prefer to live in illusions—just close this article. But if you are like me, keep reading.
You already know what business can be conducted legally in Bali. If not, first read THIS ARTICLE - https://bali-legal.com/en/business-bali-bez-oshibok-en.
However, this information is NEVER enough for our people. We are used to the notion that IF SOMEONE TELLS US “YOU CAN’T DO THAT”—IT MEANS NOTHING. We tend to perceive “you can’t” as an invitation for debate, a search for ways to “make it work,” or at least an opportunity for one or two attempts to circumvent the system.
“Can the system be circumvented in Bali?” My lawyer always says, “LAWS IN BALI CHANGE, BUT THE SYSTEM REMAINS THE SAME,” and it is partly built on the principle of “monkey money”. Not everywhere, but it does exist.
Monkey money literally translates to “bribe.” We are more familiar with the term bribes. Here, you will also often hear the term “protection.”
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How the System Works in Indonesia?
You can read about the consequences of careless and unskilled handling of local documents and law violations in my series of articles here - https://bali-legal.com/en/deportaciya-na-bali-en.
Today, I will discuss a small investigation I conducted on the topic of protection on Bali. This covers everything from the search for those who take bribes to conversations with those who use this system to legalize what cannot be legalized.
To add credibility, I created a narrative where I supposedly want to legalize a beauty salon in a tourist area with Russian employees and maximum potential client traffic in a zone where new buildings are prohibited. This idea is illegal for five reasons::
You cannot open a foreign company with foreign founders with such a business code.
You cannot hire foreigners for jobs like manicure, pedicure, tattooing, massage, or brow styling, as only locals are permitted for this work. It doesn’t matter that the quality of their work may not meet our expectations.
You cannot build a new facility in a high-traffic area (in 90% of cases) due to the area being classified as a ‘green zone.’
Read more about zoning in Bali HERE - https://bali-legal.com/en/land-on-bali-en.
You cannot accept payments from clients for illegal services. This leads to income concealment and payments to personal accounts.
You You cannot report your company’s profits transparently, as your activities do not correspond to any permitted categories.
At first glance, this is the situation. HOWEVER:
In the most touristy places on the island, along the main streets of tourist areas, you will see massive competition among foreign tattoo parlors, hair salons, barbershops, beauty salons, and so on. Their numbers grow each year due to the low quality of services provided by local workers and businesses. All measures that the Indonesian government directs to protect local workers from competition do not help but rather worsen the quality of these services. Local businesses have no incentive to improve quality without outside competition.
THIS IS THE SYSTEM.
Indonesian legislation has many loopholes, and the salaries of Indonesians are so low (the average salary in Java is around $150-$200) that circumventing the laws by simply opening an illegal business on the main street of a tourist area is possible. But how?
How Foreigners Navigate Some Obstacles in Indonesia
Let’s look at how some businesses solve the issue step by step based on the four points (which I previously outlined) that cannot be violated. For example, I will attach screenshots of conversations with individuals close to the Indonesian legislative system, who provided comments on various issues.
1 – Opening a Company with Prohibited Activities
How do they circumvent this prohibition?
They open a company in their name (PT PMA) and a company under a trusted Indonesian (PT).
For more about types of companies, read here - https://bali-legal.com/en/business-bali-bez-oshibok-en.
In this scenario, all assets and funds are funneled through the foreign-owned company, while the local company simply takes a commission for services that are prohibited for foreign companies. An agency agreement is created, and this procedure is nearly legal. The key is that all money and assets remain in the hands of the foreigner.
They open a company under a local Indonesian (PT), registering all assets and accepting working capital.
Here, a significant downside emerges — TRUST. It can happen that the foreigner ends up without a company, without assets, and without working capital. Such cases are not rare.
This method can also be considered a legal way to protect against the misappropriation of funds via a LOAN AGREEMENT, for instance, where the foreign investor lends money to the Indonesian to open a company in the latter’s name.
This part is completely legal, and, as they say, there’s nothing entrepreneurs around the world haven’t done.
In each of these individual cases, if you are unsure about your scheme or your trusted person, it’s better to reach out to us for assistance via TELEGRAM or WHATSAPP.
The article is becoming quite lengthy. I still need to address some crucial points, such as the average cost of monkey money, whether it is truly possible to find someone who can connect you with an immigration representative, what my research led to, and what conclusions I’ve drawn.
GOING FORWARD, THERE WILL BE MORE DISCUSSION OF THE LESS THAN FULLY LEGAL ASPECTS, so I decided to write a continuation and split this article into two parts.
For all this information and the continuation of my investigation, please refer - to PART 2 OF THIS ARTICLE.
If you need a more detailed consultation regarding relocation, starting, and running a business in Bali from English-speaking specialists, simply CONTACT US via TELEGRAM or WHATSAPP for quick communication.
Together, we will make life on the island comfortable
