Can a PMA (foreign-owned) companies in Indonesia engage in retail trade? The short answer is yes, but strict conditions apply. The government regulates this sector to protect local small and medium enterprises (SMEs) and to ensure fair competition.
Retail Formats Open to PMA
Foreign investors can participate in modern retail formats. Supermarkets with more than 1,200 square meters and department stores larger than 2,000 square meters allow 100% foreign ownership.
Foreign ownership in department stores ranging from 400 to 2,000 square meters is limited to a maximum of 67%. Hypermarkets and other large-format stores generally permit full foreign ownership.
Also read: Retail Industry in Indonesia: Outlook and Opportunities
Restricted Retail Segments
Small-scale retail remains reserved for local businesses. Minimarkets, convenience stores, and traditional markets are closed to foreign investment. Specialized retail segments such as street vendors, vehicle parts, cosmetics, and certain electronics also remain under domestic control.
Also read: What Fields Can a PMA Company Operate in Indonesia?
Distribution Chain Requirements
Even when permitted in retail, PMA companies face restrictions in distribution. PMA companies engaged in imports are prohibited from selling directly to end consumers or retailers; they must appoint a 100% Indonesian-owned company (PMDN) as their distributor or agent.
The chain typically follows: PMA Importer → PMDN Distributor → Retailer → Consumer.
Agreements must be notarized in Bahasa Indonesia, and local distributors must secure an STP Distributor Certificate.
Also read: Can a PMA Company Become a Distributor in Indonesia?
Capital and Licensing Rules
Foreign retail investors must meet a minimum capital requirement of IDR 10 billion (around USD 630,000), excluding land and buildings. They must also comply with location and zoning rules, parking requirements, and integration with shopping centers for certain formats. Required permits include:
- NIB (Business Identification Number) with correct KBLI retail codes
- IUTM (Modern Commercial Facility Business Permit)
- API (Import Identification Number) for import activities
Regulatory Developments
The Omnibus Law of 2021 liberalized several retail segments, opening opportunities in wholesale trade, e-commerce, and commission-based retail for 100% foreign ownership. However, the government still enforces strict oversight, with penalties for violations including license revocation, fines, and even permanent blacklisting.
Strategic Considerations for Foreign Investors
Foreign investors planning retail operations in Indonesia must:
- Select the right retail format that permits foreign ownership.
- Prepare for mandatory distributor partnerships if importing.
- Build a compliance system for capital, licensing, and operational rules.
- Consider alternatives such as franchising or licensing models to reduce risks.
Also read: How to Set Up PMA Company in Indonesia: Guide for Foreigner
Navigating these complex regulations can be overwhelming for foreign investors. From selecting the right retail format to ensuring compliance with distributor and licensing rules, expert legal and business support is essential.
This is where InvestinAsia’s PMA Company Registration Service becomes a vital partner. With deep expertise in Indonesia’s investment laws and retail compliance, we help foreign investors set up businesses efficiently, avoid costly mistakes, and enter the Indonesian market with confidence.
You can also enjoy special package prices for PT PMA and KITAS services.
Ready to start your business and investment in Indonesia? Chat with us now for FREE consultation!
FAQs
Is a PMA company allowed to operate a minimarket in Indonesia?
No. Minimarkets under 400 square meters are closed to foreign investment and reserved for domestic companies.
Is 100% ownership allowed in Indonesian supermarkets?
Yes, but only if the sales floor area is at least 1,200 square meters. Smaller supermarkets are closed to foreign investors.
How much capital is needed to establish a PMA retail company?
The minimum investment required is IDR 10 billion (approximately USD 630,000), excluding land and building assets.
Do PMA companies need local partners?
Yes, for distribution. PMA importers must appoint a 100% Indonesian-owned distributor to reach retailers or consumers.
Which licenses are necessary to run a PMA retail business?
Key permits include the Business Identification Number (NIB), IUTM for modern retail, and API if importing products.
References:
Walalangi & Partners. Wholesale and Retail Trading Businesses: The Promised Breakthrough. https://www.wplaws.com/wp-newsletter-wholesale-and-retail-trading-businesses-the-promised-breakthrough/.
KPMG. Investing in Indonesia 2021. https://assets.kpmg.com/content/dam/kpmg/id/pdf/2022/01/apx1-investment-list.pdf.
