Investment opportunities and risks for Foreigners

One of the many exciting opportunities for foreigners to relocate to Bali is opening their own business or possibly investing in existing businesses. In Indonesia, foreigners have the option of investing in a variety of industries. New businesses continuously spring up in Bali, as obtaining approval to open enterprises in Bali is relatively straightforward, contrary to what many believe. The key is to follow the legal and fiscal guidelines and work with professional consultants and agencies that can help you. The number of entrepreneurs and private investors who are considering Bali is growing still.

Why invest in Bali?

5+Million international tourists and 11+million domestic tourists travel to Bali every year (pre-covid). Ignoring the shocking effects of the pandemic for a second, this has created a thriving hospitality industry, that grew since it became significant sometime in the 90ies. Of course, this dynamic economy creates interesting and also lucrative investment opportunities. 

Running a lifestyle, wellness, or hospitality business in Bali, and particularly investing into land and properties has been undoubtedly profitable for many foreign investors since decades.

Is the Balinese economy solid?

Investing your money in Bali comes with lots of opportunities, but of course also with risks. The economy highly relies on tourism, which makes it also vulnerable.  Volcano eruptions and earthquakes for example can happen, and do happen. And of course not to forget the pandemic that brought tourism to a global standstill. Yet Bali has always recovered after each global, regional or domestic “disaster”, not just very quickly, but also grew after every low point beyond expectations. Bali is a global “brand” and the island’s economy will continue to grow; some say, “it’s just the beginning”, and we believe so too.

Even though, people call Indonesia a sleeping giant, one would have to admit, that this giant does not sleep at all anymore and has woken up. Indonesia’s demographic with its young and increasingly well educated population pushing into the middle class and further, is one of the absolute strong points of the economy, and domestic tourism will grow for years to come in Bali.

The political system and the young democracy is rather stable, welcoming to foreign investors, and a reliable international partner and member of the ASEAN countries.

We have seen dozens if not hundreds of businesses come and go over the last 20 years. While in any economy businesses fail and succeed, a good understanding of the opportunities and risks is essential.

The natural disasters such as earthquakes and volcanic eruptions did happen and will happen again, affecting tourism in some regions in Bali or as a destination overall. Even though no challenge lasts forever, the economy can crash for a few months and investors need enough resources to be able to handle such incidences, and manage cash flow. Bear in mind, that competition can be tough in all hospitality segments, there are constantly new places opening and the level of innovation and creativity of business owners is at times mind-blowing. Cash-flow management seems to be for many “inexperienced” investors a huge challenge, simply because they underestimate the tax bills, or are not aware that buying on credit is rarely happening and everyone wants to see the cash before doing anything. High interest rates, of course only if you manage to get a loan from a local bank. Lack of proper legal and fiscal research or listening to shady agents, consultants, influencers and wannabees can ruin any business rather quickly. It is absolutely crucial to build a strong foundation – legally and fiscally. The tax system can be complicated, the rules in general are getting stricter (that’s for the most part a good thing). Building & business permits need to be in place. Gradually, environmental protection requirements are getting stricter, limitations of ownership are a real thing, the requirements to have local shareholders or partners for some industries are mandatory, and you need a solution for the paid-up capital to found a company, and one needs to understand how dividends are taxed and how earnings can be sent abroad if needed. And, last but not least, there are labour laws to follow. Wehave seen business failing simply because of choosing the wrong location and not understanding the cultural differences when dealing with employees and business partners.