Bali - Island of the Gods, inhabited by mere mortals - Daniel O’Leary
Bali is back. The most recent tourism traffic numbers (up 13% in 2009) confirm what the worsening traffic congestion over the last year has subtly hinted at. Not only are more tourists coming to Bali, but it is attracting visitors from a wider range of countries than ever before. Bali’s durability as a tourist destination is evidenced by its transition from being named in some countries travel warnings list to its recent inclusion on Lonely Planet’s top ten destinations to visit in 2010. This increase in traffic has fueled a property and building boom, especially in villas targeted at visitors who have been ensnared by Bali’s undeniable charms and opted to stay.
However, the transition from tourist to resident often doesn’t go as smoothly as anticipated and many experience numerous headaches in connection with buying properties or setting up businesses here. This fact was highlighted recently when the principal of one of Bali’s most prominent expat service agencies received a prison sentence for scamming foreign clients. This serves as a timely reminder that it may be an opportune time to examine how some of these dodgy deals can be avoided.
Many who have lived here for some time have probably been the victims of one scam or another or at least know someone who has. Sit on a high stool in any expat bar in Sanur, Kuta or elsewhere in Bali and it won’t be long until you hear the story of someone who is in Immigration lock-up, has been deported or can’t find the partner who owns his business /home. Hearing such horror stories can often create a sense of paranoia and put people off settling or investing here. However, the origin of these stories can often be tied back to ignoring the basic “caveat emptor” rule or failing to do the basics that one would never neglect in their own home country.
Typical examples of how these tales of woe occur often begin by relying on unqualified advisors. So often you hear the line “my mate knows the score here, he has been here xxx years, he’ll put you right”. Although such offers of free wisdom and advice are often well intentioned, they can also be dead wrong and send people off on fruitless tangents when what they should be doing is seeking qualified professional advice from the outset. For example, would you buy a house in your country without first checking if there was a right of way? Why do so many people do so in Bali and feel ripped off when the penny drops! Would you put all your money in the bank account of a person you hardly know because you can’t figure out how to open an account in your own name? Then they are surprised when this “trusted friend” runs off to Java with the lot! Another common issue is problems associated with immigration and work visas or tax status where people who have worked here for many years without the proper paperwork end up suddenly facing either large tax bills or deportation.
Of course when a foreigner relocates to Bali, whether it is to retire or open a business, similar to many emerging market locations, there is a real risk of being “ripped off”. The amounts of money involved are significant and can often literally constitute someone’s lifesavings. Therefore, one needs to handle business affairs with caution from the outset by seeking professional advice from qualified professionals and avoid involving your “newfound friends”. Friends are great and we all need them, but someone you meet briefly a few times communicating in pigeon English doesn’t constitute a friend under most peoples’ definition. Neither does it mean someone is honest if he shares his personal life story with you or brings you to meet his family in the village. So the message here is to enjoy the charm and hospitality of Bali by all means, that is in large part what attracts us to Indonesia in the first place, but be prudent when parting with your hard earned sheckles.
Before investing in Bali and seeking professional advice it is useful to have a basic understanding of government structures here and how the legal system may differ from that in one’s home country. If we take the Island of Bali which is one of 33 provinces in Indonesia, the highest government official is the Governor. The present Governor was elected last year and previously held the position of Police Chief when the 1st Bali bombing occurred. Provinces (which are further subdivided into regencies) have their own local governments and legislative bodies. Since regional autonomy laws were passed in 1999, provinces and regencies have extensive power over their own affairs, however foreign policy, defense (including armed forces and national police), legal system, and monetary policy, are still under control of national government.
Since 2005, heads of local government (governors, regents, and mayors) have been directly elected by popular election. There are 349 regencies in Indonesia. Foreign investors wishing to set-up large projects would be well advised to get to know their Regent “Bupati” and enlist their support for projects within their constituency before proceeding. Denpasar city has a Mayor, also elected, with similar powers to a regent. Under the Regent or Mayor are “Camat” and “Lurah” respectively who are government appointed civil servants and next in line in terms of authority but with whom expats will rarely need to interact.
The government office with which most foreigners living in Bali would have interaction with is that of the Chief of Village “Kepala Desa” or better known as “Banjar” in Bali. The Banjar has authority over the local people in accordance with acknowledged local traditions and is elected by popular vote. Every foreigner living in Bali should register with his/her Banjar. Any issues regarding security or other community affairs should be discussed with the Banjar. I would recommend that foreigners become familiar with personnel in the Banjar office so if a problem ever arises there is already a familiar relationship there to build on. Personally I have found my Banjar in Semawang, Sanur to be very helpful in every way. Your legal or professional advisor should be able to introduce you to the local Banjar.
In terms of the legal system in Indonesia, the three most commonly used services in the legal profession are provided by Notaries “Notaris”, Lawyers “Pengacara” and Legal Consultants “Konsultan hukum”.
A Notary is required to hold a Bachelor’s Degree in Law “SH”, a Masters Degree in Notarial Law followed by Ethics and Company incorporation courses and one year of practical training with a licensed Notaris. Licenses to practice are issued by the ministry of justice. Notaris typically provide legal advice, handle civil and commercial agreements/contracts, leases, deeds and company incorporation. Many Notaris also hold PPAT licenses issued by the Ministry of Lands which qualifies them to process transfers of ownership of land titles.
A Lawyer is required to hold a bachelors Degree in law “SH” followed by an Advocacy training course and a period of practical training in a registered lawyer’s office. Licenses to practice “SK” are issued by the regional High Court. Lawyers typically provide general legal advice, handle criminal cases, breach of contract, immigration problems, litigation and representation at court. The most common mistake I see investors making when seeking professional legal advice is they often go to a Lawyer when they should be hiring a Notaris and visa versa. This is especially common with those of us from an Anglo Saxon system where the function of a public notary is to witness signatures and they are not required to have any legal knowledge, often being the local postman, hotel manager or publican. In the Indonesian system, a notaris is the most qualified legal professional and the only one who can execute commercial contracts on behalf of clients. Making an incorrect choice won’t be fatal as you will probably end up in the correct office eventually but could waste precious time and money in the process.
Another misunderstanding occurs when foreigners are led to believe a person with an “SH” is a qualified Lawyer or Notaris. “SH” means the person has a Bachelors degree in law and this does not qualify them to practice law, no more than it would do so in western countries. To compound this confusion, there are many dodgy institutions handing out “SH” qualifications in Indonesia, just as there are dubious over the counter qualifications available in western countries or online these days.
Before employing the services of a Lawyer or Notaris, it is good practice to ask them to show you their License or “SK”. I guarantee you they will be delighted to show off their qualifications as both titles are considered to be high positions in Indonesian society where only a few percent get third level education. If they are reluctant or hesitant to present you their credentials, then think again before hiring them. Try to find a Lawyer or Notaris who speaks your language to a level you can understand. Going through your local friend whose English is “not so good” can be costly when dealing with legal documents. Leaving your Notary’s office “thinking” you know what you agreed to/signed is a recipe for disaster. Get all documents officially translated before signing.
The third category you are likely to encounter in the legal profession is Legal Consultant / Advisors “Konsultan Hukum”. These businesses are commonly owned by professionals with connections to well qualified Lawyers, Notaris and government officials. They usually provide a suite of services such as arranging notaries and lawyers as required, translations, licenses, permits, visas, etc. They can be useful if you are not confident in dealing with the various offices yourself and want to save time as they usually have a network of professionals in place to cater for common transactions.
It is common to find Legal Consultants combining their services with Business and Investment Advisory Services. For example, they may act as advisors for investment or development projects and also manage relations with government departments and local community leaders. Finding a consultant that you feel comfortable with should involve visiting a few companies who already provide the range of services you require and negotiating a fixed price for the service before signing up. Again, find a consultant that speaks your language to a competent level and remember that consultants are only as good as the connections and professionals they employ so don’t be afraid to enquire as to the qualifications of the experts they use.
Overall, relocating to or doing business in another country is never an easy process even when dealing with similar cultures, languages and legal systems. However, when you add different languages, laws and traditions it becomes much more challenging. Therefore, one has to be disciplined and methodical and exercise careful judgment at every step of the way. Some useful general guidelines to keep in mind:
• Professional advice is relatively inexpensive in Indonesia, verify their qualifications and background and hire the best.
• If you are buying a property, have professional due diligence carried out, for example you don’t want a 30 year lease on your house with only a 15 lease on access.
• Be discerning, don’t always take things at face value and get a second opinion.
• Start by opening your own bank account, get your own safety box in the bank and keep all your own important documents.
• Hire a professional or consultant that offers independent advice. Using the same broker you are buying the property from to arrange your legal affairs and permits may be convenient at the time but may also leave you very vulnerable later on if you have made a bad choice to begin with.
Doing things the legal way in Indonesia is not as difficult as many would have you believe. Basically, by employing a similar level of caution as you would at home and avoiding some of the main pitfalls discussed above, you can ensure the transition to your new home, business or life is as smooth as possible. Then you can settle down to the real business - enjoying life in Bali.
Daniel has lived and worked in Indonesia for 25 years, holds Indonesian citizenship and is the Director of IndoAdvisors, a company based in Bali offering Business and Legal advisory services - www.indoadvisors.com
