Indonesia collection profile



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2014: 120/189 countries
2013: 116/189 countries

Complexity of collecting debt:

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Executive summary

  • Payment terms in Indonesia are around 30 days on average. However, the payment behaviour of Indonesian companies in rcent years has deteriorated. Domestic law regulates the issue of late payment.​
  • Legal action in Indonesia is usually lengthy and costly whilst the appeal process provides debtors with an opportunity to further delay the proceedings; therefore conducting orchestrated debt collection efforts is the best option.
  • The insolvency framework has improved over the last years so that the amount of inconsistent decisions which used to be rendered has been reduced, but in practice the insolvency system is still to be tested.
General Information GENERAL INFORMATION arrow-transparent
Collection Practices COLLECTION PRACTICES arrow-transparent
Court Proceedings Court PROCEEDINGS arrow-transparent
Insolvency Proceedings INSOLVENCY PROCEEDINGS arrow-transparent
General Information 


Days Sales Outstanding (DSO)

Payment terms in Indonesia are usually around 30 days on average; however, payment behaviours of Indonesian companies in recent years has deteriorated and delays may reach up to 20 days on average. The current payment behavior of Indonesian companies in recent years has improved and would be somewhere between acceptable and good. Most Foreign Investment Companies (PMA) are good payers provided that they have sufficient cash-flow liquidity and solid revenue streams and as long as all contractual conditions are met. Middle to large Private National Companies similarly tend to preserve their reputations and would thus avoid being black-listed or credit defaulted due to overdue payments. Most delays can therefore be found with SMEs - which can encounter payment difficulties if they have short term liquidity issues or are under-capitalized - and State Owned Enterprises (SOEs) which have rather questionable payment behaviors and are known to be late in meeting their payment obligations.


Late payment interest

Indonesian law prescribes no standard payment terms, but the Civil Code regulates late payment interest, which has to be paid by the defaulting party upon request of the non-defaulting party before a court. Two sorts of interest would apply. On the one hand, a conventional interest rate (bunga konvensional) may be agreed by the parties through a contract and apply in case of late payment event or if a breach of other obligations occurred. On the other hand, if no contractual agreement exists, a 6% per annum legal interest rate (bunga moratoir) is set by law. The legal late payment interest is calculated from the date it is requested to the court, whilst the conventional interest rate is calculated as provided in the contract. In both cases, commencing legal proceedings is necessary to obtain payment.

To date, there is no law or regulation in Indonesia which regulates collection costs in particular or debt collection activities in general.

collection practice 


Orchestrated negotiation first

Legal action in Indonesia is usually lengthy, costly and decisions may be inconsistent. Therefore, it is always advisable to consider amicable settlement opportunities as a serious alternative to formal proceedings which overall only be commenced where the debt is very significant (in excess of USD 500,000). As a matter of fact, you should always negotiate with the debtor in the first place because in practice, it is an ideological principle (Pancasila) and a legal requirement (under Supreme Court Regulation No. 1 of 2008 on Procedures for Mediation in Court) for the parties to seek an amicable arrangement with a mediator prior to taking a claim to court, and to show that all efforts have been undertaken to do so.

Court Proceeding 


Indonesia has a mixed legal system in which Civil Law works together with religious principles and local customs. The Law No. 48 of 2009 concerning Judicial Power grants specific attributions to various District Courts acting in first instance: Religious Courts would usually deal with family matters, Administrative Courts would deal with claims brought against official decisions and acts. Finally, General Courts (peradilan umum) would generally deal with criminal and civil cases whilst Commercial Courts (located in the five largest District Courts) decide on disputes that relate to the bank's liquidation process (Law No. 24 of 2004), intellectual property and insolvency claims (Law No. 37 of 2004). The Supreme Court supervises the work of both District Courts and High Courts (acting as appeal Courts) and it has the authority to adjudicate a petition of judicial review (i.e. examination of a statute or lower rank law against the Law / Undang-Undang). It should be added that it is a requirement to draft contracts in Bahasa Indonesia when an Indonesian party is involved, but the parties may also enter into bilingual contracts in Bahasa Indonesia and another language of their choice. In 2013, the District Court of West Jakarta has declared a contract void as it was not drafted in Bahasa Indonesia and, although Indonesia does not recognize binding precedents and judgment from one Indonesian court does not bind other Indonesian courts, a party intending to enter into contracts with Indonesian individuals or companies is advised to comply with this rule. According to the Law on Judicial Power, the courts must be independent but in practice they keep facing a high dose of corruption and the overall system suffers a lack of reliability. Having said this, although transparency has always been an issue, some improvements have been made by the Supreme Court to ease access to information.

Legal dunning ought to start with a registered Demand Letter recalling the debtor’s obligation to pay the principal together with late payment interest. Ordinary legal action may only commence when amicable collection has failed and the parties have first attempted to reach a compromise. The creditor may then file a claim with the District Court, which is given responsibility for serving the debtor with summons. If the debtor fails to appear on the hearing to lodge a statement of defence, the court has discretion to organize a second hearing or to release a default judgment (verstek / verstekvonnis). Prior to considering the debtor's defence, as previously mentioned, the court must first verify whether the parties have tried to reach an agreement or amicable settlement through mediation, as mandated by the Supreme Court Regulation No. 1 of 2008 concerning Procedures of Mediation at Court . If the parties have undergone the mediation process, the panel of judges will then continue the hearings and the parties' evidence will be examined. The court would then render a decision and may award remedies in the form of compensatory or punitive damages.

insolvency Proceeding 


Insolvency in Indonesia is not a matter of cash flow or a matter of balance sheet. A debtor having two or more creditors failing to pay at least one debt that has matured and become payable may be declared insolvent by the decision of Indonesian Commercial Court, either at his own petition or at the request of one or more of his creditors. The term "failing to pay" is interpreted broadly and does not necessarily mean that the debtor does not have sufficient cash flow to pay his debts. Sometimes, a debtor would be declared insolvent by the Indonesian Commercial Court when, following a Suspension of Payment procedure, no composition plan has been approved by the creditors and the court alike. The Insolvency Law No 4/1998 (‘Law 4/1998’) has been replaced in 2004 by the Law on Insolvency and Suspension of Payment No 37/2004 (the ‘Insolvency Law’), which governs insolvency and suspension of payment procedures in Indonesia. This framework has reduced the amount of inconsistent decisions which used to be rendered, but in practice the insolvency system is still to be tested.


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