When a Tourist Becomes a Resident: How to Avoid the Pitfalls

FIRST IN A TWO-PART SERIES ON INVESTING IN BALI

By Daniel O’Leary

Bali is back. The most recent tourism traffic numbers (up 13 percent 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 10 destinations to visit in 2010.

This increase in traffic has fuelled 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 or 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 for 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.

This can then, in turn, lead to other basic due diligence not being completed and mistakes being made that can be difficult or impossible to reverse later on.

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 first 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, defence (including armed forces and national police), the legal system and monetary policy are still under control of the 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 and 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), 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.

Next Week: The Indonesian legal system explained.

Daniel O’Leary has lived and worked in Indonesia for 25 years, holds Indonesian citizenship and is the director of IndoAdvisors, a business and legal advisory service based in Bali.

Filed under: Perspective

6 Responses to “When a Tourist Becomes a Resident: How to Avoid the Pitfalls”

  1. Tony Brown Says:

    And very often it is our fellow expats who are doing the scamming.I got taken to the cleaners by a bloke who has been in Bali for donkeys years and he arranged everything with nice commissions for himself along the way. By the time I realized what was going on I was in too deep. The paperwork is a mess and I don’t know if I will ever get it sorted, I don’t even want to think about it at this stage.

  2. Sarah Walshe Says:

    Poor Tony ! did your mammy not tell you to “never trust strangers” ? Why did you pay commissions to a bloke because he was donkeys years in Bali ? What kind of qualification is that ? Did you not get professional advice ? Some folks should never leave home.
    There is no substitute for common sense…

  3. John Power Says:

    It is easy to be critical but one has to be on one’s guard when investing abroad.I lived in Spain for many years and there are similar stories of expats losing their life’s savings on dodgy deals there. So it is not only in Bali this happens. Seeking professional advice is the absolute minimum one should do and getting a 2nd opinion could prove a worthwhile expense. Everyone has access to the internet these days so why not Google the name of the agent you are dealing with to see if he/she has a history.
    “Better be safe than Sorry”.

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