Inbound foreign direct investment (FDI) in Indonesia is managed by the Investment Coordinating Board (known by its Indonesian abbreviation “BKPM”). The BKPM operates under Law No. 25 of 2007 (the 2007 Investment Law).
Rookie investors entering Indonesia for the first time will need to establish an Indonesia-domiciled company (known by its Indonesian abbreviation “PMA”), which conforms with investment rules and procedures that BKPM may update periodically. Where legislation does not permit 100% foreign ownership, the PMA must enter into a partnership with a domestic investor – normally in the form of a joint venture. The foreign investor will be permitted to own between 30% and 95% of the PMA depending on the industry and sector (rising to 100% for certain types of public private partnerships [PPPs]).
Managing Partner
Assegaf Hamzah & Partners
There are no restrictions on the maximum size of investments, financing sources, whether products may be sold on the domestic or export market, or on repatriation of earnings. However, the BKPM restricts FDI projects to those that are worth a minimum of IDR10 billion (US$0.73 million), consisting of at least IDR2.5 billion in paid-up capital and the rest in the form of additional capital injections or loans. In addition, the government’s negative investment list (known by its Indonesian abbreviation “DNI”) requires investors in particular sectors to fulfil conditions such as, among other things, requirements to collaborate with small to medium enterprises (SMEs), or to obtain special licences or recommendations from relevant line ministries.
Foreign investors must also comply with regulations on various other issues, such as environmental protection, manpower, and zoning. The principal licences in the forestry and mining sectors are issued by relevant government ministries.
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Bono Daru Adji is the managing partner of Assegaf Hamzah & Partners in Jakarta. He can be contacted on +62 21 2555 7878 or by email at bono.adji@ahp.co.id
Eko Ahmad Ismail Basyuni is a partner of Assegaf Hamzah & Partners in Jakarta. He can be contacted on +62 21 2555 7802 or by email at eko.basyuni@ahp.co.id
