Foreign direct investment Indonesia is an investment made by a company or a person in a business interest-based in Indonesia. In open economies, it is usually done in contrast to tightly manage economies that deliver qualified workers and over-average opportunities of growth for investors. Foreign direct investment is often more than an investment in equity. It may also contain leadership requirements and technology provisions. In Indonesia, the world’s fourth most populous country with a high Internet adoption rate and a largely untapped digital market, everything is moving fast here. However, before you decide to take the chance as a new investor, there are some things you’d better know about the foreign direct investment in Indonesia.
How to establish a foreign direct investment company in Indonesia?
PMA (Penanaman Modal Asing) is the legal entity through which a foreign person or foreign business may conduct business in Indonesia (meaning to generate revenue flows and profit). The establishment of PMA is based on Law No. 40/2007 regarding Limited Liability Companies (Company Law). To establish a foreign direct investment in Indonesia, then you should go to the Indonesia Investment Coordinating Board (BKPM). It is the Indonesian government’s investment management company dealing with foreign financial. Here the stages you should follow:
1. You need the execution of a Deed of Establishment and approval from the Minister of Law and Human Rights of Indonesia to establish Limited Liability Company (Perseroan Terbatas/PT)
2. Get the Taxpayer Identification Number (Nomor Pokok Wajib Pajak/NPWP)
3. Certificate OF Domicile
4. Company Registration Certificate
5. A year temporary business license (optional)
6. Permanent business license
The minimum amount of investment
If a foreign entity intends to operate legally as a foreign investment firm or PMA, a minimum investment cost of IDR10 billion must be applied. According to current exchange rates, this is about USD700,000. Therefore, businesses should declare 25% of the minimum investment price as paid-up assets of at least IDR2.5 billion or around USD170,000. More capital-intensive industries such as finance, mines, and manufacturing may need to request a larger amount. The minimum amount of investment is required because the government wants to retain local businesses for the small to medium sector of the economy. For foreign companies, a higher minimum amount of investment helps direct foreign capital for large-scale industries. Besides, a fixed amount of paid-up equity and asset cost helps companies to ensure that they have the money and a long-term strategy to work in Indonesia.
The issuance of investment registrations
If your application is approved, BKPM must grant the Certificate of Investment to you within 1 working day of obtaining your submission, based on the Order of the Chairman of the Capital Investment Coordinating Board No. 13, the Year 2017, on Rules and Procedures for Licensing and Investment Facility. The investment registration is valid for 1 to 5 years as determined by BKPM.
