Foreign Investment For Non-Financial Services Sector in Indonesia[1]

Foreign investment for non-financial services sector in Indonesia is generally regulated under Law No. 25 of 2007 on Investment (“Investment Law”) and specifically regulated under the relevant government institution regulations and policies, e.g., regulations and policies of the Capital Investment Coordinating Board (Badan Koordinasi Penanaman Modal “BKPM”) and each Ministry (depending on the business activity).

Under the Investment Law, a foreign investment for non-financial services sector can only be conducted in the form of a foreign investment limited liability company (Perseroan Terbatas Penanaman Modal Asing “PT PMA”). Before a foreign investor establishes PT PMA, the foreign investor must understand the following provisions:

• PT PMA must have at least two shareholders. Each shareholder could be in the form of an entity or an individual person.
• PT PMA must have at least one director and one commissioner. A person cannot be a director and a commissioner at the same time at one PT PMA.
• Individual foreign investor needs to determine whether he/she wants to be a director or commissioner at PT PMA and stays in Indonesia. There is a type of foreign investment that supports an individual foreign investor to apply for a Limited Stay Permit with a longer period.
• Generally, BKPM requires PT PMA to have more than IDR10 billion investment per line of business, exclude the investment for lands and buildings.
• The first investment can be in the form of equity and loan. Meanwhile, further investment can be in the form of equity, loan and/or retained earnings.
• Foreign investor must identify whether there are some restrictions on the business activities to be conducted by PT PMA, e.g., minimum capital requirements and limitation to foreign capital ownership for certain business activities, etc.
• Location of PT PMA determines the permits that are required for PT PMA. In practice, each city, regency or province can have different regulations related to what permits are required to PT PMA.

Please note that, in addition to the above, there are other provisions that should be considered by the foreign investor before establishing a PT PMA, including but not limited to the policy of the Minister of Law and Human Rights on the registration of PT PMA’s name, the minimum size of PT PMA’s office, the use and appointment of a notary in the establishment process, the process of general and specific licenses applications submissions, etc.

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Do let us know if you have any questions regarding the foreign investment in Indonesia. You may contact our Partner, Hamdi, at: s.hamdi@b-av.co.

Best regards

BATAVIA ADVOCATORUM (B.Av)

[1] This publication is for general information only. Any belief on the material contained herein is at the user’s own risk. You should contact our lawyer to discuss the above issue further. B.Av’s publications are copyrighted and may not be reproduced without the express written consent of B.Av.