Indonesia has been one of the best performing investments throughout the world economic crisis that began in 2008 and continues to grow in the years since. Indonesia’s market capitalization is significantly smaller than the BRICS (Brazil, Russia, India, China and South Africa) economies, which creates more room to grow for foreign investors.
In the second quarter of 2022, Foreign Direct Investment (“FDI”) into Indonesia (excluding investment in banking and the oil and gas sectors) significantly increased around 39.7 percent (YoY) to a fresh record high of IDR 163.2 trillion or USD 10.89 billion which resulting the highest rise in the past decade.
A. Investment Regulation in Indonesia
On 2 February 2021, President Joko Widodo announced new Presidential Regulation No. 10/2021 (“PR 10/2021”) related to investments in the business sector known as the Positive Investment List which included business activities that were closed, or partly open to foreign investment. Under this regulation, most of the foreign investment restrictions in the Negative List have been lifted.
Based on the data that was provided by the World Bank regarding the Ease of Doing Business (“EoDB”), Indonesia is also currently ranked 73 out of 190 countries which shows that Indonesia is starting to facilitate the businessmen to obtain business license in Indonesia easier through the recent policies.
Read more: The Usage and Functions of Foreign Company Representative Office
According to the data above-mentioned, Indonesia is a new land of hope for foreign investor to expand their business and networking channel. It is supported by the fact that in January 2022, Indonesia’s total population was 277.7 million, making Indonesia the world’s fourth-most populous country led by the productive age (25 to 54 years) by 42.56 percent as the majority. Pursuing the business guide in Indonesia, hereby we are going to describe the measure to protect and mitigate the legal risks as below:
B. Foreign Business Incorporation Regulations
Based on article 9 section (9) and (10) Regulation of the Investment Coordinating Board No. 4/2021 (“RBKPM 4/2021”), there are two business entities that are permitted for foreign investors in Indonesia which are Foreign Investment Limited Liability Company (“PT PMA”) and a Representative Office (“KPPA”).
Choosing PT PMA might be beneficial for the foreign investors since the liability is limited to the shares allotted to him. However, before embarking on the process of incorporation of PT PMA, the foreign investor must understand that according to the Indonesian Company Law (“Law No. 40 of 2007”) as amended by Indonesian Job Creation Law (“Law No. 11 of 2020”), every limited liability company in Indonesia requires at least two shareholders and consist of at least one commissioner and one director.
Read More: The Enforcement of Document Legalisation with Apostille Certificate in Indonesia
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ET Consultant is a Business Consultant and Legal Consultant Expert that provides support for local and multinational clients to start and manage their business operations in Indonesia. ET Consultant specializes in Business Incorporation, Licensing & Legal, Accounting & Taxes, Immigration, and Advisory Services.
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