Indonesia is a favorite investment destination because it has a large geographical area, the fourth most population in the world, abundant natural resources and a growing local market. Indonesia is the largest market in Southeast Asia which has 37 provinces, more than 17,000 tribes and the largest archipelago in the world. Indonesia is ranked as the 16th largest economy in the world ranked by Gross Domestic Product in 2020. These data make foreign investors compete to invest in Indonesia.
The Government has released a Positive Investment List (DPI) to further attract investors. This regulation is contained in Presidential Regulation Number 10 of 2021 (Perpres 10/2021) concerning the Investment Business Sector, with its amendments in Presidential Regulation Number 49 of 2021 (Perpres 49/2021). The regulation is a derivative regulation of Law No.11/2020 on Job Creation or Omnibus Law, which was issued to encourage the improvement of the investment climate in Indonesia.
DPI consists of three classifications, namely Priority Business Fields, Allocated Business Fields or Partnerships with Cooperatives and MSMEs and Business Fields with Certain Requirements. The DPI approach replaces the Negative Investment List, which in principle all areas of business are open for investment. Except for some investments that are declared closed by law or not listed in the annex to Presidential Regulation 10/2021 with the amendment of Presidential Regulation 49/2021.
In the presidential regulation on the field of investment business, there are provisions for business fields that must not include foreign investment. Business fields that are indeed closed to make investments, namely drugs, gambling, certain fish species, taking corals from nature for building materials, live corals and dead corals, chemical weapons, industrial chemicals, chemicals that destroy the ozone layer and the liquor industry. In Appendix III of Presidential Regulation 10/2021 with its amendments to Presidential Regulation 49/2021, it is stated that fourteen other business fields are prohibited for foreign investment.
Foreign investors entering Indonesia can establish a Representative Office or a Foreign Investment Limited Liability Company (PT PMA). The foreign investors in question are individuals of foreign nationals, foreign business entities, and/or foreign governments who invest in the territory of the Republic of Indonesia. Furthermore, PT PMA has the same rights and responsibilities as a Limited Liability Company, without foreign investment.
The authority that regulates foreign investment in Indonesia is the Investment Coordinating Board (BKPM). The task of BKPM is to monitor the realization of foreign investment in Indonesia and ask foreign investors who have established businesses in Indonesian territory to submit periodic activity reports. The foreign investment regulations are BKPM Regulation No. 4 of 2021 and BKPM Regulation No. 5 of 2021.
The Online Single Submission System (OSS) managed by BKPM aims to simplify the business licensing process, also applies to foreign investors. OSS upgrades adopting the principle of Risk Based Assessment must be met before starting a business in Indonesia. Furthermore, PT PMA will obtain a Business Identification Number (NIB) from OSS, which will be valid as long as the company is established. The NIB replaced some of the registration numbers required in the previous regulations.
Foreign investors must determine the business field of PT PMA to be established, in accordance with the Indonesian Standard Classification of Business Fields (KBLI). Each investor can choose KBLI for more than one business field for his PT PMA. KBLI’s business field is an economic activity or activity that produces products/outputs, both in the form of goods and services, classified based on business fields. The purpose of KBLI is to provide uniformity of concepts, definitions and classifications of business fields in the development and shift of economic activities in Indonesia.
The step-by-step establishment of PT PMA in Indonesia is as follows:
1. Deed of Establishment
Having a notary to pour out a business activity plan in a deed of establishment, including choosing KBLI in accordance with the scope of business.
2. Taxpayer Identification Number (NPWP)
Register with the local tax office to obtain a NPWP.
3. Business Identification Number (NIB)
Register through the OSS (One Single Submission System) to obtain NIB, a unique number to identify company profile and function as an Import License (API-U), Customs Identification Number, Business Registration Number, also automatically register with the Health and Social Security System (BPJS Kesehatan and BPJS Ketenagakerjaan).
4. Operational License / Commercial License
Take care of an operational license or commercial license to be issued on the same day as the NIB, in case there are no other requirements.
The Government continues to increase the value of foreign investment in Indonesia. For this reason, the Government issued a policy that facilitates the process of foreign investment entering Indonesia. The Government also offers various incentives, both fiscal and non-fiscal incentives, to further attract foreign investment in Indonesia. In addition, the Government issued a DNI to attract foreign investors from various business fields.
The private sector must support the Government’s political will in terms of attracting foreign investors to Indonesia. SW Indonesia supports the Government by positioning itself as Indonesia’s investment gateway. SW Indonesia formed a dedicated professional team, specifically to serve PT PMA and foreign investors in terms of establishment and licensing, compliance fulfilment (monthly and yearly) and corporate actions to be carried out.