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OVERVIEW The government of Indonesia's policy encourages private sector-led growth and foreign investment. The current national policy is based on the Foreign Investment Laws No. 11/1967 as amended by law No. 11/1970 as well as Domestic Investment Law No. 6/1968 as amended by law No.12/1970. The Indonesian Investment Coordinating Board (BKPM) is in the process of reviewing the present laws and has made recommendations to further improve the investment climate in Indonesia. In 1998 and 1999, the government issued additional regulations to facilitate the easy entry of foreign firms and capital into Indonesia. Investments in Indonesia can be categorized under domestic (Penanaman Modal Dalam Negeri or PMDN) and foreign (Penanaman Modal Asing or PMA) investments. Private entities may establish, acquire, and dispose of interests in business enterprises in Indonesia. Current regulations permit the acquisition of domestic firms by foreign firms in sectors open to foreign investment, with approval from BKPM. An investment with any degree of direct foreign ownership is defined as PMA. A foreign investor may be an individual or a corporate entity. A PMA must have a minimum of two shareholders, and at least one director and one commissioner. There is no minimum or maximum total investment (debt plus equity) requirement. However, investors in the manufacturing sector are expected to have a debt to equity ratio of 3:1 or less, while those in the agricultural or mining sectors may have a ratio of 6:1 or greater. BKPM plays a key role in promoting foreign investment and approving project proposals. The relevant technical government departments handle investments in the oil and gas, banking, and insurance industries. BKPM, or the corresponding provincial board (BKPMD located in each capital city of the province), approves foreign and domestic investment in all sectors except for oil and gas, banking, and insurance industries that will be handled by relevant technical government departments. BKPM aspires to provide an integrated service for investors in Indonesia. Nevertheless, investors are encouraged to work closely with the relevant technical government departments, such as the Ministry of Finance, the Ministry of Manpower and Transmigration, the National Land Agency and the Ministry of Justice and Human Rights, as well as the regional and local authorities, unless they invest in the Bonded Zones (Kawasan Berikat) or Integrated Economic Zones (Kawasan Pengembangan Ekonomi Terpadu/Kapet). The agency also approves the import of capital goods and basic material for both foreign and domestic investments. As part of its policy to create a conducive investment climate, the government has continued to simplify the foreign investment application process as well as establish an Investment Policy Reform Initiative. Its objectives are to encourage and facilitate private sector investment through the reform and implementation of transparent, predictable, market-oriented policies, which are applied equally to both foreign and domestic investors.
Failure to submit any documents could delay the investment approval. |