General Explanations of Foreign investment law in Indonesia

Indonesia considers attracting more foreign investment to the country. The government is targetting to gain foreign investment in the sector of the infrastructure projects. To realize the plan, Indonesian Government has made and issued some new foreign investment law in Indonesia. The foreign investment law in Indonesia obliges the investors to meet its necessities. The government tends to make the regulation of establishing a company in Indonesia easier which is poured on its new rules and regulations.

Indonesia follows a civil law system and its form of constitution is a republic. The critical foreign investment law in Indonesia is written in Law No. 5 Years 2007 about investment, Presidential Regulation No. 39 Years 2014 about List of Business Fields, and Regulations of BKPM (Capital Investment Coordinating Board) including Regulation No. 14 and 15 Years 2015. In the foreign investment law in Indonesia, the negative investment law provides the sectors where the investment is closed to foreign investment and industries where there is particular investment restriction for international business.

General Explanations of Foreign investment law in Indonesia

  1. Restrictions on Foreign Investment and Investment

The Closed Business Regulation governs limitations for foreign investment. Example for which foreign investment is open in the foreign investment law in Indonesia :

  • A distribution business is open for foreign investment up to 33 %.
  • An insurance business is open for foreign investment up to 80 %.
  • A construction services business is open for foreign investment up to 67 %.
  1. Occupation of Real Estate
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The government has just issued a regulation that allows foreigners to purchase a property at a specific value depending on its location. In the example, foreign individuals may buy a house in DKI Jakarta with a minimum amount of Rp. 10.000.000.000,-, and the regulation about the value will differ from one to another province. Other than the cost, the individuals are obliged to meet the foreign investment value in Indonesia issued by the Ministry of Agrarians. For investment purpose, foreign investors have to set up a Foreign Investment Company (PMA) under the rules of BKPM.

  1. Minimum Capital Requirements

The minimum capital for foreign investment listed in the Foreign investment law in Indonesia is diverse from one industry to another. In general, the minimum capital is at least required to be Rp. 2.500.000.000,-. But, some industries have higher capital requirements, in the example :

  • The insurance field has a minimum capital requirement of Rp. 10.000.000.000,-.
  • Commercial Banks have a minimum capital requirement of Rp. 3.000.000.000.000,-.
  • The construction businesses have a minimum capital requirement of RP. 50.000.000.000,-.
  1. Exchange Control and Currency Regulations

In the foreign investment law in Indonesia, there are no relevant exchange controls, but there are some currency regulations. Bank of Indonesia published Regulation 17/3/PBI/2013 in which demands any non-cash and cash transactions in Indonesia to use the Indonesian Currency with specific exemptions. It is restricted in the foreign investment law in Indonesia to remit Indonesian currency which is rupiah abroad, but there is no restriction to remit profits overseas.

  1. Imports
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There is particular restriction in the foreign investment law in Indonesia about the commercial goods importation, depending on the specific products or goods. In the example, It is required a special license to import sugars to Indonesia. The restriction imposed by the foreign law investment in Indonesia is to protect domestic industries of sugar in Indonesia. The other restrictions in about the import of hazardous waste and shrimp. Import duties in Indonesia which are issued in the foreign investment law in Indonesia is about 0% to 150% on customs value of goods imported. However, the highest rate currently is 40%.

Indonesia has its investment law that has to be followed by the investors. Knowing the basic of foreign investment law in Indonesia will be a much of help to invest in Indonesia. Hopefully, the article about foreign investment law in Indonesia above will be helpful and understandable.

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