A Guide For Foreign Investment Company In Indonesia

Indonesia offers vast opportunities to the foreign investment company in indonesia to invest their money. Its abundance of natural resources and strategic access to the global mobility due to its location in the major sea lanes gives foreign investment company in indonesia a great opportunity. Indonesia is ranked as the fourth country for the most population in the world. It has an annual growth rate of 5,78 % with its GDP at $ 867.500.000,- in 2013. Currently, Indonesia is ranked number 17 in the world’s largest economy.

foreign investment company in indonesia

Indonesian Government also supports foreign investment company in indonesia by issuing policies and regulations that will make the investment license process simpler. Indonesia aims to be the top ten global economies in 2025. To achieve the goal, Indonesia focuses on developing its eight essential programs which are agriculture, industrial, energy, mining, tourism, telecommunication, marine, and strategic areas development. Following this issue, Indonesian Government is encouraging foreign investment company in indonesia to invest in these fields. Here is a field guide for investors to invest in Indonesia.

Challenges for Foreign investment company in indonesia

  1. Corruption

Corruption is a significant obstacle to the development of Indonesia. This matter is also one of the most significant problems for the foreign investment company in indonesia. Transparency in Indonesia is scored at 32 out of 100 in which the scales are from 0 as highly corrupt to 100 as very clean, even though the scale has increased steadily in recent years.

  1. Bureaucracy
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Many international investors consider administration in Indonesia as barriers to invest their money. The critical source of this issue is thought to be caused by disharmony between regulations in the central government and the regional level. The autonomy policy for the local government has led to generating regional regulations in which are not always consistent with the central law.

  1. Insufficient Infrastructure

This matter is also considered as a barrier for the foreign investment company in indonesia to invest their money, especially if the investors want to invest in the eastern and middle part of Indonesia. Besides that, the insufficiencies in the sector of infrastructure offer challenging opportunities for the foreign investors.

  1. Indonesian Legal System

The other critical challenges for the international investors are the characteristic of the Legal System in Indonesia. Finding conflicting laws from different authorities in Indonesia is not uncommon, and it causes an unclear regulation in which is applicable. There is also no reliable central sources to obtain a comprehensive law and regulations. Court proceedings in Indonesia are cumbersome and take a long time and process, and the judges also have a high level of discretion in deciding the matters.

Common Key Forms of Foreign investment company in Indonesia

  1. Direct Investment
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Direct foreign investment in Indonesia is governed by Law No. 25 Years 2007 about investment and its implementing policies (the Investment Law). In the direct investment form, the foreign investment company in indonesia is investing capital in an existing or a new company to set up a business or business presence in Indonesia. The investors also participate in the management of the company they invested. When a foreign investment company in indonesia performs a direct investment, it registered as a PMA Company regarding with Law No. 40 Years 2007 about Limited Liability Companies.

  1. Indirect Investment

Indirect investment or also known as portfolio investment is a form of investment where the investors invest their money throug the purchase of securities at the capital markets, such as debt, equity, or combination of both. Foreign investment company in indonesia as the investor is less participated in the management of the company they invested. This form of foreign investment is not regulated in the Investment Law. This form of foreign investment company in indonesia comes to Indonesia through stock exchange of the country in which is regulated by the OJK.

Foreign investment company in indonesia is one of benefitable form of investment for Indonesia’s company. A simple guide about foreign investment company in indonesia will help to give a broad knowledge about it. Hopefully, this article can add more understanding about this type of investment.

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