By: Evoryo Carel Prabhata S.H.
Hey Selaras Group Friends!
Are you interested in investing in Indonesia? Who is not interested in Bali? Bali is one of the gold standard for tourism collaboration, real estate investment, even the term Work from Bali emerged which the government had echoed for some time. Indonesia is one of the Southeast Asian countries that had a stable investment rate, despite the global slow investment rate.
In terms of business, there are several options to grow your business exponentially with investment, which are:
- Set up a branch company;
- Set up a whole foreign-owned subsidiary;
- Equity joint venture
- Contractual alliance.
This article only points out an overview of the above, especially the general opinion on why you should invest in Indonesia.
Indonesia is an ambitious country in increasing investment. As with President Joko Widodo’s government policy, the government is aggressively carrying out infrastructure development. Such an aggressive economic development or strategy is always echoed as a foundation in the development of the investment climate. This had significantly increase foreign direct investment.
In addition, President Joko Widodo has the ambition to make Indonesia as an ideal place for foreign investment. At the G20 Summit in Bali some time ago, President Joko Widodo even offered an investment platform to member countries for the US$20.8 billion Indonesian Capital project (IKN). This would likely invite high investment interest and a promising investment climate.
There are general principle or strategic aim on how investment done, which are:
1. Resources Seeking FDI;
Investment is done to strategically reduce production costs. Indonesia has one of the most abundant natural resources in Southeast Asia. Consequently it is a solution towards cheaper cost production
2. Market Seeking FDI;
Investment is done in aim to approach a bigger market. Statistically, Indonesian National Statistics Body reported 270.20 million citizens in 2022. The report also mentioned that it is composed of 21.88% Gen X, 25.87% Gen Y or Millennial, and 27.94% Gen Z which are a fairly promising ratio economically.
3. Efficiency Seeking FDI;
Investment is done to rationalize investment structure, you as an investor can use investment management to increase your profit and business efficiency.
4. Strategic Asset-Seeking FDI;
Investment is done to obtain assets in various countries. This can help your investment strategies in the long term, especially with the increase of international business competitiveness.
Where to Start?
Investment law in Indonesia is a little bit overwhelming, since it is not simply regulated in one Act. There are also technical regulations that are basically inseparable from the “mother Act”.
Before you invest in Indonesia, keep in mind that you need to know the investment regulations. Indonesia investment law is regulated in Act No.25/2007, Act No.40/2007, Act No.20/2008, and Act 39/2009. Overall, you need to know that:
- Foreign investment must be in the form of a Limited Liability Company;
- Your business must include some form of partnership with Indonesian citizen or an Indonesian Legal Entity;
- Your LLC needs to be located within the territory of the Republic Indonesia unless otherwise specified by other regulations;
- Investors are prohibited to make agreements and/or statements which confirms that shares ownership on behalf of others.
- All fields of business or type of business open for hosting activities capital, except for line of business or type businesses declared closed and open with conditions.
As mentioned, these are also a challenge for investment in Indonesia. Despite the risks and overwhelming regulations, it is also worth mentioning that the potential profit from investment in Indonesia is not to be underestimated. Aware of these circumstances, various business consultant services are available in Indonesia.
As an investor, these hassles are not worth your time. It is recommended to utilize services that are reliable and capable.
Indah Sari, “Syarat-Syarat Penanaman Modan Asing (PMA) di Indonesia Menurut Undang-Undang Nomor 25 Tahun 2007 tentang Penanaman Modal” (2020) 10:2 Jurnal Ilmiah Hukum Dirgantara.
Rr Riyani Yakti W, “KTT G20, Jokowi Beberkan IKN Buka Peluang Investasi Infrastruktur Rp 323 Triliun”, Tempo (15 November 2022), online: <https://bisnis.tempo.co/read/1657238/ktt-g20-jokowi-beberkan-ikn-buka-peluang-investasi-infrastruktur-rp-323-triliun>.
Mas Rahmah, “Hukum Investasi”, Kencana: Jakarta (2020)
BPS, “BPS 270.20 Juta Hasil SP20”, online: https://www.bps.go.id/news/2021/01/21/405/bps–270-20-juta-penduduk-indonesia-hasil-sp2020.html
Editor: Siti Faridah, S.H.