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Economic Overview

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Investment Guide

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Investment Guide

 

A.   Overview

This section overviews steps to be taken by investors if they are interested in investing in Indonesia. Starting out with explaining applicable laws and regulations, it continues with procedures to follow and approval steps to take for an investment activity, tax information, application form filling, costs to do business in Indonesia and information about Indonesian business sector classification.

 

Laws & Regulations pertaining to investment are classified as systematically as possible to cater investors’ needs and help them find information with ease. This is the first information presented in order to give the investors an idea about legal certainty and supporting instruments for investment in Indonesia.

 

The next step after confirming the legal certainty is to familiarize with the procedures to follow for an investment in Indonesia. Included is information about taxes imposed on investors, standard costs to expend and Indonesian business sector classifications. Supplied with this information, it is hoped that investors get an accurate idea about what to do.

 

After these two steps, if you become interested in investing in Indonesia, you can fill an application form with your company data and investment sectors interesting for you.

 

For further details, click links below from Indonesian Investment Coordinating Board (BKPM):

 

1.    Procedure, Approval & Licenses

2.    BKPM Law & Regulation

3.    Taxation

4.    Application Form

 

B.   Investment Facilities

1.    Land rights:

 

                                           i.        95 years of cultivation rights: 35 years + 30 years extension + 35 year renewable

 

                                          ii.        80 years of building rights: 30 years + 20 years extension + 30 year renewable

 

                                         iii.        70 years of land usage rights: 25 years + 20 years extension + 25 year renewable

 

2.    Fiscal incentives:

 

                                           i.        Exemption or deduction of income tax

 

C.   Negative List of Investment

According to the Presidential Regulation No.111/2007, the negative list classifies economic activities across multiple categories: (1) closed; (2) reserved for small and medium-sized enterprises (SMEs); (3) allowed through partnerships with SMEs; (4) limited foreign ownership allowed within specific regions; (5) allowed with special permits from relevant government authorities or state enterprises; (6) 100% domestic ownership; and (7) 100% domestic ownership, with special permits. The following breakdown shows the sectors where these categories apply.

 

1.    Closed: Casinos, archaeological sites, museums, cultural heritage sites, monuments, cemeteries, coral mining, hunting endangered species, transport terminals, navigational aides, air-traffic control, hazardous chemicals, chemical weapons, alcoholic beverages (hard alcohol, wine and malt liquor), alkalines containing mercury, black tin and marijuana.

 

2.    Reserved for SMEs: Power plants (less than 10 mw), travel agencies, primary rattan, semi-finished products from mangrove wood, capturing wild animals from natural habitats, near-shore fishing in small vessels, courier services, telephone kiosks (wartel), Internet cafes (warnet), telecom cable installation, small-scale construction, construction consultation, taxis, buses serving fixed routes, hand-made batik, palm sugar, tobacco processing, cultivation of food crops (including rice) in plots smaller than 25 ha, plantation crops in plots smaller than 25 ha.

 

3.    Through partnerships with SMEs: Silk, processed rattan, bamboo, gaharu wood, sago palm, fish fattening, fish hatcheries, fish processing (drying, smoking or freezing), fish distribution, value-added telephony (call centers, content services such as ring tones and premium text messaging etc), Internet service providers, cigarettes (clove, white and other), fruit and vegetable sweetening and salting, batik prints, rattan processing, finished goods from mangrove wood, goods from cement, jewelry, wooden vessels, hand tractors, bike and motorcycle components, and milk-powder processing.

 

4.    Limited foreign ownership: Banks and money brokers (99% limit); offshore hydrocarbon drilling outside Eastern Indonesia, onshore hydrocarbon drilling, oil-and-gas operators, engineering and procurement contracting services, power (generation, transmission, consulting, installation, maintenance, operation, research, distribution and nuclear), data communications system services, toll roads, drinking water, cultivation of food crops in plots greater than 25 ha, or plantation crops in plots greater than 25 ha (95% limit); insurance and insurance services (80% limit); pharmaceutical drugs and ingredients (75% limit); cellular and satellite telecommunications, Internet interconnection, health services and insurance agents (65%); construction services and consulting (55% limit); amusement parks (50%); fixed-line telecoms networks (cable or radio-based), Internet telephony, multimedia services, education, business consultation services, transport of goods, passenger services, domestic airline routes, airport services, cargo handling, provision of port facilities (ports, warehouses, container terminals, ferry terminals), explosives and job training (49%); and eco-tourism in conservation forests (25%).

 

5.    Within specific regions: Malls, supermarkets, department stores and hypermarkets must comply with spatial planning laws; entertainment businesses must not conflict with regional regulation.

 

6.    With special permits: Mining radioactive materials with permit from and co-operation with the National Nuclear Energy Agency (Batan); wood products (sawnwood, veneer, laminated, plywood, chips) with plant capacity >2,000m3 per annum must be harvested sustainably; pulp must use imported chips or wood from industrial timber estates (HTI); cigarettes must partner with SMEs or expand upon existing businesses.

 

7.    100% domestic ownership: Film and film services, recording studios, wood products from natural forests, open-sea fishing with vessels larger than 100 gross tones, sand mining, pharmaceuticals trading, hospitals, pharmacies, pension funds, press agencies, engineering design services for industrial processes, retailing other than supermarkets and department stores, alcohol distribution, property brokerages, and foreign worker placement.

 

8.    100% domestic ownership with special permit: Weapon production requires a permit from the Ministry of Defence.

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