INDONESIA – the world’s largest archipelagic nation
1-What does make Indonesia the destination for my investment?
The Republic of Indonesia is a nation blessed with almost all of the prerequisites for transformation into a great economic power. With its abundant natural resources, large, productive and young population, and strategic access to the global mobility network, these assets and access empower Indonesia to be among the leading economies of the
Indonesia is an emerging global powerhouse and member of the prestigious G20. In 2015, with a Gross Domestic Product or GDP (Product Domestic Bruto or PDB) growth rate of 4.79%, Indonesia was the group’s third fastest-growing economy, only behind India and China. Today, Indonesia is the largest economy in Southeast Asia and the world’s 16th largest economy with almost a trillion dollar of GDP.
Underlying Indonesia’s vibrant economy is political stability. Indonesia has succeeded maintaining political stability as the world’s third-largest democracy. The maturing democratic country has held three peaceful direct presidential elections since 2004. For the first time, in 2015, Indonesia managed to organize simultanous direct elections for 263 Governors and Mayors throughout the country.
Indonesia ranks the fourth most populous country in the world. Its 250 million population and the rapidly increasing buying power of its population is creating a significant market. Moreover, the young population is also increasing in the quality of its human resources, thus providing a desirable competitive edge.
Indonesia has an abundance of renewable (agricultural products) and un-renewable (mining and minerals) natural resources. It is the world’s largest producer of palm oil, and the world’s second largest cocoa and rubber producer. The country also produces tin, nickel, coal, natural gas, bauxite, copper and gold in large quantities. It must be able to optimize the handling of its natural resources by increasing a processing industry that will provide high added value.
Following the abundance opportunities Indonesia has to offer, the government continues reforming investment climate to make a safer and more attractive investment destination. President Joko Widodo has mandated the implementation of far-reaching fundamental reforms to create a solid foundation for businesses to grow and prosper for the long-term. Indonesia is at the beginning of a promising new era.http://kbrikualalumpur.org/w/hrf_faq/what-does-make-indonesia-the-destination-for-my-investment/FAQ-Intro
2-How is the infrastructure in the archipelago?
The challenges with Indonesian infrastructure have a lot to do with the geographical realities in the country, as a vast archipelago. The fiscal budget allocated for infrastructure more than doubled in the last five years and private sector’s contribution is strongly encouraged and facilitated.
The Government has issued several policies, including the provision of government guarantees, land acquisition for development projects, and viability gap fund for part of Public-Private Partnerships or PPP (Kemitraan Pemerintah dan Badan Usaha or KPBU)
project’s construction cost. In addition, thegovernment established some financial institutions to help finance PPP projects and increase their bankability.
President Joko Widodo has set an infrastructure target in the five-year development plan, to be achieved by 2019. Indonesia, among others, will build 15 new airports, increase the
capacity of 24 seaports, add 6o% to current railway tracks, construct 1,0 o o km of toll roads, as well as provide 35,000 megawatts of power.
3-What does the world say about investing in Indonesia?
- The growth of Foreign Direct Investment or FDI (Penanaman Modal Asing or PMA) in Indonesia was the highest among the Southeast Asian
countries (UNCTAD’s 2015 annual report).
- Three out of four US companies in Indonesia plan to expand their business (AmCham’s and US Chamber of Commerce’s survey, 2015).
- Indonesia remains main investment destinations in APEC region, together with China and the US (PwC’s APEC CEOs survey, 2015).
- Indonesia is #1 as the top investment destinations, followed by the US, the UK, and India (Ernst and Young Capital Confidence Barometer, 2015).
- Indonesia is the most promising country for overseas business, after India (Japan Bank for International Cooperation’s survey, 2015).
- Indonesia is the priority investment country in Asia, following China, and the highest confidence of positive reforms, after India (The Economist’s Asia Business Outlook Survey 2015).
A. Priority Sectors
4-What sector is recommended to invest in Indonesia?
As of 2015, Indonesian Government has laid the new focus on several business sectors as planned in The Investment Strategic Planning for the period of 2015-2019. These priorities sectors were selected based on the economic advantages, growth factors and productivity aspects. The sectors are as follows:
However, all industry or business fields in Indonesia is open to foreign investments unless mentioned otherwise in the Investment Guidance or previously called the “negative investment list”. This regulation attaches to the Investment Law under Presidential Regulation.
5-Why are certain investment sectors prioritized?
Investment together with manufacturing industry and export are expected to be the pillars of Indonesian economy. There are three aspects where investments shall contribute the most to the economy.
First, supporting sustainable economic growth. We seek quality investments, that do not only see Indonesia as a market, but also as a production base.
Investments that add value to our natural resources, contribute to our export and substitute our import.
Second, creating jobs, improving productivity and competitiveness. Investment in manufacturing sectors is prioritized, especially laborintensive industry, export-oriented and import-substitution industry, and also downstream industry of natural resources.
Third, promoting equal development distribution. We encourage more investments realized outside Java Island, the most populated island in Indonesia. We offer more incentives especially to investments located in eastern part of Indonesia, such as Nusa Tenggara, Maluku, and Papua.http://kbrikualalumpur.org/w/hrf_faq/5-why-are-certain-investment-sectors-prioritized/FAQ-Priority Sectors
6-I want to invest in Indonesia. What are the basic things I should know first?
First you have to check whether your business is open for FDI in Indonesia in accordance to the Indonesia Investment Guidance (Daftar Negatif Investasi or DNI) under the Presidential Decree No. 44 of 2016 that stipulates the sectors which are closed and open with conditions to investment. If the business sector is not listed in the DNI, the business will be considered open and allowed for up to 100% foreign ownership.
The legal entity of the FDI Company should be a Limited Liability Company or Ltd. (Perseroan Terbatas or PT). The ‘PT’ company should be owned by minimum 2 parties, each party is either individual or corporate.
According to Indonesian law, any company with any percentage of foreign shareholding is considered as a FDI Company or foreign-owned-PT-company, in short ‘PT. PMA’.
Additionally, it is imperative that new investor has to learn more about the location of their investment such as the market activity, office location, manpower procurement, and the regulations pertaining to their business sector.http://kbrikualalumpur.org/w/hrf_faq/6-i-want-to-invest-in-indonesia-what-are-the-basic-things-i-should-know-first/FAQ-Priority Sectors
7-What is the policy for foreign direct investment?
The FDI is required to have minimum investment ABOVE IDR 10.000.000.000,- (ten billion Indonesian Rupiah), or equivalent to current exchange rate. This applies to all business sectors and the amount of minimum investment is not including the value of the land and buildings owned by the company.
In addition, the minimum paid up capital of a FDI Company (PT. PMA) is IDR 2,500,000,000 (two and a half billion Indonesian Rupiah). For each shareholder, at least IDR 10,000,000 (ten millions Rupiah) or its equivalent in USD.http://kbrikualalumpur.org/w/hrf_faq/7-what-is-the-policy-for-foreign-direct-investment/FAQ-Priority Sectors
C. Special Economic Zones and Industrial Parks
8-Can I setup a company in any location in Indonesia?
Yes, you can setup company in any part of Indonesia. However, there are restrictions for some business sectors in certain regions. The Government has mandated (in PP No.24/2009 and UU No.3/2014) that manufacturing companies are located in industrial estates and that tenants’basic needs must be met, for example water and electricity.
Today, the Indonesian Industrial Estates Association (Himpunan Kawasan Industri Indonesia or HKI) has 69 company members, in 13 provinces, covering total gross area of about 45,600 hectares. There are more than 9,000 manufacturing companies operating and employing some 4 million people in the industrial estates. These figures do not include industrial estates non HKI members.
Main attractions of industrial estates are that the development is comprehensively planned to assure a strategic location, accessibility, building ratio, infrastructure and supporting services, secured land titles, and continuous maintenance and operation management.
15 new industrial estates will be developed until 2019. 13 industrial estates outside Java Island will be allocated for natural resources processing industry. While the other 2 in Java Island will be allocated for labor-intensive, high-technology and consumer goods industry.http://kbrikualalumpur.org/w/hrf_faq/8-can-i-setup-a-company-in-any-location-in-indonesia/FAQ-Special Economic Zones