Foreign Investment Owns 100 Percent of Foreign Capital In Indonesia, Is That Possible?
“The enactment of the Job Creation Law has an impact on foreign investment in Indonesia, in which all business fields are open to foreigners with 100 percent foreign capital unless stipulated otherwise by laws and regulations.”
In February 2021, the government issued Presidential Regulation Number 10 of 2021 concerning the Investment Business Sector (“Presidential Regulation 10/2021”) and Presidential Regulation Number 49 of 2021 concerning Amendments to Presidential Regulation Number 10 of 2021 concerning the Investment Business Sector (“Presidential Regulation 49/2021”). Both are derivative rules of Law Number 11 of 2020 concerning Job Creation (“Job Creation Law”).
Essentially, all business fields are open to investment activities, except for business fields that are declared closed or such activities can only be carried out by the central government. In this case, the business fields open to investment that are commercial (Article 2 paragraph (1) in conjunction with Article 2 paragraph (1a) of Presidential Regulation 49/2021).
Thus, in the event that the activities of the business field are fully open, this means that foreign investors can own up to 100 percent of the shares in the said business sector in Indonesia.
Open business fields are also divided into several types, namely (Article 3 paragraph (1) of Presidential Regulation 10/2021):
- Priority business fields (strategic programs/projects, capital intensive, labor-intensive, high technology, pioneer industry, export orientation, and/or orientation in research, development, and innovation activities);
- The allocated business fields or partnerships with cooperatives and Micro, Small and Medium Enterprises (MSMEs);
- Business fields with certain requirements; and
- Business fields that do not include letters a, b, and c can be operated by all investors.
How to find out whether the business field is entirely open to foreigners or not?
What can be done is to check the Attachment to Presidential Regulation 10/2021 and Presidential Regulation 49/2021. If the targeted business field does not have the requirements as stated in the attachment, it means that the business field is 100% open to foreigners.
For example, the business fields open to foreigners are entirely web portals and/or digital platforms for commercial purposes, hospitals, pharmaceutical products industry, bottled water and refill drinking water industry, property brokers, supermarkets, and so on.
It is further regulated that foreign investors can only carry out business activities on a large business scale with an investment value of more than Rp10 billion excluding the value of land and buildings (Article 7 paragraph (1) of Presidential Regulation 10/2021). However, this does not apply to investment activities carried out in special economic zones (Article 8 paragraph (1) of Presidential Regulation 10/2021).
Special economic zones are areas with certain boundaries in Indonesia which are determined to carry out economic functions to obtain certain facilities (Article 1 number 1 Government Regulation 40/2021 concerning the Implementation of Special Economic Zones).
For example, a foreign-investment limited liability company (PT PMA) which is located in a special economic zone in the technology-based startup sector can make an investment equal to or less than Rp10 billion excluding the value of land and buildings.
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Author: Athallah Zahran Ellandra