Economic Policies

Trade and Industry

InvestmentGuide

Investment Procedure

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A. Legal Aspect

1. Foreign Capital Investment Law No.1 of 1967

1. Foreign Direct Investment (FDI), further referred to as PMA (Penanaman Modal Asing), is governed primarily by the Foreign Capital Investment Law No. 1 of 1967, as amended by Law No. 11 of 1970. Based on the Law. Based on this law , the government introduced various policies and measures on FDI where great efforts is now focused on promoting Foreign Direct Investment in Indonesia.

2. A PMA company is granted 30 years to operate after its legal formation. If the company commits additional investment within this period, another 30 is granted separately for the expansion project. The period to operate for both first and additional investment can be extended for another 30 years.

2. Domestic Capital Investment Law No. 1 of 1967

1. Domestic Direct Investment, further referred to as Penanaman Modal Dalam Negeri (PMDN) is governed primarily by the Domestic Capital Investment Law No 6 of 1968 as amended by Law No. 12 of 1970.

2. A PMDN company is entirely owned by Indonesian investors which is formed either as joint venture or individual proprietorship

3. Corporate Law No. 1 of 1995

Either foreign direct investment of domestic direct investment, Corporations further referred to as Perseroan Terbatas (PT) are the most common legal business entities in Indonesia.

4. The Government Regulation No. 20 of 1994 on Share Ownership

1. In general , PMA (Penanaman Modal Asing) company is established as a joint venture between foreign and Indonesian nationals. The partnership may involved legal entities (corporations) or individual persons and there is no requirement on the minimum amount of investment (equity plus loan). The amount is for the parties concerned to determine base on their economies of scale and business considerations.

2. PMA companies in infrastructure projects such as ports, generation and transmission as well as distribution of electricity for public use, telecommunications, shipping, airlines, potable water, public railways and nuclear electric power generation should be established through joint ventures between foreign and Indonesian state-owned enterprise.

3. A PMA company may be established as a straight investment, or 100% foreign ownership. It is required, however, that not later than 15 years of commercial operation, the company starts to be divested by selling some of its shares to Indonesian individual(s) and/or business entities, through direct placements and/or indirectly through domestic stock exchange provided that the Indonesian share is maintained at least 5%.

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