What Restrictions Would You Need to Deal With in Indonesia?
Before starting any kind of business or trade-in Indonesia, it is important to know what you’re faced with, especially where foreign investment restrictions are concerned.
Who Can Trade in Indonesia?
Two types of legal entities are an option for foreigners when it comes to investments:
- Limited liability companies, also known as Perseroan Terbatas Penanaman Modal Asing, or, PT PMA.
- A Representative Office, otherwise known as Kantor Perwakilan Perusahaan Asing, or, KPPA.
Trading rules in Indonesia have stayed unchanged since 2016. This was when the Negative List by the Government was updated last. Under the Negative List, foreigners will find that several sectors are subjected to caps. These limits apply where foreign ownership is concerned. There is either limited options for investment or no investment available at all.
There are also extra caps that must be accounted for. These are enforced under industry-specific regulations and laws. Therefore, foreigners should not rely on the Negative List alone since that is not conclusive.
Are There Foreign Investment Restrictions Because of COVID-19?
No extra restrictions were introduced by the Government because of the COVID-19 pandemic. However, there were temporary relief measures in place. The Government did express positive sentiment toward the idea of attracting more foreign direct investment (FDI). They hope the initiative will help ease the impact of the economic downturn.
Some of these relief measures include:
- Welcoming foreign investment amid the COVID-19 environment.
- Support measures in the form of tax relief for hard-hit sectors.
- Encouraging production companies from South Korea, the United States and Japan to relocate to Indonesia instead of China.
- Introduction of a Task Force to aid in the Recovery and Transformation of National Economy initiative.
Does That Mean I Can Invest in Indonesia?
These new measures don’t override the Negative List system. At the moment, it is not clear if or when the changes will take place. The COVID-19 could potentially be the catalyst for change that is needed
The good news is, the foreign investment restrictions right now do not single out any country per se. There is no country that is subject to adverse treatment or additional scrutiny. The restrictions apply to all countries. If you intend to invest in Indonesia, it is best to seek advice from a legal professional.
Need Assistance? Contact 3E Accounting
Is your country impacted by the Negative List? How does that affect your chances of investing in Indonesia? Let 3E Accounting help you thoroughly assess your situation and advice on how you should proceed moving forward. Indonesia is an attractive investment destination, especially with the right legal guidance to show you the way.
For more information about the services we offer, contact the 3E Accounting team today.