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Establishment of a Foreign Direct Investment Company in Indonesia: a Promising Business Field and Things That You Should Know

To deal with global economic changes and Indonesia’s participation in diverse international cooperations it is necessary to create investment climate to be conducive, promoting, giving legal certainty, justice and efficiency with due regard to the interest of national economy. The Indonesian government is very open to the world of business and investment.

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Agustin, S.H., M.H.

Managing Partner
Indonesia Global Law Firm (Jakarta)



Right now, the world has entered the Era of Society 5.0. along with the rapid development of the national economy, progress in the business sector is inevitable. With the conveniences that exist today, business actors are competing to establish their own business entities. In addition to the stability of the economic level and supporting activities in the business world, it is also for the sake of legality and protection before the law.

How to registrate compani with Foreign Direct Investment (FDI) in Indonesia was told by Agustin the managing partner of the Indonesian Global Law Firm. Agustin graduated as a Bachelor of Law from Atma Jaya Catholic University in Jakarta, as well as a Master of Law degree from Trisakti University.

She has experience working in big law firms and foreign companies. Augustine specializes in Foreign Direct Investment procedures, business law, labor law, corporate law, consumer protection law and family law.
Foreign Citizens (WNA) are allowed to develop businesses throughout the territory of the Republic of Indonesia. With a note that it is subject to all regulations that have been set by the Government of Indonesia. One of them is by creating a legal basis for foreign investment which is regulated in Law Number 25 of 2007 concerning Investment.

Foreign Direct Investment (“FDI”) means an investing activity to do business in the territory of the state of the Republic of Indonesia that is carried out by a foreign investor (a foreign national, a foreign business entity, and/or a foreign government that makes an investment in the territory of the state of the Republic of Indonesia), both by use of all of foreign capital and by engagement in a joint venture with a domestic investor. <1>

Under Indonesian law, FDI is required to take the form of a Limited Liability Company, unless otherwise stipulated by law as an effort by the Government to provide legal certainty for foreign investors. This is implemented in Law Number 40 of 2007 concerning Limited Liability Companies. Before going any further, you need to know why establishing an FDI Company in Indonesia will be a promising decision for your business development.

Indonesia is well-known by its natural resources diversity, such as the forestry sector, mining, plantations, fisheries, tourism, etc. In addition, the land that stretches very widely and is close to the waters can be used as a strategic factory location and facilitate mobility in the distribution process of your production.

In general, many foreign businesses need to import products or raw materials from abroad and so are subject to import taxes. However, if you run an FDI Company in Indonesia, you can enjoy lower import duties by taking advantage of the tax benefits offered. Lower import duties mean the FDI Company can save a lot of money, which in turn increases the company's profits.

From the demographic aspect, the availability of labor is Indonesia's main attraction in attracting foreign investors. Even the cost of labor in Indonesia is relatively lower than the costs incurred for foreign workers which are usually higher. After that, foreign investors can carry out job skills programs to meet the required qualifications.
Law Number 25 of 2007, Article 1.

Migration benefits

The Indonesian government also provides facilities for investors in terms of immigration facilities in the form of:

(1) Recommendations for granting limited stay visas as shareholders;

(2) Recommendation to change the status of a visit stay permit to a limited stay permit; and

(3) Recommendation to change the status of a limited stay permit to a permanent residence permit.


For every business in Indonesia, it is mandatory to have a certain business and operational license, depending on the classification of the business field and the type of business entity. The big advantage that FDI Company offers is the ease of obtaining permits and licenses when compared to other business structures. You will spend less time and resources when you are licensed as an FDI Company.

Requirements for the investor
In its establishment, a FDI company must meet the criteria for large business activities and the selected business field must be included in the category of business field that open to the foreign investment activities.
Foreign investors who make an investment in the form of a limited liability company shall: <2>

  • subscribe for shares at the time the limited liability company is established;
  • purchase shares; and
  • take another method in accordance with provisions of laws an regulations.
However, in its establishment, a FDI company must meet the criteria for large business activities and the selected business field must be included in the category of business field that open to the foreign investment activities. In essence, all business fields are open to investment activities, except for the following business fields: <3>

(1) Those declared closed for investment, include: <4>

  • class I narcotics cultivation and industry;
  • all forms of gambling and/or casino activities;
  • the capture of fish species listed in Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora;
  • exploiting or harvesting coral and exploiting or extracting coral from nature which is used for calcium lime building materials, aquariums, and souvenirs/jewelry, as well as live or dead coral (recent death coral) from nature;
  • chemical weapons manufacturing industry;
  • industrial chemical industry and ozone depleting material industry; and
  • alcoholic beverage industry (KBLI 11010), alcoholic beverage industry: wine (KBLI 11020), and malt-containing beverage industry (KBLI 11031).

(2) For activities that can only be carried out by the Central Government, include activities that are of a service nature or in the context of defense and security that are strategic in nature and cannot be carried out or cooperated with other parties.<5>

But again, there are also business fields that are open with certain requirements for foreign investors, in this case, namely investment requirements with restrictions on foreign capital ownership, <6> as is the case for several business fields with the Indonesian Standard Classification Code for Business Fields, they are required to partner with Indonesian cooperatives and MSMEs to support economic development in Indonesia for micro, small and medium enterprises.

All information related to restrictions and green light on the business sector for foreign investors is contained in the Attachment to Presidential Regulation Number 10 of 2021 and Attachment II to Government Regulation Number 5 of 2021.
[1] Law Number 11 of 2020, Article 77 number 2.

<3> LEGISLATION: Law Number 25 of 2007, Article 5.

Persident Regulation Number 10 of 2021, Article 2.

[Persident Regulation Number 10 of 2021, Article 2.

Persident Regulation Number 49 of 2021, Article 6.
Creation of a company with Foreign Direct Investment
Regarding to the Indonesian law, the organizational structure of the FDI Company shall consists of at least one Director, one Commissioner, and two Shareholders, as well as The founder of an FDI Company or prospective foreign investors must meet the following requirements in terms of capital structure as follows:
(1) The minimum capital requirement is an issued/paid-up capital of at least IDR 10,000,000,000,- (ten billion rupiah), unless otherwise stipulated by laws and regulations; <7> and

(2) The minimum investment value requirement is that the total investment is more than IDR 10,000,000,000,- (ten billion rupiah), excluding land and buildings per KBLI business field 5 (five) digits per project location. <8>

The following is the procedure for establishing a FDI Company in Indonesia:

1. Prepare complete data for the establishment of the FDI Company, such as:
  • Draft of company name composition;
  • The place and position of the company;
  • The aims and objectives of the company;
  • The company's capital structure (pay attention to the above provisions);
  • Company management structure;
2. Make the deed of establishment of the company through a Notary;
3. Obtain ratification from the Ministry of Law and Human Rights in the form of a Decision Letter on Legal Entity;
4. Tax ID will be sent automatically to the registered email address or manage the issuance of Tax ID at the Tax Office in accordance with the domicile where the company is registered;
5. Register a Business Identification Numbers (NIB) through the Online Single Submission website of the Ministry of Law and Human Rights of the Republic of Indonesia;
6. Manage the issuance of business licenses to support business activities (PB-UMKU); and
7. Manage standard certificates/special permits for certain business fields (if any).

With all the advantages and conveniences provided by the current Indonesian government, it's no wonder that more and more FDI companies are established in Indonesia, and maybe you are one of them!
Persident Regulation Number 10 of 2021, Article 7.

BKPM Regulation Number 4 of 2021, Article 12.

Indonesia Global Law Firm

is one of many corporate law firms in Indonesia that has handled a lot of FDI Company Establishment matters since 2016, with many experienced and Legal Consultants, making it one of the top consulting firms in Indonesia

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