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.

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) 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!