Indonesia-Primary Investment Location?
    Category: Column By : Eddy Leks Read : 1223 Date : Wednesday, January 13, 2016 - 07:45:49

    On October 8, to simplify the licensing and non-licensing of investment in Indonesia, the Investment Coordinating Board (BKPM) enacted a new regulation on guidance and procedures of investment principle license. This new regulation revokes the previous regulation of 2013. 

    The principle license is used for the commencement of business. There are several other types of principle license, namely amendment principle license, expansion principle license, and merging principle license. For foreign investment, a principle license can only be granted to a limited liability company established under Indonesian law. No foreign legal entity can obtain a principle license. Further, no other forms of business entities, such as civil partnership, CV or sole trader may obtain a principle license. 

    A foreign investment company (PMA) must invest more than Rp 10 billion, excluding land and buildings. This provision is the same as the previous regulation. The investment threshold is high, especially for a services provider company, such as professional services. Many comment that an investment of more than Rp 10 billion for professional services, as a start-up, is unnecessary. The provision on “excluding land and building” will and is already creating confusion among prospective investors in the real estate business, including BKPM officials. 

    This new regulation also stipulates that a PMA that has already obtained a principle license prior to the new regulation must adjust its issued and paid up capital before it can apply for an extension of a project completion or expansion of a principle license. The applicability of the principle license can vary from one to five years, depending on the sector. 

    The approval for a principle license is issued at the latest three business days after the BKPM receives a proper application. In practice, however, the front officer dealing with the application may comment and return the application for revision. After revision, he may give a new comment. Hence, the application may take longer than three business days to approve. The BKPM needs to improve this. 

    Divestment obligation is now regulated, and can be to an Indonesian national or Indonesian legal entity that is fully owned by Indonesian national, through direct or stock ownership. One breakthrough is the introduction of a new investment license—used for expediting investment in special projects of least Rp 100 billion and absorbing at least 1,000 Indonesian workers. 

    In addition, if the investment license is for a project in a certain industrial estate, the PMA can commence construction even though it doesn’t have a building construction license and an environmental license. In addition, this license will be issued at the latest three hours after a complete and correct application. Earlier last month, the BKPM said three PMAs and one local investment company with a total investment of Rp 17.11 trillion have benefited from this three-hour investment license service. 

    Change is a fact of life. In his book cHaNgE!, Rhenald Kasali says: “I do not care how far you have walked on a wrong path, turn around now.” Indonesia is changing. The President and the government are implementing that change. As citizens, we should oversee its implementation to ensure that it is for the good of all, not only a few.