Understanding the Legal Framework for PT PMA

When exploring the ability of a Foreign Investment Company (Penanaman Modal Asing or PT PMA) to establish an outsourcing company in Indonesia, we must first refer to the legal provisions outlined in Indonesian Law. You can read my past posting on this website about Establishing a Foreign Investment Company (PMA) in Indonesia: A Comprehensive Guide.

The Investment Law and Company Law

Article 5, paragraph (2) of the Law No. 25 of 2007 on Investment (UUPM) stipulates:

“Foreign investment must be in the form of a limited liability company (PT) based on Indonesian law and located within the territory of the Republic of Indonesia, unless otherwise specified by law.” Therefore, foreign investment in Indonesia must comply with the provisions of the Law No. 40 of 2007 on Limited Liability Companies (UUPT). According to Article 7, paragraph (1) of UUPT, “A company is established by two or more individuals through a notarial deed drafted in the Indonesian language.” However, the explanation of Article 7, paragraph (1) of UUPT states, “the term ‘individual’ refers to natural persons, both Indonesian and foreign, or Indonesian or foreign legal entities.”

Implications for PT PMA

Based on these regulations, a PT PMA, as an Indonesian legal entity, can establish another PT PMA. You can read further about Understanding the Basic Capital Requirements for PT PMA in Indonesia.

Outsourcing Industry Regulations

Outsourcing services, or the provision of worker/labor services, is a business sector open to foreign investment with specific conditions. According to Appendix II, Page 92 of Presidential Regulation No. 36 of 2010 regarding the List of Closed Business Fields and Business Fields Open with Conditions in the Field of Investment, foreign ownership in a PT PMA providing outsourcing services is capped at a maximum of 49%.

Therefore, a PT PMA can establish another PT PMA operating in the field of worker/labor service provision, as long as the foreign ownership in the outsourcing business does not exceed 49%.

Additional Legal References

For further understanding, the following legislations also govern this area:

• Law No. 13 of 2003 on Employment.
• Law No. 25 of 2007 on Investment.
• Law No. 40 of 2007 on Limited Liability Companies.
• Presidential Regulation No. 36 of 2010 on the List of Closed Business Fields and Business Fields Open with Conditions in the Field of Investment.
• Minister of Manpower and Transmigration Decree No. Kep-101/Men/VI/2004 on Procedures for Licensing Labor/Worker Service Provider Companies.

Conclusion

In conclusion, a PT PMA in Indonesia can establish another PT PMA in the outsourcing sector, provided it adheres to the 49% cap on foreign ownership. This opportunity aligns with Indonesia’s legal framework, enabling foreign investors to participate in the outsourcing industry while complying with specific ownership and operational guidelines.