Foreign investors aiming to establish a presence in Indonesia must navigate a complex landscape, particularly under the regulations governing PT PMA (Foreign Investment Company). This article delves into the essential considerations and restrictions for foreign investors, focusing on large-scale business activities.

Restrictions on Business Sectors for Foreign Investors

Foreign investors (PT PMA) are limited to participating in large-scale business ventures. This restriction excludes them from engaging in micro, small, and medium enterprises (MSMEs) within Indonesia. This policy aims to protect local businesses and ensure that foreign investments contribute significantly to the national economy.

Closed and Conditionally Open Business Sectors

Certain business sectors are completely closed to foreign investment. These include:

1. Cultivation and industry of Class I narcotics.
2. All forms of gambling and/or casino activities.
3. Fishing of species listed in Appendix I of the CITES.
4. Utilization or collection of coral for construction materials, calcium lime, aquariums, souvenirs/jewelry, and live or recently dead coral.
5. Chemical weapons manufacturing.
6. Industries producing ozone-depleting substances.

Additionally, the alcohol industry, including the production of alcoholic beverages, wines, and malt drinks, is also closed to foreign investment.

Conditionally Open Sectors

There are sectors open to foreign investors but with specific conditions, such as limited foreign ownership. For instance, in the rental and leasing business without the option to buy, particularly for land transportation equipment (KBLI 77311), foreign investors are required to partner with Indonesian cooperatives and MSMEs.

Exceptions to Foreign Ownership Limitations

Exceptions to these restrictions include:

1. Foreign investors who received approval in specific business sectors before the enactment of Presidential Regulation 10/2021, as stated in their business licenses, unless the new regulation is more favorable.
2. Investors with special rights based on agreements between Indonesia and the investor’s home country, unless the same business sector under Presidential Regulation 10/2021 offers more favorable terms.

Detailed Information on Permissible Business Sectors

For a comprehensive understanding of the business sectors accessible to foreign investors, it is advisable to consult the Annex of Presidential Regulation 10/2021 and Annex II of Government Regulation 5/2021.

Need Assistance?

Navigating the Indonesian business landscape as a foreign investor requires a thorough understanding of the legal framework, particularly regarding large-scale enterprises. By adhering to these regulations and identifying sectors that are open or conditionally open to foreign investment, investors can make informed decisions and contribute positively to Indonesia’s economy.

For professional assistance in establishing PT PMA, contact us at WhatsApp: 08118887270, Email: gultomnando@gmail.com or info@gultomlawconsultants.com.

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