1. What role does the government of Indonesia play in approving and regulating foreign direct investment?
The existing Indonesian Investment Act is Law No. 25 of 2007 passed by the Indonesian House of Representatives (DPR) in March 2007. This Investment Act gives the Capital Investment Coordinating Board (BKPM) broader authority and powers to regulate matters concerning investment in Indonesia. A primary feature of the law is the creation of integrated service centers to assist investors in obtaining licenses and fiscal facilities, without the long process of going through the relevant ministries. This structure is intended to reduce the number of bureaucratic difficulties often experienced by investors and expedite the process of investing in Indonesia by having a “one-stop shop” for investors. BKPM also plays a role in the issuance of what is called the Negative List, a list issued under a Presidential Regulation defining which sectors within the Indonesian economy are open or closed to foreign direct investment, and determines whether investment in those sectors that are open require a local Indonesian partner or other conditions are applicable. The prevailing Investment Negative List can be found in Presidential Regulation No.36 of 2010 concerning List of Business Fields Closed to Investments and Business Fields Conditionally Open to Investment.
Other than BKPM the following government ministries and regulatory agencies play roles in the business activities of a foreign investor.
Ministry of Finance. Any direct foreign investment in either the finance or financial institutions sector requires the prior approval of the Ministry of Finance.
Ministry of Trade. In coordination with BKPM, this ministry issues non-fiscal facilities in the form of the issuance of Producer-Importer Identification Numbers (API-P) for imports of machinery, goods and/or materials needed by investors in conducting business in Indonesia.
Ministry of Manpower. This ministry establishes labor regulations and approves company manpower plans for the use of expatriate workers. Companies seeking to employ expatriates will need to obtain the approval of their Foreign Labor Utilization Plan (RPTKA) from this ministry.
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