Investment Law in Indonesia: Comprehensive Legal Framework for Foreign Direct Investment
Indonesia's investment legal framework, anchored by Law No. 25/2007 and revolutionized by Omnibus Law No. 11/2020, provides clear regulations, investor protections, and streamlined processes for foreign investors. Understand your rights, obligations, and legal certainty in Indonesia's $1.3 trillion economy.
2007
Investment Law Enacted2020
Omnibus Law Reform60+
Investment Treaties100%
Foreign Ownership (many sectors)Key Investment Laws in Indonesia
Understanding the legal framework governing foreign investment
Law No. 25/2007 on Investment
The Foundation of Indonesia's Modern Investment Framework
Enacted in 2007, this law replaced the outdated 1967 Foreign Investment Law and 1968 Domestic Investment Law, creating a unified framework for both foreign and domestic investment.
Key Provisions:
- Equal Treatment: Foreign and domestic investors treated equally
- Legal Certainty: Clear rights, obligations, and dispute resolution
- Investment Facilities: Tax incentives, import duty exemptions
- PT PMA Structure: Foreign investment through limited liability company
- BKPM Role: Investment Coordinating Board as facilitator
- Investor Protections: Anti-nationalization, profit repatriation
Omnibus Law No. 11/2020 (Job Creation Law)
Game-Changing Reform for Foreign Investors
Enacted in November 2020, this landmark legislation reformed 79 laws across 11 sectors, dramatically improving Indonesia's business climate and competitiveness.
Major Changes for Investors:
- 100% Foreign Ownership: Expanded to more sectors
- Risk-Based Licensing: Faster, simpler OSS approvals
- Updated DNI: Liberalized Negative Investment List
- Land Rights: Extended HGB rights (80 years for industry)
- Labor Flexibility: More flexible employment regulations
- SEZ Benefits: Enhanced Special Economic Zone incentives
Impact of Omnibus Law
Following the Omnibus Law, Indonesia jumped 34 positions in World Bank's Ease of Doing Business ranking and FDI inflows increased by 15.2%. The law demonstrates Indonesia's commitment to creating a more investor-friendly environment. We help foreign investors navigate these regulations through our licensing and compliance services.
Rights and Protections for Foreign Investors
Indonesia provides comprehensive legal safeguards for foreign investment
Equal Treatment
Foreign investors receive the same treatment as domestic investors in all aspects of business operations, market access, and legal protections under national law.
Protection Against Nationalization
Government cannot nationalize or take over foreign investment without due legal process and appropriate compensation based on market value.
Profit Repatriation
Foreign investors have unrestricted rights to repatriate profits, dividends, capital, and proceeds from asset sales through normal banking channels.
Dispute Resolution
Access to international arbitration (ICSID, UNCITRAL, ICC) for investment disputes, in addition to domestic courts and alternative dispute resolution.
Intellectual Property Protection
Strong IP protection under international conventions. Register trademarks, patents, and copyrights with legal enforcement.
Investment Treaties
Indonesia signed 60+ Bilateral Investment Treaties (BITs) and regional agreements (ASEAN, RCEP) providing additional investor protection layers.
PT PMA: Legal Entity for Foreign Investment
Understanding Indonesia's foreign investment company structure
PT PMA Legal Requirements
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Minimum Capital
IDR 10 billion (~$650K) minimum investment for most sectors (varies by industry)
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Shareholder Structure
Minimum 2 shareholders (individual or corporate), foreign ownership per DNI regulations
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Directors & Commissioners
At least 1 director and 1 commissioner (can be foreign nationals with proper work permits)
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Business Activities
Must comply with KBLI (Indonesian Standard Industrial Classification) and DNI restrictions
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Domicile
Registered office address in Indonesia (can use virtual office initially)
Registration Process Under Law
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1Notary Deed
Establish company through Indonesian notary with deed of establishment and articles of association
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2Ministry Approval
Ministry of Law and Human Rights approval for legal entity recognition
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3OSS Registration
Register through OSS system to obtain NIB (Business Identification Number)
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4Tax Registration
NPWP (Tax ID) and VAT registration with tax office
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5Sector Licenses
Obtain industry-specific operational licenses through OSS or sectoral agencies
Key Regulatory Bodies for Foreign Investment
Understanding which agencies oversee different aspects of FDI
BKPM
Investment Coordinating Board
Primary agency facilitating and coordinating foreign and domestic investment
Key Responsibilities:
- One-stop investment services
- OSS system management
- Investment promotion and facilitation
- Monitoring investment realization
- Issuing investment recommendations
Ministry of Law
Ministry of Law and Human Rights
Legal entity registration and approval authority
Key Responsibilities:
- PT PMA deed approval
- Company amendments approval
- Legal entity database
- Immigration (work permits, visas)
- Intellectual property registration
Sectoral Ministries
Industry-Specific Ministries
Sector-specific regulations and operational licenses
Key Responsibilities:
- Industry operational standards
- Technical licensing requirements
- Compliance monitoring
- Product certifications
- Environmental permits
Related Investment Regulations & Resources
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