FDI in figures

FDI collapsed during and after the economic crisis of 1997-1998, and its balance only became positive again in 2005. However, Indonesia has seen its FDI flow drop by almost a third between 2005 and 2006.  The country classification thus went from the 26^th to 42^nd place of countries receiving FDI in the world, and from the 3rd to the 4th place in South-East Asia. At the beginning of 2007, the country began to attract investors again and the business regulation framework reform finally made progress. In 2008 FDI flows have decreased due to the deterioration of international economic context, and this trend continued in 2009. The recent strengthening of political and economic stability has eliminated certain investment risks and improved the market climate. However, some hindrances persist, such as the increase in the cost of credit, the poor investment climate, the overweight and unpredictability of regulations, poor infrastructures, the management of terrorism risk and the high level of corruption.

Why you should choose to invest in Indonesia

Strong points

Indonesia has almost 230 million inhabitants, which represents an enormous market. Additionally, the country has abundant natural resources (timber, fish, oil, natural gas, metals) and enourmous biodiversity.

Weak points

The main hindrance to investment lies in the high cost of illegal deductions, which can be as much as 60%. For the procedures of starting a company - the number of formalities to carry out, time limits for starting up, registration rules and the threshold of the initial capital - a World Bank study has shown that Indonesia is less efficient than other Asian countries. Legal unpredictability is often denounced and several levels of justice are said to be ineffective and corrupted. The tax and customs authorities are still viewed, in the business circles, as generally being corrupted and arbitrary.

Government measures to motivate or restrict FDI

Incentives to investment are accessible to all investors, national and foreign. More specifically, these are reductions of duties on imports and equipment goods and additional incentives for export investors and investments made in certain regions.

At the beginning of 2006, the government announced a program for the improvement of the investment climate, which aims to submit to Parliament a bill on investment, the drawing up of a new negative list applicable on investments, the drastic reduction of the time required for the creation of a company, the acceleration of the re-examination process of local regulations likely to harm the enterprising spirit, as well as the rationalization of customs procedures and the improvement of customs regulations. A privatization program mainly concerning key sectors such as transport and finance and which was initiated in 1998, is regularly updated.

 

Bilateral investment conventions signed by Indonesia

Indonesia has signed bilateral agreements for the protection of investments with 57 countries, listed here.

Procedures relative to foreign investment

Freedom of establishment

Not guaranteed

Acquisition of holdings

A majority holding interest in the capital of an Indonesian company is legal, except in certain sectors of activity.

Obligation to declare

The agency for the promotion of foreign investment in the country allows you to obtain information about the necessary authorizations for setting up business in Indonesia.

Competent organization for the declaration

Agency for the control of food and drugs (BPOM)
Bureau for the coordination of investments (BKPM)

Requests for specific authorizations

A list of sectors which are closed or partially open under certain conditions to foreign investment is available here.

Finding assistance for further information

Investment aid agency

Board of Investment of Indonesia

Other useful resources

Indonesian Chamber of Commerce and Industry