Indonesia: Investing

FDI in Figures

Foreign direct investment (FDI) in Indonesia, which had collapsed due to the Asian economic crisis in 1997-1998, was clearly increasing after 2007, as the country again became attractive to investors, thanks to the progress in the reform of the business regulation framework. After having suffered from the global recession in 2009, FDI flows started to increase significantly in 2011 and have since expanded their base. Foreign exchange reserves have more than doubled from their 2008 level. However, FDI flows remain inadequate given the economy's size and potential. Strengthening the political and economic stability has removed some investment risk and improved the overall atmosphere on the market. However, some obstacles remain, such as the rising cost of credit, poor investment climate, excessive and the unpredictable nature of regulation, poor infrastructure, the control of the risk of terrorism and a 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.

In 2006, the government launched a program for the improvement of the investment climate: bill on investment, drawing up of a new negative list applicable on investments, drastic reduction of the time required for the creation of a company, acceleration of the re-examination process of local regulations likely to harm the enterprising spirit, as well as rationalization of customs procedures and 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 in the Indonesia's Investment Law.

Investment Opportunities

Investment Aid Agency

Board of Investment of Indonesia

Tenders, Projects and Public Procurement

Tenders Info, Tenders in Indonesia
Asian Development Bank, Procurement Plans in Asia
DgMarket, Tenders Worldwide

Other Useful Resources

Indonesian Chamber of Commerce and Industry

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