Indonesia

FDI in figures

FDI collapsed during and after the economic crisis of 1997-1998, and the balance of foreign direct investment only became positive again in 2005, then it deteriorated again. According to the Central Bank and UNCTAD, FDI inwards dropped by 34% in one year. From 2005 to 2006, the country fell from the 26th to the 42nd place among 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 reform of the business regulation framework made progress at last. The recent strengthening of political and economic stability has done away with certain investment risks and improved the climate of the market. But some curbs persist, such as the cost of credit, the poor investment climate, the relative ineffectiveness of regulations, the cost linked to corruption and the lack of respect for contractual obligations, the excessive weight and unpredictability of regulations, the lack of a reliable infrastructure.

Why you should choose Indonesia

Strong points

Indonesia has more than 220 million inhabitants, which represents an enormous market. In addition, the country has abundant natural resources (timber, fish, oil, natural gas, metals) and a very great biodiversity.

Weak points

The main hindrance to investment lies in the high cost of illegal deductions, which represent 60 per cent of the general problem. To launch a company - the number of formalities to carry out, time limits for starting up, registration rules and the threshold of the initial outlay of funds - a study by the World Bank has shown that Indonesia is much less efficient than other Asian countries. Legal unpredictability is often denounced and several levels of justice are said to be ineffective and corrupted. The Fiscal and Customs Administrations are always seen by the business milieu as being generally corrupted and arbitrary.

Government measures to motivate or restrict FDI

Incentives to investment are accessible to all investors, national and foreign. These are especially reductions of duties on imported inputs and capital equipment and additional incentives for investment in export and investment in certain regions.
At the beginning of 2006, the government announced a program for the improvement of the investment climate, planning to submit to Parliament a bill on investment, the setting up of a new negative list applicable to investment, the drastic reduction of the time required for the creation of a company, the acceleration of the process of re-examination of local regulations likely to harm company spirit, as well as the rationalization of Customs procedures and the improvement of Customs regulations.

Bilateral investment conventions signed by Indonesia

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

Administrative 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 or further information

Investment aid agency

http://www.bkpm.go.id/">Board of Investment of Indonesia

Other useful resources

Indonesian Chamber of Commerce and Industry