The 2025 Success Guide to Investing in Indonesia

The 2025 Success Guide to Investing in Indonesia

  • InCorp Editorial Team
  • 30 October 2024
  • 7 reading time

Every crisis brings new opportunities to start something, like a new business. If there is something good that follows the COVID-19 crisis, it is a quicker business incorporation process, and investing in Indonesia becomes a great opportunity.

Moreover, Indonesia’s economic outlook for 2024 anticipates a real GDP growth rate of approximately 5.05% yearly​. This projection reflects Indonesia’s commitment to economic recovery, private consumption, and investment resilience.

Why Should You Invest in Indonesia

Foreign investment in Indonesia is increasingly attracting attention due to the country’s strategic advantages and economic potential. Here are some key reasons why investing in Indonesia is a smart choice:

  • Strategic Location: Indonesia is a vital hub for accessing ASEAN and Asian markets along key shipping and transport routes. It is also recognized as a preferred “China +1” destination.
  • Growing Economy: The country’s GDP has consistently grown at a rate just above 5%, with domestic consumption contributing about 60% of this growth.
  • Government Reforms: Indonesia’s government has a clear economic vision focused on enhancing foreign investment through various incentives and reforms.
  • Ease of Doing Business: The country has improved its ease of doing business rankings, making it more attractive to foreign investors.
  • Young and Large Labor Force: Indonesia boasts a dynamic and youthful labor force with nearly 137 million workers and a median age below 30.
  • Special Economic Zones (SEZs): Establishing special economic zones (SEZs) provides investors with significant incentives and opportunities for growth.
  • Expanding Positive Investment List: The Positive Investment List permits foreign investments in over 200 sectors, including transportation, energy, and telecommunications.
  • Increasing Consumer Spending: With a population exceeding 237 million, Indonesia has a rapidly growing middle class and a services sector that accounts for over 40% of GDP.
  • Extensive Network of Free Trade Agreements: Indonesia has signed over 14 agreements, facilitating trade benefits with countries across Asia, ASEAN, Europe, and globally.
  • Rich Natural Resources: The country has abundant natural resources, including coal, silver, gold, nickel, copper, bauxite, thermal coal, tin, petroleum, and natural gas.

Types of Investments for Foreigners in Indonesia

Investing in Indonesia as foreigners

Foreign ownership in Indonesia has been updated recently with implementing the Positive Investment List. This list of Indonesia’s investment opportunities categorizes business sectors into different ownership levels, indicating what percentage of ownership foreign investors allow.

  • 100% Foreign Ownership: Sectors that allow complete foreign ownership include:
    • E-commerce business (with a minimum investment of IDR 100 billion)
    • Hospital services and management
    • Raw materials manufacturing for pharmaceuticals
    • Electricity generation, telecommunications, and several other industries​
  • 67% Foreign Ownership: Some sectors, such as medical equipment testing institutions and internet service providers, allow a maximum of 67% foreign ownership​
  • 49% Foreign Ownership: Certain areas, including e-commerce businesses with investments below IDR 100 billion, land transportation, and passenger transportation, have restrictions where foreign ownership is capped at 49%
READ MORE:

Requirements to Invest in Indonesia

Apply for Investor KITAS in Indonesia

Investing in Indonesia presents opportunities for foreign investors. Understanding the requirements and processes involved in investing in Indonesia for foreigners is crucial to navigating this landscape effectively. Here’s what you need to know:

Investor KITAS

The Indonesian Investor KITAS remains a crucial aspect of the investment landscape. It provides a simplified application process and a regular work permit fee waiver.

Investors can apply for either a one-year or a two-year KITAS with the following capital requirements: a minimum authorized capital of IDR 10 billion, paid-up capital of IDR 10 billion, and IDR 1 billion in personal shares.

Company Registration

Incorporating a business in Indonesia includes preparing necessary documentation, obtaining licenses, and adhering to local regulations. Foreigners can establish a business in Indonesia through a PMA company, which allows for 100% foreign ownership in eligible sectors.

Next Steps after Incorporation in Indonesia

Once a company is incorporated, the following steps are important:

Open a Corporate Bank Account

  • Foreign investors should open a corporate bank account at a licensed Foreign-Exchange Bank to manage foreign currency transactions effectively.

Customs Registration

  • Customs registration is mandatory for businesses engaged in import and export activities. Exemptions may apply under specific conditions.

Corporate Tax Obligations

  • All foreign investment companies must adhere to corporate income tax obligations, with a flat rate of 22%. Small businesses with an annual turnover below IDR 50 billion can benefit from a 50% discount on this tax rate.
READ MORE:

Can Investors Own 100% of the Shares in a PMA Company?

Under Presidential Regulation No. 10/2021, amended by Presidential Regulation No. 49/2021 (known as the “Investment List”), foreign and domestic investments, including Foreign Direct Investment (FDI), are generally permitted in most sectors.

However, there are classifications and limitations for specific businesses:

  • Closed for Foreign Investment: Eight specific sectors are entirely closed to foreign investors and can only be operated by the central government. Examples include the cultivation of Class I narcotics, gambling activities, and industries related to endangered species.
  • Allocated Sectors: Some business sectors require partnerships with cooperatives or micro, small, and medium enterprises (MSMEs).
  • Conditional Open Businesses: Certain sectors are open to investment but with specific requirements. This may include businesses limited to local investors or those with restricted foreign ownership (e.g., a maximum of 49% foreign shares).

For sectors open to foreign investment, any business not explicitly listed in the Investment List is typically considered fully open for 100% foreign ownership. Nevertheless, it is crucial to check specific sector regulations, as ownership limitations might be detailed.

As a best practice, potential investors should contact the Investment Coordinating Board (BKPM) or the relevant supervising ministry/authority to confirm that their desired business sector allows full foreign investment and to understand any additional requirements.

Industries Closed for Foreign Investment include:

  • Cultivation and industry of Class I narcotics
  • Gambling and casino operations
  • Fishing for species listed under CITES
  • Collection of corals for various uses
  • Chemical weapons manufacturing
  • Production of substances harmful to the ozone layer
  • Alcohol and malt beverage industries
  • Strategic defense and security services

Minimum Amount of Investment to Establish a PMA in Indonesia

The minimum investment requirement to establish a PMA (Penanaman Modal Asing) company in Indonesia is generally IDR 10 billion, excluding land and building costs. This investment can come from various sources, including capital contributions.

Key points to consider:

  • A PMA company must have at least IDR 10 billion in paid-up capital, applicable across most sectors unless specified otherwise by regulations (e.g., banking may require higher capital).
  • Different rules may apply for specific sectors, like trading businesses.
  • Companies can also use loan financing, factoring in tax implications, for investments above the minimum.
  • The minimum investment requirement does not apply to Representative Offices (RO).

Guide to Doing Business in Jakarta

Mailchimp Free eBook Indonesia Business Insight

Start Investing in Indonesia with InCorp

Foreign investors may need help navigating local regulations regarding company establishment, KITAS applications, and business licenses to start in this emerging market investment. That’s where InCorp comes in. Our comprehensive support includes:

  • Company Registration: We guide you through the entire process of establishing your business legally in Indonesia.
  • Business License: We help you obtain the important licenses to operate in compliance with local regulations.
  • Investor KITAS: We facilitate the application for an Investor KITAS, allowing you to work in Indonesia seamlessly.

Fill out the form below to start your best investment in Indonesia with InCorp.

Daris Salam

COO Indonesia at InCorp Indonesia

With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships.

Get in touch with us.

Lead Form

Frequent Asked Questions

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.

It should take between 30 to 45 days.