A company established with foreign investment capital in Indonesia is known as a PMA Company (Penanaman Modal Asing); while an investment company established with no foreign investors is known as a PMDN Company. The Indonesia Investment Coordinating Board or ‘BKPM’ is the institution responsible for PMA establishment.

Various industry sectors in Indonesia are closed or partially closed to foreign investment which may mean that a joint venture with a local partner is required or that foreign investment is not permitted in the industry at all. Further information on which sectors are open to foreign investment can be found within the Negative Investment List (Presidential Regulation No.39/2014) which was most recently revised in April 2014. For foreign investors looking to enter Indonesia to market and promote their products only and not engage in commercial activities at this stage, setting up a representative office is the most suitable option (See Representative Offices in Indonesia).

In order to set up a PMA in Indonesia, at least 2 shareholders are required and one individual must hold the role of President Director and the other as President Commissioner. As a foreign President Director, an Indonesian tax number called an NPWP and a work permit called a KITAS is required as of 2013 BKPM regulations. Alternatively, a nominee director who already holds a KITAS or a native Indonesian President Director can be appointed.

Foreign investment officially must adhere to a minimum capital requirement of 10 billion IDR ($1.2 million USD) and a minimum paid up capital of 25% of that figure or no less than 2.5 billion IDR ($300,000 USD). In the majority of cases the deposit of paid up capital is not required in practice (See Minimum Capital Requirements for Foreign Investment in Indonesia) and the shareholders are required to sign a Capital Statement Letter pledging the funds as well as an investment proposal to the effect of the minimum capital requirements.

The PMA set up process can take from 8 to 12 weeks or longer should additional licenses be required although reforms are currently underway at BKPM to try and reduce this. In order to establish a PMA the following items need to be prepared:

• A Model I/PMA Form
• A written business plan in English detailing the proposed investment for the minimum capital requirement amount which can be related to capital goods investment but not to property or land purchases. This should include a timeline for investment of the proposed investment amount and a flowchart illustrating the company’s services or operations.
• Proof of the minimum paid up capital either through a signed Capital Statement Letter or a bank statement showing the deposited funds in an Indonesian bank account.
• If required, proof of bank credit or finance sources.
• If applicable, a draft joint venture agreement.
• If applicable, details of any Indonesian shareholders such as NPWPs.
• Shareholder structure showing the share ownership among the Directors and Commissioners.
• The company’s Articles of Association in English.
• A Letter of Domicile from the building management of the location where the company office will be. This cannot be a virtual office or a residential property although in some cases residential developments can grants Letters of Domicile if they are mixed use.

 

After the above process for PMA establishment is complete, the next stage is to apply for a Permanent Business License (Izin Usaha Tetap) within 1-3 years depending on the industry sector. The Permanent Business License is required in order to apply for additional business licenses such as an import license for importing goods therefore it is recommended to begin the application process as soon as possible.

Global Business Guide Indonesia - 2015

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Indonesia Snapshot

Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)

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