Indonesia specifies minimum capital requirements for foreign investment; this is the amount of capital that will be invested as detailed in the company’s submitted investment plan over the course of 3 years. The minimum capital requirement currently stands at 10 billion IDR or the equivalent of $1.2 million USD depending on the industry to be invested in. The rationale behind this is to encourage the entry of large scale companies and investors so as to protect smaller sized local businesses.

Paid up capital is the minimum value of the initial investment required to establish a PMA which is 25% of the minimum capital requirement (at least 2.5 billion IDR or $300,000 USD). For capital intensive industries such as manufacturing or natural resources extraction, the invested capital proposed in the investment plan are expected to be higher than the minimum specified. Each business sector to be entered may require the establishment of a separate PMA and in such case the minimum capital requirements apply to each business sector to be entered into. Representative offices are not subject to minimum capital requirements or minimum paid up capital (See Setting Up A Representative Office in Indonesia).

In practice, it is not always mandatory to deposit the aforementioned 25% paid up capital into an Indonesian bank account to complete the PMA set up or indeed at any stage of the process. The shareholders of a PMA company can sign a Capital Statement Letter in Bahasa Indonesia that is required by the Ministry of Justice & Human Rights which essentially pledges that the minimum paid up capital funds can be deposited. This is the option that is most commonly utilised by foreign investors in Indonesia except for when the investor is engaged in specific sectors that require demonstration of liquidity such as in financial services.

This is an example of a particular quirk in Indonesian bureaucracy where often written regulations differ significantly from everyday practice. It is therefore recommended that foreign investors use an experienced consultant for PMA set up to guide them through the aforementioned issue and other inevitable bureaucratic hurdles.

If you are interested in setting up a local company or representative office in Indonesia and want to learn more, please contact GBG Indonesia.

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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