Local Investment and Foreign Investment

In the Black Law's Dictionary, investment has meaning an expenditure to acquire property or assets to produce revenue; a capital outlay. Meanwhile, Law Number 25 of 2007 concerning Investment provides a definition of investment as any form of investment activity to conduct business in the territory of the Republic of Indonesia.

Investment in Indonesia itself is divided into 2 (two) types, namely domestic investment (PMDN) and foreign investment (PMA). Domestic investment is an activity of investing to do business in the territory of the Republic of Indonesia which is carried out by domestic investors using domestic capital, while foreign investment is an activity of investing to conduct business in the territory of the Republic of Indonesia which is carried out by investors. foreigners, either using foreign capital entirely or joining forces with domestic investors. Individuals or business entities that carry out investment activities are referred to as investors or better known as investors.

With the increase in economic growth in Indonesia, namely as the third country in the world with the best economic growth rate in 2016, of course, it will further increase the enthusiasm of foreign and domestic business actors to start or even increase the scale of their business investment in Indonesian soil. The basic principles which are the principles of investment in Indonesia are also very important to be understood by both local and foreign investors as formulated in the Investment Law as follows:

  1. Legal certainty;
  2. Openness;
  3. Accountability;
  4. The same treatment and does not differentiate the country of origin;
  5. Togetherness;
  6. Fair efficiency;
  7. Sustainable;
  8. Environmentally friendly;
  9. Independence; and
  10. Balance of progress and national economic unity.

In writing this time, the author will discuss several things about problems that are often faced by investors, especially those related to legal issues. One example of the problems most often experienced by foreign investors in Indonesia is the issue of licensing. In investment licensing arrangements in Indonesia, it is found that the licensing process or procedure is convoluted and very inefficient, for example is the case of licensing problems that occurred in Cimahi in early 2011 where foreign investors from various countries such as Malaysia, France, America, Germany, and South Korea is constrained by the licensing process at the central government level through the Investment Coordinating Board.

In the business world, time is money and of course the time-consuming performance of the licensing process will be very detrimental to investors who want to start and develop their business, then whether foreign investors get guaranteed protection or even compensation when investors are hampered by the bureaucratic performance of government institutions in Indonesia? It is important for both foreign and local investors to at least have qualified and experienced legal advisors / consultants to assist / prevent potential losses as described in the above licensing issue.

Can foreign investors withdraw all the profits from their investment in Indonesia to their personal accounts or are there certain restrictive rules? If there is maladministration by a government agency, then to whom can foreign investors report and get legal protection? Of course, foreign and domestic investors should get maximum legal guarantees because they serve as the spearhead of improving the Indonesian economy.

On the other hand, are there any sanctions for Investors / Foreign Investors (PMA) who do not comply with statutory provisions such as intentionally not to employ native Indonesian workers, not providing training to Indonesian native workers as stipulated by the law?

What are the sanctions for Foreign Investors / Investors (PMA) who do not carry out the divestment obligation so that it has the potential to harm state finances, in accordance with government regulations that have regulated certain business classifications? Of course, there are many other questions that require adequate explanation and legal guidelines which will have a very positive impact on investors who want to start and develop their business in Indonesia.

In addition, with the issuance of Presidential Regulation Number 44 of 2016 related to the ASEAN era Economic Community where the share ownership of investors / foreign investment is allowed up to 70% (seventy percent), of course, brings fresh air for foreign investors to develop their business in Indonesian soil.


To Consult and make appointment with our lawyer click here