Can a Foreigner Own 100% of a Business in Indonesia?

Corporate Secretary Service – The enactment of the Cipta Kerja Law impacts foreign investment in Indonesia, where all business fields are open to foreigners with 100 percent foreign capital unless otherwise determined by laws and regulations.

In February 2021, the government issued Presidential Regulation Number 10 of 2021 on Investment Business Fields (Perpres No. 10 of 2021) and Presidential Regulation Number 49 of 2021 on Amendments to Presidential Regulation Number 10 of 2021 on Investment Business Fields (Perpres No. 49 of 2021). Both are derivative regulations from Law Number 11 of 2020 on Job Creation (Job Creation Law).

Basically, all business fields are open for investment activities, except for those declared closed or for which such activities can only be carried out by the central government. In this case, the line of business that is open for investment is a commercial line of business (Article 2 paragraph (1) jo. Article 2 paragraph (1a) of Presidential Regulation No. 49 of 2021).

Thus, if the business sector activities are fully open, foreign investment can own up to 100 percent of the business sector in Indonesia. Open lines of business are also divided into several types, namely (Article 3 paragraph (1) Perpres 10/2021):

• Priority line of business (strategic programs/projects, capital intensive, labor intensive, high technology, pioneer industry, export orientation, and/or orientation in research, development, and innovation activities);
• Allocated business sectors or partnerships with cooperatives and MSME;
• Line of business with specific requirements and
• Lines of business not included in letters a, b, and c that all investors can operate.

Then, how do we find out whether the business sector is entirely open to foreigners or not?

Check the Appendix to Perpres No. 10 of 2021 and Perpres 49 of 2021. If the intended business field does not have the requirements stated in the appendix, it means that the field is 100% open to foreigners. For example, business fields open to foreigners are web portals and/or digital platforms for commercial purposes, hospitals, pharmaceutical products, bottled water and refillable drinking water industries, property brokers, supermarkets, etc.

Read Also: How to Verify a Company in Indonesia?

It is further stipulated that foreign investors can only conduct business activities and large businesses with an investment value of more than IDR 10 billion outside the value of land and buildings (Article 7 paragraph (1) of Presidential Regulation No. 10 of 2021). However, this does not apply to investment activities in special economic zones (Article 8 paragraph (1) of Presidential Regulation No. 10 of 2021).

Special economic zones are areas with certain boundaries in Indonesia determined to carry out economic functions to obtain certain facilities (Article 1 point 1 of Government Regulation 40 of 2021 concerning the Implementation of Special Economic Zones). For example, PT PMA, located in a special economic zone in the technology-based startup sector, can make an investment equal to or less than IDR 10 billion, excluding the value of land and buildings.

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