NewsThe First ‘Stepping Stone’ to Accelerate Foreign Investment in Indonesia

At the end of 2019, the government is more vigorous in attracting both domestic and foreign investors to invest in Indonesia. Having previously enacted a ‘tax holiday’ policy package, the government through Presidential Instruction of the Republic of Indonesia Number 7 of 2019 concerning the Acceleration of Ease of Business (Inpres 7/2019) instructs all the ministers/heads of institutions to draft regulations aimed at simplifying business licensing process and providing investment incentives for investors. The government’s reason for issuing this policy, among others, is to improve Indonesia’s position in the Ease of Doing Business index, which currently stands at 73 out of 190 countries. This fact is very far from the expectation of the government which targets the ranking of the top 50 positions. In addition, the government also aims to equalize investment by attracting investors to invest in strategic sectors that exist outside Jawa Island.

There are a number of main points that are of concern to the government in increasing interest to investors as outlined in Inpres 7/2019, including accelerating the ease of trying to encourage increased investment, supporting economic growth, and providing employment opportunities. All the points covered in the Presidential Instruction are pursed in the relevant regulations simplifying the investment licensing process.

 

Develop Regulations That Facilitate Investment

Through this Presidential Instruction, the president instructs all the Ministers/Heads of Institutions to identify laws and regulations considered hindering the ease of doing business and investment. For this reason, each ministry has been ordered to reduce the number of and simplify the licensing procedures and requirements, and accelerate the issuance of business licenses. This step is realized through changes or revocation of laws and regulations governing business licensing in each Ministry/Institution. Furthermore, the president also instructs all the Ministers/heads of Institutions to coordinate with relevant parties and involve the participation of associations/business actors.

 

Appoint BKPM to Coordinate the Necessary Steps

The President has expressly instructed the Head of  Investment Coordinating Board (BKPM) to evaluate the existing implementation of business licensing and investment facilities, and then from the results of the evaluation submitted by BKPM to the relevant ministries/Institutions, improvements can be made in regulations that are considered to be hindering. Furthermore, the president also appoints BKPM as an institution that coordinates the steps needed to improve the Ease of Doing Business rankings and to develop Norms, Standards, Procedures and Criteria (NSPK) for business licensing and investment facilities providing guidelines for relevant Ministries/Institutions. Inpres 7/2019 also leads to a plan to return the authority over the integrated business and investment licensing arrangement to BKPM.

These steps are the beginning of a series of policies that will be taken by the government to achieve the above objectives. In the same way, the government will take some steps to accelerate foreign investment which include reducing the Negative Investment List (DNI), strengthening the role of Online Single Submission (OSS) in all regions in Indonesia, Strengthening the role of the National Task Force on Investment Acceleration, and Drafting the Omnibus Law as a complement to this policy package.


 

ADCO Law earns the trust to represent clients from multinational companies to emerging entities across a wide range of industries to achieve their business objectives in Indonesia.

By combining commercial sensibilities and legal expertise, ADCO Law assists the clients to structure, organize and implement their business ventures and investments, including structuring, financing and securing investments as well as establishing new foreign companies in Indonesia. Should you have more queries regarding this matter, please do not hesitate to contact us.

Dendi Adisuryo
dendi.adisuryo@adcolaw.com

Niko Karuniawan
niko.karuniawan@adcolaw.com

@2019 ADCO Law. All rights reserved.
This publication has been prepared for general informational purposes only to provide clients with information on recent legal developments and is not intended as legal advice or opinion.

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