The center of global economic gravity is shifting toward Asia as People’s Republic of China and India become two giant economies in Asia. Aside from that giants countries, ASEAN countries also growth as they are accelerating and fostering their economy by establishing a single market and production based called ASEAN Economic Community (“AEC”) or commonly known in Bahasa as Masyarakat Ekonomi ASEAN (MEA) in which the goods, services, skilled labor and investment are feely flowing across the MEA country member.
In connection with the investment in Indonesia, Singapore is ranked first in investment contribution to Indonesia based on Indonesia Investment Coordinating Board (“BKPM”) report in the First Quarter of 2016. Please see the top five (5) countries which have biggest investment realization in Indonesia during the first quarter of 2016:
However, the data also shows that the investment contribution from ASEAN countries to Indonesia is not maximum since the investment conducted by Singapore is not followed by another ASEAN countries. This fact does not match with ASEAN countries commitment to realize free and open investment regime to achive economic integration under AEC.
Therefore, the Indonesian government has focus to improve investment from ASEAN countries by allowing ASEAN countries to own higher foreign ownership percentage in certain business fields listed in New Negative Investment List 2016
A. WHO IS ASEAN INVESTORS?
Referring to the Asean Comprehensive Investment Agreement 2009 (“ACIA”), ASEAN Investor can be classified into 2 (two) categories, there are:
- The natural person means any natural person possesing the nationality or citizenship of, or right of permanent residence in one of ASEAN country in accordance with laws, regulations and national policies in its ASEAN Country.
- The Juridicial Person means any legal entity duly constituted or otherwise organized under the applicable law in one of ASEAN country, whether profit or otherwise, whether for private for or governmentally-owned, including any enterprise, corporation, trust, partnership, join venture, and sole proprietorship, association, or organisation.
As an addition, a non-ASEAN company also can get benefit from ACIA if it controls or owns an ASEAN Company. However, a member of ASEAN country (in this case Indonesia) may deny the benefits of the ACIA to:
- an ASEAN Investor of another ASEAN country that is a juridical person of such other ASEAN Country and to investments of such investor if an investor of a non- ASEAN countries owns or control the juridical person and the juridical person has no substantive business operations in territory of such other ASEAN country;
- an ASEAN Investor of another ASEAN country that is a juridical person of such other ASEAN country and to investments of such investor if the denying ASEAN country owns or control the juridical person and the juridical person has no substantive business operation in territory of such other ASEAN country; and
- An ASEAN Investor of another ASEAN country that is a juridical person and to an investment of such investor if investor of a non-ASEAN countries own or control the juridical person, and the denying ASEAN Country does not maintain diplomatic relations with the non-ASEAN country.
Please be noted that under Law No. 25 of 2007 on Direct Investment, every foreign entity who will run its business in Indonesia must be in form of Foreign Direct Investment (FDI) Company (“PT PMA” – Perusahaan Penanaman Modal Asing).
B. WHAT ARE THE BUSINESS?
The following are business fields with higher foreign ownership limitation under the ASEAN Investor scheme based on DNI 2016:
HOW CAN SMART LEGAL CONSULTING HELP YOU?
SMART Legal Consulting is an Indonesian Corporate Legal Services firm. We often assist investors from ASEAN countries in establishing their business in Indonesia through various forms of investment as well as securing investment and corporate licenses.
If you have any question about PMA Company or want to book a consultation for assistance, you can arrange a meeting with our SMART Legal Consulting at: