Indonesia’s Positive Investment List, introduced through Presidential Regulation No. 10 of 2021 and amended by Presidential Regulation No. 49 of 2021, represents a significant liberalization of the country’s foreign investment landscape.
This regulation opens up over 200 business sectors, ranging from transportation and energy to telecommunications, for foreign investment.
The list is a key component of Indonesia’s broader efforts to attract foreign capital and stimulate economic growth, offering both fiscal and non-fiscal incentives to encourage investment in priority sectors.
Also read: Investing in Indonesia: Great Opportunity for Global Investors
Understanding the Positive Investment List
The Positive Investment List is designed to replace the previous Negative Investment List, which imposed numerous restrictions on foreign ownership. Under the new regulations, the default position is that a business sector is open to 100 percent foreign investment unless specific limitations apply. This shift marks one of the most significant relaxations of foreign ownership restrictions in Indonesia’s history, making it an attractive destination for international investors.
Also read: Top Foreign Investors in Indonesia (by Country and Continent)
Classification of Business Sectors
The Positive Investment List classifies business fields into four distinct categories:
Priority Sectors
These sectors are deemed critical to Indonesia’s economic development. To qualify as a priority sector, businesses must meet specific criteria, including being labor or capital-intensive, export-oriented, or part of a national project. Priority sectors also include pioneering industries such as renewable energy, oil refining, and advanced technology. There are 246 business fields under this category, and they are eligible for various fiscal and non-fiscal incentives.
Incentives for Priority Sectors
Businesses in priority sectors can access a range of fiscal and non-fiscal incentives, designed to make Indonesia a more attractive investment destination. These include:
Fiscal Incentives:
- A 50 percent reduction in corporate income tax for investments between IDR 100 billion (approximately USD 6.9 million) and IDR 500 billion (USD 34.9 million) for five years.
- A 100 percent corporate income tax reduction for investments over IDR 500 billion for a period ranging from five to 20 years.
- Tax allowances, such as a reduction of taxable income by 30 percent of the total investment over six years, a 10 percent withholding tax rate on dividends, and the ability to carry forward tax losses for up to 10 years.
Non-Fiscal Incentives:
These include the provision of supporting infrastructure, simplified business licensing procedures, and guarantees for energy and raw materials supply.
Also read: Tax Treaty Indonesia: Countries List and Complete Guide
Examples of Priority Sectors and Their Incentives
Some of the sectors that benefit from these incentives include:
- Textile and Garment Industry
- Pharmaceutical Industry
- Digital Economy (e.g., hosting, data processing)
- Geothermal Industry (exploration and drilling)
- Automotive Industry
Also read; Indonesia’s Special Economic Zones (SEZs): A Complete Guide
Business Fields with Specific Requirements
These sectors are open to foreign investment but with certain restrictions. For example, some industries are reserved for domestic investors, while others have foreign ownership caps or require special licenses. Examples include the wholesale trade of alcoholic beverages, private broadcasting agencies, and postal services, where foreign ownership is limited to 49 percent.
Also read: Top Foreign Investment Sectors in Indonesia
Business Fields Open to Large Enterprises with Compulsory Partnerships
In this category, foreign investors or large enterprises can invest, but they must form a partnership with cooperatives or micro, small, and medium-sized enterprises (MSMEs). This requirement is in place to ensure that smaller businesses can benefit from foreign investment. The partnership can take various forms, such as profit-sharing or subcontracting.
Business Fields Fully Open to Foreign Investment
Certain sectors are completely open to foreign investment without any restrictions. These include industries like oil and gas, electricity generation, telecommunications, and e-commerce. In these fields, foreign investors can own 100 percent of the business.
Also read: Can a Foreigner Own 100% of a Business in Indonesia?
Indonesia’s Positive Investment List is a transformative policy that opens up significant opportunities for foreign investors. By liberalizing over 200 business sectors, the Indonesian government is sending a clear signal that it is open for business. Investors looking to expand their operations in Southeast Asia should consider Indonesia as a key destination, given the favorable investment climate, extensive incentives, and the potential for high returns in a rapidly growing market.
For investors, understanding the specifics of the Positive Investment List, including the incentives and sectoral requirements, is crucial for making informed decisions. With the right approach, foreign investors can capitalize on the vast opportunities Indonesia has to offer.
After reading this article, are you interested in investing and starting a business in Indonesia? If so, setting up a PT PMA offers a viable route to entering the Indonesian market, albeit with specific regulatory considerations.
By adhering to these regulations and understanding the intricacies of Indonesian corporate governance, companies can position themselves for long-term success in this burgeoning economy.
To ensure your business and company runs smoothly, consider seeking professional guidance. InvestinAsia is among the companies that specialize in aiding you with company registration Indonesia. We boast a team of seasoned experts who can guide you throughout the process of:
- PMA registration in Indonesia (Foreign Company)
- Representative office registration in Indonesia
- Indonesia Local PT PMDN Set Up
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- Business registration number in Indonesia
- Business Licenses in Indonesia
- Trademark Registration in Indonesia
- Franchise License in Indonesia
If you are interested in starting a business and investment in Indonesia, you can start by contacting us for FREE consultation.
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