Dr. Syed Mehboob
Business and Economic Analyst
http//: www.thenewslark.com
Indonesia is a country with great opportunities and provides immense opportunities for business and investment, offering immense possibilities. Its leadership has a keen desire to make Indonesia the hub of international business and has tried its best to attract foreign investment and to provide business people and investors with the best possible facilities.
Business needs stability, a peaceful and friendly atmosphere, and ample opportunities to grow and flourish. Business people and investors are highly sensitive and invest only where they get the maximum assurance to get back a good and handsome return on their investment.
Indonesia is an emerging economic power, and its visionary leadership has created a business and investment-friendly atmosphere and is ready to welcome genuine investors. The government of Indonesia values implementing prudent macroeconomic policies and structural reforms, and issued the job creation law in October 2020, also known as the Omnibus Law. The Omnibus law amends some 75 current laws and aims to stimulate domestic and foreign investment by removing bureaucratic inefficiencies, simplifying business licensing requirements, and liberalizing more industries. The Omnibus law liberalizes many business sectors for foreign investment. The regulation liberalizes over 245 business lines, including important sectors such as transportation, energy, and telecommunication. The general principle under the positive investment list is that a business sector is open to 100 percent foreign investment. The regulation removes ownership limitations in dramatic business partnerships. It has introduced dramatic liberalizations to Indonesia’s business atmosphere. The government has classified business fields into four categories. 1. Priority sectors 2. Business fields open to larger enterprises, including foreign investors, but are subject to a compulsory partnership with corporations and micro-small and medium-sized enterprises (MSMEs). 3. Business fields that are fully open to foreign investment.
The following business fields are open to 100% foreign investment
- Oil and Gas construction
- Onshore upstream oil installation
- Onshore and offshore distribution pipeline
- Onshore and offshore oil and gas drilling service
- Electricity generation
- Construction of an electricity installation
- Geothermal electricity generation
- Supermarkets
- Departmental Store
- Ports
- Airport and airport supporting services
- Maritime cargo handling
- Telecommunication
- E-commerce
- Pharmaceutical Industry
- Hospitals
The following are the priority sectors for investment
To be classified as priority sectors, business enterprises must meet the following criteria
- Must be a labor incentive
- Must be a capital incentive
- Must be part of a national project
- Must be involved in a pioneer industry (renewable, oil refinery, metals), etc
- Must implement research and development activities
245 business fields under this category can be found under the benefit of the positive investment list. Moreover, businesses in priority sectors are eligible for a range of fiscal and non-fiscal incentives. Fiscal incentives include a 50 percent corporate income tax reduction for investments between 100 billion rupiahs (US$6.9 million) and 500 billion rupiahs (US$4.9 million) for five years and 100 percent CIT for investments of 500 billion rupiahs (US$34.9 million) for a period between five and 20 years. In addition, there are tax allowances available in the form of a reduction in the taxable income of 30% of the total investment for six years, a special withholding tax rate on dividends of 10 percent, and tax losses carried forward up to 10 years. Examples of non-fiscal incentives include the provision of supporting infrastructure, simplified business licensing procedures, and the guaranteed supply of energy materials. It explores a few examples of the prioritized business lines and their incentives below: –
Examples of priority Business sectors and their incentives
| Business Lines | Incentives |
| Textile and garment Industry
Pharmaceutical Industry Digital Economy (hosting data processing,etc) Geothermal (Exploring and drilling ) Cooking Palm Oil Industry Automobile Industry Oil and Gas Refinery Cosmetic Industry
|
Tax allowance and investment allowance
Tax Allowance Tax Holiday
Tax allowance
Tax Allowance Tax Allowance Tax Holiday
|
Business fields that stipulate specific requirements or limitations
Under this category, business fields are open to foreign investments but are subject to the following types of restrictions
- Lines of business reserved for domestic investors
- Lines of business subject to foreign ownership limitations
- Lines of business that require special licenses.
Business Fields with Specific Requirements
| Business Fields | Requirements |
| Publishing of Newspapers and magazines | 100 percent domestic capital is required for establishment, and up to 99% foreign capital ownership for business development and expansion |
| Private Broadcasting Agency | 100% domestic capital is required for establishment, and up to 20% foreign capital ownership for business development and expansion |
| Subscription-based costing agency | 100 % domestic capital required and 20% foreign capital ownership for business development and expansion |
| Community Radio Agency | 100% domestic capital required for establishment and expansion, and up to 20% foreign capital ownership for business development |
| Community Television Technology | 100% domestic capital is required for establishment and up to 20% foreign capital ownership for business development and expansion |
| Postal Services | Maximum foreign capital ownership of 49% |
| Domestic Scheduled Air Transportation | Foreign Capital ownership of 49% however, domestic capital ownership should be a single majority |
| Domestic Non-Scheduled air transportation | Foreign Capital ownership of 49% however, domestic capital ownership should be the single majority |
| Air Transport activities | Foreign Capital ownership of 49% however, domestic capital ownership should be a single majority |
| Domestic Passenger liner and tramp activities | Maximum Foreign Capital 49% |
| Domestic Sea Transport for Tourism | Maximum Foreign Capital 49% |
| Domestic liner and tramp sea freight for tourists | Maximum Foreign Capital 49% |
| Domestic sea transport for special goods | Maximum Foreign Capital 49% |
| Pioneer domestic sea transportation | Maximum Foreign Capital 49% |
| Domestic sea transportation using public shipping | Maximum Foreign Capital 49% |
( Continued)
