Indonesian Business Updates

 

Massive changes to foreign investment regulations do not bode well for Indonesia

By Gary Dean  

Hot on the heels of President Jokowi's visit to the US where he referred frequently to the openness of the Indonesian economy to foreign investment, the BKPM (Indonesian Investment Coordination Board) has just made massive changes to investment regulations running to hundreds of pages.

(See perka-14-tahun-2015-izin-prinsip-011015.rar, perka-16-tahun-2015-fasilitas-300915.rar , perka-15-tahun-2015-perizinan-dan-nonperizinan-011015.rar, perka-17-tahun-2015-dalak-final.rar. Sorry, no English translations as yet.)

Nearly all the regulations detail punitive actions that the BKPM can take against foreign investors for not adhering to a plethora of minute details regarding the running of their businesses. Of course, this is just the sort ambiguity corrupt bureaucrats love.

The new regulations apply to all PMA companies, both new and existing. One regulation forces existing PMAs with paid up capital of less than Rp2.5 billion (~USD200,000) to increase their capital, whether they need it or not. This will, naturally, incur unnecessary legal and other expenses. Why do they do this? The reason is that this additional capital will be counted as "realized investment" by the BKPM. Thus this will artificially inflate the realized investment figures given to the government, making it appear that the BKPM is doing a better job than they actually are.

Foreign investors in Indonesia should prepare themselves for an extended period of harassment from the bureaucracy as a consequence of these changes.

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