Why Invest in Indonesia?
Indonesia, a country known for its breath taking natural beauty, vibrant culture, and warm hospitality, has been attracting global attention due to its remarkable economic recovery following the COVID-19 pandemic. The World Bank’s recent upgrade of Indonesia’s status to an ‘upper-middle income country’ from its previous ‘lower-middle income’ classification reflects the nation’s resilience and sustainable growth in recent years, with a positive outlook for the future.
One of the key drivers behind Indonesia’s economic progress is its focus on attracting foreign investment. President Joko Widodo has been a vocal advocate of foreign investment as a means to upgrade the country’s status, and this strategy has proven successful.
Foreign Investment, in simple terms, involves investment activities by foreign individuals or entities through a Foreign Investment Company (PT PMA). This allows non-Indonesian investors to conduct business activities across Indonesia, either with 100% foreign capital for full control over the company or through joint ventures with domestic capital.
What does the number say?
The numbers speak volumes about Indonesia’s success in attracting foreign investment.
For the first quarter of 2023 reached IDR 177 trillion (Approximately 12.5 billion USD) , growing 20.2% compared to the realization of Foreign Investment for the same period in 2022 which amounted to IDR 147.2 trillion (Approximately 9.7 billion USD).
The realization of Foreign Investment growth was higher than the growth of Domestic Investment (PMDN), which only grew 12.4% or IDR 151.9 trillion (Approximately 10 billion USD) for the first quarter of 2023.
According to the numbers Singapore is number one with the most foreign investment per country with the investment value reaching a whopping USD $ 4.3 billion or approximately or IDR 64 trillion .
Hong Kong is in second place investing USD $ 1.5 billion (IDR 22 trillion) into Indonesian Businesses. With China coming in a close third place with investment amounting to UD S$1.2 billion
Because of these policies, Indonesia has become one of the most investment-attractive places in the world. Foreign investors come to Bali, Jakarta and all over Indonesia to open businesses. As a result, Indonesia is expected to keep receiving Foreign Investment from abroad despite the threat of next years recession.
What are the benefits of Foreign Investment for Indonesia?
The benefits of foreign investment for Indonesia are numerous. Firstly, it creates economic stimulation by infusing capital into the economy, jump-starting growth. Additionally, foreign companies bring technical knowledge that gets transferred to the local workforce, boosting the country’s skills and capabilities. Foreign investment also plays a vital role in job creation, as foreign companies provide opportunities for the local population, contributing to increased productivity and decreased unemployment rates in the region.
How do Foreign Investors can invest safely into Indonesia?
For foreign investors looking to invest safely in Indonesia, setting up a Foreign Investment Limited Liability Company (PT PMA) is the most secure option. Even if foreign investors own as little as 1% of shares in a company, it is still considered foreign investment in Indonesia. The government’s regulations, including the Investment Law and Company Law, provide a clear and open pathway for foreign investments into the country.
Some other quick facts about doing business in Indonesia
- It is possible to legally establish a business in Indonesia and conduct business anywhere in the country
- A Foreign Investment Companies (PT. PMA) as Limited Liability Companies.
- All investors in Foreign Investment Company are qualified for a investor stay permit (KITAS). This Permit allows the investors to stay in the country and supervise their investment
- By definition, a legal entity that has foreign investors (even with 1% of shares owned by foreigners) is considered foreign investment.
- Newly set up companies enjoys an eased 0.5% tax on the total turnover total turnover up to 3 years.
In conclusion, foreign investment has been a driving force behind Indonesia’s economic growth and development. With its newfound status as an upper-middle income country, Indonesia is expected to continue attracting foreign investment, with Foreign Investment Limited Liability Companies acting as vital assets in the thriving Indonesian market. The combination of Indonesia’s natural allure, welcoming culture, and business-friendly policies makes it an enticing destination for investors seeking long-term growth and success.
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