Indonesia is an attractive destination for foreign direct investment (FDI) due to its relatively young demographics, strong domestic demand, stable political situation, abundant natural resources, and well-regarded macroeconomic policy. Indonesian government officials often state that they welcome increased FDI, aiming to create jobs, spur economic growth, and court foreign investors, notably focusing on infrastructure development, export-oriented manufacturing, mining refinery industries, and green investment. To further improve the investment climate, the government issued the Omnibus Law on Job Creation (Law No. 1/2020) in October 2020 to amend dozens of prevailing laws deemed to hamper investment. It introduced a risk-based approach for business licensing, simplified environmental requirements and building certificates, tax reforms to ease doing business, more flexible labor regulations, and the establishment of the priority investment list. It also streamlined the business licensing process at the regional level. At the same time, investors cite concerns over restrictive technical regulations, policy inconsistency, bureaucratic inefficiency, lack of infrastructure, sanctity of contract issues, and corruption.

The Ministry of Investment / Investment Coordinating Board (BKPM) serves as an investment promotion agency, a regulatory body, and the agency in charge of approving planned investments in Indonesia. As such, it is the first point of contact for foreign investors, particularly in manufacturing, industrial, and non-financial services sectors. In August 2021, BKPM launched the Risk-Based Online Single Submission (OSS), an integrated online system that streamlines almost all business licensing and permitting processes (except in the oil and gas, and financial sectors).  Under the OSS, businesses deemed lower risk will face fewer administrative requirements to obtain permits and licenses. The GOI abolished building permit requirements and relaxed environmental licenses, which the government deemed were major sources of corruption in the business licensing process. The OSS system intends to streamline permit issuance, but integrating overlapping authorities across ministries into one system, both at the national and subnational level, remains challenging. The Omnibus Law on Job Creation requires local governments to integrate their license systems into the OSS. The law allows the central government to take over local governments’ authority if local governments are not performing. The government has provided investment incentives particularly for “priority” sectors (please see the section on Industrial Policies).

As part of the implementation of the Omnibus Law on Job Creation, the Indonesian government enacted Presidential Regulation No. 10/2021 to introduce a significant liberalization of foreign investment in Indonesia, repealing the 2016 Negative List of Investment (DNI). In contrast to the previous regulation, the new investment list sets a default principle that all business sectors are open for investment unless stipulated otherwise. It details the seven sectors that are closed to investment, explains that public services and defense are reserved for the central government, and outlines four categories of sectors that are open to investment: priority investment sectors that are eligible for incentives; sectors that are reserved for micro, small, and medium enterprises (MSMEs) and cooperatives or open to foreign investors who cooperate with them; sectors that are open with certain requirements (i.e., with caps on foreign ownership or special permit requirements); and sectors that are fully open for foreign investment. Although hundreds of sectors that were previously closed or subject to foreign ownership caps are in theory open to 100 percent foreign investment, in practice technical and sectoral regulations may stipulate different or conflicting requirements that still need to be resolved.

In total, 245 business fields listed in the new Investment Priorities List, or DPI, are eligible for fiscal and non-fiscal incentives, notably pioneer industries, export-oriented manufacturing, capital intensive industries, national infrastructure projects, digital economy, labor-intensive industries, as well as research and development activities. Restrictions on foreign ownership in telecommunications and information technology (e.g., internet providers, fixed telecommunication providers, mobile network providers), construction services, oil and gas support services, electricity, distribution, plantations, and transportation were removed. Healthcare services including hospitals/clinics, wholesale of pharmaceutical raw materials, and finished drug manufacturing are fully open for foreign investment, which was previously capped in certain percentages. The regulation also reduced the number of business fields that are subject to certain requirements to only 46 sectors. Domestic sea transportation and postal services are allowed up to 49 percent of foreign ownership, while press, including magazines and newspapers, and broadcasting sectors are open up to 49 percent and 20 percent, respectively, but only for business expansion or capital increases. Small plantations, industry related to special cultural heritage, and low technology industries or industries with capital less than IDR10 billion (USD 700,000) are reserved for MSMEs and cooperatives. Foreign investors in partnership with MSMEs and cooperatives can invest in certain designated areas. The new investment list shortened the number of restricted sectors from 20 to 7 categories including cannabis, gambling, fishing of endangered species, coral extraction, alcohol, industries using ozone-depleting materials, and chemical weapons. In addition, while education investment is still subject to the Education Law, Government Regulation No. 40/2021 permits education and health investment as business activities in special economic zones.

In 2016, Bank Indonesia (BI) issued Regulation No. 18/2016 on the implementation of payment

transaction processing. The regulation governs all companies providing the following services: principal, issuer, acquirer, clearing, final settlement operator, and operator of funds transfer. The BI Regulation capped foreign ownership of payments companies at 20 percent, though it contained a grandfathering provision. BI’s Regulation No. 19/2017 on the National Payment Gateway (NPG) subsequently imposed a 20 percent foreign equity cap on all companies engaging in domestic debit switching transactions. Firms wishing to continue executing domestic debit transactions are obligated to sign partnership agreements with one of Indonesia’s four NPG switching companies. In December 2020, BI issued umbrella Regulation No. 22/23/2020 on the Payment System, which implements BI’s 2025 Payment System Blueprint and introduces a risk-based categorization and licensing system. The regulation entered into force on July 1, 2021. It allows 85 percent foreign ownership of non-bank payment services providers, although at least 51 percent of shares with voting rights must be owned by Indonesians, and foreign investors may only hold 49 percent of voting shares. The 20 percent foreign equity cap remains in place for payment system infrastructure operators who handle clearing and settlement services, and a grandfathering provision remains in effect for existing licensed payment companies. U.S. payment systems companies have stated that the new regulations could further limit access to Indonesia’s financial services market. Prior regulations required authorization, clearing, and settlement to be processed onshore. The new regulations add initiation of a payment as an onshore processing requirement. The regulations do not specify requirements by product. While the regulations provide for offshore processing if certain requirements are met, it is subject to BI approval.

OJK Regulation No. 12/POJK.03/2021, issued in August 2021, increased the foreign equity cap for commercial banks to 99 percent subject to OJK evaluation and approval, and foreign entities should meet requirements as follows: be committed to support the development of the Indonesian economy; obtain recommendations from the supervisory authority of the country of origin; and have a rating of at least 1 level above the lowest investment rating for bank financial institutions, 2 levels above the lowest investment rating for nonbank financial institutions, and 3 levels above the lowest investment rating for legal entities that are not financial institutions. This new regulation does not repeal the regulations listed in POJK 56 of 2016 article 2 and article 6 paragraph 1, stating that foreign entities may own shares of a bank representing more than 40 percent of the Bank’s capital subject to the approval of the Financial Services Authority (OJK). Foreigners may purchase equity in state-owned firms through initial public offerings and the secondary market. Capital investments in publicly listed companies through the stock exchange are generally not subject to the limitation of foreign ownership as stipulated in Presidential Regulation No. 10/2021.

Government Regulation 14/2018 (Regulation 14) on foreign ownership in insurance companies set the maximum threshold for foreign equity ownership of an Indonesian insurance company to 80 percent but exempted insurance companies with existing foreign ownership levels that exceed 80 percent. Subsequently, the government issued Government Regulation 3/2020 to strengthen the grandfathering provisions of Regulation 14 by allowing foreign investors to inject capital and maintain their existing capital share, repealing the obligation under Regulation 14 for a local shareholder to make a corresponding 20 percent capital injection in the event of a capital increase. In June 2020, OJK issued Regulation 39/2020, which provides for the phased elimination of the domestic cession requirements for purchase of reinsurance from companies domiciled in a country with whom Indonesia has a bilateral agreement. The regulation also phased out the requirement for domestic reinsurance obligations for simple risks by the end of 2020, and for non-simple risks in 2022.

Indonesia’s vast natural resources have attracted significant foreign investment and continue to offer significant prospects. However, some companies report that a variety of government regulations have made doing business in the resources sector increasingly difficult, and Indonesia now ranks 69th of 78 jurisdictions in the Fraser Institute’s 2020 Mining Policy Perception Index. In 2012, Indonesia banned the export of raw minerals, dramatically increased the divestment requirements for foreign mining companies, and required major mining companies to renegotiate their contracts of work with the government. The full export ban did not come into effect until January 2017, when the government also issued new regulations allowing exports of copper concentrate and other specified minerals, while imposing onerous requirements.

Of note for foreign investors, provisions of the regulations require that to export mineral ores, companies with contracts of work must convert to mining business licenses – and be subject to prevailing regulations – and must commit to build smelters within the next five years. Also, foreign-owned mining companies must gradually divest 51 percent of shares to Indonesian interests over ten years, with the price of divested shares determined based on a “fair market value” determination that does not consider existing reserves. In January 2020, the government banned the export of nickel ore for all mining companies, foreign and domestic, in the hopes of encouraging construction of domestic nickel smelters. In March 2021, the Ministry of Energy and Natural Resources issued a Ministerial Decision to allow mining business licenses holders who have not reached smelter development targets to continue exporting raw mineral ores under certain conditions. The 2020 Mining Law returned the authority to issue mining licenses to the central government. Local governments only retain authority to issue small scale mining permits.

In December 2020, the Ministry of Energy and Natural Resources issued Ministerial Decision No. 255.K/30/MEM/2020 that mandates coal mining companies fulfill 25 percent of its production for Domestic Market Obligation (DMO) and set the maximum price of coal for domestic power generation at $70/ton. In January 2022, the government of Indonesia banned exports of coal for all mining companies due to low DMO fulfillment, leading to the risk of power blackouts. The government has lifted the coal export ban and imposed stricter control to allow exports only for coal mining companies that have fulfilled DMO requirements.

The latest World Trade Organization (WTO) Investment Policy Review of Indonesia was conducted in February 2021 and can be found on the WTO website: directdoc.aspx (wto.org) 

The last OECD Investment Policy Review of Indonesia, conducted in 2020, can be found on the OECD website:

https://www.oecd.org/investment/oecd-investment-policy-reviews-indonesia-2020-b56512da-en.htm 

The 2021 UNCTAD Report on ASEAN Investment can be found here: http://investasean.asean.org/files/upload/ASEAN%20Investment%20Report%202020-2021.pdf

Business and Human Rights Resource Center’s Reports:

• Report on Human Rights Impact Assessment for Japanese Business Investmnt in Indonesia:
• Investigation Into Deforestation at An Indonesian Company:

Global Witness country-specific reports can be accessed here:

https://www.globalwitness.org/en/campaigns/environmental-activists/indonesia-palm-oil-traders-are-failing-land-and-environmental-defenders/ 

List of conflicts related to environmental and human rights involving companies investing in Indonesia can be seen on Environmental Justice can be accessed here: https: https://ejatlas.org/ 

In order to conduct business in Indonesia, foreign investors must be incorporated as a foreign-owned limited liability company (PMA) through the Ministry of Law and Human Rights. Once incorporated, a PMA must fulfill business licensing requirements through the OSS system. In February 2021, the Indonesian government issued Government Regulation No. 5/2021, introducing a risk-based approach and streamlined business licensing process for almost all sectors. The regulation classifies business activities into categories of low, medium, and high risk, which will further determine business licensing requirements for each investment. Low-risk business activities only require a business identity number (NIB) to start commercial and production activities. An NIB also serves as the import identification number, customs access identifier, halal guarantee statement (for low risk), and environmental management and monitoring capability statement letter (for low risk). Medium-risk sectors must obtain an NIB and a standard certification.

Under the regulation, a standard certificate for medium-low risk is a self-declared statement that certain business standards were fulfilled, while a standard certificate for medium-high risk must be verified by the relevant government agency. High-risk sectors must apply for full business licenses, including an environmental impact assessment (AMDAL). A business license remains valid while the business operates in compliance with Indonesian laws and regulations. A grandfather clause applies to existing businesses that have obtained business licenses. Guidance on the business application process through the Risk-Based OSS can be found at https://oss.go.id/panduan.  The OSS system is an online portal which allows foreign investors to apply for and track the status of licenses and other services online. Foreign investors are generally prohibited from investing in MSMEs in Indonesia, although Presidential Regulation No. 10/2021 opened some opportunities for partnerships in farming, two- and three-wheeled vehicles, automotive spare parts, medical devices, ship repair, health laboratories, and jewelry/precious metals.

According to Presidential Instruction 7/2019, the Ministry of Investment/BKPM is responsible for issuing “investment licenses” (the term used to encompass both NIB and other business licenses) that have been delegated from all relevant ministries and government institutions to foreign entities through the OSS system. BKPM has also been tasked to review policies deemed unfavorable for investors. While the OSS’s goal is to help streamline investment approvals, investments in the mining, oil and gas, and financial sectors still require licenses from related ministries and authorities. Certain tax and land permits, among others, typically must be obtained from local government authorities. Though Indonesian companies are only required to obtain one approval at the local level, businesses report that foreign companies must often seek additional approvals to establish a business. Government Regulation No. 6/2021 requires local governments to integrate their business licenses system into the Risk-Based OSS system and standardize services through a service-level agreement between the central and local governments.

Indonesia’s outward investment is limited, as domestic investors tend to focus on the large domestic market. BKPM is responsible for promoting and facilitating outward investment, to include providing information about investment opportunities in other countries. BKPM also uses its investment and trade promotion centers abroad to match Indonesian companies with potential investment opportunities. The government neither restricts nor provides incentives for outward private sector investment. The Ministry of State-Owned Enterprises (SOEs) encourages Indonesian SOEs through the SOE Go Global Program to increase their investment abroad, aiming to improve Indonesia’s supply chain and establish demand for Indonesian exports in strategic markets. According to the United Nation Conference on Trade and Development (UNCTAD), Indonesia recorded USD 4.5 billion outward direct investments in 2020, increasing 33.3 percent.

New Zealand has an open and transparent economy. Foreign investment is generally encouraged without discrimination. Some restrictions do apply in a few areas of critical interest including certain types of land, significant business assets, and fishing quotas. These restrictions are facilitated by a screening process conducted by the Overseas Investment Office (OIO), described in the next section.

New Zealand maintains an expanding network of bilateral investment treaties and free trade agreements that include investment components.  New Zealand also has a well-developed legal framework and regulatory system, and the judicial system is generally effective in enforcing property and contractual rights.  Investment disputes are rare, and there have been no major disputes in recent years involving U.S. companies.

The Labour Party-led government elected in 2017 and re-elected in 2020 has continued its program of tighter screening of some forms of foreign investment and has moved to restrict the availability of permits for oil and gas exploration by applying section 20B of the Overseas Investment Act 2005, which will be discussed in greater detail below for its discretionary aspect. The opposition National Party, gaining ground in early 2022 polling, wants to lift restrictions on exploration, as well as ease requirements for “responsible mining.” The current Labour government has also focused on different aspects of trade agreement negotiation compared with the previous government, such as an aversion to investor-state dispute settlement provisions.

New Zealand otherwise screens overseas investments to ensure quality investments are made that benefit New Zealand. The screening process is undertaken by the Overseas Investment Office (OIO), the government agency responsible for regulating foreign direct investment into the country. The Office is responsible for high value investments in “significant business assets,” investments in sensitive land, and investments in fishing quota. The Overseas Investment Act (OIA) 2005 was amended in 2021 with a package of reforms aimed at strengthening aspects of the OIA for high-risk investments, while also seeking to streamline the approval process for low-risk applications. Depending on the type of investment, overseas investors must pass one or more of a series of tests. They are as follows:

Investor Test

Benefit to New Zealand Test

National Interest Assessment

The Investor Test: The purpose of this test is to determine if an overseas investor is qualified to own or control assets considered sensitive to New Zealand. The Investor Test assesses the potential for the investor to be a risk to New Zealand by assessing the investor’s character and capability. Factors considered include past convictions, immigration or tax disputes, and any past probation on serving as a company director. More information can be found here:

https://www.legislation.govt.nz/act/public/2005/0082/latest/LMS468073.html 

Investors who have met the conditions of the screening process for the Investor Test, and whose circumstances have not changed, do not need to be reassessed for any subsequent approval. More information can be found here: https://www.linz.govt.nz/overseas-investment/discover/overseas-investment-tests/investor-test 

The Benefit to New Zealand Test: The purpose of this test is to screen for the investment’s potential to benefit New Zealand. This test is applied to investments involving sensitive land or a fishing quota. Benefit is assessed against seven factors, including the potential for positive impact on the economy or the environment, enhanced public access, and protection of sacred indigenous land. The OIO considers the potential for economic benefit to be the most important of these factors. The Benefit to New Zealand Test also screens for participation in the investment by New Zealanders. Applications by overseas investors that include oversight or participation by New Zealanders are given greater weight. More information can be found here: https://www.linz.govt.nz/overseas-investment/discover/overseas-investment-tests/benefit-new-zealand-test/oversight-or-participation-new-zealanders 

National Interest Test: In 2020, due to the stress placed on businesses by Covid, the Labour Government introduced a further National Interest Assessment. This threshold serves to potentially deny overseas investment that is at cross purposes with New Zealand’s strategic interests. The Minister of Finance, along with the OIO, reviews these applications. The National Interest Test is mandatory for applications that involve either land or assets that will be used for Strategically Important Businesses (SIBs) or land or assets that involve investment by a foreign government. SIBs include a wide cross-section of investment interests that impact national security, such as critical infrastructure or companies that are direct suppliers to the security agencies. More information can be found here: https://www.linz.govt.nz/overseas-investment/discover/overseas-investment-tests/national-interest-assessment 

During the peak of the Covid pandemic in 2020, the Government put in place the Emergency Notification Regime (ENR), a temporary protocol requiring investments of any type to go through a screening process. The ENR aimed to protect New Zealand assets from fire sales during a period of heightened market uncertainty. It was lifted in 2021 when it became clear to the Government that the impact to the economy of Covid had been mitigated, though the ENR still applies to transactions entered into prior to June 7, 2021. The ENR was replaced with the National Security and Public Order notification protocol, which applies to overseas investments in SIBs or Significant Business Assets (SBAs). More information can be found here:

https://www.linz.govt.nz/overseas-investment/discover/find-out-if-you-need-notify-us-your-transaction 

SIBs versus SBAs: The OIO screens for investments in both Strategically Important Businesses (see above), and for Significant Business Assets (SBAs). The vast majority (70-80 percent) of investor applications trigger the SBA screening. An SBA is defined as an investment in New Zealand securities, assets, or businesses worth more NZD 100 million (USD 70 million), or an investment that acquires 25 percent or more ownership or controlling interest in a New Zealand asset. For some investors, the dollar threshold is higher, such as those investors who are citizens of countries with whom New Zealand has an FTA. For Australian investors, the threshold is NZD 552 million (USD 386 million). Consent is needed for overseas investors who want to invest in a significant business asset or in New Zealand business assets worth less than NZ$

100 million if those assets involve sensitive land or fishing quota.

Land is considered “sensitive” if it is residential, larger than five hectares (12 acres) of farmland, or if it is any land that is used for commercial or industrial purposes. Sensitive land is also located on some domestic islands, where there is no size threshold. In marine and coastal areas, there is no minimum size to meet the sensitivity threshold. For a detailed table explaining the different types of sensitivities and what land may be subject to greater restrictions, please visit:

https://www.linz.govt.nz/overseas-investment/discover/our-investment-pathways/investing-land-provide-benefit-new-zealand/identifying-sensitive-land 

Crown entity New Zealand Trade and Enterprise (NZTE) is New Zealand’s primary investment promotion agency. In addition to its domestic presence, NZTE has 41 international offices, including four in the United States. The NZTE helps investors develop investment plans, access opportunities, and facilitate connections with private sector advisors based in New Zealand. They also offer ongoing support once an investment has been made. https://www.nzte.govt.nz/investment-and-funding/how-we-help .

Under certain conditions, foreign investors can bid alongside New Zealand businesses for government funding for research and development (R&D) grants.  For more see:  https://www.mbie.govt.nz/science-and-technology/science-and-innovation/international-opportunities/new-zealand-r-d/ .   Most of the programs that are operated by NZTE, the Ministry of Business, Innovation, and Employment (MBIE), and Callaghan Innovation, provide financial assistance, and support through skills and knowledge, or supporting innovative business ventures in the early stages of operation. For more see: https://www.business.govt.nz/how-to-grow/getting-government-grants/what-can-i-get-help-with/ .

The New Zealand-United States Business Council, established in 2001, is a non-partisan organization funded by business and the government. It fosters a strong and mutually beneficial relationship between New Zealand and the United States through both government-to-government contacts, and business-to-business links. The American Chamber of Commerce in Auckland provides a platform for New Zealand and U.S. businesses to network among themselves and with government agencies. To visit Council’s and the Chamber’s websites, please visit:

https://www.nzuscouncil.org/ 

https://www.amcham.co.nz/ 

The New Zealand government does not discriminate against U.S. or other foreign investors in their rights to establish and own business enterprises. It has placed separate limitations on foreign ownership of strategic businesses, such as airline Air New Zealand and telecommunications infrastructure provider Chorus Limited.

While waivers are granted, in some cases for investment of “significant economic value,” they are limited and subject to a technical, bespoke process that requires direct contact with the OIO: https://www.linz.govt.nz/overseas-investment/contact 

The 2022 OECD Economic Survey of New Zealand offered a number of key recommendations, particularly around growth sustainability and the Government’s response to Covid-19. Link to the OECD Survey here: https://www.oecd-ilibrary.org/economics/oecd-economic-surveys-new-zealand-2022_a4fd214c-en 

The most recent WTO Trade Policy review was in 2015. Linked here: https://bit.ly/35uMLDq 

In 2022, the NZUS Business Council, along with economics consultancy Sense Partners, produced a report on New Zealand’s bilateral trade relationship with the United States. The report highlighted a trade relationship in the services sector (e.g., computer services, gaming) that is becoming increasingly important: the United States is now New Zealand’s largest services export market. The report’s key takeaway is that the bilateral relationship is strong and presents ample opportunity for future growth. To read the report, please visit: https://www.nzuscouncil.org/wp-content/uploads/2022/03/REPORT-NZUS-trade-relationship-Stability-and-diversity-in-a-time-of-change.pdf

The New Zealand government has shown a strong commitment to continue efforts to facilitate business. There are no restrictions on the movement of funds into or out of the country. Overseas investors are required to adhere to legislation that applies equally domestic businesses. The global trend to tighten anti-money laundering laws has increased the reporting requirements of the banking sector. To prevent the increasing use of New Zealand-based shell companies for illegal activities, legislation was introduced in 2014 that requires a New Zealander to serve as company director. For more information:

https://www.legislation.govt.nz/act/public/2014/0046/latest/DLM4094913.html 

The Companies Office maintains a business registry of publicly available information on company directors. The website is accessed by creditors and those interested in doing business with the company or its directors. Registration is completed online. Those registering a new company typically register with the Companies Office, along with the Inland Revenue Department (IRD):

https://companies-register.companiesoffice.govt.nz/ 

https://www.ird.govt.nz/ 

The New Zealand Business Number (NZBN) Act 2016 allocates unique identifiers to eligible businesses to allow them to conduct business efficiently. Tax registration is required if a company is an employer or if the company pays the Goods and Services Tax (GST), which is currently 15 percent. The threshold for GST registration is NZD 60,000 (USD 42,000) of turnover over a one-year period. For more information about New Zealand and taxation, including the 2016 extension of GST registration to overseas suppliers of “remote services” to New Zealanders, please visit: https://www.ird.govt.nz/gst/registering-for-gst 

The New Zealand government does not place restrictions on domestic investors to invest abroad.

NZTE is the government’s international business development agency. It promotes outward investment and provides resources and services for New Zealand businesses to prepare for export and advice on how to grow internationally. The Ministry of Foreign Affairs and Trade (MFAT) and Customs New Zealand each operates business outreach programs that advise businesses on how to maximize the benefit from FTAs to improve the competitiveness of their goods offshore. They also provide information on how to meet requirements such as rules of origin.