The Negative Investment List imposes restrictions on certain business activities conducted by foreigners in Indonesia. However, there are certain ways through which foreigners may bypass these restrictions and thus conduct business activities in a desired but still legal manner.

Requirements Specified by the Negative Investment List

The Negative Investment List is an initiative created by the government of Indonesia. It is intended to benefit local business owners by specifying which business fields are not allowed to have any foreign investment. The Negative Investment List also limits the amount of foreign investment allowed in other business fields in Indonesia. Although it was initially believed that the Negative Investment List might have served to provide business opportunities for foreign investors and company owners, the opposite has often proved to be the case. Therefore, foreigners who plan to start a company in Indonesia might be interested in finding out if any of the requirements of the Negative Investment List may be bypassed.

 

How a Foreign Company Owner May Bypass the Negative Investment List’s Requirements

There is just one method by which a foreign company owner in Indonesia will not be bound by the requirements specified by the Negative Investment List. For this to be the case, the foreigner must choose to set up a locally-owned company (PT) instead of selecting the usual option of setting up a foreign-owned company (PMA). PTs do not have to abide by the requirements of the Negative Investment List. However, in most cases, only a local may set up a PT in Indonesia. Furthermore, all the shareholders of a PT are usually to be locals, while no portion of the PT may be owned by a foreigner. However, there is a way for a foreign company owner to bypass these requirements and set up a PT. This can be done by utilizing the services of a local who will serve as the nominee director of the PT. Locals may also be selected for the positions of the PT’s shareholders and commissioners; they are to be nominee shareholders and nominee commissioners respectively. If necessary, more than one nominee director may be hired.

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Further Information About the Negative Investment List

As has been mentioned, the Negative Investment List restricts the permitted extent of foreign ownership in certain business fields in Indonesia. The Negative Investment List is also updated from time to time in order to better reflect the economic realities of Indonesia at the time of each update. The latest update to the Negative Investment List brought changes to the details surrounding foreign investment and ownership in the following business fields: oil and gas, pharmaceutical products, power, trading, and transportation. Business activities in some of these sectors will now be subject to tighter regulations, while those in others will face more lenient regulations, much to the pleasure of their owners.

It should be noted that PMAs which have already received the requisite approval from the Indonesian Investment Coordinating Board (BKPM) will remain unaffected by the most recent set of changes to the Negative Investment List unless the changes benefit the PMA in some manner. Such will remain the case even if the PMA is sold to another foreign individual or legal entity or in the event of an acquisition or a merger involving the PMA. However, a consolidation involving the PMA will have an effect on the company as it pertains to the Negative Investment List.

It has clearly been shown that there are advantages related to the Negative Investment List that may be gained by anyone who starts a PT or a PMA in Indonesia. Therefore, you might be interested in starting such a company there. If you are, you may proceed to contact us at Paul Hype Page & Co. Our incorporation team will help you navigate the complexities of the Negative Investment List so that you will understand all of the intricate details involved. Once your understanding in this regard has been increased, you will have more ability to run your new Indonesia-based company competently.