The government of Indonesia has instituted a number of laws and policies which have been designed to increase the level of foreign investment in the country. It has done so because an increased level of foreign investment will have very positive effects on the country's economy.

Indonesian Government Attempted to Increase Foreign Investment in the Country

Every country which receives foreign investment benefits from this influx of money which comes from abroad. Money which is received by a country through foreign investment can be used by a government for various purposes. Infrastructural upgrades, projects which serve the public, and improvements of standard of living and citizen welfare can all be driven through injections of money which find their sources from investments which have arrived from other countries. For this reason, the government of Indonesia has put forth much effort to attract foreign investment from various countries around the world.

How the Indonesian Government Has Encouraged Foreign Investment

For many years, the Indonesian government has taken steps to encourage foreign investment in the country. One of the earliest laws which is related to foreign investment in Indonesia is Law No. 1 of 1967, which was subsequently amended by Law No. 11 of 1970. The purpose of this law was to attract foreign investors to invest in the Indonesian economy with a particular emphasis on the industrial sector. The Indonesian government of that era intended to promote investment in areas without sufficient domestic development, in particular managerial areas and technological infrastructure. Law No. 1 of 1967 would go on to be replaced by Law No. 25 of 2007. It did even more to attract foreign investment in Indonesia by removing all duration limits on foreign investment permits issued in the country. The government’s introduction of this law was meant to usher in an investment environment which would be among the most efficient, transparent, legally and fundamentally sound, and impartial in the entire Asia-Pacific region; these positive attributes would thus be expected to draw investors from all over the world and begin to invest in Indonesia.

In June 2019, GR 45/2019 was issued by the Indonesian government. GR 45/2019 was created in order to encourage investment in industries which were classified as labor-intensive as well as pioneer industries. The Indonesian government defines a labor-intensive industry as one which employs a minimum of 200 workers and has labor costs of 15% or less of its total production costs. The government also specifies the official definition of a pioneer industry. A pioneer industry is any industry which provides positive economic contributions to any surrounding areas.

There have also been various other policy reforms, deregulations, and incentives which have been formulated by the government of Indonesia which have been intended to promote foreign investment in Indonesia.

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