Indonesia’s Investment Coordinating Board revises divestment requirements

Publication September 2019


Introduction

The Indonesian Investment Coordinating Board (BKPM) enacted BKPM Regulation 5/2019 to amend last year’s implementing regulation on guidelines and procedures for licensing and facilities under Indonesia’s foreign direct investment (FDI).

The new regulation particularly includes requirements on divestment obligations for foreign direct investment companies.

Key items of the new Investment Coordinating Board Regulation

  • Divestment requirement - BKPM Regulation No.5/2019 provides that all divestment obligations of Foreign Direct Investment companies (FDI companies) which were set out in previous investment approvals or licences must be fulfilled. Foreign Direct Investment companies that are subject to divestment obligations under investment approvals or licences are those established prior to the enactment of Investment Law No. 25 of 2007.

    However, such divestment requirement may be exempted if the shareholders of the FDI companies submit a statement to the Investment Coordinating Board starting that:
  1. the Indonesian shareholders have no intention to claim ownership from the foreign shareholders; or
  2. the foreign shareholders have no commitment or agreement with any Indonesian party to sell it shares in the PMA companies.
  • Real estate companies - BKPM Regulation No.5/2019 also provides that the licensing procedure for real estate companies is now integrated into the Online Single Submission (OSS) system.

    Further, BKPM Regulation No.5/2019 also revokes the previous policy on minimum investment amount for certain type of real estate businesses of more than IDR 10 billion (approximately US$700,000) including land and building, which means that minimum investment value generally applied for a FDI company will be applicable for certain real estate companies of more than IDR 10 billion (approximately US$700,000) excluding land and building.

    In this regard, real estate investors will need to be aware of this requirement when setting up new companies and process real estate business licences in the OSS system.
  • Limited stay visa - BKPM Regulation No. 5/2019 also amended the previous provision on foreign workers who intend to invoke the facility to obtain a limited stay visa recommendation. Previously, the recommendation was only issued for a limited stay visa for non-working foreigner.

    BKPM has now removed such limitation and therefore the recommendation may be obtained for a limited stay visa in general – indicating that it could be obtained for foreigners who intend to work in Indonesia. However, the recommendation may only be issued to the following individuals:
  1. Foreign worker who is a shareholder and is a member of the board of directors or board of commissioners of the FDI company with a minimum of IDR 1 billion shareholding in the FDI company (approximately US$70,000); and
  2. Foreign worker who is a shareholder of the FDI company, who holds at least IDR 1,125 billion shareholding in the FDI company (approximately US$80,000).

The abovementioned foreign worker must be stated in the FDI company’s Articles of Association and other documents that affirms the legality of the foreign worker’s status as shareholder of the relevant FDI company.

Conclusion

BKPM Regulation 5/2019 further clarifies the implementation of the Online Single Submission System (OSS), a one-door online portal for business licencing that was introduced by the Indonesian government in 2018. The OSS was launched in answer to potential and current investors’ complaint on the lengthy and complicated bureaucracy in setting-up businesses in Indonesia.

The OSS system is currently undergoing further harmonization with systems at the provincial government level and further amendments to simplify the investment regime in Indonesia are expected.


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