THE PROCEDURES FOR ESTABLISHING A FOREIGN INVESTMENT COMPANY IN INDONESIA (A STUDY ABOUT INVESTMENT PROVISIONS IN THE ASEAN ECONOMIC COMMUNITY “AEC” ERA)

THE PROCEDURES FOR ESTABLISHING A FOREIGN INVESTMENT
COMPANY IN INDONESIA (A STUDY ABOUT INVESTMENT
PROVISIONS IN THE ASEAN ECONOMIC COMMUNITY “AEC” ERA)
UNDERGRADUATE THESIS

This undergraduate thesis is submitted as one of the requirements to obtain the
degree of Bachelor of Laws at the Faculty of Law
Universitas Muhammadiyah Yogyakarta

Name

:

Shofia Chairunnisa

Student Number

:

20120610220

Faculty

:

Laws

Major

:

International Program for Law and Sharia

Field of Study

:

Trade Law

FACULTY OF LAW
UNIVERSITAS MUHAMMADIYAH YOGYAKARTA

2016

THE PROCEDURES FOR ESTABLISHING A FOREIGN INVESTMENT
COMPANY IN INDONESIA (A STUDY ABOUT INVESTMENT
PROVISIONS IN THE ASEAN ECONOMIC COMMUNITY “AEC” ERA)
UNDERGRADUATE THESIS

This undergraduate thesis is submitted as one of the requirements to obtain the
degree of Bachelor of Laws at the Faculty of Law
Universitas Muhammadiyah Yogyakarta

Name

:

Shofia Chairunnisa

Student Number

:

20120610220

Faculty

:

Laws

Major

:

International Program for Law and Sharia

Field of Study

:

Trade Law

FACULTY OF LAW
UNIVERSITAS MUHAMMADIYAH YOGYAKARTA
2016

MOTTO

“whoever treads a path seeking knowledge, Allah will make easy for him the path
to Paradise.”
(Reported by IbnMajah and others, fulfilling the conditions of Imam al
Bukhari and Imam Muslim)

“Your story may not have such a happy beginning, but that does not make you
who you are. It is the test of your story, who you choose to be.”
(Soothsayer)

Smart impresses me, strength of character impresses me. But most of all, I am
impressed by kindness. Kindness, I think, comes from learning hard lessons well,
from falling and picking yourself up. It comes from surviving failure and loss. It
implies an understanding of the human condition, forgives its many flaws and

quirks. When I see that in someone, it fills me with admiration.
(Generasi Pencerah)

Writing is one way to get to know yourself and to practice transforming your
dreams into clear, worded, goals.
(Maudy Ayunda)

Everyday a deer awakens knowing it must outrun the fastest lion or be hunted to
death. Everyday a lion awakens knowing it must outrun the slowest deer or starve
to death. In this lifetime, it doesn’t matter whether you are a deer or a lion when
the sun rises, you should be running at your best.
(Anonymous)

v

DEDICATION

This Undergraduate Thesis dedicate to:

My Lord, Allah AWT

Prophet Muhammad SAW

Families:
My Father: Imam Achyat
My Mother: Ala Shofiyati
My Brother: Wildan Nurohman
My Sister: Rif’atir Rizqiyah

All Lecturers, IPOLianS and My Best Partner

vi

FOREWORD
Alhamdulillahirabbil’alamin, all praises to Allah, the lord of the universe, the
most gracious, the almighty, who has given his blessing and guidance with which
finally, I could accomplish my undergraduate thesis under the title “The Procedure
for Establising a Foreign Investment Company in Indonesia (a Study about
Investment Provisions in The ASEAN Economic Community/AEC Era)”.
My sincere thanks are addressed to both advisors, Bapak Dr. H. Mukti Fajar,
S.H., M.Hum. and Hj. Fadia Fitriyanti, S.H., M.Hum., M.Kn. who guided me with

patient, wisdom, and compassion, and also allow me to express my deepest gratitude
to Bapak M. Endrio Susila, S.H., MCL., Bapak Iwan Satriawan, S.H., MCL., Bapak
Yordan Gunawan, S.H., Int. MBA., Bapak Nasrullah, S.Ag., S.H., MCL., and all
lectures at the Faculty of Law UMY who inspired me to reach my future. Million
appreciations are also given to all staff at the Faculty of Law for their assistance
during my four-year study at Universitas Muhammadiyah Yogyakarta.
Thanks all my beloved partner in crime and my highest gratitude to IPOLianS
for their support, motivation, love and inspiration to finish my undergraduate thesis.
Finally, my beloved parents Bapak Imam Achyat, Ibu Ala Shofiyati, my brother
Wildan Nurohman and my sister Rif’atir Rizqiyah thank you for your unlimited love
and support.

Author

vii

TABLE OF CONTENTS

ABSTRACT…………………………………………………………………...

i

APPROVAL PAGE…………………………………………………………..

ii

ENDORSEMENT PAGE…………………………………………………….

iii

DECLARATION PAGE……………………………………………………..

iv

MOTTO PAGE……………………………………………………………….

v

DEDICATION PAGE………………………………………………………..

vi

FOREWARD………………………………………………………………….

vii

TABLE OF CONTENTS…………………………………………………….

viii

LIST OF STATUTES………………………………………………………...

xi

LIST OF ABBREVIATIONS……………..………………………………….

xii

CHAPTER I – INTRODUCTION
A. Background…………………………………………………………...

1

B. Research Question…………………………………………………….. 8
C. Objective of Research…………………………………………………

viii

8

D. Benefit of Research……………………………………………………. 9

CHAPTER II – LITERATURE REVIEW
A. ASEAN Economic Community (AEC)………………………………. 10
B. The General Review of the ASEAN Comprehensive Investment
Agreement (ACIA)………….…………………………………………

15

C. Overview of Investment……………………………………………….

18

D. The General Review of the Foreign Investment in Indonesia……....

21

E. The requirements of establishing the foreign investment company..

24

F. Deed of Establishment of the Limited Liability Company for
Foreign Investment……………………………………………………

25

G. The History of Regulation from Investment Coordinating Board…

26

H. The principle of One Stop Service on the Investment………………. 28
I. The General Review of Domestic Investment in Indonesia………… 30
J. The General Review of the Joint Venture……..…………………….. 32

ix

CHAPTER III – RESEARCH METHODS
A. Type of Research………………………………………………............

35

B. Sources of Data………………………………………………………..

36

C. Method of Research Data Collections………………………………..

37

D. Techniques of Research Data Collections……………………………

38

CHAPTER IV – FINDING AND ANALYSIS
A. The

Investment

Principles

according

to

the

ASEAN

Comprehensive Investment Agreement (ACIA)…………………….

39

B. Procedures for establishing a Limited Liability Company for
Foreign Investment Company (PT PMA) in Indonesia…………….

45

CHAPTER V – CONCLUSION AND RECOMMENDATION
A. Conclusion……………………………………………………………..

53

B. Recommendation……………………………………………………...

54

BIBLIOGRAPHY
APPENDIX

x

LIST OF STATUES

1. Law No. 25 of 2007 on Investment
2. Presidential Regulation No 39 of 2014 On List of Business
Fields Closed to Investment and Business Fields Open,
with Condition, to Investment
3. Regulation of the Head No. 5 of 2013 on the Investment
Coordinating Board

4. Law No. 40 of 2007 on Limited Liability Companies
5. Presidential Decree No. 27 of 2009 on One-Stop Services
6. Regulation of the Minister of the Interior Number 27 of 2009
7. Presidential Regulation No. 97 of 2014 on Organization of
Integrated One Stop Service (New Regulation)

xi 
 

LIST OF ABBREVIATIONS

ACIA

ASEAN Comprehensive Investment Agreement

AEC

ASEAN Economic Community

AFAS

ASEAN Framework Agreement on Services

AFTA

ASEAN Free Trade Agreement

AIC

ASEAN Industrial Complementation

AIGA

ASEAN Investment Guarantee Agreement 

AIJV

ASEAN Industrial Joint Ventures

AIP

ASEAN Industrial Projects

ASW

ASEAN Single Window

ATIGA

ASEAN Trade in Goods Agreement

PKP

Pengusaha Kena Pajak (taxable entrepreneur confirmation)

BKPM

Badan Koordinasi Penanaman Modal (Investment
Coordinating Board)

xii 

BPPT

Badan Penanaman Modal dan Pelayanan Perijinan Terpadu
(agency for integrated licensing services)

CMIM

Chiang Mai Initiative Multilateralization

DNI

Daftar Negatif Investasi

IAI

Initiative for ASEAN Integration

ISDS

Investor–State Dispute Settlement

MNCs

Multi National Corporations

MNEs

Small Medium Enterprises and Multinational Enterprises

MOLHR

Ministry of Law and Human Rights

NPWP

Nomor Pokok Wajib Pajak (Tax Identification Number)

NSWI

National Single Windows for Investment

PMA

Penanaman Modal Asing (Foreign Investment)

PT

Perseroan Terbatas (Limited Liability Company)

TDP

Tanda Daftar Perusahaan (Company Registration Certificate)

 

xiii 

ABSTRACT
In the era of economic globalization, every country faces increasingly fierce
competition in the two battlefields, namely: free trade and Foreign Direct
Investment. Seeing the problems faced by Indonesia as ASEAN member
countries involved in the ASEAN Economic Community, the researcher tried
to examine about the investment provisions of the convention according to the
ASEAN Comprehensive Investment Agreement and procedures for establishing
a foreign investment in ASEAN Economic Community era in Indonesia. The
four pillars of this legal basis has been agreed in the form of: ASEAN Trade
in Goods Agreement (ATIGA) which regulates the flow of goods which are
free, the ASEAN Framework Agreement on Services (AFAS) which regulates
the flow of services that are free, the ASEAN Comprehensive Investment
Agreement (ACIA) regulating the flow of investment, as well as the Chiang
Mai Initiative Multilateralization (CMIM) regulating capital flows more
freely. This research used normative legal research with statute approach. The
aims of the research are to study how is the best way for foreign investor to
invest their money in Indonesia in facing AEC. The investment provisions
according to the ASEAN Comprehensive Investment Agreement is to
establish a regime of free investment, open, transparent and integrated for
domestic and international investors across the ASEAN region, and benefits
ASEAN Comprehensive Investment Agreement including the liberalization of
investment, non-discrimination, transparency, investor protection and investor
state dispute resolution. The government shall revise of the requirement of
foreign

investor

in

the

Investment

Act

by

considering

ASEAN

Comprehensive on Investment Agreement.

Keyword: Procedure, Foreign Investment, ASEAN Economic Community,
ASEAN Comprehensive Investment Agreement.

i
 

CHAPTER I
INTRODUCTION

A. Background
The vision of the ASEAN Economic Community (AEC) is the
manifestation of the economic integration, as adopted in the ASEAN Vision
2020 which is to transform ASEAN into a region with free trade in goods,
services, investment, skilled labor and free flow of capital 1 . Acceleration of
the establishment of ASEAN community from 2020 to 2015 was agreed upon
by the ASEAN Head of States at the 12th ASEAN Summit. ASEAN
Community in 2015 is divided into three pillars: the ASEAN Security
Community, ASEAN Economic Community and ASEAN Socio-Cultural
Community 2 .
ASEAN has agreed to follow the regional economic integration. Its
implementation refers to the ASEAN Economic Community Blueprint that
includes four main pillars, namely: (1) ASEAN as a single market and
production base that is supported by elements of the free flow of goods,
                                                            
1

Wahyuningsih, 8 December 2014,“Peran Pemuda Indonesia Dalam Menghadapi ASEAN
Economic Community (AEC) Atau Masyarakat Ekonomi ASEAN (MEA)”, Linkar Studi Pendidikan
Universitas Sebeleas Maret.
2
Wawasan
ASEAN
2020,
Wikipedia,
available
at
th
https://id.wikipedia.org/wiki/Wawasan_2020_ASEAN Accessed on October 25 , 2015 at 6.31 a.m.

1 

2

services, investment, energy educated labor and freer flow of capital; (2)
ASEAN as a region with high economic competitiveness which has the
elements of competition rules, consumer protection, intellectual wealth rights,
infrastructure development, taxation and e-commerce; (3) ASEAN as a region
with equitable economic development which has the elements of the
development of small and medium enterprises, and the initiative for ASEAN
integration CMLV countries (Cambodia, Myanmar, Laos, and Vietnam); and
(4) ASEAN as a region that is fully integrated by the global economy which
has the elements of a coherent approach in economic relations outside of the
region, and it increases the participation in global production networks 3 .
The four pillars of this legal basis has been agreed in the form of:
ASEAN Trade in Goods Agreement (ATIGA) which regulates the flow of
goods which is free, the ASEAN Framework Agreement on Services (AFAS)
which regulates the flow of services that is free, the ASEAN Comprehensive
Investment Agreement (ACIA) regulating the flow of investment, as well as
the Chiang Mai Initiative Multilateralization (CMIM) regulating capital flows
more freely.
The existence of the legal basis in the field of investment ASEAN
namely ASEAN Comprehensive Investment Agreement gives benefits for the
                                                            
3

Ministry of Finance, “Laporan Dampak ASEAN Economic Community Terhadap Sektor
Industri Dan Jasa, Serta Tenaga Kerja Di Indonesia”, July 3rd, 2015, available at
http://www.kemekeu.go.id/kajian/laporan-dampak-asean-economic-community-terhadap-sektorindustri-dan-jasa-serta-tenaga-kerja. Accessed on October 25th, 2015 at 05.59 a.m.

3

investment environment and business sector. ASEAN Comprehensive
Investment Agreement provides investment protection guarantee. It makes the
investors ensure to invest their investment to the ASEAN region. Its business
gives the investors some benefits i.e. the obligation of non-discrimination
treatment, full protection and security, and cooperation from the government
regarding on the investment facility for the investors from ASEAN member
countries. However, to realize these benefits, the provisions in the ASEAN
Comprehensive Investment Agreement have to be understood and
implemented by government institutions particularly as the regulator and the
business sector in the ASEAN Member Countries. The implementation of
ASEAN Comprehensive Investment Agreement is effective depended on the
willingness and commitment of Member States to carry out the structural
reforms and regulations in accordance with the provisions of ASEAN
Comprehensive Investment Agreement. Moreover, the regulatory reforms that
support the simplification of procedures, licensing and other regulatory
requirements will produce a favorable investment environment.
In the era of economic globalization, every country faces increasingly
fierce competition in the two fields, namely: free trade and Foreign Direct
Investment (hereinafter referred to as the Investment). It is marked by the
implementation of free trade area agreement and investment agreement as
well as the advancement of information technology, which makes the

4

obstacles in trades are decreasing, international financial traffic that
increasingly free, and out flows of capital and investment in each country. The
impact of the passing of this era of globalization will pose a tough
competition between the countries. Only a country that has the ability to
compete will be able to survive 4 . It requires the economic development,
considering the cooperation of ASEAN countries in the industrial sector
mainly developed on the basis of three forms, namely: ASEAN Industrial
Projects (AIP), ASEAN Industrial Complementation (AIC), and ASEAN
Industrial Joint Ventures (AIJV). Besides, efforts are also proposed to
increase the flow of technology, skills and investment to ASEAN countries
and the exchange of information on policies and planning national industry
among ASEAN countries.
Indonesia is a country which has a wealth of natural resources, cultural
diversity, and the largest population in Southeast Asia. It is the economic
capital of the nation that should become the welfare of its people. One of the
problems that must be resolved by Indonesia is investment. Indonesia needs
capital to grow the national economy. Although the investment rules have
been discussed in Law No 25 of 2007 on Investment, but the government's
efforts in improving the flow of investment in Indonesia has experienced
some of the differences between the Negative Investment List 2014 with the
                                                            
4

Ridho Jusmadi, 2011, “Kebijakan Perdagangan Bebas Serta Pengaturan Merger & Akuisisi
Lintas Negara Dalam Sistem Hukum Persaingan Usaha”, Unpublished.

5

Negative List 2010, among others related to the policy about the ownership of
foreign capital increases, decreases, as well as the presence of the addition of
new areas of business that have not been regulated in the Negative Investment
List 2010 5 .
The Negative Investment List 2014 sets policies on business sectors
closed for investment and business fields are open with some conditions. The
conditions are divided into three groups, namely: (1) line of business reserved
for micro, small, medium, and cooperatives; (2) line of business as required
by the partnership; business field required capital ownership, specific
location, (3) and special licensing 6 . As affirmed by Hatta Rajasa, the
government has four reasons for revising the Negative Investment List. Four
reasons are to maintain economic growth and the anticipated impact of the
global crisis through investment, simplifying the investment, adjust the
existing law and the harmonization and simplification of business fields 7 .
The challenges of national economic growth need approval from
ASEAN Comprehensive Investment Agreement. How ready and open a
country to accept the liberalization of trade without barriers will disturb the
                                                            
5

Renintha Karina, 2015, Bidang Usaha Tertutup (Daftar Negatif Investasi), Jakarta:
Gramedia Pustaka Utama.
6
Deby Selina Panjaitan, 2016, “Pemerintah Menerbitkan Daftar Negatif Investasi Terbaru”,
Hukum Penanaman Modal.
7
Hukum Online.com, “Revisi Daftar Negatif Investasi Beberapa bidang usaha yang dibatasi
untuk kepemilikan asing serta pembatasan pemilikan asing yang sebelumnya dibuka dalam DNI
2013,
available
at
menjadi
tertutup”,
December
24th,
http://www.hukumonline.com/berita/baca/lt52b97a8279176/ini-dia-revisi-daftar-negatif-investasi.
Accessed on February 14th, 2016.

6

rate of the economy. The chance of becoming housework for Indonesia is to
prepare the changes or improvements which hamper the domestic economy in
attracting investment and improve national economic growth.
The system which is used in the National Single Windows for
Investment (NSWI) has become the government's agenda for the registration
and establishment of business fields. However, large variations between
regions licensing, involvement of various technical institutions, and the lack
of integrated information, as well as validation still remains an obstacle. With
the existence of such a program is expected to ease of getting information and
accelerating the process of licensing investment 8 .
It is inevitable that economic growth always creates inequality society,
the symptoms that inhibit even become difficult to make the economy grow
and lead to de-industrialization. Though the symptom of inequality is the
result of fear for rejecting the changes cannot be avoided. With the
investments that move the economic wheel, every country has a chance to
improve their national economies. Deputy Minister of Planning/Deputy Head
of Bappenas, Dr. Lukita Dinarsyah Tuwo stated that; to become the country
with the largest state economies 7th in the world, the Indonesian government
needs to do a variety of important breakthroughs in order to accelerate the
                                                            
8

NSWI (National Single Windows For Investment), National Single Window For Investment,
available at http://nswi.bkpm.go.id/wps/portal/tentangnswi/. Accessed on October 26th, 2015 at 6.17

a.m.

7

economic growth in Indonesia 9 . Strategic geographical location makes
Indonesia as a country that should be taken into account by the world and the
national interests of other countries to engage or collaborate with Indonesia.
With these opportunities, Indonesia previously still focusing on the output of
commodity should be the Indonesian industry engaged in the production
output or finished goods with international standards of quality that are ready
to compete with other countries through the ASEAN Economic Community
as an effort to realize the welfare of the people of Indonesia and the ASEAN
community as a whole.
By the formation of the ASEAN Economic Community, ASEAN will
enter the final stage of economic integration. In 1961, the theory of economic
integration was first published stating that there are five stages, namely the
integration of preferential trading arrangements, free trade area, customs
union, common market, and economic union. At this time, ASEAN has been
implementing the ASEAN Free Trade Agreement (AFTA) since 1991 which
has aims to eliminate trade barriers such as tariffs among members of
ASEAN, and implement the ASEAN Single Window (ASW) of 2013 which
aims to integrate the systems of Customs and Excise throughout the ASEAN
region. By the implementation of the ASEAN Economic Community in 2015

                                                            
9

Lukita D Tuwo, 17 April 2014, “Pada 2030 Indonesia Akan Jadi Negara Dengan Ekonomi
Terbesar Ke-7”, Unpublished.

8

then basically ASEAN will implement a common market and economic union
at the same time 10 .
Seeing the problems faced by Indonesia as a member of the ASEAN
countries and involved in the ASEAN Economic Community, the researcher
tries to examine the investment provisions of the convention according to the
ASEAN Comprehensive Investment Agreement and procedures for
establishing a foreign investment in ASEAN Economic Community era in
Indonesia.

B. Research Questions
1. How are the investment principles according to the ASEAN
Comprehensive Investment Agreement (ACIA)?
2. How are the procedures for establishing of foreign investment company in
ASEAN Economic Community era in Indonesia?

C. Objectives of Research
1. To find out the investment principles according to the ASEAN
Comprehensive Investment Agreement (ACIA).

                                                            
10

Ahmad Redi, Laporan Dampak ASEAN Economic Community Terhadap Sektor Industri
Dan Jasa, Serta Tenaga Kerja Di Indonesia, Jakarta: Kementrian Keuangan RI, (2014), p. 4-5.

9

2. To find out the procedures for establishing of foreign investment company
in ASEAN Economic Community era in Indonesia.

D. Benefits of Research
The benefits of research are:
1. Theoretical Benefit
This research will provide the understanding of foreign
investment, in such legal concerning investment in Indonesia, ASEAN,
ASEAN Comprehensive Investment Agreement, ASEAN Economic
Community. This research will open the view of the foreign investment in
Indonesia.
2. Practical Benefit
This research will describe some understanding of concepts that
the researcher studied to develop the field of research, particularly in the
areas of investment in Indonesia from procedures of foreign investment,
with the regulations and legal in accordance with the issues that examined
by the researcher.
 

CHAPTER II
LITERATURE REVIEW

A. ASEAN Economic Community (AEC)
ASEAN Economic Community is an International agreement that is
based on the principle of market liberalization. Indonesia and nine other
ASEAN member States have agreed agreement ASEAN Economic
Community.
The ASEAN Economic Community aims to create a single market and
production base characterized by free flow of goods, services, investment,
skilled labor and capital movement of goods more freely. It is a program in
economics that emphasizes on the single market open according to ASEAN
Economic Community blueprint that contains 4 main frameworks, namely 1 :
1.

Towards a single market and production base (current free trade for the
goods, services, investment, skilled labor and capital);

2.

Towards the creation of regional economy with high competitiveness
(regional competition policy, Intellectual Property Rights action plan,
infrastructure

development,

Information

and

Communication

Technologies, energy cooperation, taxation, and the development of
Small Medium Enterprises);




1

Ministry of Trade, 2015, Buku Menuju ASEAN Economic Community, Jakarta, p. 9.

10

11

3.

Towards a region with equitable economic development (region of
equitable economic development) through Small Medium Enterprises
development and programs of the Initiative for ASEAN Integration (IAI);
and

4.

Towards the full integration of the global economy (a coherent approach
in the external economic relations and to encourage participation in the
global supply network). 2

Five core principles of the ASEAN single market and production base
comprise:
1.

Free flow of goods

2.

Free flow of services

3.

Free flow of investment

4.

Free flow of capital

5.

Free flow of skilled labor
From those principles, this thesis focuses on free flow of investment.

ASEAN are near with the investment, and below is the explanation on free
flow investment. Free flow of Investment ASEAN is committed to build an
investment field to attract business. It creates the ASEAN Comprehensive
Investment Agreement (ACIA), which includes a commitment to liberalize




2

Mukti Fajar, 2015, “Strategi Kebijakan Perlindungan Investor Lokal Dalam Arus Bebas
ASEAN Economic Community”. Jurnal Fakultas Hukum Universitas Muhammadyah Yogyakarta.

12

and protect cross-border investment operations, together with best practices
for the treatment of investors and foreign investment. 3
The ASEAN Comprehensive Investment Agreement which will build
on the existing ASEAN Investment Area (AIA) agreement and ASEAN
Investment Guarantee Agreement (AIGA) cover the following pillars: 4
1.

Investment Protection
This pillar provides enhanced protection to all investors and their
investment to be covered under the comprehensive agreement. The action
to strengthen among others the following provisions, while there were
some ways on the investor-state dispute settlement mechanism:
a. Transfer and repatriation of capital, profits, dividends, etc;
b. Transparent coverage on the expropriation and compensation;
c. Full protection and security; and
d. Treatment of compensation for losses resulting from strife.




3

ASEAN up Empowering business in Southeast Asia, Benefits of the ASEAN Economic
Community-AEC, available at http://aseanup.com/benefits-asean-economic-community-aec/. Accessed
on March 13, 2016 at 6.17 a.m.
4
Ministry of Trade, 2015, Perjanjian ASEAN Economic Community Blueprint, Jakarta, p. 1214.

13

2.

Facilitation and Cooperation
Fasilitation and cooperation provided by AIA is more transparent,
consistent and predictable investment rules, regulations, policies and
procedures. The actions:
a. Harmonise, where possible, investment police to achive industrial
complementation and economic integration;
b. Streamline and simplify procedures for investment applications and
approvals;
c. Promote dissemination of investment information: rules, regulations,
policies and procedures, including through one-stop investment centre
or investment promotion board;
d. Strengthen databases on all forms of investments covering goods and
services to facilitate policy formulation;
e. Strengthen coordination among government ministries and agencies
concerned;
f. Consultation with ASEAN private sectors to facilitate investment; and
g. Identify and work towards areas of complementation ASEAN-wide as
well as bilateral economic integration.

14

3.

Promotion and Awareness
Promote ASEAN as an integrated investment area and production
network. The actions:
a. Create the necessary environment to promote all forms of investment
and new growth areas into ASEAN;
b. Promote intra-ASEAN investments, particularly investments from
ASEAN-6 to CMLV countries (Cambodia, Myanmar, Laos, and
Vietnam);
c. Promote the growth and development of Small Medium Enterprises
and Multinasional Enterprises (MNEs);
d. Promote industrial complementation and production networks among
Multi National Corporations (MNCs) in ASEAN;
e. Promote joint investment missions that focus on regional clusters and
production networks;
f. Extend the benefits of ASEAN industrial cooperation initiatives in
addition to the ASEAN Industrial Cooperation Scheme to encourage
regional clusters and production networks; and
g. Work towards establishing an effective network of bilateral
agreements on avoidance of double taxation among ASEAN countries.

15

4.

Liberalisation
Progressive

liberalisation

of

ASEAN

Member

Countrie’s

investment regime is to achieve free and open investment by 2015. The
actions:
a. Extend non-discriminatory treatment, including national treatment and
most-favoured nation treatment, to investors in ASEAN with limited
exceptions, minimize and where possible, eliminate such exceptions;
b. Reduce and where possible, eliminate restrictions to entry for
investments in the Priority Integration Sectors covering goods; and
c. Reduce and where possible, eliminate restrictive investment measures
and other impediments, including performance requirements.

B. The General Review of the ASEAN Comprehensive Investment
Agreement (ACIA)
The ASEAN Comprehensive Investment Agreement is ASEAN’s
instrument aimed at ensuring the free flow of investments within ASEAN in
support of the goals of an integrated ASEAN Economic Community.
The ASEAN Comprehensive Investment Agreement promises to
provide multiple benefits to ASEAN investors under its four (4) pillars of
Investment Liberalisation, Protection, Promotion and Facilitation. ASEAN
Member States value the growth and development dividends that can flow
from increased economic integration. There is a consensus, reflected in

16

ASEAN Comprehensive Investment Agreement, that cross-border investment
has a positive role to play in all ten ASEAN Member States and that investors
should be encouraged to maintain and expand their investments throughout
the region. This is the background to ASEAN Comprehensive Investment
Agreement and goes a long way towards explaining why it offers potentially
significant advantages to ASEAN investors doing business across the region.
The ASEAN Comprehensive Investment Agreement facilitates the
progressive liberalisation of investment in 5 main sectors: manufacturing,
agriculture, fishery, forestry, mining and quarrying, and related services. In
other words, the liberalisation of investment under ASEAN Comprehensive
Investment Agreement comprehensively considers primary, secondary, and
tertiary sectors. ASEAN investors further benefit from the forward-looking
provisions of ASEAN Comprehensive Investment Agreement, including in
regard to transparency disciplines and the promotion of ASEAN as an
integrated investment destination.
In liberalised sectors, ASEAN Comprehensive Investment Agreement
commits ASEAN Member States to treat ASEAN Investors and investments
in a non-discriminatory manner with regard to the national treatment and
most-favoured-nation treatment principles. Limitations on the nationality of
senior management and boards of directors are also minimised under ASEAN
Comprehensive Investment Agreement.

17

In addition, ASEAN Comprehensive Investment Agreement offers a
series of guarantees to ASEAN investors that host country investment
regulation will be fair and non-discriminatory. The ASEAN Comprehensive
Investment Agreement offers wider coverage than previous investment
instruments within ASEAN. The substantive protection and guarantees
offered under the agreement are clearer than those found in previous ASEAN
investment instruments.
The ASEAN Comprehensive Investment Agreement responds to the
concerns of foreign businesses over the potentially capricious nature of host
country regulatory changes and seeks to provide rights of recourse that are
efficient, transparent and legally binding. The collective commitment of
ASEAN Member States to a rules-based system of dispute settlement is a
significant improvement over the previous approach where business people
had to rely on diplomatic protection from their home country governments.
The provision of Investor–State Dispute Settlement (ISDS) depoliticises
potential conflicts between individual investors and host states, allowing the
former to prosecute alleged treaty breaches and defend their property rights
without soliciting the support of their Governments.
The Investor-state dispute settlement mechanism offered by ASEAN
Comprehensive Investment Agreement includes mediation, conciliation, and
international arbitration. Of these, arbitration is likely the most relevant in

18

addressing major investment disputes and is accordingly the subject of some
of ASEAN Comprehensive Investment Agreements most detailed rules.

C. Overview of Investment
The government of Indonesia recognizes that foreign capital
investment has a major role in economic development. However, foreign
capital investment is realized to be complementary means for the acceleration
of economic development of the country. 5 Law No. 1 of 1967 on Foreign
Investment is the legal basis for the investor to invest their money at the time,
and this law was amended by Law No. 11 of 1970 on Foreign Investment.
Law No. 25 Article 1 (1) of 2007 on Investment was enacted to revise
the previous regulation related to the investment. By definition, the world
“Investment” means any form of investing activity by both domestic and
foreign investors to do business in the territory of the state of the Republic of
Indonesia.
From the definition above, there are two types of investments
according to Law No. 25 Article 1 (2) of 2007 on Investment; on the one
hand, “Domestic Investment” means an investing activity which is done in the
territory of the state of the Republic of Indonesia by a domestic investor or by
using domestic capital. According to Law No. 25 Article 1 (3) of 2007 on



5

Sudargo Gautama, 2006, Indonesian Business Law, Bandung: Penerbit PT. Citra Aditya
Bakti, p.359

19

Investment, on the other hand, “Foreign Investment” means an investing
activity done in the territory of the state of the Republic of Indonesia by a
foreign investor both by the use of all of the foreign capital and by
engagement in a joint venture with a domestic investor.
Actually, all business sectors are open for investment. Therefore, the
government determines the requirement and the details sectors based on
priorities for the investment. Those kind of policies are related to the
objectives of investment. Among the objectives of investment are:
1.

Increasing national economic growth;

2.

Creating job opportunity;

3.

Improving sustainable economic development;

4.

Improving the competitiveness of national business sphere;

5.

Increasing the capacity and the capability of the national technology;

6.

Encouraging people economic development;

7.

Processing economic potential into the real economic strength by using
fund coming from both domestic and foreign countries;

8.

Improving the prosperity of the community.
The Law No. 25 of 2007 Articles 14, 15 and 16 on Investment regulate

the rights, obligations, and liabilities that have to be conducted by the
investor. Law No. 25 Article 14 of 2007 on Investment states that every
investor shall be entitled to obtain:
1. Right certainty, legal certainty, and protection certainty;

20

2. Open information about business fields it is running;
3. Service; and
4. Various forms of the facility according to the rules of law.
The Law No. 25 Article 15 of 2007 on Investment mentions that every
investor is also required to:
1. Apply the principle of good company management;
2. Implement the company’s social liability;
3. Make a report on investment activity and submit it to the Investment
Coordinating Board;
4. Respect the cultural tradition of communities around the location of
investment business activity;
5. Comply with all of the rules of law.
In addition, Law No. 25 Article 16 of 2007 on Investment regulated
that every investor shall be liable to:
1. Secure capital originating from any sources, not in violation of the rulesof
law;
2. Bear and settle any obligations and losses if such investor halt or leave or
abandon its business activity unilaterally in accordance with the rules of
law;
3. Create a healthy competitive business climate, refrain from monopoly
practice, and any other matters that inflict damage to the state;
4. Preserve the environment;

21

5. Provide safety, health, convenience, and prosperity of workers; and
6. Comply with all of the rules of law.
Those kinds of regulations were enacted by the government to give the
legal certainty for the investor and also protect the national interest of
Indonesia. The Law No. 25 of 2007 on Investment is the legal basis and also
the norm that has to comply by the investor as the parties who take a part in
Indonesian business sectors.

D. The General Review of The Foreign Investment in Indonesia
Foreign investment in Indonesia is generally governed by Law No. 25
of 2007 on Investment and a broad range of implementing legislation,
including Presidential Regulation No. 39 of 2014 and Regulation of the Head
No. 5 of 2013 on the Investment Coordination Board, which was amended by
Head No. 12 of 2013 on the Investment Coordination Board. In addition, Law
No. 40 of 2007 on Limited Liability Companies and sectoral legislation has an
important impact on foreign investment.
Under the Investment Act, all business fields and business types are
open to investment, except for business fields and business types that are
declared to be closed or conditionally open. The business fields that are closed
to foreign investors are production of weapons, ammunition, explosive
devices and armaments. In addition, Presidential Regulation No. 39 of 2014
on list of business fields closed to investment and business fields open, with

22

conditions, to investment introduces a Negative List that sets out the lines of
business that are closed to foreign investors (including lines of business that
are reserved for Small Medium Enterprises/UKM), and lines of business that
are open to foreign investors under certain conditions. Such conditions can be
in the form of, inter alia, local partnership requirements, limitations as to
permitted locations and special licence requirements. The Negative List also
opens up certain business fields or increases the foreign shareholding limits in
such fields for investors from ASEAN Member States.
Foreign investment must in principle be made through a limited
liability company established under Indonesian law and domiciled within the
territory of Indonesia. 6 A limited liability company that is (partly) owned by a
foreign investor should have the status of a foreign investment company. In
principle this also applies to the subsidiaries of the company. Foreign
investors who make an investment through a foreign investment company
may subscribe for shares at the time the company is established, purchase
shares in the company, or follow an alternative method in accordance with
prevailing laws and regulations.
The government agency that handles investment, including foreign
investment and related licensing matters, is the investment coordinating



6

Instead of making an investment through a PMA company, a foreign company may choose
to open a representative office. A representative office gives a foreign company a minimal presence in
Indonesia, allowing the company to promote its products and services but not to engage in direct sales
or contracts.

23

board. Other government agencies that may play a role in handling foreign
investment matters include the Ministry of Law and Human Rights (MOLHR)
and the Ministry of Trade.
Foreign investors wishing to establish a foreign investment company
in Indonesia are required to obtain a principle licence from the investment
coordinating board. This principle licence serves as an investment permit that
authorises the foreign investor to establish the company.
Indonesian law does not create a formal procedure for an applicant for
a licence or approval that does not agree with a decision by the relevant
government authority to apply for administrative review. However, a foreign
investor may submit a complaint to the investment coordinating board
regarding government services relating to foreign investment. Furthermore, it
is possible for an individual or a legal entity to submit a claim to the
administrative courts, which has the authority to review government
institutions' written decisions with legal effects that are individual, concrete
and final. 7 There are two grounds for review: contravention of laws and
regulations or that of general principles of proper administration. Written
principles are the principles of legal certainty, proportionality, disciplined
state management, transparency, professionalism and accountability. The
administrative courts also apply unwritten principles, such as misuse of power



7

Decisions by the KPPU are excepted from this general rule and may be reviewed by the
general courts.

24

and arbitrariness. In practice, it may be hard for a foreign investor to win a
case.

E. The requirements of establishing the foreign investment company
Generally, the following licenses/documents are required for the
establishment of a limited liability company for foreign investment company
in Indonesia:
1. Principle License & Business License from investment coordinating
board, estimated time 7 days.
2. Deed of Establishment (containing the Articles of Association) legalized
by a Public Notary, estimated time 1 to 2 days.
3. Legalization of the legal entity status of the limited liability company for
foreign investment company by the Ministry of Law and Human Rights,
estimated time 10 days.
4. Domicile Letter from the local district authority, estimated time 3 days.
5. Tax Identification Number (NPWP) and taxable entrepreneur confirmation
(PKP) from the tax office, estimated time 3 days.
6. Company Registration Certificate (TDP) from the agency for integrated
licensing services (BPPT), estimated time 14 days.
7. Manpower Report and Company Welfare Report from the sub-department
of the Ministry of Manpower, estimated time 7 days.

25

Note: the licenses/documents listed above involve the general
guideline for the establishment of a limited liability company for foreign
investment company. However, additional licenses and/or documents can be
required in specific sectors. Therefore legal advice should be sought before
engaging in investment activity.

F. Deed of Establishment of the Limited Liability Company for Foreign
Investment Company
In order to set up a limited liability company for foreign investment
company in Indonesia, the shareholders must present a deed of establishment
which needs to be legalized by a public notary. The deed of establishment
contains, besides the Articles of Association, the following additional
information:
1. Regarding the Founders:
a. In case the shareholder is an individual, the name, date of birth, place of
birth, current residence information and citizenship.
b. In case the shareholder is a legal entity, the domicile of the legal entity,
including the full address, the date and number of legalization of the
ministry.
2. Regarding Board of Directors and Board of Commissioners.
The name, date of birth, place of birth, current residence
information and citizenship information of the members of Board of

26

Directors and Board of Commissioners who are first appointed through the
deed of establishment.
3. Regarding the Shareholders (other than the founders).
The names, the number of shares and their issued and paid up
nominal value.

G. The History of Regulation from Investment Coordinating Board
In order to follow the Law No. 25 of 2007 on Investment and
Presidential Decree No. 27 of 2009 on One-Stop Services in the Field of
Investment, improvements have to be made both internally and for the benefit
of the implementation of the licensing service in the region, among others, by
making changes to its guidance application procedures of capital investment,
control the implementation of planting capital, reorganize standard licensing
procedures of investment, build and Information Service System and
Investment Electronic Licensing. New policies that have been published are:
1. Regulation of the Head No. 11 of 2009 on the Investment Coordinating
Board regarding Implementation Procedures, Guidance and Reported from
Investment Coordinating Board;
2. Regulation of the Head No. 12 of 2009 on the Investment Coordinating
Board regarding Procedures for Application of Capital;

27

3. Regulation of the Head No. 13 of 2009 on the Investment Coordinating
Board regarding Guidelines and Procedures for Investment Implementation
Control;
4. Regulation of the Head No. 14 of 2009 on the Investment Coordinating
Board regarding Information Service System and Investment Electronic
Licensing.
These regulations become effective and become the basis of
investment activity in the central and regional. The enactment of regulations
on the licensing service then all kinds of permissions that during conducted in
Investment Coordinating Board will change, both in type and form of
consent, Standard Operating Procedure and this will change the order of
licensing services in the field of investment. Likewise, the use of system
services electronically using National Single Window for investment is
expected to be greater certainty speed, easy for investors to apply. Due to the
electronic service system of the letter of approval issued in the Central and
Regional have the same format nationally.
The regulation of the Head No. 11, 12 and 14 of 2009 on the
Investment Coordinating Board is a rule that will be used to support the
implementation of the Investment Coordinating Board conducted nationally
using Information Service System and Investment Electronic Licensing
information system. While the Regulation of the Head No. 13 of 2009 on the
Investment

Coordinating

Board

regarding

Control

of

Investment

28

Implementation, used in the context of supervision, coaching, guidance on
the implementation of the investments made by the business world.
Broadly speaking, the basics of service Presidential Decree No. 27 of
2009 on One-Stop Services, which will be the basis for the licensing service
includes several elements. The emphasis is different from the regulatory
processes and procedures previously. The elements include:
1.

Easy, simple petition settlement process flows are easily understood
since the requirements are simple;

2.

Hurry, time is shortened for petition in the resolution process;

3.

Right, it refers to the conformity of products with the provisions of laws
and regulations;

4.

Accurate, facilitation of imports of machinery, goods and materials is in
accordance with the needs of production; and

5.

Transparent and accountable, the settlement request process flows are
clear and accountable.

H. The principle of One Stop Service on the Investment
One Stop Services is the Implementation activity of a licensing and
non licensing received by the delegation or the delegation of authority of the
agency or agencies that have authority for licensing and non licensing
management process starting from the proposal stage to the stage of
publication of documents that are done in one place.

29

Licensing is any form of approval for Investment issued by the
Government and the local government that has the authority under the
provisions of the legislation. 8
Non licensing is any form of convenience services, fiscal facilities,
and information on the investment, in accordance with the provisions of the
legislation. 9
One stop service aims to gain the ease of service, fiscal facilities, and
information regarding the Investment, by accelerating, simplifying services
and alleviating or eliminating the cost of obtaining a license and non
Licensing.
To improve the Integrated One Stop Service and shorten its process,
on 15 September 2014 the President issued Regulation No. 97 of 2014 on
Organization of Integrated One Stop Service (New Regulation), which has
been in effect since the date it was registered on 18 September 2014. Unlike
the 2009 Integrated One Stop Service (PTSP), the scope of 2014 Integrated
One Stop Service is not only restricted to licenses and non-licenses in the field
of capital investment, but also covers all licenses and non-licenses which