The most essential thing when planning to establish your business in Indonesia is to determine the business sector to enter, and which business activities you want to do. The investment license system makes it so that the investors, especially foreign investors, are required to be very specific on what they want to do when they establish their PT PMA (Perseroan Terbatas Penanaman Modal Asing) in Indonesia, since each different business activities may be required to comply with different investments requirements. Also investors have to take account that business licenses also vary for each business sectors, with some business activities requiring certain technical licenses before they can operate.
The new Standard Classification of Business Fields has issued in October 2015 (known as Klasifikasi Baku Lapangan Usaha Indonesia, “KBLI 2015”). KBLI 2015 adapts its contents from International Standard Industrial Classification (ISIC), and the classification coding and naming takes form in unique sequence of 3 to 5 numbers, and each sequence indicates different business sectors. The more numbers a sequence has, the more detailed the business activities are.
KBLI 2015 is intended with the purpose to make it easier for investors to navigate the business sectors in Indonesia when planning their investment. KBLI 2015 standardises the concepts, definitions and classification of business fields, lessening the risk of investors determining the wrong business sector and wasting time trying to fulfill investment requirements they cannot fulfill due to the different capabilities required in each business sectors.
Moreover, the Key changes in the KBLI 2015 includes new additions of business sector classification in order to keep up with the growth of economic activities in Indonesia, including the rise of e-commerce and tech-based business in the last few years.
For example, when investors think they want to establish a PT (Perseroan Terbatas) working in “online retail business” in Indonesia, the classification of the online retail activities is classified as follows in KBLI 2015:
G Wholesale and Retail Trade; Vehicles Reparation and Maintenance
47 Retail Trade outside of Vehicles Retail
479 Retail Trade outside Shops, Street Vendors and Market Stalls
4791 Retail Trade through Postal Orders or Intern
47919 Retail Trade through Media for Various Other Kinds of Goods
BKPM (Badan Koordinasi Penanaman Modal or Indonesia Investment Coordinating Board) will require investors establishing their PT to be specific on their KBLI classification, both for establishing a PT PMA and a PT PMDN (Perseroan Terbatas Penanaman Modal Dalam Negeri). A PT may be required to have more than 1 (one) initial investment license if it intends to work in more than 1 (one) business sector.
But the one thing foreign investors have to take notice and keep informed is the role of KBLI 2015 in determining the business sectors closed and opened for foreign investors, which is regulated in the Negative Investment List, currently pursuant to Presidential Regulation No. 39 of 2014 (“Negative Investment List”). Each business sector and subsectors classified in KBLI 2015 is regulated in the Negative Investment List on whether they are opened to FDI (Foreign Direct Investment) or not, and how much shareholding percentage can foreign investors hold in a company if they are opened.
With the impending revision of Negative Investment List planned by the Indonesian Government in 2016, it is advised for foreign investors looking to invest in Indonesia to consult with Indonesian Corporate Legal consultants before they put in the investment. While KBLI 2015 contains much improvements that are in tune with the growth of business practices in the country, there are still legal issues especially concerning business sectors that are hot prospects for foreign investment, but are limited for 100% Indonesian business ownership only.
HOW CAN SMART LEGAL CONSULTING HELP YOU?
SMART Legal Consulting is an Indonesian Corporate Legal Services. We assist foreign investors in establishing their business in Indonesia through various forms of investment pursuant to the prevailing laws and regulations in Indonesia. Our knowledge, experience, and connections makes us the law firm to be your legal partner in Jakarta, managing your investments in Indonesia.
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