Mechanism on the Application for Investment Licenses in Indonesia

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Today, Indonesia sees more and more investments in almost every aspect of the nation’s growth and buildings. Many more foreign investors come from afar to invest in this “promising land.”

Nevertheless, Indonesian government still has control over them so they will always obey the regulation and run their business according to the proper procedures. In fulfilling passions in investment, one must know the mechanism on the application for investment licenses.

In order to be able to carry out investment Indonesia, an authorized institution should necessarily set a regulation
in proceeding a license for investment. For such purpose, the BKPM created PTSP, a system where investors are provided with certain facilities to make investment easy, fast, precise, accurate, and above all, transparent. This is also where the mechanism on the application for investment licenses begins.

PTSP: A System that Should Be Investor-Friendly.

PTSP stands for Pelayanan Terpadu Satu Pintu or Integrated One Door Service. Just like the name implied, PTSP is introduced to serve as a “door” where investors can process the application for investing in Indonesia in just one place. Its basic principles that need to be accomplished are: easy, simple, fast, precise, accurate, and transparent. All the principles aim to provide a simple flow of application process that ensure conformity of the product and the law while everything is carried out accountably and within a short period of time.

Registration of the Investment Licenses

Foreign investors can register themselves to perform their investment activity in Indonesia by submitting the application to PTSP BKPM. Meanwhile, domestic investors can submit the application of their registration to PTSP PDPPM, PTSP BKPM, and/or PTSP PDKPM.

Introducing: The New Certain Business Sector Mechanism

Since 3 August 2015, the government has renewed the mechanism on the application for investment licenses. During the last few years, BKPM has been receiving numerous Principle License applications for investment in services and businesses.

The report showed that, despite the large variety of business activities that the investors offer, the investment of the business is very low. Consequently, since the year 2000 until July 2015, BKPM has revoked more than 10.000 licenses, due to the investors' failure the application of permanent business licenses (Izin Usaha Tetap/IUT) as well as the submission of Investment Activities Report (Laporan Kegiatan Penanaman Modalor/LKPM).

With the New Certain Business Sector Mechanism, BKPM expects investors to be ready to invest when they apply for investment licenses and create better investment in the near future.

Investment Realization

In order to realize better investment in the future, BKPM has also limited the time period for project realization starting from the license issuance to the application of IUT to strictly 6 months (it used to be 12 months), during which the company must already have a paid-up capital of minimum IDR 2,500,000,000 (two hundred billion Rupiahs). Investors' failure to fulfill the requirements during the 6-month period will result in the re-application of Principle License. BKPM continuously revises and refines the new mechanism on the application for investment licenses. Constructive feedback from the investors (if any) are welcomed.

Bagas is a writer at BP Lawyers Indonesia.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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