Indonesia has experienced an increase in the number of unemployment during the pandemic, this certainly affects economic growth, as evidenced in the fourth quarter of 2020, economic growth was minus -2.19%. The most powerful factor that causes this is the number of companies that lose money and even close. One way for the government to provide it is by increasing foreign investment in Indonesia in order to create many new jobs. This investment can be done through the establishment of PT Penanaman Modal Asing (PT PMA) in various regions. Based on data from the Investment Coordinating Board (BKPM) in 2019, Indonesia’s Investment Realization reached IDR 809.6 trillion and the largest contribution came from FDI of IDR 423.1 trillion. The data shows that investment in Indonesia has a positive value and brings benefits. What benefits will foreign parties get if they invest in Indonesia? Let’s see further reviews below.
Natural Resources
Indonesia has a variety of natural resources. This certainly attracts foreign investors to invest in Indonesia. For example, the tourism sector is a magnet for foreign investors because Indonesia has beautiful nature and has the potential to be used as a place of recreation. Other sectors can also be found such as mining, plantations, fisheries, and others.
Demographic Bonus
Indonesia has a population of more than 265 million and is the fourth country in the world with a large workforce. The good news is that in 2020-2030, Indonesia will enter a demographic bonanza where the number of productive population or labor force (aged 15-64 years) is greater than the unproductive population. In those years, it is estimated that Indonesia’s productive-age population will reach 70 percent. This availability of labor is an attraction for Indonesia in attracting foreign investors. Even the cost of labor in Indonesia is relatively lower than the cost of foreign labor, which is usually higher. Afterwards, foreign investors can carry out job skills programs to meet the required qualifications.
Tax Facility
Article 31A of Law No. 36 Year 2008 regulates the fourth amendment to Law No. 7 Year 1983 concerning Income Tax, taxpayers who make investment in certain business fields and/or regions are given tax facilities in the form of:
- The net income deduction is a maximum of 30% of the amount of investment made.
- Accelerated depreciation and amortization.
- Longer loss compensation (no more than 10 years).
- The imposition of Income Tax on dividends as referred to in Article 26 shall be 10%, unless the rate under the applicable tax treaty stipulates lower.
Immigration Facilities
Based on Article 4 letter f of Investment Coordinating Board Regulation No. 6/2018 on Guidelines and Procedures for Licensing and Investment Facilities, foreign investors are granted immigration facilities in the form of:
- Recommendation for granting a limited stay visa as a shareholder
- Recommendation to change the status of visit stay permit to limited stay permit
- Recommendation to change the status of limited stay permit to permanent residence permit.
Investment Climate
Despite the challenging global economic conditions, Indonesia continues to strive to realize a healthy economic and investment climate. One of the efforts provided by the Indonesian government is the existence of Law No. 11 of 2020 on Job Creation which contains regulations regarding the simplification of investment requirements. Furthermore, in certain business sectors, it is possible to allow foreign investors to invest 100% of their capital. Things like this can help attract foreign investors to invest in Indonesia.
Domestic Market
The domestic market is all trade activities that take place in a country outside of import and export. Indonesia’s domestic market has products that are no less competitive and guaranteed quality. This can be seen from the production of Small and Medium Industries (SMIs) to larger manufacturing industries. Therefore, Indonesia’s domestic market is very capable of providing prositive returns to investors. Read also: Everything You Need to Know about FDI
KH Contact
From the explanation above, it can be concluded that FDI not only benefits the country that is given capital, but also for foreign investors. The more foreign investors are interested in running their business in Indonesia, the more labor is absorbed and leads to an increase in the Indonesian economy. Are you interested in setting up a PT PMA? Leave the management to Kontrak Hukum. We provide professional and reliable services for your business. Or do you have questions related to business and investment law? Let’s immediately contact the Sales Consultant on our website! Read also: PMA Center – Assisting Foreign Investment in Indonesian Business and Legalities
