Key issues on the new Indonesian BKPM regulation

The Indonesian Investment Coordination Board (BKPM) has issued the new BKPM Regulation No. 5 of 2013 on the Guidelines and Procedures for Licences and Non-Licences for Capital Investment. The regulation is dated 8 April 2013 and was promulgated in the State Gazette on 12 April 2013 but has not been widely circulated to public. This briefing sets out a preliminary review of the new regulation and the key changes introduced by it.

The New Regulation explicitly and specifically addresses the typical structures used to get around foreign investment restrictions.

Any domestic investment (PMDN) company that sells its shares to a foreign individual, a foreign legal entity or a foreign investment (PMA) company must obtain prior ‘in-principle’ approval from BKPM for it to be converted to a PMA company. Foreign investment is broadly defined as an activity to invest capital for business conducted by a foreign individual/entity in Indonesia either wholly using foreign capital or in a joint venture with an Indonesian entity/individual in a PMA company. Please note that the definition of a PMDN in the New Regulation is quite broad and could be interpreted to include ordinary PT companies (PT Biasa)…

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