By KUSNANDAR & CO., Attorneys at Law – Jakarta, INDONESIA
Indonesia, Southeast Asia’s largest economy, has long been seen as a land of opportunity for international investors. With more than 270 million people, a growing middle class, and an abundance of natural resources, the country offers both scale and diversity in sectors ranging from energy to technology. Positioned strategically between the Pacific and Indian Oceans, Indonesia also serves as a vital gateway for global trade. In recent years, the government has intensified efforts to attract foreign capital by reforming regulations, simplifying procedures, and opening new industries to overseas participation.
One of the most important legal milestones was the introduction of the Job Creation Law, also known as the Omnibus Law, in 2020. This sweeping reform signaled a fundamental change in how Indonesia manages investment. Instead of a restrictive “Negative Investment List,” which dictated where foreigners could not invest, the country adopted a more welcoming “Positive Investment List.” This approach explicitly identifies sectors that are open, many of which now allow full foreign ownership. Industries such as healthcare, construction, transportation, and renewable energy are among those where overseas investors can take a larger role, while strategic sectors like telecommunications, finance, and natural resources remain subject to special requirements or local partnerships.
These changes reflect Indonesia’s determination to attract investment that supports growth and creates jobs. The government has also streamlined business licensing through the Online Single Submission system, which centralizes approvals that previously required navigating multiple layers of bureaucracy. For many foreign companies, the simplified process has reduced delays and increased transparency, although challenges remain in implementation at the regional level.
Foreign investors typically establish their businesses through a PT PMA, or limited liability company with foreign ownership. This structure is recognized under Indonesian law and overseen by the Ministry of Investment, formerly known as BKPM. A PT PMA requires a minimum paid-up capital of around ten billion rupiah, or roughly six hundred and fifty thousand U.S. dollars, depending on the industry. Once established, such companies are able to conduct business across the country, although certain activities may require additional permits or sector-specific approvals.
Opportunities today are especially strong in several priority areas. The digital economy is expanding rapidly, driven by e-commerce, fintech, and online services that cater to Indonesia’s young and tech-savvy population. Renewable energy and electric vehicles are also high on the national agenda, supported by abundant nickel reserves that are critical for global battery production. Infrastructure remains a massive investment need, from ports and airports to toll roads and digital networks, while tourism and hospitality continue to attract attention beyond the established markets of Bali.
Despite these prospects, investors must also be aware of risks and complexities. Indonesia’s legal system is rooted in civil law and influenced by layers of national and regional regulations. Although reforms have eased many barriers, overlapping rules can still create uncertainty. Infrastructure gaps, particularly in outer islands, continue to increase logistics costs, while bureaucratic delays and corruption, though improving, have not been fully eliminated. Political changes can also shape the investment landscape, underscoring the importance of long-term planning and strong local partnerships.
Still, the government has made clear commitments to strengthening investor confidence. Tax incentives are available for certain sectors, including renewable energy and projects in special economic zones. Indonesia also participates in numerous bilateral and multilateral investment agreements, giving foreign companies additional protections and access to wider markets. Dispute resolution mechanisms have improved, with greater acceptance of arbitration and clearer procedures for legal enforcement.
For all these reasons, Indonesia stands out as one of the most promising investment destinations in Asia today. The market is large, the reforms are meaningful, and the opportunities are diverse. At the same time, investors who succeed are those who take the time to understand the legal framework, build trust with local stakeholders, and work with reliable advisors who can guide them through both regulatory requirements and cultural nuances.
At Kusnandar & Co., we have witnessed firsthand how foreign businesses can thrive in Indonesia when they approach the market with the right mix of ambition and preparation. Our role as legal counsel is to ensure that investors enter with clarity, comply with the law, and are protected as they grow their presence here. Indonesia is not without challenges, but with the right strategy, it offers unmatched potential. For those seeking a foothold in Southeast Asia, this is a market that cannot be ignored.
K&Co - September 10, 2025
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