SAFEGUARDING NATIONAL INTERESTS IN CROSS-BORDER MERGERS AND ACQUISITIONS

By KUSNANDAR & CO., Attorneys at Law – Jakarta, INDONESIA

 

Cross-border mergers and acquisitions have increasingly become a part of the global economic landscape. Multinational corporations are actively acquiring local entities across various countries, including Indonesia, in pursuit of market expansion, strategic resource access, and technology consolidation. While these transactions offer opportunities for increased investment and industrial efficiency, they also raise serious legal and policy challenges related to national interest protection, regulatory oversight, and economic sovereignty.

 

Legally, Indonesia has several regulations governing merger and acquisition activities, both from a corporate governance and competition law perspective. Law No. 40 of 2007 on Limited Liability Companies provides the fundamental legal framework for mergers, consolidations, and acquisitions. Meanwhile, competition aspects are governed under Law No. 5 of 1999, further detailed in the Business Competition Supervisory Commission (KPPU) Regulation No. 3 of 2023, which outlines criteria and procedures for assessing mergers and acquisitions. In practice, any corporate action that significantly affects market structure must be notified to KPPU if it meets certain asset or sales thresholds. This notification obligation also applies to cross-border transactions that have a domestic market impact.

 

However, current regulations still leave room for improvement. One key concern is the absence of a formal legal mechanism to assess national interest in merger transactions. As foreign entities increasingly acquire Indonesian companies, the government should not merely focus on formal compliance or competition effects, but also on strategic considerations such as control over vital assets, public service relevance, and the long-term impact on domestic players. Countries like Australia, Canada, and the United States have already implemented foreign investment screening mechanisms to ensure that foreign investments do not jeopardize public interest or national security. Indonesia should begin moving in this direction.

 

Regulatory fragmentation across sectors also presents a considerable challenge. Cross-border mergers involving strategic sectors such as banking, energy, telecommunications, or mining require additional approvals from sectoral regulators, including the Financial Services Authority (OJK) and relevant ministries. Coordination among these institutions is essential. Conflicting regulations, overlapping procedures, and prolonged approval timelines can create legal uncertainty for investors. While Indonesia has introduced the Online Single Submission (OSS) system to simplify processes, its effective implementation—particularly in cross-border contexts—still requires strengthening.

 

Another emerging issue in cross-border M&A is data privacy and confidentiality. In the acquisition of digital, technology, or data-intensive companies, legal considerations now go beyond corporate ownership and extend into data governance. Law No. 27 of 2022 on Personal Data Protection imposes obligations on data controllers to ensure that any cross-border data transfer or processing adheres to principles of transparency, fairness, and maximum protection of individual rights. Therefore, mergers are not merely about business integration, but also involve the legal transfer of accountability over data previously held by the acquired entity.

 

The role of KPPU as the competition authority is critical in maintaining a fair post-merger market structure. Cross-border mergers by dominant global players can lead to oligopolistic markets, reducing the space for local competitors. KPPU should be empowered not only to conduct post-transaction reviews but also to conduct pre-transaction assessments, as is common practice in many jurisdictions. This proactive approach would help prevent anti-competitive consequences from the outset and provide legal certainty for all stakeholders.

 

From a broader policy perspective, cross-border mergers and acquisitions should not be viewed merely as corporate matters, but as a component of national strategy in safeguarding economic sovereignty. The state must play a balancing role—welcoming foreign investment while ensuring that such transactions yield long-term benefits for national development, domestic industrial growth, and meaningful knowledge transfer.

 

With stronger legal governance and more cohesive institutional coordination, Indonesia can manage cross-border M&A more wisely. Legal certainty, coupled with the protection of national interests, must serve as the foundation to ensure that global corporate transactions do not erode our economic autonomy, but instead contribute to strengthening Indonesia’s position in the global economy.

K&Co - September 26, 2025