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Foreign Investment Company in Indonesia (PMA)
Indonesia is one of Southeast Asia’s most attractive destinations for foreign investors. With a large domestic market, strategic location, rich natural resources, and pro-investment reforms, Indonesia offers significant opportunities for global businesses. One of the most common and legally recognized ways for foreigners to invest in Indonesia is through a Foreign Investment Company, known locally as Perseroan Terbatas Penanaman Modal Asing (PT PMA).
What Is a Foreign Investment Company (PMA)?
A PT PMA is a limited liability company established under Indonesian law that allows partial or full foreign ownership, subject to applicable regulations. A PMA enables foreign individuals or entities to conduct business activities, generate revenue, hire employees, and own assets in Indonesia.
PT PMA companies are regulated by the Investment Coordinating Board (BKPM), now operating under the Ministry of Investment of the Republic of Indonesia.
Why Invest in Indonesia?
Foreign investors choose Indonesia for several compelling reasons:
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A population of over 270 million people
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Rapidly growing middle class and consumer market
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Competitive labor costs
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Strategic position in Asia-Pacific trade routes
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Government incentives and economic reforms
Indonesia continues to improve its ease of doing business through digital licensing systems and investment-friendly policies.
Key Features of a PT PMA
1. Foreign Ownership
Foreign investors may own up to 100% of shares in many business sectors, depending on the Positive Investment List. Certain sectors may have ownership limits or special requirements.
2. Limited Liability
Shareholders’ liability is limited to the value of their shares, providing legal protection for investors.
3. Legal Business Entity
A PT PMA is a separate legal entity, allowing it to enter contracts, open bank accounts, lease property, and obtain business licenses.
4. Right to Hire Foreign Employees
A PMA can legally sponsor work permits (KITAS) for foreign directors, commissioners, and skilled employees, subject to manpower regulations.
Minimum Capital Requirements
Under Indonesian investment regulations, a PT PMA must meet the following capital requirements:
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Minimum investment value: IDR 10 billion (excluding land and buildings)
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Minimum issued and paid-up capital: IDR 2.5 billion
These requirements demonstrate the government’s intent to attract serious and sustainable foreign investment.
Business Sectors Open to PMA
Indonesia uses a Positive Investment List, which categorizes business sectors into:
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Fully open to foreign investment
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Open with conditions (ownership limits or partnerships)
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Reserved for local SMEs or cooperatives
Before establishing a PMA, investors must confirm that their intended business activity is open to foreign ownership.
Steps to Establish a PT PMA
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Determine Business Activity
Select the appropriate KBLI (Indonesian Standard Business Classification) code. -
Company Name Reservation
Register and approve the company name with the Ministry of Law and Human Rights. -
Deed of Establishment
Prepare and notarize the company’s deed of establishment. -
Legal Approval
Obtain approval from the Ministry of Law and Human Rights. -
Business Licensing (OSS System)
Apply for business licenses through the Online Single Submission (OSS) system. -
Tax Registration & Bank Account
Obtain a Tax Identification Number (NPWP) and open a corporate bank account.
Ongoing Compliance Obligations
Once established, a PT PMA must comply with Indonesian regulations, including:
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Annual financial reporting
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Tax filings and payments
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Investment activity reports (LKPM)
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Employment and manpower regulations
Failure to comply may result in penalties or license suspension.
Advantages of Using a PMA Structure
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Legal certainty for foreign investors
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Ability to operate nationwide
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Access to Indonesian banking and financing
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Eligibility for government incentives
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Enhanced credibility with partners and clients
Challenges to Consider
While Indonesia offers great opportunities, investors should be aware of:
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Regulatory complexity
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Sector-specific restrictions
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Language and cultural differences
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Compliance and reporting obligations
Professional guidance is highly recommended to ensure smooth establishment and operations.
Conclusion
Establishing a Foreign Investment Company (PMA) in Indonesia is a strategic gateway for global businesses seeking growth in Southeast Asia. With the right planning, sector selection, and professional support, a PT PMA allows foreign investors to operate legally, securely, and successfully in one of Asia’s most dynamic economies.
