Indonesia Simplifies Investment Permit to Attract Investors

JAKARTA (TheInsiderStories) – Foreign investors often express disappointment over Indonesia’s famously lengthy permit processing protocol. As a move to expedite this unfortunate situation, the Investment Coordinating Board (BKPM) has issued new ruling to scrap the ‘Principle Permit’ and replace it with ‘Investment Registration’.

The revised ruling allows investors engaging in certain industries to immediately seek and obtain a Business Permit. In the past, foreign investors were required to obtain a Principle Permit before being granted a Business Permit.

The Investment Registration will only take one day, compared to three days to secure a Principal Permit. The Investment Registration is expected to assist foreign investors who have yet to establish a legal entity in the country to obtain a Business Permit.

“The BKPM Ruling was issued in December and becomes a ‘New Year present’ for investors considering Indonesia,” Investment Coordinating Board Chairman Thomas Trikasih Lembong said in a statement on Thursday (4/1).

The new ruling is part of breakthroughs undertaken by the investment board to simplify investment permit procedures in Indonesia. The ruling is also an implementation of Presidential Decree Number 91, 2017 on Acceleration of Doing Business in the country.

Once foreign investors register their enterprise, they can apply for a Business Permit, thereby allowing them to speed up the realization of their business or investment.

In addition, starting from this month, BPKM is processing business permits by utilizing a digital protocol. The move is part of the investment board’s drive to adopt paperless investment licensing procedures.

In 2017, BKPM has targeted investment growth of 11 per cent, while the actual growth achieved is yet to be revealed by the investment board.

As for 2018, the Investment Board projects 10-14 per cent investment growth, reflecting the board’s optimism about the investment climate this year. Investments are expected to be led by e-commerce and tourism.

The Indonesian government pins its hopes on investment as a key driver for economic growth this year, projected to reach 5.2 per cent, higher than an estimated 5.1 per cent for last year.

The President Joko Widodo government has continued its drive to improve the business climate by issuing 16 economic reform packages in the past two years, as a move to boost investment and help business players to run their businesses smoothly. As a result, leading rating agencies, namely, Fitch Ratings, Moody’s and Standard & Poor’s, have all raised Indonesia’s sovereign rating to ‘investment grade’.

The Indonesian Economic Minister has lauded the decision of international rating agency Fitch Ratings, to have upgraded Indonesia’s Sovereign Rating much earlier than expected. The move is expected to further strengthen investor confidence in this country’s economy.

The latest rating improvement was revealed by Fitch. On Dec. 21, 2017, the rating agency reset Indonesia’s Sovereign Rating to ‘BBB’, with a ‘stable outlook’, the highest rating bestowed since 1995.

The Fitch rating upgrade reflects Indonesia’s resilience to external shocks (a factor that has steadily strengthened in the past few years), its debt management policies and an improved overall business climate.

The board data shows that the realization of investment during January to September (9M) of 2017 worth Rp513.2 trillion (US$38 billion). This value is 13.2 per cent higher compared to 9M of 2016 of Rp453.4 trillion, or 75 per cent of this year’s targeted Rp678.8 trillion.

During the period (9M), total Foreign Direct Investment (FDI) recorded Rp318.5 trillion or 7.9 per cent up from a year ago, marking Rp295.2 trillion, and Domestic Direct Investment (DDI) Rp194.7 trillion up 13.1 per cent compared to the same period in 2016 when it recorded Rp158.2 trillion.

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