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(c) Areas of Business
The New Investment Law stipulates that all business sectors or areas are open for investments,
except certain areas that are closed or opened with certain conditions. In connection with the implementation
of the New Investment Law, the government had recently enacted Presidential Regulation No. 77 of
2007 as amended by Presidential Regulation No. 111 of 2007 regarding business areas that are closed or
opened for foreign investment. Under this new regulation, most business sectors had been opened to
foreign direct investment, except for certain sectors specifically determined by the government. In
addition, conditions may be imposed for foreign investment in certain business sectors. These conditions
include, amongst others, the obligations to maintain certain minimum Indonesian participation and the
obligations to cooperate with small businesses or cooperatives. The obligations to maintain minimum
Indonesian participation, in most cases in the form of the requirement for Indonesians to hold at the
minimum 5.0% of the shareholding in the foreign investment company, are applied to foreign investments
in the areas such as power generation, plantation, certain industry using land area or has production
capacity above certain threshold, etc.
Note that Article 33 of the New Investment Law stipulates that any investor (whether domestic or
foreign) investing in the shares of an Indonesian limited liability company is prohibited from entering
into an agreement and/or making a statement asserting that share ownership in such limited liability
company is for and on behalf of another person. Such agreement or statement is deemed null and void by
operation of law.
(d) Rights and Obligations of Investors
The New Investment Law stipulates that investor is entitled to receive:
(i) legal and right certainty as well as protection;
(ii) freedom of information;
(iii) rights to be served; and
(iv) other facilities as provided by the prevailing regulations.
However, the New Investment law also imposes extensive obligations and responsibilities to
investors. These obligations include (i) the obligation to implement good corporate practices and
corporate social responsibilities; (ii) the responsibility to ensure that the invested fund comes from
legitimate sources; and (iii) the obligation to protect the environment and to observe fair competitive
practices.
Pursuant to Article 34 of the New Investment Law, failure to comply with the aforesaid obligations
may lead to the imposition of certain administrative sanctions, including the restriction on business
activities or the revocation of the businesses and/or investment facilities by an authorised agency or
institution in accordance with the prevailing laws and regulations. In addition to administrative sanctions,
business entities or sole proprietorship may be imposed with other sanctions in accordance with the
prevailing laws and regulations.
(e) Permits and Licenses
Under the New Investment Law, all matters relating to investments will be handled by the Indonesian
Investment Coordinating Board (Badan Koordinasi Penanaman Modal, or “BKPM”) under the so-called
“one-roof” policy. This policy has the objective of reducing the bureaucratic formalities which are
currently existing in various business sectors. However, the implementation of this policy remains unclear
as the government has not enacted the relevant implementation regulation.
BKPM had issued implementing regulations under the previous Foreign Investment Law pertaining
to guidelines and procedures for filing applications for foreign investment and the approval of foreign
investment. These implementing regulations remain effective until the government issued new implementing
regulations under the New Investment Law.
Environmental Protection Law
Indonesian companies operating in the industrial sectors are generally subject to various environmental
laws relating to water, air and noise pollution and the management of hazardous and toxic waste. The principal
environmental regulations in Indonesian are Law No. 23/1997 concerning Environmental Management,
Government Regulation No. 27/1999 concerning Analysis on Environmental Impact (“ANDAL”) and their
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