Foreign Investment (“PMA”) is an investment activity to conduct business in the territory of the Republic of Indonesia carried out by foreign investors, either using foreign capital entirely or jointly with domestic investors.

In principle, all business fields are open to investment activities (including foreign investment), except for business fields that are declared closed to investment or activities that can only be carried out by the central government. Meanwhile, business fields that are closed to investment include:

1. cultivation and industry of class I narcotics;
2. all forms of gambling and/or casino activities;
3. catching fish species listed in CITES Appendix I ;
4. utilization or taking of coral and utilization or taking of coral from nature which is used for building materials/lime/calcium, aquariums, and souvenirs/jewelry, as well as live coral or dead coral from nature;
5. chemical weapons manufacturing industry; And
6. industrial chemical industry and ozone layer depleting materials industry.

Apart from the above business sectors, the alcoholic liquor business sector (KBLI 11010), the alcoholic beverage industry, wine (KBLI 11020), and the malt beverage industry (KBLI 11031) are also closed for capital investment. Meanwhile, business activities that can only be carried out by the central government are activities of a service nature or within the framework of defense and security, including, among other things, the main weapons system equipment, government museums, historical and ancient relics, carrying out aviation navigation, telecommunications/navigational aids. and vessels. Thus, the plantation business sector and the palm oil industry are not included in the business sectors that are closed to investment and are not activities that can only be carried out by the central government. This means that plantations and the palm oil industry are business fields that are open to investment, including foreign investment.

Oil palm plantation businesses are classified as KBLI 01262 which includes plantation businesses starting from land processing activities, sowing, seeding, planting, maintaining and harvesting oil palm. Including nursery and seeding activities for oil palm plants. Meanwhile, KBLI 10431 is an KBLI for the crude palm oil industry which includes the business of processing palm oil into crude palm oil (CPO) which still needs further processing and usually this product is used by other industries.

Based on Presidential Decree 10/2021 as amended by Presidential Decree 49/2021, there are provisions for limiting FDI in business fields with certain requirements, namely business fields that can be operated by all investors, including cooperatives and MSMEs, with the following requirements:

1. investment requirements for domestic investment;
2. investment requirements with restrictions on foreign capital ownership;
3. investment requirements with special permits; or
4. Other investment requirements include business fields that are limited and strictly supervised and regulated in laws and regulations in the field of control and supervision of alcoholic beverages.

Requirements for palm oil plantation business permits are also regulated in Appendix II Agricultural Sector PP 5/2021. However, KBLI 01262 (pp. 363 – 370) and KBLI 10431 (pp. 12 – 13) do not regulate restrictions on foreign investment in the oil palm plantation business sector and the palm oil processing industry. In the Attachment to Minister of Agriculture Regulation 15/2021, where KBLI 10431 (pp. 14 – 19) and KBLI 01262 (pp. 338 – 366) do not regulate certain conditions related to foreign investment. Likewise, in the Attachment to Permenperin 9/2021, KBLI 10431 (pp. 258 – 277) there are no provisions regarding conditions or restrictions on foreign investment.

Business fields with KBLI 01262 and KBLI 10431, namely the oil palm plantation business and the crude palm oil industry, are open to PMA and there are no restrictions on PMA, meaning 100% foreign investment can be carried out. In other words, an oil palm plantation company with the KBLI code can have 100% foreign shares.

Legal basis:

1. Law Number 25 of 2007 concerning Capital Investment;
2. Government Regulation in Lieu of Law Number 2 of 2022 concerning Job Creation;
3. Law Number 6 of 2023 ;
4. Government Regulation Number 5 of 2021 concerning Implementation of Risk-Based Business Licensing ;
5. Presidential Regulation Number 10 of 2021 concerning the Investment Business Sector ;
6. Presidential Regulation Number 49 of 2021 concerning Amendments to Presidential Regulation Number 10 of 2021 concerning the Investment Business Sector ;
7. Presidential Decree Number 43 of 1978 concerning Ratifying the “Convention on International Trade in Endangered Species of Wild Fauna and Flora”, which was signed in Washington on March 3 1973, as attached to the Presidential Decree ;
8. Minister of Industry Regulation Number 9 of 2021 concerning Standards for Business Activities and/or Products in the Implementation of Risk-Based Business Licensing in the Industrial Sector ;
9. Minister of Agriculture Regulation Number 15 of 2021 concerning Standards for Business Activities and/or Products in the Implementation of Risk-Based Business Licensing in the Agricultural Sector

Reference:

1. Hukumonline.com
2. KBLI OSS.