Investment Climate Statement - Indonesia · Singapore 32% Japan 18% Malaysia 4% ... treaty, the tax...
Transcript of Investment Climate Statement - Indonesia · Singapore 32% Japan 18% Malaysia 4% ... treaty, the tax...
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Investment Climate Statement - Indonesia
October 2018
Mizuho Bank, Ltd.
Global Strategic Advisory Department
Direct investment trends (i) ~ Investment from the world
1
The disbursed amount of direct investment has been increasing since 2009 but in 2014 it was stagnant due to the impact of thestrengthening of foreign investment regulations and the general elections and presidential elections.
In 2015 Indonesia changed direction toward attracting foreign investment through a phased easing of regulations, but the effect in a single year is limited, so investment was stagnant in 2016 as well.
Regarding the investment amount by country, in Asia Singapore and Japan account for the majority of investment but in recent years direct investment from China has grown rapidly.
(Source) Prepared by the Mizuho Bank Global Strategic Advisory Department based on JCIF
Trends in the direct investment amount
(Unit: million USD)
19,475
24,565
28,618 28,530 29,276
28,964
0
5,000
10,000
15,000
20,000
25,000
30,000
2011 2012 2013 2014 2015 2016
Singapore 32%
Japan
18%Malaysia
4%Netherlands
5%
United Kingdom
1%
United States
4%
South Korea
4% China
9%
Hong Kong
8%
Other
15%
Direct investment amount (share by country)
Direct investment amount (share by industry)
Agriculture,
forestry, and
fisheries6%
Mining
10%
Manufacturing
business
57%Electricity,
gas, and water
7%
Construction
1%
Wholesale and
retail sales
2%
Hotels and
restaurants
3%
Transportation,
communications,
and warehousing3%
Real estate and
business services
8%
Other services
3%
Direct investment trends (ii) ~ Investment from Japan
2
In 2012 and 2013 many automobile suppliers entered Indonesia as a consequence of the Low Cost Green Car policy and due to this the investment amount in 2013 increased 190% compared to the previous year.
Looking at investment by industry type, transport equipment (the industry of two-wheeled and four-wheeled vehicles and the related components), which previously had a ratio of nearly 70%, continues to be top, but in 2016 it fell by half compared to the previous year to 34.7%.
In recent years, the entry of not only the manufacturing business but also service industries for which the unit price of investment is comparatively low has accelerated.
According to the Indonesia Investment Coordinating Board, the average investment amount per investment was 19.80 million USD in 2000 but 1.64 million USD in 2016
Trends in the amount of direct investment from Japan
(Unit: million USD)
(Source) Prepared by the Mizuho Bank Global Strategic Advisory Department based on JCIF reports and Indonesia Investment
Coordinating Board materials
Trends in the number of direct investments from Japan
Composition by industry type (2016)
713
1,516
2,457
4,713
2,705
2,877
5,401
0
1,000
2,000
3,000
4,000
5,000
6,000
2010 2011 2012 2013 2014 2015 2016
321 421 405
775 1,010
2,030
3,302
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2010 2011 2012 2013 2014 2015 2016
Transport
equipment
35%
Metals and
machinery
15%
Chemicals and
pharmaceuticals
14%
Power generation,
gas, and water
11%
Real estate and
industrial parks
6%
Other
19%
Major industrial parks and special economic zones
3
Approximately 80% of Japanese enterprises have offices or factories in the districts surrounding Jakarta.
Many industrial parks are dotted along the expressway heading east from Jakarta.
Batam Industrial Park
There are approximately 40 companies
including Kyocera, etc.
(12) Karawang International Industrial City
There are approximately 50 companies including
Daihatsu Motor, Yamaha, etc.
(8) MM2100 Industrial Town
There are approximately 60 companies
including Toyota Motor Corporation, etc.
(11) East Jakarta Industrial Park
There are approximately 70 companies
including Seiko Epson, etc.
1 Jakarta Industrial Estate Pulogadung
2 Nusantara Bonded Zone
3 Marunda Industrial Park
4 Krakatau Industrial Estate - Cilegon
5 Modern Cikande Industrial Estate
6 Pasar Kemis Industrial Estate
7 Cikarang Industrial Estate
8 MM2100 Industrial Town
9 Bekasi International Industrial Estate (BIIE)
10 Bekasi International Industrial Estate
11 East Jakarta Industrial Park (EJIP)
12 Karawang International Industrial City
13 Suryacipta City of Industry
14 Bukit Indah Industrial Park
15 Cirebon Industrial Estate
16 Cirebon Industrial Estate
17 Cilacap Industrial Estate
18 Turboyo Industrial Estate
19 Tanjung Emas Export Processing Zone
20 Guna Mekar Industrial Estate
21 Ngoro Industrial Park
22 Gresik Industrial Estate
23 Kabil Industrial Estate
24 Batam Industrial Park
25 Bintang Industrial Park
26 Spinindo Mitradaya Batam Industrial Estate
27 Batamasia Industrial Park
28 Bintan Industrial Estate
29 Medan Industrial Estate
30 Makassar Industrial Estate
31 PIER (Pasuruan Industrial Estate Rembang)
32 Greenland International Industrial Center
(Source) Prepared by the Mizuho Bank Global Strategic Advisory Department based on the Indonesia Investment Coordinating
Board (BKPM)
Medan
Sumatra
Batam
Jakarta
Bandung
Kalimantan(Borneo)
Ujung Pandang
Sulawesi(Celebes)
Surabaya
Denpasar
Bali
Irian Jaya
Batam
Hang Nadim
International Airport
Jakarta area
Soekarno–Hatta International Airport
Jakarta
Accounting and taxation-related information (i) ~ Accounting
4
It is necessary for the Board of Directors to prepare the annual reports, including the financial statements, and after completion
of the audit of the Komisaris Board, to receive the approval of a shareholders' meeting within 6 months of the end of the fiscal
year.
In the case that any of the following are applicable, it is necessary to present the annual financial statements to a certified public
accountant to receive an audit.
In the case that the business field is related to the raising of funds for the general public
In the case of issuing debt approval forms, etc.
In the case that the company is a publicly-traded company
Major accounting systems
Status of compliance with
international accounting standards
Accounting currency
The standard is accounting principles (PSAK) in compliance with the international financial reporting standards (IFRS)(Accounting principles for small and medium-sized enterprises: ETAP is also available)
Indonesia rupiah-denominated or US dollar-denominated (in the case that this is permitted by
the Ministry of Finance)
Related laws and regulations Company Law, Capital Market Law, etc.
Booking language Indonesian or a foreign language (in the case that this is permitted by the Ministry of Finance)
Accounting period 12 months (establishment of the fiscal year is optional but mainly December settlement of
accounts)
Books maintenance period As a general rule, 10 years
(Source) Prepared by the Mizuho Bank Global Strategic Advisory Department based on "Investment, M&As, Company Law,
Accounting and Taxation, and Labor in Indonesia,” etc.
Accounting and taxation-related information (ii) ~ Taxation
5
The major taxes in Indonesia are as follows.
Note should be made of the prepaid import tax (PPH 22) and domestic income tax withheld at source (PPH 23), etc. which are distinctive tax systems in Indonesia.
Corporate
income tax
Individual
income tax (PPH
21)
Value added tax
Export and
import duty
Land and
building tax
Overseas income
tax withheld at
source (PPH 26)
Luxury-goods
sales tax
Stamp duty
25%
The following taxes are stipulated based on taxable income.
50 million rupiahs or less: 5%; more than 250 million rupiahs to 500 million rupiahs or less: 25%
More than 50 million rupiahs to 250 million rupiahs or less: 15%; more than 500 million rupiahs: 30%
10% with respect to the sale of goods and the provision of servicesIn the case of exports the tax is exemptedAnimal feed, agricultural goods, mining products, medical health services, public transportation, educational services, social welfare services, mail services, etc. are non-taxable
The import duty is taxable at the tax rate of 0% to 150% of the appraised customs value of the imported goods.
(Japan and Indonesia concluded a bilateral free trade agreement in 2008. Exports from Japan: 90% tax reduction. Exports from Indonesia: 93% tax reduction)
This is based on the government construction sales price decided by the Ministry of Finance every three years and applies a uniform 0.5% of the following taxable amountsIn the case of less than 1, billion rupiahs: 20% of the government construction sales price In the case of 1, billion rupiahs or more: 40% of the government construction sales price
Withholding tax with respect to foreign services: basic tax rate of 20% (dividends, interest, royalties, etc. remitted overseas. In the case that there is a tax treaty, the tax is in accordance with that treaty.) Based on the tax treaty, the rate for Japan is 10% (in the case of dividends to Japan, if the investment ratio is 25% or more: 10%; if the investment ratio is less than 25%: 15%)
The tax rate of the luxury-goods sales tax is 10% to 75%, and the items subject to the tax are classified into seven taxable categories based on their degree of luxury.They are taxable only once, either when a manufacturer of luxury goods delivers the luxury goods or when the luxury goods are imported. Dairy products, juices, carbonated drinks, cosmetics, photographic film, carpets, rugs and mats, etc. are outside the scope of the taxation
For notarial deeds, contracts, receipts, checks, etc. the stamp duty is 6,000 rupiahs when the money value stated in the document is more than 1 million
rupiahs and 3,000 rupiahs when the money value stated in the document is 1 million rupiahs or less.
(Source) Prepared by the Mizuho Bank Global Strategic Advisory
Department based on JBIC materials and JCIF materials
Prepaid import
tax (PPH 22)
Importers that possess an import license (API): (general consumer goods): 2.5%
Importers that do not possess an import license (API) and consumer goods other than the above: 7.5%
Domestic income
tax withheld at
source (PPH 23)
Withholding tax with respect to domestic services: basic tax rate of 15% (dividends, interest (bank interest is separate), royalties, etc. that are generated inside
Indonesia)
Tax rate with respect to other domestic service-related fees: 2%
Entry format (i) ~ Overview
6
The basic investment and entry format in Indonesia is as follows.
In the majority of industry types entry using the branch format is not permitted, so the general approach is entry as a local
corporation
(Source) Prepared by the Mizuho Bank Global Strategic Advisory Department based on a full range of information
The basic investment and entry format in Indonesia
Direct investment (local subsidiaries: PT)
Entry using a branch is not permitted except
for some industry types such as financial
institutions, etc.
Establishment of a branch
Commercial activities are not permitted
Establishment of a representative office
100% foreign
investment
Joint ventures
Other
Investment by a single or
multiple foreign enterprises
Joint ventures with Indonesian
enterprises (state-run and private
sector) and individuals
Investment on the basis of
individual private sector and
government-affiliated projects
In the case of direct investment, there are the
following three basic formats.
1 2 3
Period necessary for formation: about 3~6
months Period necessary for formation: about 1.5
months
Foreign representative
office
Foreign representative
trading office
Foreign construction
company representative
office
Gathering of a full range of
information, formation of a local
corporation, preparation, etc.
Promotion, information
gathering, and buying and selling
agents are possible.
Construction service activities
through joint ventures with local
construction companies are
possible
In the case that activities for profit are included in
the content of the activities in Indonesia, formation
of a local corporation becomes an option
In the majority of industry types the branch format
is not permitted
If only auxiliary operations (mediation for the
overseas parent company, sales promotion, and
information gathering) are to be carried out, the
representative office format also becomes an
option. (In the case of a construction business,
partial operations are possible.)
Entry format (ii) ~ Local subsidiaries
7
The local subsidiaries of foreign-owned enterprises may be founded either using 100% foreign capital or in joint ventures with
Indonesian enterprises. Depending on the business field, there are investment restrictions so confirmation of the "negative investment list (Daftar Negative Investasi: DNI)” is necessary.
Enterprises formed by foreign enterprises are foreign investment enterprises (PMA enterprises: Perusahaan Penanaman Modal
Asing).
Regarded as an Indonesian enterprise regardless of the nationality of the share owners, and compliance with Indonesian law is
necessary.
Stock companies are classified as follows based on the number of shareholders, the minimum capital amount, and whether or
not they are registered in a stock market.
(Source) Prepared by the Mizuho Bank Global Strategic Advisory Department based on a full range of information
Non-public companies (PT Tertutup)
[Example company name: PT●●●]
Minimum number of shareholders: 2
Minimum paid-in capital: 50 million rupiahs
(However for foreign investment
enterprises, the minimum paid-in capital is
over 2,500 million rupiahs under the
Regulation of Chairman of Investment
Coordinating Board)
Minimum number of directors: 1
Application to the Ministry of Law and Human
Rights to receive permission for the business
Public stock companies (PT Tbk)
[Example company name: PT●●● Tbk]
Public companies
(Perseroan Publik)
Companies registered in the
securities markets
(Emiten)
Minimum number of shareholders: 300
Minimum paid-in capital: 3 billion
rupiah
Application of the regulations of the
Capital Market Supervisory Agency
for the protection of shareholders
Application of the Stock Companies
Law
Company registered on a securities
Submission of a registration
notification to the Capital Market
Supervisory Agency in order to sell
shares to the public
⇒ Listing on a stock market
Stock companies (PT)
Entry format (iii) ~ Representative offices
8
(Source) Prepared by the Mizuho Bank Global Strategic Advisory Department based on materials disclosed by the authorities,
JETRO materials, etc.
Operated by one or multiple representatives appointed by foreign enterprises or joint venture enterprises between foreign enterprises
Representative offices are classified into three types based on their business format and purpose, and their conditions for permission and functions differ.
(i) Foreign representative offices Kantor Perwakilan Perusahaan Asing: KPPA
(ii) Foreign representative trading office Perwakilan Perusahaan Perdagangan Asing
(iii) Construction representative offices*
Perwakilan Badan Usaha Jasa Konstruksi Asing
Purpose Foreign investment enterprise formation and
development preparation, etc.
Market research and promotion Provision of a construction service in Indonesia
Activ
ities conten
t
Company formation preparation operations
Supervision and adjustment of the business of the
related local subsidiaries in Indonesia
The validity period is 3 years but extension is possible
Introduction and promotion of the sales of products
manufactured in foreign countries
Market surveys and management sales
Conclusion of export contracts with local enterprises
The validity period is 1 year but extension is possible.
Communicating with individuals, corporations, and
government institutions in order to open up the
construction service market.
It is possible to provide a construction service in
Indonesia without forming a local subsidiary, by
concluding joint work contracts with local construction
companies (Joint Operation). However, it is necessary to
satisfy the conditions on P35.
The validity period is 3 years but extension is possible.
Restrictio
ns
The following activities cannot be implemented.
Producing income from export and import and buying
and selling transactions
Involvement in the running of the operations of the
group companies
The following activities cannot be implemented.
Direct transactions, sales activities
Bidding, complaints processing
Export and import operations (Note) A contract with a local
agency is necessary.
Technology transfers to the local construction
companies, the joint work partners, must be guaranteed.
Em
plo
yee
requ
iremen
ts
It is necessary for the representative to reside in
Indonesia.
It is not mandatory to employ Indonesian people.
It is possible to nominate a foreign national as the head
of the firm.
The employed foreign nationals must be university
graduates or above or be equivalent to university
graduates, and have at least 3 years of experience in
that field.
It is mandatory to employ 3 Indonesian people for each
one foreign national employed.
In the case foreign workers are hired, it is necessary to
employ Indonesian people who have about the same
level of ability.
* • It is necessary to conclude a JO contract with local construction enterprises that have a construction license.• The JO operational structure shall be in accordance with all of the provisions. (Minister of Public Works provisions No05/PRT/M/2011 ⇒ amended to the No.10/PRT/M/2014 dated September 22, 2014)
Investment promotion
Indonesia has 32 industrial parks that offer the following preferential treatment systems for companies expanding into Indonesia
(Source) Prepared by the Mizuho Bank Global Strategic Advisory Department based on JETRO and JCIF materials, etc.
Encouraged investment
Preferential
treatments by
industry type
Preferential treatment
systems for foreign capital
Preferential
treatments by
region
Other preferential
treatments
Preferential treatment
systems in the Eastern
Region of Indonesia
(KTI)
Preferential treatment
systems in bonded
zones (KB)
Preferential treatment
systems in free trade
zones (FTZ)
Exemptions from
import duties
Tax allowances
Corporate tax allowances
Tax holidays
Temporary exemptions from
corporate tax
Preferential treatment
systems in Integrated
Economic Development
Zones (KAPET)
9
Regulations related to the Company Law
10
The current Company Law of Indonesia was established in 2007 and is comprised of a total of 161 articles.
The commercial law of Indonesia has been greatly influenced by the law of the Netherlands, and even in the modern era when the Company Law was established systems derived from the law of the Netherlands such as the system of the Komisaris Board, etc. survive.
The highest law regulating investment activities by foreign enterprises with respect to Indonesia is the Investment Law.
The first legal procedures when forming PMA (foreign capital) enterprises are application to the Investment Coordinating Board (BKPM) for basic investment permission and acquisition of the basic investment permission.
The positioning of the Company Law
(Source) Prepared by the Mizuho Bank Global Strategic Advisory Department based on JETRO materials, Ministry of Justice materials, etc.
Major points of difference from the stock companies of Japan
“Company” under the Company Law means a stock company (Perseroan
Terbatas), and the liability of the stockholders is limited liability in the same
way as for stock companies in Japanese law.
Stock companies are classed as “non-public companies” and “public
companies (Perseroan Terbuka)" and the latter are classed as "major
companies (Perseroan Publik)" and "companies which make public share
offerings." (Most Japanese enterprises take the format of non-public
companies.)
In Indonesia, unlike Japan, stock companies with one shareholder are not
permitted, and a minimum of 2 shareholders is necessary even in business
fields in which foreign capital with a 100% stake is possible.
If 2 shareholders are formally in place, for example the parent company in
Japan and its representative director, etc., then the requirement under the
Company Law is satisfied regardless of the relationship between the
minimum 2 shareholders.
The matters that it is necessary to state in the Articles of Incorporation
(Anggaran Dasar), the fundamental principles of a stock company, are
largely similar to the Articles of Incorporation in Japanese law, and as long
as the provisions of the Company Law are not violated the stipulation of
optional provisions in the Articles of Incorporation is permitted.
Permissiveness regarding formation Stock companies are formed when 2 or more individuals or corporations
(hereinafter referred to as “incorporators”) prepare a formation notarial deed and obtain the permission of the Minister of Law and Human Rights.
Each of the incorporators must subscribe to some of the shares of the company; therefore a minimum of 2 shareholders exist in stock companiesfrom the time of their formation.
Stipulation of the minimum capital amount Under the Company Law, authorized stated capital must be a minimum of 50
million rupiahs Under the Investment Coordinating Board Chairman rules, PMA (foreign
capital) enterprises are required to have an investment amount (the stated capital and the business funds procured through borrowings) of over 10 billion rupiahs and paid-in stated capital of 2.5 billion rupiahs or more, and the minimum paid-in capital under the Company Law is not applied. (There are minimum paid-in capital requirements under the Commerce Law forspecific industry types.)
Komisaris Boards These are institutions that supervise the company management by the Board
of Directors and offer advise regarding management to the Board of Directors (institutions similar to the board of company auditors in Japan).
Under the Company Law, each Komisaris bears the duty of care of a good manager with respect to companies in the same way as the directors, and in the case that the company incurs damages due to a violation by a Komisaris, said Komisaris bears liability as an individual to pay compensation for thedamages to the company.
11
Guide to the Indonesian branch of Mizuho Bank
LocationSinar Mas Land Plaza Menara 2, 24th Floor, Jl. M.H. Thamrin No.51, Jakarta 10350, Republic of Indonesia
Main telephone line
62-21-392-5222
Business days Monday to Friday
Business description
Deposits
Loans
Issuance, document registration, and
confirmation of export and import letters of
credit
Underwriting and collection of trade bills
Remittances and forward exchange contracts
Guarantees
PT. Bank Mizuho Indonesia
Access from the airport
Taxi: approximately 60 minutes
約30km/60分
タクシー利用:通常時
スカルノハッタ国際空港
ジャカルタ市内中心部
当社オフィス
日本大使館
PT MHCT Consulting Indonesia
12
Guide to local companies in Indonesia related to the Mizuho Financial Group (i)
Area around the officeLocation
Wisma Nusantara 25th Floor,
Jl. M.H. Thamrin No.59, Jakarta 10350,
Republic of Indonesia
Overview
of the
enterprise
Major operations: consulting operations
Advisory operations
Mizuho Bank investment ratio: 100%
Business
description
Started business in September 2015 as a local
corporation offering support for entry into
Indonesia to Japanese enterprises, etc.
Provides a consulting service regarding
business reorganization and meeting the
requirements of local regulations
Approximately
30km/60 minutes
Taxi use: at normal times
Embassy of Japan
Our office
Jakarta city center
Soekarno–Hatta
International Airport
PT Mizuho Balimor Finance
13
Guide to local companies in Indonesia related to the Mizuho Financial Group (ii)
Location
Grha 137 Building, 7th Floor,
Jl. Pangeran Jayakarta No.137, Jakarta 10730,
Republic of Indonesia
Overview
of the
enterprise
Major operations: automobile loan and lease
operations
Mizuho Bank investment ratio: 51%
Business
description
In 2011 Mizuho acquired 51% of the shares
issued by Balimor Finance, converting said
company into a consolidated subsidiary of the
Bank.
Provides an automobile-related finance
business in Indonesia (centered on the
automobile loan and lease business)
14
Business alliance ~ Bank Negara Indonesia
(i) Collaboration regarding liquidity
⇒Mutual exchange of the dollars possessed by Mizuho and the rupiahs possessed by BNI
(ii) Collaboration in the funds management service
⇒ Provision of a cash management service utilizingthe broad network of BNI
(iii) Collaboration regarding the retail business for
clients
⇒ Provision of a retail banking service including accounts for receiving salaries, credit cards, etc.
(iv) Collaboration regarding cross-border
M&As/business matching
⇒Mashing the investment needs of Mizuho clients with the investment acceptance needs of BNI clients
(v) Support for the provision of information to BNI
clients
⇒ BNI will be able to provide information to its clients utilizing Mizuho’s global network
In February 2013 Mizuho Bank concluded an MOU (memorandum of understanding) regarding a business alliance with Bank
Negara Indonesia (BNI). This makes working together in a wide range of fields possible, including utilizing the network
covering all of Indonesia possessed by BNI for our customers, the introduction of business mashing destinations, the use of the
retail banking service, etc.
• Bank Negara Indonesia (BNI) is the fourth-largest state-run bank in Indonesia by asset size. In 1996 it
became the first state-run bank to achieve listing on a
stock market. Its domestic branch network consists of
approximately 920 branches. Its distinguishing feature
is that it has a client base of blue-chip local enterprises,
centered on state-run enterprises. It is the only state-run
bank of Indonesia that has a branch in Tokyo.
[Main prizes, etc. won by BNI]
• Best Local Cash Management Award
⇒Won an award at Asia Money (2010, 2011, 2012, and 2015)
• Best Cash Management Solution Provider in
Southeast Asia
⇒Won an award at Alpha South East Asia (2011) • Became a funds management bank for leading oil and
gas enterprises
⇒ PT. Medco E&P Indonesia, Total EP Indonesia etc.
Content of the alliance Overview of Bank Negara Indonesia (BNI)
Disclaimer
15
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