2022-03-25-莱坊-Indonesia_Industrial_Property_Investment_Guide_2021_2021_37页_7mb

Indonesia Industrial Property Investment Guide Summary

Core Content

This document provides a comprehensive overview of Indonesia's industrial property investment landscape, highlighting the country's regulatory environment, economic potential, and key legal and tax considerations for foreign investors. It serves as a guide to assist investors in understanding the legal and operational framework for industrial investments in Indonesia, particularly in the context of the Omnibus Law on Job Creation and the broader economic and infrastructure development plans.

Key Economic and Demographic Highlights

• Population: Indonesia is the world's fourth most populous country, with over 260 million people, and is projected to have a productive age group of 70% by 2030.
• Middle Class Growth: The number of established middle class consumers is expected to rise from 26 million in 2017 to 65 million in 2030.
• Economic Outlook: Indonesia is forecast to become the world's fourth-largest economy by 2050, valued at US$10.5 trillion.
• Industrial Contribution: The manufacturing industry contributed approximately 20% to Indonesia's GDP in Q2-2020.
• Infrastructure Spending: In 2020, the infrastructure budget reached Rp419 trillion, with significant investments in roads, railways, sea transport, and other sectors.
• Investment Grade Status: Indonesia has been rated as an Investment Grade Country since 2017 by Sovereign Debt Rating Agencies.

Industrial Estates and Major Locations

• Map of Industrial Estates: Includes Greater Jakarta, Surabaya, Semarang, Medan, Batam, and Makassar.
• Key Industrial Zones: These zones are strategically located and serve as hubs for various industries, with access to major infrastructure and workforce.

Legal and Regulatory Framework

• Omnibus Law on Job Creation (2020): A major legislative reform aimed at simplifying business operations, easing foreign ownership, and promoting job creation.
• Negative List: Regulates foreign shareholding limitations. Currently, 100% foreign ownership is allowed in sectors like property development, manufacturing, and trading.
• Ease of Doing Business: Indonesia has improved its ease of doing business rankings due to streamlined processes, digitisation, and the introduction of the Online Single Submission (OSS) system.
• Legal Entities: Foreign investors can establish either a Limited Liability Company (PT PMA) or a Foreign Representative Office (RO), with the latter being more cost-effective.

Investment and Legal Considerations

• PT PMA Requirements:

  • Minimum paid-up capital of IDR 2.5 billion.
  • Minimum investment of IDR 10 billion per business line.
  • Dual board structure (Directors and Commissioners).
  • Foreign nationals can be on the board, though a local Indonesian director is often recommended for smoother operations.

• RO Considerations:

  • No capital injection required.
  • Not a legal entity; cannot generate revenue, only conduct marketing and promotional activities.

• Compliance Post-Incorporation:

  • Monthly and annual tax filings.
  • Manpower and facilities reports.
  • Investment activities report.
  • Employee welfare and healthcare insurance registration.

Key Legal Aspects

Core Compliance

• Tax compliance
• Business identification
• Business licence
• Import licence

Fringe Compliance

• Employee welfare and healthcare insurance certificates
• Environmental permits
• Manpower and facilities reports

Specific Compliance

• Technical licenses/permits required for specific activities
• Sector-specific regulations

Transaction Terms

• Sales Price: In Rupiah, excluding VAT and other charges.
• Down Payment: Up to 20%, subject to negotiation.
• Balance of Payment: Generally within one month of down payment.
• Handover and Construction: Allowed after 100% payment and signing of SPA/AJB.
• Cost of Deed: Buyer is responsible.
• Building Permit License: Buyer is responsible.
• Future Expenses and Utilities: Buyer is responsible for all future charges and fees.

Lease Terms for Single-Factory Buildings (SFB)

• Base Rentals: In Rupiah per square meter per month.
• Lease Terms: Minimum of 2 years.
• Rent Frequency: Paid in advance, some annually.
• Rental Deposit: 3 months of gross rental.
• Rental Renewal: Based on market rates unless specified in lease.
• Service Charges: Governed by government regulations on costs like manpower, fuel, and other operational expenses.
• Tenant Improvements: Not typically required; SFBs are offered on an "as-is" basis.
• Building Signage: Tenant is responsible.

Disposal of Leases

• Subleasing/Assignment: Requires prior written notice and landlord approval.
• Early Termination: Only possible via a break clause (not common).
• Reinstatement: Tenant must return the building to its original condition, allowing for normal wear and tear.

Conclusion

Indonesia is transitioning into a new era of economic growth, with a strong focus on infrastructure, human capital, and manufacturing. The Omnibus Law and the OSS system are pivotal in enhancing the ease of doing business and attracting foreign investment. Understanding the legal and regulatory landscape is crucial for foreign investors to navigate the market effectively and capitalize on the opportunities presented by Indonesia's evolving industrial sector.