HIGH OPENNESS TO FOREIGN INVESTMENT
For foreign investors, openness is measured in two ways: how many sectors investors can enter, and how much of a company can be owned- since 2021, Indonesia has made significant progress in both areas.
For a long time, investing in Indonesia started with a list of restrictions. Under the old Negative Investment List, the government set out which business fields were closed to foreign money and which were open only with conditions attached, usually an ownership cap or a mandatory local partner. Working out where you actually stood came with a lot of legal uncertainty, requiring sector checks and a fair amount of patience.
The 2021 reform flipped that starting point: issued as one of the implementing rules of the Job Creation Law, Presidential Regulation 10/2021 (later amended by Perpres 49/2021) replaced the negative list with a Positive Investment List. The logic is that business fields are generally open unless the rules say otherwise. Investors no longer read the list to find what's allowed; instead, they read it to find the exceptions.
The list of closed business fields was narrowed down from 20 to six with fields open only with specific requirements dropped from 350 to 46. A new category of 245 priority sectors was added, many of which are eligible for tax holidays and other incentives. Every activity is mapped to a KBLI code, Indonesia's standard business classification, which gives investors a clearer legal reference when checking a specific line of business, lowering the barrier to entry.
In practice, sectors like telecommunications, construction, distribution, energy and transportation, which were previously closed or capped, are now far easier to enter. In many eligible fields, a foreign investor can own 100% of a PT PMA without a local joint-venture partner and keep full control of the capital and technology it brings in.
On top of everything, if your business field is part of a national strategic project, export-oriented, labour or capital intensive, or built on advanced technology, it likely qualifies as a priority sector, where the government is actively trying to allocate most capital. So it is where things get interesting.
The biggest perk is the tax holiday. In pioneer industries such as base metals, petrochemicals and semiconductors, investments of at least IDR 500 billion can receive a full corporate income tax exemption for 5 to 20 years, depending on how much is invested, followed by two years at a 50% reduction. For projects between IDR 100 billion and IDR 500 billion, you can still get a 50% cut for five years.
Whereas for investors who don't qualify, there is still the tax allowance that offers a smaller but broader benefit: a deduction equal to 30% of the investment value, spread over six years. There are also super deductions of up to 300% on R&D spending and 200% on vocational training costs, plus import duty exemptions on machinery and raw materials.