Indonesia to loosen foreign investment rules for local start-ups

Out-Law News | 28 Jan 2021 | 6:23 am |

Foreign investment in tech start-ups in special economic zones (SEZ) in Indonesia will be exempted from minimum standards applied to other types of foreign investment.

The Indonesian government has announced a draft presidential regulation that flows from the Job Creation Law. Under the regulation foreign investment in local tech start-ups does not have to meet the minimum capital requirement of Rp10 billion ($710,111).

Brian Scott of Pinsent Masons, the law firm behind Out-Law, said: “Foreign capital investment rules in Indonesia have historically set a minimum amount of capital to be injected at the outset to set up a business. This could act as a hindrance for investors looking to establish companies and contrasted with the position in places such as Singapore.”

“The proposal to remove or reduce a minimum capital threshold to establish a business and create more flexibility is a welcome one. It is in line with the general drive to make capital investment in Indonesia easier to implement. Indonesia can be confident in its capabilities and successes in tech-driven businesses. Loosening an arbitrary threshold that owed more to the ‘old economy’ can help draw investment from businesses and entrepreneurs that want to be active in Indonesia but value speed and flexibility,” he said.

The Job Creation Law was signed in November.