foreign investment in distributor business sector
1. Investment Negative List
The President Regulation No. 10 Year 2021 on Investment Business Sectors as amended by President Regulation No. 49 Year2021 (“PR 49”) stipulates that all business sectors are open for investment except those sectors which are listed as being closed for Investment or which activities are conducted only by Central Government.
The business sectors open for Investment consist of (a) prioritized business sectors as they are listed in Attachment 1 to PR 49, (b) business sectors which are allocated for micro, small and medium scale business as they are listed in Attachment 2 to PR 49, (c) business sectors which are open with certain restrictions as listed in Attachment 3 to PR 49 [namely they are restricted only for domestic investment, limited foreign owned, or require specific licensing] and, (d) business sectors which are not included in (a), (b) and (c) above.
The previous regulation also stipulated the similar provision that all business sectors which were not listed as being closed for Investment nor be they listed as being open with certain restrictions, are open for Investment.
2. Trading as Distributor
Trading as distributor which were not affiliated to the products were listed under the previous regulation as being open with certain restriction namely restricted for foreign investment up to 67% foreign owned.
Currently under PR 49, no trading as Distributor is listed as being closed nor be it only carried out by Central Government nor be it listed in Attachments 1,2 and 3 of PR 49 as being prioritized, allocated for small scale business actors or open with certain restrictions.
Thus, trading as Distributor is open for investment without capital restriction as it was required under the previous regulation.
3. Other Requirements
Notwithstanding trading business sector as distributor is open for foreign investment with 100% capital foreign owned, Minister of Trade Regulation (“MOTR”) No. 24 Year 2021 on Agreement for Distributing goods by Distributor and Agent (MOTR 24/2021) requires a distributor/supplier which is a foreign investment to appoint an Indonesian national company (PMDN) as distributor/sole distributor/agent.
The appointment shall be made in an agreement legalized by an Indonesian notary as required under Article 4 and Article 6 of MOTR 24/2021 and that such agreement must obtain a prior written approval from the principal of the goods. If the appointment agreement is written in foreign language, it must be translated into Indonesian language by sworn translator.
Further, being a foreign investment company, some requirements are required, among other as follows:
(a) Minimum total investment value shall be more than Rp 10.000.000.000 (ten billion Rupiah) excluding investment value for land and building per the first four digits of the KBLI code as regulated under Article 189 (3) of the Government Regulation No.5 Year 2021 on Risk-Based Business Licensing (GR 5/2021).
(b) Distribution activities are subject to the type of goods/products to be distributed, which correspond to the applicable KBLI number. Under GR 5/2021, distribution activities have various risk levels namely low risk, medium risk and high risk, which determines the business licensing requirements.
Disclaimer: This article is intended as general information only and it does not constitute a legal advice. We accept no responsibility for any loss that may arise from reliance on this information. Please contact us if you need full legal advice.
The President Regulation No. 10 Year 2021 on Investment Business Sectors as amended by President Regulation No. 49 Year2021 (“PR 49”) stipulates that all business sectors are open for investment except those sectors which are listed as being closed for Investment or which activities are conducted only by Central Government.
The business sectors open for Investment consist of (a) prioritized business sectors as they are listed in Attachment 1 to PR 49, (b) business sectors which are allocated for micro, small and medium scale business as they are listed in Attachment 2 to PR 49, (c) business sectors which are open with certain restrictions as listed in Attachment 3 to PR 49 [namely they are restricted only for domestic investment, limited foreign owned, or require specific licensing] and, (d) business sectors which are not included in (a), (b) and (c) above.
The previous regulation also stipulated the similar provision that all business sectors which were not listed as being closed for Investment nor be they listed as being open with certain restrictions, are open for Investment.
2. Trading as Distributor
Trading as distributor which were not affiliated to the products were listed under the previous regulation as being open with certain restriction namely restricted for foreign investment up to 67% foreign owned.
Currently under PR 49, no trading as Distributor is listed as being closed nor be it only carried out by Central Government nor be it listed in Attachments 1,2 and 3 of PR 49 as being prioritized, allocated for small scale business actors or open with certain restrictions.
Thus, trading as Distributor is open for investment without capital restriction as it was required under the previous regulation.
3. Other Requirements
Notwithstanding trading business sector as distributor is open for foreign investment with 100% capital foreign owned, Minister of Trade Regulation (“MOTR”) No. 24 Year 2021 on Agreement for Distributing goods by Distributor and Agent (MOTR 24/2021) requires a distributor/supplier which is a foreign investment to appoint an Indonesian national company (PMDN) as distributor/sole distributor/agent.
The appointment shall be made in an agreement legalized by an Indonesian notary as required under Article 4 and Article 6 of MOTR 24/2021 and that such agreement must obtain a prior written approval from the principal of the goods. If the appointment agreement is written in foreign language, it must be translated into Indonesian language by sworn translator.
Further, being a foreign investment company, some requirements are required, among other as follows:
(a) Minimum total investment value shall be more than Rp 10.000.000.000 (ten billion Rupiah) excluding investment value for land and building per the first four digits of the KBLI code as regulated under Article 189 (3) of the Government Regulation No.5 Year 2021 on Risk-Based Business Licensing (GR 5/2021).
(b) Distribution activities are subject to the type of goods/products to be distributed, which correspond to the applicable KBLI number. Under GR 5/2021, distribution activities have various risk levels namely low risk, medium risk and high risk, which determines the business licensing requirements.
Disclaimer: This article is intended as general information only and it does not constitute a legal advice. We accept no responsibility for any loss that may arise from reliance on this information. Please contact us if you need full legal advice.