Facing an economic slowdown, the Indonesian government is set to revamp laws on foreign ownership in certain sectors, starting with tourism investments.
To many foreigners, doing business in Indonesia has long been an attractive opportunity. The country is strengthening in terms of spending power, demographics, and diversity. It’s also becoming a world-renowned hotspot for tourism.
Unfortunately, the prospect of legally doing business in Indonesia comes with caveats, especially in the case of foreign ownership in businesses that take money out of the local economy. Most sectors have caps in place that limit foreign ownership to a maximum of 51 percent, as of 2014; the latest official revision of the government’s Negative Investments List. Historically, foreign firms have been made to jump through hoops just to operate legally in the archipelago.
Sizeable companies looking to do business in Indonesia without a local partner must usually set up a foreign investment entity. Indosight, a market entry service for foreign businesses in Indonesia, says this typically means a firm must have around US$1 million in capital on paper, with 25 percent of that amount paid upfront into an Indonesian bank account. This is not an easy thing for small or medium-sized enterprises looking to tap into the nation’s tourism sector. If foreigners want to be cowboys about it – and many do – they need to find a trusted local partner to act as the business owner. It happens more often than some might think
Indonesia’s Tourism Sector to Take on Foreign Investment
