Legal & Regulatory
By: Winnindo R&D Team
Editor: Samuel Glickstein
The Indonesian government recently published its fourth revision of Regulation No. 23 2010, which governs the country’s mineral and coal mining sector.
The government also published two decrees for the Ministry of Energy and Mineral Resources to implement the regulation: Ministerial Decree No. 5 and Ministerial Decree No. 6. Ministerial Decree No. 5 concerns the increase of the added value of minerals for domestic processing and purification and Ministerial Decree No. 6 Year involves the export agreement.
According to Ministerial Decree No. 5, holders of mining production and operation licenses, special mining production and operation licenses, as well as mining production and operation licenses that specialize in processing and purification are obligated to fulfill minimum processing and/or purification requirements. Companies may process and purify minerals individually or through joint ventures.
In addition, this decree stated that low-grade nickel that is less than 1.7 percent and low-grade bauxite that is less than 42 percent must be purified at a minimum of 30 percent of smelter capacity. If the domestic demand for low-grade nickel and low-grade bauxite is met, the unpurified surplus of minerals can be exported.
However, the work contract holder can only sell their purified products to foreign markets after they meet the minimum purification requirement. The government has provided an opportunity for work contract holders as well as holders of different types of mining production and operation licenses to sell their mineral concentrate overseas for the next five years. This period began on the date that the government issued both Ministerial Decrees.
The requirement to change from work contracts to special mining production and operation licenses commits each firm to build a smelter. Firms must also pay a maximum 10 percent in exit customs according to their progress in building smelters. Companies may only export their products after their export application is approved by the Directorate General on behalf of the Minister of Energy and Mineral Resources.
Ministerial Decree No. 6 states that before acquiring an export permit, the holder of the mining production and operation license must first obtain approval from the Directorate General.
In order to obtain approval, the holder of the production and operation license must submit an export application to the Minister for Energy and Mineral Resources c.q. Directorate General of Mineral and Coal. Although these decrees have only recently been announced, they have the potential to contribute to the development of Indonesia’s mining industry.
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Dezan Shira & Associates Brochure
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.
An Introduction to Doing Business in ASEAN 2016
An Introduction to Doing Business in ASEAN 2016 introduces the fundamentals of investing in the 10-nation ASEAN bloc, concentrating on economics, trade, corporate establishment and taxation.We also include the latest development news in our “Important Updates” section for each country, with the intent to provide an executive assessment of the varying component parts of ASEAN, assessing each member state and providing the most up-to-date economic and demographic data on each.
An Introduction to Foreign Investment in Indonesia
Indonesia stands out in the ASEAN region for its competitive wages, large labor pool, and burgeoning domestic market. With a population exceeding 250 million, the country is poised to become an immensely lucrative market as it develops further and the urban consumption class continues to grow. In this inaugural issue of Indonesia Briefing magazine, we examine these trends, and highlight how Indonesia has made enormous strides in streamlining and liberalizing its business environment.
The Guide to Manufacturing in Indonesia
Choosing if, where, and how to establish foreign manufacturing operations in Indonesia can be a significant challenge. While the archipelago’s vast diversity may initially seem daunting, a number of options are available which will allow entry and operations to be conducted in a seamless manner.In this issue of ASEAN Briefing, we discuss the growing importance of Indonesia as a hub for manufacturing within Southeast Asia, and provide guidance on how to select and establish operations within the country.
By: Winnindo Business Consult
Editor: Dustin Daugherty
As a country with a population exceeding a quarter billion – by far the largest in ASEAN – Indonesia is an alluring market for foreign companies to promote and sell their products and services w. With a young population (the median age is 29 years, which is low by regional standards) and a large and growing middle class, many foreign businesses have established Indonesian subsidiaries to tap into the large market.
However, in many cases – especially for small and medium-sized enterprises (SMEs) or other investors lacking the resources of multinational corporations – it is prudent to ease into the market slowly with a less expensive and lighter footprint to explore opportunities and gain market insights before committing to larger investments. For companies looking to conduct market research, identify potential partners, provide post-sales service or other support services, or even oversee the execution of commercial agreements with local partners, a Representative Office (RO) offers a low risk and low cost local presence. An RO can be an ideal structuring option to take advantage of Indonesia’s vast potential without committing substantial investment capital for patient investors initially content to conduct more limited activities and without a need to generate revenue locally.
By: Dezan Shira & Associates
Editor: Samuel Glickstein
Foreign firms in Indonesia can protect their investments by familiarizing themselves with the country’s intellectual property rights (IPR) landscape. Indonesia possesses a strong legal IPR framework that generally meets international standards. The country is a member of the World Trade Organization (WTO) and has acceded to the Agreement on Trade-related Aspects of Intellectual Property (TRIPs Agreement). Furthermore, Indonesia has ratified most major international IP agreements, including the Paris Convention and the Berne Convention. In 2014 the Indonesian government amended the 2002 Copyright Law to improve the efficiency and effectiveness of the country’s IPR system and protect copyright owners. The changes include extending copyright protections for most types of works from 50 years to 70 years after the death of the author, outlawing the illegal upload and download of copyrighted material for commercial purposes, creating harsher penalties and criminal sanctions for copyright violations, and establishing landlord liability for “deliberately and knowingly” permitting the sale or duplication of copyright infringing products.
However, it is difficult to safeguard and enforce IPR in Indonesia. The Office of the United States Trade Representative has placed Indonesia on its Special 301 Priority Watch List, a list of trading partners that experience IPR protection and enforcement issues. Counterfeiting as well as physical and online piracy are common in Indonesia. According to the International Intellectual Property Alliance, 86 percent of business software in the archipelago is unlicensed and retail piracy rates are likely even higher. Investigators from the Directorate General of Intellectual Property (DGIP) do not have authority to arrest people and must cooperate with the police for enforcement action. IP owners in Indonesia must file formal complaints with the police before authorities can take action. Carrying out raids on businesses that violate IPR in Indonesia is an expensive and time-consuming process because the police must interview witnesses.
By: Dezan Shira & Associates
Editor: Samuel Glickstein
In March 2016, the Indonesian Ministry of Trade (MOT) issued Regulation No. 22 of 2016 on General Provisions on the Distribution of Goods. This law explains how goods can be distributed directly and indirectly within Indonesia. It defines a number of terms in Indonesian law including, distributors, sub-distributors, agents, sub-agents, grocers, retailers, etc. Furthermore, this regulation states that importers and distributors must go through retailers to sell their goods to consumers.
However, prevailing analysis on Regulation No. 22 indicates that changes it puts forward are meant for domestic companies and not foreign investment.
RELATED: Corporate Establishment Services from Dezan Shira & Associates
Distribution Via Local Partnerships
Foreign investment (PMA) companies are currently subject to regulation under Ministry of Trade Regulation No. 11 of 2006, which prohibits PMA companies from directly selling their goods to retailers. According to this regulation, PMA companies have to appoint a local distributor/agent to sell goods to a retailer. Then the retailer can sell the original products to consumers. Therefore, PMA companies must add another layer to their distribution chains, which will likely increase the price of their products.
The inaugural issue of Indonesia Briefing magazine, titled “An Introduction to Foreign Investment in Indonesia“, is out now and available to subscribers as a complimentary download in the Asia Briefing Publication Store.
- Navigating Indonesia’s Foreign Investment Environment
- Indonesia’s Updated Negative List: New Opportunities for Foreign Investment
- Establishing a Representative Office in Indonesia
- Understanding Tax Treatment of Representative Offices in Indonesia
By: Dezan Shira & Associates
Editor: Cameron Turnbull
On February 17th, 2016, Indonesian president, Joko Widodo, announced plans to further liberalize his nation’s economic policy’s 10th economic stimulus package aimed at stimulating foreign direct investment.
Indonesia has long been on the radar of international investors as a rapidly developing region with serious potential. More stable and diversified than many believe, domestic consumption represents 56 percent of total GDP. This is higher than fellow ASEAN member countries Malaysia (52.4 percent) and Thailand (52.2 percent). It also dwarfs the domestic consumption of Asian economic giant China, which comes in at just 36.5 percent.