The Embassy of the Republic of Indonesia

DECREE OF THE STATE MINISTER FOR INVESTMENTS/HEAD OF THE INVESTMENT COORDINATING BOARD No. 38/SK/1999

CONCERNING

THE GUIDELINE AND PROCEDURE FOR FILING APPLICATIONS FOR INVESTMENTS SET UP IN THE FRAMEWORK OF DOMESTIC CAPITAL INVESTMENTS AND FOREIGN CAPITAL INVESTMENTS

CONSIDERATIONS

CHAPTER I : GENERAL PROVISIONS

CHAPTER II : APPLICATIONS FOR NEW CAPITAL INVESTMENTS

PART ONE : DOMESTIC INVESTMENTS

PART TWO : FOREIGN INVESTMENTS

PART THREE : SPECIFIC PROVISIONS ON CERTAIN BUSINESS SECTORS AND ACTIVITIES

    A. INVESTMENTS IN NON OIL/GAS MINING UNDER PMDN
         ARRANGEMENTS
    B. INVESTMENTS IN NON OIL/GAS MINING UNDER PMA
         ARRANGEMENTS
    C. REGIONAL REPRESENTATIVE OFFICE OF FOREIGN
         COMPANIES
    D. CAPITAL PARTICIPATION BASED COMPANIES

CHAPTER III : FIXED BUSINESS LICENCE (IUT)

CHAPTER IV : APPLICATIONS FOR EXPANSION OF INVESTMENTS

CHAPTER V : AMENDMENT OF CAPITAL INVESTMENTS

PART ONE : GENERAL REQUIREMENTS FOR AMENDMENT APPLICATIONS
PART TWO : CHANGE IN LOCATIONS OF PROJECTS
PART THREE : CHANGE IN LINES OF BUSINESS AND PRODUCTION
PART FOUR : CHANGE IN EMPLOYMENT OF FOREIGN PERSONNEL
PART FIVE : CHANGE IN INVESTMENTS AND SOURCES OF FINANCING
PART SIX : CHANGE IN SHARE OWNERSHIP OF PMA COMPANIES
PART SEVEN : CHANGE IN STATUS OF PMA COMPANIES INTO PMDN COMPANIES
PART EIGHT : CHANGE IN STATUS OF PMDN OR NON-PMA/ PMDN COMPANIES INTO PMA COMPANIES
PART NINE : EXTENSION OF PMDN AND PMA PROJECT COMPLETION PERIODS
PART TEN : MERGER OF COMPANIES
PART ELEVEN : CHANGE IN NAMES OF COMPANIES
PART TWELVE : CHANGE IN FORMS/PATTERNS OF PARTNERSHIPAND / OR BUSINESS PARTNERS ESPECIALLY FOR BUSINESS LINES REQUIRING PARTNERSHIP WITH SMALL-SCALE BUSINESSES

CHAPTER VI : CAPITAL INVESTMENT IMPLEMENTATION APPROVAL AND LICENCES

PART ONE : IMPORT OF CAPITAL GOODS
PART TWO : IMPORT OF BASIC/AUXILIARY MATERIALS
PART THREE : LIMITED IMPORTER'S IDENTIFICATION NUMBER (APIT)
PART FOUR : EXPATRIATE WORK PERMITS

CHAPTER VII : CAPITAL INVESTMENTS IN BONDED ZONES AND IN INTEGRATED ECONOMIC DEVELOPMENT ZONES (KAPET)

CHAPTER VIII : SANCTIONS

CHAPTER IX : MISCELLANY

CHAPTER X : TRANSITIONAL PROVISIONS

CHAPTER XI : CONCLUSION

DECREE OF THE STATE MINISTER FOR INVESTMENTS/HEAD OF THE INVESTMENT COORDINATING BOARD

No. 38/SK/1999

CONCERNING

THE GUIDELINE AND PROCEDURE FOR FILING APPLICATIONS FOR INVESTMENTS SET UP IN THE FRAMEWORK OF DOMESTIC CAPITAL INVESTMENTS AND FOREIGN CAPITAL INVESTMENTS THE STATE MINISTER FOR INVESTMENTS/HEAD OF THE INVESTMENT COORDINATING BOARD

Considering:

a. that within the framework of promoting economic activities and national development, it is necessary to create a business environment which is increasingly attractive and better guarantees the continuity of capital investments through a reform in licensing service;

b. that in order to facilitate service for investments in the framework of Domestic Investments (PMDN) and Foreign Investments (PMA), it is deemed necessary to increase the number of service centres, through a policy on the delegation of authority to grant opprovoWicences to institutions in regions and representative offices of the Republic of Indonesia;

c. that in order to support the policy as meant in point above, it is deemed necessary to re-improve the guideline and procedure for filing applications for investments and their settlement so as to be further adjusted to the provisions and regulations in force.

In view of :

Act No. I/I 967 jo Act No. I I/I 970 on Foreign Capital Investments (State Gazette of 1967 No. I Supplement to State Gazette No.2818 }o State Gazette of 1970 No.48, Supplement to State Gazette No.2943);
Act No.6/l 968 }o Act No. 12/1970 on domestic capital investments (State Gazette of 1968 No.33, Supplement to State Gazette No.2853 )o State Gazette of 1970 No.47, Supplement to State Gazette No.2944);
Act No. I/I 995 on limited liability companies (State Gazette of 1995 No. 13, Supplement to State Gazette No.3587);
Act No.9/l995 on small-scale businesses (State Gazette of 1995 No. 74, Supplement to State Gazette No.3611);
Government Regulation No.24/1986 jo No-9/1993 on the periods of licences for foreign capital investment companies (State Gazette of 1986 No. 32, Supplement to State Gazette No. 3335 Jo State Gazette of 1993 No.l3, Supplement to State Gazette No.3515);
Government Regulation No. 20/1994 on share owner-ship in companies set up under foreign capital investments (State Gazette oJ 1994 No. 28, Supplement to State Gazette No. 3552);
Government Regulation No. 20/1994 on share owner-ship in companies set up under foreign capital investments (State Gazette oJ 1994 No. 28, Supplement to State Gazette No. 3552);
Government Regulation No. 44/1997 on business partnership (State Gazette of 1997 No. 91, Supplement to Statute Gazette No. 3718);
Presidential Decree No. 26/1980 on the establishment of the Regional Investment Coordinating Board;
Presidential Decree No. 330981 )ls. No. 780982 No.113/1998 on the Investment Coordinating Board and Presidential Decree No. 25/1991 )o. No. 114/1998 on the status, tasks, functions and organisational structure of the Investment Coordinating Board;
Presidential Decree No. 17/1986 on the requirements for national share .ownership in foreign investment companies for equal treatment as domestic investment companies;
Presidential Decree No. 53/1987 on regional representative offices of foreign companies
Presidential Decree No. 53/1987 on regional representative offices of foreign companies;
Presidential Decree No. 750995 on the employment of expatriates;
Presidential Decree No. 410.996 on industrial estates;
Presidential Decree No. 89/1996 jo No. 90998 on the development of integrated economic development zones;
Presidential Decree No. 122M/1998 on the establishment of the Development Reforms Cabinet;
Presidential Decree No. 96/1998 on the negative list for capital investments;
Presidential Decree No. 99/1998 on the fields/types of business reserved for small-scale companies and the fields/types of business open to medium-scale or large-scale companies under business partnership;
Presidential Decree No. 183/1998 jo No. 370999 on the Investment Coordinating Board as already amended by Presidential Decree No. 121/1999;
The Decree of the 'State Minister for Mobilisation of investment Funds/Chairmann of the Investment Coordinating Board No. 15/SK/1994 on the implementation of share ownership in companies set up under foreign capital investments;
The Decree of the State Minister for Mobilisation of Investment Funds/Chairmann of the Investment Coordinating Board No. zZ/sK/1996 on the monitoring and evaluation, fostering, and control of capital investment realisation;
The Decree of the State Minister for Investments/Head of the Investment Coordinating Board No. 22/SW1 99 on capital participation in holding companies;
The Decree of the State Minister for Investments/Head of the Investment Coordinating Board No. 37/SK0999 on the delegation of authority to grant approval and facilities as well as implementation licences of investment to Governors/Heads of First-level regions.

DECIDES :

By revoking the Decree of the State Minister for Investments/Head of the Investment Coordinating Board No. 30/SKI1998 dated October 20, 1998 on the guideline and procedure for filing applications for Investments set up In the framework of domestic and foreign capital investments;

To stipulate:

THE DECREE OF THE STATE MINISTER FOR INVESTMENTS/HEAD OF THE INVESTMENT COORDINATING BOARD CONCERNING THE GUIDELINE AND PROCEDURE FOR FILING APPLICATIONS FOR INVESTMENT SET UP IN THE FRAMEWORK OF DOMESTIC CAPITAL INVESTMENTS AND FOREIGN CAPITAL INVESTMENTS

CHAPTER I GENERAL PROVISIONS Article I

Hereinafter referred to as :

Applications for new capital Investments are applications for approval of investments, luithin the framework of domestic investments (PMDN) as well as foreign Inuestrnents (PMA), along with relevant facilities, which are filed by prospective investors for setting up and running new; business undertakings.
Applications for expansion of capital investments are applications for approval of the increase/addition of capital along with relevant facilities to increase the installed capacity of production approved and/or odd the variety of goods/service produceduced.
Expansion of capital investments in the subsector of food crops and plantations is additional investments to finance one or more activities out of the following;

diversification, namely increasing the number of crop varieties; and/or
rejuvenation/rehabilitation which makes use of high yielding seedlings; and/or
intensification, namely Increasing production with - out expanding land; and/or
increasing the production capacity of the relevant processing unit; and/or
expanding crop planting areas; and/or
integrating business operations lulth upstream and downstream industries.

Restructuring is the activity of replacing main machinery (adding equipment or component of machinery) for quality enhancement or efficiency promotion of the process of production without increasing capacity.
Applications for amendment of capital investments are applications for approval of changes in investment provisions already stipulated in the previous investment approval.
PMDN approval Is the approval of investments along with facilities, which is granted within the framework of implementing Act No.6/l968 jo No.lZ/1970 on domestic investments (PMDN) and also effective as the principle approval or the provisional business licence.
MA approval is the approval of investments along with facilities, which is granted within the framework of implementing Act No. I/I 967 jo No. I I/I 970 on foreign investments (PMA) and also effective as the principle approval or the provisional business licence.
Approval of expansion is the approval of investments along with facilities to increase the installed capacity permitted and or the kinds of products and services.
pproval of amendment is the approval to moke changes in certain investment provisions already stipulated in the previous investment approval.
Approval of establishment of the regional representative office of foreign companies (KPWA) is the approval to set up a representative office in Indonesia which Is domiciled in Indonesia.
Holding is a capital portictpatton/share participation based company established in accordance with the provisions as meant in the Decree of the State Minister for Investments/Head of the Investment Coordinating Board No. 12/SW1999 doted June 8, 1999.
Capital investment implementation licences are licences from central-government and regional-administration agencies, which are needed for the realisation of investment approval.
Approval of investment facilities is the approval of the granting of investment facilities in the form of import duty facilities and other fiscal facilities as determined by the government.
The limited importer's identification number (APIT) is the identification ntimber serving as the licence to import capital goods and basic/auxiliary materials for use by relevant companies in the process of production of investment projects already approved by the government.

he decision on the plan for employment of foreign personnel (RPTK) is the approval of the planned number, functions and employment periods of foreign personnel needed as the basis for the approval of the entry of expatriates (TKWNAP) and the issuance of work permits forexpatriates (IKTA).
The decision on work permits for expatriates (IKTA) is the licence for companies to employ a number of expatriates in certain functions and period.
The fixed business licence (IUT) is the licence which shall be possessed by companies for the realisation of commercial production of goods as well as services, as the implementation of investment approval letters already previously obtained by companies
The expansion business licence is the licence which shall be possessed by companies for the realisation of commercial production in connection with the increase in production of goods as welt as services, as the implementation of investment expansion approval letters already previously obtained by companies.
Status change is the change in status of investments especially requested viz. the change from PMDN or non PMA/PMDN into PMA, or from PMA into PMDN, as a consequence of a change in share ownership.
Merger is the combination of 2 (two) or more companies set up under PMDN and/or PMA and/or non PMA/PMDN which have been engaged in commercial.production and have obtained IUT into a company, which will carry on all activities of the companies combined, while the merg ing companies are liquidated.
apital investment progress reports (LKPM) are periodic reports on the developments of activities of investment companies according to the model and procedure already laid down.
The bonded zone is a building, place or area with certain borders in which industrial business octitiuitles of goods and materials processing, designing, engineering, sorting, initial examination, final inspection and packaging of goods and materials derived from imports and other Indonesian custom are as whose production is destined for exports ore carried out.
The bonded zone operator is a state owned corporation in the form of Persero (state limited liability company} or an authority especial set up for the purpose of operating and or managing a bonded zone.
The Integrated Economic Development Zone (KAPET) Is a geographical region with certain borders fulfilling requirements, which has potential for rapid growth and/or has leading sectors capable of boosting the economic growth of surrounding areas and/or needs investments in surrounding areas and/or needs investments in large amounts for its development. KAPET is stipulated on the basis of Presidential Decree No.89/1996 }o No.9/1998.
The Management Board for integrated economic development zones (KAPET) is the board especially set up for the purpose of operating and or managing KAPET.
Criteria of small-scale businesses are :

a. possessing maximum net assets worth Rp 200,000,000.- (two hundred million rupiahs), excluding land an buildings of business sites; or

b. registering maximum annual sales proceeds worth Rp1,000,000,000.- (a billion rupiahs);

c. being owned by citizens of Indonesia;

d. being independent, not constituting a subsidiary owned, controlled by or directly and indirectly affiliated to medium-scale or large-scale companies;

e. having the status of individual businesses, non statutory body business units, or statutory body businessunits including cooperatives.

Heads of Regional Investment Coordinating Board (BKPM) in the filing of applications are staff of Governors/Heads of Provincial Regions in charge of investments.
Heads of representative offices of the Republic of Indonesia in the filing of applications are heads of representative offices of the Republic of Indonesia abroad

Article 2

(1) Prospective investors planning to undertake investment activities under PMDN arrangements shall file applications for investments to:

the State Minister for Investments/Head of the Investment Coordinating Board;
heads of local BKPMD;

(2)Prospective investors planning to undertake investment activities under PMA arrangements shall file applications for investments

the State Minister for Investments/Head of the investment Coordinating Board;
heads of local representative offices of the Republic of Indonesia; heads of local BKPMD.

(3) a. Letters of approval (SP) of PMDN shall be issued by the State Minister for Investments/Head of the Investment Coordinating Board or Governors/Heads of Provincial Regions in this case Chairmen of local BKPMD.

b. Letters of approval (SP) of PMA shall be issued by the State Minister for Investments/Head of the investment Coordinating Board or Minister of Foreign Affairs in this case heads of local representative offices of the Republic of Indonesia or Governors/Heads of Provincial Regions in this case Chairmen of local BKPMD.

Investors already obtaining the letters of approval as meant In paragraph (3) shall file applications for investment implementation licences, which are required for the realisation of their investments.
The applications for investment implementation licences as meant in paragraph (4) shall be filed to:

the State Minister for Investments/Head of BKPM by investors obtaining approval of investments from the State Minister for Investments/Head of BKPM or Minister of Foreign Affairs in this case heads of local representative offices of the Republic of Indonesia.
heads of local BKPMD, by investors obtaining approval of investments from heads of local BKPMD or heads of local representative offices of the Republic of Indonesia.

Applications for implementation invesment licences of projects located in KAPET as meant in paragraphs (3),(4) and (5) shall be filed to the local management board of KAPET.

Article 3

Investment approval letters (SP) shall be automatically cancelled if within I (one) year starting from the date of issuance there is no project realisation in the form of concrete administrative or physical activities.
Concrete administrative activities shall be those for the following licensing:

the location licence or the building lease agreement especially for the field of services or the regional mining licence (SIPD) or the mining concession (KP) especially for the field of mining; and
bank accounts in the names of PMA companies (especially for new PMA companies); and
Customs SP for capital goods; and/or
APIT (limited importer's identification number); and/or
RPTK (decision on the plan for employment of foreign personnel) for those using expatriates; and/or
IMB (building construction permit); and/or
HO/UUG (Nuisance Act based permit).
deed of establishment of companies already validated by the Minister of Justice for capital participation based companies.

Concrete physical activities shall be those already conducted :

for industries: there ore main activities in the form of land clearance covering at least 25% of the areas contained in approval letters, or
for services and capital participation (holding): there are main activities in the form of land clearance covering at least 25% of the areas contained in approval letters, or office/building space.

Article 4

Prospective investors in filing applications for PMDNand PMA shall observe the following guides :

The negative list for investments.
The sectors/types of business reserved for small-scale businesses and the sectors/types of business open to medium scale or large-scale companies with partnership requirements.
Other provisions issued by the government

Article 5
(1) The approval of facilittes and investment implementation licences issued by the State Minister for lnvestments/Head of BKPM or Chairmen of BKPMD shall be composed of :

Approval of the granting of facilities of exemptionfrom import duty and other facilities of taxation on the import of capital goods.
Approval of the granting of facilities of exemption from import duty on basic materials and or auxiliary materials for the first 2 (two) years production on the basis of installed capacity.
Approval of the granting offacliltlef of government borne income tax to certain industries.
The limited importer's identification number (APIT).
The decision on the plan for employment of foreign personnel (RPTK).
The decision on the expatriate work permit (IKTA).
The fixed business licence (lUT) the expansion business licence and lUT renewal.

The investment implementation licences issued by regencies/munlclpatities shall be composed of :

The location licence.
The Nuisance Act based permit (UUG/HO).
The building construction permit (IMB).

All licences to projects located in KAPET shall be issued by the management board of relevant KAPET.

CHAPTER II APPLICATIONS FOR NEW CAPITAL INVESTMENT PART ONE DOMESTIC INVESTMENTS Article 6.

Applications for new capital investments under PMDN arrangements can be filed by limited liability companies (PT), partnership companies (CV), firms (fa), cooperatives business units, state owned enterprises (BUMN), regional-administration owned companies (BUMD), or individuals.
The applications for new capital investments as meant in paragraph (1) shall be filed to :

a. the State Minister of lnvestments/Head of BKPM; or
b. chairmen of local BKPMD.
In the case of new investments being located in 2 (two) or more provinces, the applications shall be filed to the State Minister of Investments/Head of BKPM.
The applications for new investments as meant in paragraphs (2) and (3) shall be filed in duplicate by using the form of model I/PMDN as contained In Attachment 1.
The approval of the applications for investments as meant in paragraph (2) letters a and paragraph (3) shall be issued by the State Minister for Investments/Head of BKPM in the form of the letter of approval of domestic Investments (SP-PMDN), shall be conveyed to applicants with copies made available to the following officials :

The Minister of Home Affairs;
Ministers fostering business fields of the relevant investments;
The Minister of Finance;
The State Minister for Agrarian Affairs/Head of the National Land Affairs Agency (BPN)
The State Minister for Environment Affairs/Head of BAPEDAL (Board of Control over Impacts on the Environment);
The Minister of Cooperatives, Small and Medium-scale Businesses (in the case of partnership with small-scale businesses)
Governor of Bank Indonesia;
Governors of the relevant provincial regions
Directors general in charge of technical affairs of the relevant investments;
The Director General of Taxation;
The Girector General of Customs and Excise;
The Director General of Acts and Legislation;
Chairmen of the BKPMD concerned;
Heads of technical service Institutions of regencies/municipalities concerned.

The approval of applications for Investments as meant In paragraph (2) letter b shall be issued by Chairmen of BKPMD to Governors/Heads of Provincial Regions on behalf of the State Minister for Investrnentdhleod of the Investment Coordinating Board in the form of the letter of approval of domestic investments (SP-PMDN) with copies made available to Institutions concerned :

The State Minister for Investments/Head of BKPM
The Minister of Home Affairs
The Director General of Law and Legislation
Governors Meads of the relevant provincial regions
Local Bank Indonesia offices
Local regional offices of technical ministries fostering business fields of the relevant investments;
Local regional offices of the Directorate General of Taxation;
Local regional offices of the Directorate General of Customs and Excise;
Local regional offices of the National Land Agency
Local regional offices of the Ministry of Cooperatives, Small and medium-scale businesses (in the case ofpartnership with small-scale businesses);
Local offices of BAPEDAL (Board of Control over Impacts on the Environment).
Regents/mayor/heads of regencies/cities where the relevant investment activities ore located.

The approval as meant in paragraphs (4) and (5) shall be issued not later than 10 (ten) working days as from the receipt of complete and true applications.
SP-PMDN shall be automatically cancelled if there is no realisation of projects in the form of concrete actitivies as meant in Article 3 for 3 (three) years as from the date of issue of SP-PMDN.
The stipulation of periods of the completion of projects, which are contained in the letter of approval of investments, shall be adjusted to scales of investments or business fields.

PART TWO FOREIGN INVESTMENTS Article 7

Applications for new capital investments under PMA arrangements can be filed by :

foreign citizens and/or foreign statutory bodies and/or PMA companies; or
foreign citizens and/or foreign statutory bodies and/or PMA companies along with Indonesian citizens and/or Indonesian statutory bodies.

Applications for new investments as meant in paragraph (1) shall be filed to:

The State Minister for Investments/Head of BKPM; or
Heads of local representative offices of the Republic of Indonesia; or
Chairmen of local BKPMD.

in the case of new investments being located in 2 (two) or more locations, the applications shall be filed to the State Minister for Investments/Head of BKPM.
Applications for new investments as meant in paragraphs (2) and (3) shall be filed in duplicate by using the form of model WMA as meant in Attachment 2.
Based on the evaluation of applications for investments, the State Minister for Investments/Head of BKPM or Minister of Foreign Affairs In this case Heads of local representative offices of the Republic of Indonesia or Governors/Heads of Provincial Regions in this case Chairman of local BKPMD shall issue letters of approval of foreign investments (SPPMA), shall be conveyed to applicants with copies mode available to :

The Minister of Home Affairs;
Ministers fostering business fields of the relevant investments;
The Minister of Health:
The State Minister for Agrarian Affairs/Head of BPN;
The State Minister for Environment/Head of BAPEDAL (Board of Control over Impacts on the Environment);
The Minister of Cooperatives, Small and Medium scale Businesses (in the case of partnership with scale businesses);
Ambassador/Heads of representative offices of countries of origin of foreign participants in Indonesia;
Governor of Bank Indonesia;
Governors of the relevant provincial regions;
Directors general in charge of technical affairs of the relevant investments;
The Director General of Taxation;
The Director General of Customs and Excise;
The Director General of Acts and Legislation;
Chairmen of the BKPMD concerned;
Heads of technical service institutions of regencies/municipalities concerned.

A copy of the letter of approval issued by Chairmen of local BKPMD as meant in paragraph (5) shall also be made available to the State Minister for Investments/Head of BKPM.
Copies of the letter of approval issued by heads of local representative offices of the Republic of Indonesia as mean in paragraph (5) shall also be made available to the Minister of Foreign Affairs and the State Minister for Investments/Head of BKPM.
The approval as meant in paragraph (5) shall be issued not later than 10 (ten) working days as from the date of receipt of complete and true applications.
SP-PMA shall be automatically cancelled if there is no realisation of projects in the form of concrete actitivies as meant in Article 3 for 3 (three) years as from the date of issue of SP-PMDN.
The stipulation of periods of the completion of projects contained in the letter of approval of investments, shall b