LAW OF THE REPUBLIC OF INDONESIA
NO. 25/2007

CONCERNING
CAPITAL INVESTMENT

WITH THE BLESSING OF ALMIGHTY GOD
THE PRESIDENT OF THE REPUBLIC OF INDONESIA

Considering:

In view of:

Article 4 paragraph (1), Article 5 paragraph (1), Article 18 paragraphs (1), (2), and (5), Article 20, and Article 33 of the 1945 Constitution of the Republic of Indonesia.

With the approval of the
HOUSE OF REPRESENTIVES OF THE REPUBLIC OF INDONESIA and the PRESIDENT OF THE REPUBLIC OF INDONESIA

HAS DECIDED:

To stipulate:

LAW REGARDING CAPITAL INVESTMENT

CHAPTER I
GENERAL PROVISIONS

Article 1

In this law is meant:

(1) Capital Investment, is all forms of capital investing activity, both by the domestic capital investor and foreign capital investor, to undertake business within the territory of the Republic of Indonesia.

(2) Domestic investment is investment activity to conduct business in the territory of the Republic of Indonesia by a domestic investor using domestic capital.

(3) Foreign investment is investment activity to conduct business in the territory of the Republic of Indonesia by a foreign investor, whether using all foreign capital or in partnership with a domestic investor.

(4) Capital Investor is individuals or legal entities conducting capital investment, as a domestic investor or foreign investor.

(5) Domestic Investor is an individual Indonesian citizen, Indonesian enterprise, State of the Republic of Indonesia, or region conducting capital investment in the territory of the Republic of Indonesia.

(6) Foreign Investor is an individual foreign citizen, foreign enterprise, and/or foreign government conducting capital investment in the territory of the Republic of Indonesia.

(7) Capital is assets in the form of cash or in a form other than cash that belongs to the investor and has economic value.

(8) Foreign Capital is capital owned by a foreign state, individual foreign citizen, foreign enterprise, foreign corporate legal entity, and/or Indonesian corporate legal entity of which the capital is partly or wholly owned by foreign parties.

(9) Domestic Capital is capital owned by the State of the Republic of Indonesia, individual Indonesian citizens, or business entities, which (may be) in the form of a corporate legal entity or not a corporate legal entity.

(10) One door integrated service is a service to investors in the implementation of licensing and non-licensing that is delegated or authorization is given by the authorized institutions or department for licensing and non-licensing, which process runs from the application stage until the issue of documents, which is conducted in one place.

(11) Regional autonomy is the right, authority, and obligation of an autonomous region to regulate and self-manage its affairs and the interests of the local communities in accordance with laws and regulations.

(12) Central government, hereinafter referred to as Government, is the President of the Republic of Indonesia who holds mandate as the government of the Republic of Indonesia as stipulated in the Constitution of the Republic of Indonesia of 1945.

(13) Provincial government is a governor, head of a regency or a mayor and provincial instruments as elements of the implementation of provincial government.

Article 2

Provisions stipulated in this law shall apply to investment in all sectors in the territory of the Republic of Indonesia.

CHAPTER II
PRINCIPLES AND OBJECTIVES

Article 3

(1) The implementation of capital investment is based on the principles of:

(2) The implementation of capital investment is aimed at:

CHAPTER III
BASIC PRINCIPLES OF CAPITAL INVESTMENT

Article 4

(1) The Government stipulates basic principles of capital investment to:

(2) In stipulating the basic principles of capital investment as meant in paragraph (1), the Government:

(3) The basic principles stipulated in paragraph (1) and (2) are promulgated in a General Plan for Capital Investment.

CHAPTER IV
FORM OF BUSINESS ENTERPRISE AND STATUS

Article 5

(1) Domestic capital investment may be conducted in the form of an enterprise, which is in the form of a legal entity, non-legalized entity or sole proprietorship, in accordance with the provisions of laws and regulations.

(2) Foreign capital investment shall be in the form of a limited liability company under the laws of the Republic of Indonesia and domiciled in the territory of the Republic of Indonesia, unless stipulated otherwise by prevailing laws and regulations.

(3) Domestic and foreign investors which are undertaking capital investment in the form of a limited liability company undertake this by:

CHAPTER V
TREATMENT OF CAPITAL INVESTMENT

Article 6

(1) Government provides equal treatment to all investors, regardless of their country of origin, who undertake investment activity in Indonesia in accordance with prevailing laws and regulations

(2) The treatment stipulated in paragraph (1) is not applicable to an investor from a country which obtains special rights based on an agreement with Indonesia.

Article 7

(1) Government will not undertake any nationalization action or take over the ownership rights of the investor, unless by law.

(2) In the event government takes action to nationalize or takes over ownership rights as mentioned in paragraph (1), then the government willl grant compensation, which amount will be specified based on the market value.

(3) If there is no consensus on the amount of compensation among the parties as stipulated in paragraph (2), the dispute shall be settled through arbitration.

Article 8

(1) The investor may freely transfer its assets to parties appointed by the investor, as long as this is not contrary to prevailing laws and regulations.

(2) Not included as assets stipulated in paragraph (1) are assets determined by law to be state assets.

(3) The investor is given the right to freely transfer and repatriate in foreign currency, amongst others:

(4) The right to undertake transfer and repatriation as stipulated in paragraph (3) is conducted in accordance with prevailing laws and regulations.

(5) The provisions set out in paragraph (1) shall not prejudice:

Article 9

(1) In the event that a liability of the investor is not met:

(2) A bank or other institution may implement the declaration of such delay based on a court decision as stipulated in paragraph (1) point (b) until all liabilities of the investor are completed.

CHAPTER VI
EMPLOYMENT

Article 10

(1) In meeting its needs for manpower, an investment business has an obligation to give priority to Indonesian manpower.

(2) The investment business may utilize foreign experts for particular positions and skills in accordance with prevailing laws and regulations.

(3) The investment business is obliged to increase the competencies of Indonesian manpower through training in accordance with the provisions of laws and regulations.

(4) The investment business that employs foreign manpower shall conduct training and transfer of technology to Indonesian manpower in accordance with laws and regulations.

Article 11

(1) A serious effort to settle industrial disputes shall be made through deliberation towards consensus between the capital investment company and manpower.

(2) If such settlement as stipulated in paragraph (1) fails, the settlement shall be conducted through a tripartite mechanism.

(3) If such settlement as stipulated in paragraph (2) fails, the investment business and manpower shall settle the industrial dispute through the industrial court.

CHAPTER VII
BUSINESS SECTORS

Article 12

(1) All business sectors/types of business are open to investment activity except business sectors/types of business which are closed or open with restrictions.

(2) The business sectors that are closed for foreign investors are:

(3) The Government based on a Presidential Regulation shall determine the business sectors closed for the capital investment, both foreign and domestic, based on criteria of health, morals, culture, environment, national defense and security, and other national interests.

(4) Qualifications and requirements for each of the closed and open business sectors shall be regulated under a President Regulation.

(5) The Government shall determine the business sectors open with restrictions based on national interest, namely the preservation of natural resources, the protection and development of micro, small-scale, medium-scale and cooperative enterprises, the supervision of the production and distribution process, the increase of technological capacity, domestic capital participation, and cooperation with institutions appointed by the Government.

CHAPTER VIII
THE DEVELOPMENT OF THE CAPITAL INVESTMENT OF MICRO, SMALL-SCALE, MIDDLE-SCALE AND COOPERATIVE BUSINESS

Article 13

(1) The Government shall determine the business sectors planned for micro, small-scale, medium-scale business and cooperative enterprises, and the business sectors open for large-scale business under the condition of cooperation with micro, small-scale, medium-scale business and cooperative enterprises.

(2) The Government shall achieve the establishment and growth of micro, small-scale, medium-scale business and cooperative enterprises through partnership programs, the acceleration of the capacity to compete, support for innovation and the extension of the market, and the wide distribution of information.

CHAPTER IX
RIGHTS, OBLIGATIONS AND LIABILITIES OF THE INVESTORS

Article 14

Each investor is entitled to:

Article 15

Each investor is obliged to:

Article 16

Each investor has the responsibility to:

Article 17

The investors that manage renewable natural resources shall allocate funds progressively for the preservation of the area to attain the environmental standards as required by prevailing laws and regulations.

CHAPTER X
CAPITAL INVESTMENT FACILITIES

Article 18

(1) Government grants facilities to investors conducting capital investment activities.

(2) Such facilities as stipulated in paragraph (1) may be given to the investor who:

(3) The capital investment granted facilities as stipulated in paragraph (2) has to fulfill at least one of the following criteria:

(4) Facilities granted to the capital investment as stipulated in paragraphs (2) and (3) can be in the following forms:

(5) Exemption from or reduction of income tax in a certain amount and time period that shall be granted only to new investment In a pioneer industry, namely industry with wide scale application, which brings additional quality and high externality, introduces new technology and gives strategic value to the national economy.

(6) Relief or exemption from import tax for ongoing capital investment that is replacing machinery or other capital goods.

(7) Further provisions regarding the grant of fiscal facilities stipulated in paragraphs (4) until (6) are promulgated in a Regulation of the Minister of Finance.

Article 19

The facilities as stipulated in Article 18 paragraph (4) and (5) shall be granted based on the national industry policies determined by the Government.

Article 20

The facilities as stipulated in Article 18 shall not be granted to foreign capital investment which is not in the form of a limited liability company.

Article 21

Other than the facilities stipulated in Article 18, the Government grants facilitated services and/or licensing to capital investment businesses, to obtain:

Article 22

(1) The facilitated services and/or licensing of the rights over land as stipulated in Article 21 letter a can be granted and extended in advance all at once and can be renewed upon the request of the investor, in the form of:

(2) Rights over land as stipulated in paragraph (1) can be granted and extended in advance all at once for capital investment with the following requirements:

(3) Rights over land can be renewed after evaluation as to whether the land continues to be used and cultivated properly based on the conditions, type and purpose of the rights grant.

(4) The advance grant and extension of the rights over land which can be renewed as stipulated in paragraph (1) and (2) may be terminated or annulled by the Government if the capital investment business abandons the land, disturbs the public interest, uses or cultivates the land other than in accordance with the aims and purposes of the grant of such rights over land, and otherwise violates the provisions of laws and regulations regarding land.

Article 23

(1) The facilitated services and/or licensing regarding immigration facilities as stipulated in Article 21 letter b can be granted to:

(2) The facilitated services and/or licensing regarding immigration facilities granted to capital investment as stipulated in paragraph (1) letters a and b shall be granted after the investor obtains a recommendation from the Capital Investment Coordination Board.

(3) Foreign capital investors may be granted the following facilities:

(4) The limited stay permit for the foreign investor as stipulated in paragraph (3) letters (a) and (b) is actioned by the Director General of Immigration based on a recommendation of the Capital Investment Coordination Board.

Article 24

The facilitated services and/or licensing for import license facilities as stipulated in Article 21 letter (c) can be granted for the import of:

CHAPTER XI
AUTHENTICATION AND BUSINESS ENTITY LICENSES

Article 25

(1) A capital Investor who intends to undertake capital investment in Indonesia shall comply with Article 5 of this Law.

(2) Ratification of the establishment of a domestic capital investment business in the form of a legal entity or sole proprietorship shall be carried out in accordance with the prevailing laws and regulations.

(3) Ratification of the establishment of a foreign capital investment business, which is in the form of a limited liability company, shall be carried out in accordance with the prevailing laws and regulations.

(4) A capital investment business, which will undertake business activity, shall obtain licenses in accordance with laws and regulations from the authorized institutions, unless stipulated otherwise by the law.

(5) Licenses as mentioned in paragraph (4) are obtained through one door integrated services.

Article 26

(1) One door integrated services are intended to give support to investors in obtaining facilitated services, fiscal facilities and service facility and information concerning capital investment.

(2) The one door integrated service is provided by authorized institutes or institutions in the field of capital investment, which obtain a delegation or delegation of authority from the institute or institution, which has the authority to license at the central level, or an institute or institution, which has the authority to issue licenses in the province or district/city.

(3) Provisions for procedures and implementation of one door integrated services as stipulated in paragraph (2) shall be regulated in a Presidential Regulation.

CHAPTER X
COORDINATION AND IMPLEMENTATION OF CAPITAL INVESTMENT POLICIES

Article 27

(1) Government coordinates capital investment policy, whether coordination between Government institutions, between Government institutions and Bank Indonesia, and coordination between Government institutions and regional government, and also coordination among regional governments.

(2) The coordination of the implementation of capital investment policy stipulated in paragraph (1) is carried out by the Capital Investment Coordination Board.

(3) The Capital Investment Coordination Board as stipulated in paragraph (2) is chaired by a chairman who is directly responsible to the President.

(4) The chairman of the Capital Investment Coordination Board as stipulated in Article (3) shall be appointed and dismissed by the President.

Article 28

(1) In order to coordinate the implementation of the capital investment policy and services, the Capital Investment Coordination Board shall have the following duties and functions:

(2) Other than the duty of coordinating as stipulated in Article 27 paragraph (2), the Capital Investment Coordination Board has the duty to implement services for capital investment in accordance with the provisions of laws and regulations.

Article 29

In carrying out its duties and functions along with the one door integrated services, the Capital Investment Coordination Board should directly involve representatives from each relevant sector and region using officials who are competent and authorized.

CHAPTER XI
THE IMPLEMENTATION OF CAPITAL INVESTMENT

Article 30

(1) The Government and/or regional governments shall ensure business certainty and safety in capital investment activities.

(2) Regional governments shall implement capital investment activities which fall within its authority, except such capital investment as falls within the Government's area.

(3) The implementation of capital investment by regional government shall be based on criteria of externality, accountability, and efficiency.

(4) The implementation of inter-provincial capital investment shall be a Government matter.

(5) The implementation of inter-regency/city capital investment shall be a provincial government matter.

(6) The implementation of capital investment in one regency/city shall be a regency/city government matter.

(7) In the implementation by government of capital investment, the authority of the Government covers:

(8) For capital investment which is the responsibility of Government as set out in paragraph (7), the Government shall either implement itself, delegate to the governor as the Government representative, or delegate to a regency/city government.

(9) Provisions for the distribution of governmental power in capital investment shall be regulated further by Government Regulation.

CHAPTER XIV
SPECIAL ECONOMIC ZONES

Article 31

(1) A special economic zone may be determined and developed, in order to accelerate the development of the economy in certain regions considered strategic for national economy development, and to maintain the balance in progress of an area.

(2) The Government is authorized to determine stand-alone capital investment policies in a special economic zone.

(3) Provisions for special economic zones as stipulated in paragraph (1) shall be regulated by the law.

CHAPTER XV
SETTLEMENT OF DISPUTES

Article 32

(1) Capital investment disputes between the Government and investors shall first be settled through deliberation towards consensus.

(2) If such deliberation towards consensus stipulated in paragraph (1) fails, the settlement of dispute shall be carried out through arbitration or alternative dispute settlement or in court in accordance with prevailing laws and regulations.

(3) A capital investment dispute between the Government and a domestic investor shall be settled through arbitration based on agreement between the parties, and if such arbitration fails, the settlement of dispute shall be conducted in court.

(4) A capital investment dispute between the Government and a foreign investor shall be settled through international arbitration based upon agreement between the parties.

CHAPTER XVI
SANCTIONS

Article 33

(1) Domestic investors and foreign investors who undertake capital investment in the form of a limited liability company are prohibited from entering into agreements and/or statements which assert that share ownership in such limited liability company is for and on behalf of another person.

(2) If a domestic investor and foreign investor enter into an agreement and/or statement as stipulated in paragraph (1), such agreement and/or statement is legally invalid.

(3) If an investor who undertakes business activity based on an agreement or cooperation contract with the Government commits a corporate crime in the form of a tax crime, inflating recovery costs, and other markups to minimize profit, resulting in loss to the state, based on a finding or investigation by authorized officers, and after a binding court decision, the Government shall terminate such agreement or cooperation contract with the investor concerned.

Article 34

(1) Business enterprises and sole proprietorships as stipulated in Article 5 that do not meet the obligations stipulated in Article 15 can be subjected to the following administrative sanctions:

(2) Administrative sanctions as stipulated in paragraph (1) shall be implemented by the institution or body which is authorised under prevailing laws and regulations.

(3) Business enterprises and sole proprietorships can be charged with sanctions other than administrative sanctions based on prevailing laws and regulations.

CHAPTER XVII
TRANSITIONAL PROVISIONS

Article 35

International agreements, whether bilateral, regional, or multilateral in the field of capital investment, which have been approved by the Government of Indonesia before this law came into effect, shall remain valid until the time the said agreements end.

Article 36

Drafts of International agreements, whether bilateral, regional, or multilateral in the field of capital investment, which have not been approved by the Government of Indonesia before this law came into effect, shall be adjusted to the provisions of this Law.

Article 37

(1) At the time this law comes into effect, all laws and regulations which are implementing regulations of Law No. 1/1967 regarding Foreign Capital Investment as amended by Law No. 11/1970, and Law No. 6/1968 regarding Domestic Capital Investment as amended by Law No. 12/1970, shall remain valid provided that they do not contradict and have not been regulated by new implementing regulations based on this law.

(2) All capital investment approvals and implementing permits which have been granted by the Government based on Law No. 1/1967 regarding Foreign Capital Investment as amended by Law No. 11/1970 and Law No. 6/1968 regarding Domestic Capital Investment as amended by Law No. 12/1970, shall remain valid until the validity periods of the permits expire.

(3) All capital investment applications and other applications related to capital investment which have already been submitted to the authorized institution and have not yet received government approval at the time of ratification of this law, shall be subjected to the provisions of this Law.

(4) In the case of capital investment enterprises which have been granted a business permit by the government based on Law No. 1/1967 regarding Foreign Capital Investment as amended by Law No. 11/1970, and Law No. 6/1968 regarding Domestic Capital Investment as amended by Law No. 12/1970, in the event that the period of the business permit has ended, the business permit can be extended based on this Law.

CHAPTER XVIII
CLOSING PROVISIONS

Article 38

With the entry into force of this Law:

Article 39

All provisions of laws and regulations directly related with capital investment shall be based on and shall be adjusted with the provisions of this Law.

Article 40

This law shall take effect as from the date of enactment.

For Public notice, this Law shall be enacted by publication in the Statute Gazette of the Republic of Indonesia.

Ratified in Jakarta
on date 26 April 2007
PRESIDENT OF THE REPUBLIC OF INDONESIA,
signed
SUSILO BAMBANG YUDHOYONO