PT PMA ownership in Indonesia can be a little tricky. It is important to understand that to be able to conduct business in Indonesia, entrepreneurs must have a legal business entity. In Indonesia, there are two types of companies which are a local company and foreign direct investment company.
Definition Of PT PMA or Foreign Direct Investment
PT PMA or foreign direct investment company is a company that has foreign passport holders as its shareholders. Even if the company only have one foreign shareholder, it will have to register as PT PMA. Within PT PMA, the company can choose to hire either a local or foreign director.
Ownership Depends On the Industry
There are several differences between local companies and PT PMA. For instance, most industries allow local companies to have full ownership. On the other hand, PT PMA ownership is limited to certain industries. The number of PT PMA ownership varies according to the industry as well as the business. For key strategic businesses in Indonesia, PT PMA ownership is not allowed.
Some of the examples are industries like exploitation of timbre forest, sea sand extraction, onshore oil and gas drilling services, most retail services, etc. The Indonesian government prohibit PT PMA to invest in it, and only allows local companies to own the project.
Limitations in Industries for PT PMA Ownership
The reason the government imposes these limitations is to protect local companies and security within the company. There have been several cases in the past where foreign companies hold full ownership over key projects. The result does not fare well with the country. Income flows from the country along with their resources while Indonesia remains a developing country.
On the other hand, certain industries only allow PT PMA ownership to have partial ownership. For instance, warehousing, tourism travel bureau, transportation services, supermarket, etc. The government made these limitations to ensure that local companies and talents get an opportunity.
Due to the nature of the project, certain industries still require the foreign company to invests. For instance, spherical tank construction for oil and gas. Local companies, using local talents may be able to design and install the tank. However, they may not be able to conduct proper maintenance. Therefore, they need more experienced foreign companies to help. Hence, the government allows partial ownership for these sorts of business.
Ways to Counter Limitations on PT PMA Ownership Projects
Having limitations on certain industries does not mean that PT PMA cannot get involved in the business. Regardless of the project, it is possible for PT PMA to get involved. Here are the two options:
The easiest way is perhaps to have a local partner. That way in accordance with the investment guideline, on certain limited projects PT PMA ownership can range between 30% to 95%. Local partners will also be beneficial to PT PMA as they are familiar with the local ways of doing business.
Especially when it comes to large scale businesses like constructing geothermal powerplants and such. There are a lot of parties that will be involved. Starting from the local government to the society. The permits too will be complicated. PT PMA who are not familiar with these business conducts may find it overwhelming.
Having a trustable local partner can help to smoothen the process. They will be able to handle the local authorities, the permit issues, as well the public affairs. Foreign partners can focus on the business side of the project.
Contracted by Project Owner
Another way to get into lucrative but limited projects is to get contracts to work with the project owner. It is quite common for local companies to hire PT PMA as contractors or even consultants. Although PT PMA ownership may not be possible the company can still gain profit from the key strategic project.
Feel free to contact MESO if are interested in setting up PT PMA or a foreign direct investment company in Jakarta. Plus, get your very own fully furnished serviced or private office and virtual office at MESO. Visit us on our website or send us an e-mail for more information.