How to Succeed in Indonesia as a Malaysian Investor

Indonesia has become a key investment destination for Malaysian investors, providing numerous market opportunities, strategic advantages, and a strong economy. Many Malaysian entrepreneurs and companies seek ways to grow their businesses in Indonesia.

As one of the largest investors in the country, they are actively seeking opportunities throughout the archipelago. But why is Indonesia such a lucrative option? What makes it ideal for Malaysians looking to invest as foreigners?

This article is a complete guide for Malaysian investors investing in Indonesia. It will cover which business sectors are open to foreign investment, which industries are restricted, and the best ways to set up a business there. 

Can Malaysians Start a Business in Indonesia?  

Yes, Malaysians can start and own a business in Indonesia. However, investing in Indonesia as a foreigner comes with specific legal requirements. The Indonesian government regulates foreign investments through the Indonesia Investment Coordinating Board (BKPM) to ensure compliance with local laws. 

READ MORE:

• Expand to Indonesia: A Guide for Malaysian Investors
• Indonesia Improves Foreign Investment Landscape with A Positive Investment List
• Top 17 Foreign-Owned Businesses in Indonesia

Business Sectors in Indonesia Open to 100% Foreign Ownership 

One of the most significant advantages for Malaysian investors in Indonesia is that the government has opened several industries to 100% foreign ownership. Malaysian entrepreneurs and corporations can fully control their businesses in specific sectors without needing an Indonesian partner. 

The Positive Investment List, introduced in 2021, replaced the previous Negative Investment List, allowing more significant foreign direct investment (FDI) in key industries. If you’re considering a Malaysian investment in Indonesia, here are some of the most promising business sectors that allow full foreign ownership: 

• Oil and Gas Construction 
• Onshore Upstream Oil Installation 
• Onshore and Offshore Distribution Pipelines 
• Onshore and Offshore Oil and Gas Drilling Services 
• Oil and Gas Well Maintenance Services 
• Electricity Generation 
• Construction of Electricity Installations 
• Geothermal Electricity Generation  
• Supermarkets (Less than 1,200 sqm) 
• Department Stores (Between 400 – 2,000 sqm) 
• Ports 
• Airports and Airport Supporting Services 
• Maritime Cargo Handling 
• Telecommunication 
• E-Commerce 
• Pharmaceutical Industry 
• Hospitals 

Why Should Malaysians Invest in These Sectors? 

• High Market Demand: With over 270 million people, Indonesia offers vast retail, healthcare, and infrastructure opportunities for businesses. 
• Strategic ASEAN Expansion: Investing in Indonesia can be a gateway to Southeast Asia. 
• Government Support: Indonesia actively encourages foreign investment in these priority industries. 

Restricted Sectors for Foreign Investment 

While Indonesia has opened many industries for foreign ownership, specific business sectors remain strictly off-limits to both domestic and foreign investors, including Malaysian investors in Indonesia. These restrictions are primarily in place due to environmental concerns, public health, security risks, and cultural values. 

• Class-I Narcotics and Cultivation 
• All Forms of Gambling and Casino Activities 
• Fishing of Endangered Species 
• Utilization of Corals for Commercial Purposes 
• Chemical Weapons Production 
• Alcoholic Beverage Manufacturing 
• Wine 
• Malt-based Alcohol  
• Ozone-depleting substances and Industrial Chemicals 

How Can Malaysian Investors Navigate These Restrictions? 

Since these sectors are completely closed to foreign investment, Malaysian investor in Indonesia should focus on industries where foreign ownership is permitted or consider joint ventures in restricted but not banned sectors. Consulting legal experts and understanding Indonesian investment regulations are crucial to ensuring compliance. 

Ways Malaysians Can Establish a Business in Indonesia

Understanding the right approach to setting up a business is crucial for Malaysian investors in Indonesia. While Indonesia has made foreign investment easier, Malaysians still must follow legal procedures. 

Whether you’re an entrepreneur or a corporate entity, there are multiple ways to enter the Indonesian market. Here’s how you can establish a business successfully. 

Setting Up a Foreign-Owned Company (PT PMA) 

If you’re a Malaysian investor looking to control your business in Indonesia fully, setting up a PT PMA (Perseroan Terbatas Penanaman Modal Asing)—a foreign-owned limited liability company—is your best option. This is the most common and effective way for Malaysian investors to establish a business in Indonesia while maintaining 100% ownership in permitted sectors. 

Partnering with a Local Company (Joint Venture) 

If your sector has foreign ownership restrictions, consider a joint venture. Malaysian investors can partner with an Indonesian company in sectors with such restrictions. However, JV agreements must be legally sound to protect foreign investors’ interests. It is highly recommended that you engage an experienced business consultant. 

Establishing a Representative Office (KPPA) 

To test the market before investing, consider establishing a Representative Office (KPPA – Kantor Perwakilan Perusahaan Asing). This option allows you to enter the market without committing to a full-scale investment. 

Acquiring an Existing Indonesian Company 

Consider a company acquisition to achieve instant market presence. Another way for Malaysian investors to enter the Indonesian market is through mergers and acquisitions (M&A). Purchasing shares in an existing Indonesian company can be a strategic move, particularly in competitive industries. 

Applying for an Investor KITAS 

If you’re a Malaysian planning to stay in Indonesia for business purposes, you’ll need an Investor visa, KITAS. This visa allows foreign investors to live and work in Indonesia while managing their businesses. 

Simplify Your Investment Journey in Indonesia with InCorp 

Indonesia offers a promising landscape for Malaysian entrepreneurs and corporations seeking long-term growth. Malaysian investors can successfully enter and expand their businesses in Indonesia by choosing the proper business structure, navigating industry regulations, and taking advantage of investment incentives. 

However, navigating Indonesian regulations and legal requirements can be complex. Professional assistance from InCorp Indonesia (an Ascentium Company) is highly recommended to ensure a smooth business setup. 

• Company Registration: Establish your business in Indonesia with ease. From legal compliance to paperwork, InCorp ensures a smooth and hassle-free setup. 

• Investor KITAS: Stay and manage your business in Indonesia legally. Secure your Investor KITAS quickly and enjoy exclusive benefits for foreign investors. 

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