Government and BKPM to boost the emergence of new unicorns in Indonesia

Indonesian IT Minister Rudiantara inaugurated the NextICorn Foundation to establish long-term cooperation between the government and key ecosystem stakeholders in Indonesia’s digital sector.

Indonesian IT Minister Rudiantara inaugurated the NextICorn Foundation to establish long-term cooperation between the government and key ecosystem stakeholders in Indonesia’s digital sector.

The foundation will provide opportunities for startups to meet the right venture capital firms and offers support in technology, marketing, and business model development through a series of activities. The minister targets to have at least 20 new unicorns in Indonesia by 2025.

Thomas Lembong, the chairman of Indonesia’s Investment Coordinating Board commended the foundation and promised to support it as he believes it will have a big impact on local startups. NextICorn is designed to be a vehicle to help startups grow long-term and minimize the risk of being overly dependent on market trends. “The Investment board will actively participate, not only as a coach but also help in terms of sponsorship and other forms of support,” Lembong said in an official statement.

The NextICorn initiative was founded in 2017 to promote promising Indonesian startups to investors across the globe. Minister Rudiantara started the program by inviting founders of five up-and-coming startups at that time, Go-Jek, Tokopedia, Traveloka, Matahari mall, and Kaskus, to Silicon Valley and to introducing them to industry leaders and investors. With the launch of the foundation, the initiative now has a formal legal framework and is adding more programs.

Last year, NextICorn hosted two international summits in Bali. Founders of four Indonesian unicorn companies; Nadiem Makarim of Go-Jek, William Tanuwijaya of Tokopedia, Ferry Unardi of Traveloka, and Achmad Zaky of Bukalapak, opened the summit to show their support for NextIcorn and its mission to develop Indonesia’s burgeoning digital sector.

BKPM Assumes Operation of OSS System for Business Licenses and Permits

At the end of June 2018, the government introduced the “Online Single Submission” initiative (“OSS”) that comprises an online system for applying for licenses and permits issued by Indonesian governmental authorities.

Initially, the OSS system was administered by the Coordinating Ministry for Economic Affairs (“CMEA”). However, from 2 January 2019, this role has been transferred in a staggered manner to Indonesia’s Investment Coordinating Board (“BKPM”). BKPM’s role as the OSS system operator has been contemplated for some time, given that BKPM – rather than the CMEA– was previously responsible for handling the processing of FDI other approvals under the One-Stop Service Centre program.

The OSS system was intended to streamline the process of investment and business licensing in Indonesia, and this objective is starting to be delivered in a number of areas. Nevertheless, it is reasonable to describe the OSS system as a “work-in-progress”, particularly in regards to its integration at a local level and with other ministries who regulate particular sectors (such as the Ministry of Energy and Mineral Resources).

While wrinkles in the OSS system are being ironed out, investors must carefully navigate applications for OSS licenses and permits to ensure that delays are limited and that intended outcomes are achieved. Existing companies must also ensure that their line of business is aligned with the new OSS system and that steps are taken to register the company under the OSS system (rather than waiting for when a particular permit or approval is needed in the future).

Read more on the new OSS system created to simplify  the Business Creation procedures

New Restrictions on the Collection of Export Proceeds

The Indonesian government has placed new limits on the use of US Dollar (or other) foreign currency denominated proceeds derived from the export of natural resources (“FX Proceeds”). FX Proceeds must be placed with a licensed Indonesian foreign exchange bank (an “FX Bank”), as was previously the case. Under the new regulations, however, they also must be parked in a specially designated account held with the FX Bank (the “Account”) by the end of the 3rd month after the registration of the underlying export declaration.

Once deposited in the Account, the exporter may only use its FX Proceeds for specified purposes, such as paying export duties, loans, imports, dividends and other investment related matters. In order to move FX Proceeds offshore, supporting documents must be disclosed to the supervisory authority, which is likely to be Bank Indonesia. These will include the underlying loan agreement for offshore loans to be serviced by Indonesian borrowers using FX Proceeds.

Special rules apply to escrow accounts for the collection of FX Proceeds, which also must be held with a FX Bank. Such banks must be licensed by Indonesia’s Financial Services Authority (OJK) to deal in foreign currency, with offshore branch offices excluded.

Restrictions on remitting FX Proceeds offshore need to be considered in the context of both existing cash waterfall arrangements involving offshore collection and disbursement accounts, and underlying concession agreements (such as Production Sharing Contracts), which may otherwise permit the offshoring of FX Proceeds.

Sanctions may involve fines or, ultimately, the revocation of the exporter’s business license.

The new regulations, which cover the mining, oil and gas, plantations, forestry and fishery sectors, can be found in Government Regulation No. 1 of 2019 regarding Foreign Exchange Export Proceeds from the Business, Management and/or Processing of Natural Resources. These are to be further implemented by way of Ministry of Finance decree and must be read in conjunction with other relevant regulations.

New Work Permit and Visa Regulations for Foreign Workers

Indonesia’s Ministry of Manpower, together with the Ministry of Law and Human Rights, has changed the requirements for employing foreign workers, with a stated objective of supporting the national economy and expanding work opportunities through increased investment.

Key changes include the following:
• Indonesian immigration and work permit application systems have now been integrated into the new TKA Online system
• an Expatriate Manpower Employment Permit (“IMTA”) is no longer required as an additional step following the approval of the Expatriate Manpower Utilisation Plan (“RPTKA”)
• the RPTKA, and subsequent “Notification” from the Ministry of Manpower is now required to be completed in 4 business days as opposed to the previous 6 business day timescale
• the RPTKA and Notification must align with the tenure of employment as set out in the relevant employment contract
• Limited Stay Permits (“ITAS”) can now be obtained at authorised points of entry (such as certain airports). This is in contrast to the previous regulations, which required a visit to the local immigration office in Indonesia
• The list of eligible positions which can be held simultaneously has been expanded to include educational/digital economy sectors and PSC contractors

It is important to bear in mind that under the previous regime, applications tended to take longer than 6 business days from the date of application, and it remains to be seen if the process can be expedited under the TKA Online system.

Also, previous IMTAs remain valid until their expiry dates. We understand that it is possible to adjust existing IMTAs by way of the TKA Online system.

The above changes have been implemented under (among others) Presidential Regulation No. 20 of 2018 regarding the Utilization of Expatriate Manpower, MOM Regulation No. 10 of 2018 regarding Procedures for the Utilization of Expatriate Manpower and MOLHR Regulation No. 16 of 2018 regarding Procedures for Granting Visas and Stay Permits for Expatriate Manpower.

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