Setting The Ground: Indonesia 2026 Legal & Investment Guide For Middle East Sovereign Capital

A. INDONESIA IN THE SECOND YEAR OF THE PRABOWO ADMINISTRATION

1. Political and Policy Priorities

President Prabowo Subianto and Vice-President Gibran Rakabuming Raka enter the second year of their administration pursuing an 8% (eight per cent) GDP growth target underpinned by a downstreaming agenda, a large socio-economic spending programme of Makan Bergizi Gratis (i.e., the free nutritious meals initiative), and a centralisation of strategic economic decision-making around the newly created sovereign wealth superholding, Daya Anagata Nusantara (“Danantara”). Indonesia's economic policy architecture in 2026 rests on 2 (two) pillars operating in parallel: (i) the conventional ministerial and regulatory apparatus (Investment Coordinating Board (Badan Koordinasi Penanaman Modal or “BKPM”), Ministry of Finance (“MoF”), Central Bank of Indonesia (“BI”), Financial Services Authority (Otoritas Jasa Keuangan or “OJK”)); and (ii) a separate, increasingly prominent investment vehicle, Danantara, that now controls a majority of state-owned enterprise (“SOE”) equity and an expanding share of strategic natural-resource commodity export policy.

Fiscal and Monetary Policy Mix: The government's 2026 budget targets a fiscal deficit below 3% (three per cent) of Gross Domestic Product (“GDP”), consistent with the longstanding statutory ceiling under the Elucidation of Article 12 (3) of Law No. 17 of 2003 on State Finance, although rating agencies have flagged the legislative review of that law itself, and the fiscal pressure created by the free meals programme and social assistance spending, as a source of medium-term policy risk. BI’s mandate has also been broadened to include growth and employment objectives alongside price and exchange-rate stability, a change that international observers have noted may introduce additional complexity in implementing monetary policy credibility during periods of capital outflows.

2. Danantara Operationalisation Under the Amended State-Owned Enterprise (“SOE”) Law and Its Implementing Regulations

Danantara was established under Law No. 1 of 2025 on Third Amendment to Law No. 19 of 2003 on State-Owned Enterprises, enacted on 24 February 2025, with the implementing frameworks detailed in Government Regulation (“GR”) No. 10 of 2025 on Organisation and Governance of Danantara Investment Management Agency, as amended by GR No. 19 of 2026 (“GR 10/2025”). While Danantara's public profile – as a roughly USD 900 billion-plus asset sovereign entity and a named counterparty in Gulf co-investment discussions – is well established, 2 (two) points of its underlying corporate-law structure deserve particular attention:

1. First, Danantara did not replace BKPM or the general foreign investment licensing regime (see Section C (2)); it operates alongside that regime as the controlling shareholder and consolidator of Indonesian SOEs, following the September 2025 dissolution of the separate Ministry of SOEs and the transfer of the great majority of operational control over SOEs to Danantara, with a new SOE Regulatory Agency (Badan Pengaturan Badan Usaha Milik Negara) retaining a residual 1% (one per cent) Class A Dwiwarna share (shares owned by the Republic of Indonesia) and a supervisory role in each SOE.
2. Second, Danantara's governance rests on 3 (three) bodies – a Supervisory Board, a Managing Board, and an Advisory Board – all appointed and removable at the President's discretion. The Managing Board operates through an investment committee, a risk management committee, and a portfolio operational committee.

Danantara's 2026 Corporate Work Plan and Budget, presented to the House of Representatives' (Dewan Perwakilan Rakyat or “DPR”) Finance and Investment Commission on 1 December 2025, targets investment placements of up to USD 14 billion in 2026, funded principally by dividends upstreamed from its portfolio SOEs, alongside coinvestment commitments with foreign sovereign wealth funds reported to total roughly USD 45 billion, including a previously announced cooperation arrangement with Qatar, and a strategic partnership with Saudi Arabia's ACWA Power for renewable energy, green hydrogen, and water desalination projects worth up to USD 10 billion.

Danantara has also begun raising its own capital independently of the state budget, including a USD 3.1 billion Patriot Bond programme and, more recently, a Merah Putih bond issuance, reflecting the latest amendment of GR 10/2025, which significantly widened Danantara's operational scope, including the establishment of a subsidiary, PT Danantara Sumberdaya Indonesia (“DSI”) (see Section C (4) below). Accordingly, governance, credit, and disclosure diligence on a Danantara-linked platform should be conducted at both the Danantara holding level and the operating SOE level, since Danantara's own credit profile (i.e., rated BBB by Fitch, on a par with the sovereign) is closely tied to, but legally and structurally distinct from, that of the underlying portfolio companies.

3. The Legislative Pipeline Through 2026

New Manpower Law. Indonesia's Constitutional Court Decision No. 168/PUU-XXII/2023 dated 31 October 2024 ordered the legislature to enact a standalone Manpower Law separating employment regulation from its amendment set out in Law No. 11 of 2020 (Omnibus Law) and Law No. 6 of 2023 on Enactment of GR in lieu of Law No. 2 of 2022 on Job Creation into Law (“Job Creation Law”) framework. The legislature is required to complete this within a 2 (two)-year deadline expiring 31 October 2026, with formal deliberation targeted for completion in early October 2026 ahead of the constitutional deadline.

Investors with existing or planned Indonesian workforces should anticipate a materially different regime on fixed-term contract duration (i.e., currently up to 5 (five) years under the Job Creation Law framework, with reduction under discussion) and on outsourcing, which has already been narrowed by Ministry of Manpower (“MoM”) Regulation No. 7 of 2026 on Outsourcing, to supporting functions only with enhanced parity of wages, social security, religious holiday allowances, and severance for outsourced staff.

Natural Resource Export Proceeds (Devisa Hasil Ekspor Sumber Daya Alam or “DHE SDA”) Refinements. The natural-resources export-proceeds retention regime under GR No. 36 of 2023 on Foreign Exchange from Export Proceeds from Natural Resources Business, Management and/or Processing Activities has been amended 3 (three) times through 2026 alone, with the latest being GR No. 21 of 2026, effective 1 June 2026. These amendments include tightening or recalibrating the mandatory retention period, the permissible conversion ratio to Rupiah, and the recognition of eligible custodian banks (see Section C (5) below).

Personal Data Protection Implementing Regulations. Indonesia's Personal Data Protection regulation, Law No. 27 of 2022 on Personal Data Protection (“PDP Law”), has been in force since 17 October 2022, with its transitional compliance period having expired on 17 October 2024. On 13 July 2026, the government issued GR No. 33 of 2026 on the Implementing Regulation of the PDP Law; however, this new GR will only take effect 6 (six) months from its enactment, which is approximately 13 December 2026.

Gulf investors should monitor these developments closely, as the PDP implementing framework will take effect before year-end and may affect data-handling obligations for any Indonesia-facing investment.

Indonesia’s International Financial Centre (Pusat Finansial Internasional Indonesia or “PFII”). The DPR is deliberating on a draft law establishing an international financial centre in Indonesia (the “Draft PFII Law”), mandated under Article 248A(7) of Law No. 4 of 2026 on the Amendment to Law No. 4 of 2023 on the Development and Strengthening of the Financial Sector. The PFII is conceived as a designated zone with financial and administrative autonomy and legal specialty, governed by a dedicated PFII Board (Dewan PFII) appointed by the President, an independent management body (LP PFII) with initial capital sourced from Danantara, and an independent financial services supervisory authority (LPJK PFII). The Draft PFII Law would create a bespoke legal environment: English is the designated language of business, civil and commercial law within the PFII may adopt, incorporate, or align with international principles and standards, and a dedicated PFII Court – a special court within the general court system staffed by Supreme Court justices and ad hoc judges (who may be foreign nationals) – would have exclusive jurisdiction over PFIIrelated commercial disputes, with appellate decisions being final and not subject to cassation. A separate PFII Arbitration Institution would handle alternative dispute resolution. Permitted activities span banking, insurance, Islamic finance, capital markets, derivatives, commodity trading, fintech, family offices, investment management, and professional services. The draft guarantees participants the right to transfer and repatriate capital, profits, dividends, and investment proceeds without delay, and expressly exempts activities conducted within or through the PFII from Indonesia’s general foreign-exchange controls, capital controls, and transfer restrictions. Tax incentives include a 100% corporate income tax reduction, a 0% final income tax for qualifying financial-sector professionals, exemption of foreign-sourced income, non-collection of VAT, customs duty exemptions, and a noinheritance-tax regime for assets held through family offices – with core financial-sector tax facilities available for up to 50 (fifty) years. Implementing regulations must be issued within 6 (six) months of enactment. For Gulf sovereign and institutional investors, the PFII framework is directly relevant as a potential platform for structuring Islamic finance operations, wealth management, treasury centres, and regional headquarters within Indonesia under a common-law-influenced, English-language legal regime with dedicated dispute resolution and substantial tax incentives.

Energy-transition framework legislation. Indonesia's Just Energy Transition Partnership (“JETP”), a USD 20 billion public-private financing arrangement agreed with the International Partners Group at the November 2022 G20 Summit, continues to progress under its Comprehensive Investment and Policy Plan, notwithstanding the withdrawal of United

States JETP funding in early 2025 – following the executive order withdrawing the United States from the Paris Agreement, after which Germany and Japan assumed co-leadership of the International Partners Group and a German-funded JETP Delivery Unit replaced the former JETP Secretariat from January 2026. No standalone primary energy-transition statute has yet been enacted; the framework instead continues to operate through JETP's own investment-plan architecture, sectoral regulations of the Ministry of Energy and Mineral Resources (“MoEMR”), and presidential regulation-level renewable energy targets. Gulf renewable energy investors, in particular Masdar (UAE), are already active participants in this framework (see Section E below).

Applicable Corporate-Law Framework. Notwithstanding Danantara's high public profile, any direct investment, joint venture, or acquisition in Indonesia continues to be governed by the ordinary corporate-law framework, namely:

1. Law No. 40 of 2007 on Limited Liability Company, as amended by the Job Creation Law (“Company Law”);
2. Law No. 25 of 2007 on Investment, as amended by the Job Creation Law (“Investment Law”);
3. Presidential Regulation No. 10 of 2021 on Investment Business Sector, as amended by Presidential Regulation No. 49 of 2021 (“PR 10/2021”);
4. GR No. 28 of 2025 on Risk-Based Business Licensing (“GR 28/2025”); and
5. BKPM Regulation No. 5 of 2025 on Guidelines and Procedure for Implementing RiskBased Business Licensing and Investment Facilities through the Electronic Integrated Business Licensing System (Online Single Submission) (“BKPM Reg. 5/2025”).

Gulf investors who engage with Indonesia primarily through Danantara-level relationships should still expect any operating-company-level transaction to run through the conventional regulatory substrate (as examined in Section C(2) below).

B. THE FOREIGN DIRECT INVESTMENT ENVIRONMENT

1. The Headline Data

BKPM reported that foreign direct investment realisation in Q1 2026 reached approximately IDR 250 trillion, equivalent to USD 15.5 billion, up 8.5% (eight point five per cent) year-onyear and accounting for 50.1% (fifty point one per cent) of total investment realisation of IDR 498.8 trillion for the quarter – the first quarter in which foreign investment exceeded domestic investment on a realisation basis. This trend continued into the first half of 2026, with cumulative foreign direct investment of IDR 507.6 trillion, compared with a full-year national investment target of IDR 2,041.3 trillion.

The genuine stress in 2026 is concentrated in the public equity and fixed-income markets, not in realised foreign direct investment. The Jakarta Composite Index (Index Harga Saham Gabungan or IHSG) fell by close to 30% (thirty per cent) over the course of 2026, one of the steepest declines among major global markets, and dollar-hedged Indonesian government bonds recorded losses of around 10% (ten per cent), the second-worst performance among emerging markets after South Korea. Foreign investors were net sellers of approximately USD 3.89 billion of Indonesian equities in 2026, and the aggregate market capitalisation of Indonesian equities fell from more than USD 900 billion in January 2026 to roughly USD 601 billion by mid-year. The rupiah has also weakened materially, at times breaking past IDR 18,000 per US dollar during the year. These developments primarily reflect volatility in portfolio flows and public markets, rather than a deterioration in the trajectory of realised direct investment into operating businesses.

2. The Morgan Stanley Capital International (“MSCI”) Review

On 28 January 2026, MSCI indicated that Indonesia could be reclassified from Emerging Market to Frontier Market status, citing concerns about shareholder transparency, suspected coordinated trading, and inadequate free-float visibility. MSCI's June 2026 Market Classification Review retained Indonesia's Emerging Market status. Still, it extended the review period to November 2026, at which point MSCI will assess whether reforms announced by the OJK, the Indonesia Stock Exchange (Bursa Efek Indonesia or “IDX”) and the Indonesian Central Securities Depository (Kustodian Sentral Efek Indonesia or “KSEI”) have been implemented consistently and with sustained effect.

Those reforms include enhanced disclosure of shareholdings above 1% (one per cent), a High Shareholding Concentration framework, and a roadmap to raise the minimum free-float requirement based on the corresponding market capitalisation, up to 15% (fifteen per cent) (Article 3 of IDX Director Decree Letter No. Kep-00045/BEI/03-2026). A failure to demonstrate credible progress by November 2026 could result in MSCI opening a formal consultation on reclassification, which market commentators have estimated could trigger significant passive fund outflows.

3. Sovereign Credit Rating Actions

Moody's revised Indonesia's sovereign rating outlook from stable to negative on 5 February 2026, while affirming the Baa2 (i.e., lower-medium grade) rating, citing reduced policymaking predictability and growing centralisation of policymaking authority.

Fitch followed on 4 March 2026, affirming Indonesia's Long-Term Foreign-Currency Issuer Default Rating at BBB (i.e., good credit quality) but revising the outlook to negative, citing the same governance and policy-credibility concerns, together with pressure on the fiscal framework from the Makan Bergizi Gratis programme and specific uncertainty regarding Danantara's mandate and the potential for quasi-fiscal, off-budget activity to increase contingent liabilities.

Notably, Standard & Poor’s (“S&P”) Global Ratings departed from this trend. On 13 July 2026, S&P affirmed Indonesia's BBB/A-2 rating with a stable outlook, characterising the fiscal strains as temporary and citing continued adherence to the 3% (three per cent) GDP deficit ceiling, with resilient growth projected at 5.1% (five point one per cent) for 2026 and averaging 4.9% (four point nine per cent) per year from 2026 to 2029, while improving nontax revenue from natural-resources royalties.

Indonesia therefore retains investment-grade status from all three major rating agencies as at the date of this guide. This differing outlook – Moody's and Fitch have negative outlooks, while S&P is stable – suggests that investors should view Indonesia’s credit position as the subject of an ongoing policy debate, rather than a settled deterioration in credit quality.

C. KEY 2026 LEGAL AND REGULATORY DEVELOPMENTS

1. Adjustment of Criminal Law Provisions

Law No. 1 of 2026 on Criminal Law Adjustment (“Law 1/2026”), enacted 2 January 2026, adjusts criminal law provisions across a wide range of Indonesian sectoral statutes to align them with the newly enforced Law No. 1 of 2023 on Criminal Code (“Indonesian Criminal Code”), which itself took full effect in January 2026 after a 3 (three)-year transition period from its issuance on 2 January 2023. Read together, these two statutes materially broaden the scope of corporate criminal liability across the regulatory areas most relevant to a controlling shareholder or co-investor, including environmental offences and sector-specific regulatory breaches.

Existing Corporate Liability Framework. Indonesia's principal corporate criminal liability statutes already impose direct liability on a corporation where an offence is committed or ordered by a controlling individual, beyond the corporation's purposes, within the scope of the offender's function, and for the corporation's benefit. This four-part test appears consistently across Indonesia's anti-money laundering and counter-terrorism financing framework, which impose criminal fines on the corporation itself, up to IDR 100 billion, in addition to potential asset forfeiture, business licence revocation, dissolution, or state takeover of the corporation as supplementary sanctions (Articles 7 of Law No. 8 of 2010 on Prevention and Eradication of Money Laundering (“Law 8/2010”) in conjunction with Article 8 (4) and (5) of Law No. 9 of 2013 on Prevention and Eradication of Counter-Terrorism Financing).

The Indonesian Criminal Code and Law 1/2026 extend this same corporate-liability architecture, and the sanction menu of fines, licence revocation, asset forfeiture, and dissolution, into the general criminal law, meaning that a broader range of criminal offences beyond the historically codified financial-crime statutes can now expose a corporate investment vehicle, and potentially its controlling shareholder acting through board representation, to direct corporate criminal sanction rather than only individual officer liability (Articles 118 and 120 of the Indonesian Criminal Code).

Practical Implications. For a Middle Eastern sovereign wealth fund or institutional investor acting as a controlling shareholder or significant co-investor in an Indonesian portfolio company, the expanded corporate criminal liability framework has 3 (three) key practical implications.

1. First, board nomination rights should be exercised carefully. A nominee director who effectively acts as a beneficiary may expose themselves to criminal liability. Under the corporate liability framework, the company may also be held criminally liable where the relevant offence is committed.
2. Second, pre-investment legal and compliance due diligence should now extend beyond the traditional financial-crime and anti-corruption checklist to a broader assessment of the target's exposure under the Indonesian Criminal Code's expanded provisions, including environmental, competition, and consumer-protection offences that may now carry corporate criminal, rather than purely administrative, consequences.
3. Third, shareholder agreements and governance protocols for Indonesian portfolio companies should address these risks expressly. Representations, warranties, and compliance covenants should be strengthened to reflect the broader corporate liability framework. This is particularly important because a criminal conviction may result in severe sanctions against the company, triggering licence revocation or dissolution, which could have a substantially greater impact on equity investors.

2. Risk-Based Licensing

The BKPM Reg. 5/2025 was issued to serve as the further implementing regulation of GR 28/2025. Together, these instruments constitute the operative 2026 investment-licensing framework, including any foreign investment (Penanaman Modal Asing or “PMA”) limited liability company (Perseroan Terbatas or “PT”) established in Indonesia.

The Corporate-Law Baseline. Under the Investment Law, a PT PMA refers to a limited liability company established within and governed under Indonesian law and territory. Foreign investment is permitted in all business fields not expressly declared closed or reserved to the government as expressed under PR 10/2021. The regulation stipulates which business activities are reserved for cooperatives and micro, small, and medium enterprises, and which are open, subject to conditions, including foreign shareholding thresholds, detailed field by field in the Indonesian Business Classification Standard (Klasifikasi Baku Lapangan Usaha Indonesia, or “KBLI”).

2025–2026 Greenfield-Friendly Recalibration. GR 28/2025 reduced the minimum paidup. It issued capital threshold that has long applied to PT PMA structures (i.e.,  IDR 10 billion in paid-up capital, exclusive of land and buildings, per line of business per project location). Under GR 28/2025, the paid-up capital for a PT PMA has now been reduced to IDR 2.5 billion, which must be retained for at least 12 (twelve) months, except for operational purposes. The minimum investment value under GR 28/2025 remains set at IDR 10 billion per KBLI per project location.

In addition, the regulation has streamlined the risk-based licensing pathway for business licences, including the Business Identification Number (Nomor Induk Berusaha or “NIB”), standard certification (Sertifikat Standar or “SS”), and sector-specific licences, through the Online Single Submission (“OSS”) system, with a more adaptive approach to KBLI classification announced by BKPM alongside its Q1 2026 investment realisation results.

In practice, these changes result in a materially lower capital-commitment threshold at incorporation, a streamlined licensing process through the OSS system, and closer alignment between the KBLI classification chosen at incorporation and the specific investment-list conditions associated with that classification. Investors should, however, verify the applicable capital threshold and licensing timeline for their specific KBLI directly against the current OSS system at the time of structuring, since these operational parameters are set at ministerial and sub-regulatory level and are subject to further adjustment.

3. The Danantara Framework and Co-Investment Platform

Three additional points bear on structuring a co-investment with Danantara:

1. First, Danantara's expanded scope under GR No. 19 of 2026 on Amendment to GR 10/2025 includes the mandate to establish an operational and investment holding, intended to supervise and improve the operational performance of SOEs, as well as manage their financial capacity through investment and management interventions. The investment holding function has been formally designated for PT Danantara Investment Management. By contrast, the regulation has not yet formally designated an entity as the operational holding, although PT Biro Klasifikasi Indonesia (ID Survey) is widely regarded as serving this role. Through this development, Danantara has introduced a subsidiary mandated to control export flows and operate as the singlewindow export framework for natural-resource commodities that are considered strategic (ie., designated by the government having regard to national interest, economic stability, domestic needs, and/or strategic national management of natural resources), as further discussed at Section C (4) below.
2. Second, President Prabowo confirmed at the World Economic Forum in Davos on 22 January 2026 that Danantara has been authorised to recruit expatriate and foreign professionals into leadership roles at its portfolio SOEs, a governance signal directly relevant to a Middle East co-investor's ability to place its own nominees or advisers into operating leadership.
3. Third, Danantara's stated policy priority sectors for its USD 14 billion 2026 deployment include downstream natural resources, renewable energy, advanced manufacturing, food security, and digital infrastructure, sectors that overlap substantially with the sectoral entry map at Section E below, and Danantara's co-investment platform is emerging as the preferred large-ticket route into these sectors precisely because it internalises SOE counterparty risk and government alignment within a single negotiating structure, discussed further at Section F below.

4. Export Proceeds Retention and the DSI Framework

GR No. 36 of 2023 on Foreign Exchange Export Proceeds from the Exploitation, Management, and/or Processing of Natural Resources, as lastly amended by GR No. 21 of 2026 (“GR 36/2023”), requires every exporter of natural-resources goods from the mining, plantation, forestry, and fisheries sectors, with an export value on the export customs declaration of at least USD 250,000 or its equivalent, to place its DHE SDA into (i) a special account with an SOE bank licensed to conduct foreign-currency business, (ii) a bank instrument with an SOE bank licensed to conduct foreign-currency business, (iii) BI-related securities, and/or (iv) government bonds or sharia securities, no later than the end of the third month following the month of export customs declaration registration (Articles 5, 6, and 8 (1) of GR 36/2023). The retention of DHE SDA is subject to the nature of the underlying proceeds; generally, DHE SDA must be retained at 100% (one hundred per cent), save for those generated from oil and natural gas mining, with at least 30% (thirty per cent) of that DHE SDA to remain placed within the Indonesian financial system for a minimum period of 3 (three) months (Article 7 (1) and (2a) of GR 36/2023).

Practical Implications for Natural-Resources Investors. For a Gulf investor in an Indonesian mining, plantation, forestry, or fisheries export business, the retention and conversion rules under GR 36/2023 directly affect the timing and currency composition of dividend upstreaming and repatriation, since export proceeds must generally clear the mandatory retention period in an Indonesian state-owned bank account before being freely available for offshore transfer, subject to the permitted-use exceptions in foreign currency (Article 11A (1) of GR 36/2023), such as:

1. law-related obligations to government (eg., tax and non-tax state revenue);
2. dividends payment;
3. procurement of raw material, supporting material, or capital goods and services;
4. repayment of loans for the procurement of capital goods and working capital;
5. exchange to Rupiah with an SOE bank licensed to conduct foreign currency business.

Investors from Gulf states with a qualifying bilateral trade instrument with Indonesia may, depending on how that instrument is characterised for the purposes of Article 18A of GR 36/2023, benefit from the lighter 30% (thirty per cent) for 3  (three)-month retention standard and broader choice of custodian bank applicable to mining-sector exports.

Fitch Ratings has separately noted the DSI single-window strategic commodities export framework, which in its starting phase covers (i) coal, (ii) palm oil, and (iii) ferroalloys (Article 2 of GR No. 24 of 2026 on Governance of Export of Strategic Natural Resource Commodities), as a source of policy uncertainty that could, depending on implementation, affect commodity export flows and foreign direct investment, while also potentially strengthening government revenue and foreign-exchange reserve accumulation. The government has indicated that the framework will be expanded progressively to other natural-resource commodities. Accordingly, investors with exposure to these specific commodities should treat the implementation of the DSI framework and any subsequent expansion of its scope as ongoing regulatory and investment-monitoring items.

5. Financial Conglomerates Holding Companies (Perusahaan Induk Konglomerasi Keuangan or “PIKK”)

OJK Regulation No. 30 of 2024 on Financial Conglomeration and Financial Holding Company (“OJK Reg. 30/2024”) replaces the previous financial-conglomerate framework under OJK Regulation No. 45/POJK.03/2020 and imposes a mandatory PIKK structure on any group of financial services institutions under common ownership or control that meets specified size thresholds.

PIKK Threshold. A Financial Conglomerate must form a PIKK where (i) its member financial services institutions have combined total assets of at least IDR 100 trillion across at least two institutions in two different financial sectors or (ii) combined total assets of between IDR 20 trillion and IDR 100 trillion across at least three institutions in three different financial sectors, calculated on a six-month rolling average basis (the “Financial Conglomerate”) (Article 2 (1) until (3) of OJK Reg. 30/2024). OJK also retains discretion to designate a group as a Financial Conglomerate requiring a PIKK even where it does not meet these numerical thresholds (Article 3 of OJK Reg. 30/2024). 

The PIKK may take 2 (two) forms, namely:

1. Operational PIKK, a financial services institution within the group that is designated to also perform the PIKK function (Article 9 OJK Reg. 30/2024); or
2. Non-Operational PIKK, a holding entity established as an Indonesian limited liability company dedicated to only carry out management of Financial Conglomerate business (Article 10 OJK Reg. 30/2024).

A Non-Operational PIKK may be foreign-owned up to 99% (ninety-nine per cent) of its paidup capital, which preserves the possibility of foreign control of the holding entity (Article 21 of OJK Reg. 30/2024). However, the underlying formation, governance, and reporting obligations are substantial: an Operational or Non-Operational PIKK formation application must be submitted to OJK within 6 (six) months of the group satisfying the Financial Conglomerate criteria (Articles 16 (1) and 22 (1) of OJK Reg. 30/2024), and where the formation requires an ownership restructuring or share transfer to satisfy the PIKK criteria, that restructuring must generally be completed within a year of OJK's approval, subject to OJK's discretion to extend that period in appropriate circumstances (Articles 25 (4) and (6) of OJK Reg. 30/2024).

The PIKK itself, once formed, carries an ongoing statutory duty to set group-wide strategy and risk appetite, monitor compliance across all group members, consolidate group financial statements, and take remedial action, including capital support, where a group member faces financial difficulty (Articles 36 to 42 of OJK Reg. 30/2024). Non-compliance carries tiered administrative sanctions, including written warnings and prohibitions on specified business activities (Articles 15, 27, 35 and 39 of OJK Reg. 30/2024).

Any Middle East investor, in particular an Islamic banking group or a diversified financial holding structure such as a bank-plus-insurance or bank-plus-securities combination, that already holds a stake in an Indonesian financial group spanning banking, insurance, securities, financing or related sectors should therefore assess as a matter of priority whether its existing Indonesian holding structure now meets, or is likely imminently to meet, the asset and institution-count thresholds, since the 6 (six)-month application window and the 1 (one)-year restructuring deadline run from the date the thresholds are met, not from any later date of the investor's own choosing.

D. MIDDLE EAST-INDONESIA BILATERAL INVESTMENT FRAMEWORK

1. Indonesia-UAE Framework

The Indonesia-UAE Comprehensive Economic Partnership Agreement establishes a free trade area with tariff commitments requiring each party to reduce or eliminate customs duties on originating goods, and to apply the lower rate where its most-favoured-nation tariff on a given good falls below its scheduled CEPA rate (Chapter 2 of Indonesia-UAE CEPA). Since CEPA entered into force, bilateral trade has grown materially, reaching approximately USD 5.1 billion in 2024¹.

Investment Protection Bilateral Investment Treaty (“BIT”). Investment protection between Indonesia and the UAE is governed under the separate Agreement between the Government of the Republic of Indonesia and the Government of the United Arab Emirates for the Promotion and Reciprocal Protection of Investments, signed at Bogor on 24 July 2019. 

That agreement provides fair and equitable treatment defined by reference to denial of justice, fundamental breach of due process, targeted discrimination, and abusive treatment; most-favoured-nation treatment excluding dispute-resolution mechanisms; and national treatment subject to Indonesia's domestic laws and regulations (Articles 6 to 8 of IndonesiaUAE BIT). It safeguards against uncompensated expropriation, with compensation set at market value immediately before the expropriation or its public announcement, excluding speculative or windfall profits (Article 9 of Indonesia-UAE BIT). For dispute resolution, Joint Committee consultation is required before investors can proceed to domestic courts, ICSID arbitration, or UNCITRAL arbitration.

Crucially, the BIT contains major carve-outs and exceptions. While it guarantees the free transfer of investment payments at market exchange rates, host states may delay or suspend transfers to enforce financial reporting, record-keeping, or central bank registration rules (Article 11 of Indonesia-UAE BIT). Natural resources are notably excluded from the BIT's coverage in the case of Indonesia, unless granted by specific government decree, directly impacting any UAE investment in mining, plantation or forestry assets.

2. Indonesia-Saudi Arabia Framework

Investment protection between Indonesia and Saudi Arabia is governed by the Agreement between the Government of the Kingdom of Saudi Arabia and the Government of the Republic of Indonesia concerning the Promotion and Reciprocal Protection of Investments (BIT), signed at Jeddah on 15 September 2003. 

The treaty guarantees national and most-favoured-nation treatment for admitted investments and returns, alongside safeguards against expropriation except for public purposes, on a non-discriminatory basis, and with prompt, market-value compensation accruing interest until paid (Articles III and IV of Indonesia-Saudi Arabia BIT). This BIT ensures the free, timely transfer of capital, returns, loan repayments, and liquidation proceeds at prevailing exchange rates within a strict 1 (one)-month limit (Article VII of Indonesia-Saudi Arabia BIT). For dispute resolution, investors are allowed to choose between competent domestic courts or ICSID arbitration, with the initial selection being final (Article X of Indonesia-Saudi Arabia BIT).

Both governments concluded a 2024 Memorandum of Understanding on Cooperation and Promotion of Direct Investment, under which the parties agreed to share statistical data, exchange investment information, and update their regulatory frameworks to facilitate crossborder capital flows, reflecting Indonesia's broader shift from a historically pilgrimagecentred relationship with Saudi Arabia toward a larger-scale direct investment partnership.

3. Indonesia-Qatar Framework Agreement

Investment protection between Indonesia and Qatar is governed by the Agreement between the Government of the Republic of Indonesia and the Government of the State of Qatar for the Promotion and Protection of Investments (BIT), signed at Doha on 18 April 2000.

Distinctively among Indonesia's Gulf investment treaties, the Qatar BIT's definition of covered investment expressly extends to business concessions conferred by law or contract, including concessions related to natural resources (Article 1 (1) (e) of IndonesiaQatar BIT). The agreement affords fair and equitable treatment and adequate protection and security, while strictly prohibiting uncompensated expropriation or nationalisation, requiring real market-value compensation plus interest from the date of dispossession to the date of payment (Articles 2 and 3 of Indonesia-Qatar BIT). It also guarantees the free repatriation of returns, sale or liquidation proceeds, and loan repayments, in convertible currency at the prevailing exchange rate (Article 4 of Indonesia-Qatar BIT). For dispute resolution, Article 9 of the Indonesia-Qatar BIT offers a  final choice between a competent domestic court, ICSID arbitration, or an ad hoc UNCITRAL tribunal.

Beyond this bilateral treaty, Qatar has emerged as a key sovereign co-investment partner with Danantara, reflecting the parties’ reported cooperation arrangement referenced at Section A (2) above, providing a second and complementary channel, alongside direct BITprotected investment, for a Qatari investor structuring exposure to Indonesia.

4. Cross-Cutting Investment-Protection Standards Across the Gulf Treaty Network

Across the UAE, Saudi and Qatar BITs, several common investment-protection principles emerge, although the scope and formulation of those protections differ between the treaties. 

1. First, all three BITs provide substantive protection against expropriation, although the applicable compensation standards and formulation differ. The UAE BIT provides for compensation based on market value immediately before the expropriation or its public announcement, while the Saudi and Qatar BITs similarly require compensation in connection with expropriation or nationalisation.
2. Second, all three BITs provide mechanisms for the transfer or repatriation of investment-related funds, although the scope and applicable conditions differ. The UAE BIT guarantees transfers subject to specified regulatory exceptions, while the Saudi and Qatar BITs provide for the transfer of capital, returns and other specified proceeds in convertible or prevailing currencies.
3. Third, all three BITs provide investors with access to international investment disputeresolution mechanisms, although the available procedures and preconditions differ. The UAE BIT requires Joint Committee consultations before an investor may proceed to domestic courts, ICSID or UNCITRAL arbitration; the Saudi BIT permits an investor to choose between domestic courts and ICSID arbitration; and the Qatar BIT provides a choice among competent domestic courts, ICSID arbitration and an ad hoc UNCITRAL tribunal.

E. SECTORAL ENTRY MAP

1. Downstream Nickel

Indonesia's downstream nickel and battery-materials sector remains open to foreign investment and is a stated priority for both BKPM and Danantara. However, the economics of new projects have changed. GR No. 19 of 2025 on Types and Rates of Non-Tax State Revenue Allocated to the MoEMR (“GR 19/2025”) introduced higher, price-linked royalties:

1. 14% (fourteen per cent) – 19% (nineteen per cent) for nickel ore;
2. 5% (three point five per cent) – 5.5% (five point five per cent) for nickel matte;
3. 4% (four per cent) – 6% (six per cent) for ferro-nickel; and
4. 5% (five per cent) – 7% (seven per cent) for nickel pig iron.

This increase applies alongside comparable increases for copper, gold, silver, tin, and bauxite, albeit a lower 2% royalty applies to certain low-grade nickel ore used as feedstock for Indonesia's battery-based electric-vehicle industry (Appendix of GR 19/2025).

For Gulf investors, this means that the financial model for a nickel smelter or batterymaterials project should account not only for Indonesia’s downstreaming policies and restriction on exporting unprocessed minerals, but also for the higher royalty burden and rules on keeping export proceeds in Indonesia for non-oil and gas natural resources (see Section C (4)).

2. Data Centres and Digital Infrastructure

Indonesia’s growing demand for cloud computing, AI, and digital services has drawn increasing interest in data centres and related digital infrastructure. Danantara has likewise identified AI and technology infrastructure as an area of interest, although any proposed sovereign AI fund should be treated as a policy initiative rather than an established investment vehicle.

Foreign investment in the broader digital sector is already substantial; in the first half of 2026, the combined transportation, warehousing, and telecommunications sector accounted for IDR 102 trillion, although this figure covers the entire combined sector and should not be treated as data-centre investment alone². Investors in this sector should nonetheless treat the still-incomplete Personal Data Protection Agency architecture, discussed at Section A (3) above, as a live compliance dependency, particularly for cross-border data-flow structuring and the adequacy-assessment obligation under Article 56 of the PDP Law for transfers outside Indonesia.

3. Renewable Energy

The UAE's Masdar is already Indonesia's most visible Gulf renewable-energy investor, having developed the 192 megawatt-peak Cirata Floating Solar Power Plant in West Java in joint venture with state utility PT PLN, and having signed further agreements on 11 April 2025, on the sidelines of President Prabowo's state visit to the UAE, to develop the Jatigede floating solar project and to explore expansion of the Cirata facility. 

Saudi Arabia's ACWA Power has separately entered a strategic partnership with Danantara worth up to USD 10 billion across renewable energy, green hydrogen and water desalination, referenced at Section A (2) above, including the Haj Village project in Mecca mandated under Presidential Instruction No. 15 of 2025, illustrating the bidirectional character of the Indonesia-Gulf renewable-energy relationship. 

At the multilateral level, the JETP's Comprehensive Investment and Policy Plan continues to be implemented under German-Japanese co-leadership of the International Partners Group following the US withdrawal, with the Asian Development Bank leading the JETP's Financial Working Group. The JETP's Captive Scenario alone is projected to require approximately USD 31 billion in cumulative investment by 2030 to decarbonise Indonesia's captive power sector, a scale of financing need that leaves substantial room for additional Gulf sovereign and development-finance participation alongside the existing multilateral architecture.

4. Halal Industry and Islamic Finance

As the world's largest Muslim-majority nation, Indonesia continues to pursue a national strategy to develop its halal industry and Islamic finance sector as a tool for broader economic development, an area of natural complementarity with Gulf institutional capital. Islamic finance more broadly has grown to more than 80 (eighty) jurisdictions globally, with

Sharia-compliant assets exceeding USD 5 trillion in 2025, anchored in the Gulf Cooperation Council, Malaysia, and Indonesia. Gulf investors pursuing this sector in Indonesia should structure with reference to the Sharia-compliant overlay considerations addressed at Section F below and should factor in the sukuk-specific tax treatment addressed at Section G below.

5. Healthcare and Medical Tourism

Indonesia's healthcare market offers opportunities in areas such as hospitals, specialist clinics, diagnostics and healthcare technology. There is also a broader commercial opportunity arising from Indonesian patients who currently travel overseas for specialist treatment. Investment in higher-end healthcare facilities could therefore help meet domestic demand while reducing the need for patients to seek treatment abroad. 

Investors interested in this sector should nevertheless assess the rules for the specific type of healthcare business, because foreign ownership and licensing requirements can differ depending on the activity. The principal framework includes Law No. 17 of 2023 on Health and Government Regulation No. 28 of 2024, which regulate healthcare facilities, healthcare professionals, pharmaceutical and medical-device activities, and other aspects of the health sector.

6. Real Estate, Hospitality, and IKN

Jakarta and Bali remain the established Indonesian real estate and hospitality investment markets for Gulf capital, with Indonesia's extended land-use rights regime under Article 22 of the Investment Law permitting Cultivation Rights (Hak Guna Usaha) of up to 95 years, Building Rights (Hak Guna Bangunan) of up to 80 years, and Right to Use (Hak Pakai) of up to 70 years, each combining an upfront grant-and-extension period with a further renewal period, offering materially longer tenure than is available in many comparator jurisdictions for foreign-invested projects meeting the qualifying criteria. These rights should not, however, be treated as automatic entitlements for foreign investors and should be assessed carefully.

Indonesia's new capital city, Ibu Kota Nusantara (“IKN”) in East Kalimantan, is a specifically designated growth corridor with its own investment-facilitation framework and is the site of planned Gulf-linked renewable energy investment, including the Masdar-PLN renewable energy project referenced above. Investors considering IKN exposure should note that its legal and licensing framework, while linked to the general investment list under PR 10/2021 and the BKPM licensing regime, includes bespoke incentives administered through a dedicated capital authority, and should be diligenced separately from the relevant national framework.

7. Infrastructure Public-Private Partnerships

Indonesia's public-private partnership (Kerjasama Pemerintah dengan Badan Usaha or

“KPBU”) framework under PR No. 38 of 2015 on Government Cooperation with Business Entities in the Provision of Infrastructure (“PR 38/2015”) continues to be the primary legal channel for concession-based infrastructure investment, spanning transportation, water and sanitation, telecommunications, energy and social infrastructure (Article 5 (2) of PR 38/2015). In essence, it allows the Government and private investors to structure projects with appropriate government support and agreed commercial arrangements.

KPBU concession vehicles may be relevant for large, long-term infrastructure projects where direct acquisition of an existing company is not the preferred approach. The attractiveness of each project will depend on its specific concession terms and revenue model (i.e., availability payments, tariff-based user-pays structures, or hybrid models) and on how risk is allocated. KPBU should therefore be viewed as a framework for structuring and allocating project risks, rather than as a guarantee of government-backed returns.

F. STRUCTURING OPTIONS FOR MIDDLE EAST CAPITAL

1. PT PMA

A PT PMA remains the standard vehicle for an investor seeking operating control of an Indonesian business, particularly for mid-sized greenfield projects where the reduced capital threshold and streamlined licensing pathway are most beneficial. This route affords direct board representation and operational control, as well as access to the applicable bilateral investment treaty protections (as referred to in Section D). The trade-off is that the investor bears the project’s commercial and regulatory risk directly, rather than sharing it with a government or multilateral co-investment partner.

2. Danantara Co-Investment Platform

For large investments involving strategic assets or SOEs, Danantara can serve as a government-linked co-investment counterparty with direct access to SOE assets and strategic projects. However, Danantara's involvement does not remove project-level risk; investors should separately assess the relevant SOE or operating company, including its financial position, liabilities, governance, and regulatory compliance, as well as Danantara's role and rights in the particular transaction.

3. Indonesia Investment Authority (“INA”) Co-Investment Vehicles

INA, Indonesia's original sovereign wealth fund established in 2021, has historically operated a co-investment platform structure attractive to Gulf sovereign investors seeking a government-linked but more narrowly investment-mandated counterparty than a direct SOE holding. Following Danantara's establishment and the broader SOE consolidation, INA has increasingly focused on private-sector investments and international partnerships. Accordingly, for Gulf investors, INA remains a potential co-investment partner, in particular for private-sector and infrastructure opportunities, although the respective roles of INA and Danantara should be assessed on a transaction-by-transaction basis.

4. Islamic Development Bank (“IsDB”) and Islamic Corporation for Insurance and Export Credit (“ICIEC”)-Supported Multilateral Platforms

As a founding member of IsDB, Indonesia has ongoing access to IsDB project financing and to political risk and credit insurance from the ICIEC, both of which offer a Gulf-aligned multilateral credit-enhancement layer for Indonesian infrastructure, energy, and tradefinance transactions structured on a Sharia-compliant basis. For Gulf investors, this channel is particularly relevant when Sharia-compliant financing or political risk insurance is desired. Their involvement should, however, be viewed as an additional layer of financing or risk mitigation rather than a substitute for Indonesian regulatory compliance, contractual protection, or investment-treaty protection.

5. Dubai International Financial Centre (“DIFC”) and Abu Dhabi Global Market (“ADGM”) Holding Structures

A holding structure interposed in the DIFC or ADGM provides a common-law contracting and governance environment, English-language documentation, and an internationally recognised arbitration seat for the shareholder-level joint venture or co-investment agreement, while the underlying Indonesian operating investment remains structured as a PT PMA or Danantara co-investment vehicle as appropriate.

Adopting this structure does not automatically confer protection under the Indonesia-UAE treaty; therefore, investors should confirm that the DIFC or ADGM holding entity itself qualifies as an investor for the relevant bilateral investment treaty (i.e., the Indonesia-UAE BIT) and should structure accordingly, including by ensuring genuine economic substance at the DIFC or ADGM level, to preserve treaty protection.

6. KPBU Concession Vehicles

For infrastructure projects, a KPBU concession vehicle structured under PR 38/2015 (see Section E (7) above) offers a defined-term concession contract with the relevant Indonesian government contracting agency, typically incorporating step-in rights, termination compensation and a contractually agreed dispute-resolution mechanism, providing a more bespoke and negotiated risk allocation than a general corporate investment, at the cost of a longer and more government-intensive procurement and negotiation process than a direct PT PMA acquisition or establishment.

7. Sharia-Compliant Overlay

Any of the structures described above can, in principle, incorporate a Sharia-compliant financing or equity structure (e.g., murabahah, ijarah, mudharabah, or musharakah arrangements), consistent with Indonesia's well-developed Islamic finance regulatory framework, including its Islamic capital markets law and OJK's Islamic banking supervision. Investors combining a Sharia-compliant overlay with an OJK-regulated Indonesian financial institution holding should cross-refer to the Financial Conglomerate restructuring considerations (see Section C (5) above), since an Islamic banking group's Sharia-compliant holding structure does not exempt it from the PIKK formation obligation and other associated corporate, investment, and licensing requirements under Indonesian general laws and regulations.

G. REPATRIATION AND TAX

1. Domestic Withholding Tax Baseline

Under Article 26 of Law No. 7 of 1983 on Income Tax, as lastly amended by Law No. 7 of 2021 on the Harmonisation of Tax Regulations (“Law 7/1983”), Indonesia generally imposes 20% (twenty per cent) withholding tax on Indonesian-source payments to non-residents, including (i) dividends, (ii) interest, (iii) royalties, (iv) remuneration, (v) gifts, (vi) pension or periodic payments, (vii) swap premiums and hedging transactions, and/or (viii) exemptionrelated gains, which is not creditable against any other Indonesian tax liability. Where a

Double Taxation Avoidance Agreement (“DTAA”) is in force between Indonesia and the recipient's jurisdiction of residence, that default rate may be reduced, provided the recipient obtains and submits a valid Certificate of Domicile in the prescribed form.

Treaty-Access Procedure. Ministry of Finance Regulation No. 112 of 2025 on Procedures for the Implementation of Double Taxation Agreement (“MoF Reg. 112/2025”), effective from 31 December 2025 and applicable to the revised Directorate General of Taxes form format from 1 January 2026, materially tightens the procedural conditions for accessing a reduced treaty rate. Most significantly for a Gulf institutional investor, MoF Reg. 112/2025 introduces a mandatory minimum holding period of 365 (three hundred and sixty-five) consecutive days to qualify for a reduced treaty dividend rate, incorporates a principal purpose test (uji tujuan utama), and requires all certificate of domicile (surat keterangan domisili) and treaty-benefit filings to be processed through Coretax, Indonesia's mandatory digital tax platform (Articles 9 (1), 18 (3) (f), 20 (2) of MoF Reg. 112/2025). The exemption is obtained through an application on the DGT form, which carries only a 12 (twelve)-month validity window (Article 8 (4) of MoF Reg. 112/2025). Investors should build the 365 (three hundred and sixty-five)day holding period and Coretax documentation timeline into the transaction schedule for any planned dividend distribution from an Indonesian portfolio company.

2. Interaction With the DHE SDA Retention Requirement

The withholding tax on a dividend and the ability to use export proceeds are separate issues. Indonesia’s DHE SDA regime generally requires exporters in the non-oil and gas natural resources sector to retain all export proceeds, subject to permitted-use exceptions (see Section C (4) above). A compliant Indonesian exporter can generally distribute a foreigncurrency dividend to its shareholder from within the DHE SDA retention structure itself. The retention requirement does not by itself prevent a compliant exporter from paying a dividend, but the payment must satisfy the applicable DHE SDA rules and documentary requirements.

3. Sukuk Coupon Tax Treatment

Indonesia applies the same reduced final income tax treatment to sukuk as to conventional bonds. For non-resident investors, the Indonesian government reduced the final withholding tax on qualifying bond interest to 10% (ten per cent) under Article 2 of GR No. 9 of 2021 on Tax Treatment to Support the Business Environment. This rate applies to domestic taxpayers and permanent establishments, meaning any PT PMA or representative office established in Indonesia by Gulf investors will receive similar treatment in respect of sukuk coupon.

Nevertheless, for Gulf investors, the applicable rate should be determined by reference to the type of sukuk, the investor’s tax status, and any applicable tax treaty, rather than assumed to apply automatically to every sukuk return.

H. KEY RISK CONSIDERATIONS

1. Foreign Ownership Restrictions

PR 10/2021 provides that certain activities are closed to or restricted for foreign investors at specified thresholds. For instance, businesses engaged in (i) the batik industry, (ii) traditional cosmetics and drugs, (iii) journalistic and broadcasting activities, (iv) Umrah and Hajj pilgrimage travel services, (v) wood-building material manufacturing, and (vi) the shipbuilding industry are declared exclusive to domestic business owners. Certain business activities such as (i) the defence equipment industry, (ii) maritime and aviation transport, and (iii) courier services are limited to 49% (forty-nine per cent) foreign ownership (Appendix III of PR 10/2021).

This investment list regulation further provides a residual category of business fields open with conditions, comprising fields reserved for domestic investors, fields subject to a foreign shareholding cap, fields requiring special licensing, and the separately regulated alcoholicbeverage trading and retail sector (Article 6 (1) of PR 10/2021). An investor's assessment of the specific business code (i.e., KBLI) before proceeding with any acquisition or establishment is critical to avoid unwarranted challenge or delay.

2. Divestment Obligations

Indonesia's mining, banking, and insurance sectors each impose distinct, sector-specific divestment or shareholding-adjustment obligations that an investor must assess separately from PR 10/2021. In mining, GR No. 96 of 2021 on Implementation of Mineral and Coal Mining Business, as last amended by GR No. 39 of 2025 (“GR 96/2021”), regulates, among other matters, the transfer of mining licences and shares in mining companies, including requirements for approval and compliance with specified conditions to ensure that SOE shareholding in the relevant entity does not fall below 51% (fifty-one per cent) (Article 12 of GR 96/2021). In banking and insurance, a foreign investor holding a controlling stake typically remains subject to OJK's fit-and-proper and shareholder composition requirements.

Investors should therefore check the relevant sectoral rules at the outset rather than assuming that the general foreign-ownership rules determine the investor's position throughout the life of the investment.

3. Domestic Component Level (Tingkat Komponen Dalam Negeri or “TKDN”) LocalContent Requirements

TKDN rules require the use of domestic products and components in certain activities, including government procurement and specified industrial sectors. The requirements vary significantly by product and industry, and there is no single threshold applicable across manufacturing, mining, and telecommunications projects. Investors should assess during project planning whether the proposed project or product falls within a sector subject to mandatory TKDN requirements, and if so, what percentage and certification requirements will apply, since TKDN can affect eligibility for government procurement and access to certain government-related benefits.

4. Enforcement of Foreign Arbitral Awards

Indonesia is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“1958 New York Convention”) by way of Presidential Decree No. 34 of 1981, and accordingly recognises and enforces qualifying foreign arbitral awards. Under Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Arbitration Law”), the Central Jakarta District Court is the sole first-instance court competent to register and grant foreign arbitral award recognition and enforcement power (i.e., exequatur), with typical registration-to-execution timelines of 3 (three) to 9 (nine) months, varying on a caseby-case basis. For a foreign arbitral award to obtain an exequatur, it must fulfil the following requirements (Article 66 of Arbitration Law):

1. The International Arbitral Award is rendered by an arbitrator or arbitral tribunal in a state with whom Indonesia is bound by treaty (whether bilateral or multilateral) on the recognition and enforcement of International Arbitral Award;
2. The International Arbitral award is limited to awards that under Indonesian Law fall within the scope of commercial law;
3. The International Arbitral Award does not violate Indonesian public order;
4. The International Arbitral Award may be enforced in Indonesia only after obtaining an exequatur from the Head of the Central Jakarta District Court; and
5. If the Republic of Indonesia is involved as a party in the arbitration, the enforcement will only be effective after obtaining an exequatur from the Supreme Court of the Republic of Indonesia, to which the enforcement will be delegated to the Central Jakarta District Court.

Enforcement of a foreign arbitral award in Indonesia is not automatic merely by virtue of Indonesia's accession to the 1958 New York Convention. The award must first satisfy the applicable statutory requirements for recognition and enforcement under Indonesian law, after which the Chief Judge of the Central Jakarta District Court will assess the application and determine whether an exequatur may be granted.

In practice, a dispute-resolution clause should specify clear arbitration terms if the parties intend the resulting award to be treated as a foreign award eligible for New York Convention enforcement through the Central Jakarta District Court's exequatur procedure, and should ensure that the applicable statutory requirements for obtaining an exequatur are satisfied.

5. Corruption and Anti-Money Laundering Enforcement

Indonesia's Corruption Eradication Commission (Komisi Pemberantasan Korupsi) continues to operate as the principal specialist anti-corruption enforcement agency, alongside the Financial Transaction Reports and Analysis Centre (Pusat Pelaporan dan Analisis Transaksi Keuangan or “PPATK”), Indonesia's financial intelligence unit under Law 8/2010. As elaborated in Section C (1) above, Law 8/2010 provides that a corporation may be held criminally liable where money laundering is committed in circumstances connecting the offence to the corporation, with substantial fines and additional sanctions potentially including licence revocation, business suspension, dissolution, and asset forfeiture. Accordingly, Gulf investors engaging in any transaction should implement enhanced due diligence on Indonesian partners, beneficial owners, sources of funds, and transaction structures, particularly for acquisitions, joint ventures, and investments involving government-linked or natural-resource businesses.

6. Enhanced Corporate Criminal Liability

The expanded corporate criminal liability framework introduced by Law 1/2026 in conjunction with the Indonesian Criminal Code is relevant not only as a pre-investment diligence consideration but throughout the life of the investment. Ongoing governance protocols, board composition, and internal compliance monitoring should be designed with this expanded liability regime in view, given the severity of the potential supplementary sanctions (i.e., licence revocation, dissolution, and state takeover) available against a convicted corporate entity.

I. EXIT ROUTES AND LISTING CONSIDERATIONS

1. IDX Listing

The IDX operates 5 (five) principal listing boards: 

1. Main Board, for larger and more established issuers; 
2. Development Board, for growth-stage companies not yet meeting Main Board standards; 
3. Acceleration Board, introduced to facilitate listings by small and medium enterprises that cannot yet meet Development Board or Main Board requirements, with lower application and annual listing fees (e., IDR 25 million against a minimum IDR 50 million for the other two boards) and more flexible underwriting;
4. New Economy Board, intended for issuers meeting specified requirements relating to technology-driven and innovative businesses.
5. Special Monitoring Board, a list of shares designated by IDX that meet certain criteria relating to liquidity, issuances, trading suspensions, and other relevant equity-related matters.

Only Indonesian legal entities in the form of a PT (i.e., a limited liability company) may list shares on the IDX, provided they have fulfilled the equity, profit, cash flow, and free-float requirements for an initial public offering set by IDX. No foreign company has yet successfully listed depository receipts on the exchange, notwithstanding several expressions of interest, due to ambiguity in the applicable OJK rules.

Listing-Rule Overhaul. The IDX materially changed the requirements applicable to an eventual IPO exit. On 31 March 2026, the IDX issued Decree No. Kep-00045/BEI/03-2026, amending Regulation I-A, together with Circular Letter No. SE-00004/BEI/03-2026. The revised rules introduce a market-capitalisation-based approach to the minimum free-float³ requirement for initial listings:

1. 25% where market capitalisation is below IDR 5 trillion;
2. 20% where it is between IDR 5 trillion and IDR 50 trillion; and
3. 15% where it exceeds IDR 50 trillion, subject to minimum free-float share requirements of 300 million shares for the Main Board and 150 million shares for the Development Board.

The rules also strengthen the definition of free-float shares, introduce tighter listing and continuing-listing requirements, and require directors, commissioners and audit committee members to complete relevant continuing education once the applicable IDX circular takes effect. 

Investors planning an eventual IDX listing as an exit route, whether for a direct PT PMA investment or a Danantara co-investment portfolio company, should model these changes into the exit timeline now, since the Development Board route may in practice become the more accessible listing venue during the pre-profitability growth phase of a project.

2. Strategic Sale to a Domestic or Regional Acquirer

A trade sale to a domestic Indonesian conglomerate, a regional strategic acquirer, or a further inbound foreign strategic investor remains a conventional exit route. The incoming investor will need to satisfy the foreign-ownership requirements (see Section H (1) above) applying afresh to the incoming purchaser, and, where the target operates in mining, banking, or insurance, any applicable divestment or shareholder-approval requirements. Shareholder agreements for Gulf co-investments should incorporate customary drag-along, tag-along, and right-of-first-refusal provisions calibrated to this exit route from the outset.

3. Secondary Sale to Another Sovereign Wealth Fund or Private Equity Fund

Given the increasingly active role of Danantara, INA, other regional sovereign wealth funds, and global private equity funds in the Indonesian market, a secondary sale of a minority or co-investment stake to another institutional investor is an increasingly viable exit route where the incoming purchaser may already be pre-qualified as an eligible co-investment counterparty under the relevant platform's governance framework. The availability of such an exit will depend on the target's constitutional documents, shareholders' agreement, applicable regulatory approvals and any transfer restrictions imposed by the relevant coinvestor.

4. Sukuk Exit

For a Sharia-compliant financing structure, a sukuk issuance and subsequent secondarymarket trading or maturity-based redemption offers a defined exit path distinct from an equity sale, and benefits from the favourable 10% (ten per cent) final income tax rate on sukuk coupon and profit-sharing income. As noted in Section G (3), the applicable rate should be determined by reference to the type of sukuk, the investor’s tax status, and any applicable tax treaty, rather than assumed to apply automatically to every sukuk or investor.

5. Put-and-Call Arrangements at the Shareholder-Agreement Level

Regardless of the ultimate exit channel selected, a Gulf investor should consider incorporating appropriate call and put options, or other transfer mechanisms, into the shareholders' agreement for any Indonesian joint venture or co-investment. Depending on the transaction, these may address, at minimum, a deadlock-triggered exit, a change-ofcontrol trigger tied to the corporate criminal liability and licence-revocation exposure, a material regulatory change, and loss of a required licence. The exercise mechanics should also address valuation, funding, payment currency and timing, regulatory approvals, and compliance with Indonesian foreign-exchange and repatriation requirements.

J. SIGNALS TO WATCH OVER THE NEXT 12 MONTHS

1. MSCI November 2026 Review

The MSCI Index Review scheduled for November 2026, as examined at Section B (2) above, will determine whether Indonesia's Emerging Market classification is retained, placed under formal consultation for reclassification to Frontier Market status, or reclassified outright. The outcome will depend on demonstrated, sustained implementation of the IDX, OJK, and KSEI transparency and free-float reforms examined at Section I (1) above.

2. Danantara Sub-Fund Launches

Continued build-out of Danantara's sectoral sub-fund and co-investment platform architecture, including any further Gulf-linked strategic partnerships.  Separately, DSI's single-window export mechanism commenced operation on 1 June 2026, with an initial mandate covering strategic exports of coal, palm oil, and ferroalloys. The government has also introduced a transitional period for the new export-governance framework, making the implementation of the framework and any subsequent expansion of DSI's mandate relevant to investors in natural-resource businesses.

3. New Manpower Law Adoption

The government is continuing to deliberate the new Manpower Law ahead of Constitutional Court Decision No. 168/PUU-XXI/2023, which required the employment provisions in the Job Creation Law to be separated and consolidated into dedicated manpower legislation within two years of the decision dated 31 October 2024 – that is, by 31 October 2026. Based on publicly available information, the draft legislation would materially reshape the duration of fixed-term contracts and outsourcing rules. Investors with existing or planned Indonesian workforces should track the bill's progress and be prepared to promptly update employment documentation and workforce structures upon enactment.

4. PDP Agency Operationalisation

Presidential signature and operationalisation of the Personal Data Protection Agency remain a live 2026 milestone for any data-intensive investment, and its establishment will trigger a further wave of government regulations implementing risk-based data classification, crossborder transfer adequacy assessment, and administrative sanction procedures.

5. Further Commodities Regulatory Refinements

The government has indicated it will continue to assess the impact of the 2025 mineral and coal royalty overhaul on company profitability, raising the possibility of further calibration of nickel and other mineral royalty rates during 2026, while the DSI single-window export mechanism's initial coverage of coal, palm oil and ferroalloys is likely to be a template for further commodity-specific export-control refinements.

Footnotes

^{1. https://jakartaglobe.id/business/trade-pact-gold-palm-oil-indonesia-aims-42-billion-export-to-uae#goog_rewarded}  

^{2. https://invest.jakarta.go.id/news/290/indonesias-investment-realization-continues-to-grow-in-the-first-half-of-}

^{2026#:~:text=The%20Ministry%20of%20Investment%20and%20Downstream%20Industry%2FIndonesia,increase% 20and%20creating%20742%2C293%20direct%20jobs%20nationwide.} 

^{3. Free float shares are (i) shares held by shareholders owning less than 5% of the total shares, (ii) excluding shares held by the controller and/or its affiliates, (iii) owned by the members of the board of directors or board of commissioners, (iv) shares repurchased by the company, and (v) shares subject to transfer restrictions.}

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.