Can Foreigners Own Palm Oil Plantations in Indonesia?

PERTANYAAN

Under Indonesian law, are foreign citizens or foreigners allowed to own oil palm plantations in Indonesia?

INTISARI JAWABAN

Plantation business actors can conduct plantation business in all regions of the Unitary State of the Republic of Indonesia in accordance with the provisions of laws and regulations in the field of investment.

Based on our research, foreigners can own a plantation business through foreign investment. What are the provisions?

Please read the review below for a further explanation.

ULASAN LENGKAP

This article is an English translation of Bolehkah Orang Asing Punya Usaha Perkebunan Sawit di Indonesia?, written by Dian Dwi Jayanti, S.H. and published on Tuesday, 3 October 2023.

This article below is an update of the article entitled Can Foreigners Conduct Oil Palm Plantation Business?, written by Sovia Hasanah, S.H. and was first published on 23 February 2017.

All legal information available on Klinik hukumonline.com has been prepared for educational purposes only and is general in nature (read the complete Disclaimer). In order to obtain legal advice specific to your case, please consult with Justika Partner Consultant.

Can Foreigners Own Palm Oil Plantations in Indonesia?

Answering your question, as far as we can see, foreigners can own a plantation business through foreign investment.

This is in accordance with the provisions in Article 29 number 10 Perppu Job Creation which amends Article 39 Plantation Law, that plantation business actors may carry out plantation business in the entire territory of the Unitary State of the Republic of Indonesia in accordance with the provisions of laws and regulations in the field of investment.

Furthermore, according to Article 2 President Regulation 49/2021, it is stated that all business fields are open to investment activities such as domestic and foreign investment, except for business fields that are declared closed for investment or for activities that can only be carried out by the Central Government.[1]

Business fields that are declared closed to domestic investment and foreign investment are:[2]

1. Business fields that cannot be operated in accordance with the business fields listed in Article 12 Investment Law as amended by Job Creation Law; and
2. Alcoholic Beverages Industry (KBLI 11010), Alcoholic Beverages Industry: Wine (KBLI11020), and Malt Beverages Industry (KBLI 11031). KBLI stands for Klasifikasi Baku Lapangan Usaha Indonesia or Indonesia Standard Industrial Classification.

Business fields for activities that can only be carried out by the Central Government are activities that are of a service nature or in the framework of defense and security which is strategic in nature and cannot be carried out or cooperated with other parties.[3]

Based on the above provisions, oil palm plantation is a line of business that is not included in business activities that are closed to investment, either domestic investment or foreign investment. This means that foreigners can have an oil palm plantation business in Indonesia, by way of foreign investment.

You can read more about foreign investment limitations on oil palm plantations in the Foreign Capital Limitation Rules for Oil Palm Plantations.

Requirements for Foreigners to Invest in Plantation Businesses

Foreign investment must be in the form of a Limited Liability Company (“LLC”) under Indonesian law and domiciled within the territory of the Republic of Indonesia, unless stipulated otherwise by the law.[4]

As for foreigners or foreign citizens as foreign investors who invest in the form of an LLC shall:[5]

1. subscribe for shares at the time of the incorporation of the LLC;
2. purchase shares; and
3. take another method in accordance with the provisions of the laws and regulations.

In addition, foreign investors may only carry out business activities in Large-scale Businesses with an investment value of more than IDR 10 billion excluding the value of land and buildings.[6]

It is also important to note that the transfer of ownership of Plantation Companies to foreign investors may be carried out after obtaining approval from the Central Government.[7]

Based on the above explanation, it can be concluded that foreigners can own an oil palm plantation business through foreign investment in the form of an LLC, by taking shares at the time of LLC establishment, or by purchasing shares. In addition, foreigners can only invest in oil palm plantations with an investment value of more than IDR 10 billion excluding land and buildings. If a foreigner takes over ownership of an oil palm plantation company, it must be approved by the central government.

These are the answers we can provide, we hope you will find them useful.

Legal Basis:

1. Law Number 25 of 2007 on Investment;
2. Law Number 39 of 2014 on Plantation;
3. Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation which has been enacted into law under Law Number 6 of 2023;
4. Regulation of the President Number 10 of 2021 on Investment Business Fields as amended by Regulation of the President Number 49 of 2021 on the Amendment to Regulation of the President Number 10 of 2021 on Investment Business Fields.

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[1] Article 2 section (1) and (1a) Regulation of the President Number 49 of 2021 on the Amendment to Regulation of the President Number 10 of 2021 on Investment Business Fields (“President Regulation 49/2021”).

[2] Article 2 section (2) President Regulation 49/2021.

[3] Article 2 section (3) President Regulation 49/2021.

[4] Article 5 section (2) Law Number 25 of 2007 on Investment (“Investment Law”).

[5] Article 5 section (3) Investment Law.

[6] Article 7 section (1) Regulation of the President Number 10 of 2021 on Investment Business Fields.

[7] Article 29 number 11 Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation that amends Article 40 Law Number 39 of 2014 on Plantation.