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Ada Pertanyaan? Hubungi Kami Marcell Sihombing, Kartini L. Makmur
As part of its ongoing mission to boost foreign direct investment (FDI) in Indonesia, the Widodo Administration has deregulated much of the country’s investment licensing procedures, as well as simplified a large number of bureaucratic procedures. However, a number of issues still need to be tackled by the government if FDI is to reach its full potential, including the pressing need to improve the current regulatory framework governing mergers and acquisitions (M&A).
According to Ivan Ferdiansyah, a Managing Partner at the IABF law firm, a number of provisions relating to M&A are hampering the flow of FDI into the country. By way of example, Mr. Ferdiansyah points to the issue of holding companies, a concept which is not recognized under the country’s current regulatory framework. Indeed, Law No. 40 of 2007on Limited Liability Companies states that companies can only be established if they engage in actual business activities here, which obviously excludes the concept of holding companies, as such entities are based upon capital equity (penyertaan modal) instead of the undertaking of actual business activities.
Mr. Ferdiansyah also revealed that many foreign companies are interested in investing in Indonesia, however many of these companies are reluctant to directly invest funds in Indonesian companies. According to Mr. Ferdiansyah, most foreign companies would ideally like to establish holding companies in Indonesia and then subsequently acquire domestic companies after investment funds have first been disbursed to these holding companies.
“For example, a number of investors from China recently expressed their wish to acquire several Indonesian companies via the establishment of a holding company. However this proposal was ultimately turned down, with the result that the investors in question instead invested their money in another country. This is a highly regrettable situation, as these funds could have been invested in Indonesia,” asserted Mr. Ferdiansyah at a Hukumonline training event entitled Legal Aspects of Company Mergers and Acquisitions, which was held in Jakarta’s Hotel Harris on Wednesday, 20 April, 2016.
During his address, Mr. Ferdiansyah also explained that a number of technical issues remained problematic with regard to Indonesia’s current mergers and acquisitions procedures. In order to highlight this point, Mr. Ferdiansyah recounted a negative experience encountered by his law firm, which involved a mergers and acquisitions application filed with the government being delayed for a whole month. It eventually turned out that the application in question had been addressed to the wrong governmental department.
“Bureaucratic and technical issues remain an intractable problem in our country, while the application and use of information technology, which should actually streamline things, so often presents another hurdle to be overcome,” asserted Mr. Ferdiansyah.
Nevertheless, Mr. Ferdiansyah is of the opinion that acquisitions will soon become commonplace in Indonesia, due specifically to the implementation of the ASEAN Economic Community (AEC). According to Mr. Ferdiansyah, many ASEAN member countries will be interested in investing funds in Indonesia through the acquisition of existing domestic companies. Mr. Ferdiansyah also stressed that while he was unsure whether such an increase would ultimately prove economically significant or not, he was sure that the increase in the number of acquisitions would be substantial. Mr. Ferdiansyah also noted that not all future investments would come from ASEAN member countries, as potential investors could also come from non-member countries and have already invested in companies located in other ASEAN member countries, which would then in turn be instructed to invest in Indonesia.
Almaida Iskandar, also partner at the IABF law firm, shares Mr. Ferdiansyah’s view and asserted during the recent training event that acquisitions in the mining sector were bound to increase in the near future. According to Mrs. Iskandar, the government’s announcement of a mining-license moratorium should have a significant impact upon small-scale mining companies. Moreover, small-scale mining businesses are already struggling due to the current freefall in commodity prices, specifically that of coal.
“In the end, mergers and acquisitions will prove to be the only viable options as eventually only major companies will be able to survive in this climate,” Mrs. Iskandar asserted.
Mrs. Iskandar also predicted that a similar situation would occur in the palm-oil plantation sector, although the impact of the government’s recently announced moratorium on palm-oil plantations should not prove as severe as the one in the mining sector. This is mainly due to the fact that palm oil remains competitively priced, which in turn means that the industry can still support many companies.
Mrs. Iskandar also voiced overt criticism of the Minister of State-Owned Enterprise’s plan to acquire PT Newmont Nusa Tenggara, and pointed out that the underlying principle behind acquisitions rested upon the willingness of stockholders to sell their shares. This means that the government should not resort to flexing its legal muscles in order to force various parties to relinquish their shares to the government.
Also commenting on this matter, Mr. Ferdiansyah asserted the government should be cautious and take full account of the possible consequences of its actions as regards its controversial acquisition plan. According to Mr. Ferdiansyah, the situation would be different if the government waited until its foreign-investment contract with Newmont ended before seeking to acquire the company.
“We can’t let this set a negative precedent for investment in Indonesia, as the knock-on effect could lead to a significant reduction in foreign investment here. An acquisition should not amount to nationalization,” Mr. Ferdiansyah concluded.
According to Ivan Ferdiansyah, a Managing Partner at the IABF law firm, a number of provisions relating to M&A are hampering the flow of FDI into the country. By way of example, Mr. Ferdiansyah points to the issue of holding companies, a concept which is not recognized under the country’s current regulatory framework. Indeed, Law No. 40 of 2007on Limited Liability Companies states that companies can only be established if they engage in actual business activities here, which obviously excludes the concept of holding companies, as such entities are based upon capital equity (penyertaan modal) instead of the undertaking of actual business activities.
Mr. Ferdiansyah also revealed that many foreign companies are interested in investing in Indonesia, however many of these companies are reluctant to directly invest funds in Indonesian companies. According to Mr. Ferdiansyah, most foreign companies would ideally like to establish holding companies in Indonesia and then subsequently acquire domestic companies after investment funds have first been disbursed to these holding companies.
“For example, a number of investors from China recently expressed their wish to acquire several Indonesian companies via the establishment of a holding company. However this proposal was ultimately turned down, with the result that the investors in question instead invested their money in another country. This is a highly regrettable situation, as these funds could have been invested in Indonesia,” asserted Mr. Ferdiansyah at a Hukumonline training event entitled Legal Aspects of Company Mergers and Acquisitions, which was held in Jakarta’s Hotel Harris on Wednesday, 20 April, 2016.
During his address, Mr. Ferdiansyah also explained that a number of technical issues remained problematic with regard to Indonesia’s current mergers and acquisitions procedures. In order to highlight this point, Mr. Ferdiansyah recounted a negative experience encountered by his law firm, which involved a mergers and acquisitions application filed with the government being delayed for a whole month. It eventually turned out that the application in question had been addressed to the wrong governmental department.
“Bureaucratic and technical issues remain an intractable problem in our country, while the application and use of information technology, which should actually streamline things, so often presents another hurdle to be overcome,” asserted Mr. Ferdiansyah.
Nevertheless, Mr. Ferdiansyah is of the opinion that acquisitions will soon become commonplace in Indonesia, due specifically to the implementation of the ASEAN Economic Community (AEC). According to Mr. Ferdiansyah, many ASEAN member countries will be interested in investing funds in Indonesia through the acquisition of existing domestic companies. Mr. Ferdiansyah also stressed that while he was unsure whether such an increase would ultimately prove economically significant or not, he was sure that the increase in the number of acquisitions would be substantial. Mr. Ferdiansyah also noted that not all future investments would come from ASEAN member countries, as potential investors could also come from non-member countries and have already invested in companies located in other ASEAN member countries, which would then in turn be instructed to invest in Indonesia.
Almaida Iskandar, also partner at the IABF law firm, shares Mr. Ferdiansyah’s view and asserted during the recent training event that acquisitions in the mining sector were bound to increase in the near future. According to Mrs. Iskandar, the government’s announcement of a mining-license moratorium should have a significant impact upon small-scale mining companies. Moreover, small-scale mining businesses are already struggling due to the current freefall in commodity prices, specifically that of coal.
“In the end, mergers and acquisitions will prove to be the only viable options as eventually only major companies will be able to survive in this climate,” Mrs. Iskandar asserted.
Mrs. Iskandar also predicted that a similar situation would occur in the palm-oil plantation sector, although the impact of the government’s recently announced moratorium on palm-oil plantations should not prove as severe as the one in the mining sector. This is mainly due to the fact that palm oil remains competitively priced, which in turn means that the industry can still support many companies.
Mrs. Iskandar also voiced overt criticism of the Minister of State-Owned Enterprise’s plan to acquire PT Newmont Nusa Tenggara, and pointed out that the underlying principle behind acquisitions rested upon the willingness of stockholders to sell their shares. This means that the government should not resort to flexing its legal muscles in order to force various parties to relinquish their shares to the government.
Also commenting on this matter, Mr. Ferdiansyah asserted the government should be cautious and take full account of the possible consequences of its actions as regards its controversial acquisition plan. According to Mr. Ferdiansyah, the situation would be different if the government waited until its foreign-investment contract with Newmont ended before seeking to acquire the company.
“We can’t let this set a negative precedent for investment in Indonesia, as the knock-on effect could lead to a significant reduction in foreign investment here. An acquisition should not amount to nationalization,” Mr. Ferdiansyah concluded.
(rfs/sp)
Marcell Sihombing, Kartini L. Makmur
As part of its ongoing mission to boost foreign direct investment (FDI) in Indonesia, the Widodo Administration has deregulated much of the country’s investment licensing procedures, as well as simplified a large number of bureaucratic procedures. However, a number of issues still need to be tackled by the government if FDI is to reach its full potential, including the pressing need to improve the current regulatory framework governing mergers and acquisitions (M&A).
According to Ivan Ferdiansyah, a Managing Partner at the IABF law firm, a number of provisions relating to M&A are hampering the flow of FDI into the country. By way of example, Mr. Ferdiansyah points to the issue of holding companies, a concept which is not recognized under the country’s current regulatory framework. Indeed, Law No. 40 of 2007on Limited Liability Companies states that companies can only be established if they engage in actual business activities here, which obviously excludes the concept of holding companies, as such entities are based upon capital equity (penyertaan modal) instead of the undertaking of actual business activities.
Mr. Ferdiansyah also revealed that many foreign companies are interested in investing in Indonesia, however many of these companies are reluctant to directly invest funds in Indonesian companies. According to Mr. Ferdiansyah, most foreign companies would ideally like to establish holding companies in Indonesia and then subsequently acquire domestic companies after investment funds have first been disbursed to these holding companies.
“For example, a number of investors from China recently expressed their wish to acquire several Indonesian companies via the establishment of a holding company. However this proposal was ultimately turned down, with the result that the investors in question instead invested their money in another country. This is a highly regrettable situation, as these funds could have been invested in Indonesia,” asserted Mr. Ferdiansyah at a Hukumonline training event entitled Legal Aspects of Company Mergers and Acquisitions, which was held in Jakarta’s Hotel Harris on Wednesday, 20 April, 2016.
During his address, Mr. Ferdiansyah also explained that a number of technical issues remained problematic with regard to Indonesia’s current mergers and acquisitions procedures. In order to highlight this point, Mr. Ferdiansyah recounted a negative experience encountered by his law firm, which involved a mergers and acquisitions application filed with the government being delayed for a whole month. It eventually turned out that the application in question had been addressed to the wrong governmental department.
“Bureaucratic and technical issues remain an intractable problem in our country, while the application and use of information technology, which should actually streamline things, so often presents another hurdle to be overcome,” asserted Mr. Ferdiansyah.
Nevertheless, Mr. Ferdiansyah is of the opinion that acquisitions will soon become commonplace in Indonesia, due specifically to the implementation of the ASEAN Economic Community (AEC). According to Mr. Ferdiansyah, many ASEAN member countries will be interested in investing funds in Indonesia through the acquisition of existing domestic companies. Mr. Ferdiansyah also stressed that while he was unsure whether such an increase would ultimately prove economically significant or not, he was sure that the increase in the number of acquisitions would be substantial. Mr. Ferdiansyah also noted that not all future investments would come from ASEAN member countries, as potential investors could also come from non-member countries and have already invested in companies located in other ASEAN member countries, which would then in turn be instructed to invest in Indonesia.
Almaida Iskandar, also partner at the IABF law firm, shares Mr. Ferdiansyah’s view and asserted during the recent training event that acquisitions in the mining sector were bound to increase in the near future. According to Mrs. Iskandar, the government’s announcement of a mining-license moratorium should have a significant impact upon small-scale mining companies. Moreover, small-scale mining businesses are already struggling due to the current freefall in commodity prices, specifically that of coal.
“In the end, mergers and acquisitions will prove to be the only viable options as eventually only major companies will be able to survive in this climate,” Mrs. Iskandar asserted.
Mrs. Iskandar also predicted that a similar situation would occur in the palm-oil plantation sector, although the impact of the government’s recently announced moratorium on palm-oil plantations should not prove as severe as the one in the mining sector. This is mainly due to the fact that palm oil remains competitively priced, which in turn means that the industry can still support many companies.
Mrs. Iskandar also voiced overt criticism of the Minister of State-Owned Enterprise’s plan to acquire PT Newmont Nusa Tenggara, and pointed out that the underlying principle behind acquisitions rested upon the willingness of stockholders to sell their shares. This means that the government should not resort to flexing its legal muscles in order to force various parties to relinquish their shares to the government.
Also commenting on this matter, Mr. Ferdiansyah asserted the government should be cautious and take full account of the possible consequences of its actions as regards its controversial acquisition plan. According to Mr. Ferdiansyah, the situation would be different if the government waited until its foreign-investment contract with Newmont ended before seeking to acquire the company.
“We can’t let this set a negative precedent for investment in Indonesia, as the knock-on effect could lead to a significant reduction in foreign investment here. An acquisition should not amount to nationalization,” Mr. Ferdiansyah concluded.
According to Ivan Ferdiansyah, a Managing Partner at the IABF law firm, a number of provisions relating to M&A are hampering the flow of FDI into the country. By way of example, Mr. Ferdiansyah points to the issue of holding companies, a concept which is not recognized under the country’s current regulatory framework. Indeed, Law No. 40 of 2007on Limited Liability Companies states that companies can only be established if they engage in actual business activities here, which obviously excludes the concept of holding companies, as such entities are based upon capital equity (penyertaan modal) instead of the undertaking of actual business activities.
Mr. Ferdiansyah also revealed that many foreign companies are interested in investing in Indonesia, however many of these companies are reluctant to directly invest funds in Indonesian companies. According to Mr. Ferdiansyah, most foreign companies would ideally like to establish holding companies in Indonesia and then subsequently acquire domestic companies after investment funds have first been disbursed to these holding companies.
“For example, a number of investors from China recently expressed their wish to acquire several Indonesian companies via the establishment of a holding company. However this proposal was ultimately turned down, with the result that the investors in question instead invested their money in another country. This is a highly regrettable situation, as these funds could have been invested in Indonesia,” asserted Mr. Ferdiansyah at a Hukumonline training event entitled Legal Aspects of Company Mergers and Acquisitions, which was held in Jakarta’s Hotel Harris on Wednesday, 20 April, 2016.
During his address, Mr. Ferdiansyah also explained that a number of technical issues remained problematic with regard to Indonesia’s current mergers and acquisitions procedures. In order to highlight this point, Mr. Ferdiansyah recounted a negative experience encountered by his law firm, which involved a mergers and acquisitions application filed with the government being delayed for a whole month. It eventually turned out that the application in question had been addressed to the wrong governmental department.
“Bureaucratic and technical issues remain an intractable problem in our country, while the application and use of information technology, which should actually streamline things, so often presents another hurdle to be overcome,” asserted Mr. Ferdiansyah.
Nevertheless, Mr. Ferdiansyah is of the opinion that acquisitions will soon become commonplace in Indonesia, due specifically to the implementation of the ASEAN Economic Community (AEC). According to Mr. Ferdiansyah, many ASEAN member countries will be interested in investing funds in Indonesia through the acquisition of existing domestic companies. Mr. Ferdiansyah also stressed that while he was unsure whether such an increase would ultimately prove economically significant or not, he was sure that the increase in the number of acquisitions would be substantial. Mr. Ferdiansyah also noted that not all future investments would come from ASEAN member countries, as potential investors could also come from non-member countries and have already invested in companies located in other ASEAN member countries, which would then in turn be instructed to invest in Indonesia.
Almaida Iskandar, also partner at the IABF law firm, shares Mr. Ferdiansyah’s view and asserted during the recent training event that acquisitions in the mining sector were bound to increase in the near future. According to Mrs. Iskandar, the government’s announcement of a mining-license moratorium should have a significant impact upon small-scale mining companies. Moreover, small-scale mining businesses are already struggling due to the current freefall in commodity prices, specifically that of coal.
“In the end, mergers and acquisitions will prove to be the only viable options as eventually only major companies will be able to survive in this climate,” Mrs. Iskandar asserted.
Mrs. Iskandar also predicted that a similar situation would occur in the palm-oil plantation sector, although the impact of the government’s recently announced moratorium on palm-oil plantations should not prove as severe as the one in the mining sector. This is mainly due to the fact that palm oil remains competitively priced, which in turn means that the industry can still support many companies.
Mrs. Iskandar also voiced overt criticism of the Minister of State-Owned Enterprise’s plan to acquire PT Newmont Nusa Tenggara, and pointed out that the underlying principle behind acquisitions rested upon the willingness of stockholders to sell their shares. This means that the government should not resort to flexing its legal muscles in order to force various parties to relinquish their shares to the government.
Also commenting on this matter, Mr. Ferdiansyah asserted the government should be cautious and take full account of the possible consequences of its actions as regards its controversial acquisition plan. According to Mr. Ferdiansyah, the situation would be different if the government waited until its foreign-investment contract with Newmont ended before seeking to acquire the company.
“We can’t let this set a negative precedent for investment in Indonesia, as the knock-on effect could lead to a significant reduction in foreign investment here. An acquisition should not amount to nationalization,” Mr. Ferdiansyah concluded.
(rfs/sp)