BUSINESS ACTIVITIES THAT MUST PARTNERED WITH MICRO, SMALL, AND MEDIUM ENTERPRISES (MSMEs) FOR FOREIGN DIRECT INVESTMENT (FDI)
The government aims to strengthen economic activities not only in the investment sector carried out by standalone foreign entities, such as Foreign Direct Investments (FDIs), but also targets bolstering the MSME sector. This aligns with prevailing regulations as stipulated in Presidential Regulation Number 10 of 2021 concerning Business Fields for Investment ("Presidential Regulation No. 10/2021"), which has been amended by Presidential Regulation Number 49 of 2021 regarding amendments to Presidential Regulation Number 10 of 2021 concerning Business Fields for Investment ("Presidential Regulation No. 49/2021"). As per Article 12 of the Investment Coordinating Board Regulation Number 4 of 2021 concerning Guidelines and Procedures for Risk-Based Business Licensing Services and Investment Facilities ("BKPM Regulation No. 4/2021"), FDI falls under the category of large-scale enterprises.
FDI investment activities need to consider which business fields are open for foreign investment. As stipulated in Article 3 paragraph (1) of Presidential Regulation No. 10/2021, the following business activities are open:
- Priority business sectors;
- Business sectors allocated or partnered with cooperatives and MSMEs;
- Business sectors with specific requirements; and
- Business sectors not included in a, b, and c.
According to Article 5 paragraph (1) of Presidential Regulation No. 10/2021, for business sectors allocated or partnered with cooperatives and MSMEs, they are divided into two categories:
- Business sectors allocated for Cooperatives and MSMEs, and
- Business sectors open to Large Enterprises that partnered with Cooperatives and MSMEs.
As FDI business activities fall under large-scale enterprises, several business activities are required to partnered with MSMEs by meeting the following criteria:
- Business sectors predominantly operated by Cooperatives and MSMEs; and/or
- Business sectors encouraged to be part of the supply chain for Large Enterprises.
To identify FDI companies categorized as large-scale enterprises that are required to partnered with MSMEs, reference can be made to Appendix II of Presidential Regulation No. 49/2021. For example, business activities mandated to partnered with MSMEs include:
- KBLI 53202 - Courier Agent activities;
- KBLI 86903 - Health Clinic Laboratory; and
- KBLI 23952 - Nail, Screw, and Nuts Industry.
The brief overview above provides a general understanding of the business activity regulations that mandate partnerships between Foreign Direct Investments (FDIs) and Micro, Small, and Medium Enterprises (MSMEs). If you wish to learn more about this matter, Suria Nataadmadja & Associates Law Office can assist you.