What were the most important legal developments in the last 12 months and how might they affect businesses?
The Indonesia Investment Coordi­nating Board's data (Badan Koor­dinasi Penanaman Modal or BKPM) shows that the total com­bined realisation of foreign and do­mestic investments was in the region of IDR721.3 trillion for January-December 2018, increas­ing by 4.1 % when compared to 2017. In the first quarter of 2019, despite certain foreign investors' "wait-and-see" tendencies due to the 2019 presidential election, BKPM still records IDR195.1 tril­lion in investment, which repre­sents a 5.3% growth when compared to the same period in 2018.

According to the data of the Indonesian Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha or KPPU), Indonesian M&A in 2018-19 focused more on private rather than public M&A, with 69 M&A deals recorded in 2018 that are subject to merger notifications at a total value of approximately IDR150 trillion ($10 billion). One of the reasons for the concentra­tion on private M&A owes to the complex regulatory framework and procedures for public M&A, which often leads to lengthier deal times and costlier transactions.

A few notable developments: 
i) Licensing procedures: two sig­nificant regulatory updates in­clude the new Government Regulation No. 24 of 2018 on Electronically Integrated Licens­ing Services and BKPM Regula­tion 6 of 2018. Through the issuance of those regulations, the government of Indonesia continues its commitment and efforts to create more transpar­ent and efficient environments by implementing the Online Single Submission (OSS) sys­tem, whereby companies can now obtain their various busi­ness licences electronically rather than through the previ­ous complicated manual appli­cations.
ii) Antitrust law: following the conclusion of the 2019 parlia­mentary and presidential elec­tions, it is now expected that the new antitrust law will be enacted in 2019 or 2020. Two significant changes include the amendment of the merger notifi­cation requirement from post­notification to prior approval, and the introduction of a le­mency programme. 
iii) Multi-finance business: the In­donesia Financial Services Au­thority (Otoritas Jasa Keuangan or OJK) issued the long awaited OJK Regulation No.
35/POJK.05/2018 on multi-fi­nance activities that provides the possibility for multi-finance companies to extend cash loans directly to borrowers. This new business feature has induced the interest of some potential in­vestors to rejuvenate the multi­finance business market in Indonesia.
iv) Equity crowdfunding: following the vigorous growth of peer-to­-peer lending businesses in In­donesia towards the end of 2018, OJK issued new regula­tions on equity crowdfunding providing companies — particu­larly start-ups — with an alterna­tive for fundraising by way of offering equity securities directly to investors via an online plat­form operated by equity crowd­funding.

What are the main restrictions on foreign investment?
Foreign investment in Indonesia is regulated under certain investment laws and regulations, with the BKPM being the government au­thority responsible for handling general investment through the OSS system. There are some excep­tions in certain sectors — such as banking, financial institutions, in­surance, mining, and oil and gas­ — that are subject to separate regulatory regimes.

The government from time to time issues the so called "negative list", which sets out certain classifi­cations of lines of business — also known as Klasifikasi Baku Lapan­gan Usaha Indonesia or KBLI­ — that are either prohibited, or subject to greater scrutiny and re­strictions. These include businesses reserved for small and medium­scale enterprises, or opened for in­vestment with certain conditions. This includes limitations on foreign ownership, requirements for local partnership, limited permitted lo­cations, and requirements for spe­cial licences. Under the prevailing negative list, a "distributor not af­filiated with production" is limited to a maximum 67% foreign own­ership (previously 33%) and Freight Forwarding is limited to 67% foreign ownership (previously 49% ). E-commerce is now open for 100% foreign investment with a partnership scheme. It has been reported that Indonesia's govern­ment is planning to amend the cur­rent negative list so as to allow full foreign ownership — or at least a higher threshold of foreign owner­ship — in a greater number of busi­ness sectors.

What key structuring and other considerations should be highlighted to potential investors/businesses looking to enter this market? 
• Indonesian law requires foreign investment to be conducted through the establishment of an Indonesian limited liability com­pany (PT), with an exception of upstream oil and gas and con­struction services, which can be done through a joint operation.
• Foreign investment is subject to the negative list.
• Indonesian law permits transfer and repatriation in foreign cur­rency against, among others, capital (including shares), profit, and dividends.

What are the typical structure and pricing mechanism used for Private M&As?
The tools and techniques used in private M&As really depend on the characteristics of the business of the target and the negotiating circumstances of the parties:
• A locked-box mechanism is more common for transactions that involve companies with dy­namic business activities and a wide range of customer portfo­lios, such as banks or multi-finance companies.
• An escrow is common for spe­cific deals where certain condi­tions or procedures are to be fulfilled by the buyer and seller within the same timeframe, or in interconnected deals which require payment to be fully paid up/made before the other con­nected deal is completed, or where there is a price adjust­ment agreed by the parties after the completion.
• A price adjustment mechanism, allowing the parties to adjust the purchase price after comple­tion if, for example, the valua­tion of the assets/shares decreases.

Fundamental pre-closing condi­tions, depending on the character­istics of the deal and business line, include government approvals (if required by specific regulations); the internal corporate approval of the parties and acquired company; creditors' consent; and announce­ments to the creditors and employ­ees.

Post-closing conditions are more administrative requirements by na­ture and include a notification to the authorised government, credi­tors, and a newspaper announce­ment. This includes a merger notification report to the KPPU when the threshold set under the regulation is met. Other contrac­tual conditions between sharehold­ers include a non-competition clause — between the business of the shareholders and the acquired company — and price adjustment conditions. It is common that a sale and purchase agreement of shares is subject to a foreign law, although Indonesian law must gov­ern the implementing deed of transfer.

What anti-bribery/anti­corruption laws are in place and how strictly are they enforced?
Indonesian anti-bribery law is mostly focused on gratification to civil servants and government offi­cials. The law imposes obligations on the recipient of gratification to report its receipt to the anti-bribery supervisory commission (Komisi Pemberantasan Korupsi or KPK) who will then determine whether the gratification belongs to the re­cipient or the state. Recently, as can be seen in some major high­lighted cases, KPK has been ex­panding its focus to watch-over private-led business projects, which are potentially exposed to corrup­tion/bribery risk involving govern­ment officials.

Is there a competition law in place and how strictly does it control M&A or other activity?
Indonesia introduced competition law in 1999 through the enactment of Law No. 5 of 2009 on the Pro­hibition of Monopoly Practices and Unfair Business Competition. In 2010, the implementing regula­tion on merger reports came into force, requiring mandatory post­merger notifications for transac­tions meeting certain thresholds set under the KPPU Guidelines.

Luky I. Walalangi 
Founding Partner and Managing Partner 
Email: lwalalangi@wplaws.com
Website: www.wplaws.com
Walalangi & Partners 
Jakarta, Indonesia 

Practice area/industry focus: M&A, banking and finance, real estate 
Career highlights: Mr Luky I. Walalangi is an Indonesian qualified lawyer, an expert and a leading lawyer in M&A, banking and finance and real estate transactions with almost two decades' experience. Mr Walalangi has been assisting various foreign companies in their complex investments and acquisitions, including assets and portfolio loan acquisitions, and corporate restructurings in Indonesia. He has also been representing global leading banking and financial groups on major finance transactions, bond issuances, sophisticated fund­raising projects as well as a number of major electricity projects in Indonesia. 

Chambers Global 2019: Leading Individual in M&A and Corporate. 
Chambers Asia Pacific 2019: Leading Individual in M&A and Corporate. 

Asia Business Law Journal 2079: The A-List: Indonesia's Top 100 Lawyers. 
Asialaw 2079 Asia/aw Profiles Research: 5 Best Lawyers.
IFLR1000 2019: Leading Lawyer — Highly Regarded.