Manufacturing in Indonesia: Setting Up a Foreign-Owned Factory

For manufacturing in Indonesia, a foreign-owned factory is run through a PT PMA (Perseroan Terbatas Penanaman Modal Asing, a limited liability company with foreign investment). A factory then adds a few things of its own: a site, normally inside an industrial estate, the industrial business licence, an importer identity for its own machinery and materials, and regular industry reports through SIINas.

The sections below go through manufacturing in Indonesia step by step, with what the rules require and what we take care of for you. Laws are cited as UU (Undang-Undang, law) and government regulations as PP (Peraturan Pemerintah); Permenperin and Permendag are regulations of the Ministry of Industry and the Ministry of Trade.

From company to factory floor

The site, environmental and building approvals are in location and environmental approvals; this article covers what is specific to a factory in Indonesia.

1. 1

   PT PMA

   Form the foreign-owned company.

2. 2

   Site

   Normally a plot in an industrial estate.

3. 3

   Licence

   The industrial business licence.

4. 4

   Build

   Build (inside an estate, within four years); reports can start.

5. 5

   Operate

   Operate, and report every quarter.

Where the factory may sit

The starting rule is that an industrial company must locate in an industrial estate (kawasan industri). It is in the industry law (UU 3/2014, Article 106, as amended by UU 6/2023) and restated in the licensing regulation (PP 28/2025, Article 151(1)) and the industrial zoning regulation (PP 20/2024, Article 62).

A factory may sit outside an industrial estate in Indonesia where its regency or city has no estate or the estate’s plots are all taken, or where it is in the industrial zone of a special economic zone (KEK, Kawasan Ekonomi Khusus) (PP 28/2025, Article 151(2)). Some kinds of industry are exempt too: medium industry with no potential for wide-impact pollution, and industry that uses special raw materials or whose production process needs a special location, as the Ministry of Industry decides (Article 151(2) and (4)). A factory outside an estate because there is none or it is full, and an exempt medium industry, still needs land zoned for industry in the spatial plan (Article 151(3)).

Small industry is exempt as well, but UU 3/2014, Article 103(1), says small industry may be owned only by Indonesian citizens. Our note on special economic zones covers the zones themselves.

Inside an industrial estate

These duties apply to a factory inside an estate (PP 20/2024, Article 64):

• Follow the estate’s own rules.
• Maintain the environment around the estate, which includes not drawing groundwater.
• Build the factory or its supporting buildings within four years of buying or leasing the land; the period can be extended by one year.
• Report any change to the business licence, including an expansion or a new line of business, to the estate company.

The environmental approval inside an estate is covered in the location article linked above. Factories in an estate may also receive fiscal and non-fiscal incentives under the rules that govern each (PP 20/2024, Article 66(1)).

The industrial business licence

Every industrial business needs a business licence from the central government (UU 3/2014, Article 101(1)). Its form follows the activity’s risk level, from the NIB (Nomor Induk Berusaha, the business identification number) alone to a verified standard certificate or a permit before operating (PP 28/2025, Articles 128 and 130 to 133).

How OSS sets the risk level explains the tiers in OSS (Online Single Submission, the government’s licensing system).

The licence covers, among other things:

• running an industry that processes raw materials, including industrial services (Article 149(1));
• storing machinery, materials and output that serve the production, at the same site, provided the storage is not rented out (Article 150).

One licence covers one business at one site. It can also cover an integrated unit, or the same business at several sites, within one estate; anything else needs a new licence (Article 153). Once licensed, the company must operate within its licence and must ensure the safety and security of its equipment, processes, products, storage and transport (UU 3/2014, Article 101(3)).

A licensed company may expand in line with the rules (UU 3/2014, Article 104, as amended by UU 6/2023). A change of industrial classification that adds land or moves the factory must meet the location rule again (PP 28/2025, Article 152(1) and (2)).

Importing machinery and materials

API-P (Angka Pengenal Importir Produsen, the producer importer identity) is given only to a business importing goods for its own use as capital goods, raw materials, auxiliary materials or production inputs (Permendag 16/2025, Articles 1(17) and 7(2)). An importer holds either API-P or API-U (Angka Pengenal Importir Umum, the general importer identity) (Article 3(3)). Goods brought in under API-P stay with the business, with exceptions (Article 7(3) and (4)). Our guide to importing goods into Indonesia compares the two and covers the first shipment.

SIINas reports can start while the factory is being built

Every industrial company reports industry data periodically through SIINas, the national industry information system (Sistem Informasi Industri Nasional), under UU 3/2014, Article 64, and PP 28/2021, Article 120. Under Permenperin 13/2025, the reports come four times a year, each within a short window after the quarter ends (Article 5(2) and (3)). Filing is through a SIINas account (Permenperin 13/2025, Article 4(2)).

Standards and capital

Goods covered by a mandatory SNI (Standar Nasional Indonesia, the national standard) may not be produced, imported or put on the market unless they meet it (UU 3/2014, Article 53(1)(b)); obtaining an SNI certificate sets out the process. How the planned investment is counted for a production line is in PT PMA capital requirements.

What MAM takes care of

For a factory, we set up the PT PMA and obtain the industrial business licence: with the formation where the activity is low risk, and as a separate engagement where it is medium or higher risk. We then file the company’s quarterly SIINas industry reports. Share the product and the site you have in mind, and we will map out each step from there.