Requirement to Appoint Local Trading Company under Indonesia’s Omnibus Law

Indonesia’s Omnibus Law and the introduction of the Positive Investment List have significantly relaxed foreign ownership restrictions in various business sectors, including certain trading activities. As a result, many foreign investors have questioned whether a foreign-owned distributor company (PMA Distributor Company) may now distribute products directly in Indonesia without appointing a local trading company. This article examines the current regulatory framework and explains why, despite the liberalization of foreign investment rules, certain distribution activities may still require the appointment of a local distributor, agent, or similar trading partner.

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Requirement to Appoint Local Trading Company under Indonesia’s Omnibus Law

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Attorney-at-law admitted in Indonesia

Fiesta Victoria

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Fiesta Victoria is an Indonesian qualified lawyer with over 16 years of experience in M&A and general corporate. She graduated from the University of Pelita Harapan in 2006 and started her career as a lawyer in the same year at one of the largest and oldest law firms in Indonesia. She joined ZeLo in 2019 with the primary role of establishing and developing ZeLo’s Indonesian practice group. She won the title of "Business Development Lawyer of the Year" at the ALB Women in Law Awards 2021. Additionally, she was nominated as one of the top 5 finalists for "Foreign Lawyer of the Year" at the ALB Japan Law Awards 2023, following a nomination in the same category at the ALB Japan Law Awards 2022.

Prior to the enactment of Law No. 11 of 2020 on Employment Creation on November 2, 2020 which was subsequently revoked by Law No. 6 of 2023 concerning the Stipulation of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation as Law (Undang-Undang No. 6 Tahun 2023) (the “Omnibus Law”) and issuance of its implementing regulation, the Government Regulation No. 29 of 2021 on Implementation of Trading Sector as amended by Government Regulation No. 3 of 2026 regarding the Amendment to Government Regulation No. 29 of 2021 concerning the Administration of the Trade Sector, a foreign wholesale distribution investment company (“PMA Distributor Company”) had to appoint a 100% locally-owned trading company (“Local Trading Company”) to act as its local distributor or agent to sell its products. This was because only such a Local Trading Company was allowed to distribute goods to retailers (which would then sell the goods to consumers).

With the enactment of Omnibus Law and issuance of an implementing regulation that comprises a new priority list of investments (also known as the Positive List of Investments) ,^[1]the Indonesian government now allows foreign parties to invest and hold up to 100% of shares in several trading- that were previously subject to foreign ownership restrictions or prohibitions.

ZeLo, a Foreign Law Joint Enterprise has received many questions as to whether, after the enactment of the Omnibus Law, a PMA Distributor Company still is required to appoint a local distributor pursuant to Minister of Trade Regulation No. 11/M-Dag/PER/3/2006 on Guidelines and Procedures of Registration of Agent and Distributor of Good and/or Services (“MOT Regulation No. 11/2006”).

However, Minister of Trade Regulation No. 24 of 2021 regarding Agreements for the Distribution of Goods by Distributors or Agents was subsequently issued, revoking the MOT Regulation No. 11/2006. The new regulation essentially confirms that a PMA distributor company is still required to appoint a local Distributor, Sole Distributor, Agent, or Sole Agent to distribute and sell its products in Indonesia. Such appointment must be made by way of an agreement legalized by a public notary and supported by the written approval of the foreign Principal (Producer) represented by the PMA distributor company.

Generally, even though certain foreign shares ownership is now more flexible, as indicated above, there are other technical requirements in trading sectors that are not expressly addressed in the Omnibus Law, which foreign parties may need to observe depending on the type of trading business sectors involved.

For further information on the above, please contact this form.

[1] Presidential Regulation No. 10 of 2021 on Investment Sectors, effective as of March 4, 2021 as amended by Presidential Regulation No. 49 of 2021 regarding the Amendment to Presidential Regulation No. 10 of 2021 on Investment Business Fields.

The information provided in this article does not, and is not intended to, constitute legal advice and is for general informational purposes only. Readers of this article should contact an attorney to obtain advice with respect to any particular legal matter.