Indonesia's Draft Industrial Zone Law to Simplify Immigration for Expat Workers, Investors

The Indonesian government is currently drafting a bill on Industrial Zones that would establish a framework covering investment, spatial planning, licensing, incentives, infrastructure, manpower, and other aspects of Industrial Zone development, with the goal of making the sector more comprehensive and integrated. One of the proposed measures is to grant incentives and ease of doing business to companies within Industrial Zones, including simplified immigration procedures for foreign workers and investors operating in, or connected to, companies located in these zones.

The proposed immigration facilitation is intended to help avoid lengthy bureaucratic processes, including through faster stay permits and visa services. The provision aims to make the Industrial Zone ecosystem more attractive to global investors and to foster competitive business conditions. The bill has not yet been enacted into law. Its provisions remain subject to the legislative process and may still change before final passage.

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Immigration Ease Proposed as an Incentive for Foreign Nationals

Through this bill, the government proposes to regulate incentives and facilities within Industrial Zones. The provisions focus on Industrial Zone Companies and companies operating within Industrial Zones, which may be granted both fiscal and non-fiscal incentives. This is intended to encourage investment, boost production, and expand employment opportunities. The proposed immigration-related incentive facility is set out in Article 47, paragraph (2), letter j of the bill. That provision states that the proposed non-fiscal incentives may include ease of business licensing, port services, manpower, and immigration matters for foreign nationals, as well as security facilities.

It is important to note that this provision does not create a separate immigration administration for foreign nationals. Rather, the proposed immigration facilitation is offered as one form of non-fiscal incentive available within the administrative framework of Industrial Zones.

The Scope of Proposed Incentives and Facilities Is Very Broad

The proposed incentives cover a scope far broader than immigration alone. Article 47, paragraph (2) also contains provisions on ease of land or site provision, training for Industrial Workers, professional competency certification, Industrial Infrastructure development, spatial-planning adjustment facilities, renewable energy development, and special procedures for acquiring land rights.

In addition, Article 47, paragraph (1) regulates fiscal incentives in the form of tax and customs reductions, to be further governed by ministerial regulation in the field of state finance.

Accordingly, the bill's ultimate objective is broader still: making Industrial Zones more attractive and efficient for businesses by simultaneously addressing various regulatory and operational barriers. The bill also proposes additional incentives for Industrial Zone companies located in designated industrial growth centers.

Under Article 49, the Government may also grant incentives to Industrial Zone companies located in industrial growth centers. Qualifying companies must meet certain conditions, including being located in border or underdeveloped regions, optimizing the use of domestic goods and services, developing Industrial Workers, contributing to export performance and domestic value-added, providing space for micro and small businesses, and implementing environmental initiatives such as Green Industry and Halal Industry programs.

These incentives will be granted for a specified period depending on the type and characteristics of the business activity. Extensions will depend on evaluation of the company's performance against applicable requirements. The bill also allows the Government to suspend or revoke incentives, or require partial or full repayment of incentives already received, if a recipient no longer meets the relevant requirements.

The Government Sets Requirements for Granting the Proposed Incentives and Facilities

The proposed incentives and facilities will not apply automatically to every company operating in an Industrial Zone.

Article 46, paragraph (3) further stipulates that the granting of incentives will take into account several factors:

• the type and scale of business activity;
• the positive impact of the business activity on the national economy;
• alignment of the business activity with national industrial development plans;
• the state's financial capacity; and
• applicable laws and regulations.

This means the proposed immigration facilitation cannot be interpreted as an automatic right for all foreign workers, expatriates, or investors. Eligibility, form, procedure, and implementation of the incentives will depend on regulations and requirements that are ultimately set out in the final legal framework.

Development of Local Indonesian Workers as a Utilization Effort

The benefits proposed for foreign workers come together with certain obligations related to developing Industrial Workers in Indonesia. Article 22 stipulates that Industrial Companies and/or Industrial Zone Companies that employ foreign workers are required to provide work-related education for Industrial Workers, in line with the qualifications of the position held by the foreign worker. Article 25 contains a similar provision, requiring Industrial Companies that employ foreign workers to provide job training for Industrial Workers, in accordance with the qualifications of the position held by the foreign worker.

The bill also places broader emphasis on developing a more competent and competitive industrial workforce through education, training, and apprenticeship programs. In addition, companies in Industrial Zones are expected to prioritize and engage local workers residing in and around the industrial zone, provided they meet the required competencies, qualifications, and other criteria. If local workers do not yet meet these requirements, the bill provides for education and training programs to improve their qualifications and competencies. Thus, the proposed approach is not solely aimed at easing the entry of foreign workers into Indonesia. It also seeks to link the utilization of foreign expertise with skills development and capacity building for Indonesia's local industrial workforce.

Incentives as Support for Investment, Competitiveness, and Industrial Sector Growth in Indonesia

The proposed framework of incentives and facilities in these provisions aligns with the bill's broader objectives. Article 3 explains that the regulation of Industrial Zones under the bill aims to increase investment contributions in Industrial Zones, strengthen the capacity of a competent industrial workforce, create jobs, improve investment competitiveness, and foster a conducive investment climate.

The bill's elucidation also refers to the government's economic growth target of 8% driven by the industrial sector, with the expectation that strengthening industrial-sector regulation will help achieve that target by boosting investment, exports, household consumption, and industrial sector development. This places the proposed immigration facility within a much broader economic policy framework one aimed at attracting investment while developing industrial capacity, expanding employment, developing infrastructure, and creating domestic value-added.

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The Policy Still Requires a Lengthy Legislative Process

For foreign investors and business actors, the key point is that these proposed provisions remain only a draft. The bill and its provisions may still change during the legislative process. The bill also provides for implementing regulations to be issued at a later stage. Article 83 stipulates that implementing regulations for this law must be issued no later than one year after the law is enacted.

The institutional structure is also not yet final. The draft materials present several options for the institutional form of the proposed National Industrial Zone body, including a cross-ministerial coordination structure led by the President, an agency under a Minister, or an independent agency reporting to the President. Therefore, investors should view the current provisions as an indication of regulatory direction rather than as benefits that can be obtained immediately.

If passed with substantially the same content as it currently stands, the bill could provide a more integrated framework for companies in Indonesia's Industrial Zones. Nonetheless, foreign business actors must still comply with applicable requirements relating to incentives and facilities in business licensing, land matters, spatial planning, manpower, immigration, and other regulatory aspects.

Conclusion

Indonesia's draft Industrial Zone Law signals a policy direction that could become more investor-friendly for the country's industrial sector. One of the proposed steps is to provide non-fiscal incentives covering business licensing, port services, manpower, and immigration for foreign nationals connected to companies in Industrial Zones. At the same time, the proposed framework is not designed as an unconditional benefit for investors or foreign workers. Eligibility for incentives will depend on various factors, such as the scale and type of business, economic impact, alignment with national industrial development plans, and applicable laws. Companies employing foreign workers will also be obligated to provide education and training for Indonesian industrial workers.

Since this regulation is still in draft form, details regarding immigration facilities, application procedures, eligibility criteria, and implementation mechanisms have not yet been determined. Foreign business actors are therefore advised to monitor the legislative process while continuing to prepare for compliance with the currently applicable regulatory framework. For companies and individuals considering an early entry into Indonesia's Industrial Zones, understanding the interplay between immigration, work permits, business licensing, land rights, and company establishment still requires careful legal and administrative planning.

CPT Corporate can assist with visa and work permit processing, business licensing, PT PMA (foreign-owned company) establishment, and other corporate services. Our team is ready to help you navigate Indonesia's regulatory requirements so you can stay focused on your investment and business operations.