Joint Venture Setting in Indonesia

Joint venture is one form of investment activity conducted by domestic investors and foreign investors through
joint ventures to conduct business in the territory of the Republic of Indonesia.

This joint venture or joint venture is categorized as a foreign investment activity ("PMA") as defined in Article 1
letter (c) of Law no. 25 Year 2007 regarding Investment ("Investment Law").

Based on Article 27 of the Capital Investment Law, the Government shall coordinate the investment policy,
whether coordination between Government agencies and Bank Indonesia, between Government agencies and
regional governments, as well as among local governments. The coordination of the implementation of this
investment policy is carried out by the Head of Investment Coordinating Board ("BKPM"). BKPM is a non-
departmental independent agency directly responsible to the President. The President then enacted
Presidential Decree no. 90 of 2007 on the Investment Coordinating Board on September 3, 2007 ("Perpres No.
90/2007").

In accordance with Article 28 of the Capital Investment Law and Article 2 of Presidential Regulation no.
90/2007, BKPM has the main duty to implement policy and service coordination in the field of investment
based on the provisions of legislation.

With the authority granted to him, BKPM issued Head of BKPM Regulation no. 13 of 2009 on Guidelines and
Procedures for Controlling the Implementation of Capital Investment on December 23, 2009 ("Perka BKPM No.
13/2009"). Control of Capital Implementation is intended to carry out monitoring, guidance and supervision on
the implementation of investment in accordance with investors' rights, obligations and responsibilities.

The purpose of controlling the implementation of this capital is to be able to:

i. obtaining data on the realization of the realization of investment and information on problems and
constraints faced by the company;
ii. guidance and facilitation of problem solving and constraints faced by the company;
iii. supervise the implementation of capital investment provisions and the use of fiscal facilities and follow up
the irregularities committed by the company.

Thus, it is expected to achieve smooth and precise implementation of investment and availability of data
realization of investment.

Supervision of the Implementation of Joint Venture and Authorized Bodies for Supervision

Supervision of capital investment implementation is regulated in Article 6 letter (c) Perka BKPM No. 13/2009 is
done through:
(i) research and evaluation of information on implementation of provisions on investment and facilities already
provided;
(ii) inspection to the location of investment projects; and
(iii) follow-up to deviations from investment provisions.

The authorities authorized to supervise the implementation of such investment are:

a. Regional Device of Regency / City in the Field of Investment ("PDKPM") to all investment activities in
regencies / municipalities;
b. Provincial Device on Capital Investment ("PDPPM") for investment whose activities are cross-regency /
municipal and based on laws and regulations become the authority of the provincial government;
c. BKPM on the use of investment fiscal facilities under the authority of the government;
d. technical institution on the implementation of investment in accordance with the provisions of laws and
regulations governing business activities.

In carrying out the supervisory duties as mentioned above, PDKPM coordinates with related local agencies.
While PDPPM coordinates with PDKPM and related local agencies, where BKPM coordinates with PDKPM,
PDPPM and related local agencies.
In certain cases, BKPM can directly conduct monitoring, guidance and supervision on investment activities that
become the authority of provincial or district / city government. So as regulated in Article 10 of Perka BKPM
No. 13/2009. Perka BKPM is then amended by Head of BKPM Regulation no. 7 of 2010 concerning Amendment
to Head of BKPM Regulation no. 13 of 2009 on Guidelines and Procedures for Controlling the Implementation
of Capital Investment ("Perka BKPM No. 7/2010").

Methods of Joint Venture Implementation

In conducting the joint venture in Indonesia, any PMA that has received Investment Registration and / or
Permit of Investment Principles and / or Investment Approval and / or Business License must submit
Investment Activity Report ("LKPM") periodically to the Head BKPM through the Deputy for the Control of
Implementation of Capital Investment, Head of PDPPM and Head of PDKPM as regulated in Article 13
paragraph (7) of Perka BKPM No. 7/2010 jo. Article 15 paragraph (c) of the Investment Law.

LKPM is a regular report on the development of corporate activities and constraints faced by investors
submitted online through the Information Services System and Electronic Investment Permit on the website
http://nswi.bkpm.go.id or directly to BKPM and to the Provincial and Regency / Municipal Investment Board
where the investment project is located . The LKPM reporting method is as follows: a. For PT PMA which is still
in development stage, obligation to submit LKPM become every quarterly or quarterly that is: 1. LKPM quarter
I for January to March reporting period is submitted no later than 5 April of the month; Quarter II LKPM for the
April to June reporting period, submitted no later than July 5 of the month concerned; Quarter III LKPM for the
July to September reporting period, submitted no later than October 5 of the month concerned; and 4. Quarter
IV LKPM for the October to December reporting period is submitted no later than January 5 of the following
year. B. For PT PMA who already have Business License, the obligation to submit LKPM become per six month
or per semester that is: 1. LKPM for the first semester for the January to June reporting period, submitted on
the first week of July of the month concerned; dan2. LKPM for the second semester for the July to December
reporting period, submitted in the first week of January next year.c. For PMA who have investment activities of
more than one regency / municipality must submit LKPM for each kabupaten / kota.d. For PT PMA having
several business fields, it is required to detail the realization of investment for each business sector in LKPM.
This LKPM Form can be downloaded through the website www.bkpm.go.id With the existence of this LKPM,
then all developments of investment and production realization of PT PMA can be supervised by BKPM whose
authority can be delegated to PDKPM or PDPPM related. This LKPM can be used as a basis for: (i) research and
evaluation of information on the implementation of investment and facility provisions already provided; (ii)
inspection to the location of investment projects; and (iii) follow-up to deviations from investment provisions. If
the PMA does not submit the obligation to submit LKPM, the PMA may be subject to administrative sanctions
such as revocation of business activities and / or investment facilities as stipulated in the Investment Law.

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The meaning of the joint venture is not explicitly regulated in the Law, but it is explained in Article 5 paragraph
(3) sub-paragraph a of Law Number 25 Year 2007 regarding Investment ("Law 25/2007") which states:

"Domestic and foreign investors investing in a limited liability company shall be entitled to take part of the
shares at the time of the establishment of a limited liability company."

In Anderson's Business Law And The Legal Environment written by David P. Twomey mentioned:

"Joint venture is a relationship in which two or more persons are employed and share profits and losses equally
or as otherwise agreed."

From the above understanding, we can see that the joint venture is a framework agreement between two
parties (companies) or more that have the same purpose. This agreement usually leads to the formation of a
joint venture company. With this joint venture scheme, the parties get some benefits such as:
1. Reduce the need for capital and other resources due to the element of the distribution of needs;
2. Transfer of technology between parties;
3. Minimize business risk;
4. Allows to expand the business to the global scale.

In its development, the joint venture is often associated with the capability of national capital which can
already cooperate with foreign investors through Foreign Direct Investment ("PMA") in Indonesia. Even
Sunaryati Hartono in his book Some Transnational Issues In Foreign Investment in Indonesia put forward the
boundaries of joint ventures as any joint venture between Indonesian capital and foreign capital, whether it is a
joint venture between private and private, government and private, or government and government. It is also
not distinguished whether the joint venture is regarded as a foreign investment or domestic investment.

Huala Adolf in his book The Legal Basis of International Contract states that the joint venture is chosen by
foreign capital owners usually because of concerns about arbitrary takeover without going through a legal
procedure by the recipient country (nationalization).

The issue of nationalization still exists in some communities. Legally, however, nationalization is not possible,
except by Law [1], for example through divestment mechanisms. Therefore, the joint venture becomes one of
the investment activity model (investment) conducted by PMA as an investor through a joint venture that
conducts its business in the territory of the Republic of Indonesia.

Here it is seen that the joint venture is one means of attracting foreign capital which in its implementation
based on the agreement of the parties. The Agreement shall comply with the rule of covenant under Article
1320 of the Civil Code namely:
1. The parties agree to commit themselves;
2. The parties are competent to conduct a legal act;
3. The act of the law shall concern one particular matter; and
4. The Agreement shall be subject to a matter which is not contrary to law, morality, and public order.

Establishing a joint venture agreement is the first step in establishing a joint venture company. The joint
venture agreement itself contains the parties' agreement in the matter of, among other things, ownership of
capital, shares, increment of share ownership, finance, management, technology and expertise, possible
dispute settlement, and termination of agreement.

Joint venture companies whose capital is obtained from a mixture of domestic and foreign capital are
categorized as FDI. In Indonesia itself, concerning the establishment of PT PMA is regulated in Article 1 Sub-
Article 3 of Law 25/2007 which reads:

"Foreign Investment is an activity of investing to conduct business in the territory of the Republic of Indonesia
conducted by foreign investors, whether using full foreign capital or in connection with domestic investment."

The terms of becoming a joint venture company itself include:

1. Mandatory in the form of Limited Liability Company (PT) if there is element of foreign capital. [2]
2. For a joint venture of PMA, domestic capital shall be at least 51% of the total capital of the joint venture
company. However, the percentage of ownership may be larger or smaller depending on the business field that
will be entered by the joint venture company considering the Government of Indonesia has issued Negative
Investment List (Negative Investment List) in which mentioned maximum percentage of foreign capital that
may enter the business field certain.
For details of business line, you may see Presidential Regulation No. 39 of 2014 on the List of Closed Business
Fields and Opened Business Fields with Requirements in the Field of Investment
3. There are a number of closed business fields for joint ventures [3], so potential investors should see the most
recent Investment Negative List.4. PMA joint venture companies must apply for a license of principle and
permanent business license (IUT) to the Investment Coordinating Board (BKPM) .5. PMA joint venture
companies regularly submit Investment Activity Report (LKPM) to BKPM. Furthermore, regarding the domestic
company itself, we interpret what you mean is Domestic Investment (PMDN). Therefore, we are holding on to
Article 5 Paragraph (1) of Law 25/2007 stating that: "PMDN may be conducted in the form of a business entity
in the form of a legal entity, not a legal entity or sole proprietorship, in accordance with the provisions of
legislation". By looking at the above rules, we assume that the domestic company you are referring to is a
PMDN manifested in the form of a business entity, whether a legal entity or an incorporated entity,
incorporated under Indonesian law and capital of its enterprise, is derived from the capital owned by the state
of the Republic of Indonesia, an individual Indonesian citizen, or business entity in the form of a legal entity or
non-legal entity. [4] Thus, PMDN is a company incorporated under the laws of the State of Indonesia which
invests in the territory of the Republic of Indonesia and shares and the rights attached to such shares (Law
Number 40 Year 2007 on Limited Liability Company) is owned by an individual Indonesian citizen, BUMN,
BUMD, local government or the government of the Republic of Indonesia. Since the joint venture is essentially
a joint venture capital, it is possible for two domestic companies to form a joint venture company. Branch
Office of the CompanyOnly concerning the company branch, in Article 1 point 5 of Regulation of the Minister of
Trade No. 37 / M-DAG / PER / 9/2007 concerning the Implementation of Company Registration ("Permendag
37/2007") stated: "The branch office of a company is a company or part of its parent company which may be
located in a different place and may stand alone or in charge of carrying out some of the tasks of its parent
company. "To establish a branch office, here are the requirements to be met: 1. There is a head office which is
evidenced by the existence of: a. notarial deed and SK Kemenhukham which explain the establishment of the
company that will become the head office.b. photocopy of all the management of the company headquarters
whose names are listed in the deed of establishment of the company's head office.c. SIUP and TDP from the
company's head office.2. The form of a branch office is the same as its head office.3. Establishment of deed of
establishment of branch office and issuance of SK Kemenhukham which in the process require document: a. a
power of attorney from one of the head office administrators in the case of the establishment of a branch
office. copy of personal appointment letter / appointment to head of branch later along with photocopy of
identity / ID card and photo of branch head.c. the arrangement of branch office administrators.4.
Establishment of Corporate Domicile Certificate (SKDP) of branch office which in the process requires
document: a. the location / office plan from the branch office. proof of UN repayment of branch offices.5.
Manufacture of Company Registration Certificate (TDP) of branch office. Establishment of other relevant
licenses, such as principal approval for foreign companies. Fulfill minimum capital requirements for certain
branch offices, such as a futures brokerage office. That is our answer. May be useful.

From these terms it can be seen that the joint venture is an agreement. In this case an agreement must be
bound to the provisions of article 1320 of the Civil Code regarding the validity of the agreement, namely the
parties agree to bind themselves; the parties are competent to conduct a legal act; the act of law must be of a
certain nature; and such consent shall be subject to a matter which is not contrary to law, morality and public
order. Then in terms of binding parties, these parties may be foreign parties as well as national parties, namely
foreign investment companies (PMA) and citizens the Indonesian state and / or Indonesian legal entity. This
Indonesian legal entity consists of State Property Agency, Regional Government-Owned Enterprises.
Cooperatives, PMA companies, PMDN companies, Non-PMA / PMDN companies. In its development, the joint
venture is more aimed at cooperation between foreign parties with the national side. But in order not to cause
confusion, then the Joint venture in this case is only intended for business formed based on an agreement
between a foreign party and a national party. This can be seen from the definition restrictions by Sunarayati
Hartono as discussed earlier.

The joint venture agreement referred to in the definition of Joint Venture is a joint venture capital or capital
investment agreement. Such mixing of capital may result in the establishment of a new business entity
between the two parties conducting the joint venture. The business entity is for investment involving foreign
parties, in the context of this is a Joint Venture, the entity shall be a limited liability company domiciled in
Indonesia, unless otherwise provided by law.

Companies that conduct joint ventures such as Lombok Tourism Development Corporation (LTDC) which is a
company formed based on a joint venture between PT Asset Management Company (PPA) and Bali Tourism
Development Corporation (BTDC) from the Indonesian side with Emaar Properties from Arab.Kemudian
AutoAlliance International is a joint venture between Ford and Mazda. Then The Nokia Siemens Networks,
which is a partnership between Nokia and Siemens in the development of telecommunication infrastructure.

1. Regulations - Regulations Relating to Joint Venture

Joint ventures are not specifically regulated in existing legislation. However, in terms of their joint venture
agreement, the provisions of the joint venture may refer to the Investment Law, namely Law No. 25 of 2007. In
addition, basically a joint venture is an agreement then the provisions of the Civil Code (Civil Code) also apply
to the Joint Venture. If the joint venture turns out to produce a new business entity, then also apply the
provisions concerning business entities regulated in the Book - Law on Trade Laws and laws on limited liability
companies (Law No. 40 of 2007). In addition, the provisions concerning the joint venture may also be found in
Government Regulation No. 20/1994 on the ownership of shares in companies established in the framework of
foreign investment, BKPM No. Law No. 12 Year 2009 on Guidelines and Procedures for Investment Application
(Perka BKPM No. 12 Year 2009), and regulations related to business entities based on a joint venture such as
Presidential Regulation No. 36 of 2010 on a list of closed and open business fields with requirements in the
field of planting capital, and Presidential Regulation no. 27 Year 2009 on One Stop Service in the Field of
Investment.

1. Business Entity Establishment based on Joint Venture

Firstly before the formation of a joint venture company, the first thing to do is to establish a joint venture
agreement or a joint venture agreement which refers to the general provisions of the contract law set forth in
the Civil Code (Civil Code). This is in accordance with the provisions of the article 1319 The Civil Code states
that: "All good agreements with special names, as well as those unknown to a particular name are subject to
general rules, contained in this chapter and in the last chapter."

Having successfully entered into an agreement, under Article 5 paragraph (2) of the Investment Law, the
foreign investment shall be in the form of a limited liability company under Indonesian law and domiciled
within the territory of the Republic of Indonesia, unless otherwise provided by law. Based on the provisions of
that article, in order to carry out the business under a joint venture agreement it is necessary to establish a
limited liability company. Limited liability companies based on the type of investment can be differentiated into
PT PMA or Foreign Investment, ie PT which is part of the capital or all of its capital is owned by a foreign party
and PT PMDN, namely PT whose capital is owned by a citizen of Indonesia or an Indonesian legal entity. Related
to the joint venture, the PT in question is PT PMA, whose capital may be partly owned by a foreign party and
partly owned by an Indonesian citizen or an Indonesian legal entity by doing joint venture.

Regarding the establishment of PT PMA, actually the same as the formation of ordinary PT refers to the Law
No. 40 of 2007. The different is about licensing to conduct business. In ordinary PT required Trading Business
License (SIUP), while the PT PMA enough with a license from BKPM only without the need for SIUP. In addition,
other permits are also required depending on what type of business will be done.

1. Business Period by Joint Venture

Article 3 of Government Regulation No. 20/1994 concerning Share Ownership in Companies Established in the
Framework of Foreign Investment, it has been determined that the Company is granted a business license for a
period of 30 years from the time the company commercially produces. Although foreign companies are only
given a 30 year investment period , but the company may renew its business license by applying to the
Chairman of BKPM, provided that the company is still running its business that is beneficial to the economy and
national development. The renewal period is 30 years. So the total time of foreign investment to invest in
Indonesia is for 60 years, consisting of 30 years and renewal of permit for 30 years.

2. Rights, Duties and Responsibilities of Investors

The rights, obligations and responsibilities of investors are set forth in Article 14 through Article 17 of Act No.
25 of 2007 concerning capital investment. Rights guaranteed to investors are: the certainty of rights, laws and
protection; open information about the business sector it is running; right of service; and various forms of
amenity facilities in accordance with the provisions of legislation. What is meant by "certainty of rights" is a
Government guarantee for investors to obtain rights as long as the investor has fulfilled the determined
obligations. "Legal certainty" means Government guarantees to place laws and statutory provisions as the main
basis in every action and policy for investors. The definition of "certainty of protection" is a Government
guarantee for investors to obtain protection in carrying out activities capital investment.

The obligations to be made by investors include: applying the principles of good corporate governance;
carrying out corporate social responsibility; prepare reports on investment activities and submit them to the
Investment Coordinating Board; respect the cultural traditions of the communities surrounding the location of
investment business activities; and comply with all laws and regulations. In addition Investors who seek non-
renewable natural resources shall allocate funds gradually for the recovery of sites that meet environmental
feasibility standards, whose implementation is regulated in accordance with the provisions of legislation.
Every investor should also be responsible for: ensuring the availability of capital originating from sources that
do not conflict with the provisions of legislation; bears and resolves all obligations and losses if the investor
discontinues or abandons or abandons his or her business activities unilaterally in accordance with the
provisions of legislation; create a healthy competitive business climate, prevent monopolistic practices, and
anything else that harms the state; preserving the environment; creating the safety, health, comfort, and
welfare of workers; and comply with all laws and regulations.

1. Characteristics of Joint Venture Enterprises

Joint venture has its own characteristics and characteristics, namely the first of each who became a
shareholder of a company established for certain economic activities. In accordance with the proportion of
shares agreed upon, usually foreign parties become the majority shareholder.It can be seen from the minimum
limit of shareholders for the Indonesian side is 5%. The next characteristic or characteristic is in the case of
supervision. Unlike in a parent company where control usually resides in a dominant company, in the joint
venture precisely the two binding firms that each exercise control regardless of the number of shares put into
the company the.

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Every country always tries to improve the development, prosperity and prosperity of its people. The business is
carried out in different ways from country to country. One of the efforts that is always done by the state is to
attract as much as possible foreign investment into the country.

1 Attracting as much inward investment into a country is based on a myth that states to be a prosperous
country, national development must be directed to industry. To lead to it, since the beginning of these
countries are faced with the problem of lack of capital and technology which is the basic element in the
direction of industrialization. The path taken to overcome the problem is to invite the entry of foreign capital
from developed countries into the country.

2 The entry of foreign capital to the Indonesian economy is a demand of both the economic and political
conditions of Indonesia. The alternative of accumulating Indonesia's economic development funds through
direct capital investment is much better than with other international fund withdrawals such as foreign loans.

3 Investments should be part of national economic operations and placed as an effort to promote national
economic growth, create jobs, promote sustainable economic development, enhance national technological
capacity and capabilities, realize the welfare of communities in a competitive economic system.

4 Foreign capital brought by investors is very important as a tool to integrate the global economy. In addition,
investment activities will have a positive impact on the recipient countries, such as encouraging business
growth, the supply of technology from investors both in the form of production processes and machinery
technology, and create jobs.

5 Foreign investment is one of the main forms of international business transactions, in many countries,
government regulations on foreign investment require joint ventures, namely the provision that foreign
investment should form a joint venture with a local company to carry out the economic activities they desire.

6 Opening of opportunities for foreign investors to invest in Indonesia, then it is necessary law enforcement to
regulate its implementation, so that investment is expected to provide large profits and improve the
Indonesian economy. The history of the New Order during the period 1966-1997 has proved how important
the role of foreign direct investment (Foreign Investment) as one of the driving force of development and one
of the sources of economic growth of the State of Indonesia.

7 The legal basis for investment in Indonesia is governed by the laws and other regulations that follow it.
Among them are Law No. 1 Year 1967 About Foreign Investment jo Law no. 11 of 1970, Law N0. 6 Year 1968 jo
Act no. 12 Year 1970 on Domestic Investment, then amended by Act no. 25 Year 2007 About Investment. In the
provision of Article 5 paragraph 2 of Law no. 25 of 2007 on Investment, hereinafter referred to as UUPM, states
that: "Foreign Investment shall be in the form of a limited liability company under Indonesian law and
domiciled in the territory of the Republic of Indonesia, unless otherwise provided by law".

8 Holding a joint venture agreement is the first step in establishing a joint venture company. Where in the joint
venture agreement agreement contains the parties' agreement on the ownership of capital, shares, increase of
share ownership, finance, management, technology and experts, possible dispute settlement, and the end of
joint venture agreement. Foreign entrepreneurs and local entrepreneurs form a new company called a joint
venture company in which they become shareholders of magnitude in accordance with mutual agreement.

9 The cornerstone of the establishment of a joint venture is a joint venture agreement and general agreement
provisions set forth in the Civil Code (Civil Code). UUPM authorizes the Capital Investment Coordinating Board
to coordinate in the implementation of investment, the authority mentioned in Article 27 paragraph 2 UUPM.
However, the implementation provisions have not been issued by the government, including other provisions
of the Capital Market Law. The impact of this condition then the previous regulations governing the
implementation of investment is still enforced previous provisions derived from the Law of Foreign Investment
and Domestic Capital Investment Law (UUPA and UUPMD) which is based on the provisions of the passage of
Article 37 UUPM No . 25 Year 2007. Decision of the Head of Investment Coordinating Board (BKPM) no. 10 /
SK / 1985 Jo Decision of the Head of BKPM No. 6 / SK / 1987 jo Decree of BKPM No. 57 / SK / 2004 jo Head of
BKPM Regulation no. 1 / P / 2008, requires that one of the requirements for a foreign investment application is
an Arrangement of Joint Venture Agreement which must be included in the application. The Joint Venture
Agreement as one of the requirements for foreign investment by BKPM is used as the basis for the
establishment of the Joint Venture Company. This means that the Joint Venture Company is subject to the
treaty law. However, in UUPM article 5, paragraph 2, joint venture company must be a limited liability company
under Indonesian law. 10 So it can be said that the Joint Venture Company is subject to corporate law in this
case Law no. 40 Year 2007 About Limited Liability Company (UUPT).

Investment and Foreign Investment In the general provisions of Chapter I Article 1 of Law no. 25 Year 2007
About Investment (UUPM) defines Investment is any form of investment activity, either by domestic
investment or foreign investment to do business in the territory of the Republic of Indonesia.

11 Further to foreign investment arrangements conducting activities in the territory of the Republic of
Indonesia in its implementation may use the full foreign capital as well as those associated with domestic
investment.

12 The provisions concerning foreign investment refer to the provisions of another Article in the Capital Market
Law, Article 5, paragraph 2, which states that Foreign Capital Investment shall be in the form of a limited
liability company under Indonesian law and domiciled within the territory of the Republic of Indonesia. Unless
otherwise specified by law.

13 The capital mechanism can be done by: a.Mengambil share at the establishment of the company limited; b.
Buying shares; and c. Conducting other means in accordance with the provisions of legislation.

14 Understanding of foreign investment in UUPM no. 25 Year 2007, covers only foreign direct investment
(foreign direct investment). Direct investment means that the owner of the capital assumes the risk of the
investment and the owner of the capital directly runs his or her company in the Territory of the Republic of
Indonesia.

15 Article 37 paragraph 1 of the Capital Market Law stipulates that other provisions stipulated under the
previous regulation are still enforced to the extent that they are not contradictory to the new UUPM and as
long as the regulations are not regulated under the new UUPM.

16 This article undertakes an important influence, since the implementing regulations underlying the previous
law can still be enforced. One of them is the Decision of the Head of Investment Coordinating Board (BKPM)
no. 10 / SK / 1985 Jo Decision of the Head of BKPM No. 6 / SK / 1987 jo Decree of BKPM No. 57 / SK / 2004 jo
Head of BKPM Regulation no. 1 / P / 2008 requires that one of the requirements for a foreign investment
application is an Arrangement of Joint venture Agreement which must be included in the application. Joint
venture The participation of national capital in foreign investment companies has become a common trend in
both developing and developed countries. It is a reflection of nationalism in the economic field and is a desire
to avoid dependence on and foreign control on their economies.

17 The easiest strategy to be able to exercise this right is the enforcement of the provision of a joint venture.
For business actors themselves, joint venture is one effective way to develop and improve business. As Ian
Hewitt has pointed out in his book Joint Venture: Joint venture is vital to business. They have become an
important strategic option for many companies, particularly those operating internationally. Even the larges
companies do not have the capital, skill or market access necessary to achieve their commercial objectives
entirely through their own recourse. Rarely a day passes without an announcement of a new joint venture or
alliance.

18 While the term joint venture according to Peter Muchlinski in his book entitled Multinational Enterprise and
the Law is as follows: "The term 'joint venture' has no precise legal meaning, it can refer to any agreement or
undertaking between two independent firms. However, certain features are commonly associated with the
concept. In particular, the joint venture involves the cooperation of two or more independent parent
undertakings which are linked, through the venture, in the pursuit of a common commercial, financial or
technical activity ".

19 The joint venture agreement is subject to various conditions governed by the law governing the joint
venture, whereas the legal form of the joint venture may take the model of agreement, civil partnership or
limited liability company.

Joint Venture agreement The term Joint Venture Agreement is intentionally not translated into a joint venture
as already known in Indonesia, it aims to avoid misunderstanding, because joint ventures, joint enterprises,
contracts of work, production sharing, investment with DICS-rupiah (Debt Investment Conversion Schema),
investment with investment credit and investment portfolio. Joint venture agreement or commonly called joint
venture agreement is a contract that initiates joint venture, this contract becomes the basis for establishment
or establishment of joint venture company.

22 A joint venture agreement in practice is more commonly used if it contains broader provisions relating to
the initial establishment of a joint venture company, condition precedent, and the business contribution of the
parties.

23 Further explained Muchlinski, that the joint venture agreement between the company regulates the control
of the company, the proportion of capital, the arrangement of profit sharing, the legal form of the joint
venture, as well as the arrangement regarding the termination of the agreement.

24 Joint Venture Company Henry Campbell Black means Joint Venture Company is an association of people to
do a business to make a profit, to combine their assets in the form of money, stock, expertise and knowledge.

25 Joint Venture Company is a company whose shareholders are owned by those who enter into joint venture
agreements. Agreement A covenant is an event in which a person promises another person or where the two
men promise to do one thing. From this event there arises a relationship between the two people called the
engagement. The Agreement issues an engagement between the two persons who make it. In its form, the
agreement is a series of words containing promises or abilities that are spoken or written.

26 Clarifying the definition of the agreement, M Yahya Harahap states that the agreement is a legal relationship
of property or property between two or more persons, which gives the power of the right to a party to gain
achievement and at the same time oblige the other party to perform the achievement.

27 The definition of the agreement can also be found in article 1313 of the Civil Code. According to article 1320
KHUP, the agreement must meet the following requirements:

a.According to Agreement: is the occurrence of a meeting or suitability of the will that occurs between the
parties and the agreement shall be freely given, ie free from coercion, oversight, and fraud as contained in
article 1321 of the Civil Code.
b.Kecakapan: is a person has the authority in acting legally either for self-interest or others who are
represented, article 1330 Civil Code determines the parties who are not proficient, ie
1). people who are immature,
2) those who are placed under the ability
3) women or persons prohibited from entering into an agreement. However, this provision is based on Law no.
1 Year 1974 About marriage states that the wife is able to make covenant.

c.Important: is the object of agreement or achievement that is agreed to be clear, can be calculated and can be
known type.

d.For the Halal: is the contents of the agreement should not be contrary to
laws, public order and morals. Understanding should not conflict with the law here is a law that is disruptive
public interest, so that if violated can disrupt the public interest.

Foreign direct investment in Indonesia is manifested in the form of a Joint Venture Company incorporated
as a Limited Liability Company. In order to establish a joint venture of foreign investors and national
investors, first create a cooperation agreement which is set forth in the form of Joint Venture Agreement.
Joint Venture Agreement is an agreement that becomes the foundation in forming a joint venture company.
The arrangement of the Joint Venture Agreement in Indonesia is subject to Law Number 25 Year 2007
regarding Investment (UUPM). This UUPM regulates some of the things that become the foundation in
creating JVA as related to the form of business entity, position, business line, company licensing, and
dispute settlement. In the Capital Market Law there is a provision concerning the limitation of the business
sector for foreign investment so that foreign investors may invest in closed business fields for foreign
investors, it is necessary to cooperate with national investors. The JVA is also subject to the provisions of
the law of covenant provided for in the Civil Code (Civil Code) where the JVA must comply with the validity
of an agreement set forth in article 1320 of the Civil Code. JVA as an agreement between foreign investors
and national investors should be made carefully, detailed and comprehensive and legal aspects must be
considered so that the gaps in the legal void in the JVA can be avoided so as not to cause a problem of one
contractual problem among the party. In the event of a dispute relating to the realization of the JVA then
the first reference is to look to the applicable law / governing law and dispute settlement agreed upon by
the parties in the JVA. The problem of settlement of investment disputes in Indonesia has been explicitly
regulated in Article 32 of Capital Market Law. If carefully considered in the Capital Market Law, it appears
that the Government of the Republic of Indonesia provides space for the settlement of investment
segments through arbitration institutions.

Joint Venture Agreement (JVC) is a form of cooperation between local government and private sector whereby
local government and private parties agree joint business, which in the framework of laws and regulations
prevailing in Indonesia is obliged to take the form of Limited Persero (PT ) to build and manage a particular
facility and service to the community. In this form of cooperation, the Company / Parent institution still exists,
the JVC Company's assets are conducted together according to the agreement, as well as the sharing of profits
and the imposition of the risks.

Furthermore, the most important thing is to supervise the general implementation of the business cooperation
between BUMD / Regional Company and Third Party is done by the Regional Head.

The legislation authorizes the Regional Government to engage in cooperation in which the form of permissible
cooperation is divided into two categories:
Cooperation of Management (Join Operation);
Joint Venture Cooperation (Join Venture)
Legislation indicates that the basis of cooperation undertaken BUMD is to meet the interests of both parties by
holding a bond that is:

The existence of legal certainty and sense of security comply with written provisions that have been mutually
agreed upon;
Provide benefits and benefits are balanced and reasonable for both parties.
1. Requirements of each Party in the Joint Venture Agreement

a. Requirements for BUMD / Regional Company

BUMD / Regional Company that can enter into cooperation with Third Party shall meet the following
conditions:

Having legal status of Regional Company in accordance with the provisions of applicable laws and regulations;
Have a pre-feasibility study and proposal on business prospects that are the object of cooperation;
Having legal proof of ownership of the assets of the Regional Government which will be the object of
cooperation.
b. Requirements For Third Parties

Third Party in the form of Business Entity / Individual and will hold cooperation with Regional Company must
fulfill the following requirements:

Has legal status in accordance with the provisions of applicable legislation in Indonesia;
Has NPWP;
Foreign institutions / private entities must obtain permits / recommendations from authorized officers and
subject to prevailing laws and regulations;
Having bonafidity and credibility;
Third Party in the form of a business entity that conducts joint venture cooperation submits the complete
Financial Statement for the last 3 (three) years which has been audited by Public Accountant. . For a newly
formed joint venture company must submit a complete Financial Statement from one of the elements of the
holding company.
2. Content of Material and Nature of Agreement of Join Venture Cooperation between BUMD and Private

Basically a joint venture agreement ("Join Venture") has little difference with the agreement in general, where
for the Join Venture agreement between BUMD and Third Party there are matters that must be obeyed in the
framework of procurement cooperation in accordance with the Laws and Regulations.

a. Content of the Agreement Material

Although under Article 1338 the Civil Code explains that basically a content or material agreement is
determined by each Party in the agreement without any coercion, but different with the Join Venture
Agreement between BUMD with private parties. The Join Venture Agreement between BUMDs and Third
Parties (in this case private parties) has its own standards regarding the content of the materials regulated by
the Laws and Regulations in order to be implemented, even though essentially the arrangement of the content
is not much different from the content of a Join Venture Agreement in general. As for

a) The matters governed by the cooperation agreement shall include:

Purpose and objectives;

subject;
form and scope of cooperation;
territory;
time period;
performance bond;
transition period;
rights and obligations of the parties;
insurance liability;
circumstances force (force majeure);
termination;
settlement of disputes arbitrating;
taxation;
the duration of the cooperation agreement;
and others needed.
b) Cooperation agreement in question is made by Notary Act.

c) Obtain principal approval from the Regional Head.

b. Nature of the Agreement

A contents of a Join Venture agreement between BUMD and Third Party must be able to guarantee:

Increased efficiency and productivity of Regional Companies or improving Services to the public;
Increased security of the Company's capital / assets
Cooperation should be mutually beneficial for both parties;
The roles and responsibilities of each party are linked to risks that may occur, either during the period of
cooperation or after the termination of the cooperation agreement.
3. Profit / Business Results

The share of profits or results of joint ventures of BUMD / Regional Company with Third Parties that are
entitled to the Company acquired during the Company's fiscal year shall be accounted for under the accounting
principles of Indonesia.

4. The termination of the Agreement and its Procedures

Basically, the termination of Join Venture between BUMD and Third Party can be done by:

both parties agree to terminate the cooperation before the expiry of the term;
the occurrence of a wan of achievement by a party which may result in termination of the cooperation
agreement;
the term of the cooperation has ended.
Whereas in the event that the termination of the Join Venture agreement between BUMD / Regional Company
and Third Party shall be regulated in such a way as the procedure, which includes:

Within 6 (six) months before the agreement expires, both parties shall conduct joint research and evaluation of
the assets and accounts payable related to the implementation of the joint venture;
To assist in conducting research and evaluation, the Board of Directors may establish a Research and
Assessment Team consisting of various related elements and Expert Consultant in their field;
The end of the next cooperation is set forth in the Minutes and signed by both parties.

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