In practice, as a general guide BKPM will require share
capital for a small to medium sized company engaged
in trading activities to have share capital in a range of
USD100,000. There are no formalized Thin Capitalization
rules in Indonesia, however a “general rule of thumb”
applied by BKPM is 1/3:equity and 2/3:debt. This can
vary depending on the nature of business and scale of
investment. Investors in the manufacturing sector typically
are expected to have a debt to equity ratio of 3:1 or less,
while those in the agricultural or mining sectors may have
ratios of 6:1 or greater. The expansion of existing facilities
funded with retained earnings, new equity or loan capital,
also requires approval by BKPM.