TESS: Country Report Summary – Indonesia

Country Report Summary

Indonesia

Anti Money Laundering

FATF status

Indonesia was removed from the FATF List of Countries that have been identified as having strategic AML deficiencies on 26 June 2015.

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Indonesia was undertaken in 2023. According to that Evaluation, Indonesia was deemed Compliant for 6 and Largely Compliant for 29 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 4 of the Effectiveness & Technical Compliance ratings.

Sanctions

There are no international sanctions currently in force against this country.

Bribery & Corruption

Rating: 0 (bad) - 100 (good)

Transparency International Corruption Index = 37

World Bank: Control of Corruption Percentile Rank = 36

Despite President Jokowi’s commitment to good governance, corruption remains a significant issue in Indonesia, as highlighted by its low ranking in Transparency International’s Corruption Perceptions Index. The Corruption Eradication Commission (KPK) has faced challenges, including reduced independence following a 2019 law, which has led to a decline in investigations, although notable prosecutions have increased in recent years. Corruption is particularly prevalent in the natural resources sector, exacerbated by weak enforcement of anti-corruption laws and a lack of compliance with international conventions.

Economy

Indonesia boasts a USD 1.2 trillion economy supported by a population of 276 million and a growing middle class, making it an attractive destination for U.S. investors. Despite its abundant natural resources and stable economic environment, challenges such as bureaucratic inefficiency, legal uncertainties, and corruption persist, complicating the investment landscape. Recent reforms, including the 2023 Omnibus Law on Job Creation, aim to enhance competitiveness and streamline regulations, yet concerns remain regarding labor rights and the overall investment climate.

Indonesia’s investment climate has improved significantly since the elimination of its Negative Investment List in 2021 and the ratification of the 2023 Omnibus Law on Job Creation, which aims to enhance competitiveness by reducing corporate taxes and regulatory barriers. However, foreign investors still face challenges such as legal uncertainties, economic nationalism, and corruption, which complicate the investment landscape. Despite these hurdles, Indonesia continues to attract substantial foreign investment, particularly in sectors like digital technology and renewable energy.