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In an effort to create a healthy and transparent investment climate, the Indonesian government requires every investment company to submit an Investment Activity Report (LKPM) on a regular basis. This regulation applies to all business actors, including Foreign Investment Limited Liability Companies (PT PMA), operating in Indonesia.

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The obligation to submit LKPM reports is not merely an administrative formality. More than that, this report serves as an indicator of a company’s compliance with applicable regulations and demonstrates its commitment to good corporate governance. On the other hand, LKPM also functions as an important strategy for maintaining the company’s reputation in the eyes of the government, business partners, and potential investors.

What is LKPM?

LKPM, or Investment Activity Report, is an official document that records the progress of investment realization as well as the company’s operational activities. This reporting is mandatory for all business actors, including PT PMA, that have obtained business permits from the government.

This report is submitted to the government through the Investment Coordinating Board (BKPM), which now operates under the Ministry of Investment. BKPM acts as the institution that monitors and assesses the extent to which companies fulfill their investment commitments in accordance with the permits that have been issued.

The contents of LKPM cover various important aspects of business activities, such as licensing status, the number of workers involved, and details of investment fund utilization. The information reported includes both domestic and foreign investment, providing a comprehensive picture of the company’s business condition.

Legal Basis of LKPM

The obligation to submit the Investment Activity Report (LKPM) does not stand alone but is based on a set of regulations established by the government. These regulations serve as the legal foundation binding all business actors, particularly companies in the form of PT PMA, to carry out periodic reporting obligations.

One of the main regulations is BKPM Regulation No. 5 of 2021 on Guidelines and Procedures for Risk-Based Business Licensing Supervision. This regulation provides technical guidance on how business actors must submit LKPM, including the format, reporting schedule, and follow-up actions if data discrepancies are found.

Another legal basis is Law No. 25 of 2007 on Investment. This law emphasizes the importance of transparency and accountability on the part of investors in carrying out their investments, including through orderly and continuous reporting.

In addition, Government Regulation No. 5 of 2021 on the Implementation of Risk-Based Business Licensing also regulates the risk-based supervision mechanism, in which LKPM serves as one of the main instruments to ensure that the licenses granted are carried out in accordance with the provisions.

Through these three regulations, it is clear that the submission of LKPM is not merely an administrative obligation but also a part of the government’s monitoring system over business continuity and investment realization. With this reporting, the government can monitor investment progress in real time and respond promptly if any issues arise in the field.

Why Does the Government Require LKPM?

The main purpose of the LKPM reporting obligation is to monitor the realization of investments promised by business actors. The government seeks to ensure that the investment commitments stated in the permits are truly implemented in the field, whether in the form of physical development, procurement of capital goods, or recruitment of workers.

In addition, LKPM plays an important role in the early detection of business obstacles and challenges faced by companies. Through periodic reporting, the government can identify emerging issues early on and provide facilitation or solutions before these problems escalate into major obstacles.

The data collected from LKPM reports serves as a crucial source of information for formulating national investment policies. The government requires factual and accurate data to develop strategies for increasing investment, improving regulations, and designing more well-targeted incentive programs.

From a transparency perspective, LKPM provides clarity to stakeholders at the central government, regional, and other technical agency levels. All parties can see how far a business has developed and how much it contributes to the national economy.

Moreover, LKPM also serves as an official communication tool between business actors and the government. Through this report, business actors can convey technical obstacles, special needs, or specific requests for support related to the continuity of their investment in Indonesia.

What Is Reported in LKPM?

The contents of the LKPM report include various important pieces of information related to the company’s activities. One of the main components that must be included is the company’s identity data along with the business permits it holds. This covers basic information such as the business entity’s name, business location, and Business Identification Number (NIB), which serves as the legal basis for the company’s operations.

The report also covers investment realization, both in terms of value and type of investment made. Companies are required to report the use of funds for construction, machinery purchases, or other expenditures that support business operations. The use of capital goods, whether sourced domestically or through imports, must also be recorded in detail.

In addition to financial and asset aspects, LKPM also requires data on workforce utilization, including both local and foreign workers. This information covers the number of employees, their positions, and any changes in workforce during the reporting period. Equally important, companies are also required to report operational issues they face so that the government can provide responses or facilitation when necessary.

All of this data is complemented by the company’s future business development plans, reflecting its long-term commitment in Indonesia. Regarding the reporting period, LKPM is divided into two schemes: quarterly reporting for companies classified as high-risk and semiannual reporting for those classified as medium- or low-risk. This division follows the risk-based supervision approach in accordance with applicable regulations.

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How to Submit the Report?

The LKPM reporting process is carried out online through the OSS (Online Single Submission) system, which is managed by the Ministry of Investment/BKPM. To access this system, companies must have an OSS account linked to their Business Identification Number (NIB) as their legal business identity in Indonesia. The OSS system is designed to simplify reporting while ensuring data integration across sectors.

The reporting steps are quite systematic. The company must log in to its OSS account and select the LKPM reporting feature. After that, users are required to fill in all the requested data completely and accurately, including details of investment realization, business activities, workforce utilization, and operational challenges. If necessary, supporting documents such as financial statements or proof of transactions can also be uploaded as attachments.

Once all data has been completed, the company must submit the report before the deadline specified according to its business risk classification. It is important to note that delays or errors in submission may affect the company’s compliance assessment by the authorities. In the long run, this can impact the company’s reputation and may even lead to a reevaluation of the permits that have been granted.

What If the Report Does Not Reflect Reality?

Filling out the LKPM inaccurately is considered a serious administrative violation. The data reported must reflect the actual condition of the company’s operations, including its financials, workforce, and assets. Any discrepancies, especially if intentional, may trigger further investigation by the relevant authorities and become a finding during the audit process.

If a violation is found, the government has the authority to impose administrative sanctions. These sanctions may take the form of written warnings, notices, or even the suspension of the Business Identification Number (NIB). In more severe cases, business licenses may be revoked as a firm measure against companies deemed uncooperative in fulfilling their reporting obligations.

Beyond administrative sanctions, dishonesty in reporting also affects the company’s reputation. The government, investors, and business partners will view the company as a non-transparent and high-risk entity. As a result, the company may face difficulties in securing support, forming strategic partnerships, or accessing fiscal and non-fiscal facilities provided by the government.

Strategic Recommendations

To ensure compliance with LKPM reporting obligations, PT PMA is advised to appoint dedicated staff or engage the services of consultants who have sufficient understanding of investment regulations. This appointment ensures that there is a party specifically responsible for the completeness, accuracy, and timeliness of the reports.

The next step is to create an internal reminder calendar that regularly notifies the company of LKPM reporting deadlines. With a good reminder system in place, the company can avoid the risk of administrative negligence that could result in sanctions or operational disruptions.

To maintain data accuracy, companies need to integrate their accounting and operational data systems. The information reported through LKPM must reflect actual conditions and be verifiable. This way, the report is not only administratively valid but also strategically useful.

It is also recommended that companies conduct periodic internal audits. These audits are useful for reviewing the consistency of the information in the LKPM with the actual realization in the field. In addition to serving as a control tool, internal audits help companies build a more disciplined reporting system and one that is oriented toward continuous improvement.

Finally, it is important to view LKPM reporting not merely as an obligation but also as a tool for reflection and strategic planning. Through this report, companies can evaluate the performance of their investments and prepare future development steps.

If necessary, do not hesitate to consult with a legal advisor or licensing specialist to ensure that the reporting process runs smoothly and complies with applicable regulations.