Improving Investment Climate with New Negative Investment List
    Category: Column By : Eddy Leks Read : 751 Date : Sunday, July 10, 2016 - 19:50:25

    On 25 April, the Investment Coordinating Board (BKPM) put out a press release entitled: “Investment Realization in First Quarter of 2016 Rose 17.6%. Optimism on Improved Investment Climate Confirmed.” The release explained that the rise broke the previous record of Indonesia’s investment realization, with domestic direct investment reaching Rp 50.4 trillion in Q1 2016, up 18.6% from Rp 42.5 trillion in the same period of 2015, while total foreign direct investment (FDI) was Rp 96.1 trillion, up 17.1% from the previous year’s Rp 82.1 trillion. BKPM Chairman Franky Sibarani said that since the investment realization was high during Q1, it should grow for the full year. This is good news.

    About a month later, Presidential Regulation Number 44 of 2016 on List of Closed Business Field and Opened Business Field with Condition on Investment was promulgated, effective May 18. The regulation favors FDI even further, allowing more foreign ownership in many sectors. The new regulation stipulates that opened business sectors shall adhere to the location requirements under the prevailing  laws, and applies when the PMA company expands to a new location. The new regulation further stipulates a new PMA is not required when the PMA expands to other locations, unless required by law.

    If the opened business field is implemented within a special economic zone, it also an opened business field unless reserved for micro or SME enterprises, and cooperatives. Foreign investors often ask what will happen if the new negative investment list gives a lesser foreign ownership. It is clear under the new regulation that previously approved license are exempt, unless it is more beneficial to the investor.

    For example, the sugar industry is now reserved for SMEs where previously under a special license, foreign investor can have 95% ownership. Yet aside from this, there is little change in the agricultural, forestry, maritime and fishery, industrial, defense and security sectors. In energy and mineral resources, the construction, audit and testing of electrical installation business, specifically for high voltage, is now opened for 49% FDI. In public works, for high risk, high tech, and/or construction work value exceeding Rp 10 billion, FDI is allowed for 67%, and 70% for ASEAN countries, from 55% previously.
    The cold storage business, toll roads, many sports-related businesses and restaurants can now be 100% open for FDI. Distributorship and warehouses are now opened for 67% FDI, from only 33% before. In tourism and creative economy, hotels up to two-star can now be owned 67% by FDI. For motels, ASEAN countries can have ownership up to 70%. Further, the convention business is increased to 67% for FDI, and 70% for ASEAN countries. Many changes also occur in the transportation sector, with many now opened for 67% for FDI and 70% for ASEAN countries. In communication and informatics, including many Internet services, are now opened for 67% FDI. In labor and transmigration sector, work training is increased to 67% from 49% before. In healthcare, hospital management services are now fully opened for FDI. The world is becoming flat. Indonesia is no exception. This new regulation gives more opportunities to all foreign investors to invest in Indonesia. Let us hope that this year is better than last year.