The government is set to revise Indonesia's negative investment list to allow full foreign ownership in 25 industries in a bid to attract more investment into the country. (Antara Photo/Maulana Surya)

Indonesia to Revise Negative Investment List, Allow Full Foreign Ownership in More Industries

BY : SARAH YUNIARNI

NOVEMBER 22, 2018

Jakarta. The government is set to revise Indonesia's negative investment list to allow full foreign ownership in 25 industries in a bid to attract more investment into the country.

Indonesia enacted a law on investment in 2007 to provide a single legislative framework for domestic and foreign investment. In accordance with this law, all business sectors are open to investment, including foreign investment, unless specified in a negative investment list, issued by the president.

The list was last revised in 2016.

The Coordinating Ministry for Economic Affairs announced a new list on Monday as part of the government's 16th economic policy package, which also includes tax holidays for certain categories of businesses and tax cuts for companies that repatriate their export earnings.

Fifty-four industries will be removed, while full foreign ownership will be allowed in 25 in the newly revised list, expected to be approved by President Joko "Jokowi" Widodo in the coming weeks.

Coordinating Economic Minister Darmin Nasution said the government decided to remove several industries from the list because investment in those sectors had stagnated.

He said a lack of awareness among the public and business players also contributed to limited investment in certain industries, such as power plants with capacities of more than 10 megawatts, and market research services.

Indonesia needs foreign direct investment to narrow its growing current-account deficit, which is now at its biggest since the second quarter of 2014.

Indonesia's current-account deficit widened to $8.8 billion, or 3.7 percent of gross domestic product, in the third quarter of this year, compared with $8 billion, or 3.02 percent of GDP, in the second quarter.

The 25 sectors in which full foreign will be allowed include tourism (art galleries), trade (survey and market research services), transportation, communications and telecommunications.

Here is the full list:

  • Ecotourism in forestry areas (foreign ownership limit currently at 51 percent)
  • Oil and gas construction (foreign ownership limit currently at 75 percent)
  • Offshore oil and gas drilling (foreign ownership limit currently at 75 percent)
  • Geothermal drilling and geothermal survey services (foreign ownership limit currently at 95 percent)
  • Operation and maintenance of geothermal facilities (foreign ownership limit currently at 90 percent)
  • Power plants with capacities of more than 10 megawatts (foreign ownership limit currently at 95 percent)
  • Testing service for high-voltage electrical installations (foreign ownership limit currently at 49 percent)
  • Polling services (Southeast Asian investors currently allowed to own up to 70 percent)
  • Art galleries and theaters (foreign ownership limit currently at 67 percent)
  • Land transportation without any specific tracks (foreign ownership limit currently at 49 percent)
  • Overseas sea transportation of passengers, excluding cabotage (Southeast Asian investors currently allowed to own up to 70 percent)
  • Data communication services (foreign ownership limit currently at 67 percent)
  • Fixed and mobile telecommunication networks and content services (foreign ownership limit currently at 67 percent)
  • Call centers and other value-added telephone services (foreign ownership limit currently at 67 percent)
  • Internet service providers, internet telephony services for public purposes and internet interconnection services (foreign ownership limit currently at 67 percent)
  • Job training (foreign ownership limit currently at 67 percent)
  • Pharmacy industry for investment of more than Rp 100 billion ($6.8 million) (foreign ownership limit currently at 85 percent)
  • Acupuncture facilities (foreign ownership limit currently at 49 percent)
  • Pest control/fumigation services (foreign ownership limit currently at 67 percent)

Sectors that will no longer require special recommendations:

  • Cigarette industry, including clove cigarettes
  • Wood processing operations, such as wood pellets, paper, pulp, plywood, veneer wood and wood chip factories
  • Crumb rubber
  • Cyclamate, saccharin, or artificial sweeteners
  • Coral or ornamental coral cultivation
  • Medical equipment, including producers of surgical masks, syringes and high-tech equipment such as CT scanners and MRI machines.
  • Banks and laboratories for cell and tissue culture

Sectors that will shift from closed to fully open to foreign ownership:

  • Surveyor services, including warehousing supervision, nondestructive testing survey, etc.
  • Leasing of construction machinery
  • Leasing of other machinery, including for power plants, textile, metalwork or woodwork processing, etc.

Sectors that will no longer require partnerships with local entities:

  • Internet- or postal-based retail trade

Sectors no longer restricted to small and medium enterprises, open to full foreign ownership:

  • Stripping and cleaning of tubers
  • Fabric printing services
  • Lace knitting services
Additional reporting by Reuters

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