On February 15, 2016, the Coordinating Ministry for Economic Minister (the "Ministry") issued an official press release regarding the upcoming presidential regulation that will supersede the Presidential Regulation No. 39 of 2014 on the negative list of investment (Daftar Negatif Investasi – "DNI"). Along with the press release, the Ministry also issued a list of the proposed revisions of the DNI. The Ministry ensures that micro, small, and medium enterprises and cooperatives will be protected while also providing a more relaxed provision for foreign investment.
Relaxation of Foreign Ownership Limitation
There are 35 business lines that are proposed to be taken out from the DNI. If approved, these business lines will opened for up to 100% foreign investment. These business lines include the following:
- crumb rubber industry (currently only open for domestic investment);
- toll road concession (currently open for up to 95% foreign investment);
- direct selling (currently open for up to 95% foreign investment);
- restaurants, catering, bar, and café (currently open for up to 51% foreign investment);
- e-commerce (currently only open for domestic investment, proposed to be opened for up to 100% foreign investment if the investment is over Rp100 billion and up to 49% foreign investment if the investment is Rp100 billion or less); and
- pension fund (currently only open for domestic investment).
Foreign investment will also be more open for 29 lines of business that are proposed to be up to 67% foreign investment. These lines of business include the following:
- distributorship (currently open for up to 33% foreign investment);
- warehousing (currently open for up to 33% foreign investment);
- hotels (currently open for up to 51% foreign investment);
- MICE (currently open for up to 51% foreign investment); and
- telecommunication services providers (currently open for up to 49% foreign investment).
Closed Business Lines
The current business lines that are closed for investment under the DNI will remain closed. There is one new business line may be added to the list of business closed lines for investment, which is the excavation of treasures in shipwrecks.
Business Lines Subject to Other Regulations
Despite the proposed increase of foreign ownership limitation, investors will still be subject to other investment regulations, such as the Chairman of Capital Investment Coordinating Board (Badan Koordinasi Penanaman Modal – "BKPM") regulations. For example, investors will need to realize the investment of more than Rp10 billion prior to entering into production/commercial phase and particularly for the non-manufacturing sector, the Rp10 billion investment is required to be realized for each sub-group of business within one regency/city. Therefore, even though restaurant business may be up to 100% foreign investment, investors will need to realize the investment of Rp10 billion or more in each regency/city that they wish to hold open their restaurants.
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