Foreign Investment: Indonesia New Negative List

Foreign Investment: Indonesia New Negative List

Presidential Regulation No. 39 of 2014 on The List of Business Fields that are Closed or Conditionally Open for Investment (“Negative List”) was issued and became effective on 24 April 2014. This new negative investment list revises and replaces the previous Negative list which was released in 2010. The new Negative List revises the components of the 2010 list classified as: a) closed for investment; and b) conditionally open for investment. The business fields covered by the Negative List are in a wide variety of sectors with perhaps the most influential changes being in the energy and mineral resources, trade (in particular, distribution), agriculture, power and pharmaceutical fields.

Business sectors that are not mentioned in the Negative List are, in theory, considered completely open to investment from non-Indonesian investors but this is not necessarily the case in practice. Article 3 of the Negative List confirms that business sectors that are not specifically mentioned are unconditionally open for investment. However, we consider that it would be prudent to re-confirm with BKPM (as the government institution that administers the enforcement of the foreign ownership limitations provided in the Negative List other than those in the banking, finance and mining sectors) that there is no unwritten policy in place, or condition imposed, that restricts foreign investment into business lines that are not listed in the Negative List. Where new business sectors have been introduced, although a new foreign ownership limit may now apply where previously there was no formal restriction, investors at least have some certainty as to what restriction or condition applies.

List of Business Fields That Are Closed to Investment

Field

Business Field

Agriculture

Growing of Marijuana

Forestry

  1. Fishing of species of fish listed in Appendix 1 of CITES
  2. Gathering (taking) of coral from nature for construction materials/lime/calcium and souvenirs/jewelry as well as living coral or dead coral (recently dead coral) from nature.

Industry

  1. Manufacture of chemicals that damage the environment:
    1. Mercury processed Chlorine Alkali
    2. Manufacture of active ingredients of pesticides
    3. Industrial chemicals: Polychlorinated Biphenyl (PCB), Hexachlorobenzene
    4. Manufacture of the ozone depleting substances listed in President Regulation No.39/2014
  2. Chemical Material Industry Schedule 1 Chemical Weapons Convention (Sarin, Soman, TabunMustard, Levisite, Ricine, Saxitoxin, VX, etc)
  3. Manufacture of Alcoholic Beverages (Hard Liquor, Wine, and Malt Containing Beverages)

Transportation

  1. Provision and operation of terminals for passenger land transport
  2. Provision and operation of Weight Stations
  3. Telecommunication/aids to shipping navigation and vessel traffic information system (VTIS)
  4. Provision of air navigation services
  5. Performance of testing of Motor Vehicle

Communication and Informatics

Management and implementation of radio frequency spectrum and satellite orbit monitoring stations

Education and Culture

  1. Governmental museums
  2. Historical and archaeological remains (temples, Sultan’s palace, inscriptions, ruins, ancient buildings, etc)

Tourism and Creative Economy

Gambling/casinos

 

The business fields that are conditionally open for investment and the existing business fields where there is now greater or less flexibility include the following:

Business Field

New Maximum

Old Maximum

Energy and mineral resources

Electricity installation testing and maintenance

Closed

100%

Electricity installation in building and civil construction

Closed

95%

Power plants producing >10 MW built under a Public Private Partnership (PPP) project

100%

95%

Power plants producing 1-10 MW

49%

Uncapped with domestic partner

Electricity transmission and distribution PPP project

100%

95%

Land drilling services

Closed

95%

Offshore oil and gas drilling

75%

95%

Certain oil and gas support services

Closed

95%

Certain oil and gas construction services

Closed

95%

Geothermal surveying

95%

100%

Trade

Postal and online retail shopping

Closed

Unregulated

Distribution, warehouse and cold storage (except cold storage in area listed below)

33%

100%

Cold storage business in Kalimantan, Sulawesi, Nusa Tenggara, Maluku and Papua

67%

100%

Transportation

Construction of land terminals (eg passenger land transport terminals and general cargo terminals)

49%

Closed

Motor vehicle testing

49%

Closed

Provisions of port facilities built under a Public Private Partnership (PPP) project

95%

49%

Communication and informatics

Advertising companies (for ASEAN investors only)

51%

Closed

Fixed and multi-media integrated telecommunication networks

65%

100%

Call centers and other telephony services

49%

Uncapped with domestic partner

Communication data systems

49%

95%

Multimedia content

49%

Uncapped with domestic partner

Finance

Venture capital

85%

80%

Health

Pharmaceutical companies

85%

75%

 If you would like to discuss any aspect of this update, or your business activities or plans, please feel free to contact us.