Indonesia’s Negative Investment List to be Replaced with Positive Investment List

To encourage more investments in restricted sectors, negative investment list in Indonesia is to be replaced with a positive investment list. Learn here.

According to the government in Indonesia, a positive investment list, also known as the priority list, will be issued in January 2020. The purpose of the positive investment list is to encourage more foreign investments for sectors that are previously partially closed or fully closed under the negative investment list in Indonesia.

With the increase of investments through this upcoming priority list, the Indonesian government will be able to promote the country’s financial stability, decrease the existing account deficit, and finally boost the economic growth of Indonesia.

The current negative investment list (DNI) was enacted so that the country will be able to provide protection to local companies against the competition with foreign organisations.

However due to this stringent policy and the less than satisfying economic growth in Indonesia, foreign investments injected into Indonesia have been stagnant.

According to the Statistics Indonesia, Indonesian GDP growth was recorded at the lowest in more than two years: 5.02% in the third quarter of 2019. The slowing of GDP is of no surprise because the investment growth, accounting for the country’s 33% of GDP, also dropped to 4.21% from 6.92% in the same period of the previous year.

Welcoming Foreign Investments with Priority List in Indonesia

While some sectors such as cannabis cultivation, gambling, wildlife trade and chemical weapons trade still remain banned, many other sectors will be included in the priority list to welcome more foreign investments in Indonesia.

Currently, there are only six negative list sectors. The government will now focus more on incorporating industries that are more export-oriented and import-substitution into the priority list.

With an aim to strengthen value-added chains in the country, sectors such as automotive, coal gasification and electronics are also proposed to be covered under the positive investment list.

Change of Negative Investment List

In fact, earlier in November of 2019, the government already revised the negative investment list as part of the 16th economic policy, in an effort to exempt more business sectors from the DNI for foreign investors to participate.

Therefore, it is of no surprise that the release of the positive investment list will change the policy of the negative investment list in Indonesia significantly.

Previously, the government has proposed to free 49 business sectors from the DNI and allowed foreigners to have greater investment options through the elimination of acquiring ministry recommendations.

For many foreign investors, revising DNI also means that the government is trying to reform and improve the investment policy and procedure, in order to attract more foreign direct investments for the vitalization of the country’s economy and growth.

President Jokowi also mentioned to simplify the labor laws and lower the corporate tax rates to improve the investment climate in Indonesia.

A positive investment is beneficial in many ways to improve the country’s investment climate. However, a more detailed plan is absolutely necessary to guarantee a successful implementation, especially for sectors that do not fall in either the DNI or the priority list.

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Pandu Biasramadhan

Pandu is the Consulting Manager at Cekindo. He has extensive experience in working with government agencies. Notably, he has provided market-entry solutions for enterprises in Indonesia and managed regional partnership channels in Southeast Asia. At Cekindo, Pandu aspires to lead the consulting team to provide top-quality market-entry services and maintain a portfolio of global clientele. His specialty is market-entry advisory and business process outsourcing.