In order to boost foreign and domestic investments in Indonesia, the government of Indonesia is going to update the Negative Investment List (NIL), which was last amended in 2016.
The new list was announced in November 2018 as part of the 16th economic policy package by the Coordinating Ministry for Economic Affairs. This amended list is a gesture to many foreigners to make investments that will contribute to the reformative and consistent progress in the country.
Another important goal is to decrease the current national deficit as foreign direct investments in Indonesia play a significant role. The account deficit of Indonesia has hit US$8.8 billion (3.7% GDP) as of the end of 2017.
Also, foreign investments in particular sectors were much lower than expected. It is believed that the low awareness among foreign entrepreneurs was one of the major reasons for their poor development. These fields include market research services, and power plants (> 10 megawatts capacities), oil and natural gas exploration and exploitation, as well as the power grid construction in free trade zones.
However, the official announcement of the reform caused disagreement among local entrepreneurs as Indonesians fear of the global corporations entering the market and ‘devastating’ its local businesses. Therefore, it is expected that the NIL will undergo several updates until releasing its final version.
To further drive the restructuring of the market, the negative investment list will be shortened, especially in those sectors where investments have slowed down, and many industries will be further expanded.
The revised list will open 54 business activities, and full foreign ownership is going to be permitted in 25 business activities from 8 different sectors. Noticeably, not all 54 fields are suitable for a foreign company (PT PMA) as it requires capital of IDR 10 billion.
The 25 business activities from 8 different sectors that are proposed for full foreign ownership include industries that were previously open to foreigners, but the number of investors was low. These fields are related to trade, tourism communications, transportation and telecommunications mainly.
The details are listed as follows (the bracket shows the current allowed foreign ownership):
Other specific fields that will open up to full ownership from its current closed status:
Good news for small and medium companies is that the following sectors are no more restricted based on the size of businesses:
Previously requiring special recommendations, these sectors below will not need them anymore. They are:
The business sectors which are affected and will not require local partnerships include retail trade that is portal-based or internet-based (e-commerce).
The Negative Investment List significantly influences the development of the Indonesian economy and the amount of foreign direct investment pouring into the country. Even though its final version has not been approved by the Indonesian president yet, investors should be aware of its latest development.
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