News & Announcements

W&P Newsletter – Indonesia’s (No Longer) Negative List?

The long-awaited Presidential Regulation on investment sectors[1] is now issued by Mr. Joko Widodo, the President of Indonesia. This regulation is one of the implementing regulations of the Omnibus Law and will be effective as of 4 March 2021. The lists of sectors in this Presidential Regulation replace the previous lists issued in 2016 (also commonly known as the ‘2016 Negative List’).

One key emphasis in the Presidential Regulation is that all sectors in Indonesia are open (with certain exceptions) which suggests the strong determination of Mr. Joko Widodo’s administration to show to investors, in particular, foreign investors, the level of its commitment in welcoming them. This momentum can therefore present more opportunities to foreign investors. We note that business sectors such as, general manufacturing, real estate, and business management consulting services remain fully open for foreign direct investments as they previously did under the old regime. While sectors, such as, construction, offline retail trading, transportation and logistics, telecommunications, and power, have seen increased foreign ownership levels compared to those set under the 2016 Negative List. You can click here to see our observations on certain selected sectors where foreign ownership levels have been increased significantly.

Having considered the number of sectors that have been taken out from the previously ‘closed sectors’ category, we can appreciate the effort of the Indonesian government to try to boost foreign investment coming into the country; although handful of sectors remain restricted to foreign ownership or  are still required to comply with certain conditions (such as, partnership with SMEs). This suggested that the government also wanted to balance between the interest of foreign investors, on one hand, and the national interest, as well as the interests of local investors and small/medium businesses, on the other hand.

That said, foreign ownership limitations and the requirement to partner up with SMEs do not apply to indirect investments with transactions being made through domestic capital market.

As a general note, other than the closed sector category and the sector category which can only be operated by (or in cooperation with) the central government, other categories under the new Presidential Regulation include:

  • priority sectors (such as, those that are considered strategic/ national projects, labour intensive sectors, capital intensive sectors, high technology industries, export-oriented sectors, R&D-oriented sectors, or innovative sectors) – which can enjoy certain tax and import facilities;
  • sectors that must be in partnership with co-operatives or small and medium size businesses;
  • sectors that are open with conditions (such as, foreign ownership limitations, zoning/ location).
  • sectors that are fully open for all investors.

 Some Exceptions

The Presidential Regulation also made it clear that the new foreign ownership limitations:

  • do not affect existing investments, and
  • do not apply to investors from countries that have special agreements with Indonesia (unless the limitations are considered more beneficial to the investors compared to those set under the investment agreements).

Closing Remarks

In ending our note, we would like to highlight that this publication only focuses on PR 10/2021. The publication does not attempt to include all changes brought by the new lists and that there may be other regulations which set out additional conditions/ requirements with respect to certain sectors – so please reach out to us at info@wplaws.com or any of our lawyers you have been in contact with if you would like to understand further about the new Presidential Regulation and the lists as well as other conditions that may affect your proposed investments.

 

 

[1] Presidential Regulation No.10 of 2021 (“PR 10/2021”)