INDONESIAN NEGATIVE LIST REVISION

INDONESIA INVESTMENT COORDINATING BOARD

INDONESIAN NEGATIVE LIST REVISION

Negative List Seminar with JICA, Jakarta, 2nd June2016

invest in

The Investment Coordinating Board of the Republic of Indonesia

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100% FDI Distributor affiliated with

production

67% FDI for distributor not affiliated with

production

100% FDI Raw material for Pharmacy

From previously open to 85% FDI

100% FDI E-Commerce

in partnership with SMEs

From previously closed to FDI

100% FDI Marketplace

For min. Investment of IDR 100 billion (USD 8 million). Open 49% FDI

for investment < IDR 100 billion

100% FDI Film Industry

Production, post-production, distribution, projection

100% FDI Tourism

Sports center, restaurant, bar,

cafe

67% FDI Transport

infrastructure & support services

Including cargo handling and air

transport

Investment Climate

Economic Package X Negative List Revision – Presidential Regulations 44/2016


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1. The achievement of national targets both economic and infrastructure development

2. Enhancing the role of domestic and foreign investments in economic development

3. Creation of new employment opportunities 4. Increasing value added and national exports 5. The increase in state revenues

Negative List Revision on List of Business Fields Closed to Investment and Business Fields Open, with Condition, to Investment.

Purpose for the Changes:


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Mechanism For “Negative Investment List” Formulation

Pending Issue

Implementation of Presidential Reg.

39/2014

Business International/ Economic Development

Inputs from Various Stakeholders: Embassy Foreign Chambers Business Association Etc. Inputs from

Ministry/Govt. Institution

BKPM and Ministry/ Govt. Institution

Coordinating Ministry, BKPM and Ministry/

Govt. Institution

President Enactment of Presidential Regulation


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Negative List Revision Overview

• Revision of the Presidential Regulation on negative list ensure that henceforth no regulatory level under the regulation, which is more limiting (restrictive).

• After Presidential regulation 44/2016 being enacted, the regulation of implementing regulations under the Negative List (including the Regulation of the Minister or Head of Institution) must comply with the provisions in this regulation.


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Presidential Regulations Number 44/2016 – New Provisions-


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Business Sector Provisions on Appendix Separation of Business Fields from 2 Appendix to 3 Appendix

Presidential Regulation 39/2014 Presidential Regulation 44/2016

Article 1

(2) List of closed business field as referred to in paragraph (1), is as set out in Appendix I of this Presidential Regulation.

Article 4 Closed Business Fields referred to in Article 2 paragraph (1) point b are listed in Appendix I and is an integral part of this Presidential Regulation.

Article 2

(2) List of business fields open, with conditions, as referred to in paragraph (1), is as set out in Appendix II of this Presidential Regulation.

Article 5 (1) Business fields open, with conditions : which are

licensed businesses reserved for or requiried establish under a Partnership with Micro, Small and Medium Enterprises and Cooperatives as referred to in article 2 paragraph (2) point a are listed in Appendix II and is an integral part of this Presidential Regulation.

(2) The partnership which is referred in paragraph (1) conducted by the Investor with Micro, Small and Medium Enterprises and Cooperatives with the pattern: the core plasma, subcontracting, agency, franchise, and the pattern of other partnerships.

Article 6 Business Fields Open with certain Conditions as referred in Article 2 paragraph (2) point b are listed in Appendix III and is an integral part of this Presidential Regulation.


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Provisions of Investment Implementation Investment Implementation through the Portfolio and the provision of Negative List on Special Economic Zones

Presidential Regulation 39/2014 Presidential Regulation 44/2016

Article 5 Article 8

The provisions referred to in Article 1 and Article 2 shall not be applicable for non-direct investment or whose portfolio transactions is made through a the domestic capital market.

(1) In terms of implementation of Investment activities in Business Fields Open with condition referred to in Article 2 paragraph (1) point c conducted as non-direct investment or whose portfolio transactions is made through a the domestic capital market, which is Business Fields Open with conditions referred in Article 2 paragraph (1) point c becomes Opened Business Fields.

(2) In terms of implementation of Investment activities in Business Fields Open with condition referred to in Article 2 paragraph (2) shall be conducted in Special Economic Zones, the Business Sector becomes Open Business Fields except Business Fields which are reserved for Micro, Small and Medium Enterprises and Cooperatives.


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Monitoring, Evaluation and the settlement of Investment Issues The addition of Provisions related to the authority in the Monitoring, Evaluation and the settlement of Investment Issues

Presidential Regulation 44/2016

Article 12

(1) Minister who held coordinate government affairs in the field of economic, performs monitoring, evaluation, and the settlement of Issues in the implementation of Investment activities in Business Fields as regulated in this Presidential Regulation.

(2) Implementation of the monitoring, evaluation, and settlement of the issues as referred to in paragraph (1) is assisted by National Team For Export and Investment Improvement (Tim Nasional Peningkatan Ekspor dan Peningkatan Investasi) whose been formed and established by a separate presidential Regulation.


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Presidential Regulations Number 44/2016 Overview


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Presidential Regulations Number 44 of 2016 is more open to investments, with the following changes :

• More Business Sectors open to 100% foreign capital ownership and excluded from the negative list, most of them are creative industry sectors.

• The number of business fields in the category Open With Conditions has been reduced, from 664 becoming 515 business fields.

• More Business Fields which will be opened to foreign investment with majority shares ownership (more than 50% shares ownership).

• The number of Business Fields which is allocated for 100% domestic ownership has been reduced from 66 business sector.

Presidential Regulations Number 44 of 2016 More Open to Investment


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Presidential Regulations Number 44 of 2016 makes investment process is easier, with these following changes:

• Deleting the prior-investment technical approval from other Ministries/Institutions, including Technical Recommendation from Agriculture Ministry for Plantation more than 25 Hectares.

• Deleting the conditions which are related to Regional Government, including the conditions in 18 tourism Business Fields.

• The Indonesian Negative List is not applicable to investment in Special Economic Zone (SEZ). Except for Business Fields which are allocated for Micro, Small, Medium Enterprises (UMKM) or Cooperation (Koperasi) as listed in appendix II.

Presidential Regulations Number 44 of 2016 Easier Investment process


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Presidential Regulations Number 44 of 2016 provided more protection to investor, with these following changes:

• The addition of the provisions related to monitoring, evaluation, and settlement of issues in respect of investments will be assisted by Tim Nasional Peningkatan Ekspor dan Peningkatan Investasi (Timnas PEPI).

• The addition of the provisions relate to the prohibition of the establishment of regional regulations or the Ministry / Agency regulations which is contrary to the Presidential regulation on Negative List.

Presidential Regulations Number 44 of 2016 Protection of investor


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Presidential Regulations Number 44 of 2016 is easier to be understood by the investors, with these following changes:

• The number of foreign ownership are simplified to several numbers, which are 49%, 67% or 95% foreign ownership, which are in line with Indonesian Company Law.

• The Business Fields are divided into 3 categories:

The Business Fields which are closed for investment

The Business Fields which are allocated for Micro, Small, Medium Enterprises (UMKM) or Cooperation (Koperasi) and Partnership (Kemitraan)

The Business Fields which are opened with conditions

Presidential Regulations Number 44 of 2016 Easier to be Understood


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• To reduce the cost of logistic for investors who produced the goods or open a fabric, the Distributors who affiliated to the Producers are opened for 100% foreign investment. In addition, for the non-affiliated Distributors, the foreign ownership are increased from 33% to 67%.

• The business fields related to land and sea transportations will be more opened to foreign investment, especially for these following business fields which will be opened for 67% foreign ownership:

The terminal supporting business

The air cargo services

The transportation handling services

• Provide an opportunity for investors to invest and set up cold-storage both in Java and outside Java due to the opening of a 100% foreign ownership for this field in order to support the distribution of logistics especially fisheries.

Presidential Regulations Number 44 of 2016 Reduce the cost of logistic


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• The Government is supporting the raw material industry, including the raw material for pharmaceutical industry which will be opened for 100% foreign ownership

• The change of foreign ownership limitation in the raw material for pharmaceutical industry will make the price of raw material for pharmaceutical is lower and may reduce import for the raw material

Presidential Regulations Number 44 of 2016 Reduced production cost


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• The development of technology, especially in retail business through online system has made the transactions are becoming more effective and efficient.

• Previously, E-Commerce was allocated to 100% domestic ownership. But now the revised Negative List will open this business field to foreign ownership as follows:

E-Commerce is open for 100% foreign ownership with Partnership scheme.

Marketplace, Daily Deals, Price Grabber:

Investment value ≤ Rp 100 Billion, opened for 49% foreign ownership

Investment value > Rp 100 Billion, opened for 100% foreign ownership

Presidential Regulations Number 44 of 2016 Retail Business


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Presidential Regulations Number 44 of 2016 Support for the Creative Industry

• Currently, there are only 1.171 cinema in Indonesia, which 35% are located in Jakarta. In other hand, the film industry has targeted 20 million viewers with 3.000 - 5.000 cinemas

• The revised negative list support the upstream and downstream of film industry, therefore these following business fields will be opened for 100% shares ownership:

- Film technical services

- Film making

- Film distributors

- Recording Studio

- Cinema

• However, the cinema must also comply to the regulations which set 60% local content/movie in the cinema.


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• In order to increase the quality of the workers and manpower in Indonesia, the foreign ownership in Trainings (Pelatihan Kerja) are increased from 49% to 67% foreign ownership.

• The improvement of the workers’ education will also make Indonesian people are more competitive compared to other countries, especially for labor intensive industry.

Presidential Regulations Number 44 of 2016 Improvement of the worker/manpower


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Presidential Regulations Number 44 of 2016 Tourism Sectors

up to 67% foreign ownership

No Business Fields

1 Private Museum

2 Historical heritage managed by private sector

3 Tourism Travel Bureau

4 One-Star Hotel

5 Two-Star Hotel

6 Non-star hotel

7 Other Accomodation Sevices (Motel)

8 Art Impresario Service

9 Singing Room/ Karaoke

10 Nature tourist object business outside conservation areas

up to 70% foreign ownership

No Business Fields

1 Catering service

2 Billiard, Bowling, Lapangan GolfGolf Court

3 Convention, Exhibition, and Incentive Tour Services)

4 Motel

100% ownership

No Business Fields

1 Restaurant

2 Bar

3 Cafe

4 Sport Stadium: Swimming, Soccer, Tennis, Sport Center

• Indonesian Government has targeted 272 million tourist for 2016. (12 million foreign tourists and 260 million local tourists)

• Therefore the negative list has been revised to attract more investors in tourism sectors, as follows:


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To support the 35 Giga Watts electricity programs and the renewable energy, the revised negative list also increased the foreign ownership for Geothermal Power Plants (≤ 10 MW capacity) from 49% to 67% shares ownership.

Presidential Regulations Number 44 of 2016 Renewable Energy


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Badan Koordinasi Penanaman Modal (BKPM) Indonesia Investment Coordinating Board Jln. Jend. Gatot Subroto No. 44 Jakarta 12190 - Indonesia

t . +62 21 525 2008

f . +62 21 525 4945

e . [email protected] Contact Centre : 0807 – 100 – 2576 (BKPM)

www.bkpm.go.id

Thank You

Terima Kasih

Indonesia Investment Promotion Centre (IIPC)

Documents

INDONESIAN NEGATIVE LIST REVISION