News sites have preemptively published stories about the upcoming new negative investment list for some time. After the release of the actual new negative investment list (DNI) we can now finally put an end to rumors and look what it means for the foreign investors.
Let’s look closer the President Regulation no. 39 Year 2014, issued on 23rd April 2014 alias the new negative investment list. You can download the file here .
Be warned, the changes in many industries are going to upset foreign investors. In the end of the article we’ll give few solutions for the investors that now find their expansion plans under question.
Key changes in the new negative investment list
|Sector||Before||New negative investment list|
|Energy and Mineral Resources Sector||Oil and Gas Drilling Service Offshore outside Eastern Indonesia Teritory : Max of 95%||Oil and Gas Construction Service:
|All survey services, only local capital||Survey service on Oil and gas, max 49%|
|Survey service on Geology and Geophysics, max 49%|
|Survey service on Geothermal,max 95%|
|Oil and Gas Drilling service on land, max 95%||Oil and Gas drilling service on land, only local capital|
|Oil and Gas engineering and procurement service, max 95%||Oil and gas engineering and procurement service, only local capital|
|Oil and gas facility operating and maintainance service, max 95%||Oil and gas facility operating and maintainance service, only local capital|
|Geothermal operating and maintenance, not regulated||Geothermal operating and maintenance, max 90%|
|Power plant small scale (1-10MW), 100% foreign ownership if partnering with local||Power plant small scale (1-10MW), Maximum of 49%|
|Public Sector Works||Private cleaning service, only local capital||Undangerous waste management , max of 95%|
|Trade sectors||Distributor, 100% foreign capital is allowed||Distributor, max of 33%|
|Warehousing and cold storage, 100% foreign capital is allowed||Warehousing and cold storage, max of 33% foreign ownership|
|Market research, local capital only||Market research, max of 51%|
|Tourism and Creative Economy||Film promotional facility(advertisement, poster, stills,photo, slide, negative, banner,
pamphlet, giant banner, folder, etc), only local capital
|Film promotional facility(advertisement, poster, stills,photo, slide, negative, banner,
pamphlet, giant banner, folder, etc), max of 51%
|Communication and Informatics sector||Local Based Cable by circuitswitch or packet switch technology, max 49%||Local Based Cable by circuitswitch or packet switch technology, max 65%|
|Multimedia Service provider, vary, starts from 49% to 95%||Multimedia Service provider, all activities are now max 49%|
|Private Broadcasting Agency(LPS) and Subscription Broadcasting Agency(LPB), only local capital||Private Broadcasting Agency(LPS) and Subscription Broadcasting Agency(LPB), max of 20% only for business expansion on existing one|
|Finance||Venture capital, max 85%||Venture capital, max 80%|
|Manpower||Work Training, max 49%||Work Training (except for holticulture and security training), 100% foreign capital|
|Health Sector||Pharmaceutical industry, max 85%|
Indosight’s expert Marlissa Dessy comments the changes
Marlissa Dessy, Indosight’s co-founder and senior consultant, was given early access to the newly launched negative investment list. Here are her key takeaways:
- The regulation is more open to foreign ownership in sectors of Energy and mineral resources(especially oil and gas and power plant), trading, finance sector.
- Also more open industries are public sector works (for waste management), Tourism and creative economy (for advertising), telecommunication, education (working training), and health sector (pharmaceutical industry)
- Special treatment for investors from ASEAN in some sectors: for example overseas transportation foreign ownership is limited to 49% for non-ASEAN investors and to 60% for ASEAN. Same goes for consulting.
- Higher foreign ownerships are allowed for certain projects in East Indonesia (excluding Makassar and Manado)
What if my industry became closed to foreign investment?
First of all, if your company already has a principal license, the grandfathering principle protects your business and you don’t need to worry about future changes.
However, if you were about to invest in a sector that’s ownership regulations have changed, you’ll need to comply.
There are essentially four options in such case:
- Alter your business plan and apply for a different classification
- Engage or increase the involvement of a local partner
- Use nominee shareholder(s)
- Redesign your corporate structure and open instead a representative office
Many consultants will advise you to just apply for a wrong classification and then conduct whatever activities you want. This is a horrible advice will guarantee that you’ll need to restructure later on. Save time and money and go for the other options.
Contact us at firstname.lastname@example.org if you need a legal and safe option to get your operations started in Indonesia regardless of the industry.