Indonesia to encourage foreign ownership to attract Investments & job creation

INDONESIA

In-order to curb recession, the government of Indonesia is set to remove energy, communications, and tourism from a list of sectors restricted to foreigners in a bid to boost investments and create jobs. The list of industries limited to foreign investment has been cut to just 48, from more than 300, according to a draft of the presidential decree. The government is set to remove restrictions for sectors such as communications, information and technology, energy, tourism and creative economy, although they may still be subject to other regulations.

The lineup, expected to be issued next month, is a long-awaited overhaul of the so-called negative investment list that restricts and limits foreign ownership in hundreds of business fields. Through the job creation omnibus law passed last October, the government has cut its list of 20 sectors closed to private investment to only six: controlled drugs, gambling, catching endangered fishes, harvesting corals, manufacturing of chemical weapons and industrial chemicals.

The government also plans to maintain a list of priority sectors, those that are export-oriented or are key to national strategic projects, capital or labor-intensive projects. The list includes industries eligible for fiscal incentives such as tax holidays, tax allowance and investment allowance, as well as non-fiscal incentives like ease of business licensing, infrastructure support or guaranteed availability of raw materials. Foreign ownership would still be limited in sectors linked to transportation, broadcasting and news publishing, as well as alcoholic beverages, while industries including banking and finance would require special licenses from the government, according to the draft decree. Global funds can only do business involving investment value of above 10 billion rupiahs ($710,000), except for investment in technology-based startups in special economic zones, according to the draft, which is currently open to public input.

Southeast Asia’s biggest economy is struggling to emerge from its recession. Sweeping reforms and simplification of regulations could bring in more foreign direct investments.

The investment list also aims to support small businesses, which are the biggest source of jobs in Indonesia. Investors must partner with small- and medium-sized businesses when investing in projects that use low technology, involve special cultural heritage, or those that require less than 10 billion rupiah of capital when excluding real estate assets.

As many as 56 large-scale companies have committed partnerships with 196 small and medium enterprises on Monday, so far with a combined potential contract value of 1.5 trillion rupiahs ($107 million), according to Head of the Indonesia Investment Board Bahlil Lahadalia. These partnerships aim to develop the regional economy further and balance investments inside and outside Java’s island, he said at a briefing.

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