Positive Investment List: A Revoked Negative Investment List

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positive investment list

In response to the enactment of the “Omnibus Law” (Law No. 11 of 2020), the Indonesian government introduced the Presidential Regulation No. 10 of 2021 on February 2, 2021. This regulation, set to be effective 30 days post-issuance, presents the “positive investment list.”

Marking a significant shift in the government’s stance on foreign investment, this new regulation supersedes the previous 2016 Negative Investment List (DNI), opening up previously restricted or closed business fields to foreign investors.

The transition from Negative to Positive Investment List: Understanding the Shift

The DNI was originally established to shield local businesses from intense competition posed by foreign entities. Yet, this protective measure, combined with Indonesia’s underwhelming economic performance, led to a stagnation in foreign investments.

MetricDataObservation
GDP Growth (Q3 2019)5.02%Lowest in over two years
Investment Growth Contribution33% of GDPSignificant contributor to the nation’s GDP
Investment Growth (Q3 2019)4.2%A decline from the previous year
Investment Growth (Q3 2018)6.92%Higher growth in the same period of the previous year

Data from Statistics Indonesia reveals a concerning trend: the GDP growth for the third quarter of 2019 dipped to its lowest in over two years, registering at 5.02%. This decline aligns with the observed slowdown in investment growth, which contributes to 33% of the nation’s GDP. Notably, it decelerated to 4.2%, down from 6.92% in the previous year’s corresponding period.

Indonesia’s Open Arms: Encouraging Foreign Investments

In alignment with the Omnibus Law, the Presidential Regulation 10/2021 was introduced, featuring the positive investment list. This regulation was crafted to entice a broader spectrum of investors and to streamline business operations in Indonesia.

Furthermore, it seeks to bolster the national investment environment, placing emphasis on strengthening cooperatives and bolstering micro, small, and medium-sized enterprises (MSMEs).

This regulation stipulates that, with a few exceptions, all business sectors are accessible to foreign investments. Some exclusions pertain to areas specifically governed by other regulations or those reserved solely for the government. The regulation also incorporates references to the 2020 Indonesian Standard Business Classification (KBLI).

Spotlight on Priority Sectors: Benefits and Incentives

The Presidential Regulation 10/2021, featuring the positive investment list, categorizes businesses open to foreign investment into three distinct groups. Leading the list are the ‘Priority Sectors’, encompassing 245 business fields. Investments in these fields are rewarded with both fiscal and non-fiscal incentives.

Within this category, full (100%) foreign ownership is permitted. However, foreign entities, also known as PT PMA, venturing into these fields must satisfy specific criteria, including:

  • Involvement in National Strategic Projects
  • Commitment to High Capital Investment
  • An Export-Oriented Approach
  • Adoption of Advanced Technology
  • Establishment or involvement in Pioneer Industries
  • Engagement in Research Activities
  • Emphasis on Labor-Intensive Operations

Businesses aligning with any of the aforementioned criteria stand to benefit from tax incentives, tax holidays, and exemptions from customs duties.

Diverse Investment Opportunities: Exploring Other Categories

The ‘Designated Business or Partnership’ category emphasizes collaboration with Cooperatives and Micro, Small, and Medium Enterprises (MSMEs). Within this bracket, 89 business fields are earmarked either exclusively for Cooperatives and MSMEs or for joint ventures involving larger corporations, including foreign entities.

To illustrate, agricultural ventures focusing on specific staple goods and spanning less than 25 acres are reserved for Cooperatives and MSMEs. On the other hand, woodchip production units with an annual capacity under 2000 sqm exemplify businesses where larger corporations can collaborate with Cooperatives or MSMEs.

The final category, ‘Business Subject to Specific Requirements or Limitations’, retains certain restrictions on foreign investments. Spanning 46 business fields, certain limitations persist. For instance, in the media publishing sector, foreign entities can only own up to 49% of the total shares.

Off-Limits: Sectors Restricted from Investment

There are six sectors where investments, whether domestic or foreign, are either restricted or completely prohibited:

  • Pharmaceuticals: Production and cultivation of Class-I drugs.
  • Entertainment: All variations of gambling activities.
  • Wildlife: Fishing activities targeting endangered species.
  • Marine Resources: Exploitation of natural corals for crafting jewellery, souvenirs, and construction materials, among others.
  • Defence: Production of chemical warfare agents.
  • Environment: Industries producing ozone-depleting chemicals and related products.

This list delineates areas that prioritize safety, environmental conservation, and ethical considerations.

Wrapping Up: The Impact and Opportunities of the Positive Investment List

Through the introduction of the positive investment list in the Presidential Regulation, the Indonesian government aims to fortify the nation’s financial resilience, curtail the current account deficit, and catalyze economic growth by amplifying investments.

For investors, this regulation unveils a plethora of advantages. Establishing a company in Indonesia becomes more straightforward, complemented by a range of enticing incentives.

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