Change of Paradigm in Indonesia’s Foreign Investment Policy

Indonesia Investment Coordinating Board or Badan Koordinasi Penanaman Modal (BKPM) is in the process of revising the Investment Negative List or Daftar Negative Investasi (DNI). The decision to revise the list is mainly to reduce Indonesia’s dependency toward import goods. Indonesia is known to have an investment policy that heavily protects domestic entrepreneur and small medium enterprise; hence DNI only allows small percentage of foreign ownership in certain sectors. The government has finally recognized that the current foreign investment policy has benefited importers and is not creating production activities in the country.

In 2014 DNI, sectors such as film industry, pharmacy and tourism are some of the sectors that impose limitation in foreign ownership. Current revision will include these three sectors to be more lenient toward foreign investors.

In addition to that, e-commerce as well as processing in fishery that are closed for foreign investment will be open for foreign investment in the near future.

This change of paradigm is a pleasant thing for business and foreign investors looking to invest in these particular sectors. By attracting more foreign investors to build production facilities in the country, it is hoped to open more employment for Indonesians and in the end will improve the economy. However, it is worth noting that the employment regulation especially regarding foreign workers has been stricter than ever and the government does not seem to amend the labor regulation which is known to be pro labor, at any time soon. This means, although the foreign investment policy will change towards the better, it will not get the support it needs from the other sector.

 

Marini Sulaeman
Managing Partner – m.sulaeman@legisperitus.co.id

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