With the introduction of Omnibus Law (Law No. 11 of 2020), the government of Indonesia has issued a new Investment list to replace the old Daftar Negatif Investasi (DNI) or Negative Investment List under Presidential Regulation No. 44 of 2016 and Presidential Regulation No. 76 of 2007. The old Negative Investment List used to list those business activities that were either open, partially closed or fully closed to foreign investors. The new investment list as a result of Omnibus Law, aptly titled Priority Investment List, is issued under Presidential Regulation No. 10 of 2021 on Investment Business Activities. Like the old Negative Investment List, the list of business sectors in the Priority Investment List refers to the classification of sectors set out in the Indonesian Business Sector Classifications (“KBLI“).
In the Priority Investment List (a new list issued as a result of Omnibus Law), permitted and restricted sectors have been simplified, and instead of navigating a long list of businesses that foreign investors cannot invest in, they can now target the desired business and comply with the necessary conditions.
Below we are providing the summary of changes in key business sectors where restrictions have been relaxed for foreign investors.
BUSINESS AREAS WITH LIFTED FOREIGN OWNERSHIP RESTRICTIONS DUE TO OMNIBUS LAW
|No.||Sector||Position under Negative Investment List||Position under Priority Investment List|
|1||Telecommunications and information technology service provider||Foreign investment was capped at 67%||100% open.
In addition, e-commerce/web portals business (even if the investment is less than IDR 100 billion) is now open to 100% foreign investment, from previously 49%.
|2||Health, which includes investment in hospitals, wholesale of pharmaceutical raw materials and healthcare equipment||Closed for investment or capped to a certain percentage only.||100% open.
Investment in a company engaged in pharmaceutical products for human is also entitled to tax allowance
|3||Energy and mineral resources, which includes investment in oil and gas construction (platform), onshore and offshore oil and gas drilling services||Investment was capped to certain percentage||100% open|
|4||Construction implementation services or construction consultancy services, both using high technology or involving high risk.||Foreign investment was capped at 67%, or 70% if the investor is from an ASEAN country.||100% open|
|5||Trading, which includes distribution that is not affiliated with production||Foreign investment was capped at 67%.||100% open|
|6||Transportation, including in freight forwarding services and operation of terminal for land transportation of passengers.||Foreign investment in a freight forwarding services company was capped to 67%.
Meanwhile, no foreign investment in a company operating terminal for land transportation of passengers was allowed.
|100% open for both types.|
|7||Plantations and agriculture, including palm oil seed plantations and agriculture of certain fruits and vegetables.||For palm oil seed plantations, foreign investment was capped at 95%.
For agriculture of certain fruits and vegetables, foreign investment was capped at 30%
|100% open for both types.|
|8||Press, including publication of newspaper, magazines, and bulletins||Closed for foreign investment||Must be 100% domestically owned at the time of its establishment. After that, foreign investment is capped at 49% and can only be made by way of a capital increase or business expansion|
BUSINESS ACTIVITES WHICH WERE CLOSED BEFORE OMNIBUS LAW
It is worth noting that there are some business sectors that are completely closed for not only foreign investors but also local businesses and can only be carried out by the central government. These closed business activities are as follows:
- Cultivation and industry of narcotics.
- Industry of chemical weapons manufacturing.
- All forms of gambling and/or casino activities.
- Industry of industrial chemicals and industry of ozone depleting substances.
- Capture of any Endangered species of fish according to Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).
- Utilization and collection of coral and utilization and collection of corals from nature which are used for building materials/limestone/calcium, aquarium, and souvenirs/jeweler, as well as live and dead coral (recent death coral) from nature.
- Industry of the alcoholic drinks and wine.
Investors should note that existing laws and regulations relevant to their investment remain valid to the extent that they do not conflict with the Omnibus Law and the Priority Investment List.
The new Omnibus law and issuance of the highly anticipated Priority Investment List is a positive step forward for Indonesia’s economy and welcomed by investment and business communities both within and outside of Indonesia. With the relaxation of foreign ownership restrictions in many important business fields, investment structures will be simplified and investors will be able to focus on bringing greater value to the Indonesian economy.
How MAM Corporate Solutions can help?
Indonesian laws frequently change and Omnibus Law is just one example of this fact. MAM Corporate Solutions business Advisors and Legal Consultants have extensive experience in the Indonesian legal landscape. Our experts have assisted small, medium and large firms in their complex legal disputes and also advised them on how to remain legally compliant in Indonesia.
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