Indonesia Readies New Negative Investment List. What Should Investors Expect?

deal-news-300x135

By Stephen Igor Warokka

According to numerous media reports, the Indonesian government is in the process of revising the Negative Investment List, commonly known as the DNI, as contained in Presidential Regulation No. 39 of 2014. The revised DNI is expected to be issued in February or March 2016, according to reports.

Why is a revised DNI so highly anticipated by investors and the business community in Indonesia? That is because the first step in establishing a foreign investment company in Indonesia is to determine whether the proposed company can engage in the business intended by its founding shareholders and, if so, whether the company can be wholly foreign owned or only partially foreign owned. The DNI lists those industries and business areas in which investment by both foreigners and Indonesians is prohibited or restricted.

According to media reports and statements by government officials, there are at least 20 new lines of business that various ministries have suggested be opened to 100% foreign investment in the new DNI.

In addition to opening new lines of business to 100% foreign investment, the Indonesian government is expected to relax foreign investment restrictions in certain business sectors under the new DNI. For example, the operation of golf courses reportedly will be opened to 70% foreign investment, an increase from a maximum 49% foreign investment, or 51% in certain cases where there is a partnership with a small, micro or medium-sized business or a cooperative.

Interestingly, even before the new DNI is issued, Indonesia’s Business Fields Classification, or KBLI, was already updated in October 2015, causing some confusion as to whether the updated KBLI was based on the current DNI or the soon-to-be-issued DNI. For example, e-commerce marketplace is included in the updated KBLI, but under the current DNI, such line of business is closed to foreign investment.

Based on media reports and public statements from government officials, e-commerce and the film industry will be open to up to 100% foreign investment. This includes film technical services, film production and cinemas. In the current DNI, certain sub-categories of film technical services are limited to 49% foreign investment or are closed to foreign investment, while filmmaking, motion picture projection, sound recording studios and motion picture distribution are closed to foreign investment.

The Indonesian government seems to be taking positive steps toward the creation of a better investment climate. However, as with critically acclaimed Hollywood movies that underperform at the box office, it remains to be seen whether the new DNI will be a blockbuster or a flop with investors.

Comments are closed.