INDONESIA’S POSITIVE INVESTMENT LIST

The Indonesian Government has finally issued the long-anticipated Positive Investment List through Presidential Regulation No. 10 of 2021 on Investment Business Fields (”Positive List”). The Positive Investment List is one of the 49 implementing regulations of Law No. 11 of 2020 on Job Creation (“Job Creation Law”) which is set to replace the previous Presidential Regulation No. 44 of 2016 concerning The List of Business Fields that are Closed and Business Fields that are Open with Conditions to Investment (“PR 44/2016”) In this writing we are highlighting the key changes to the previous PR 44/2016.

A. Business Fields Classification Under the Positive List

1. Business Fields that are Closed to Investment

Under the Positive List, all business fields are open to investment activities, except for (i) business fields that are declared closed for investments; or (ii) activities that can only be carried out by the central government.

Under the Job Creation Law there are only 6 business fields that are completely closed for investment, namely:

  1. narcotics cultivation and industry class I;
  2. all forms of gambling and/or casino activities;
  3. fishing of species of fish listed in Appendix I of Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES);
  4. utilization or taking of coral and utilization or taking of corals from nature, that is used for construction material/lime/calcium, aquarium, and souvenirs/jewelry as well as living coral or dead coral (recently dead coral) of nature;
  5. chemical weapon manufacturing industry; and
  6. industries of Industrial chemicals and ozone-depleting substance;

 

2. Business Fields that are Open to Investment

     a. Priority Business Fields

To be defined as a “Priority Business”, the relevant business fields must meet the following criteria: (i) a national strategic program or project; (ii) capital intensive; (iii) labor-intensive; (iv) advance technology; (v) pioneer industry; (vi) export-oriented; and/or (vii) research, development, and innovation activities oriented.

Investors that are investing in priority business fields are eligible to receive:

(1) Fiscal Incentives, consisting of:

  • Tax Incentives (including tax allowance, tax holidays, or investment allowance).
  • Customs incentives in the form of exemption from import duty on imported machinery, goods, and material for industrial development and investment.

(2) Non-Fiscal incentives include the ease of obtaining business licenses, provision of supporting infrastructure, the guarantee of energy availability, the guarantee of material availability, immigration permits, employment permit, and other conveniences under the prevailing regulations.

      b. Business Fields Allocated for or which Require Partnership with Cooperatives and Micro, Small, and Medium Scale Enterprises (“UMKM”)

The allocated business fields or partnership with cooperatives and UMKM are the business sectors that are fully allocated for cooperatives and UMKM and business fields that requires Big Scale Enterprises to be in mandatory partnerships with cooperatives or UMKM.

Business fields that are allocated for cooperatives and UMKM are determined based on the following criteria:

  1. business activities that do not utilize technology or only use simple technology;
  2. business activities that have process specificities, are labor-intensive, and have a special and hereditary cultural heritage.
  3. the capital of the business activities does not exceed IDR 10,000,000,000 (ten billion Rupiah) excluding land and property.

Considering that the Positive List requires foreign investors to have Big Scale Business with an investment value of more than IDR 10,000,000,000 (ten billion Rupiah) excluding land and property, it is not possible for foreign investors to carry out business fields that are allocated for cooperatives and UMKM.  The Positive List, however, allows foreign investors to partner-up with cooperatives and UMKM as long as it covers the following criteria: (i) it must include business fields that are mostly occupied by cooperatives and UMKM; and/or (ii) it is a business sector that is purposely boosted to enter the larger supply chain.

      c. Business Fields that are open with certain requirements

There were 350 business fields that are open with certain requirements under PR 44/2016.  The Positive List reduced such number to only 46 business fields which makes many business fields no longer subject to certain maximum foreign ownership restrictions.   Business fields that are open with certain requirements are divided into 3 categories:

  1. investment requirements for domestic investors;
  2. investment requirements with the limitation for foreign investment; or
  3. investment requirements with special permits.

 

B. Minimum Investment Value for Foreign Investment under the Positive List

The Positive List requires foreign investors to only conduct business activities in a Big Scale Enterprise with a minimum investment value of more than IDR10,000,000,000 (ten billion Rupiah) excluding land and property for business premises. The exception for such requirement is given only to business entities that are domiciled in the Special Economic Areas (Kawasan Ekonomi Khusus or KEK) and the technology-based startup sector. The purpose of such an exception is to encourage the strengthening of the ecosystem of technology-based startups, which are not limited to funding aspects, infrastructure, mentor networks, transfer of technology, and market access.

C. Updated List of Business Fields that are Open with Certain Requirements

No. Business Field KBLI Positive List Previous Requirements under PR 44/2016
1. Publishing of newspaper magazines and newsletter (press) 58130 a.      Domestic capital: 100% for establishment;

b.      Foreign capital ownership: Maximum 49% (through the capital market) only for business expansion and development.

100% Domestic capital
2. Private Broadcasting Agency (Lembaga Penyiaran Swasta/LPS) 60102 a.      Domestic capital: 100% for establishment;

b.      Foreign capital ownership: Maximum 20% only for business expansion and development.

a.      Only for business expansion and development.

b.      Foreign capital ownership: Maximum 20%

3. Subscription Broadcasting Agency (Lembaga Penyiaran Berlangganan /LPB) 60202 a.      Domestic capital: 100% for establishment;

b.      Foreign capital ownership: Maximum 20% only for business expansion and development.

4. Radio community broadcasting agency 60102 a.      Domestic capital: 100% for establishment;

b.      Foreign capital ownership: Maximum 20% only for business expansion and development.

Reserved for Cooperative and UMKM
5. Television community broadcasting agency 60202 a.      Domestic capital: 100% for establishment;

b.      Foreign capital ownership: Maximum 20% only for business expansion and development.

6. Postal activities 53100 Foreign capital ownership: maximum 49% Foreign capital ownership: maximum 49%
7. Domestic scheduled commercial air transportation 51101 a.      Foreign capital ownership: maximum 49%;

b.      National capital must outnumber the entire foreign capital ownership.

a.      Foreign capital ownership: maximum 49%;

b.      National capital must outnumber the entire foreign capital ownership.

8. Domestic non-scheduled commercial air transportation 51102 a.      Foreign capital ownership: maximum 49%;

b.      National capital must outnumber the entire foreign capital ownership.

a.      Foreign capital ownership: maximum 49%;

b.      National capital must outnumber the entire foreign capital ownership.

9. Air transportation activities 51109 a.      Foreign capital ownership: maximum 49%;

b.      National capital must outnumber the entire foreign capital ownership.

a.      Foreign capital ownership: maximum 49%;

b.      National capital must outnumber the entire foreign capital ownership.

10. Liner and tramper domestic sea transportation for passengers 50111 Foreign capital ownership: maximum 49% Previous investment list only categorized Sea Transportation into 4, which are:

 

a.      Domestic Sea Transportation: Foreign capital ownership: maximum 49%

b.      International Sea Transportation: Foreign capital ownership: maximum 49%

c.       International Sea Transportation for Passengers (Excluding Cabotage): Maximum investment 70% for Investors from ASEAN Countries

d.      International Sea Transportation for Goods (Excluding Cabotage): Maximum investment 70% for Investors from ASEAN Countries.

 

11. Domestic sea transportation for tourism 50113 Foreign capital ownership: maximum 49%
12. Pioneer sea transportation for passenger 50114 Foreign capital ownership: maximum 49%
13. Liner and tramper domestic sea freight for goods 50131 Foreign capital ownership: maximum 49%
14. Domestic sea transportation for special goods 50133 Foreign capital ownership: maximum 49%
15. Pioneer domestic sea transportation for goods 50134 Foreign capital ownership: maximum 49%
16. Public shipping domestic sea transportation 50135 Foreign capital ownership: maximum 49%
17. Overseas liner and tramper sea freight for goods 50141 Foreign capital ownership: maximum 49%
18. Overseas sea transportation for special goods 50142 Foreign capital ownership: maximum 49%
19. Interprovincial general inland water transportation 50214 Foreign capital ownership: maximum 49% Foreign capital ownership: maximum 49%
20. Interprovincial pioneering inland water transportation 50215 Foreign capital ownership: maximum 49% Foreign capital ownership: maximum 49%
21. Interdistrict/intercity general inland water transportation 50216 Foreign capital ownership: maximum 49% Foreign capital ownership: maximum 49%
22. Interdistrict/intercity pioneering inland water transportation 50217 Foreign capital ownership: maximum 49% Foreign capital ownership: maximum 49%
23. Inner district/city general inland water transportation 50218 Foreign capital ownership: maximum 49% Foreign capital ownership: maximum 49%
24. River and lake transportation for passengers with fixed and regular routes 50211 Foreign capital ownership: maximum 49% Foreign capital ownership: maximum 49%
25. River and lake transportation for passengers with non-fixed and irregular routes 50212 Foreign capital ownership: maximum 49% Foreign capital ownership: maximum 49%
26. River and lake transportation with non-fixed and irregular routes for tourism 50213 Foreign capital ownership: maximum 49% Foreign capital ownership: maximum 49%
27. River and lake transportation for general goods and/or animals 50221 Foreign capital ownership: maximum 49% Foreign capital ownership: maximum 49%
28. River and lake transportation for special goods 50222 Foreign capital ownership: maximum 49% Foreign capital ownership: maximum 49%
29. River and lake transportation for hazardous goods 50223 Foreign capital ownership: maximum 49% Foreign capital ownership: maximum 49%
30. Main equipment industry 25200 Capital ownership based on approval from the Minister of Defense a.      100% domestic capital;

b.      Recommendation from the Ministry of Defense.

31. Industry of liquor containing alcohol* 11010 a.      For new investments, it currently can only be carried out in Bali, East Nusa Tenggara, North Sulawesi and Papua by paying attention to local culture and wisdom;

b.      Investment other than letter a, can be determined by the Head of Investment Coordinating Board based on the governor’s recommendation

Closed for Investment.
32. Industry of beverage containing alcohol: wine* 11020 a.      For new investments, it currently can only be carried out in Bali, East Nusa Tenggara, North Sulawesi and Papua by paying attention to local culture and wisdom;

b.      Investment other than letter a, can be determined by the Head of Investment Coordinating Board based on the governor’s recommendation

Closed for Investment.
33. Industry of beverage containing malt* 11031 a.      For new investments, it currently can only be carried out in Bali, East Nusa Tenggara, North Sulawesi and Papua by paying attention to local culture and wisdom;

b.      Investment other than letter a, can be determined by the Head of Investment Coordinating Board based on the governor’s recommendation

Closed for Investment.
34. Industry of traditional medical products for humans 21022 Domestic capital: 100% Domestic capital: 100%
35. Industry of wooden building products 16221 Domestic capital: 100% Required partnership with Cooperatives UMKM
36. Industry of coffee processing that has received geographical indication 10761 Domestic capital: 100% Previously not regulated
37. Industry of rendang 10750 Domestic capital: 100% Previously not regulated
38. Industry of vessels:

–          Pinisi;

–          Outrigger;

–          Wood with typical traditional design.

30111 Domestic capital: 100% Required partnership with Cooperatives UMKM
39. Industry of wood carving craft non mebeller: wood carving, reliefs, masks, sculptures, puppets 16293 Domestic capital: 100% Reserved for UMKM
40. Industry of traditional cosmetics 20232 Domestic capital: 100% Previously not regulated
41. Industry of raw materials on traditional medicine for humans 21021 Domestic capital: 100% Domestic capital: 100%
42. Industry of Batik:

–          Industry of written Batik;

–          Industry of stamp Batik;

–          The combination of written and stamp Batik Industry.

`13134 Domestic capital: 100% In the previous Investment List:

–          Industry of written Batik was reserved for Cooperatives and UMKM;

–          Industry of stamp Batik required partnership with Cooperatives and UMKM.

 

43. Industry of crackers, chips, Peyek and such (manufacturers and non manufacturers) 10794 Domestic capital: 100% Reserved for Cooperatives and UMKM
44. Retailer trade on liquor alcoholic beverages 47221 Distribution network and specially designated place. Require:

 

a.      Alcoholic Beverages Trading Business License (SIUP-MB);

b.      Distribution network and specially designated place.

45. Small retailer trade on liquor or alcoholic beverages 47826 Distribution network and specially designated place. a.      Alcoholic Beverages Trading Business License (SIUP-MB);

b.      Distribution network and specially designated place.

46. Activities of the travel bureau for umrah and Special Hajj 79122 Domestic capital: 100% and Muslim Previously not regulated.

*Update: On Tuesday, 2 March 2021, President Joko Widodo announced the revocation of the provision in the Positive Investment List regarding the opening of investment in the industry of liquor and beverages containing alcohol and malt, thus the industry of liquor and beverages containing alcohol and malt will be closed for investment.


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