Background

In order to increase investment activities in Indonesia as well as the implementation of Indonesia’s commitment with respect to the Association of Southeast Asian Nations/ASEAN Economic Community (AEC), it is necessary to rework the provisions on the list of business fields closed to investment and business fields open with conditions to investment or commonly known as negative investment list, as stipulated under Presidential Decree Number 36 of 2010 (“NIL 2010”). In addition, this is also the implementation of provisions under Article 12 paragraph (4) and Article 13 paragraph (1) of Law Number 25 of 2007 on Investment (“Investment Law”). The new negative investment list was enacted on 23 April 2014 under the Presidential Decree Number 39 of 2014 on List of Business Fields Closed to Investment and Business Fields Open with Conditions to Investment (“NIL 2014”).

There are several differences between NIL 2014 with NIL 2010, among others related to policy of foreign capital ownership, increased or decreased of capital ownership, and the presence of additional new businesses, which has not been stipulated in the NIL 2010. NIL 2014 stipulates policy concerning business fields closed to investment and open with conditions that are divided into 3 (three) categories, namely:

  1. businesses reserved for micro, small, medium enterprises and cooperatives;
  2. businesses requiring partnership;
  3. businesses requiring certain capital ownership, a certain location, and special permit.

The Decreasing Foreign Capital Ownership

In the NIL 2014, there are changes on several business fields with regards to capital ownership either domestic or foreign, both increased and also decreased. With regards to the foreign capital ownership which is decreased, the business field that has changed, among others are in the field of energy and mineral resources and field of communications and informatics.

In the sector of energy and mineral resources, one of the business fields that has changed is business of drilling, either off-shore or on-shore. In the previous regulation, under NIL 2010, activities of off-shore and on-shore drilling, maximum foreign capital ownership is 95%, while in the new regulation, under NIL 2014, the off-shore drilling, maximum foreign capital ownership is 75% and for on-shore drilling it is 100% domestic capital ownership (penanaman modal dalam negeri).

The Increasing Foreign Capital Ownership

In addition to the decreasing of foreign capital ownership, some foreign capital ownership are also increased, such as energy and mineral resources, transportation, health, tourism and creative economy, and finance. In connection with energy and mineral resources sector, the related business such as electricity generator >10 MW, electricity transmission, and electricity distribution that was only allowed for maximum of 95%, currently, under NIL 2014, it is allowed for 100% as long as the capital investment is made for the framework of government partnership (kerjasama pemerintah swasta/KPS). In additions, related to financial sector such as capital venture business, where under the previous policy stipulates that foreign capital ownership is maximum 80%, the current regulation allows the foreign capital ownership reaching 85%.

Business Fields that are not Listed under NIL 2010 and Become Opened with Conditions under NIL 2014

In addition to the policy changes with regards to foreign capital ownership, either increased or decreased, there are also new business fields that are open with conditions under NIL 2014. The new business fields include energy and mineral resources, public works, trade, and transportation. In the trade sector, trade service or logistic sector, such as distributor, warehousing, and cold storage are now opened for foreign capital ownership maximum of 33%. Furthermore, related to business of cold storage, if the investment is located in Sumatra, Java, and Bali, foreign capital ownership is allowed until 33%, while in Kalimantan, Sulawesi, Nusa Tenggara, Maluku, and Papua it is allowed until 67%.

Moreover, transportation sector which includes business of multimode transport is also opened for foreign capital ownership for a maximum of 49%.

With regards to business field that is closed, open with conditions, and some changes on foreign and domestic capital ownership can be seen further in the Annex of NIL 2014.

By  the enactment of NIL 2014, the NIL 2010 is revoked and declared no longer valid.

Deby Selina Panjaitan