At the time of preparation of this material, the proposed government regulation on foreign ownership has not been issued. The Ministry of Finance has finished its required consultation with the Indonesian parliament on the proposed regulation (as required by the Insurance Law).
Latest reports are that the proposed government regulation (all subject to change) will:
- grandfather existing shareholdings so that foreign ownership above the current (and proposed) limit of 80% will be respected and there will be no need for a sell-down (as was proposed earlier this year); however, if there is a need for additional capital (as is likely either for ongoing expansion or on an acquisition given new equity requirements), Indonesian shareholders must have at least 20% participation in that additional capital, where over time the Indonesian shareholding will eventually be increased
- not provide for dilution by a foreign shareholder above 80%, as is currently the case.
The above is subject to the requirements that the Indonesian shareholding must be wholly Indonesian-owned, that shareholders cannot receive loan financing in acquiring (new or issued) shares and that the Indonesian shareholders' shareholders equity must exceed the Indonesian shareholders' investment in an insurance company. This means that, in reality, any insurance company must have a creditable, interested, contributing and active Indonesian shareholder.
No longer can foreign shareholders fund Indonesian shareholders or rely on an Indonesian shareholder being diluted continuously.