The Indonesian government recently issued Presidential Regulation No. 39 of 2014 on the List of Business Fields that are Closed to Investment and Business Fields that are Conditionally Open for Investment (“Regulation No. 39/2014”) which changes the permitted levels of foreign investment (including by Japanese companies), including in relation to communications and informatics.

Background

As many Japanese TMT clients who have a presence in Indonesia will be aware, foreign entities (including Japanese companies) must obtain a license issued by BKPM (the Investment Coordinating Board) in order to conduct business in Indonesia. The Indonesian government has issued a number of Presidential Regulations setting out a list of sectors that are either wholly closed to foreign investment or in which foreign investment is limited to a certain percentage investment in the entity licensed by BKPM (the “Negative List”).

Changes to the Negative List

Regulation No. 39/2014 makes a number of changes to the Negative List, the first revisions since 2010 (the previous Negative List being issued under Presidential Regulation No. 36 of 2010 on the List of Business Fields that are Closed to Investment and Business Fields that are Conditionally Open for Investment).

Notably, for communications and informatics:

  • data communications system services: the maximum foreign capital ownership for data communications services has decreased, from 95% to 49% (unless integrated with wired/wireless/satellite telecommunications services in which case the maximum is now 65%);
  • internet interconnection services (network access point): the maximum foreign capital ownership for internet interconnection services (network access point) has decreased, from 65% to 49% (unless integrated with wired/wireless/satellite telecommunications services in which case the maximum is still 65%);
  • content services and call centres and other value added telephony services: content services and call centres and other value added telephony services now have a specific maximum foreign capital ownership of 49%, rather than being categorised as requiring a partnership (without a specific maximum foreign capital ownership level, but deemed as permitting up to 100% foreign capital ownership).
  • internet service providers, public internet telephony services or other multimedia services: while the maximum foreign capital ownership remains at 49%, where integrated with wired/wireless/satellite telecommunications services the maximum foreign capital ownership has now increased to 65%; and
  • wired telecommunications services: the maximum foreign capital ownership for wired telecommunications services has increased, from 49% to 65%.

Set out below is a more detailed summary for communications and informatics.

Click here to view table.

Impact of the changes

Pursuant to Article 9 of Regulation No. 39/2014, the changes to the Negative List do not apply to investment in specified business fields approved prior to the regulation being issued, unless such provisions are of more benefit to the relevant investment. Indirect or portfolio investment with transactions being made through domestic capital markets continue to be permitted.