13 February 2020 (closed)
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Distributors and other trading companies were highly protected against foreign investors under the old negative investment list based on Presidential Regulation No. 39/2014 (Old Regulation). The new negative investment list, based on Presidential Regulation No. 44/2016 on the List of Business Fields Which Are Closed and Conditionally Open to Investment (New Negative Investment List), now sets less stringent restrictions for foreign investors for these fields of business. In this column we discuss the changes for trading companies based on the New Negative Investment List.
Changes in the Trade Sector Based on the New Negative Investment List
The New Negative Investment List features the following changes:
- Under the Old Regulation the business field of futures brokers was open for 95% for foreign investors (95% of the shares could be owned by a foreign investor). Now the business field of futures is no longer included in the list, which means that there is no longer a restriction for foreign investors.
- The addition of a new restricted business field i.e. department stores with a store surface area between 400 m2 and 2000 m2 are now open for foreign investment for maximum 67%. Moreover, these stores require a special license from the Ministry of Trade. The latter requirement only applies however to certain department stores.
- The most important change of the New Negative Investment List related to the trade business field is that companies active in the field of warehousing and distributors which are not related to any production process are now open for maximum 67% foreign investment. Previously distributors and warehousing was open for maximum only 33% foreign investment. Moreover, under the new regulation it is clear that distributing activities by factories is holds no investment restriction. This was a point of confusion under many investors, as the Old Regulation was not clear about this point.
The New Negative Investment List is a welcome change for many foreign investment companies that wish to engage in trade activities in Indonesia. Moreover, we expect that many existing distributors and warehousing PT PMA companies will change their shareholding structure in the upcoming months as foreign investors will want to increase their control over their Indonesian companies.
This column is provided by PNB Law Firm Jakarta