The government of Indonesia is again opening room for foreign ownership in a number of sectors in an effort to boost economic expansion and reach the 7 percent year-on-year (y/y) gross domestic product (GDP) growth rate by 2019 as targeted by Indonesian President Joko Widodo. Examples of sectors that are to be opened for the full 100 percent to foreign ownership are the cold storage business, crumb rubber industry, sport-centers, film production industry, restaurants, raw materials for medicines, toll roads, and telecommunication equipment. These revisions are part of Indonesia's 10th economic stimulus package.
These changes imply a revision of Indonesia's Negative Investment List (Dafter Negatif Investasi); the document that stipulates to what extent (ownership share) foreign investors can own businesses in Indonesia. Indonesian Chief Economics Minister Darmin Nasution commented on the revisions saying they are designed to optimize the nation's economic growth, while they will not cause reduced local competitiveness (due to the bigger role of foreign businesses). In fact, it should support Indonesians' higher purchasing power. For example, medicines are currently very expensive in Indonesia due to the combination of limited domestic suppliers and high production costs caused by the need for imports of raw materials. Now the government will open the manufacturing of raw materials for medicines for the full 100 percent to foreign ownership it should cause declining prices of medicines as raw materials can be purchased domestically.
Pramono Anung, Indonesia's Cabinet Secretary, said the inflow of foreign funds, technology and expertise should create more jobs in Southeast Asia's largest economy and should improve local competitiveness in terms of innovation and creativity.
Full ownership means that foreign investors do not need to team up with a local partner. However, in other industries - those in which Indonesia's local small and medium enterprises play a large role - foreigners are still required to partner with a local company (if open to foreign investment at all).
However, Djonny Sjafrudin, Chairman of the Indonesian Union of Cinema Owners (GPBSI), expressed his concern if foreigners can own a 100 percent stake in the film production industry or cinema industry as he expects existing local production houses and cinema operators to lose market share and profit.
On the other hand, Zaldy Ilham Masita, Chairman of the Indonesian Logistics Association, welcomed the government's plan to open up room for foreign investment in the nation's logistics sector as this will curtail logistics costs, hence improving domestic competitiveness. Given Indonesia has entered the era of the ASEAN Economic Community, it is important to improve the country's competitiveness.
New versus Old Maximum Allowed Foreign Ownership:
|Transport Supporting Services||67%||49%|
|Film Production Houses||100%||49%|
|Exhibitions & Travel Incentives||67%||51%|
|Raw Materials for Medicines||100%||85%|
|Telecommunication Testing Agency||100%||95%|
Source: Bisnis Indonesia
from Susan Bennett In Time Pictures, London
As British film-makers who intend to shoot a movie in Java, we welcome the liberalisation of ownership laws relating to the film industry, since our favoured financial model, co-production, has been problematic till now because of the ban on production companies having equity-based foreign investment. Co-production has always appeared to us a good model, spreading risk and equalising the profit, as well as giving a fair place to the world-views of the partner countries.
The question of total foreign-ownership, however, must to be looked at carefully before it is unequivocally welcomed, and needs to be seen in the context of other sources of funding. In this context, the situation in Britain is very instructive, since several global giants have implanted themselves in this country for the production of blockbusters such as the ‘Harry Potter’ series, taking advantage of our tax incentives. This has had both positive and negative effects. On the positive side it has given well-paid work to numerous actors and technicians. On the negative side, as these firms are American-owned much of the profit goes back to the USA, and local firms may be 'crowded out'.
Local investment has a huge role to play here. It is impossible to exaggerate the importance of a film-friendly financial climate within a country for the industry to flourish and achieve two goals, nurturing local talent, and linking to the international market. An awareness is required, which we in Britain are in danger of forgetting, that home-grown films can and do make money, and both promote tourism and enhance the country’s image abroad. Active participation by the state in film-production encourages private investment as can be seen in France where regional governments give incentives to companies to choose touristically-interesting places for their productions, or in Germany, where companies are subsidised when using local crew and premises. In South East Asia both Malaysia and Singapore reward companies for spending money in their territory. I wonder if the Indonesian government will do the same?