The Negative Investment List of Indonesia stipulates which sectors within the Indonesian economy are open to foreign investment as well as the percentage shares of foreign ownership that are permitted.

In several sectors, the Indonesian government permits higher foreign ownership if investors engage in public- private partnerships (PPPs) with the government.

The following revisions have been announced:


Expanded Foreign Ownership:

                               Foreign Ownership
     Previous                       New
A. Energy and Mineral Resources
     Electricity Generation > 10MW
Maximum 95% Maximum 100% through PPPs
during concession period
Without PPP maximum 95%
B. Transportation
    i. Provision of Port Facilities´╗┐
Maximum 49% Maximum 95% through PPPs
Without PPP 49%
    ii. Organization of periodic testing
       of motor vehicles,
       Terminals
Development
Closed to FDI
Maximum 45% (recommendation
from the Transportation Ministry
required)
C. Healthcare
     Pharmaceuticals Industry
Maximum 75% Maximum 85%
D. Creative Economy
     Production of films
Closed to FDI Maximum 51% for investors
from ASEAN
E. Finance
     Venture Capital
Maximum 80% Maximum 85%


Reduced Foreign Ownership:

                  Foreign Ownership
        Previous            New
A. Energy and Mineral Resources
    i. Electricity Generation 1-10MW
Maximum 100%
through PPP
Maximum 49%
    ii. Drilling Services on land Maximum 95% Closed to FDI
    iii. Drilling Services in sea Maximum 95% Maximum 75%
    iv. Oil and Gas support services Maximum 95% Closed to FDI
    v. Installation of electric power
       utilization
Maximum 95% Closed to FDI
B. Communication and Information
    i. Operation of Telecommunications
       Services

Maximum 100% Maximum 49%
    ii. Data Communications Systems
       Services
Maximum 95%
Maximum 49%
    iii. Internet Services Maximum 65% Maximum 49%


In the first quarter of 2014, direct investments grew 14.6 percent (year-on-year) to IDR 106.6 trillion (USD $9.4 billion). Although this constitutes a new record, the slowing pace of foreign direct investments is reason for concern. Whether the revision of Indonesia's Negative Investment List will immediately lead to increased investments is questionable as the sectors that are opened up involve long-term investments and will require considerable planning, research and time before a foreign investor decides to invest in the sector.

The Indonesia Investment Coordinating Board (BKPM) targets IDR 456.6 trillion (USD $39.7 billion) worth of investments in 2014, a 14.5 percentage growth from investment realization in 2013 (IDR 398.6 trillion).

Indonesia hopes to see more foreign investment as the economy has been slowing since 2012. Earlier this week, Statistics Indonesia announced that GDP growth was only 5.21 percent (yoy) in the first quarter of 2014, the slowest quarterly growth pace since the fourth quarter of 2009. The economic slowdown is caused by weak exports and limited domestic consumption (both government and household consumption), which is partly the result of prudent fiscal management. However, through more FDIs, the government aims to boost economic growth and employment opportunities.

Bureaucracy remains a major concern too. Economist Purbaya Yudhi Sadewa stated that 25 permits are currently needed in order to start oil or gas exploration in Indonesia and it can take about two years before all permits have been granted. After exploration, another 25 permits are needed to start production.


Foreign and Domestic Investment in Indonesia (in IDR trillion)

  First Quarter 2014
Domestic Direct Investment            34.6
Foreign Direct Investment            72.0
Total Investment
          106.6 


Foreign and Domestic Investment in Indonesia (in IDR trillion)

                   2011
               2012                2013
 Q1  Q2  Q3  Q4  Q1  Q2  Q3  Q4  Q1  Q2   Q3   Q4
Domestic Direct Investment 14.1 18.9 19.0 24.0 19.7 20.8 25.2 27.5 27.5 33.1  33.5  34.1
Foreign Direct Investment 39.5 43.1 46.5 46.2 51.5 56.1 56.6 65.5 65.5 66.7  67.0  71.2
Total Investment
53.6  62.0 65.5 70.2 71.2 76.9 81.8 83.3 93.0 99.8 100.5 105.3

Source: Indonesia Investment Coordinating Board (BKPM)

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