8/17/2014 Govt raises foreign ownership limit | The Jakarta Post

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After years of debate, the government has finally completed the revisionof the negative investments list (DNI) and raised the level of foreignownership in a number of business sectors including transportationterminals, seaports and power plants.

Under the new DNI, which is expected to be signed soon by PresidentSusilo Bambang Yudhoyono, the maximum limit on foreign ownership inland transportation facilities such as bus terminals and train stations willbe set at 49 percent, up from the previous zero, Investment CoordinatingBoard (BKPM) chairman Mahendra Siregar told reporters on Tuesday.

With the new regulation, foreigners can now own up to 100 percent ofpower plants built under public-private partnerships (PPPs), on thecondition that the power plants have the capacity of at least 10megawatts (MW). For power plants with capacities up to 10 MW, foreignownership is limited to 49 percent.

“For these PPP projects, we should have greater openness forforeigners because we really have a pressing need to develop ourinfrastructure,” Mahendra said.

The new DNI would also allow foreign investors to own up to 95 percentof shares in the management of toll roads and water utilities — relativelyunchanged, but it was necessary to include the rule to provide legalcertainty for foreign investors, he said.

Govt raises foreign ownership limitSatria Sambijantoro, The Jakarta Post, Jakarta | Business | Thu, December 26 2013, 10:42 AM

Foreign ownership: Local residents are given the chance to visit the Kuala Namu International Airport in DeliSerdang, North Sumatra before the inauguration of the newly built airport on July 25, 2013. A new governmentregulation allows foreigners to own as much as 49 percent of airports and 100 percent of power plants built underpublic-private partnerships. (JP/Apriadi Gunawan)

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However, the foreign ownership cap in airports, which had initially beenexpected to be relaxed to 100 percent, had to be set at 49 percent due tothe conflicting Transportation Law that stipulates local investors muststill be the majority shareholders in such businesses, according to theBKPM chief.

Meanwhile, the foreign ownership cap in the pharmaceutical industry willbe raised to 85 percent from the current 75 percent; in the venture-capital financial sector it will be raised to 85 percent from 80 percent;while in the advertising sector it will be raised to 49 percent from zero,specifically for ASEAN investors.

The DNI liberalization, however, was also complemented by tighterrestrictions on foreign ownership in sectors such as farming andlogistics, as the government aims to safeguard local firms from the influxof foreign competition.

In the farming sector, maximum foreign ownership will be capped at 30percent from the existing 95 percent, while in the distribution and storageindustry it will be set at 33 percent.

“The guidance of the President in the Cabinet meeting held on Nov. 14,2013, in which we all concurred, was that [the DNI revision] mustprioritize national interests to boost the competitiveness of localindustries,” Coordinating Economic Minister Hatta Rajasa said.

Revision of the DNI was necessary to lure more foreign directinvestment (FDI), the growth of which has decelerated to a three-yearlow, economists have said. More FDI will also be needed to strengthenthe country’s capital account, which is likely to face pressure due tolimited portfolio inflows amid the prevailing global uncertainty in 2014.

However, the plan to revise the DNI, which had been on the table since2010, was met with opposition due to growing nationalistic sentimentsahead of next year’s elections, with critics calling on the government tosafeguard Indonesia’s strategic sectors from the influx of foreigncompetitors.

Indonesian Employers Association (Apindo) chairman Sofjan Wanandisaid that local businesses were “quite satisfied” with the new DNI, whichhe argued was a win-win solution for both foreign and local investors.

“I believe this will improve our investment climate ahead of the upcomingpolitical year,” he said. “The DNI will provide certainty for them [foreigninvestors], so that they will not be hesitant about investing here.”

The new negative list of investments (DNI)

1. Sectors that are more open to foreign investment

• Land transportation facilities (new foreign ownership cap 49 percentfrom zero) • Regular vehicle inspection (49 percent from zero)• Pharmaceutical (85 percent from 75 percent)• Venture capital financing (85 percent from 80 percent)

2. Sectors that are more restricted to foreign investment

• Distribution (33 percent, from 100 percent)• Storage (33 percent, from 100 percent)• Cold storage (Sumatra, Java, Bali maximum 33 percent, forKalimantan, Sulawesi, East Nusa Tenggara, Maluku and Papuamaximum 67 percent, from 100 percent)

3. New regulation for telecommunication sector

• Fixed telecommunications (65 percent, previously unregulated)• Multimedia-integrated telecommunication network (65 percent,previously unregulated)• Multimedia service provider (49 percent, previously unregulated)

4. Public-private partnerships (PPP) project

• Airports (49 percent under concession period)• Seaports (95 percent)• Land transportation terminals (49 percent)• Water utilities (95 percent)• Toll road facilities (95 percent)• Power plants (49 percent for 1-10 megawatt capacity, 100 percent forcapacity of 10 megawatts above)• Electricity transmission (100 percent)• Electricity distribution (100 percent)

5. Sectors that are adjusted according to the new law

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8/17/2014 Govt raises foreign ownership limit | The Jakarta Post

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• Farming (30 percent from previously 95 percent, adjusted according tothe 2010 Law on horticulture)

Source: BKPM

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