An Overview ofNEW NEGATIVE INVESTMENT LIST2016

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ABOUT US

SMART Legal Consulting is an Indonesian Corporate Legal Firm which provides one-stop legal solution for everyone who runs their business in Indonesia. SMART focuses on providing effective and best legal solutions and also being your full time partner for the development and sustainability of your business.SMART is offering a wide range of services to domestic and international clients interested in business development in Indonesia with minimal ease of effort.

INTEGRITY – SKILLFUL – INNOVATIVE - PROFESSIONAL

WHAT IS NEGATIVE INVESTMENT LIST ?

“List of business field that are closed or open with limitation or requirements for foreign

investment.“

The newest Negative List is enacted through Presidential Regulation No. under Presidential

Regulation No. 44 of 2016, which became effective on 18 May 2016.

If your business fields are not listed on Negative List, then you can own 100% shares in your Foreign Investment Company (PMA).

What kind of

Limitation?

Reserved For Or Subject To

Partnership With Local SME As Well As Cooperatives

Foreign Ownership Limitations.

Higher Foreign Ownership Capacity in The Context Of Cooperation with ASEAN Countries

Location Requirements

Special Licensing

Requirements

WHAT does the 2016 Negative List says ?

Businesses open for investors

Recommendations are eliminated

Business with Increased Foreign Owneship

45

83

65

Simplified Business CategoriesExample: Construction Business.

Shares ownership for ASEAN investor is increased for several business

WHAT does the 2016 Negative List says ?

NO. BUSINESS SECTOR BUSINESS ACTIVITIES

01. Film Production

Film Shooting Studios, Film Processing Labouratories, Film Dubbing Equipments, Film Developing and/or Duplication Equipment, Film Shooting Equipment, Film Editing Equipment, Film Subtitling Equipment, Filmmaking, Motion Picture Projection, Motion Picture Distribution, Motion Picture Advertising

02. Food and Beverages Restaurants, Cafes, Bars

03. Energy and Mineral Manufacture of Biomass Pellets for Energy

04. Public Works Operation of Toll Roads, Treatment and Disposal of Non-Hazardous Waste

05. TradeDirect Selling through a Network Developed by a Business Partner, Distribution affiliated with Production, Cold Storage, Futures Broker

06. Sports Centres Operation of: Swimming Pools, Football Stadiums, Tennis Centres, Fitness Centres, Sport Centres, Other Sport Facilities

07. Communications and Informatics

Performance of Telecommunications Equipment Testing (Laboratory Test)

08. HealthManufacturing of Drug Raw Materials, Hospital Business and/or Management Consultancy Services, Hospital Management Services, Renting of Medical Devices, Laboratories of Clinics, Medical Check-up Clinics

BUSINESS SECTORSOPEN FOR 100% FOREIGN

OWNERSHIP

NO. BUSINESS ACTIVITIES % OF SHARES ALLOWED

01. Power Construction and Installation for High/Medium Voltage Electrical Installation

49%

02.Testing and Analysis of Electrical Installation for: Electrical Utility Construction High/Extra High Electrical Installation

49%

03.

Passenger Land Transport:A. On Scheduled Routes

Intercity and Interprovincial Transport Border Bus Transport In-province Intercity Transport Urban/Suburban/Rural Transport Cross-Border Transport

B. On Non-Scheduled Routes Taxi Transport Tourism Transport Specific Destination Transport Specific Area Transport

49%

04. Department Store (400 m2 – 2.000 m2 area of selling)67%

(Special License from Ministry of Trade)

OPEN BUSINESS SECTORSPREVIOUSLY CLOSED FOR FOREIGN

OWNERSHIP

WHAT YOU NEED TO KNOWREGARDING NEGATIVE

INVESTMENT LIST

Open New Business

Identify the Business Sectors with great prospects in Indonesia.

Shares Ownership

Assess the allowed percentage of Foreign Direct Investment in Shares Ownership to verify your investment options.

Control Your BusinessEnsure the Negative Investment List allows 100% Foreign Ownership for your Business Sector.

TOP 4 BIGGEST INVESTOR COUNTRIES

SingaporeJapanChina Hongkong

28 %18

%8 % 8 %

Metal, Machinery and Electronic – 11,3%

Chemical and Pharmaceutical Industry – 11%

Paper and Printing – 16,7% 1

2

3

TOP 3 BIGGEST INDUSTRIESFOR FOREIGN INVESTMENT

20,1%

15.5%

11,7 %

South Sumatera

TOP 3 INVESTMENT AREA

West Java

Banten

This year, BKPM (Indonesia Investment Coordinating Board targets an Investment Realization growth of 14,4 % from 2015, or in the value of IDR 594,8 trillion.

To reach the target, BKPM has reached out to 10 Countries as their priority, which includes United States, Australia, Singapore, Japan, South Korea, Taiwan, China, Malaysia, and the United Kingdom. This does not limit the possiblity of investors from other countries joining in and get a head-start on direct investment in Indonesia.

CONCLUSIONFor domestic investors, the following should be considered as a result of the proposed foreign investment liberalisation:1. Identify any threats that may arise

given increased competition;2. Establishing a joint venture with foreign

investors;3. Identify any call option(s) under which

foreign shareholders may be entitled to, in order to increase their shareholdings in joint ventures.

CONCLUSIONFor foreign investors, the things to consider are:1. Identify opportunities to invest in Indonesia

given the additional liberalised sectors (either wholly owned or through joint ventures);

2. Assess the possibility of increasing shareholdings in existing joint ventures (and for certain business lines this will allow financial consolidation), whether through negotiation or the exercise of call options or the conversion of convertible financing instruments; or

3. Assess the possibility (if appropriate) to remove the small shareholdings held by Indonesian investors, where foreign investment is now open for 100% foreign ownership.

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Kuningan, Jakarta12980

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