On 18 May 2016, the Indonesian Government enacted Presidential Regulation No. 44 of 2016, which sets out the new negative investments list (the "2016 Negative List") and revokes the 2014 Negative List1. The 2016 Negative List has been issued following extensive discussions within the Indonesian Government and corporate sector. It is intended to help increase Indonesia's regional competitiveness and encourage greater foreign direct investment, whilst maintaining protections for domestic businesses of a certain size. As such, the 2016 Negative List is largely consistent with the 10th Economic Package announced by the Indonesian Government in February 2016.
From an investment perspective, the key categories that are relevant in the context of the 2016 Negative List are:
A. Business lines that are now open for 100% foreign ownership (subject to specified licensing/technical requirements in certain instances)
B. Business lines where 100% foreign ownership is not permitted, but where the level of permitted foreign investment has been increased
C. Business lines that are reserved for investment by, or in partnership with, Domestic SMEs2
D. Business lines that are entirely closed to both foreign and domestic investment
E. Other Key Changes
F. What has not changed
The 2016 Negative List is regarded as a key part of the economic incentive packages introduced under President Joko Widodo's leadership, that are intended to increase foreign direct investment and Indonesia's competitiveness in the region. The opening of certain sectors to foreign investment in the 2016 Negative List, as well as other key changes, such as the streamlined investment process and simplified categories, are significant steps forward in this regard and are indicative of the intention of policymakers and lawmakers to achieve these goals.
In response to the 2016 Negative List, foreign investors should consider opportunities to, among others, (i) invest in the newly opened or relaxed sectors and/or (ii) increase their existing investments in sectors which have been further relaxed. We would recommend close consultation with the BKPM and/or the relevant technical ministry to ensure that issues are not encountered with any inconsistent implementation of the streamlined investment process or varying interpretations of categories that are not explicitly mentioned under the 2016 Negative List.
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1 Presidential Regulation No. 39 of 2014 on the List of Business Lines that are Closed for Investments and Business Lines that are Open with Limitations for Investments (the "2014 Negative List").
2 Domestic Indonesian micro, small and medium enterprises and cooperatives as further detailed in Law No. 20 of 2008 on Micro, Small and Medium Businesses (the "SME Law") and Law No. 25 of 1992 on Cooperatives.
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