Still on Investment’s Negative List 2010

Wednesday, June 16, 2010

Provinces of Indonesia

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The World Bank once says that Indonesia’s negative list is by no means a simple system. Here’s a list of news and analysis discussing the 2010 negative list:


There’s a good article about this in HPLaw’s website:

PR No.36/2010 regulates 17 business fields that are conditionally open to capital investment, namely agriculture, banking, communications & information technology, culture & tourism, defense, education, energy & mineral resources, finance, forestry, health, industry, manpower & transmigration, marine & fisheries, public works, trading, transportation, and security.

Ebeling Heffernan (probably sourced from the Jakarta Post) tries to explain the ‘hierarchy of law’, operating with the DNI:

The regulation also recognizes a grandfather clause, meaning the new regulation will not affect investors that have complied with the previous regulation issued in 2007, he added. "This regulation also recognizes law hierarchy, so other regulations whose hierarchies are below this regulation are not effective," said Gita, adding that Indonesia wanted to eliminate investment uncertainties.

The Jakarta Globe details the ‘ownership percentage’ :

It permits, for example, foreign companies to own 67 percent of construction businesses, up from 55 percent. Meanwhile, foreign companies will be able to own 67 percent stakes in hospitals nationwide, up from 65 percent in specific health-related enterprises that were restricted to a few cities. Desperate to address a power shortage, however, the government has granted foreign investors the right to own up to 95 percent of joint ventures in power plants with a capacity above 10 megawatts.Meanwhile, in movie production, the government is allowing foreigners to own 49 percent of such companies, up from zero.

I found that this article from the Singaporean Law Firm O’Melveny to be particularly helpful and quite detail. It also addresses the BTS antenna controversy. As you might be aware, the current DNI resolves the overlap by siding with the Communication Ministry by forbidding foreign investment in Telecom Towers:

One significant area of difficulty in determining the Indonesian foreign ownership regime has been the existence of conflicting regulations issued by various different regulatory bodies. The most well known example is the telecommunications tower industry, which was opened to 100% foreign investment by BKPM under the 2007 Negative List, but which was declared closed to foreign investment by regulation of the Communications Ministry. The revised Negative List resolves this particular debate in favor of the Communications Ministry by closing the telecommunications tower industry to foreign investment. It was hoped that the New Regulations would address these conflicts by reconciling all foreign ownership issues to a single regime.


Meanwhile, Bisnis daily focuses on the overlap between the current DNI and the Shipping Law:

Johnson reminded the relaxed requirement for international route sea transportation was overlapping with Law 17/2008 on Shipping. "In implementing the presidential regulation, please don't violate Article 29 clause 2 of the Shipping Law." The article reads Indonesian citizens or business agencies can establish joint ventures with foreigners in forms of sea transportation companies. "To get business permit in Indonesia based on the law, foreign investors should at least have one Indonesia-flagged ship weighed 5,000 gross tonnage (GT) and the ship has to be registered to the government," he said.

Overlaps are quite normal for DNIs. But it can be a problem too if the industry sector is tightly regulated by a department or a ministry or especially, if it is correlated with license conditions. This is where potential investors normally requires an advice.


To read the Presidential Regulation 36 Year 2010 on Investment’s Negative List, click on my previous post here. Contact me at movanet(at)gmail.com for queries.

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The New Negative List for Foreign Direct Investment 2010 (Confirmed)
The new investment negative list (2010)
The New Negative List of Investment (2007)
How to set up a company in Indonesia
Geothermal projects in Indonesia
Water investment in Indonesia
Some note on Indonesian Investment Law
Living with the Other Fishes
Guide to doing business in Indonesia