Indonesia opens doors wider to foreign investors

JAKARTA • Indonesia has issued new regulations opening dozens of business sectors to foreign investors, a measure described by President Joko Widodo as a "Big Bang" liberalisation of the economy.

Mr Joko signed the new presidential decree last week, which was published yesterday, easing restrictions on a range of enterprises including tourism businesses, transportation companies and movie theatres. Restrictions on ownership of businesses in the retail and port services sectors were scaled back, although the regulations introduced stricter controls on telecommunications towers and on e-commerce.

The liberalisation is part of Mr Joko's strategy to expand the manufacturing and tourism sectors in South-east Asia's largest economy to reduce its reliance on raw commodity exports.

The new regulation also eased the foreign ownership cap for maritime cargo handling at ports, several specific airport services and telecommunication services, as well as Internet provision, to 67 per cent versus the previous 49 per cent limit.

In addition, the new regulations allow foreigners to own 67 per cent of department stores with a sales floor area of 400 sq m to 2,000 sq m, as long as they are located in a mall, whereas previously they could invest only in a department store with a sales floor larger than 2,000 sq m.

As announced in February, the restaurant business, film industry, cold storage, waste management and pharmaceutical raw materials sectors have been opened up completely to foreign ownership.

But the new regulations set a 49 per cent foreign-ownership cap on small e-commerce businesses, specifically Internet-based marketplace platforms and single-line online advertising with a valuation of less than 100 billion rupiah (S$10 million).

It also restricted the value threshold of construction projects reserved for Indonesian small- and medium-sized enterprises to 50 billion rupiah from one billion rupiah to protect local businesses.

"This is the first time in many years... that Indonesia has taken steps to open up investment rather than close it," said Mr Lin Neumann, managing director of the American Chamber of Commerce in Indonesia, adding that US companies have expressed interest in the sectors the government said it would open.

But it may still take time before Indonesia sees more inward foreign direct investment, he said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on May 25, 2016, with the headline 'Indonesia opens doors wider to foreign investors'. Print Edition | Subscribe