Indonesia plans review of investment rules

The Indonesian economy is growing at its slowest pace in six years. Red tape, corruption and regulations currently deter foreign investors from entering some industries.
The Indonesian economy is growing at its slowest pace in six years. Red tape, corruption and regulations currently deter foreign investors from entering some industries.PHOTO: REUTERS

To be completed by mid-2016, it aims to open up more industries to foreign investors

JAKARTA • Indonesia plans to complete a review of its investment regime by the middle of next year, aimed at granting greater foreign ownership in industries ranging from e-commerce to luxury retirement homes.

The Indonesia Investment Coordinating Board has asked ministries and international chambers of commerce to suggest revisions to its "negative investment list", a lengthy document that regulates the extent of foreign ownership across the economy, said Mr Azhar Lubis, deputy chairman for investment supervision at the agency.

Films, along with other "creative industries" and horticulture, are being considered in a "far reaching review", he said yesterday.

"We want things to be more open, this is the idea," Mr Lubis said in an interview at his office in Central Jakarta. "This is from the President himself."

The changes are part of efforts by President Joko Widodo to stimulate an economy growing at its slowest pace in six years. Foreign direct investment in July through September was unchanged from the previous quarter and down from a year earlier in dollar terms, data showed on Thursday.

Mr Joko met a Danish delegation this week including A.P. Moeller-Maersk and Lego, and is heading to the United States next week. He will meet executives of US companies, including Google, Apple and Microsoft, and sign agreements in the energy and maritime sectors.

Significant areas of Indonesia's economy, including telecommunications and banking, are currently partially or wholly closed to foreign investors, either to protect local interests or because of domestic political sensitivities. Red tape, corruption and poor law enforcement are also deterrents to investors.

Indonesia last changed the negative list last year, a process Mr Lubis said took two years.

The list can be changed by presidential decree, but liberalisation of some industries will require a change in the law, a lengthier and more difficult process that is complicated by Mr Joko's ruling coalition not having a majority in Parliament.

"How far they could really materialise this depends on the cooperation between the different ministries which will implement the changes," said Mr Shanti Shamdasani, president of Asean International Advocacy, an economic and trade consultancy.

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A version of this article appeared in the print edition of The Straits Times on October 24, 2015, with the headline 'Indonesia plans review of investment rules'. Print Edition | Subscribe