The Negative Investment List Daftar Negatif Investasi is compiled by the Indonesia Investment Coordinating Board, BKPM. It stipulates which sectors are open to foreign investment in Indonesia as well as the percentage of foreign ownership permitted. This list is regularly revised with the most recent version being Presidential Decree No.36/2010.
The list of business sectors is split among the following categories:
- Closed to Investment
e.g. casinos, historical & sacred sites, alcoholic beverage production.
- Reserved for Small and Medium Enterprises (SMEs)
e.g power plants below 10 MW, painted batik industry, small scale businesses engaged in tourism, construction and telecommunication services.
An SME must meet the criteria prescribed by the Ministry of SMEs and Cooperatives as well as Law No.9/1995.
- Through Partnerships with SMEs
e.g. silk cocoon industry, telephone value added service provider, ceramic industry.
Partnerships Kemitraan with SMEs are defined by Presidential Regulation No.76/2007 as a non equity arrangement with an SME and a larger business for ‘strengthening and mutual benefit’.
Note: When setting up as a PMA, the foreign company must submit to BKPM or relevant Ministry the Letter of Partnership Agreement with the SME as well as documentation testifying that the SME fulfils the relevant criteria as per Law No.9/1995.
- Limited Foreign Capital Ownership
e.g. toll road business up to 95%, pharmaceutical manufacture up to 75%, power plants above 10 MW up to 95%.
- Defined Location
e.g. pig germination and culture.
This is industries that can only be carried out in areas that do not contradict local regulations of where it is to be set up.
- Requires a Special License
e.g. radioactive mineral mining requires authorisation from the National Nuclear Energy Agency (BATAN), cigarette industry requires authorisation from the Ministry of Industry, crumb rubber industry requires authorisation from the Ministry of Agriculture.
- 100% Domestic Capital
e.g. retail business such as supermarkets below 1,200 sqm and department stores below 2,000 sqm.
- Foreign Capital and Defined Location
e.g. 1 & 2 star hotels may have up to 51% foreign ownership provided it does not contradict with local regulations of where it is to be set up.
- Foreign Capital and Special License
e.g. commercial airline transportation can be held up to 49% by foreign ownership but subject to a domestic shareholder always holding a single majority.
- 100% Domestic Capital and Special License
e.g. production of weapons and ammunition requires authorisation from the Ministry of Defence.
- Foreign Capital Ownership / Location for Capital Investment from ASEAN Countries
e.g. recreational and entertainment facilities such as golf courses and leisure centres up to 51%/100% foreign ownership.
See Presidential Decree No.36/2010 Negative Investment List for the full list of business sectors.
Global Business Guide Indonesia - 2012