Indonesia has been actively encouraging investment in the country for many years, which has led to significant growth in many sectors of the economy. However, in order to protect local businesses and industries, the government has established a Negative Investment List (Daftar Negatif Investasi) that outlines foreign investments that are restricted or prohibited. The latest version of this list was issued by the Indonesia Investment Coordinating Board (Badan Koordinasi Penanaman Modal, BPKM) in 2016 and is commonly referred to as the Negative Investment List BPKM.
What is the Negative Investment List BPKM?
The Negative Investment List BPKM is a list of business sectors and industries where foreign investment is either prohibited or restricted in Indonesia. The list is updated periodically to reflect changes in economic conditions and government policies. It is intended to protect local businesses and industries from competition and to encourage the development of domestic industries.
Why is the Negative Investment List BPKM important?
The Negative Investment List BPKM is important because it provides a clear framework for foreign investors to understand which sectors and industries are open to investment in Indonesia and which are not. This helps to reduce uncertainty and risk for foreign investors and encourages more investment in sectors that are open to foreign investment. It also helps to protect local businesses and industries from unfair competition.
What are the restricted sectors?
There are several sectors that are restricted for foreign investment in Indonesia, including:
- Media and publications
- Telecommunications
- Postal services
- Transportation
- Electricity
- Finance and banking
- Trading and distribution
- Education
- Healthcare
Foreign investment in these sectors is limited to a maximum of 49% ownership. This means that Indonesian businesses must own at least 51% of the company in order to operate in these sectors.
What are the prohibited sectors?
There are also several sectors that are completely prohibited for foreign investment in Indonesia, including:
- Drugs
- Gambling
- Manufacture and trading of hazardous materials
- Prostitution
- Human cloning
- Forestry and logging
- Marine and fisheries
- Certain types of mining
Foreign investment in these sectors is completely prohibited, meaning that foreign investors cannot own any part of a company operating in these sectors.
What are the implications of the Negative Investment List BPKM for foreign investors?
The Negative Investment List BPKM has several implications for foreign investors. Firstly, it limits the sectors and industries that are open to foreign investment in Indonesia. This means that foreign investors must carefully consider which sectors to invest in and ensure that they comply with the restrictions that apply to those sectors.
Secondly, it can make it more difficult for foreign investors to enter the Indonesian market. This is because they may face more competition in sectors that are open to foreign investment, as there are fewer sectors available for investment. It can also be more difficult to find local partners who are willing to own at least 51% of the company in the restricted sectors.
Finally, the Negative Investment List BPKM can create uncertainty for foreign investors. This is because the list is updated periodically and can change, so investors need to be aware of any changes that may affect their investments.
Conclusion
The Negative Investment List BPKM is an important tool for regulating foreign investment in Indonesia. It provides a clear framework for foreign investors to understand which sectors are open to investment and which are not, which reduces uncertainty and risk. However, it also limits the sectors that are open to foreign investment, which can make it more difficult for foreign investors to enter the Indonesian market. Foreign investors need to carefully consider the implications of the Negative Investment List BPKM when investing in Indonesia.
