Indonesia has been an attractive destination for foreign investment due to its abundant natural resources, large population, and strategic location. However, foreign investment in certain sectors is limited by the Negative List BPKM. In this article, we will explore the Negative List BPKM, its purpose, and its impact on foreign investors in Indonesia.
What is the Negative List BPKM?
The Negative List BPKM, or Daftar Negatif Investasi, is a list of sectors or industries in Indonesia where foreign investment is limited or prohibited. This list is regulated by the Indonesian Investment Coordinating Board (BPKM) and is regularly updated to reflect changes in the government’s policies and priorities.
The Negative List BPKM was first introduced in 2010 and has been revised several times since then. The latest revision was in 2016, which saw the removal of some restrictions on foreign investment in certain sectors such as e-commerce, healthcare, and film production.
What is the Purpose of the Negative List BPKM?
The Negative List BPKM is designed to protect certain sectors of the Indonesian economy that are considered strategic or sensitive. The government believes that allowing too much foreign investment in these sectors could lead to foreign domination, which could harm the country’s economic and national interests.
At the same time, the Negative List BPKM also aims to attract foreign investment in sectors that are considered non-strategic or less sensitive. By doing so, the government hopes to stimulate economic growth, create jobs, and improve the country’s competitiveness in the global market.
What are the Limitations for Foreign Investment under the Negative List BPKM?
The Negative List BPKM imposes several limitations on foreign investment in Indonesia. These limitations can be classified into three categories:
Prohibited Sectors
Foreign investment is prohibited in certain sectors or industries in Indonesia. These include:
- Manufacture of firearms, ammunition, explosives, and military equipment;
- Production of narcotics and psychotropic substances;
- Production and trade of hazardous waste;
- Manufacture of gambling tools and equipment;
- Trading, import, and distribution of certain chemicals;
- Production of certain traditional medicines;
- Businesses that endanger public morals, security, and health.
Restricted Sectors
Foreign investment in certain sectors or industries is restricted under the Negative List BPKM. These restrictions include:
- Maximum foreign ownership limit;
- Minimum investment requirement;
- Location requirement;
- Technology transfer requirement;
- Employment requirement;
- Research and development requirement;
- Local content requirement.
Sectors with Partnership Requirement
Foreign investment in certain sectors or industries requires a partnership with local investors or companies. These sectors include:
- Construction services;
- Transportation services;
- Consulting services;
- Education services;
- Telecommunication services;
- Tourism services.
What is the Impact of the Negative List BPKM on Foreign Investors?
The Negative List BPKM has both positive and negative impacts on foreign investors in Indonesia. On the positive side, it provides clarity and transparency on the sectors and industries that are open for foreign investment and those that are not. This helps foreign investors to make informed investment decisions and reduces the risk of legal disputes with the government.
On the negative side, the Negative List BPKM imposes several restrictions on foreign investment, which can increase the cost and complexity of doing business in Indonesia. For example, foreign investors may need to establish a local subsidiary or partner with a local company to comply with the ownership and investment requirements. This can result in a loss of control and profits for the foreign investors.
Conclusion
The Negative List BPKM is an important regulatory framework for foreign investment in Indonesia. It aims to protect the country’s strategic and sensitive sectors while promoting economic growth and competitiveness. However, the limitations imposed by the Negative List BPKM can pose challenges for foreign investors, especially those who are looking to invest in restricted sectors. Therefore, it is important for foreign investors to understand the Negative List BPKM and its impact before making any investment decisions in Indonesia.
