Negative Investment List of Indonesia to Be Revised
The Indonesian government announced it plans to allow 100 percent foreign ownership of cold storage businesses, sugar factories, rubber manufacturing companies, and the e-commerce business by revising Presidential Regulation No. 39/2014 on the Negative Investment List. The Negative Investment List (in Indonesian: Daftar Negatif Investasi) lists the sectors that are either fully or partially closed to foreign investment. Meanwhile, the government is studying whether other sectors can also be opened (or opened up wider) to foreign investors.
Franky Sibarani, Head of the Indonesia Investment Coordinating Board (BKPM), said the cold storage, sugar and rubber businesses will be opened for the full 100 percent to foreign investment. However, the government will set specific conditions that investors need to comply with.
The government of Indonesia may also open up room for foreign investment in Indonesia's department store and minimarket businesses. Deliberations on this matter continue on Tuesday (19/01). Indonesian President Joko Widodo stated that he wants to see the Negative Investment List revised before the end of January. "Given that the ASEAN Economic Community (AEC) started per 1 January 2016 Indonesia has to make its investment climate a bit more friendly," Cabinet Secretary Pramono Anung said. The AEC creates a single market and production base among the ASEAN member nations.
Cold Storage Business in Indonesia
Regarding the cold storage business, Sibarani said there will not be any geographical restriction. The business will be opened for the full 100 percent to foreign investors throughout the archipelago. Presently, foreign ownership of cold storage facilities is limited to 33 percent in Sumatra, Java and Bali. Outside these three islands, foreigners can own a 67 percent stake.
Currently, the lack of cold storage facilities across Indonesia form a problem for the transportation of certain food products. For example, Indonesia's fish processing industry is seriously hampered by the lack of cold storage facilities. Indonesia's total cold storage facility capacity (available to fisheries) was 7.2 million tons in 2014. However, the country produces 14 million tons of fish annually (data taken from the Indonesia Cold Storage Association, or ARPI).
Sugar and Rubber Manufacturing Industries in Indonesia
Currently, foreign ownership of the sugar industry in Indonesia is limited to 95 percent. The government plans to open it up to 100 percent under the condition that foreign investors need to engage in partnerships with local farmers who own sugarcane plantations. In order to be allowed 100 percent foreign ownership, the sugar plant needs to use around 30 percent of domestically produced raw material.
Recently, the Indonesian Sugar Association (AGI) said it expects a widening sugar deficit in Indonesia in 2016 as domestic production is estimated to slow further to 2.3 million tons in 2016, implying that about 400,000 tons of sugar need to be imported in order to meet domestic demand.
Also in the rubber manufacturing industry, foreigners will have to engage in partnerships with local farmers.
E-Commerce Business in Indonesia
Sibarani said Indonesia's e-commerce business will be open (100 percent) to foreign investors provided that a minimum of IDR 10 billion (approx. USD $760,000) will be invested and provided that the foreign investor works together with local warehousing companies.