Overview of Negative Investment List (Daftar Negatif Investasi) 2016

The new Negative Investment List (Daftar Negatif Investasi) 2016 is released on 18 May 2016 in the form of Regulation of President of Indonesia No. 44 Year 2016 regarding Opened and Closed Business Fields for Foreign Investment (Peraturan Presiden Republik Indonesia Nomor 44 Tahun 2016 Tentang Daftar Bidang Usaha yang Tertutup dan Bidang Usaha yang Terbuka dengan Persyaratan di Bidang Penanaman Modal). Below is the overview of revisions made in Negative Investment List (Daftar Negatif Investasi) 2016:

1. Increase in Open Business Fields for Investment

Revised Negative Investment List (DNI) 2016 offers increase in open Business Fields for foreign Investment, with the following changes:

1. 26 Business Lines opened for 100% foreign equity ownership and excluded from the Negative Investment List (DNI), the majority in the creative industries sector.
2. The number of Business Lines in the Negative Investment List (DNI) has been reduced, from 664 to 515 Business Lines.
3. More areas of business are now open for the majority ownership of foreign capital (foreign equity ownership of more than 50%).
4. Total Business Sector allocated for 100% domestic ownership has been reduced from 66 to 51.

2. Ease in the Investment Process

Revised Negative Investment List (DNI) 2016 make the investment process easier, with the following changes made:

1. Removal of some of the technical recommendations of the Ministry / Institution, including technical recommendations of the Ministry of Agriculture for Plantation with land area of over 25 hectares.
2. Removal of provisions of location restriction not contrary with Local Regulations, including provisions for 18 Tourism Sectors.
3. Investment Negative List Annex III does not apply to investments in Special Economic Zones, except for reserved business field for Micro, Small, Medium Enterprises and Cooperatives as contained in annex II.

3. Protection of Investors

Revised Negative Investment List (DNI) 2016 provide more protection to the investor, with the following changes made:

1. The addition of the provisions related to monitoring, evaluation and settlement of problems in terms of investments that will be addressed and resolved by the National Team for Export and Investment Enhancement (Tim Nasional Peningkatan Ekspor Dan Peningkatan Investasi atau Timnas PEPI).
2. The addition of provisions related to the Investment prohibitions from Regional Regulations or other Ministerial Regulations which are contrary to the Presidential Regulation on Negative Investment List.

4. Easier to understand

Revised Negative Investment List (DNI) 2016 will be more easily understood by investors, with the following changes made:

1. Ownership restrictions of foreign capital are now simplified including ownership percentage (49%, 67%, or 95%) in accordance with the principles of Indonesian Company Law.
2. Business Sectors are divided into three categories:
   • Closed Business Sectors for Investment;
   • Business Sectors Opened with the Terms, Fully Reserved or Reserved for Partnership with the Micro, Small, Medium Enterprises and Cooperatives;
   • Business Sectors Opened with Specific Requirements.

5. Reduction in Logistics Cost
   1. To reduce logistics costs for investors with manufacturing and factory businesses, foreign ownership for distributors directly affiliated with manufacturers is now 100%. In addition to this for distributors who are not directly affiliated with the manufacturers, foreign equity ownership limit increases from 33% to 67%.
   2. For Business Sectors related to land and sea transportation, foreign capital ownership is increased. Especially for the following business areas which is now increased to maximum 67% of foreign equity ownership:
      • Supporting efforts on terminal
      • Loading and unloading of goods (maritime cargo handling services)
      • Transportation Management Services
   3. More opportunities for investors to invest and set up cold-storage both in Java and outside Java due to increase of foreign ownership to 100% for this business line to support the fisheries sector, especially logistics distribution.
6. Reduction in Production cost
   1. Industrial raw materials for the pharmaceutical drugs is now open 100% for foreign equity ownership.
   2. Changes in foreign capital ownership restrictions for industrial raw materials will result in lower costs of pharmaceutical raw materials and will reduce imports of raw materials.
7. Support for the Development of Retail Business

Technological developments, especially in the retail business through the online system has made transactions more effective and efficient. In past e-Commerce was allocated 100% to Local Business Sector, but in the revised Negative Investment List (DNI) 2016 is not open for Foreign Investment with following arrangements:

1. E-Commerce is open 100% for foreign capital ownership with requirement of partnership.
2. Marketplace, Daily Deals, Price Grabber:
   • Investment value ≤ Rp. 100 Billion, open for maximum foreign equity ownership of 49%.
   • Investment Value > Rp. 100 Billion, open for 100% foreign equity ownership.

8. Support for the Creative Industries

Currently, there are only 1,171 cinemas in Indonesia, 35% of which are in Jakarta. On the other hand, the film industry has been targeting 20 million viewers with the 3000-5000 cinemas. Revised Negative Investment List (DNI) 2016 supports the development of upstream and downstream film industry, therefore several business fields are now open to 100% for foreign equity ownership, including:

1. Technical Film Services
2. Filmmaking
3. Film Circulation
4. Recording Studio
5. Film Performances

However, Cinemas must also comply with the applicable regulations to show/have 60% local contents / movies.

9. Improving the Quality of Labor

In order to improve the quality of Indonesian Workers, the foreign capital ownership for business fields related to Job Training is now increased from 49% to 67%. Improvement in quality of workforce education will also make the Indonesians more competitive compared to other countries, especially for labor-intensive industries.

10. Tourism sector

The Indonesian government has targeted the 272 million tourists in 2016. Therefore, the revision of the negative list is intended to attract more investors in the tourism sector, among others, as follows:

1. Up to 67% Foreign Capital Ownership

1. Private Museum
2. Private Heritage management
3. Travel Agent
4. One Star Hotels
5. Two Star Hotels
6. Non-Star Hotels
7. Other Accommodation Service (Motel)
8. Art Impresario Services
9. Karaoke
10. Natural Tourist Attraction outside conservation area

2. Up to 70% Foreign Capital Ownership
   1. Catering Services
   2. Billiards, Bowling, Golf Course
   3. Convention, Exhibition and Travel
   4. Motel

3. 100% foreign capital ownership
   1. Restaurant
   2. Bar
   3. Café
   4. Sports: Pool, Soccer, Tennis, Sport Center

11. Renewable energy

To support the 35 GW Electricity and Renewable Energy Program, Revised Negative Investment List (DNI) 2016 increases the foreign capital ownership, especially for geothermal electricity (capacity ≤ 10 MW) from 49% to 67%.

12. Conclusion
    1. Negative Investment List (DNI) 2016 provides an opportunity for development of MSME (Micro Small and Medium Enterprises) by reserving several Business Sectors for MSME and reserving mandatory partnership with MSME.
    2. Provides greater certainty for businesses.
    3. Improving national competitiveness, especially ASEAN, in increasing domestic and foreign investment.